Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

Apparently, Cramer’s latest pump of a tiny stock ruffled a feather or two — as well it should have. Check out the links in the comments section of today’s market wrap.

Hat tip to BMB reader Steve.

Martin Goldberg is trying to ignore all of the anecdotal evidence of a market top: the Cramer thing, TradingMarkets running a stock-picking contest among Playboy models, you know, the usual stuff. He says that stocks need the help of the bond market to continue to move higher. Interest rates must stay stable or move lower, and that’s anything but a sure thing.

Just a thought, as everyone rejoices over this week’s strength in the market: the major indices - Dow, S&P 500 and Nasdaq - have NOT yet recovered their losses from last Friday’s selloff.

	These days, that question is a little tough to answer — it all depends on how you look at it. If you started with a couple of the big names in the biotech biz, you’d think that the group was probably in the dumper, right? After all, the charts of Amgen (AMGN) and Genentech (DNA) look pretty lousy.
	And you might get the same impression by looking at the Biotech HOLDRS (BBH). But a look behind the scenes explains why: the BBH is 40% DNA and 24% AMGN.
	But the IBB — the ETF that tracks the Nasdaq Biotech index — and the $BTK, the AMEX Biotech Index, look quite different. Why? Because the IBB is only 17% AMGN, and the second biggest influence is GILD (5%). DNA isn’t even represented in the IBB. I assume this is because DNA is not a Nasdaq stock. As far as the $BTK is concerned, it represents 18 or so companies, and each of those companies carries a weight of only about 5%.

Looks to me like you can be either a bull or a bear on biotech, and you can be right both ways. If you’re looking to invest in this area, I suggest you be selective and look for the strong names — and stay away from the two biggees.

Charts courtesy of StockCharts.com

Wow, another solid day for stocks. The Dow Industrials climbed 100 points (+0.9%) to 10809, the S&P 500 picked up 9 points (+0.7%) to 1274, and the Nasdaq jumped 22 points (+1.0%) to 2283. The Russell 2000 again beat the big boys, climbing 12 points (+1.7%) to another all-time high of 728. The Dow Transports moved up 1.6%, but the Utilities fell 0.9% as interest rates rose again. That move came as bonds slid for another day, and yields moved up: 6-month to 4.53%, 2-year to 4.47%, 5-year to 4.43 % and the 10-year to 4.51%.

Market internals were strong, and we finally saw a pickup in volume on an up day (that would be good). Advances led declines by 20 to 11 on the NYSE and 13 to 6 on the Nasdaq, with up/down volume nearly 7 to 3 on the NYSE and better than 2 to 1 on the Nasdaq. New highs strengthened, with highs/lows 299/38 on the NYSE and 246/29 on the Nasdaq.

A good number of strong groups today, led by the semiconductors (+2.9%). Next came steel stocks (+2.6%), brokers (+2.5%), transports (+2.0%), disk drives (+1.8%), internets (+1.7%), defense stocks (+1.6%), banks (+1.6%), telecom (+1.5%), gold & silver (+1.4%), software (+1.3%), housing (+1.3%), biotechs (+1.2%), and hospitals (+1.1%). Only a few groups were lower, led by the networkers (-1.3%) and utilities (-0.9%).

Energy prices edged a little higher today, with crude moving back up to $66.47/barrel. Gasoline is trading near $1.69/gallon and natural gas at $8.24/mBTU. The dollar improved, pushing the dollar index up to 88.62, and gold is holding right near $560/ounce.

BMB Note: Hard to complain. I’m still surprised that the market is as strong as it seems, but it is what it is. For now, Friday’s selloff seems to be just a distant memory. The S&P and Nasdaq held their 50-day moving averages, almost to the point. The Dow, well, it’s the Dow. The Russell 2000 is setting new highs. The one stick-in-the-mud seems to be the Nasdaq 100, which broke its 50-day last Friday, and has been unable to work its way back above it, so that will be something to keep an eye on.

So far, so good. The majors are holding on to gains, and internals look pretty good at this point. Leading the way are defense stocks, software, semis, brokers, internets and banks. Energy stocks continue to pull back - the losers are led by oil services, natural gas, networking and natural resources.

Bonds are lower again, pushing rates up - the 10-year is starting the day near 4.52%. Energy prices are lower, with crude near $65.50 and natural gas moving below $8. The dollar is unchanged, and gold is down about 5 bucks to $557/ounce.

Gary Kaltbaum gives you a concise market breakdown.

• Earnings in from 5 of the Dow components this morning.
• Durable good orders up in December.
• Weekly initial jobless claims up.

The futures are indicating a higher open. We’ll see what happens, and whether the market can hold any positive movement.

Update: Add GM to the news list. The company lost $4.8 billion in the fourth quarter, $8.6 billion in ‘05. Ouch.