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.

	The major indices just can’t get their acts together. Today, the Dow poked out of the top side of its trading range for the first time since mid-January. It’s been on a mini-hot streak, and is above its 50-day moving average. But the 20-day is still below the 50-day…
	The S&P 500 was able to sneak back above the junction of the 50-day and the drooping 20-day moving averages today, but had just violated near-term support last week and now must contend with the downtrend off the January highs.
	The Nasdaq is the weakest of the three, teasing support in the 2230 area, and stuck below its 50-day moving average. And the Nasdaq 100 is even weaker yet. To get a clear picture of market strength - or weakness - we need to see better agreement between the major indices.

Charts courtesy of StockCharts.com

If you’re looking for explanations for the recent spastic market action, you’ve come to the wrong place. I can’t help you.

Down days, up days, up mornings with down afternoons and vice versa — we’ve got it all. Today it was the ‘up’ day - after one of the ‘down’ days, of course. The Dow Industrials have been the star of the show of late, pushing back through the 11K mark with a gain of 136 points (+1.3%) to 11028. Go figure. The S&P 500 got back 13 points (+1.0%) to 1276, and the Nasdaq added 22 points (+1.0%) to 2262. The Russell 2000 played along, picking up 9 points (+1.3%) to 720. The Dow Transports moved back to new highs with a gain of 2.6%, but the Utilities fell 0.2%. Bonds were lower across the board, so yields went up, but the shape of the curve didn’t change much. We find the 6-month yield at 4.71%, 2-year 4.69%, 5-year 4.60%, 10-year 4.61% and the 30-year 4.59%.

Market internals were strong, but one crucial element was missing, especially on the Nasdaq: Volume. The trading on the NYSE picked up from yesterday’s low levels, but barely moved higher on the Nasdaq. Advances led declines by about 2 to 1 on each exchange, and up/down volume was better than 7 to 3 on each. New highs/lows were 116/31 on the NYSE and 88/20 on the Nasdaq.

The strongest moves came from some of the beaten down groups today, with steel stocks leading the way, up 3.8%. The steelies were followed by the airlines (+3.8%), paper stocks (+3.0%), HMOs (+2.2%), chemicals (+2.0%), retail (+1.9%), housing (+1.9%), gold & silver (+1.9%), computer hardware (+1.8%), telecom (+1.8%), transporation (+1.8%), brokers (+1.7%) and biotechs (+1.6%). The big losers on the day were the oil services, which fell 2.8%.

Energy prices continue to drift lower, with crude oil now below $60 at $59.48/barrel, gasoline at $1.38/gallon and natural gas at $7.08/mBTU. The dollar index hasn’t moved much, sitting at 90.54. The spot price of gold moved up to $547/ounce.

BMB Note: I’m at a loss. When the market is as unpredictable as it has been lately, even the best traders will have a very difficult time. For trend followers, it’s a hopeless cause. There is no trend. The divergence between the major indices is disturbing, and before we can act in either direction we need some confirmation from all the indices AND we could use a little volume in the direction of the move.

The Dow stocks have been the place to be lately. A flight to safety? A bull market beginning in mega-cap stocks?? (I doubt that…) I did notice that the Dow move today was turned back at the January high, within a few hundredths of a point - the high on 1/11 was 11047.76, today we hit 11047.68. Does it mean anything? Maybe, maybe not.

If you’ve got the guts to buy stocks in this environment, feel free. Me?? I’m waiting for the market to pick a direction and go with it. For now, the trend, and sentiment indications are downward. But you can’t get too aggressive on the short side when you’re having days like today. Time for a vacation, I guess…

Interesting developments these days. Here we sit, with the Dow back above 11,000, at its highest level since January 12th. At the same time, the Nasdaq is still floundering below its 50-day moving average, despite being up 17 points today.

Eventually, the indices will have to be in agreement. It’s a matter of when, and in which direction.

In a global economy, it helps to have glimpses of other parts of the world—whether for investment opportunities or to help us realize the potential in ourselves and other countries. That is one of the reasons that BMB recommends Jim Rogers’ Adventure Capitalist—it offers glimpses into other countries and people, not to mention serves as a reminder of the many opportunities and wealth that Americans enjoy. BMB has also done a few posts on China and Hong Kong.

BMB is now privileged to present a glimpse into Dubai (part of the United Arab Emirates) from a good friend who traveled there. From the travelogues of Amer Habda, he shares Dubai:

I was in Abu Dhabi, the capital of the UAE in 1992, and was very impressed by the modern state of the Emirate. It is much like Europe with a Middle Eastern flavor. Dubai was no different. Dubai is a thriving metropolitan with beautiful high-rises, clean streets and green plantations in the middle of the desert. The city is an oasis with special water conservation programs that allow native plants to grow in abundance making it hard to believe that you are actually in a desert.

The most shocking aspect of Dubai was the openness of the society despite being so close to Saudi Arabia. I learned of this openness quite by accident: After checking in the hotel on New Year’s Eve, I asked the bellboy about getting a taxi to the airport at 4:00a.m. the next morning. The bellboy, from south Asia (perhaps Pakistan or Bangladesh) could barely communicate in Arabic or English. He nodded continuously and wrote down a number that I thought was for a Taxi Company. I thanked him and asked if calling at 4:00 a.m. for the taxi would be acceptable.

He nodded again and said, “Yes, yes, Turkish, Iranian, and Arab anytime.”

Puzzled, I asked again, “For the taxi service?”

He replied, “No sir. Women they can come now!”

I laughed and showed him to the door. I could not believe that the guy was offering women services in Dubai, an Arabic and Islamic country a few hundred miles from Mecca.

I should have learned from this experience, but I was unaware of the number of immigrants in the workforce until this visit. It was brought home to me when I proudly filled out my breakfast menu in Arabic. Being in Dubai, I was eager and happy to use my Arabic. When the food did not appear the next morning, I assumed the failure was due to the very early hour. However, when I called room service and asked about the delay I was told, “Sir, we are trying to find someone who can read Arabic so we can complete the order.”

Ah well.

Luckily Dubai has not left its roots completely. The past is still the present when it comes to prayer time. Near prayer time I was unsure of the direction of Mecca, but just outside the hotel window, I noticed a mosque. I decided to pray at the mosque until I figured out the proper direction. As I joined the people praying at the mosque, it dawned on me that in Islam, you can walk to any mosque at any location around the world and pray the same prayer with people you have never met. In addition, although I hadn’t realized it at the time, all hotel rooms have a sign on the ceiling pointing the direction for Mecca.

The stop in Dubai on the way to Saudi Arabia proved to be just a taste of new experiences mixing with old. The hotel in Dubai was comparable to a 3 star hotel in the U.S. The lodging cost was about 300 Dirham (which is equivalent to $90.00.) It was clean, modern and affordable. I only wish I could say that Saudi Arabia welcomes tourists and pilgrims with such modern amenities.

Contributed by Amer Habda

A slightly more positive day so far, with the major indices holding onto small gains and the advance/decline line a bit in the green. More groups are higher, with steel stocks, airlines, disk drives and paper stocks leading the way. Continuing to struggle are the oil services, oil stocks and natural gas stocks, along with natural resources. Transocean (RIG), one of the last strong stocks in the oil services groups, is getting hammered today after reporting good earnings but lowering their outlook. When it comes to the energies, very few have escaped the damage of the last couple of weeks.

Bonds are struggling a bit, and rates are moving higher across the board. Energy prices are also lower, with oil pushing down on $60/barrel, and gasoline moving below $1.40/gallon. Both the dollar and gold prices are gaining ground.

The big news item of the morning is the January retail sales report, which said that retail sales rose 2.3% in January vs. a 0.9% expectation:

Retail sales outpaced expectations and rose a seasonally adjusted 2.3% in January as gasoline and automobile sales strengthened, the Commerce Department said Tuesday.

I highlighted the “seasonally adjusted” phrase. Obviously, they are always “adjusting” these numbers. Why? Why can’t they just report the numbers as they are? So were these “adjusted” up or down? How in the world are we supposed to draw any conclusions from government numbers when we don’t know what they really mean?