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.

Finally, it’s over. Now we can stop hearing about RIMM and their patent issues.

But then there’s this, lost in all the noise of the settlement, as RIMM shares are up 13 bucks in the after-market: RIMM Warns.

What a circus.

Well. That was a weird one, wasn’t it? The market started off poorly this morning, and Intel’s warning didn’t help matters any. Then mid-day, things turned around and moved higher. But in the last hour, the indices gave up all their gains for the day and fell back into the red. The Dow Industrials, after being up 70-odd points, lost 4 points to 11022. The S&P 500 lost 2 points (-0.2%) to 1287 and the Nasdaq dropped 9 points (-0.4%) to 2303. The Russell 2000 was lower by 2 points (-0.2%) to 738. The Dow Transports held onto a gain of 0.6% and the utilities were higher by a just a fraction. The real action of the day, once again, was in the bond pits where bonds were sold off and yields moved higher for the third day in a row. This leaves us with the 6-month at 4.75%, the 2-year at 4.75%, the 5-year at 4.71%, the 10-year at 4.68% and the 30-year at 4.66%. The good news is that the yield curve is flattening back up quite a bit. The bad news is that rates have moved much higher.

Market internals were negative, but it’s hard to make much of the volume picture, since volume was quite strong on the Nasdaq but weak on the NYSE. Go figure. Advances/declines were 8 to 11 on both exchanges, with up/down volume near 4 to 5 on each. New highs/lows were 169/27 on the NYSE and 175/33 on the Nasdaq.

Not a lot of big movement in the groups today, but there were more losers than winners. The best group was the steel stocks, with a gain of 0.7%. On the losing side were semiconductors (-1.6%), gold & silver stocks (-1.4%) and housing stocks (-1.3%).

Energy prices were marginally higher. Crude oil moved up to $63.67/barrel, gasoline to $1.74/gallon and natural gas to $6.79/mmBTU. The dollar index held fairly steady at 89.60, and the price of gold is holding near $566/ounce.

BMB Note: Not even the experts can figure this market out, so what makes you think I can? The fact is, we seem to be stuck, trying to break higher, failing to do that, and there is little to no follow through lower. I’d like to say this will end someday, but we’ve been pretty rangebound for more than two years now. And yes, it’s getting old.

All you can do is continue to tread lightly - and trade lightly - until the picture becomes clearer. If you want prices to go higher though, you might have to cheer for interest rates to come back down. If rates/yields continue to move higher, I think stocks will have a rough go of it.

Leave it to the Fed officials: they were out today, talking up the economy, here and here. I’d be willing to bet that their comments have quite a bit to do with the midday turnaround in the market.

Another gem from “Market Wizards” by Jack Schwager, in an interview with a gentleman by the name of Larry Hite:

Any final words?

I have two basic rules about winning in trading as well as in life: (1) If you don’t bet, you can’t win. (2) If you lose all your chips, you can’t bet.

Never lose big.

I’ll bet you didn’t know that the high-tech world was creating demand for platinum. Don’t feel bad - neither did I.

Not a lot of movement in the major indices thus far, with all three slightly in negative terrirtory. But the mood of the market is biased to the downside as well, with advance/decline figures in the red and more groups up than down. The few winners are led by the internets and the brokers, with loser being led by housing, paper, airlines and precious metals stocks.

Bonds are again a big story of the day, as they continue to fall and push yields higher. The 10-year yield is pushing 4.69%, levels not seen since November. Yields haven’t been able to move much above this area since the spring of ‘04, and then only for a short time, so a break above this resistance area would be quite significant - and would likely NOT be good news for stocks.

Energy prices are little changed. The dollar is recovering very little from its drubbing yesterday, and gold prices have hung around $567/ounce.

…and long overdue for a correction. From Lawrence McMillan, in the Option Strategist Weekly Updater (sign up here):

In summary, the market finds itself trapped in a tight range — with $SPX between roughly 1275 and 1295. The next breakout of that range should produce some follow-through, although there have already been several false breakouts this year. Meanwhile, the length of time since this market last had a correction of 9% or more is now 1,113 days — the second longest “drought” on record.

The University of Michigan measure of consumer sentiment for February was revised downward to 86.7 from 87.4 earlier in the month. That compares to the January reading of 91.2.

Overnight, the Nikkei continued to pull back as the Japanese version of the CPI showed inflation picking up.

That’s pretty much inevitable when the central bank continues to ‘inflate’ the economy:

Seven years ago, the Bank of Japan brought its short-term interest rate target down to zero. In recent years, it has injected huge amounts of liquidity into the banking system, a policy known as “quantitative easing” that has resulted in a massive increase in bank reserves, totaling about $233 billion.

The story for Intel just doesn’t seem to be getting any better. Stay far, far away from INTC.