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.

That would be our wonderful politicians in Washington. Just think how fast and how far bond prices would fall - and interest rates would rise - if these stellar folks were to get their way and restrict foreign ownership of US bonds. From Stephen Roach’s latest:

The Dubai port incident, unfortunately, is only the tip of a much bigger iceberg. There was also last year’s high-profile rejection of a bid to buy Unocal by a Chinese oil company. Moreover, in recent weeks, Washington’s increasingly xenophobic politicians have gone even further. A leading US senator floated the possibility of legislation preventing cross-border acquisitions of US companies by foreign state-owned entities. And during last week’s negotiations over the debt ceiling bill — with a lifting of the government’s debt limit required only because a saving-short US has decided to up the ante on deficit spending — there was actually an attempt made to restrict foreign ownership of US Treasuries. The good news, if you want to call it that, is that this latter attempt has since been watered down “only” to require a detailed accounting of the overseas holding of US government debt. But the irony of these politically motivated efforts to throw “sand in the gears” of America’s external funding mechanism is especially striking: At precisely the moment when the US has pushed its external funding requirements into unprecedented territory, it is becoming more and more aggressive in dictating the terms of the requisite inflows.

Scary stuff. These people may hold powerful positions. That doesn’t guarantee their intelligence. Or that they’re doing what’s best for the country.

A third case of mad cow disease in the U.S.

Advanced Micro Devices had been one of the market leaders, until recently. Last week, the breakdown began as the stock fell from its 6-week trading range, and crashed through the 50-day moving average. Today, AMD got smacked with double downgrades. You don’t like to see the market leaders start to fold, especially when nobody’s stepping up to take their place.

Chart courtesy of StockCharts.com

Not a real encouraging day after Friday’s bounce, as the market started strong out the gate and proceeded to weaken all throughout the day. The Dow Industrials faded from a 40-point gain to a loss of less than a point, finishing up at 11076. The S&P 500 fared a little better, hanging on for a 3 point gain (+0.2%) to 1284, and the Nasdaq added 5 points (+0.2%) to 2267. The Russell 2000 picked up 2 points (+0.2) to 728. The Dow Transports lost just a fraction, and the Utilities gained 0.2%. Bonds slipped again, and most yields moved higher: 6-month: 4.80%, 2-year: 4.72%, 5-year: 4.77%, 10-year: 4.77% and 30-year: 4.76%.

Market internals were generally positive, but volume was pretty weak. Advance/declines were 5 to 4 on the NYSE and 10 to 9 on the Nasdaq, with up/down volume 3 to 2 on the NYSE and 4 to 3 on the Nasdaq. New highs/lows were 159/45 on the NYSE and 142/43 on the Nasdaq.

Leading the groups higher were oil stocks (+2.1%), oil services (+2.0%), natural resources (+1.8%), natural gas stocks (+1.7%), computer hardware (+1.5%) and paper stocks (+1.3%). Moving lower were steel stocks (-1.7%) and airlines (-1.2%).

Energy prices surged higher, with crude oil up nearly 2 bucks to $61.83/barrel. Gasoline was up to $1.75/gallon, and natural gas moved back above 7 bucks to $7.03/mmBTU. The dollar index fell to 90.53, and the price of gold is back up to $545/ounce.

BMB Note: The market remains a rather confusing mess. I heard Cramer, on his afternoon segment, say: “What goes up today goes down tomorrow.” That’s pretty much the truth. A lot of thrashing going on here, and not a lot of progress being made.

Sometimes, stocks just aren’t the best way to go. The 6-month T-bills auctioned today yielded better than 4.82%. That’s a lot easier than trying to pick stocks in this market…

Update on money market yields:

Paypal has steadily been decreasing its money market yield of late–it’s back down to 4.25%. Why, you wonder? Who knows–interest rates are still rising. Perhaps the higher rate, somewhere around 4.5 at the highest, was to draw investors in.

HSBC is still offering 4.8% and the site says it will stay that way until April 30. Keep watching after that to see where it might go.

Capital One high yield savings: 4.25%
ING: 4.75% on new deposits 3.80% on everything already in the account.

3 month Treasury 4.60%
6 month Treasury 4.82%

Looks to me like the treasuries have been steadily pulling ahead in this race–and the rate won’t change for the stated period, so at least you are locking in the rate for a while. These other banks seem to be playing a game to lure investor money in, but they aren’t staying in the game.

Paul Nolte isn’t usually real bearish on the market or the economy, but it sounds like he’s starting to lean that way.

I read a lot of columns and articles, and they seem to be pretty evenly split as to whether the market is headed higher or lower. One common thread amongst many who believe we’re headed higher is that the move would be driven by increasing liquidity in the marketplace - i.e., more money being made available by central banks, that just needs to find a place to go.

None of this can answer the question as to which direction we go from here. All we can do is wait for the move, and then act accordingly. No sense in trying to guess.

A positive start to the week so far, with the major indices enjoying modest gains. Market breadth is positive most groups in the green at the moment. Leading the way are the paper, energy and precious metals stocks. Moving lower are the steel stocks and the HMOs.

Bonds are lower, with the yield on the 10-year again teasing the 4.8% mark. Energy prices have moved higher, and nat gas is pushing 7 dollars as we ’speak’. The dollar index is unchanged and gold is holding at $544/ounce.

The weekly look at technicals and sentiment from Schaeffer’s. Still a rather muddy picture, with a bias to the upside:

All-in-all, the market retains a slight positive bias as the major indices are finding intermediate-term support while sentiment measures continue to favor the upside a bit more than they do a sell-off. Despite the sentiment, this is a market that warrants caution. Continue to watch for multiple closes below the key levels described above as an indication that the market’s erosion will continue. If that happens, the sidelines or the short side of the market will begin to make more sense.

Deron Wagner, in his morning report:

While the Dow has been trying to pull the broad market higher, the Nasdaq has been pulling it lower. It’s been a tug-of-war over the past several days, but it will be difficult for the broad market to advance if tech stocks don’t recover. Many leading tech stocks and their corresponding sectors now have badly damaged charts that sustained a lot of technical damage. While they could certainly recover, it will take time. For now, any bounce in the tech arena is likely to be met by selling due to the overhead supply that formed when the Semiconductors slid rapidly last week.

In today’s Market IQ email, Dr. Joe Duarte quotes the Financial Times on the Dubai port control issue:

America’s current account deficit and accompanying strong economic growth have been sustained precisely because the country welcomes large inflows of foreign portfolio and direct investment. US interests are put in jeopardy when it conveys to the rest of the world that there is one law for American companies and another for the rest. The US could soon find such arguments deployed against it, and not just in the Arab world.

Dr. Duarte’s summary on the subject:

The world is looking at the Dubai Ports situation from a much different view point than those sequestered by their own partisanship and inside the beltway one way sunglasses. It is the world that is buying U.S. bonds. And it is the world that buys Coca Cola, Kentucky Fried Chicken, Starbucks, Exxon Mobil gasoline, and Colgate toothpaste. And although it can take a long time for a major wave of protectionism to take hold around the world, after 9/11 and the ensuing set of events, it won’t take as long as it used to.

As we said on 3-10, and is worth repeating: Congressmen and Senators, up for re-election, and concerned about their own self interest, have made a big mistake, as they have clearly blundered into a situation that they don’t understand, the global flow of money. The White House clearly made a mistake in the way it went about getting the deal through whatever channels are necessary. The public may never know what the grisly details and quid pro quos of the deal were when it all started. But, one thing is certain. The stains will stay around for some time.

Joe Duarte’s weekly Market Intelligence report is available for free. Sign up at his website.