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.

A mildly positive day - lots of volume, but little volatility. I must assume that some of that volume can be attributed to options expiration. The Dow continues to grind higher, adding another 26 points (+0.2%) to 11280. The S&P 500 gained a couple of points (+0.2%) to 1307, and the Nasdaq recovered 7 points (+0.3%) to 2306. The Russell 2000 gained 2 points (+0.3%) to 746. The Dow Transports posted a gain of 0.2%, and the Utilities fell 0.5%. Bonds were lower pretty much across the board, and yields backed up a bit: 6-month: 4.77%, 2-year: 4.64%, 5-year: 4.62%, 10-year: 4.67%, 30-year: 4.71%.

Market internals leaned to the positive side on the stronger volume. Advances/declines were 5 to 4 on the NYSE and 10 to 9 on the Nasdaq, with up/down volume 13 to 11 on the NYSE and 3 to 2 on the Nasdaq. New highs/lows were 273/27 on the NYSE and 185/48 on the Nasdaq.

Not a lot of movement in the groups, with steel stocks up 1.8%, housing stocks up 1.6% and biotechs up 1.0%. The losers were led by the oil services (-1.1%), oil stocks (-1.0%) and paper stocks (-1.0%).

Energy prices fell, with crude dropping to $62.77/barrel, gasoline dropped a penny to $1.86/gallon, and natural gas fell to $7.05/mmBTU. The dollar index dropped further, to 88.95, and gold hung around $554/ounce. As was mentioned in the comments on our ‘early take’ today, the price of copper hit an all-time high today, up 7% on the week. Silver is at a 22-year high.

BMB Note: Not much to take away from today’s action. There wasn’t a lot of movement, despite the pickup in volume. Things pretty much stand as they have been - the Dow and S&P continue to grind to new highs, while the Nasdaq toys with the top of its trading range, and the Nasdaq 100 struggles to hold onto its 50-day moving average. The short-term bias is to the upside, but we’ll have to see how things pan out as we get away from options expiration, and start moving into warnings season and earnings season.

A mildly positive tone thus far, with the major indices just in the green, but advance/declines running in the red on the Nasdaq. More groups up than down, but not many big moves - the biggest being in the housing stocks again, up another 2% today. In more news from the housing sector, the CEO of William Lyon Homes (WLS) has offered $93/share to buy the rest of the company. Then why is it trading at $99?? Go figure. Considering the way WLS has been acting the past few months, there must be an awful lot of shareholders on their knees giving thanks - the stock is up over 30% today.

Bonds are pulling back after yesterday’s big rally, pushing yields a bit higher. Energy prices are down just slightly, the dollar is unchanged and gold is down a buck or two.

…belongs to the bulls for the time being, according to Larry McMillan in the free Option Strategist Weekly Updater (sign up):

Traders have been frustrated by this market’s inability to hold what happeared to be breakout moves — on both the upside and the downside. Nevertheless, this one looks like it might have ’staying power.’ Both $SPX and $DJX (the Dow) have broken out to new 5-year highs, and appear to be holding the breakout levels. QQQQ is not nearly in as good shape, but a close above 42 would be constructive for that index as well.

Most of our technical indicators are falling into line with this breakout move, although it is still the case that none have given true buy signals for quite a while. For example, market breadth has expanded nicely in the last few days as $SPX approached the 1295 resistance area and then broke on through. Prior to that, though, there was not a true oversold condition which would have been a proven buy signal…

In summary, we look for $SPX to run to the 1320-1325 area at least. That’s commensurate with the move that took place near the first of the year when the market broke out to the upside at that time. This is more important than the fact that it’s been three years since this market had a meaningful correction, or the fact that the mid-year of the Presidential Cycle (this year) usually sees a sharp decline into a good trading bottom. Those longer-term facts may lead to a decline later this year, but for now the bulls have the upper hand and — for once — seem to be taking advantage of it.

…Mr. Wagner recommends sticking to the tech arena, particularly the semis:

Yesterday’s broad market divergence complicates the technical picture even more, but confirms our original reasons for moving to a neutral short-term bias. Clearly, the tech stocks are sick. Just take a quick look at the technical damage on the charts of Google, Apple, or nearly any other former high flyer in the tech arena. Because of this, we feel that shorting is relatively low risk if you confine your short selling operations to the weakest sectors such as the Semis.