Bear Mountain Bull

I’m not sure that the gasoline price situation is all a mess of Uncle Al’s making, but Tim at The Mess That Greenspan Made has an SUV Fill-Up Index, detailing the size of the dents that the big SUVs put in your wallet with gas at $3.10/gallon. Ouch.

Hat tip to Barry at The Big Picture.

Even the pundits know that our politicians are just wasting their time and blowing even more hot air than usual. Charles Krauthammer in the Washington Post:

If you thought the Dubai port deal marked a record high in Washington cynicism, think again. Nothing can match the spectacle of politicians scrambling for cover during a spike in gasoline prices. And this time the panderfest has gone all the way to the Oval Office. President Bush has joined the braying congressional hordes by ordering the Energy and Justice departments and the Federal Trade Commission to launch an investigation into possible gasoline price fixing.

What a disgrace.

Precisely 10 years ago (April 29, 1996) as gas prices reached a shocking $1.27 a gallon, President Bill Clinton ordered his Energy and Justice departments to launch investigations to find out why. In my column that week, I offered a wild guess as to why: “supply is down and demand is up.” I offered Energy Secretary Hazel O’Leary and Attorney General Janet Reno a $100 bet (I roll high on sure things) that their million-dollar probes would do nothing more than confirm my hunch.

No takers. Even Cabinet secretaries don’t throw away C-notes. Sure enough, months later these perfectly pointless investigations discounted charges of price gouging and attributed the price hike to . . . increased demand and decreased supply.

Items of note on the latest industry moves:

• The banks have led the financials up without the brokers.
• A pullback in energy and commodities, but those still are strong over the longer term.
• Oil services the strongest group in the energies.
• Housing looks like it may be getting ready for another leg down.
• Transportation stocks ($TRANQ) aren’t in danger yet, but seem to have lost quite a bit of their momentum.
• Networking stocks ($NWX) and telecoms ($XTC) look like they could be in a bit of trouble.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page.

For those of you that haven’t seen the video put together by the students at Columbia Business School, you might want to check it out. It made quite a buzz in the financial circles this week. I’ll let John Mauldin set it up for you:

The following is a link to a very funny satirical music video by the students at the Columbia Business School (first sent to me by Gary North among a host of friends). This takes a little set-up to understand some of the inside jokes. It is set to the tune of the old Police hit, “Every Breath You Take.” It makes fun of the fact that the Dean of the Business School, Glenn Hubbard, former chairman of the Council of Economic Advisers to the President, wanted to be Fed chairman. CBS refers to Columbia Business School and not the TV network. Major kudos to the kids who did this! And for those of you who aren’t familiar with Hubbard’s face (after all, he is an economist), the student who “plays” Hubbard is an uncanny look-alike of a young Hubbard. At least now, Glenn, you can make claims to being an erstwhile rock star.

Sample lyrics, as “Hubbard” sings about Bernanke:

“First you move your lips, and hike a few more bips, when demand then dips and the yield curve flips, I’ll be watching you!” Crank up the volume and enjoy!

And while you’re here, go ahead and read the rest of John’s column on the Fed, volatility and the dollar.

I missed this earlier in the week. A couple of new Nasdaq ETFs began trading, one an equal-weighted Nasdaq-100 index (QQEW), and the other a Nasdaq 100 Technology index (QTEC):

The First Trust NASDAQ-100 Equal Weight Index Fund (NASDAQ: QQEW - News) is an exchange-traded fund designed to replicate the holdings and weightings of the NASDAQ-100 Equal Weighted Index, an equal weighted version of the NASDAQ-100 Index which includes 100 of the largest non-financial securities listed on The NASDAQ Stock Market based on market capitalization.

The First Trust NASDAQ-100 Technology Index Fund (NASDAQ: QTEC - News) is an exchange-traded fund designed to replicate the holdings and weightings of the NASDAQ-100 Technology Sector Index, an equal weighted index based on the securities of the NASDAQ-100 Index that are classified as Technology according to the Industry Classification Benchmark (ICB) classification system.

Why would you be interested in an equal weighted Nasdaq-100 index? Well, to help reduce the drag from the big laggards like MSFT, INTC and DELL.

	Energy stocks had a pretty sharp pullback this week. Earnings from some of the big oil players hurt things a bit, and the prospect of the politicians going after the energy companies isn’t very comforting. You never know what stunts they’ll try to pull. It might pay to be a little selective in this area.
	A pullback in Materials as well. But still looking pretty healthy at the moment.
	The same can be said for the Industrials.
	Financials broke out this week, with most of the push coming from the banks. Something to watch if you’re interested in that sector.
	The Utilities have stabilized a bit, but still nothing to do here.
	Health care. Still very avoidable.

This week’s numbers:

Charts courtesy of StockCharts.com

Another rather peculiar day in the market, with some things up and some things down - and some things that were down yesterday were up today, and vice versa. The Dow Industrials dropped 15 points (-0.1%) to 11367. The S&P 500 gained a point (+0.1%) to 1311, and the Nasdaq got hit for 22 points (-1.0%) to fall to 2323. The Russell 2000 gained 3 points (+0.4%) to 765. The Dow Transports dropped 0.1% and the Utilities rose by that same amount. Bonds were higher across the board, but more so in the 2-3 year range. Yields were lower: 6-month 4.91%, 2-year 4.86%, 5-year 4.92%, 10-year 5.06% and 30-year 5.17%.

Market internals were mixed, and volume remained somewhat strong, though down a bit from yesterday’s levels. Advance/declines and up/down volume were consistent on the NYSE at about 3 to 2, but another divergence on the Nasdaq, with the A/D line at 5 to 4, but up/down volume negative at 3 to 7. New highs/lows were 171/97 on the NYSE and 170/51 on the Nasdaq.

Action in the groups was mixed as well - a few more up than down, but pretty split nonetheless. A few big winners on the day, led by the beaten-up HMOs (+6.5%), gold & silver stocks (+4.0%), steel stocks (+2.7%), banks (+1.9%), oil services (+1.9%), commodities (+1.5%), natural resources (+1.3%) and health care (+1.1%). On the losing side of the ledger were computer tech (-3.2%), airlines (-2.3%), brokers (-2.2%), software (-1.4%) and internets (-1.0%).

Energy prices were also mixed: crude oil higher by a buck to $71.88/barrel, gasoline up a couple of cents to $2.09/gallon, but natural gas down to $6.56/mmBTU. The dollar index continued its slide, falling to 86.11 - the dollar has fallen below 114 Yen, and a Euro will now cost you $1.26. Precious metals had a big day, with gold up to $651/ounce and silver stretching back up to $13.51/ounce, helped by the launch of the silver ETF. Copper prices are holding at $3.25/pound.

BMB Note: The market is still a pretty mixed-up mess. Stocks just can’t decide where to go from one day to the next, and a lot of them keep going in different directions. It remains a very tough market, so it makes more sense than ever to stick to the strongest areas.

You know, we keep being told that inflation is under control - but the dollar doesn’t seem to believe it, and the precious metals most certainly don’t agree. Gold and silver just continue to climb, unable to hold any sort of correction for more than a day or two. And bonds don’t seem to be able to muster a lot of strength - weak currency and weak bond markets often lead to trouble.

Energy prices remain high, regardless of what the politicians say they’re going to do about it. Iran is going to go nuclear, and the world will probably not be able to muster up the will to stop them. Politicians the world over cannot seem to make the tough decisions, as it’s much easier not to.

Just a few things to ponder as you decide how best to protect your capital.

The HMO index is recovering a great deal of its drop yesterday with a 6.3% rebound. Today it’s AGP that’s the star, up 20%. Of course, Cramer had the UNH CEO on his show last night in a desperate attempt to try and help right the sinking HMO ship.

These days, you just can’t keep the metals stocks down for very long. After yesterday’s nosedive, we find names like ACH, PCU, SSRI, NG, CLF, PD, MDG, AUY, CMC and TIE all up more than 4% today.

More work on the home projects, so the ‘early take’ turns into the ‘midday market’…

In a lot of ways today’s action looks a lot like yesterdays, only some of the characters have changed roles. The Dow is down just slightly and the S&P just above water, but the Nasdaq is down nearly 1 percent. The A/D line is positive on the NYSE but slightly negative on the Nasdaq. The groups are pretty much split, and some of yesterday’s big losers are the big winners of the day. Buyers are stepping back in on the HMOs and the metals (gold, silver, steel, etc.). Energies and commodities up as well, along with the banks. Losing ground are the computer tech stocks (a.k.a. Microsoft, taking an 11% pounding), airlines, brokers and software.

Bonds are mixed up, with yields a little lower on the short end and a little higher on the long end of the curve. Crude oil and gasoline are higher after falling for a few days, but natural gas is down a couple of cents. The precious metals are climbing - gold is near $654/ounce, and silver has taken off again, to $13.64/ounce, likely helped by the launch of the silver ETF this morning. And the dollar continues to skid.

The University of Michigan consumer sentiment index slipped to 87.4 from 89.2 in early April, and the Chicago PMI fell from 60.4 in March to 57.2 in April.

For those that might be interested, BMB reader Steve posted some interesting numbers regarding Google and the volatility of its stock price. Check out the comments section of last night’s market wrap.

According to the Amex website, the iShares folks will be ringing the opening bell today to celebrate the launch of SLV, the iShares Silver Trust.

It’s about time.

The market will likely be dragged down a bit in the early going, hurt by a rather discouraging earnings report from Microsoft. MSFT stock is down about 10% in pre-market trading.

The first reading on Q1 GDP showed the economy grew at a 4.8% annual rate in the first quarter.

When I saw the intro to this CNN article on readers’ ideas on how to help ease the burden of higher gas prices, I was prepared for some of the worst ideas I’d ever heard, or at least the usual ranting about the evil oil companies or the terrible Bush administration.

I have to admit, I was pleasantly surprised by the sanity of the responses. Well, at least the ones that CNN chose to publish - congratulations to that part of the public that seems to have a rational understanding of the problem. For a sampler, here are the first couple of replies:

In the short term, the only thing we can do is jot down a note to ourselves: “for future reference, remember not to assume that a finite resource is unlimited”. In the long term, massive funding for alternative energy research is the only thing that’s going to get us out of this mess. Oil demand is growing, oil supply is tight, and it’s getting tighter indefinitely, unless anyone happens to know of another planet where carbon-based life-forms died millions of years ago. Never mind price-gouging, OPEC, SUV’s or the comparatively tiny deposits of oil in Alaska and the Gulf of Mexico; oil is harder (i.e., more expensive) to get out of the ground than it used to be, and it’s going to get steadily harder to get it out, until it’s gone.
David Doty, Ames, Iowa

As an oilfield worker I know what is involved in providing consumers with gasoline, and it blows my mind to see people willing to pay two bucks for a gallon of water, but that complain about spending $3 on a gallon of gasoline. This is a product extracted from miles underneath the Earth’s surface, along with sand and water that come in proportions much larger than that of actual oil. Not to mention all the refining processes that commence once the oil is out of the ground. If people actually thought about what is involved in providing them with their gas, maybe they would realize $3 a gallon is a great deal.
Nathan Holsapple, Lloydminster, Alberta

Maybe the public is a little bit smarter than the media would like them to be.

The long-awaited silver ETF may begin trading tomorrow (Friday) on the Amex under the symbol SLV.

I’ll believe it when I see it…

We get our first look - of many - at first quarter GDP tomorrow. We’ve been hearing for quite some time that Q1 was going to be a good one, and expectations are for a number up near 5.0%. So in this good news is bad news world, will a hot Q1 GDP report take the air out of Bernanke’s puff talk today?

We’ll find out first thing in the morning. If the number is a big one, watch out for those bond yields. They could hit new highs again, and hurt stocks in the process.

The dollar has really been taking a beating lately, and looks to be putting in a pretty serious year-long topping formation here. Can the Fed really afford to stop raising interest rates and just let the dollar disintegrate? I guess we’ll find out.

Chart courtesy of StockCharts.com

A little something for everybody in the market today — there was some good, some bad, and some ugly. The major indices started off pretty poorly, but worked their way back throughout the morning, and finished with slight gains: the Dow Industrials gained 28 points (+0.3%) to 11383, the S&P 500 added 4 points (+0.3%) to 1310 and the Nasdaq moved up 11 points (+0.5%) to 2345. In the broader market, however, we find the Russell 2000 small-cap index down 4 points (-0.5%) to 761. The Dow Transports gave up 0.7%, but the Utilities were higher by 1.2%. Bonds were generally higher, but sent yields down more on the short-end of the curve: 6-month 4.93%, 2-year 4.90%, 5-year 4.95%, 10-year 5.08% and 30-year 5.17%.

Market internal were mixed, on the highest volume we’ve seen in a while. Both advance/declines and up/down volume were pretty much flat on the NYSE, but diverged on the Nasdaq with the A/D line at 7 to 8, but up/down volume 3 to 2. New highs/lows were 167/138 on the NYSE and 164/54 on the Nasdaq.

The groups were pretty much split, with big movers on both sides of the page. On the plus side we find biotechs (+2.3%), banks (+2.0%), software (+1.4%), utilities (+1.4%), semiconductors (+1.3%), health care products (+1.3%), drug stocks (+1.2%) and computer tech (+1.0%). Even bigger movers on the bad side, led by HMOs (-5.9%), steel stocks (-4.7%), gold & silver stocks (-3.6%), oil services (-2.0%), paper stocks (-1.9%), housing (-1.9%), commodities (-1.8%), natural resources (-1.4%), networking (-1.1%), hospitals (-1.0%) and transports (-1.0%).

Energy prices continue to drift lower: crude oil down to $70.88/barrel, gasoline to $2.07/gallon and natural gas to $6.80/mmBTU. The dollar was doing ok in the early morning, but got slammed before noon, I would assume on the news coming out of the Bernanke testimony. The dollar index fell to 86.67, its lowest level since last September. Gold slipped to $634/ounce, with silver trading at $12.61/ounce. Copper prices remain strong, at $3.21/pound.

BMB Note: Hmm. What do you make of a day like today? Good healthy volume, but a very split tape, with energies, commodities and metals getting blasted along with the HMOs, housing and assorted others. And the discouraging thing on the plus side of the market today was that many of the winners were in the health care groups that had already been beaten down pretty badly.

No clear winners in market breadth, with an even split on the NYSE and another divergent day on the Nasdaq. Pretty hard to call this any sort of a rally. Days like today just emphasize the point that, these days, you can’t just buy “the market”. The strongest groups of late, the commodity stocks, appear to have put in at least some short-term tops here. That leaves us without any clear leadership, and there are some disasters taking place alongside - just take a look at the HMO index chart. Yeesh - I don’t know if they get worse than that.

What happens from here? Your guess is as good as mine. Maybe better.

Sounds like Bernanke said plenty, but didn’t say a whole lot. And he said enough that he gave absolutely no clue as to what the Fed would do. Not that I think he should have. But I just think it’s funny that everyone waits to get a hint as to what might happen, and they get stuff like this:

“There is … the possibility that if there is sufficient uncertainty, that we may choose to pause, simply to gain more information to learn better what the true risks are and how the economy is actually evolving,”

“Of course, a decision to take no action at a particular meeting does not preclude action at subsequent meetings,”

“In particular, even if in the committee’s judgment the risks to its objectives are not entirely balanced, at some point in the future the committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook,”

Lemme see if I got this straight: we might pause, we might not. We might pause, then keep going, but we might not pause, we could just keep going. Or we might not keep going if we pause.

The slaughter of the HMOs has accelerated, with the $HMO index down more than 6%. AET leads the way, down more than 21%. Yikes. Joining the party are CI, CNC, CVH, HNT, HUM, MOH, SIE, WCG and UNH. Maybe more that I haven’t seen. Total devastation going on in that group lately.

Many of the metals and mining stocks are getting trashed today. ATI, TIE, MDG, ACH, PAL, PD, RTP, PCU, CMC, MEE all down more than 4%. Sometimes, everyone just decides it’s time to get out, and they leave.

After an initial rush for the exits, the market has turned things around rather quickly, and we now find the Dow and Nasdaq above ground, with advance/decline figures coming up from their early depths to right near zero. At this point, more groups are higher than lower, which is a far cry from where we were right after the open. In what is a quickly changing environment right now, we find biotechs, utilities and drug stocks higher, while HMOs, steel stocks, oil services and housing stocks lead the move downward.

Some of the turnaround can probably be attributed to early remarks coming from Bernanke in his testimony before Congress.

The bond market, after sending yields higher, has turned around as well, and yields are now slightly lower. Energy prices continue to drift lower. The dollar was higher early in the morning, and is now falling back. Gold and silver are holding fairly steady to yesterday’s levels.

Deron Wagner says he’s keeping a close eye on the Internets and Semiconductors to see if they make a move to join the biotechs in the Nasdaq ugly camp:

The Goldman Sachs Internet Index (GIN) closed only 1.1% above its 200-MA, while the heavily weighted Semiconductor Index (SOX) is sitting only 4.7% above its 200-day MA. If either of these sectors follow the negative lead of the BTK, it will create a lot of pressure on the Nasdaq and could result in a “series of unfortunate events.” Of course, this has not happened yet, but a cautious stance is warranted when so many sectors in the Nasdaq could slide below their 200-MAs within only one or two bad days.