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.

An essay by Congressman Ron Paul of Texas on income taxes and government spending.

It’s short. Read it. And think about it come election day.

Even as the major indices hang on at or near their recent highs, not all is well and good beneath the surface of the market. A few groups are starting to get into a bit of trouble, most notably a great deal of the health care sector - biotech, drugs, HMOs, hospitals and health care products. In addition, we’re starting to see signs of weakness in the formerly strong REITs and airlines.

Charts courtesy of StockCharts.com

Another day that tells us very little. Everything was mixed today. The Dow gained 21 points (+0.2%) to 11141, and the S&P 500 added 1 point (+0.1%) to 1297, but the Nasdaq finished lower by 6 points (-0.3%) at 2333. The Russell 2000 fell 3 points (-0.4%) to 753. The Dow Transports dropped 0.5% while the Utilities gained the same amount. Bonds barely budged, leaving rates pretty much where they were on Friday: 6-month 4.87%, 2-year 4.89%, 5-year 4.89%, 10-year 4.96% and 30-year 5.03%.

Market internals were on the negative side today, but volume dropped off quite a bit from Friday’s levels. Advances/declines were about 2 to 3 on both exchanges, with up/down volume 4 to 5 on the NYSE but worse than 1 to 2 on the Nasdaq. New highs trailed new lows on the NYSE at 90/109, but the highs won out on the Nasdaq at 125/45.

The group picture showed more groups down than up. Leading the small group of winners were the enery stocks: oil services (+2.2%), natural resources (+1.4%), oil stocks (+1.4%) and natural gas stocks (+1.3%). Making their way lower were the airlines (-2.1%), disk drives (-1.9%), HMOs (-1.5%), networkers (-1.3%), computer hardware (-1.1%), paper stocks (-1.1%), REITs (-1.0%) and housing stocks (-1.0%).

Energy prices worked their way higher, with crude oil up to $68.70/barrel, gasoline to $2.02/gallon and natural gas to $6.88/mmBTU. The dollar index held steady at 89.68. Gold pushed above $600/ounce in the futures market, with the spot price at about $599. Silver was also higher, at $12.67/ounce.

BMB Note: Indecisive. Nothing new. Can’t make a call, one way or the other, and we’ve been here for what seems like months now. Those that were waiting for the market to break after Friday’s losses have to wait a while longer. Those that are waiting for the market to break out aren’t getting what they want either. And the longer this goes on, the better cash looks.

Energy stocks seem to be one group that’s hanging on pretty well, but these days, you just don’t know how long that lasts. But there is a bit of deterioration going on, as some groups are starting to roll over, and we’ll look at a few of those charts in a post later today.

Maybe earnings will start to give us a kick one way or the other - Alcoa starts things off after the bell tonight.

From Dave Landry’s column on TradingMarkets.com last Friday:

In case you were wondering….

No, it’s not just you. This has been an extremely difficult market to trade.

Hmm. I’m not sure if that makes me feel better or not. I’ll have to check, but I don’t think my broker factors in a “degree of difficulty”.

Sure, copper prices have risen quite a bit in the last year or two, and they’re still going up. Can it continue? According to this article on the World Copper Conference, copper suppliers are facing challenges in meeting current demand, not the least of which are energy and water.

How do these commodity booms get going? Well, it’s pretty simple, really. Low prices for a period of time discourage investment in mining and exploration. Then, when demand picks up, the supply isn’t there to meet it, and it takes time for those things to ramp up again, and prices rise.

“The copper industry is facing the consequences of insufficient investment in exploration and equipment replacement and maintenance due to low metal prices over a five-year period from the end of the 90s”

Another mixed bag so far today, with gains in the Dow and S&P, but the Nasdaq flat at the moment. A/D lines are also right around flat on both exchanges. Groups are about half-and-half, with energy stocks leading the charge upward, and HMOs and airlines sliding lower. Bonds are holding relatively steady for the moment.

Energy prices are slightly higher, the dollar is flat, gold and silver are higher.

If you’re one to try and keep up with the bounces and rolls that go on in the worldwide currency markets, start your morning with EverBank’s Chuck Butler and The Daily Pfennig. Always an enjoyable read, mixed with a little current events and sports. You may as well get the currency news from the folks that live and breathe this stuff.

The US Oil Fund (symbol USO) began trading on the Amex this morning, opening at about $68.25, currently down 35 cents to $67.90.

You now have a couple of different options when looking to trade the price of oil, outside of investing in oil-related companies and futures contracts. USO will track the price of oil pretty closely. The Deutsche Bank commodity index fund (symbol DBC) is comprised of about 50% crude oil and heating oil, so it is also strongly influenced by the price of oil.

Have at it.

The weekly look at sentiment and technicals from Schaeffer’s indicates that the market could still have an upward ‘lean’ to it. But caution is still advised:

Wrapping it up, expect that the sentiment landscape discussed above will continue to fuel a market that is both resilient in staving off sellers and has an upward bias. Earnings may provide a much-needed catalyst for stocks to move higher, as pre-earnings warnings have not painted a gloomy picture for this quarter’s results. Oil and interest rates will remain on investors’ radar screens as potential potholes and are reason enough for investors to remain cautiously bullish.

Gary Kaltbaum takes a good look at the market, tells you what’s working and what isn’t, and joins BMB in voicing his concern about the bond market:

We have to start with what has been our biggest worry recently and that is the BOND MARKET. Please note that both the 30 year and the 10 year have broke out to new highs as the BOND MARKET continues to break down. We bring this up for several reasons Firstly…and we think most important…NO ONE IS WORRIED ABOUT THIS. In fact, we are finding most say it is a good thing if long-term rates go higher. Secondly, we are incensed that there is not a day that goes by that another FEDHEAD comes out and states that there is no inflation and that everything is perfect. We did not know the FED was supposed to be a mouthpiece on a daily basis. Do not worry that GOLD, SILVER, COPPER, STEEL, ALUMINUM, OIL, PLATINUM, PALLADIUM and others are at multi-decade highs. Do not worry about the rising costs of everything you pay for. According to the FED, there is no inflation. We will simply let the BOND MARKET become the final arbiter on inflation…as it always has. We understand that rates are still low on a relative basis…but we are watching the direction closely.