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.

Hmm. What is the market trying to tell us when it sends the brokerage stocks AND the exchanges out to the woodshed at the same time?

Charts courtesy of StockCharts.com

Well, what sort of shenanigans is someone going to pull next to send the energy markets into a tizzy? I guess it’s Bolivia’s turn.

Well, things backfired on Tout TV today. The market was doing ok - not great, but ok - going into the last hour of trading until CNBC hit it from the blind side. The Dow finished down 24 points (-0.2%) at 11343, the S&P fell 5 points (-0.4%) to 1305, and the Nasdaq dropped 18 points (-0.8%) to 2305. The Russell 2000 lost 3 points (-0.5%) to 761. The Dow Transports gained 0.1%, but the Utilities fell 0.9%. Bonds were lower all day, but got a little kick downward on that late CNBC report, and yields moved even higher: 6-month 4.95%, 2-year 4.95%, 5-year 5.01%, 10-year 5.14% and 30-year 5.23%.

Market internals were negative, but volume lightened up significanly from the end of last week. Advance/declines were 4 to 5 on the NYSE and 7 to 12 on the Nasdaq, while up/down volume was 3 to 4 on the NYSE and 3 to 5 on the Nasdaq. New highs/lows were 230/121 on the NYSE and 183/51 on the Nasdaq.

Looking at the groups (without new numbers on housing and banking), we find more groups down than up, and the ’stuff’ stocks leading the way once again: steel stocks (+3.6%), oil services (+2.2%), commodities (+1.9%), oil stocks (+1.5%), natural resources (+1.4%) and natural gas stocks (+1.2%). Leading the losers were the brokers (-3.2%), biotechs (-1.4%), REITs (-1.3%) and hospitals (-1.1%).

Energy prices rebounded, with crude oil up nearly two bucks to $73.70/barrel, gasoline up to $2.15/gallon and natural gas to $6.70/mmBTU. The dollar had a much better afternoon than morning (as rates spike late in the day), and recovered much of its early losses, leaving the dollar index at 86.09. Gold came back to $654/ounce, silver to $13.83/ounce.

BMB Note: Today we saw again just how Fed fanatical this market is. We wouldn’t have as much of a problem with these Fed freaks if they would just stay in their offices and keep their mouths shut, particularly when there are CNBC anchors around.

The energy/commodity stocks still seem to be the strongest areas. And we’re seeing a sharp move down in the brokers - does the market know something here or is this just a pullback after a strong runup? Tough times in the market could lead to tough times for the brokers - is this a hint?

Has anyone seen the Philadelphia Banking or Housing indexes today? My live quote screen has had no updated values for them throughout the day, nor does anywhere else I have looked: StockCharts, Yahoo, MSN, another broker - not even the PHLX web site itself has updated values. Apparently they’re not showing up on any data feeds anywhere.

The lack of the index values would sure throw a wrench into my group tracking…

CNBC is interviewing Chicago Fed president Michael Moskow live. Take a look at the action in the markets - things took a dive in the last 10 minutes, as investors react to every word these people say.

During the interview, Maria Buttarooni said that Fed Chairman Bernanke told her over the weekend that the market got it wrong when they interpreted what he said on Capitol Hill last week - and the market promptly tanked.

Get these people off TV. They have no business being out jabbering like they’ve been, and jerking the markets around.

Update: Marketwatch has already placed the blame for the drop on CNBC:

U.S. stocks turned lower Monday after a CNBC anchor said Federal Reserve Chairman Ben Bernanke had told her that the markets had misunderstood his congressional testimony, interpreting him as more dovish than he was on interest rates. Noted CNBC news anchor Maria Bartiromo announced on the air that she had a private conversation with Bernanke at a Washington dinner on Saturday and Bernanke told her that the media misunderstood his remarks. In testimony to Congress on Thursday, Bernanke said: “there is … the possibility that if there is sufficient uncertainty, that we may chose to pause, simply to gain more information to learn better what the true risks are and how the economy is actually evolving.” Bartiromo said that Bernanke told her that he was trying to create flexibility for the central bank and data would determine rate moves.

Don’t look now, but even the 6-month T-Bill yield is threatening the 5 percent mark!

Today’s Treasury auction results: 3-month investment yield = 4.807%, 6-month investment yield = 4.966%.

Chris Johnson remains “cautiously optimistic” in the weekly look at technicals and sentiment from Schaeffer’s:

While sentiment remains in a position to extend the new highs, the clock appears to be ticking. Some of our key indicators are beginning to suggest that the pessimism that has been unwinding in the market may be near the end of its decline. If so, the market could become more vulnerable to selling pressure in the near future, as the sideline money that helps fuel higher equity prices begins to fade…

So let’s get to the bottom line, Despite the fact that a significant amount of unwinding pessimism has been exhausted, resulting in a lot of sideways activity, there appears to be enough to remain cautiously optimistic over the next few weeks. With some technical strength remaining under current market levels, stocks should be able to mount an advance to higher prices. As I have pointed out over the last few weeks, crude oil, interest rates, and saber rattling will continue to add jitters to the daily activity, though the overall uptrend should extend itself over the short term.

Stock have given up some of their early gains, and the major indices are settling back toward the flat line. Advances/declines remain positive on the NYSE but are back below zero on the Nasdaq. More groups up than down, with some of the usual suspects leading the pack: steel stocks, commodities, oil services, resources, oil stocks and precious metals. The brokers continue to lose ground.

Bonds are lower, with yields working their way higher again: 5.14% on the 10-year and 5.23% on the 30-year. The dollar is still struggling, much to the delight of gold and silver: gold pushing $660/ounce and silver nearing the $14 mark. Energy prices are also working their way back up after last week’s pullback.

Aside from possible opportunities in gold, banks and Mexico, Deron Wagner remains cautious on the major indices:

As for the major indices, nothing has substantially changed since our last analysis of the S&P and Nasdaq. For the S&P 500, the 1,310 level remains a key area of resistance that the index has failed to hold above on numerous occasions over the past seven weeks. Until it convincingly breaks out of that range, we must remain cautious with new long positions. The relative weakness in the Nasdaq provides further reason to reduce your share size and quantity of positions on the long side. Yet, the Nasdaq remains in a choppy, sloppy trading range as well. Keep an eye on the 2,312 level, ten points below last Friday’s close, as that represents support of the 50-day moving average. A break below that could trigger a wave of downside momentum, particularly in the tech arena. As short-term trend traders, we would be equally fine with a breakout to new highs or a breakdown below support, as either one should result in the development of a new trend. But as it has been for the past two months, steady trends remain few and far between, continuing to challenge both short-term momentum and trend traders.

Gary Kaltbaum agrees with BMB - we need to keep an eye on the bond market and the dollar. As long as these two markets are in decline, it’s unlikely that a lot of good things will come of it.

Incidentally, the dollar index has broken below 86 in this morning’s trading.

Personal income and spending numbers in this morning. Not a lot to speak of, but a lot of folks are watching the wage numbers - inflation can really take hold once wages pick up to keep pace with the higher prices.