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.

According to Deric Cadora over at The DOCument, homeowners are still rushing to get cash out of their “housing ATMs” in a race against higher interest rates:

Another eventual victim of the housing slowdown will be retail stocks, but their demise may be further off than many bears suspect. Freddie Mac reported that cash-out refinances as a percentage of total refinancing activity ran at its highest level since 1990 during the first quarter of 2006. The percentage was reported at 88%, up from 81% in the fourth quarter of 2005. This report exemplifies how macro processes can take a very long time to reverberate through the economy. Though mortgage rates bottomed in late summer and median home prices have been declining since September, the housing ATM has actually accelerated as home owners rush to get cash before rates rise even further. We will see an even further delay in the topping process for retail shares as this cash is slowly dispersed into the consumer economy.

And here I thought that the consumer would start coming to his/her senses soon. Silly me.

Despite near-75 dollar oil and gold above $665, the stock market continued to grind its way higher today, recovering from yesterday afternoon’s CNBC takedown. The Dow Industrials gained 73 points (+0.6%) to 11416, the S&P 500 added 8 points (+0.6%) to 1313 and the Nasdaq was higher by 5 points (+0.2%) to 2310. The Russell 2000 gained 6 points (+0.9%) to 768. The Dow Transports tacked on 1.3% and the Utilities were up 2.4%. Bonds were slightly higher, holding yields down a bit: 6-month 4.97%, 2-year 4.92%, 5-year 4.98%, 10-year 5.11% and the 30-year 5.20%.

Market internals were positive, with very little volume change from yesterday. Advancers outnumbered decliners by 12 to 7 on the NYSE and 5 to 4 on the Nasdaq, with up/down volume 13 to 6 on the NYSE and 5 to 4 on the Nasdaq. New highs/lows were 227/109 on the NYSE and 170/66 on the Nasdaq.

The group cross-section shows more groups up than down, with oil services leading the way (+3.4%), followed by commodities (+2.1%), natural resources (+2.1%), natural gas stocks (+2.0%), utilities (+2.0%), steel stocks (+1.8%), oil stocks (+1.8%), paper stocks (+1.8%), networkers (+1.6%) and the brokers bouncing a bit (+1.3%). Leading the way down were biotechs (-1.6%) and the homebuilders (-1.0%).

Energy prices made their way higher again, with crude oil reaching to $74.61/barrel, gasoline $2.18/gallon and natural gas $6.75/mmBTU. The dollar index slipped to 85.86. Gold continues to surge to new quarter-century highs, with the spot price now above $668/ounce. Silver climbed to $14.30/ounce. Copper is trading at $3.28/pound.

BMB Note: I continue to be amazed that stocks are hanging on as well as they are, with energy and commodity prices continuing to climb, interest rates up and the winds of inflation blowing all around. We are seeing groups break down from time to time, but many times those groups will catch themselves and stop the slide after a week or two - an exception to that may be the homebuilders, which look to be starting another leg down. And the major indices have a way of hiding the troubles beneath the surface. But the fact remains that the troubles just haven’t grown large enough to tear things down.

We are seeing rotation even in the major indices once again, as the Dow and S&P put in new closing highs for the year, but the Nasdaq has returned to the rear of the train, having closed the past two days below its 50-day moving average. And it wasn’t very long ago when we were talking about the Nasdaq outperformance. Bottom line is that there is still a lot of churning going on, and not a lot of progress.

Except of course, in a few areas. I can’t really complain, as I’ve stayed long the energy/commodities/metals complex, and have done very well by doing so. And I will continue to stay there as long as its working.

Okay, so going from 4 miles per gallon to 5 or 6 may not sound like much, but every little bit helps…

Even the military wants better gas mileage.

Of course, given the latest automotive sales figures, the American public might be getting a little bit pickier about gas mileage too. Funny, every time an automotive CEO is interviewed, he insists there is no reason to make fewer trucks and SUVs…the whole US auto industry has been particularly slow to turn to innovation also. And for the record, while the “industry executives” are surprised at how quickly the SUV market is eroding, sitting here, I’m surprised at how SLOWLY it has eroded.

Quotes on the PHLX Banking Index (BKX) and Housing Index (HGX) still are nowhere to be found today, and the PHLX web site seems to be having its share of problems as well. I have no idea why those indexes have no new quotes available, and I’d be awfully surprised if they’ve been discontinued. They can’t just yank ‘em when there are options traded on them…

Anyway, for the time being I’ll be using the StreetTracks KBW Banking index ETF - symbol KBE - to track the banks, since the KBW index is the same as (I believe) the PHLX. And I’ll be watching the StreetTracks SPDR Homebuilders ETF - symbol XHB - to track the housing industry.

Update: Hey!! It looks like the BKX and HGX might be back. We’ll see if they stick around.

Not a lot of movement this morning, and no real economic news to push things one way or the other. The indices have recovered a few points from yesterday’s drop, with the A/D line positive on the NYSE but just below the flat line on the Nasdaq. More groups are up than down, led by the utilities, natural gas stocks and oil services. Biotechs lead the losers - of course, I’m still without an updated reading on the PHLX housing index (HGX), and quite a few of the homebuilders are getting smacked around today, so I wouldn’t imagine that index looks real good - if you could see it.

Bonds are up a bit, with yields a little lower. Energy prices are also slightly higher. I can’t get to my dollar index page either, but I think the dollar is lower. Gold and silver are up - I do know that!

Yesterday’s not-so-little episode near the end of the trading day, with CNBC’s Buttarooni mouthing off about Bernanke, has got Gary K. sending off letters to the Fed. His message? “SHUT UP!”:

It was bad enough that two more FEDHEADS yapped earlier in the day but are you kidding? The head honcho…the top dog.,..the big cheese…the man that trillions of dollars around the world react to…is now talking to journalists? Big Al was at least smart enough to know when and when not to open his mouth. Do we have to worry about Big Ben’s next cocktail party? Maybe he should have put his name in for co-host of “The View.”

Tonight, I am writing a letter to the FED. It is bad enough they decided to not announce M3 anymore…but the endless chatter is now becoming ridiculous. I am simply going to ask them to keep it down. I am simply going to explain to them that the markets are fragile and words will one day hurt. I hope they listen. It is absolutely insane what they are doing and I repeat…if they keep this up, one day the market is not going to like what they say…and look out.

My real problem is that the Fed may be trapped now. They want to ease but see soaring commodity prices, a housing bubble, a cracking currency and an uncooperative bond market. This is going to get interesting.

And on the current market conditions, he has this to say:

As I suggested in the weekend report, the BROKERS were getting in some trouble. On Monday, they cratered…and this was before the market was hit. We now add another market proxy as being in trouble, the INVESTMENT MANAGERS. Names like BEN, AMG and CLMS are now joining the ugly party. This is very important as these groups are market proxies. We would not ignore that these areas are breaking down. Add in the recent tops in BIOTECHS, SEMIS, UTILITIES, REITS and a few others…and you have a market that needs to be watched closely. With all the internal damage being done, we believe the next time down is not just going to be a normal correction. We believe there is a chance of something of consequence. We advise you to watch the support levels we have outlined for you.