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.

Larry McMillan isn’t exactly sowing seeds of hope in this week’s Option Strategist Weekly Updater (sign up here):

“A sharp, but short-lived rally is occurring, but the intermediate term is bearish.”

Ironically, the above comment is the same one we used three weeks ago. The market was more oversold this time than it was then, so perhaps the current rally will last longer than the 3-day one we saw a few weeks ago. The overriding picture is still bearish, though, as markets that have been this deeply wounded do not just turn around and go straight up.

From a bullish perspective, the best that can be hoped for is that this rally is strong enough to build upon when the inevitable retest of this week’s lows occurs. That retest might not take place for several weeks, depending on the strength of this bounce, but it surely will take place. If that retest holds, then the intermediate-term “W” bottom will have formed, and one might then adopt a more positive, longer-term outlook…

…many indicators are in place for a short-term rally. Of course, they were in a similar state three weeks ago (both breadth and $VIX gave buy signals then), but the bears turned that rally back with a vengeance. We don’t expect this one to do much better, and don’t think it will get much past 1260 on the $SPX Index.

Not much to get excited about today. The market started out with a negative bias right out of the gate this morning, and was never really able to shake that feeling. The Dow Industrials finished down less than a point at 11015. The S&P 500 dropped nearly 5 points (-0.4%) to 1252 and the Nasdaq fell 14 points (-0.7%) to 2130. The Russell 2000 dropped 8 points (-1.1%) to 693. The Dow Transports fell less than 0.1% and the Utilities were flat. Bonds were relatively flat until midday, when they began to fall and yields went up: 6-month 5.18%, 2-year 5.16%, 5-year 5.10%, 10-year 5.13% and 30-year 5.17%.

Market internals turned lower today, and options expiration didn’t contribute a huge amount to volume, although trading did pickup slightly from yesterday. Advance/declines were 7 to 12 on the NYSE and 1 to 2 on the Nasdaq. Up/down volume was 3 to 7 on the NYSE and 1 to 2 on the Nasdaq. New highs/lows were 26/101 on the NYSE and 53/88 on the Nasdaq.

Not a lot of positive movement in the groups - wait, not a lot of movement period. Only a short list of winners with airlines leading the way, up 0.9%. On the down side, we find the disk drives at the bottom, down 1.4%, followed by biotechs (-1.1%), computer hardware (-1.0%) and networkers (-0.9%).

Energy prices were mixed - crude oil up 30-odd cents to $69.88/barrel, gasoline flat at $2.04/gallon and natural gas down a dime to $7.18/mmBTU. The dollar regained all of its morning losses, and is holding at 85.94. Gold is holding its ground at $579/ounce, and silver fell a nickel to $10.13/ounce.

BMB Note: Well, not a real exciting expiration festival. I’m not too surprised that stocks gave a little back today after yesterday’s big run - you almost had to expect a little selling into that huge rally. I would have sold too if I was still waiting to get out of something.

So what does today tell us? Not a heck of a lot. We’re still stuck here trying to figure out what’s going to happen from here. Do we get a big runup into resistance? Does this bounce peter out and turn down to retest the lows? Or do we get some follow-through to yesterday’s big action and start grinding our way higher? Too early to tell, so it’s too early to act.

We’ll keep watching - but remember, the downtrend is still in effect, and the market bias is down until proven otherwise. That keeps us leaning toward looking for short opportunities rather than longs. Next week should help clear up the picture a bit.

In the meantime, the 6-month T-bill is yielding 5.18% today. Have a good weekend. BMB will be here with the sector and industry breakdowns.

BMB is currently involved in home projects (again. Will it never end???) Luckily there isn’t much happening on the market today. The wrap will be here as always, but might run a bit late. The weekend updates will also be posted. Now, where did I put the pliers?

Mostly negative open thus far, but not unexpected after yesterday’s big gains. The damage isn’t severe yet, and it could shape up to be a rather quiet day if things don’t get worse. Major indices are just under water, and advance/declines are in the red, as are most of the groups. Gaining ground are the airlines, helped by some fare hikes yesterday. Some of yesterday’s winners are giving up a little - steel stocks, oil services, natural resources, semiconductors, disk drives and oil stocks. Bonds are showing little change at present.

Energy prices are pretty much unchanged, and the dollar is rallying back after an overnight dip. Gold and silver are slightly higher.

Lots of futures and options expiring today. Generally, we see a pickup in volume on these days. Sometimes, we’ll see added volatility as well - but with as much volatility as we’ve been getting lately, I’m not sure you could tell the difference.

Nikkei up 408 points, Hang Seng up 407. European indices are higher, but less than 1%. US index futures are slightly lower following yesterday’s big move.

Crude up a nickel, gold up 14 bucks.