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.

Or in this case, symbol dropping.

As shaky as the market seems, there are still some stocks that are holding up, and may be pulling back at the moment. I know some folks just love to trade, so it’s up to you to decide if they look good to you, where your entry point might be, and if you’ve got the guts to buy ‘em in this market: CHRW, CME, CMI, CPB, DAKT, EXPD, FTI, KSS, LVS, MRO, ODFL, OII, PXD, TTH, UCO.

As always: these are not recommendations, just observations. BMB holds no position in any of these stocks.

	While the Dow and S&P try to hang on, the Nasdaq 100 looks like it’s about ready to give it up. The $NDX dipped below the late June lows today, but recovered to close right at that level of 1520. If that level doesn’t hold, the mid-June low of 1511 is only a few points away.
	The index is also teasing the lows set last October. A break below current levels would not be good news.

Charts courtesy of StockCharts.com

Still some decent looking yields coming out of the short-term Treasury market. Today’s auction results show an investment yield of 5.056% on the 3-month T-Bill and 5.313% on the 6-month.

You might look at the numbers for today and say that the market didn’t do a heck of a lot, and in some ways you’d be right. But the intra-day action was pretty disappointing. The market started off relatively strong, but deteriorated all throughout the day, bouncing only slightly in the last hour to make things look a little better. The Dow Industrials finished with a gain of 13 points (+0.1%) at 11104 - but the index had been as high as 11174. The S&P 500 closed with a gain of 2 points (+0.2%) at 1267, but that was 7 points off its high of the day. The Nasdaq, once again, was a true laggard, losing 13 points (-0.6%) to 2117. The $COMPQ had been as high as 2142 early in the day. The Russell 2000 pulled the same stunt, falling from an early high of 716 to finish at 710, resulting in a loss of less than a point. The Dow Transports hung onto a 0.4% gain, and the Utilities added 0.5%. Bonds recovered from an early dip, and finished about flat, with yields holding pretty steady: 6-month 5.28%, 2-year 5.17%, 5-year 5.09%, 10-year 5.13% and 30-year 5.17%.

Market internals also worsened as the day wore on, and finished mixed, but on lighter volume than Friday. The NYSE internals were positive, with advances/declines at 3 to 2 and up/down volume 5 to 4. Things were much bleaker on the Nasdaq, with A/Ds at 4 to 5 and up/down volume near 1 to 4. New highs/lows were 70/76 on the NYSE but a poor 47/118 on the Nasdaq.

The group picture was about evenly split, but the losers put up bigger numbers than the winners. Finishing in the green were the airlines (+1.7%), HMOs (+1.1%) and REITS (+1.1%), while the residents of techland took it on the chin. Leading the way down were the disk drives (-2.6%), networkers (-2.4%), semiconductors (-2.4%), computer hardware (-2.2%), software (-1.1%), computer tech (-1.1%), biotechs (-1.0%) and internets (-1.0%).

Energy prices were mixed, with crude oil down about 50 cents to $73.61/barrel and gasoline sliding more than a nickel to $2.18/gallon, but natural gas bounced up almost a dime to $5.61/mmBTU. The dollar gained a little ground overnight and held those gains, bringing the dollar index up to 85.47. The precious metals pullback continued, with gold slipping to $624/ounce and silver to $11.04/ounce.

BMB Note: You can tell me all you want that we’re in a ‘rally’ here, or that sentiment shows that stocks should be moving higher, but I’m not buying it. Did you see what happened to the tech stocks today? Ugly stuff. And let’s be clear - any sort of “rally” will NOT have any legs at all with the tech stocks as battered and bloody as they’re getting. The techs have to find some support, and soon, or things could get a lot worse very quickly.

As I said last week, this market still ‘feels’ very heavy to me, and I am very wary of the long side. The tech stocks are already in a pretty serious bear market of their own, and there isn’t much that’s doing real well. I’m keeping an eye out, trying to decide what moves I want to make if things break down. Also watching some of the market-leading ‘hot’ stocks that are taking pretty big hits, like GRMN and HANS. When the leaders start to gag, be very careful.

For all the talk of money waiting to flow into this market, I just don’t see it happening. And if it is happening, that money certainly isn’t going into the big Nasdaq names.

The Nasdaq 100 ($NDX) today has tested - to the point - it’s June 28th low of 1520. So far, that low has held, and the $NDX is currently at 1522. If that low is broken, the June 13th low of 1511 isn’t very far away…

Update: Here are a few of the big tech names down more than 3% today: SNDK, MRVL, NTAP, NVDA, AMD, PALM, HPQ. Ouch.

Some of the buzz in the energy market this morning has to do with an article in the Wall Street Journal - I’m not a subscriber, so I have not read it - that says that the Saudis will be exploring ways to get at untapped reservoirs of heavy crude. The tease paragraph on WSJ Online says:

Saudi Arabia is testing a technique that could unlock its hard-to-tap reservoirs of heavy crude. Amid soaring demand for energy, the effort could add significantly to Saudi oil reserves and inject slack into tight energy markets.

I have one question: Why would the Saudis bother with the extra expense and effort to get at heavy crude if their supply of light sweet crude was still plentiful and easy to extract?

Think about it. Matt Simmons, in his book “Twilight in the Desert”, talked a lot about the Saudis and all of the publicity they did, bragging about all of the latest fancy technology they were using to increase their oil production. Simmons made the point that the reason that the Saudis were bothering to make use of all of the latest technology was that they have to - their major oil fields’ production levels are already in decline, and without the latest technology, they would simply be unable to keep production levels where they are. As a matter of fact, Saudi oil production has been falling, not rising, even with oil prices at levels above $70/barrel:

Saudi Arabian oil minister Ali Naimi acknowledged that Saudi Arabia only produced 9.1 million barrels of crude oil per day in April. That’s 400,000 barrels less than they have typically been producing over the last two years, which would be a significantly bigger supply reduction than that resulting from conflict in Nigeria in February and March.

And there are others who believe as well that the world’s oil production capacity has peaked:

Academic and former National Iranian Oil Company executive Dr Ali Samsam Bakhtiari has told the Financial Services Institute in Sydney the world’s oil fields are producing as much oil as they can.

He says giant fields in Saudi Arabia and Kuwait are struggling to meet production targets.

Dr Bakhtiari says the massive output declines in the North Sea oil fields and Mexican oil fields will have a major economic impact.

“Crude oil is the master domino,” he said. “When you tumble crude oil, all the other dominos tumble.”

Dr Bakhtiari says for the first time in 150 years, the world is entering an era in which it cannot have all the oil it wants.

Believe it. Or not. Your choice.

For your reading pleasure:

Toil, Trouble, and Rot, a short story by the BMWife, is available online for the next 14 days as part of the Short-Form Writing Competition with Amazon Shorts.

Read it and rate it!

Slight gains off of the open are holding thus far, but the gains aren’t huge. Advance/declines are positive and more groups are higher than lower, but the numbers aren’t real big on either side. The airlines, HMOs, chemicals and defense stocks lead the winners, while tech stocks lead the losers yet again.

Bonds are just a little lower, yields a little higher. Oil and gasoline are lower, natgas higher. The dollar is up slightly, with gold and silver lower.

Chris Johnson tells us that the sentiment indicators still show that money is poised to move into the market:

Technicals played heavily on the market last week, as the S&P 500 (SPX - 1,265.48), Dow Jones Industrial Average (DJIA - 11,090.7),and Russell 2000 Index (RUT - 709.30) were each rejected at their respective 50-day moving averages on lighter-than-average trading volume during the holiday-shortened week. We said last week that these trendlines would be key in determining short-term success or failure for the market, as there is often increased buying or selling based off the market’s ability to break above or remain below these support/resistance levels. Should investors continue to worry as the market becomes troubled by these trendlines? Our analysis of current market sentiment suggests that buyers are ready to move into the market, adding to the bullish short-term potential. Combined with the kick-off of earnings season with Alcoa and others ready to post their quarterly results, this increases the odds that the market will make a breakout move this week.

I’ll believe it when I start to see the charts improve…

The evil oil companies have had every opportunity to gouge you, the consumer, recently, and they’ve just been blowing it. From Phil Flynn’s Energy Report:

Gasoline demand is at record highs yet gasoline prices are not! What is wrong with this picture? Maybe the oil companies are not trying hard enough! I mean what kind of gouging is that? I am so irritated I may start my own investigation! Oh come now great gougers, we have heard of your amazing ability to move oil prices and control the weather and world events at will and according to the Lundberg survey the best you could do is an 11 cent increase in retail gas prices the last two weeks?! And what is worse retail gasoline prices came short of the all-time record high of $3.00 a gallon, only hitting $2.995! Come, come Big Oil; get to work because you’re really not trying.

It’s not like Big Oil didn’t have excuses. How about the oil spill in the Calcasieu shipping channel due to all those heavy rains? That was a tailor made excuse. I mean hey, it came right as we heading into the 4th of July super driving weekend extravaganza. What, no spot shortages? What, no panic buying? What about the price of crude that has reached a record high? It hit a record high and has been stubbornly trading in the $70.00 per barrel handle. Certainly Big Oil could have used that fact to drive prices above the record high. There is Iran playing chicken with the world community over their nuclear program and the always entertaining Kim Jong Very-Ill threatening a possible all out war if you make him angry.

So what is Big Oil’s problem! Now is the time to gouge! What’s wrong with those guys! We always understood from our legislators they were the worst of the worst! Thieves in the night…and the day in fact! Instead they allow near record imports to offset refinery issues. They are trying to build supply to meet record demand. And in spite of that we are not paying a record high price for gas. What kind of market manipulating gougers are they? You Big Oil guys are not living up to your reputation. Hmmm…

Regarding our post on Too Inc. over the weekend: the company’s name change to Tween Brands is complete, and the stock began trading today under the symbol “TWB”.

Gary Kaltbaum is back from his two-week vacation in Hawaii, and it’s pretty obvious he enjoyed himself. Of course, if you go to Hawaii and don’t enjoy yourself, you have serious problems.

But the two weeks away didn’t do much to change his market view:

Since June 29th, the market has already experienced 2 distribution days. Sorry, this does not look good on a resume’.

Many of the strongest stocks in the market came under heavy volume distribution on Friday. This is the last thing one wants to see.

The unofficial Kaltbaum indicator says there are very few stocks in good bases to buy off of right now…but on the other end of the spectrum, there are a ton of names that look not only sellable…but shortable in here.

Lastly, earnings are going to start coming out in droves. Don’t worry about the noise…worry about the reaction.

Aren’t you glad I am back? I bet you bulls would love to send me back to Hawaii.

Asian markets did pretty well, the Nikkei finishing up 1.6% after starting down more than 1%. Not much movement in the European indices at the moment. US index futures pointing higher.

Oil prices lower, natgas higher. Gold lower, little change in the dollar.