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.

Correction in gold or was it Mr. T dumping his chains suddenly into the gold market?

Not quite as yukky as yesterday, but more yuk nonetheless. CNBC tried pretty desperately to put a positive spin on things by telling us that there wasn’t any late-day selloff. Yeah, thanks. There was an early selloff instead.

The Dow tumbled another 107 points (-1.0%) to 10739 - its third triple-digit drop in a row. The S&P 500 fell 6 points (-0.5%) to 1236 and the Nasdaq dropped another 17 points (-0.8%) to 2037. The Russell 2000 lost 6 points (-0.9%) to 681. The Dow Transports fell another 1.5% while the Utilities gained 0.2%. The bond market continues to push yields down: 6-month 5.25%, 2-year 5.09%, 5-year 5.03%, 10-year 5.07% and 30-year 5.12%.

Market internals were again negative, but volume did lighten up a bit from yesterday’s levels. Advances/declines were just better than 1 to 2 on the NYSE, but a little worse than 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 were again hard to find, with highs/lows at 24/219 on the NYSE and 35/239 on the Nasdaq.

We did see a few groups in the green today, but there were more in the red. Gaining ground were paper stocks (+1.7%), gold stocks (+1.5%), natural resources (+1.0%) and oil stocks (+0.9%). On the losing side were the homebuilders (-3.4%), airlines (-3.3%), transportation (-2.0%), biotechs (-1.8%), disk drives (1.4%), computer hardware (-1.4%), networking (-1.4%), REITs (-1.3%) and metals and mining stocks (-1.3%).

Energy prices were higher for the fourth day in a row. Crude oil pulled back from near $78, but set a new closing high of $77.03/barrel. Gasoline was up 2 cents to $2.32/gallon and natural gas jumped 24 cents to $6.35/mmBTU. The dollar is finding strength amidst the global unrest, and the dollar index moved up to 86.15. Gold edged up to $666/ounce, but silver pulled back to $11.47/ounce.

BMB Note: BMB had been telling you that the market was feeling ‘heavy’. Well, this week, whatever was holding up that increasing weight let go and it fell, big time. If you’d been cautious, as you should have been, you haven’t been hurt too badly, if at all. If you were long oil, you even got a boost this week.

The bearish condition of the market remains something that needs to be taken seriously. If you haven’t already taken steps to protect your capital, BMB recommends that you consider doing so until conditions improve.

As crude oil trading closes for the day above $77/barrel, it’s interesting to see where the futures market is betting the price of oil will go. Right now, all of the futures contracts from December ‘06 through July ‘07 are trading just above $80, and prices start to slope lower after that.

Many of the metals stocks have been hurt in the recent selloff, but the action has been particularly bad in the titanium stocks. Today, we have RTI down 11%, TIE down nearly 10% and ATI down 6%, adding to their losses of the past few days.

I guess they’ve decided to kick ‘em while they’re down.

Big breakdowns in the transports over the last couple of days, and it looks like that group has finally been dragged into the ugly party. Here’s a list of some of those that are suffering mightily: AMR, CAL, CHRW, CSX, EXPD, FDX, GMT, JBLU, LCC, LSTR, R, UAUA, UNP, UPS.

Keep your eyes on the transportation group if you’re looking for short candidates on the next bounce.

The yuk continues. Major indices in the red, advance/declines quite poor, and only a few groups in the green. Big losses in the homebuilders, airlines/transportation and steel stocks. Bonds are mixed, the dollar is maintaining its strength.

Energy prices are higher, crude at $77.15. Gold and silver also higher.

The market has yet another reason to sell off this morning, as July consumer sentiment falls.

Gary K. says the bear market started back on May 11th, and the recent action just proves that its “gaining teeth”:

The blame for Thursday’s action was OIL going up another $3. The blame for Thursday’s action was heightening Middle East problems. I wanted to be clear. If we were in a bull market right now, the stock market would not be going down like this. I am not naive. Geopolitical news does have an effect on markets. The news does not help…but we have had Middle East problems since I was born. OIL PRICES have been in the 70s for months. Please recall the London bombings. The markets went down for a few hours and then ramped right back up. Why? Because the market was still in a bull phase at that time. Keep things in perspective. This bear market started on May 11…not on July 13…

…As I thought would happen, the rest of the market is now playing catch-up to the weakest areas. Their patterns are horrid. We continue to believe you should be at your most defensive position right now because we believe we are still in the early innings of this bear that will have more to go in time and price.

Emphasis mine again. Ignore at your own financial risk.

Valuable advice from Deron Wagner this morning (emphasis mine - BMB):

Our reversion back to a negative short-term bias has certainly been confirmed by the price action of the past several days. Our bearish intermediate-term bias that we assumed in late May never changed, despite the late June bounce. There will occasionally be upside retracements, sometimes fast and furious, within the context of the current downtrend, but there is nothing to indicate the selling is finished or that stocks have found a market bottom. It is crucial that you are vigilant with regard to cutting losses on any long positions that fall more than 7 or 8% below your entry price. Failure to stick with a plan of protective stops could easily result in the rapid disappearance of your trading capital when downside momentum is so strong. Live to trade another day by maintaining discipline to cut your losses. Better yet, follow the trend of the market and profit instead.

Retail sales for June fell 0.1%, but were up 0.3% ex-autos. Still an unimpressive number.

The Bank of Japan raised its key interest rate by a quarter-point - the first time since 2001 that the rate has been above zero.

Another step in the global tightening process.

Asian markets were lower, European indices are lower this morning. Oil trading at $77.75, nearing the end of electronic trading. The dollas higher higher, as are gold and silver.