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.

From Chuck Butler’s Daily Pfennig this morning:

Did you see the quote from the new U.S. Treasury Secretary, Henry Paulson, yesterday? Oh, this is sooooo classic! Out of one side of Paulson’s mouth came the “a strong dollar is in the best interest of the U.S.” statement… And out of the other side of his mouth came the “The Chinese need to allow the renminbi to become more flexible” statement… CLASSIC!

In case there’s any confusion here… By saying he wants the Chinese to allow the renminbi to become more flexible, he’s saying that he wants it to get stronger. Mainly VS the dollar, which would mean a weaker dollar…. Now, we know that Paulson is just another John Snow…

I have a feeling we will be seeing higher oil and gas prices over the next couple of weeks. A few more days of maps that look like this one, and they’ll be evacuating rigs in the Gulf.

SINA - closed at 20.91, trading at 24.60
INSP - closed at 21.22, trading at 23.15
SBUX - closed at 33.30, trading at 30.30
FOXH - closed at 24.45, trading at 27.65
MDT - closed at 50.93, trading at 48.00
WCG - closed at 49.81, trading at 53.50
COGT - closed at 13.70, trading at 9.70

Silver, as represented here by the SLV ETF, has made a nice move higher over the past few days. The move in silver prices has also been reflected in silver stocks, like PAAS and SSRI. On the gold front, gold prices themselves haven’t quite made the breakout yet, but the stocks are starting to look a little interesting. If the Fed decides to pause in its rate hikes next week, I would not be surprised to see the dollar suffer, and gold and silver prices benefit.

Software stocks look like they’re trying to put in a near term bottom here. The group was helped today by a 14% move up in ADBE - and all the company did was reaffirm guidance.

Charts courtesy of StockCharts.com

Markets gapped higher at the open this morning, and made a couple of runs at big moves up, but those moves faded and things traded pretty much sideways into the close. The indices did hold onto gains though, with the Dow finishing up 74 points (+0.7%) at 11200. The S&P 500 gained 8 points (+0.6%) to 1279 and the Nasdaq kept 17 points (+0.8%) of its gains for the day to close at 2079. The Russell 2000 added 7 points (+1.0%) to 697. The Dow Transports had an up day (!!!!), getting back 0.8% while the Utilities were unchanged. Bonds moved slightly higher, and yields dipped: 6-month 5.17%, 2-year 4.95%, 5-year 4.88%, 10-year 4.96% and 30-year 5.05%.

Market internals were positive, and volume ticked up from yesterday’s levels on both exchanges, but still running at below average levels on the Nasdaq. Advances/declines were 2 to 1 on the NYSE and 3 to 2 on the Nasdaq, with up/down volume near 2 to 1 on each exchange. New highs/lows were 138/46 on the NYSE and 86/88 on the Nasdaq.

Most groups were in the green, but the big winners were limited to the HMOs (+3.7%), software (+2.9%), metals and mining (+2.3%), steel stocks (+2.2%), gold and silver stocks (+2.1%), telecoms (+2.0%), hospitals (+1.8%), semiconductors (1.1%) and computer hardware (+1.1%).

Energy prices were higher across the board: crude up another 90 cents to $75.81/barrel, gasoline up to $2.34/gallon and natural gas to $7.80/mmBTU. The dollar index rose just slightly to 85.11, gold was up 4 bucks to $651/ounce and silver had another strong day, gaining more than 40 cents to $12.11/ounce.

BMB Note: The market is still trying to hold together here. The Dow was up more than 100 points twice today, and managed to keep two-thirds of that. The S&P poked up above Friday’s highs and the July 3 highs, but was just unable to stay there. As for the Nasdaq, well, it’s still a mess, and that remains a huge concern in trying to get this market to turn the ship around. With the Dow and S&P at or near the tops of their ranges, the Nasdaq and Russell are still near the bottoms of theirs. That situation has to change.

Volume was a little better today, and there is some good looking action in some groups, but other groups still look pretty poor, so you have to be choosy if you’re going to try to trade in this mess.

If you’re a Garmin (GRMN) shareholder lately, you have to have a pretty strong stomach.

June 30 - high of 109.50, closed at 105.44
July 26 - close at 98.76
July 27 - open at 98.19, close at 92.90
July 31 - close at 94.99
Aug 1, yesterday - open at 92.85, low of 88.63, close at 90.00

Today - announce earnings before market open. Hit high above 103.00 in pre-market trading. Open trading at 97.60. Hit high of 98.82. Drift down to 95.00. Conference call starts 11AM ET. Stock falls to low of 89.62. Now trading around 92.00.

Yikes.

Update: GRMN broke down even further, hitting a low of 86.15 before bouncing back up to close at 88.14.

Still waiting for confirmation. Gary K. won’t be changing his stance on the market until he sees some, and who can blame him? That said, he does see a few areas showing a little life. But on the market’s chances:

We have not changed our stance. We believe a bear market, bear phase, bear anything…whatever you want to call it…started on May 11. We have had 3 rallies in this bear…and so far, all failing. The recent failing looks to be right at short-term resistance at 1280 S&P…but do believe a move above is possible. We won’t go into the shenanigans that keeps occurring into month-end. Just that you need to know every rally has ended into the end of month window dressing. Tuesday’s action looks to be the same. Of course, window dressing is illegal.

Look how easily the NASDAQ/NDX were sent lower on Tuesday. We have told you on several occasions that these areas lead the market both up and down. The recent bounce was anemic and on light volume. We have told you many times in the past, during bearish phases, the DOW and S&P will hold up while the rest of the market leads down. This continues.

Speaking of light volume, the whole move up in the past few days was on light volume. Until we see a confirming high-volume follow through day, we are suspicious of any rally. We believe good and bad markets leave footprints. One of the most important footprints is the conviction measured by volume on any move. Always keep this in mind.

There is no way this market can be led by all the DEFENSIVE areas we have named in the past. It is simply indicative of a market in trouble. On top of that, there is literally no growth leadership in the market. In fact, most leaders of the past cycle have been smashed to bits. We continue to believe defense is the best offense.

The initial rush higher at the open has pulled back, but some of the gains are holding for now. The major indices are showing gains of just shy of a half-percent. Advance/declines have slipped, but are still in the green and most groups are higher. The HMOs, gold stocks, software, metals and mining and oil services are leading the train for now. Bonds are showing little movement.

Energy prices are higher, with crude up more than a buck and natgas up 85 cents. The dollar is near unchanged, gold and silver higher.

Here’s the headline inventory data from the EIA report today:

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell 1.8 million barrels compared to the previous week. However, at 333.7 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year. Total motor gasoline inventories inched lower by 0.1 million barrels last week, and are near the middle of the average range. Distillate fuel inventories rose by 0.7 million barrels and are above the upper end of the average range for this time of year.

On refinery capacity and demand:

U.S. crude oil refinery inputs averaged 15.5 million barrels per day during the week ending July 28, down 301,000 barrels per day from the previous week’s average. Refineries operated at 90.8 percent of their operable capacity last week. Gasoline production decreased slightly last week compared to the previous
week, averaging over 9.0 million barrels per day, while distillate fuel production remained relatively unchanged, averaging over 3.8 million barrels per day.

Total products supplied over the last four-week period has averaged nearly 20.8 million barrels per day, or 0.5 percent less than averaged over the same period last year. Over the last four weeks, motor gasoline demand has averaged 9.6 million barrels per day, or 1.6 percent above the same period last year. Distillate fuel demand has averaged over 4.1 million barrels per day over the last four weeks, or 7.0 percent above the same period last year. Jet fuel demand is down 2.1 percent over the last four weeks compared to the same four-week
period last year.

So we see a drop YOY in jet fuel demand, but still seeing increases in gasoline demand.

NEW YORK (MarketWatch) — The Federal Trade Commission Wednesday said it’s determined through a unanimous vote that Rambus Inc. (RMBS) unlawfully monopolized the markets for four computer memory technologies. These technologies were incorporated into industry standards for dynamic random access memory, or DRAM, chips, which are used in computers, servers, printers and cameras. The FTC said the company used a course of deceptive conduct to “to distort a critical standard-setting process and engage in an anticompetitive “hold up” of the computer memory industry.” Shares of Rambus finished Tuesday at $16.98, down 3.7%.

RMBS was halted at the open this morning. Has now resumed trading at $14.00.

This month, payroll firm ADP sees job growth of 99K in July. Seeing how things worked out last month, we probably won’t hear the same projections to Friday’s government jobs report this time around:

However, the ADP report got it stupendously wrong in June, when it forecast private-sector gains of 368,000, while the government report showed just 90,000 new jobs created in the private sector and an additional 31,000 government jobs.

No surprise on my face:

Despite lower interest rates, the number of loan applications for mortgages fell by 1.2% last week to the lowest level since May 2002, the Mortgage Bankers Association said Wednesday.

Mortgage applications are down 29% in the past year, reflecting a severe slowdown in the housing market after four years of strong growth.

But wait, there’ll be a ’soft landing’, right?

Looking for a unique gift for that someone who has absolutely everything?

I’ll bet they don’t have their own pen made from a corn cob, do they? (Click on images for larger view.)
	If that’s a little too ‘corny’ for your cousin Joe, how about the rifle cartridge model?
	Or, maybe just a really nice pen or pencil made from some beautiful wood - say, Koa or Kingwood?
One of the BMBrothers (recently retired, good for him!) began doing beautiful scroll saw work a few years ago, everything from clocks…
…to animal portraits, and has recently added the turning of pens to his list of woodworking activities. And as you’ve seen, the pen turning hasn’t been limited to pieces of wood!

Check out his web page to see some of the other wonderful projects he’s done. And I’d be willing to bet that if you asked him real nicely - well, ahem, and paid him, of course - he might even do a project for you! If you’re interested, email him from his web site, or email BMB and we’ll put you in touch with him.

Photos courtesy of TAS.