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.

	The S&P 500 has been stuck in a range of just over 20 points since July 25th…
	…while the Nasdaq has spent most of that time trapped in a 50+ point range.

Charts courtesy of StockCharts.com

A mixed bag in the T-Bill auction today, with the 3-month falling back to 5.114% but the 6-month gaining some to 5.233%.

It still is easier money than trying to pick stocks these days…

Ho-hum. Another day - another failed rally. What’s that make it now, four out of the last seven days?

Once again, the story isn’t in the final numbers, but rather the route taken to get there. The Dow pushed to another triple digit gain in the morning - +114 points - only to give it all back and dip into the red in the final hour, only to recover a bit and finish with a 10 point gain. The Nasdaq was up 33 points at one time, finishing up 11. Here are the final scores:

Bond prices slid for another today, pushing the 2 and the 10 year yields back to the 5% mark:
6-month: 5.22%   2-yr: 5.01%   5-yr: 4.95%    10-yr: 5.00%    30-yr: 5.12%.

Market internals were positive, and volume picked up from Friday’s very low levels. Advances/declines were 10 to 9 on the NYSE and 5 to 4 on the Nasdaq, with up/down volume 10 to 9 on the NYSE and nearly 3 to 1 on the Nasdaq. New highs/lows were 86/66 on the NYSE and 63/127 on the Naz.

The group picture faded considerably from the very positive showing early in the day, finishing with only a few groups showing decent gains: airlines (+1.6%), computer tech (+1.2%), networking (+1.2%) and semiconductors (+1.1%). Energy and commodity stocks were the hardest hit on the down side: oil services (-2.2%), gold and silver stocks (-1.8%), oil stocks (-1.7%), natural resources (-1.7%), metals and mining (-1.4%), commodity stocks (-1.3%).

Energy prices pulled back again and helped boost groups like the beaten-down airlines. Crude oil fell 82 cents to $73.53/barrel. Gasoline was lower by more than a nickel at $1.99/gallon, and natural gas slipped to $6.91/mmBTU. The dollar was mixed, but the dollar index nudged higher, to 85.61. Gold fell to $627/ounce, but silver rose to $12.02/ounce.

BMB Note: Even though the market managed to finish in the green today, and the Nasdaq put in a better showing than it has been, it doesn’t do much to change things, especially considering that the early gains were all but given back.

Some tech areas got a bit of a bounce, but some of the energies and metals stocks took big hits. Just another day where money flowed into some groups and out of others, but showing very little overall constructive action.

The major indices remain very rangebound. Sooner or later, we’ll get a break out of this range and a little more might start to happen. For now, the market continues to just chop back and forth. When it comes to trading this market, unless you’re extremely nimble - or very lucky - you will most likely end up being a genius for a day and a chump the next.

Keep your money in your wallet and wait for conditions to improve. We’ve got numbers coming out this week that might get things moving a bit: PPI tomorrow, the CPI and housing starts data on Wednesday. Maybe that’ll help shake things up.

Barry’s got it right over at The Big Picture. We’ve heard them tell us over and over, year after year, that THIS was going to the be year of the big cap stocks:

For example, for the past 5 years, we have heard pundits wishfully say this was the year of the Big Cap stock. 12 months later: they said, “No, I meant THIS year;” and after another year, we heard, “No THIS year!

But a look at this chart on Barry’s site of the ratio of the S&P 100 to the S&P small-cap index does seem to indicate that there may finally be some change afoot.

Just like a broken clock, if you keep saying the same thing over and over, sooner or later, you’re bound to be right. You know, like “maybe next year the Cubs will win the Series…”

Chris Johnson discusses the daily push-and-pull that has the market confined to a narrow trading range:

this market continues to be pulled and stretched on a daily basis by price-driven technical activity and indicators. This situation is exaggerated by the fact that seasonally light summer volume allows technical traders and programs to more easily nudge stocks one direction or another. For those of us who watch indicators such as the NYSE’s net ticks, the signs of program and technical trading have likely never been more apparent given the intraday waves of buying and selling seen throughout a typical trading day…

…The technical “ground clutter” of trendlines and other technical indicators that are congesting the current trading range continues to provide reasons to buy and sell over the very short term. Until this congestion clears and daily volume begins to swing higher, expect the market to offer the best opportunities to those willing to act nimbly in quickly moving from stock to stock or sector to sector…

Wrapping it up, the newly constructed Middle East cease-fire agreement (assuming, of course, that it holds) should give stocks a boost, as it will likely relieve some of the pressure on the market based on geopolitical concerns and rising oil prices, both of which should see some easing. Despite this potential positive, the lack of initiative by buyers or potential buyers will continue to plague stocks and leaves the market susceptible to technical pressure, which is considerable due to the congestion of the current trading range.

The initial boost at the open, presumably a little excitement over the tentative cease-fire in the middle east, has quieted. Prices seem to be holding for the most part, but they haven’t moved much in the last half-hour. The major indices are sporting slight gains, and the A/D lines are holding in the green. More groups are up than down, and the gainers are led by the spastic airlines/transports (helped by a drop in oil prices), REITs, networking, semis, internets and retail. Losers are concentrated in the energy/commodity areas.

Bonds are slightly lower, yields higher. Energy prices have dropped across the board - oil, gasoline and natgas. The dollar is mixed, gold lower, silver higher.

After Bill Fleckenstein gets in a little Cisco/tech bashing and the usual home lending attack, he goes on to discuss what is building up to be a potentially huge problem here in the US — underfunded and mismanaged pension plans:

Lest anyone think that this original stock-bubble aftermath is behind us, the surfacing of municipal pension problems tells another story. Which brings me to “Pension Plans Face Billions in Shortages,” a story in the Aug. 8 edition of The New York Times (registration required). It starts with the debacle in San Diego, whose shortchanging of worker pension funds was revealed thanks to the efforts of a whistleblower. These actions by the city have not exactly been a secret. It’s just that no one cared for quite a while.

Besides illuminating similar problems in lots of places, the Times story points out what can go wrong when something as seemingly innocent and obscure as pension accounting wreaks havoc with its financing: “San Diego remains barred from raising money by selling bonds. Cut off from a vital source of cash, it has fallen behind on its maintenance of streets, storm drains and public buildings. Potholes are proliferating and beaches are closed because of sewage spills.”

Remember, folks, this is happening while times are good. Times are about to get worse.

Deron Wagner discusses the tight trading range we’ve seen lately, and has this advice for today:

Presently, both the S&P and Nasdaq cash futures are pointing to significantly higher opening prices. The cease-fire between Hezbollah fighters and Israeli troops in Lebanon has likely been a contributing factor to this, but the big question is whether or not stocks will retain their gains throughout the day. Most opening gaps over the past several months have failed, as traders have used the higher prices as a chance to sell into strength. However, we do not recommend aggressively selling short into today’s gap unless the major indices clearly show an inability to sustain their opening gap prices. Now is probably a good time to simply focus on managing existing positions and building a new watchlist of stocks and ETFs for potential entry on both sides of the market. Doing so will enable you to be prepared when the S&P and Nasdaq finally break out of their recent ranges, though this may not occur until after the summer doldrums have passed.

Don’t forget, we also have options expiration this week…