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.

Since world markets tend to move more or less together, it’s interesting to keep an eye on what’s going on with the stocks of companies from other countries as a hint of what might be coming. Currently, we’re seeing some weak action in the ETFs representing indexes of Canada, the U.K. and South Africa.

Charts courtesy of StockCharts.com

Over at TheDOCument.com, Deric has been waiting some time for what he felt was the inevitable next move down in the metals - so he can start buying:

As I have written many times, it simply did not make sense for precious metals to angle back up to new highs directly after the May-June blow-off. Another sell-off strong enough to shake out weak longs made sense to me, and we are witnessing the shake out now.

As for the impetus for the slump, there are several theories, including central bank selling, interest rate fears, and an outright declaration of the end to the commodities bull market. This last bit of nonsense comes from Stephen Roach of Morgan Stanley, who is frequently quoted in major financial news outlets. Mr. Roach views the 5-year run in metals prices as a bubble and says, “The mega-run for commodities has run its course.” At some point in the near future, I hope his clients heed his advice and sell their gold to me.

Like BMB, he’s not convinced that this little rally in retail has the legs to run much further:

Retailers also came under heavy bidding today, gaining nearly 2% as a group. The strength here seems to be driven by the presumption that plummeting gas prices will bring consumers back to the stores. I have serious doubts about the validity of this line of thinking. Home equity has been fueling consumption, not fuel. Nevertheless, the mentality is strong enough to drive consumer shares higher for now. Let’s see how these shares respond later this week after the publication of a couple of important retail reports. The reaction will give us clues as to what comes next.

Mixed results for the 3 and 6 month T-bills today, as the 3-month yield slipped to 4.947% but the 6-month bumped up to 5.132%.

BMB is still of the belief that cash is not a bad investment these days.

If a company has ever even thought about being in metals or energy, chances are good that its stock has been hurting:

Charts courtesy of StockCharts.com

The markets started lower this morning, with help from the foreign markets last night, but managed to catch themselves mid-morning and stabilize a bit - maybe it was the non-stop stream of Fed-folk on CNBC today. I have no idea, I certainly didn’t listen to what they had to say. The move higher failed to turn into much, but the lack of movement in the major indices hid a lot of action behind the scenes, like the continued implosion of the energy sector. And now the Utilities look like they’re getting ready to roll over as well:

Bond slipped, and yields moved slightly higher - not making a lot of progress in either direction lately:
6-month: 5.12%   2-yr: 4.83%   5-yr: 4.73%    10-yr: 4.80%    30-yr: 4.94%.

Despite the positive bias in the indices, the market internals were mixed, but biased to the negative side. The numbers I have on volume were mixed as well, with volume dropping on the Nasdaq but increasing on the NYSE. Advances/declines were 4 to 5 on both exchanges, with up/down volume 4 to 5 on the NYSE but 11 to 8 on the Nasdaq. New highs/lows were 90/59 on the NYSE and 61/56 on the Nasdaq.

Looking at the groups, there were a few winners: the semiconductors got a 2.4% bump, but that was skewed by a 20% move in FSL on news of a possible buyout. Other gainers included the homebuilders (+1.9%), retailers (+1.8%), HMOs (+1.5%), transportation (+1.4%), hospitals (+1.1%) and disk drives (+1.1%). Losers were in the commodity business, and they got hit hard: gold and silver stocks (-7.1%), steel stocks (-5.2%), oil services (-4.2%), commodity stocks (-3.9%), natural resources (-3.6%), natural gas stocks (-2.5%), oil stocks (-2.4%) and chemicals (-1.4%).

Energy prices continue their free fall - sooner or later they will hit bottom and just go ’splat’. Crude oil fell to $65.60/barrel, while gasoline slid to $1.60/gallon and natural gas to $5.67/mmBTU. The dollar index dropped slightly to 85.92. Gold got hammered all the way down to $588/ounce, and silver was crushed for a loss of more than a dollar to $11.06/ounce.

BMB Note: Judging by the way the market turned up mid-morning, I can only assume that all of the Fed folks that were paraded in front of the cameras today were singing sweet lullabies to investors. Certainly the Fed is getting what they want from the commodities markets - isn’t that a coincidence? And apparently the investors bought the sweet music, because they were rushing all over to buy up more consumer stocks today - retailers, restaurants, homebuilders and the like. Wonder how long that’s going to last. I have a feeling that in not too long, the shorts will be able to go after the retailers all over again.

Question: If the consumer is back in the game, and everything is going to be fine because consumers are going to continue buying everything in sight and building their ever-increasing mountains of debt, shouldn’t the transports be turning around along with the consumer stocks? I mean, somebody’s got to move all of these fabulous goods that everyone is going to buy, right? Yet the trannies, even though they were up today, remain chained to the dungeons of their charts, and look like they’re reading to start digging an even deeper hole - and that’s after a huge dropoff in energy prices.

Something isn’t right with this picture…

Dell is back still in Wall Street’s doghouse. The SEC is probing the company’s financial reporting as far back as 2002, and restatements could be coming. Not good.

You don’t ever want to hear the name of a company whose stock you own and the phrase “SEC investigation” in the same sentence.

The reports indicating the death of consumer spending have been greatly exaggerated, or at least that’s what the market seems to believe. Is this a reaction to the recent drop in energy prices?

New 52-week highs today from the likes of AEOS, BIG, CVX, FD, KSS, TJX and WAG.

Update: From the recreational vehicle area, add Harley Davidson to that list - symbol formerly HDI, now HOG.

Along with all of the other energy related issues, coal stocks are getting smacked pretty hard of late. Today we see ACI, BTU and MEE all at new lows.

Not a very grand opening to the week, as the major indices have slid further, and A/D lines are buried in the red. The energy/commodity areas are getting slammed again, with gold stocks, steel stocks, natural resources, oil services, natural gas stocks and oil stocks leading the way down, with chemicals and airlines following.

Bonds are lower, yields higher. Energy prices continue to fall - crude, gasoline and natgas all lower. The dollar is near unchanged. Gold and silver down sharply.

Gary Kaltbaum see changes afoot in the market. Commodities - oil, gold, and just about all the others - are struggling. Good news?

Some say this is a good thing for the market. If OIL PRICES go down…if COMMODITIES drop…the overall market should do better because inflation talk can come off the table. We are not so sure. We believe there is a good chance that all this is occurring because the economy is in major slowdown mode…and not sure that is a good thing right now.

The market had two distribution days on Wednesday and Thursday. Friday’s rally was on lighter volume. We certainly do not want to see more of that. High volume down days and lower volume up days will only lead to overall lower prices. The short-term support we are watching closely is 1289 on the S&P…11,260 on the DOW…428 on the SOX and 2122 on the NASDAQ. We have no overall worries until these levels are taken out. These thoughts do not take away the fact we are now starting to see better action in some RETAIL…some RESTAURANTS…and the HOTELS…we are just not so sure there is enough leadership to carry this market much higher. If those support levels are taken out, you will hear from us.