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.

Step away from the markets for a moment, and read this editorial in the NY Post. If only more people - not just Arabs, but more human beings, period - were as rational and sensible in their thinking as this man is:

Well, here it is, five years late, but here just the same: an apology from an Arab-American for 9/11. No, I didn’t help organize the killers or contribute in any way to their terrible cause. However, I was one of millions of Arab-Americans who did the unspeakable on 9/11: nothing.

The only time I raised my voice in protest against these men who killed thousands of innocents in the name of Allah was behind closed doors, among the safety of friends and family. I did at one point write a very vitriolic essay condemning their actions, but fear of becoming another Salman Rushdie kept me from ever trying to publish it.

Well, I’m sick of saying the truth only in private - that Arabs around the world, including Arab-Americans like myself, need to start holding our own culture accountable for the insane, violent actions that our extremists have perpetrated on the world at large.

Yes, our extremists and our culture.

Read the whole thing.

Hat tip to Little Green Footballs.

	Full speed ahead and damn the option ARMs! Lower oil prices will cover it! Buy retail!
	Repeat after me, “there is no trouble in the housing market”. It’s all a conspiracy! Buy the homebuilders!
	Get the best of both worlds - a retailer that sells into the housing market! Buy Home Depot!

Charts courtesy of StockCharts.com

BMWife here, with a technology update:

Hydrogen Cars are on the way and despite the claim by American car makers that it will take ten years…well BMW has a plan for next April. Ladies and gentlemen, they claim they will have a hybrid–that’s right, a hybrid–gasoline/hydrogen car, ready for leasing in April.

A spokesman said the car would be leased to selected customers rather than sold because of its high price. Leasing rates would be similar to those for a top-end BMW 760LI with a full-service package.

I’m betting if the leasing works out, they will expand the program or start selling the cars outright.

BMW has said it intends to build a few hundred such cars at first. They will be able to switch between burning standard petrol and hydrogen so that drivers will not be left stranded while the infrastructure to deliver hydrogen is built up.

The bulls took control today and sent stocks higher, pretty much across the board. Most of the major indices all registered solid gains, which appeared to have come at the expense of the Utilities index:

Bonds up, yields down:
6-month: 5.10%   2-yr: 4.81%   5-yr: 4.70%    10-yr: 4.77%    30-yr: 4.90%.

Market internals were obviously quite positive, and volume picked up for the second day in a row. Advances/declines were 3 to 1 on the NYSE and 14 to 5 on the Nasdaq, with up/down volume 7 to 2 on the NYSE and 9 to 1 on the Nasdaq. New highs/lows were 179/46 on the NYSE and 109/55 on the Nasdaq.

Most groups finished in the green, and some had big days, led by the airlines (+4.9%), transportation (+3.9%), networking (+3.8%), housing stocks (+3.7%), semiconductors (+3.7%), brokers (+3.2%), disk drives (+3.2%), retailers (+3.1%), internets (+2.7%), computer hardware (+2.3%) and software (+2.2%). Oil services (-1.0%) led the short list of losers, limited to energy, commodities and utilities.

Energy prices continue in free-fall mode. Crude oil down another buck to $63.76/barrel, gasoline fell to $1.56/gallon and natural gas to $5.57/mmBTU. The dollar index was near unchanged at 85.89. Gold hung around $588/ounce and silver slipped a bit to $10.97/ounce.

BMB Note:A solid day for stocks, with the exception of the energies and utilities. But what’s really going on from the macro perspective? Does it make a lot of sense? Stocks have been celebrating the recent drop in oil prices and continued low interest rates. Those things sound like good news. Are they really?

Stocks and bonds are really painting very different pictures of the road ahead. Stocks have seemed more than happy for the past couple of months - with the exception of retail and the transports, but it’s ok, those have been “fixed” these last couple of days. Bonds have been happy as well, but the higher prices and lower yields have resulted in a deepening yield curve inversion, and every point on that curve is below the Fed funds rate. The bond market is indicating an economic slowdown around the corner, and you wouldn’t think that would be good news for stocks.

On the oil front, we won’t know for some time if this is truly the end of the bull run in crude, just a correction, or a point where prices might bounce and then consolidate for some amount of time. What is certain is that oil is very oversold right now - down 7 days in a row and 9 of the last 11 - and is due for a bounce. That may turn out to be just a bounce, and there could still be lower prices on the horizon. While it may seem like good news that oil prices could be headed even lower, if the real reason for the lower prices is reduced demand brought on by a global economic slowdown, that might not really be worth rejoicing either.

And lest we forget, it’s options expiration week. Throw that into the mix along with the CPI report due out Friday morning, and anything can happen.

Last but not least, who else would we get on CNBC after this fine day in the market? But of course, our old favorite, Abby Joseph Cohen is brightening our day, telling us how great things are going to be. Like she has a clue. What’s your year end S&P target today, AJC? 2000? 2500?

A few breakout moves in the semiconductors today, particularly in AMAT, KLAC and MXIM.

There must be an awful lot of good things going on in the housing industry that I’m not hearing about. Many of the homebuilders’ stocks are up from 5-10% again today. Check out the chart of the SPDR Homebuilders ETF (XHB). Up nearly 5% today, in addition to yesterday’s gains.

The homies join the retailers in some rather inexplicable action the past few days. Amazing.

Phil Flynn’s reaction to yesterday’s devastation in the commodity arena, from The Energy Report:

Creamed commodities! It was a full court commodity crush! Commodities got smashed across the board and it was almost impossible to find a commodity that was higher for the day. In fact the only front month commodity that I saw that had a higher close was the lightly traded number fourteen sugar that closed a mere 3 ticks higher giving that market the distinction of being the strongest commodity of them all. It’s a sad day for commodity bulls when we have to stoop to number 14 sugar to find hope of a rally.

This grand sugar rally did not bode well for the energy complex struggling to find stability in a commodity world gone sell crazy. Oil, gas and natural gas have relentlessly hammered the sell side seemingly squeezing every available penny of risk premium out of the market. That premium of course includes a less than active hurricane season, a perceived lessening of tensions with Iran and OPEC’s promise to continue pumping oil. Bottom line: the oil market that was hit with bearish news and a reduction of risk premium, still tried to find support but was thwarted by the broad based commodity sell-off.

Of course the key story with oil was the offer by Iran to suspend temporarily their nuclear program. One of the main geo-political drivers of oil all summer has been the growing Iranian threat. With its nuclear program and its meddling in Iraq and support for Hezbollah in its war with Israel. The oil market must believe now that Iran has seen the light and will move only in the interest of peace.

It looks as though the strong utilities are beginning to fade, or are becoming a source of funds to move into other areas. The chart of the DJ Utilities index now appears to be rolling over after stalling in its uptrend.

If you’re long the utes, be careful here. For the traders, the utilities might be the next area to look for shorts.

A positive start to the day, after yesterday’s rather confusing performance. Major indices are posting slight gains, advance/decline figures are well into the green and most groups are higher. Leading the way up are homebuilders (??), networkers, airlines, brokers, semiconductors and steel stocks. On the downside, the utilities are leading the way.

Bonds are slightly lower, yields higher. Energy prices are near the flat line, the dollar is also near unchanged. Gold and silver are bouncing a little after their big drops yesterday.

Yahoo Finance will now be carrying content from financial blog Seeking Alpha.

That’s a start. Now if only we could get some of the mainstream news providers to carry blog content on their sites. Perhaps we’d all get a much more honest picture of what’s really happening in the world, instead of constantly being fed the rather twisted opinions reports of the AP and Reuters.

What are the chances? Slim to none, at the moment.

Hat tip to Barry at The Big Picture.

Now I don’t feel so bad about not knowing what in the world to do when it comes to trading this market. I’m not the only one. Rob Hanna seems to be having many of the same thoughts:

As the market did its low-volume creep at the end of August, I found myself more and more skeptical of the rally. I was turning from my stated neutral stance to outright bearish. When the market fell rapidly on last Wednesday and Thursday, I felt more sure of my bearish convictions. When the market rose last Friday on light volume, I felt good that it was a weak oversold bounce. Today has confused me a bit.

A gap down in the morning followed by a sharp reversal would seem bullish. Rising volume would seem bullish. Yet there were more decliners than advancers. The Nasdaq, which finished the strongest and in the green had more new lows (66) than new highs (65). And the turn around in the market was not reflected in most of my portfolio’s long positions. Semis did well, so that helped. Retail also did well, and that didn’t help..

Sectors saw the following action: Semis did well. Retail did well. Oils tanked, metals tanked, materials tanked.

So the message from the sectors seemed to say that cheap oil means more money in consumer’s pockets to spend at the stores. Unfortunately, that isn’t quite right. If oil is dropping due to speculation of a big increase in supply, then the above logic would work great. That’s not the case, here. The drop in oil and basic materials is more likely a warning that demand for these products may drop off. Demand drops off when a recession occurs. Recessions mean lower corporate earnings and ultimately lower stock prices.

It’s options expirations week. I expect we’ll continue to see some volatility. I don’t know which way the market is going to go over the next few days. I don’t even have a good guess, since many of the things I look at are giving me conflicting signals. We’re in the middle of the recent 3-week trading range and right where we began it on 8-18 after the strong 1-week rally in mid-August.

I still expect September/October will have some real difficulties and we will see a significant sell-off that will at least test the summer lows. Whether that is ready to begin just yet, I’m not sure. Therefore, I’d suggest continuing to play defense and waiting for a higher-odds situation before committing too much capital one way or the other.

The US managed yet another record trade deficit in July. The ‘credit’ is going to record imports of crude oil:

The U.S. imported $20.8 billion worth of crude oil in July, the highest amount on record. The import average price per barrel of crude oil was a record $64.84 in the month.

Those same record imports have helped keep crude inventories up, and helped push the price of crude oil down.