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.

	In the tech space, the software stocks have managed to work their way back near their spring highs. Can they break through? The GSTI Software Index is about 25% ORCL, MSFT and ADBE.
	The utilities look like they’re hanging by a thread here. But considering the number of fakeouts and whipsaws that have been taking place lately, especially to the downside, things could change in a hurry. If the market were to weaken and turn a little more defensive again, the utils could be saved.

Charts courtesy of StockCharts.com

Stocks acted like they never got out of bed today, starting lower and staying there most of the day, but not doing very much - unless you consider the continued breakdown in the commodity space. But that’s hardly news at this point. Here are the scores for the majors:

Bonds fell, a rarity these days, I know, and yields were up:
6-month: 5.09%   2-yr: 4.83%   5-yr: 4.74%    10-yr: 4.79%    30-yr: 4.91%.

Market internals leaned to the red side all day, but volume looks to be a bit lighter than yesterday’s. Advances/declines were 2 to 3 on the NYSE and 7 to 9 on the Nasdaq, with up/down volume 1 to 2 on the NYSE but 3 to 2 on the Nasdaq. New highs/lows were 103/30 on the NYSE and 83/49 on the Nasdaq.

Few groups were able to post meaningful gains, the best being the airlines (+1.8%) and the brokers (+1.1%), continuing their strong showing this week. Energy and commodities once again dominated the losing side: gold and silver stocks (-4.0%), oil services (-3.1%), paper stocks (-2.3%), natural gas stocks (-2.2%), natural resources (-2.1%), oil stocks (-1.9%), commodity stocks (-1.8%), steel stocks (-1.8%) and transportation (-1.5%).

Energy prices were lower again: crude fell 75 cents to $63.22/barrel, gasoline held at $1.55/gallon, and natural gas tumbled to $4.89/mmBTU on report of a further build in inventory. The dollar index fell to 85.63. Gold fell to $576/ounce and silver slid to $10.72/ounce.

BMB Note: Not a lot interesting about today: the commodity area is still a disaster, utilities are struggling, and the transports gave up all of yesterday’s gains. But tomorrow could be a different story, with CPI and consumer sentiment numbers out in the morning, it’s options expiration Friday, and there’s S&P rebalancing being thrown into the mix. Might be a good day just to stand and watch from sidelines. Who knows what’s going to happen?

…and eat it too. That’s the way a lot of market/economic pundits see things. Anything can be twisted to make the point that they want it to make.

In this post at The Big Picture, Barry points out that the commentary has been dancing on both sides of the oil price issue - all the way up, and now that prices have pulled back:

…here’s what I find infuriating:

• The Inflation ex inflation crowd is now saying dropping Oil prices lower inflation; On the way up, no inflation due to energy, but on the way down, whoopee! No more inflation!
• Rising Oil prices will not crimp consumers or retail, but dropping Oil prices are a huge plus for both
• Increased energy consumption is a sign of global economic growth, but decreased prices will stimulate economic growth
• Commodities were never in a major secular bull market — which is now officially over.

You can make many of the same arguments about Gold, also.

I do not insist that every strategist, economist and analyst reach the exact same conclusion, but there needs to be some consistency and intellectual honesty in the arguments they make.

Guys like Kudlow fit pretty squarely into this “both ways” framework - he cheers wildly whenever commodity prices are falling - especially gold. Yet when prices are going up, he claims that it’s a strong sign of global growth. Whatever Larry…

The tone of the market is more negative this morning, but that hasn’t resulted in a great deal of movement. The major indices are slightly in the red, and the A/D lines are negative as well. Continuing the pattern of ‘hot turns cold’ pretty quickly, the recent ‘hot’ areas of retail, homebuilders and transportation are leading the way down right now.

Bonds are fairly flat. Oil and gasoline are flat, with natural gas slipping. The dollar is lower, and gold and silver are lower as well.

Rob Hanna remains pretty skeptical of the market at this point, and cautions against getting over-extended on the long side:

Despite the fact that it is September…despite the fact that it is a mid-term election year…despite the fact that the housing market looks to be shaky…despite the fact that the economy is slowing…despite the fact that there are signs of inflation…despite the fact that there is an inverted yield curve…despite the fact that new highs were slow to expand…the market keeps rising. The rally over the last two months, and especially since mid-August, has been impressive. The S&P is approaching its May highs. The NASDAQ has a way to go but has begun to exert some leadership recently. So the question is, will all those issues that I mentioned above manage to turn the market lower, or can it break out and rally significantly higher from here?

I’m still of the opinion that the market is likely to undergo a selloff in the near term. Recent action has that selloff starting at higher and higher levels. The rally of the last two days may very well be options-related, and once that is resolved the move lower may begin. Of course there is still the matter of CPI and the upcoming Fed meeting. We all know these can be market moving events as well. Timing the exact top is very difficult, to say the least, but I believe we’ll see one of some consequence sometime in the next week.

August retail sales increase by 0.2%. This article at Yahoo tells a completely different story on the retail sales numbers than this one at Marketwatch does. I don’t know which one, if either, has it right. It doesn’t really matter. But you gotta love the Marketwatch story: sales were up 0.2%, ‘boosted’ by a gain in auto sales. Excluding autos, sales were up 0.2%. Huh?

Import prices rose 0.8%, more than expected.