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.

Bill Fleckenstein warns you to beware of markets that are rallying for no reason:

…of course, all bad news has been ignored in spades recently, as the stocks with really uninspiring results have recently gone wild.

Apparently, there exists the belief generically that all of our problems will be sorted out positively and that we’re headed for a soft landing, followed by a new rebound. The market appears to strike folks as bulletproof at this moment in time.

Having said that, my experience has taught me that, once a market gets as frothy as this one has become, in the very short term, it can do anything. But remember, the market always looks the best at the end of a rally, just as it always looks the worst at the bottom of a decline. (Witness my being head-faked on the low in July.) My view — and recognize that it’s just a guess — is that at some point in the next week or so, this rally will have ended in exhaustion (with the recent $10 break in crude oil offering no bailout).

We’ll see if he’s right soon enough.

Items of note on the latest industry moves:

• Techs lead the 8-week list, with consumer stocks - retail, housing - coming on strong of late.
• REITs continue to hold up, despite the known troubles in residential real estate.
• Telecoms ($XTC) continue to roll.
• Housing joined retail in having a big week. The $HGX was up 5.8%, but the homebuilders by themselves did even better than that (see XHB chart).
• Software ($GSO) needs a rest - the group hasn’t been this overbought in nearly two years. Similar story in retail ($RLX), where it’s been over a year.
• Utilities ($UTY) need to hang on here to prevent further damage.
• Brokers and banks got a second wind this week.
• Energy and commodity stocks turned from breakdown to nightmare this week. I can imagine they’ll be the next group to put in a big bounce, as that has been the pattern. I just don’t know when it starts.
• Precious metals stocks had a horrible week, but that just put them back where they were four weeks ago.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page.