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.

Yeah, I know, it’s all just ‘anecdotal evidence’. But even though anecdotes and hearsay may not hold up in a courtroom, that doesn’t mean they aren’t real. From Michael Shedlock’s blog, “Mish’s Global Economic Trend Analysis”:

I have been gathering these anecdotes for a couple of weeks from private Emails, public responses to my blog, responses to various audio broadcasts I have done, and personal and private messages from people on the Motley FOOL, Silicon Investor, and other places.

Yes, I know that anecdotes do not make a market but the number of cities and towns involved really suggests that something serious is at hand regardless of what the stock market thinks.

Sorry, but you’ll have to go read all the anecdotes. But here’s a sampler:

Peabody, MA, a suburb north of Boston
I had two contractors ask me this morning if I had any work coming up for them, one a plumber the other an electrician. They said work was really slow and they were starting to worry. These same guys I couldn’t get a return phone call for the past 5 years.

Just an aside I just talked to the electrician I mentioned earlier about an hour ago and he told me he had lowered his prices by 25%, just to keep busy. He said things were getting worse week by week and he was really worried about keeping his bills up.

Interesting stuff. Oh, and congrats to Mish for his selection to Barry’s “Blog Spotlight” series.

Steel stocks were the place to be today, but that ride, since May, has been anything but smooth.

Chart courtesy of StockCharts.com

Even though the TV folks get to talk about another new high on the Dow today, the big cap indices spent the day running in place. The small and mid caps hung in there however, along with the Transports. It’s about time they show up to the party.

Here’s how the major indices looked at closing time:

The bond market pulled back, and yields moved a little higher:
6-month: 5.01%   2-yr: 4.65%   5-yr: 4.54%    10-yr: 4.61%    30-yr: 4.76%.

Though the major indices may not reflect it, market internals were strong, although volume pulled back after yesterday’s big move. Advances/declines were 2 to 1 on both exchanges, with up/down volume around 3 to 2 on each. New highs/lows were 276/16 on the NYSE and 152/51 on the Nasdaq.

In the groups, it has been the energy and commodity stocks turn for the big bounce, after suffering some pretty serious losses. Leading the way today were the steel stocks (+6.3%), followed by oil services (+2.8%), gold and silver stocks (+2.4%), commodity stocks (+2.1%), natural gas stocks (+1.7%), natural resources (+1.7%), hospitals (+1.7%), HMOs (+1.7%) and biotechs (+1.3%). Only the airlines lost more than a percent, falling 1.2%.

Energy prices have been sneaking back up, though the media doesn’t like to tell you that. Crude oil moved back above $60 to $60.03 today, gasoline rose to $1.52/gallon and natural gas has been climbing for more than a week now, ending the day at $6.30/mmBTU. The dollar was relatively quiet, and the dollar index finished just slightly higher at 85.91. Gold prices were up to $573/ounce, and silver moved back above $11 to $11.06/ounce.

BMB Note: No complaints about today’s action. While the majors didn’t do a lot, the small and mids did some catching up, and the energies/commodities and the Transports also recovered some lost ground on the group scene.

In the bond market, there were a few more hawkish comments from a couple of Fed fools, and the European Cental Bank raised rates, hinting at another rate hike in December. I think that helped cool bonds down a bit, at least for the day. Stocks have been enjoying the rising bonds / falling rates scenario, along with the drop in energy prices. The energy price dip has stalled, at least for a few days. What about bonds? Will they stall here as well?

More than likely we’ll get some reaction in the bond pits tomorrow morning, after the monthly jobs report is released. Fun, fun, fun with the numbers.

CNBC has been hailing the great retail numbers reported throughout the day, but I don’t see the same sort of reaction in the market. In my current list of 32 retail stocks, I see one up more than 2%, that being ANF. On the other hand, I see ten of those names down more than 2%, with DDS leading the slide, falling 8% today.

A cautious start to the day’s trading, as the indices are hugging the flat lines, with A/D lines just in positive territory. The group picture shows gains in the energy and commodity stocks, but little else. Losers are being led by homebuilders and airlines.

Homebuilders and airlines? Hmm - lemme see - interest rates and oil must be up.

Bonds are lower, rates are higher. Energy prices are also up, with crude above $60 and natural gas above $6. The dollar is higher, as are gold and silver.

This story about the hedge fund business almost sounds like the whole dot-com start-up proliferation in the late 90s that slowed considerably after 2000.

The news this morning is mostly about retail, as the monthly sales reports come pouring in. But despite the seemingly good-looking numbers, the market seems to be a little sour on retail in the early going.

For this bull move to really have staying power, the laggards have to get back in step with the groups and indices that are leading the way. Here’s Deron Wagner this morning:

The most notable thing about yesterday’s action was the breadth. Every one of the more than twenty industry sectors we track finished in positive territory. Frankly, we don’t remember the last time that happened. Unfortunately for the bulls, most of the stock market’s “up” days in recent months have lacked essential leadership by the Nasdaq, Russell, and S&P Midcap indices, but yesterday’s rally was quite broad-based and each of those three indexes showed relative strength for a change. As discussed in yesterday’s newsletter, it is crucial that the Nasdaq “catches up” to the fresh 52-week highs in both the S&P and Dow. If the relative strength in the Nasdaq and Russell continues, we will feel much more confident about the prospects of continued strength in the broad market.

We haven’t seen many writings from Gary Kaltbaum lately, but he hasn’t vanished from the face of the earth. Good stuff in his column today - here’s some of it, but make sure you go read the whole thing:

Notice I did not mention anything about the all-time highs in the DOW. Please keep things in perspective. It is clearly a positive that it broke the highs but not thrilled with all the noise. I like markets to move quietly. Whenever we have all seen and heard too much noise, it has marked the end of a move in the past. Many are complaining about the DOW being weighted in a way that accentuates just a few names. They are correct. Many DOW stocks are WAAAAAY down from the all-time highs. The DOW has been riding the wave of a few names…but everything counts. I can throw cold water on everything also…

The bulls are now pounding their chests…and rightfully so. The bears are scratching their heads and pulling their hair out. The bulls say the drop in OIL as well as the drop in INTEREST RATES are causing the rally. The bears say the drop in those areas are forecasting a recession. Listen to all but pay attention to none. The market has been the great forecaster of the economy. Does anyone in their right mind believe a recession is around the corner with RETAIL stocks showing strength? Does anyone in their right mind believe a recession is around the corner when FINANCIALS have remained strong? In my studies of past markets, no recession has ever occurred while these areas are strong. If things change…then we can talk…but never fight what the market is saying…

All in all…as a buyer of leadership and a buyer of growth breakouts, it has not been the best market to be buying in. The IBD MUTUAL FUND INDEX has lagged badly. This index is all about growth. I am hoping yesterday’s action was something of a “joining of the party.” As always, I will be taking it day by day and using the daily action as my guide. As long as I see no distribution…as long as I see leadership breaking out…all is cool. Now we get to deal with earning’s season…yummy! Just remember, NOTHING stays extended forever. Be more and more careful as the bigger averages get more and more extended…but don’t ignore the new breakouts if they occur…with stops of course.