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.

	This latest rally in stocks has not been kind to all. Stocks like CVS and Walgreens have been hammered in reaction to the new generic drug pricing from Wal-Mart.
	In the semis, AMD has obviously broken its uptrend off the lows, and is now teetering on rather important near term support around 24.
	Interest rates took their biggest jump in quite some time today. While rates have gone nowhere but down since late June, it looks as though that downtrend could be in danger as rates try to bottom out.

Charts courtesy of StockCharts.com

Seemed like kind of a an aimless day for stocks today. BMB was out much of the day, but looking at the intraday movement, it looks like things snuck back up around the flat line and then fell back again, and the A/D lines never made it into the green.

After floundering around, here’s how things stood at the bell:

Bonds and interest rates were probably the big story of the day, as bond prices took a tumble, and rates took their biggest jump up in months:
6-month: 5.04%   2-yr: 4.74%   5-yr: 4.64%    10-yr: 4.70%    30-yr: 4.84%.

Market internals were weak, but so was volume, coming in near the lightest of the week. Advances/declines were 7 to 12 on the NYSE and 8 to 11 on the Nasdaq, with up/down volume worse than 1 to 2 on the NYSE and about 3 to 5 on the Nasdaq. New highs/lows were 146/16 on the NYSE and 132/44 on the Nasdaq.

Action in the groups was also weak, with more groups down than up, but not huge changes in either direction. Leading a short list of winners were the disk drive stocks, up 1.0%. Moving lower were hospitals (-1.4%), transportation (-1.3%), HMOs (-1.2%) and airlines (-1.0%).

Energy prices were mixed, with crude oil slipping to $59.76/barrel and gasoline dropping a couple of cents to $1.50/gallon, but natural gas continues to move higher, today to $6.43/mmBTU. The dollar gained strength with the help of higher rates, pushing the dollar index up to 86.53. Despite the strength in the dollar, gold and silver held their ground at $573/ounce and $11.08/ounce.

BMB Note: Not a lot of change today. A very slight bit of pullback, but nothing to be overly concerned about at this point.

The move in the bond market could be meaningful however. It looks like rates might be digging in their heels here, and putting in at least a near-term bottom. That doesn’t mean, of course, that they’ll be moving higher, but a move up wouldn’t be great news for stocks. The same might be said for energy prices. Oil looks like it doesn’t want to go lower very badly - and OPEC doesn’t want it to go lower - and natural gas has been rising for nearly two weeks straight. Some things to watch.

In the groups, still not a lot of strength in the semis, which could be important. It seems as though the energy and commodity stocks are fighting to keep from going lower too, and a leveling off of oil prices would help that.

Most likely a light trading day on Monday with the Columbus Day holiday, but then we’ll start rolling into earnings season, and that might shake things up a bit. Right now, a pullback would be welcome, and if it was controlled and on light volume, could set up some good buying opportunities.

An initial move down has lost momentum, but it leaves everything in the red for now. Majors are down a half-percent or so, and A/D lines are solidly in negative territory for now. Same goes for the groups, with transportation, networking, brokers, homebuilders and hospitals falling the most.

Bonds are lower, pushing yields back up. Energy prices are slightly lower, the dollar is stronger (higher yields will do that), and gold and silver are lower.

From Larry McMillan’s Option Strategist Weekly Updater this week (sign up here - it’s free!):

Much ado has been made about the fact that the Dow is now at all-time highs. Proponents (bulls) say this is terrific, and it’s only a matter of time until the other indices follow. Cynics (bears) have cited a litany of problems, including 1) none of the other major broad-based indices is even close to an all-time high, 2) the average Dow stock is actually 32% below its 2000 peak, meaning that the Dow was dragged to these high by a handful of stellar performers (an event made possible by the fact that the Dow is a price-weighted index, not a capitalization-weighted one), and … well, you get the idea. However, the fact remains that the Dow is at an all-time high and $SPX has broken out to new 5+ years highs. These simple facts mean that the upside momentum is strong and therefore the charts of these indices are bullish…

In summary, the market remains intermediate-term bullish and short-term overbought. As such, short and perhaps sharp corrections are possible, but unless $SPX falls below 1325 — and is accompanied by confirmed technical sell signals when it does so — we would remain bullish.

September non-farm payroll numbers only added 51,000 jobs, but upward revisions to July and August numbers help lessen the effect of the rather weak number. But the market doesn’t seem real thrilled with the data at the outset, and this may have something to do with it:

Average hourly wages increased by 4 cents, or 0.2% to $16.84. Average wages are up 4.0% in the past year.

According to CNBC, that YOY increase is the highest since March of 2001. That’s not real good news for the “inflation fighters”, and the bond market’s initial reaction this morning has been to send yields higher.