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.

A little more Chavez backlash, in Alaska:

…yet a few villages are refusing free heating oil from Venezuela, on the patriotic principle that no foreigner has the right to call their president “the devil.”

The heating oil is being offered by the petroleum company controlled by Venezuelan President Hugo Chavez,
President Bush’s nemesis. While scores of Alaska’s Eskimo and Indian villages say they have no choice but to accept, others would rather suffer.

“As a citizen of this country, you can have your own opinion of our president and our country. But I don’t want a foreigner coming in here and bashing us,” said Justine Gunderson, administrator for the tribal council in the Aleut village of Nelson Lagoon. “Even though we’re in economically dire straits, it was the right choice to make.”

Buried in last week’s payroll data was a huge revision upward by the BLS in job creation over the entire year from March 2005 to March 2006. From Barry Ritholtz at The Big Picture (see here and here):

Yes, we know that 51k new jobs stink; No, it was not a “perfect number” (Attention Mark Zandi: please lay off the Psilocybin before airtime).

Notable beneath the awful headline was the even more astounding adjustment: Payrolls for the 12 months ended in March 2006 will be revised higher by 810,000

Thanks to this adjustment, the BLS now claims that job growth during the 12 months ended in March 2006 was 45 percent higher than previously reported. The revision magically adds payroll employment growth between March 2005 and March 2006 up by a 67,500 per month.

This was the biggest revision since the Labor Department started benchmarking in 1991. To make a comparison, “the aggregate benchmark revisions dating back to 1996 added a whopping 1,555K jobs to the economy, 810K of which (52%) were added during April 2005-March 2006!”

In a follow-up post, Barry quotes the BLS:

“Each year, the Current Employment Statistics (CES) survey data are benchmarked to comprehensive counts of employment for the month of March derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For national CES series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent. The preliminary estimate of the benchmark revision for March 2006 is +810,000 (0.6 percent).

BLS currently is researching possible sources for this larger-than-normal expected benchmark revision. On initial review, the difference between the CES sample-based estimates and the UI employment counts does not appear to be concentrated in any one industry or geographic region.”

So, the BLS just discovered that nearly a million jobs were created, between 6 and 18 months ago, that they didn’t know about at the time:

“Researching possible sources” — let’s call that the bureaucratic understatement of the year. The BLS has a benchmark restatement that is 300% of its 10 year average, and they announce: “We are looking into this.”

As Barry says, something just isn’t right:

I suspect that this revision may accidentally reveal a few economic and market truths:

1. Is the Fed really data-driven, or do they merely say that because it is more palatable than admitting this is all a seat of the pants exercise?
2. Has the equity market rally truly been based on a Goldilocks scenario, or has it been correctly anticipating a bold and robust economy?
3. Was the bond market anticipating a slow down? Given all this hiring and economic strength, we have to wonder how real their fears and concerns actually are.

Something strange is afoot at the Circle K: Either the economy is much stronger than we previously believed, ending the Goldilocks scenario — or the data driven Fed is reliant on what we now know to be bad data.

Neither case presents an attractive outcome.

How much you wanna bet that we never see the government come through with a similar ‘absurdly large’ revision to the CPI data?

Another nice move in the metals stocks today. Here are a few charts that might be starting to get interesting:

Charts courtesy of StockCharts.com

No big surprise here. Google has decided to buy YouTube for $1.65 billion. A lot of money for a website that generates no revenue, but I suspect that will change.

Look for more ads on YouTube. Will they have to embed ads in the video clips? It seems the solution for everything these days is to sell advertising. Someday, there isn’t going to be enough advertising to go around…

A pretty uneventful day. Things bounced around on low volume, so it’s really hard to get a read on anything meaningful. The Dow did manage to best last week’s intraday high, but pulled back from that level rather quickly. The final scores look like this:

The bond market was closed for the Columbus day holiday.

Market internals were positive, but volume was the lightest we’ve seen in a while. Advances/declines were 3 to 2 on the NYSE and 11 to 8 on the Nasdaq, with up/down volume nearly 3 to 2 on the NYSE and just better than 3 to 2 on the Nasdaq. New highs/lows were 179/12 on the NYSE and 155/37 on the Nasdaq.

In the groups, there were more winners than losers, with steel stocks (+3.1%), housing stocks (+1.8%), computer hardware (+1.2%), retail (+1.1%) and semiconductors (+1.0%) leading the way. Oil services led the losers, falling 1.6%.

Energy prices can’t decide what to do, and that’s because OPEC can’t decide whether they’re actually going to trim supplies or not. Crude oil was higher by more than a buck early, but finished with a gain of only 20 cents at $59.96/barrel. Gasoline and natural gas were flat at $1.50/gallon and $6.43/mmBTU. The dollar index was also flat at 85.63, with gold up a few bucks to $576/ounce and silver up to $11.25/ounce.

BMB Note: Not much of note in the ‘note’ today, with the market half asleep most of the day. The move in the metals was probably the most interesting aspect of the day’s trading.

Earnings will start rolling in this week. That should probably get a little something going. For now, a lot of areas, including the major indices, look rather overbought and ’stretched’. But that doesn’t mean they won’t go higher while they’ve got the momentum.

Pretty much a holiday-type yawner up to this point. Not much movement outside the metals, and not a lot of volume.

Go back to sleep.

A mixed bag in the early going, with the indices hugging the zero level and the A/D lines just in the red. In the groups, we see metals, semiconductors and commodities in the lead to the upside, while the hospitals lead the losers.

I believe the bond market has the day off.

In energy, prices are all higher. The dollar is flat, gold is also flat and silver higher.

Normally, this section would contain some technical and sentiment analysis on the market action for the week to come from Chris Johnson at Schaeffer’s. However, Schaeffer’s has decided to move most, if not all, of their public content behind a curtain requiring “free” registration at their site. BMB is already registered at Schaeffer’s, so I am able to view this content. But my policy, whenever possible, is to link only to content that is freely available to my readers, and not require them to register anywhere to see it.

Having been registered at Schaeffer’s for some time, I know that the registration does cost you something - a nearly daily barrage of ’sales pitch’ emails, advertising their numerous investment advisory services. I don’t see any reason that BMB readers should need to subject themselves to that deluge. Therefore, while I may provide a quote or two from Schaeffer’s at times in the future, I will not link to any of their ‘registration required’ content, and the link to their site has been removed from BMB’s front page.

I have always believed that many of these investment services make more money by selling their advice than by trading it - I guess business hasn’t been that great lately.

The latest issue of the ChartWatchers newsletter from StockCharts.com is available. This time around, discussion included October performance, the dollar, the S&P reaching resistance, and the recent rally in tech stocks.