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.

AAPL - closed at 74.53, trading at 78.80
AMD - closed at 24.23, trading at 21.10. That’s not going to help the semis tomorrow.
EBAY - closed at 28.49, trading at 29.15

	It appears as though some investors are looking to get the defense back on the field, with the latest moves in drugs, health care and the utilities.
	Two big down days in a row for the semis. The SOX is lodged between the 200-day MA overhead and the 50-day below, and the near-term support at 444-445 is in sight.
	After reaching a relative high last week, then reversing hard on Wednesday, the brokers haven’t been able to muster a challenge to that high as of yet.

Charts courtesy of StockCharts.com

A rather mixed up day in the markets today, as the Dow raced above the 12K mark right after the open, but didn’t stay there long. By early afternoon, all of those gains had been given back - but the average rallied back to a 40 point gain by the close. By contrast, the Nasdaq spent most of the day in the red, and the S&P hovered around the zero line. Here are the closing numbers, as the Transports slide again but the Utilities start to sneak back up:

Bonds have played the same game for three days running now, edging yields just slightly lower:
6-month: 5.13%   2-yr: 4.84%   5-yr: 4.72%    10-yr: 4.76%    30-yr: 4.89%.

Market internals reflected the mixed results in the indices, with advances/declines running 5 to 4 on the NYSE but just below flat on the Nasdaq, and up/down volume 4 to 5 on the NYSE and 2 to 3 on the Nasdaq. Total volume increased on the NYSE but came up a bit shy of yesterday’s mark on the Nasdaq. New highs/lows were 304/11 on the NYSE and 189/31 on the Nasdaq.

The group picture was, you guessed it, split. The winners were HMOs (+1.6%), airlines (+1.5%), health care (+1.2%) and drug stocks (+1.1%). Taking losses were the semiconductors (-2.7%), gold and silver stocks (-1.9%), transportation (-1.3%), oil services (-1.3%), steel stocks (-1.3%) and disk drives (-1.3%).

Energy prices were, of course, mixed. Crude oil moved higher in the morning, then sold off the rest of the day, finishing down more than a buck at $57.65/barrel. But gasoline was up a penny to $1.47/gallon, and natural gas bounced back with a nearly 40-cent move to $6.81/mmBTU. The dollar rallied early, but pulled back, leaving the dollar index with only a small gain to 86.89. Gold held its ground near $590/ounce, and silver was higher by 8 cents to $11.75/ounce.

BMB Note: Quite a day, but not a very impressive “12,000″ milestone for the Dow, as it came crashing back down, even moving into the red before being saved in the afternoon. The S&P also snuck up to new relative highs, but couldn’t hold it. Of the three biggees, the Nasdaq has stuggled a bit more than the other two over the past couple of days.

So where are we? At this point, it looks like the market wants to pull back here, and that would be a good thing. A little of the froth needs to come off the top, and if the market wanted to just settle back or move a little sideways, that would be fine. Interesting moves over the past couple of days, however, back into health care and utilities, indicating a bit of a jerk back into a more defensive posture. We’ll have to see how that plays out.

Looking at a few other areas, the transports have had a rough couple of days, the brokers have been unable to regain their recent highs, and the semiconductors are having a rough time of it. We’ll look at the chart later, but the rest of the market probably doesn’t want to see the semis give up much more ground.

Of course, there well be earnings news after the bell tonight, with EBAY and AAPL among the biggees. Always makes for some interesting after-market moves.

Update: I thought I saw on the TV screen that AAPL guided lower for the next quarter’s earnings. Maybe I was mistaken, since the stock is up about $4.50 in the after market so far. Or maybe the after-market traders are just freaks. EBAY up about 50-60 cents.

Aha! I thought I saw it correctly - doesn’t matter, stock ran up anyway:

Apple also forecast a fiscal first-quarter profit between 70 cents and 73 cents a share, on revenue in a range of $6 billion to $6.2 billion. Analysts had expected Apple to earn 77 cents a share on $6.44 billion in revenue.

Despite the big 5% move in IBM today, which is contributing about 30 points to the current 45 point move up in the Dow, not all is well and good in techland today.

Looking through my list, I see ADI, AMAT, MOT and LLTC all down more than 4%, and SMH, TXN, BRCM, NSM, YHOO, MXIM and KLAC all down more than 2%.

Another classic from MarketWatch.com:

From MarketWatch:

U.S. home builders broke ground on more new homes in September, but took out the fewest building permits in five years, the government said Wednesday.

New construction of homes unexpectedly increased 5.9% in September to a seasonally adjusted annual rate of 1.772 million, the Commerce Department estimated.

It’s the first increase in housing starts since May and the highest level since June. Starts are down 18% in the past year.

Building permits, meanwhile, fell 6.3% to a five-year low of 1.619 million annualized. Typically, permits are higher than starts. Permits have fallen eight months in a row and are off 28% in the past year. Permits are considered a leading indicator not only of housing but of the economy as a whole.

“I think it may be bottoming out,” said Bill Hampel, chief economist for the Credit Union National Association. “It’s just one month’s data, but it suggests the worst may be behind us.”

I’m not quite sure that you can say something is “bottoming out” while it’s still going down. What is it about a five-year low that “suggests the worst may be behind us.” It’s that whole “downtrend” idea.

How ’bout we talk again when we see some “sideways” action, ok?

With refineries backing off to only 86% capacity, crude oil inventories rose, but there were large drawdowns in gasoline and distillate inventories:

With crude oil inputs to refineries down sharply, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 5.1 million barrels compared to the previous week. At 335.6 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year. Total motor gasoline inventories plummeted by 5.2 million barrels last week, but they remain above the upper end of the average range. Distillate fuel inventories dropped up by 4.5 million barrels, but remain well above the upper end of the average range for this time of year. Regular and ultra-low-sulfur diesel fuel inventories fell by a combined 4.0 million barrels, while high-sulfur distillate fuel (heating oil) inventories fell by 0.5 million barrels.

The demand picture remains strong, though the YOY numbers could be slightly skewed by last year’s Katrina effect:

Total products supplied over the last four-week period has averaged over 20.8 million barrels per day, or 3.4 percent more than averaged over the same period last year (when Hurricane Katrina lowered demand levels). Over the last four weeks, motor gasoline demand has averaged over 9.2 million barrels per day, or 3.1 percent above the same period last year. Distillate fuel demand has averaged 4.3 million barrels per day over the last four weeks, or 5.0 percent above the same period last year. Jet fuel demand is up 3.7 percent over the last four weeks compared to the same four-week period last year.

Not surprisingly, the big moves after the bell last night (ie, IBM) helped push the Dow through the 12K barrier right out of the chute this morning, but the picture has changed considerably since then. The Dow is now 85 points off the high of the day, and falling fast, with the Nasdaq and S&P now in the red. A/D lines, which started hot, have deteriorated considerably, the NYSE A-D percentage falling from +60 to +19, and the Nasdaq dropping from +49 to just below zero.

HMOs and natural gas stocks lead the winners, while semiconductors and disk drives lead the losers. Another big drop in semis today, which is a bit worrisome.

Bonds are just slightly higher for another day, yields slipping another few bps. Energy prices have moved higher following the morning inventory data report (more on that in another post). The dollar is higher, along with gold and silver.

“The Ten Trading Commandments”, according to Todd Harrison at Minyanville.

Here’s a sampler:

Discipline trumps conviction.

No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and, above all, never believe that you’re smarter than the market.

Opportunities are made up easier than losses.

It’s not necessary to play every move, it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.

Emotion is the enemy when trading.

Emotional decisions always have a way of coming back to haunt you. If you’re personally attached to a position, your decision making process will be flawed. It’s that simple.

Zig when others Zag.

Sell hope, buy despair and take the other side of emotional disconnects in the context of controlled risk. If you can’t find the sheep in the herd, chances are that you’re it.

Following in the footsteps of yesterday’s PPI, release, the headline consumer price index fell 0.5%, but the core rate rose 0.2% for the third straight month. But even the doctored up “core” inflation has moved to its highest level in 10 years, on a YOY basis, and doesn’t seem to be improving:

The core CPI’s now up 2.9% in the past year, compared with a 2.8% increase in the 12 months through August. This is the highest level since February 1996.

The core CPI has risen at a 3.0% annual rate so far this year.

But it’s ok. There’s no inflation. Just ask Kudlow.

In today’s Dilbert, Wally has the answer:

One day I realized that sadness is just another word for not enough coffee.