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.

For those of you keeping an eye on gold stocks, here’s a look at all of the stocks in the Gold Bugs Index ($HUI) from Martin Goldberg.

The major indices are holding up, and the sector charts are hanging in there as well. But the market hasn’t been without a few breakdowns:

AMG, APOL, ATYT, BK, CGNX, CTXS, ENDO, FCS, HSY, MOT, NTRS, RDN

GOOG - closed at 426.06, trading at 458.00
SNDK - closed at 61.73, trading at 54.00
SYNA - closed at 24.09, trading at 26.10
BRCM - closed at 28.97, trading at 29.75

	It seems that volatility has nowhere to go but up.
	For the past couple of weeks, investors haven’t found coal stocks to be dirty or messy at all. The recent sharp rise in natural gas prices hasn’t hurt matters either, since natural gas and coal are commonly used fuels for the generation of electricity.

Charts courtesy of StockCharts.com

More churning today, as the major indices couldn’t get moving, and advance/declines settled on slightly positive ground and stayed there throughout the day. Aside from a rebound in the Transports, helped by earnings from UPS, the major indices weren’t able to cover much ground today:

Bonds fell back, sending yields back up:
6-month: 5.14%   2-yr: 4.86%   5-yr: 4.75%    10-yr: 4.78%    30-yr: 4.91%.

Market internals were positive, with volume about the same as yesterday on the NYSE, but falling back on the Nasdaq. Advances/declines were 3 to 2 on the NYSE and 11 to 8 on the Nasdaq, but up/down volume was only about 10 to 9 on each exchange. New highs/lows were 244/12 on the NYSE and 158/36 on the Nasdaq.

In the groups, metals and energies made another strong move: oil services led the pack, up 3.6%, followed by gold and silver stocks (+3.5%), transportation (+2.4%), natural resources (+2.3%), natural gas stocks (+2.3%), commodity stocks (+1.9%), oil stocks (+1.8%), steel stocks (+1.7%) and disk drives (+1.4%). The losers were led by the brokers (-1.4%), paper stocks (-1.3%) and software (-1.0%).

Energy prices were higher, with crude oil making its way back above $59 before pulling back to $58.50/barrel. Gasoline was higher by a couple of cents to $1.49/gallon, and natural gas moved back above $7 for the first time in quite a while, finishing at $7.13/mmBTU. The dollar index fell to 86.27, its lowest level in two weeks. Gold gained ground again, up to $599/ounce, and silver regained the $12 mark at $12.04/ounce.

BMB Note: Another day, strong in some areas and a little questionable in others. The rebound in energy and metals continues. Those groups remain strong, it’s a matter of picking stocks and entry points. BMB dipped his toe in on one of the metals stocks himself today. We’ll see how that goes. My feeling is that there will be more opportunities shaping up there, especially if we see a little pulling back.

On the down side, semis didn’t get anywhere again, and as we saw in the chart yesterday, are now resting pretty much right at near-term support. The brokers also have pulled back to near-term support, but are in a little better shape than the semis. The transports had a decent day, but they’ve been all over the place the last three days. I’m not sure if they know which direction they want to go from here.

Of course, after the bell, it’s all about earnings, and today, it’s all about Google. The stock closed at 426.06, and is currently trading above $452. I guess they liked it.

Today at The Big Picture, Barry is poking holes in the spin following some of the latest housing numbers. For instance, there was the attempt to spin the housing starts number as indication of a turnaround:

The spinmeisters approach to Housing is to live in Goofytown — and if you check out your maps of Spin City, you will find Goofytown is right near the border of Absurdville. A quick look at the Housing data and charts reveals that the details — you know, the numbers and charts — simply do not match up with the spoken words from the dissemblers who endeavor to mislead you.

For example: Yesterday, we saw New Building Permits drop, and we learned Home Buyer Mortgage Applications fell. That is consistent with what we have seen around our area, heard from the various builders, and learned via the warnings coming out of mortgage writers (See WaMu’s conference call yesterday for the ugly details).

Then comes the New Home Starts, and its as if a life preserver was thrown to a drowning man. Part of the problem, however, is in the innumeracy in this nation, and in much of the financial press also.

Here is the data point released by the Census Bureau:

Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,772,000. This is 5.9 percent (±8.9%)*

Single-family housing starts in September were at a rate of 1,426,000; this is 4.3 percent (±8.4%)* above the August figure of 1,367,000.

What is the mathematical significance of this release? ABSOLUTELY ZERO. Any datapoint below the margin of error is statistically insignificant.

As the Census Bureau notes:

* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

Insufficient evidence to conclude the change is different from zero. So September starts up 5.9% with a +/- 8.9% error rate means nothing. Single Family Home starts of 4.3% and a +/- 8.4% margin is meaningless.

However, do note the year over year change from September 2005 — down 17.9%, with a margin error of +/- 7.0% actually IS significant. That means the range does NOT include zero, but rather is from -10.9% to -24.9%. This data is consistent with the rest of what we see and hear from builders, mortgage writers and anecdotal evidence.

Barry mentions the WM conference call. Add WM’s earnings together with a warning from LEND, and the reaction in the lenders’ stocks today has not been a kind one - with LEND down > 11%, NEW down 4%, WM down 3.4%, CFC down 3.2%, to name a few.

Then there was the ridiculous talk of a bottom on a one-point gain in the homebuilders sentiment index.
Go read the whole thing.

Once again, the early rush has faded, leaving the major indices near the UNCH mark. The exception so far are the Transports, up 1 percent, helped by a nice move in UPS. A/D lines remain in the green, but that’s not helping the indices at the moment.

The groups are led by transportation, gold stocks, metals, oil services and natural gas stocks. Software, brokers and banks are giving up ground.

Bonds are slipping, yields moving higher. Energy prices are mixed, but with only slight changes. Even though rates are higher, the dollar has slipped. Gold and silver are both higher.

I don’t care about Foley and his priest buddy, ok?
He resigned. I’d like to resign from the situation too, but you media folks won’t let me.

Deron Wagner examines yesterday’s Nasdaq weakness in comparison to the S&P, and has some comments on the sagging SOX:

After falling 5.3% over the past two days, the $SOX now sits at support of its 50-day moving average. Yesterday, we illustrated the major resistance of its 200-day MA and prior uptrend line, but support in the $SOX should be found at its 50-day moving average, half a percent below yesterday’s closing price. The S&P and Dow are doing their best to hold near their highs, but the $SOX could throw a wrench in the works if its relative weakness continues. A number of major tech companies released earnings after the close yesterday as well, so let’s see how the market digests these results. When the indices are out of sync with each other, as they were yesterday, it often leads to choppy and erratic trading action, so beware of aggressively entering new positions on either side of the market right now.

Microsoft is releasing version 7 of their Internet Explorer browser. IE7 will be pushed out to existing customers through Windows update, though users will not be required to upgrade.

The BMB site has not yet been tested with IE7. If any readers decide to try the upgrade, or have been running the beta versions, please let us know if you notice any site issues when viewed with IE7.

This article wonders if individual investors aren’t arriving a little late to the party, just like they always do:

Retail investors “are starting to participate, but they didn’t begin until nine days ago,” Biderman said in an interview.

TrimTabs estimates that $2.5 billion was put into U.S. domestic equity mutual funds from Oct. 4 through Oct. 16, with $900 million flowing in Monday alone. But as the Dow Jones Industrial Average was rising more than 2% in September, just $2 billion flowed into U.S. domestic equity funds.

So what’s been helping the market move up lately? How ’bout a healthy dose of buybacks?

Companies in the Russell 1000 Index repurchased $2.4 billion of their stock a day during the third quarter and $2.2 billion a day in the second quarter, according to TrimTabs estimates. That’s up from $1.8 billion a day during the fourth quarter of 2005.

“Companies have been heavy buyers as the market begins to go up,” while retail investors have been sellers, Biderman said. “Individuals invest with their hands on the steering wheel, their foot on the gas and their eyes on the rearview mirror.”

And don’t forget, 2005 was no slouch of a year when it came to corporate buybacks either.

Notable moves pre-open:

CTXS - down 6.08 to 28.98
AAPL - up 4.65 to 79.18
IFIN - down 6.04 to 36.62
LOGI - up 2.45 to 24.70
LEND - down 5.70 to 28.50