Bear Mountain Bull

As the holidays begin, it’s time for BMB to indulge in a little R & R - and no, I don’t mean Ranting and Raving…

Regular posting will resume during the first weekend in December. Comments on the site will be disabled until that time - so those comment spammers out there can go ahead and take some time off as well (and you thought that only email suffered from spam - don’t I wish).

Just because we won’t be updating the site doesn’t mean that you can ignore the markets - you never know when conditions are going to change. If you need to get good, objective updates on a daily basis, maybe now’s a good time to check out Gary Kaltbaum’s radio show. Or start your day with Dave Landry’s Market in a Minute.

When it comes to these holiday weeks, the markets just may as well not be open:

Bonds were slightly higher, yields ever-so-slightly lower:
6-month: 5.14%   2-yr: 4.74%   5-yr: 4.56%    10-yr: 4.56%    30-yr: 4.65%.

Market internals were mostly positive, but on very light volume. Advances/declines were 3 to 2 on the NYSE but just below flat on the Nasdaq, with up/down volume 13 to 7 on the NYSE and 3 to 1 on the Nasdaq. New highs/lows were 344/14 on the NYSE and 160/30 on the Nasdaq.

The groups were led by computer hardware (+2.0%), airlines (+1.4%), semiconductors (+1.2%), chemicals (+1.2%) and housing stocks (+1.1%). Oil stocks (-0.7%) led a short list of losers.

Energy prices were lower across the board. Crude oil recovered somewhat from an early morning selloff, but still dropped to $59.24/barrel. Gasoline fell 4 cents to $1.60/gallon and natural gas lost more than a quarter to $7.72/mmBTU. The dollar broke down early, then traded sideways for the rest of the day. The dollar index finished at 84.55. Gold and silver crept higher, to $630/ounce and $13.03/ounce.

BMB Note: A pretty dull week. Don’t look for any excitement on the short day on Friday either.

The dollar broke down big today. That bears watching - if the dollar index breaks support at around 84.50, that could cause a little uncertainty to creep into other markets.

Have a great Thanksgiving. BMB will be taking the rest of this week and all of next week off - regular posting will resume the first weekend of December.

The weekly report from the EIA showed a build in crude and gasoline inventories, but a drawdown in distillates:

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) jumped by 5.1 million barrels compared to the previous week. At 341.1 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 increased by 1.4 million barrels last week, but remain in the lower half of the average range. Distillate fuel inventories fell by 1.2 million barrels, but remain in the upper half of the average range for this time of year.

Refineries operated at 87.1% of capacity, and demand seems to still be strong:

Total products supplied over the last four-week period has averaged nearly 21.1 million barrels per day, or 2.9 percent more than averaged over the same period last year. Over the last four weeks, motor gasoline demand has averaged nearly 9.3 million barrels per day, or 1.9 percent above the same period last year. Distillate fuel demand has averaged over 4.4 million barrels per day over the last four weeks, or 9.2 percent above the same period last year. Jet fuel demand is down 0.1 percent over the last four weeks compared to the same four-week period last year.

We always hear the ‘experts’ tell us that inventories are well above their “5-year” averages. What they don’t tell us is how much demand has increased over that time period. Does a “5-year” average benchmark mean anything if demand has risen considerably in those same 5 years? Supply number mean very little without the correlating demand numbers. What we really need to know is how those inventory numbers translate to “days of supply”. That would be much more useful.

More of the same - indices hanging right around the zero mark. Gold stocks, computer hardware and airlines up, energy stocks lower following a reported build in crude inventories. Bonds are showing little change.

The dollar has gotten smacked overnight, gold and silver are higher.

Some believe that our government lends a hand to support the markets now and then - or even continuously. As I’ve said before, I’m not big on conspiracy theories, because I’m not that tuned in to the goings on behind the curtains. But as Barry notes by relaying this quote at The Big Picture this morning, the behavior of the markets has been well away from historical norms:

“A Trader friend emailed this:

It has been 95 trading days since we have had a down 1% close. This is 4.5 standard deviations from the historical norm, which means a one in 260,000 chance of happening without the intervention which we have seen.

It has been 917 trading days since we have had a 2% down day at the close. This is 6.13 standard deviations from the norm, and the second longest streak since 1942. The odds of this happening without the Fed’s intervention is one in 86,579,799.

It’s great to know that your tax dollars are working hard to keep the financial system afloat. But what happens when the support stops, or an event overwhelms the ability of the Treasury to support the market?

Paulson says that they have been able to inflate stock prices more than enough to offset the decline in the value of housing; but what happens when stock prices can no longer be pushed higher without running into foreign sellers of dollar assets? Are we going to buy back all of our overseas debt too?

Fascinating stuff . . .”

It’s hard to deny that the behavior of the market has been strange the last 2-3 years, and the past 4 months in particular. But I’m certainly not qualified to determine any specific reasons for it - although it’s fun to speculate!

I’ll let you decide.

This quote from Yahoo/Briefing.com says it all: “If your life was in need of some excitement ahead of a long holiday weekend, Wall Street wasn’t the place to look today. The major averages traded in very narrow ranges throughout the session, making modest moves on either side of the unchanged mark as investors were lacking notable trading catalysts.”

Bonds were slightly higher, bringing yields back down a bit:
6-month: 5.13%   2-yr: 4.76%   5-yr: 4.58%    10-yr: 4.58%    30-yr: 4.66%.

Market internals were slightly positive, with volume just above yesterday’s levels. Advances/declines were 3 to 2 on the NYSE and just above flat on the Nasdaq. Up/down volume was 3 to 2 on the NYSE and 10 to 9 on the Nasdaq. New highs/lows were 268/20 on the NYSE and 148/42 on the Nasdaq.

More groups higher than lower. The gold and silver stocks (+3.8%) led the winners, followed by steel stocks (+2.9%), airlines (+2.4%), oil services (+2.2%), natural resources (+1.9%), commodity stocks (+1.9%), natural gas stocks (+1.8%), oil stocks (+1.7%) and REITs (+1.6%). Semiconductors (-1.1%) and biotechs (-0.9%) led the losers.

Energy prices were again mixed. Crude oil gained more than a buck to $60.17/barrel and gasoline was 8 cents higher at $1.64/gallon, but natural gas fell a few cents to $7.99/mmBTU. Gold finished up 5 bucks to $628/ounce, and silver made a strong showing, moving back up to $13.01/ounce.

BMB Note: Pretty much the same holiday story. These weeks are tough to sit through.

Looking past the holiday weekend, BMB is planning to take a bit of a break, so it’ll be up to you to keep your eyes open to see how things flow once the turkey has all been digested.

The intraday 5-minute chart of Google (GOOG) shows that the surge to push it up over the $500 mark this morning took place in a very short time period - and it’s gone pretty much sideways since.

The day after a nice move up in the semiconductors, the losers on my ‘tech’ list today are all semis: BRCM, INTC, MRVL, LSI, NVDA, LLTC, XLNX, ADI, ALTR, NTE, AMD, TXN.

Typical lackluster trading in a holiday week. The major indices are mixed right around the flat line, and the A/D lines are mixed as well. In the groups, the commodity areas are getting a little movement to the upside, with the REITs tagging along. Semis and biotechs lead the laggards at this point.

Bonds have slipped just a bit, pushing yields up. Energy prices are mixed - crude and gasoline higher, natgas lower. The dollar is near flat, gold and silver are higher.

ETF Trends reports that yesterday’s big move in platinum prices may have been influenced by rumors of a platinum ETF.

	The VIX moved into single digits today, at or near all-time lows. Good news for buyers of option premium, bad news for sellers.
	The Dow Transports still have almost 200 points to go to confirm the new highs in the Industrials, but they’re thinkin’ about it.

Charts courtesy of StockCharts.com

As we expected, we got a snoozer today. Things leaked a little into the red as the day wore on, but nothing very interesting went on, other than in a few groups ‘in the news’. The Dow and S&P did have their ‘winning streaks’ snapped at six:

The bond market was pretty quiet as well, and yields drifted lower:
6-month: 5.13%   2-yr: 4.77%   5-yr: 4.60%    10-yr: 4.60%    30-yr: 4.68%.

Market internals were mixed, and of course, volume was light. Advances/declines were right around flat on both exchanges, while up/down volume was 11 to 13 on the NYSE but 2 to 1 on the Nasdaq. New highs/lows were 307/18 on the NYSE and 195/46 on the Nasdaq.

In the groups, the REITs (+3.2%) led the way on the EOP buyout, followed by metal & mining (+2.4%), steel stocks (+2.2%), disk drives (+1.6%), semiconductors (+1.6%) and commodity stocks (+1.2%). Giving up ground were the hospitals (-1.1%) and the housing stocks (-1.1%).

Energy prices were mixed. The new front month crude contract dropped slightly to $58.80/barrel, gasoline was up a penny to $1.56/gallon and natural gas fell to $8.02/mmBTU. The dollar index gained just a bit to 85.43. Gold was up a buck at $623/ounce, and silver fell a couple of cents to $12.71/ounce.

BMB Note: If you think it can’t get any duller, just wait until Wednesday. Or Friday. These holiday weeks can be tough if you’re waiting for something to happen. And if something interesting does happen, I’m not sure you can read a lot into it.

You’re better off just putting your stops in place - just in case - and going off to do something more fun.

Not a lot of movement overall as of yet, as the major indices hover around the zero line. The big moves in the groups are to the upside: steel stocks are following through on Friday’s move, the mining stocks are getting a boost from the PD buyout, and REITs are also getting a buyout boost from EOP - YABB (Yet Another Blackstone Buyout).

The bond market is quiet. Energy prices are lower, the dollar is fairly flat, and gold and silver are both a little higher.

At The Big Picture this morning, Barry Ritholtz has a good post centered around a WSJ article on skepticism in the market, and how that sentiment can help to keep a rally going - that proverbial “wall of worry” that the market is said to climb. He quotes from the article:

“That’s where the irony comes in. Stock rallies often happen when the market is full of doubters. Those are times when money managers and individuals alike have pulled money out of stocks and are holding cash, bonds or other investments. If the market begins to turn up, these people start to feel left behind. They have money available to shift into stocks, and they do so.

As long as doubters remain to be converted, money can keep moving away from other investments and into stocks, pushing prices higher.”

In most cases, it irks me when bloggers link to articles on pay sites, since I’m far too cheap to subscribe to things like WSJ or Barron’s online. But Barry pulls out the good stuff on a regular basis for all of us poor folk.

Not surprisingly, Bill Fleckenstein is amazed by the “upside-down logic” of Wall Street. But he’s not convinced that the apparent ‘liquidity fest’ is for real:

Part of me thinks that the current mini-mania in equities is a response to Fed-induced liquidity. And yet, when I discuss with my good friend Jim Grant what the big central banks of the world are doing — Japan’s, the United States’ and Europe’s — he suggests that they really aren’t spewing out liquidity as aggressively as people think. Of course, if they were, one might expect commodities to be on more of a run than they have been. To me, they seem to be suggesting that the world economy is slowing down at the margin.

Therefore, I’ve concluded that what we may have is the illusion of a liquidity fest. The stock market is acting as though there’s an enormous fire hose of liquidity gushing forth — when, what might actually be the case, is that a wanton derivatives/credit/lending mania is in full force.

Markets in motion may stay in motion. If, however, the source of the propulsion is mispriced and badly structured credit, things can come to a sudden stop. But if that were to occur, the Fed at some point would ride to the rescue with plenty of liquidity. That is Marc’s (Faber) point and is, of course, the point of my pet saying that in a social democracy with a fiat currency, all roads lead to inflation…

…the important takeaway point: If the environment is as I suggest, it can end quickly and violently. Those who are tempted to participate are likely to be hurt. That’s my best attempt to make sense of what’s going on and what it may lead to.

This time it’s a big one in the mining industry:

Freeport-McMoRan Copper & Gold Inc. (FCX) said on Sunday it agreed to acquire Phelps Dodge Corp (PD) for about $25.9 billion in cash and stock, creating what it called the world’s largest publicly traded copper company.

	If the chart of the oil stocks looks like this…
	…and the chart of the oil services stocks looks like this…
	…why does the chart of crude oil prices look like this? There is a clear divergence between oil stocks and oil prices at this point, as the stocks have rebounded but the price of the commodity itself has not. This divergence will be resolved, sooner or later. The general belief is that the stock prices will lead the commodity, implying that oil prices will rise to catch up with the stocks. But there are no rules to say that the stocks can’t fall back if the commodity price never gets going.

Charts courtesy of StockCharts.com

A new edition of the ChartWatchers newsletter from StockCharts.com is available for your viewing enjoyment. This week, the experts discuss commodities and Canadian stocks, the four-year cycle, another breakout in the QQQQs and the state of the current Nasdaq rally.

Items of note on the latest industry moves:

• The airlines and tech are trying to take over the ‘best’ list.
• The semiconductors made a little breakout above their range this week ($SOX chart), but other tech areas like internet ($DOT chart), computer hardware ($HWI chart) and networking ($NWX chart), along with biotech ($BTK chart), have been much stronger.
• The commodities took the top spots in the ‘worst’ list this week, but health care still holds on to the ‘leadership’ spots over the past few weeks.
• The health care groups got a nice bounce out of their post-election selloffs.
• Housing stocks ($HGX chart) were able to save themselves after looking like they were going to roll back over.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page.

I’m sure you heard all the buzz over the debut of Sony’s PS3 this week. Well, not all of those folks standing in line to get one of the newest ‘hot’ consoles was planning on using it themselves - many were looking to take advantage of the short supply and sell the new hardware at prices far above the retail price.

Here in Central TX, listings of PS3 consoles on Craigslist.com numbered well over 200, and asking prices reached upwards of $3000-$4000. However, it seems that far too many people had the same idea, and what do you know? Those consoles aren’t selling. And many of those who hoped to make a quick buck might not be able to afford to sit on their ‘inventory’ very long.

This response to the ’suppliers’ was seen on Craiglist today:

Face the facts, PS3 reselling losers…

The truth is, you people who are trying to sell for $1000 or more are getting desperate because no one is buying into your BS. Especially funny are the idiots that are claiming that the systems are going for $3000-$5000 on ebay. Yeah right, I was just there and most that were over $1200 had NO bids on them 5 minutes to end of auction.

Now the retards realize they spent upwards of $650-$800 and they will not get the windfall they were expecting. I’ve seen people on here whining that they have to get rid of it ASAP, have bills to pay, stood in line for days in the cold weather (like that gives you license to rip people off), etc. Shoulda thought of that before becoming greedy, scumbags. You took the opportunity that GAMERS (people who actually WANT to play the system) should have had to buy the systems. Now you sit on your “investment” whining that no one will buy it. Tough shit. Stop crying like a bunch of wusses because everyone else is smarter than you. Prices WILL NOT go up because YOU are flooding the market and the market will dictate that YOU will have to sell your system for little or no profit.

Oh, by the way, you can flag and remove this all you want since it scares you. I have all day tomorrow to repost it. And since Thanksgiving holidays are upon us, I have even more time to repost. Yeah, I do have a life, before you break out that lame old insult, but right now it seems that I may need to dedicate some time for a greater good (busting the chops of lowlife overpriced PS3 resellers).

Update: And of course, you have to factor in the competition from the release of Nintendo’s new console as well.

A price-weighted index can do funny things. At The Big Picture today, Barry’s got a nice table of the 30 Dow stocks, their all-time highs, the date they hit those highs, and their current percentage below those highs.

So as we see the Dow Industrials Average making new highs nearly every day recently, make note that:

• Only 4 of the Dow 30 have hit new highs in the month of November.
• Only 5 of the Dow 30 have hit new highs since mid-May.
• Only 7 of the Dow 30 have hit new highs in 2006.
• Only 9 of the Dow 30 are within 10% of their all-time highs.
• 15 of the 30 Dow stocks - half of them - are 30% or more below their all-time highs.

Food for thought. CNBC doesn’t usually tell you these things.

It would be silly to try to say that there is much wrong with these charts:

Energy stocks had the worst week of all, with a particularly bad day on Thursday, but the uptrend is still intact at this point. As for the Staples, they had a good week, but haven’t been making a lot of progress of late.

The health care stocks rebounded nicely from the post-election selloff.

The numbers as the market continues to move:

Charts courtesy of StockCharts.com

Last Friday we said: “To get a better idea of where the market is headed, watch for some of these trading ranges to be resolved, in one direction or the other.” Here’s how those same indices look after this week’s action.

Obviously, the Dow and S&P have broken out, and software, transportation and the brokers appear to have made their way out of those ranges as well. Semis had a nice run. Retail kinda snuck out, but not very convincingly, and the big banks are still stuck - although the regional banks had a great week (see $KRX chart).

Charts courtesy of StockCharts.com

Not a great day for stocks - but that didn’t stop the Dow and S&P from making new highs. I’m not sure anything can stop them anymore. The major indices finished mixed:

Bonds recovered from a couple of days of losses, and yields moved down:
6-month: 5.13%   2-yr: 4.76%   5-yr: 4.60%    10-yr: 4.60%    30-yr: 4.69%.

Market internals were negative for the day in a while. Volume was about the same as it has been most of the week on the NYSE, but dropped off on the Nasdaq. Advances/declines were 5 to 6 on the NYSE and 8 to 11 on the Nasdaq, with up/down volume 9 to 10 on the NYSE and 2 to 3 on the Nasdaq. New highs/lows were 162/17 on the NYSE and 145/42 on the Nasdaq.

Outside of the steel stocks (+4.1%), there weren’t many big movers to the upside - natural gas stocks were higher by 1.2%. On the down side, airlines (-1.6%) and transportation stocks (-1.0%) led the way.

Energy prices were mixed - sort of. Gasoline was higher by a couple of cents to $1.55/gallon and natural gas bounced back with a 42 cent gain to $8.18/mmBTU. Crude oil appeared to be lower by 40-some cents to $55.81/barrel. But before you get too excited about oil below $56/barrel, note that with today’s expiration of the December contract, the January ‘07 contract becomes the new ‘front month’ come Monday - and it is trading more than three dollars higher than the December contract, at around $58.85/barrel. Funny stuff can happen as these contracts expire. The dollar index slipped back to 85.33. Gold gained a few bucks to $622/ounce while silver dropped a couple of pennies to $12.73/ounce.

BMB Note: Well, today’s action didn’t change a heck of a lot, and we’re headed into a shortened holiday week, where light volume is the order of the day. That sometimes brings about some wild price swings, and sometimes can be incredibly boring. Maybe we’ll get some of each.

Some bizarro stuff going on the oil markets the last two days. I wonder how long this weird behavior around contract expiration will go on.

As usual, we’ll look at the sectors and groups over the weekend.

Steel stocks are on the move today. Here’s why - various buyout scenarios are being tossed around.