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.

More than a little.

This article from Bloomberg cites various opinions of the chance of a US recession. Basically, the votes are in a nice narrow range - anywhere from 0 to 90 100 percent. I’m guessing they can’t all be right.

Here’s a sampler:

- the economy is “on a knife’s edge”
- the U.S. “is in recession right now.”
- “Recessions are built on complete excess. We had that in housing, but we didn’t have that in the broader economy.”
- “we still don’t see the probability of recession as being particularly high. It wouldn’t be over 35 percent.”
- puts the possibility of a recession at “about a third” and calls that “significant.”
- “Recessions come because of policy mistakes. Right now, we’re not making those kinds of mistakes.”
- “We’re at a 90 percent probability of a recession.”
- Recession chances are nowhere near that.

I don’t know about for you, but for me, that really clears the picture up quite nicely.

Hat tip to Calculated Risk.

	Time to pay a little more attention to what’s going on with some of the groups. REITs have been on a constant move higher for months, but have suffered their biggest setback in quite a while over the past couple of days.
	Paper stocks have joined the hospitals in the doghouse.
	Insurance and defense stocks have been in a slide that has taken them back to their 50-day averages so far.
	Banks - and regional banks - are breaking below their recent ranges, and risk setting up some significant overhead resistance by doing so.
	A similar situation faces the brokers and the retailers if they fall much further.

Charts courtesy of StockCharts.com

Some indecision in stocks today, as the action was pretty much split - some good, some bad, but not a lot of big movement in either direction. The major indices looked like this at the end of the day:

Bonds pulled back after rallying hard for several days, and that bounced yields a little higher:
6-month: 5.11%   2-yr: 4.67%   5-yr: 4.55%    10-yr: 4.60%    30-yr: 4.72%.

Market internals were again on the negative side, but volume slacked off a bit from that of yesterday’s selloff. Advances / declines were 4 to 5 on the NYSE and 8 to 11 on the Nasdaq, with up/down volume 13 to 11 on the NYSE and just below flat on the Nasdaq. New highs have contracted considerable, as highs/low came in at 120/38 on the NYSE and 61/57 on the Nasdaq.

The groups were pretty evenly split, but without a lot of big movers. HMOs (+1.8%), hospitals (+1.2%) and brokers (+1.0%) led the winners, while REITs (-1.8%), paper stocks (-1.5%), airlines (-1.4%) and defense stocks (-1.2%) led the losers.

Energy prices were mixed again today. Crude oil still isn’t able to make much headway to the upside, dropping to $57.88/barrel, and gasoline fell a penny to $1.45/gallon, but natural gas was higher, to $7.81/mmBTU. The dollar index was fairly flat at 85.36. The precious metals continue to move higher - gold to $623/ounce and silver to $12.52/ounce.

BMB Note: Not a lot of big moves today, but the overall softness continues. Some sectors are starting to break their near-term support, but so far this move hasn’t amounted to much more than a pullback from the streched, oversold condition the market was in.

Not time to panic just yet, but I’d be a little careful about putting too much money to work at this point, as it looks like many of the groups have a little bit of down side left to go. We’ll take a look at some of those charts later. Without a doubt, the strongest area right now is the precious metals themselves. Gold and silver look pretty good, and are likely buyable on pullbacks here. As for the precious metals stocks, they seem to be held back by the softness in the market itself, but would likely break away to follow the metals if a big move gets going. As far as getting in the metals themselves, there are exchange-traded funds you can take a look at, like GLD, SLV and CEF. As far as gold stocks are concerned, you can check out the Gold Miners ETF, symbol GDX.

The rest of the energy/commodity area is still pulling back for the most part, but I’m keeping an eye on a few setups there in case they get moving, things like ACI, CMC and UPL are looking interesting.

Tomorrow morning we get the big October jobs number. I’m not sure it’ll be as big of a deal as it has been, especially if it comes in anywhere near expectations. The market doesn’t seem too worried about more Fed tightening, so I think only an extremely poor number would have an effect on the market.

Gary Kaltbaum notes the action in the small-caps, brokers and retail, and says that the party is over - at least for now:

We believe the market has lost some, if not all the wind at its back. This is not occurring out of recent weakness but out of recent strength. Markets have been too stretched and extended for too long. Eventually, markets trade back to the norm…which would be recent support levels or moving averages.

***

All this does not mean the party is over. It means…RIGHT NOW…the party looks to be over. Pullbacks are normal after a good move up. We just wanted to let you know that we believe risk has picked up here and believe more corrective work could be at hand.

Yes, it’s same-store-sales day again, where the numbers come pouring in from every retailer you can think of, and some you’ve never even heard of. I don’t even try to keep track. Doesn’t matter that much to me. And every month, it’s a pretty mixed bag, and some retail stocks move higher and some lower.

Today, in the ‘higher’ category we find ARO, CACH, JOSB, PSUN, LTD, JWN, AEOS, PLCE, CLE and JCP, and on the ‘lower’ side are CHS, GPS, ANN, WFMI, WMT, TGT, ANF, DDS and SHLD. Like I said…

And to follow up on the BMWife’s recent post of anecdotal retail evidence, there’s this from Barry at The Big Picture today.

A zero productivity gain, higher labor costs, and a flat forecast from Wal-Mart have helped to hold things in check so far this morning. The major indices are all showing slight losses, and advance/decline figures remain in the red. Bonds have pulled back, giving yields a bit of a bounce higher.

In the groups, we’re seeing a slight rebound in the HMOs and hospitals, while paper stocks, transports and oil services are leading the down side.

Energy prices are mostly lower. The dollar is flat, while gold and silver are higher again.

Deron Wagner is eyeing gold, but is recommending caution on the market as a whole because of the poor performance of market leaders:

Looking purely at the daily charts, one could easily surmise that the current correction down to the 20-day moving averages in the S&P and Nasdaq is no different than others over the past several months. But there is one crucial, yet easily overlooked difference this time — poor performance of leading stocks. In a healthy market, leading growth stocks will show relative strength by retracing a smaller percentage than the broad market on the down days. However, since the correction began on October 27, we have seen many leading stocks such as Hittite Microwave (HITT) and Garmin (GRMN) completely fall apart. Further, there have been many failed breakouts to new highs as well. Clearly, these are not good signs, so we are against buying new long positions right now until this scenario changes. Remember, though, that commodity and currency ETFs are not directly tied to the stock market’s performance.