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.

Or central banks run amok - or both?

gold price day before 2000 election: $265.05
gold price day before 2002 election: $318.55 (+20.2%)
gold price day before 2004 election: $427.55 (+34.2%)
gold price day before 2006 election: $623.20 (+45.8%)

Thanks to Ron Sen.

And I’ll add another one:
Dollar index before 2000 election: ~115
Dollar index before 2006 election: 85.38

	Boeing had been looking a little shaky of late, but got a nice shot in the arm today when FedEx dumped an Airbus contract and went with BA.
	The dollar has been struggling, unable to break above a year-long downtrend and move above more recent resistance at 87. Now the buck is in danger of falling below the uptrend off the May-June lows.

Charts courtesy of StockCharts.com

The market had a couple chances to break out of its range today, both fell short both times and pulled back, leaving the major indices with modest gains. The Dow picked up 51 points - but about 35 of those points were due to a big move in Boeing:

Bonds prices moved higher again, and yields fell again:
6-month: 5.15%   2-yr: 4.77%   5-yr: 4.63%    10-yr: 4.66%    30-yr: 4.75%.

Market internals remained positive, but were not as strong as yesterday’s numbers, but volume picked up from yesterday’s levels. Advance/declines were 5 to 4 on the NYSE and just better than flat on the Nasdaq, with up/down volume 6 to 5 on the NYSE and 2 to 1 on the Nasdaq. New highs/lows were 291/13 on the NYSE and 171/41 on the Nasdaq.

Most groups finished higher, but the gains weren’t nearly as large as yesterday’s. Leading the winners were airlines (+1.6%), biotechs (+1.2%) and networking (+1.2%), while steel stocks (-1.1%) and REITs (-1.0%) led the losers.

Energy prices were mixed, with crude oil down more than a dollar to $58.93/barrel, and gasoline near unchanged at $1.52/gallon, but natural gas higher to $7.76/mmBTU. The dollar index bounced back from morning losses, but finished lower at 85.41. Gold picked up a couple of bucks to $625/ounce, but silver dropped a nickel to $12.56/ounce.

BMB Note: The indices did try to poke to new highs today, but weren’t wildly successful. I wouldn’t get too excited about any new highs just yet. Let’s wait to see what the reaction to the election results is over the next day or two to see what the market’s going to do. Maybe we can get a better picture at that point.

Considering the fact that today’s move higher was rather weak, I wouldn’t give it a lot of weight. If you’re curious, the biotechs, networkers and internets seem to be the ones that are holding the Nasdaq up for now. But I think I’ll wait a bit to see what the market does here before looking to add to long positions.

“In a sign of a deepening housing slump, two major homebuilders on Tuesday reported steep declines in new orders and weaker fourth-quarter results.”

“We continue to look for signs that a recovery is imminent but can’t yet say that one is in sight,” Toll Brothers Chief Executive Robert Toll said in a statement. “It is worth noting that, atypically, this housing market is weak in an environment of low interest rates and low unemployment.”

But the market doesn’t seem to care a heck of a lot today, as tech leads stocks higher. The homebuilders, on the other hand, are slightly in the red for the day.

Stocks are making a bid to best their recent highs today, with the Nasdaq leading the way. A/D lines are positive, and most groups are in the green. Airlines, semiconductors, networking and biotech lead the winners, while oil services lead a short list of losers. The bond market has decided to move back up, bring yields down.

Energy prices are lower, but the dollar is under pressure. Gold and silver are slightly higher.

Deron Wagner is pretty focused on commodity ETFs at the moment - things like OIH, USO, DBC and GLD.

On the move in the broader market yesterday, volume was a bit of a disappointment:

Despite yesterday’s firm gains, the low turnover was disappointing for the bulls. In both the NYSE and Nasdaq, total volume increased by only 1% over the previous day’s levels. Volume in the NYSE was so light that it failed to exceed its 50-day average level. The Nasdaq volume barely came in above its 50-day average. After snapping back sharply from last week’s losses, one would have expected to see more shares changing hands, but institutions were not interested in aggressively buying stocks. Since volume was unimpressive on the upside, keep a close eye on the price to volume relationship in the broad market throughout the remainder of the week. A sole session of higher volume losses could easily trigger another correction that would wipe out yesterday’s gains in short order.

***

The S&P, Dow, and Nasdaq did what they were “supposed to do” by rallying off support of their primary uptrend lines yesterday. However, they still must contend with the overhead supply from resistance of their October 26 highs. Unless they clear those levels, caution is still advised on the long side of the market, especially with volume being so light yesterday. The resistance levels are as follows: S&P 500 - 1,389.45, Dow Jones - 12,167.02, and Nasdaq Composite - 1,379.29. As always, remember to trade what you see, not what you think!