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.

Conor Sen, on the Technically Speaking blog:

Back to the US markets, we continue to see stocks and bonds saying different things. While the S&P and Dow continue to head higher, bond yields stubbornly drift lower, with the yield curve getting more and more inverted. If that weren’t confusing enough, Fed Funds futures give the odds of a rate cut within the next 4 months at less than 10%. This despite several economic indicators which have been reliable in the past saying a slowdown in manufacturing and other economic activity is underway.

Although, on the other hand, commodities are headed higher again, with some commodity indices now above their May levels and at all-time highs. So stocks and commodities are signalling growth/inflation while bonds and economic data are saying slowdown. Only one of the two outcomes is possible, but by the time we know for sure the opportunity will be gone.

Some potential market-moving reports due out this week:

- Tomorrow (Tuesday): Oct. Producer Price Index (PPI) and Retail Sales
- Wednesday: release of the Fed minutes from the most recent meeting
- Thursday: Oct. Consumer Price Index (CPI) and Philly Fed data
- Friday: Housing starts and building permits

Rob Hanna is watching the decreasing RSI reading on the S&P and wondering if we aren’t seeing a market top being formed:

So does this mean the market is forming a top? Not necessarily. It’s possible we could consolidate around these levels and then embark on another leg higher like the 2003 example. I think that’s unlikely, though. Regardless, the character of the market is changing and your approach should as well. I believe it is time to utilize strategies that would take advantage of oscillations as opposed to strategies that would take advantage of momentum. Take what the market gives you and understand that the up-move is likely weakening.

I’m not sure I agree just yet. Even though the rally has clearly lost some steam, that doesn’t mean that steam won’t come back in a hurry. The Nasdaq just worked its way to new highs today, and price action trumps indicators every time. So until we see some support levels taken out - and we’d have to move down instead of up to see that - I wouldn’t be very quick to call a top here.

As Deron Wagner likes to say, “trade what you see, not what you think!”

You know things can’t be all that interesting when the airlines are where all the action is. Buy ‘em if you want. I’m not interested.

Chart courtesy of StockCharts.com

Another one of those irritating days. The indices edge higher, most groups edge higher, but nothing really changes. It’s hard to be convinced that the next big move is up when there’s no power to the current move.

Bonds were down slight, edging yields up:
6-month: 5.14%   2-yr: 4.76%   5-yr: 4.59%    10-yr: 4.60%    30-yr: 4.70%.

Market internals were positive, but volume was again light, just above Friday’s low levels. We’ll need to see more volume come into the game as well to be convinced that any moves are legit. Advances/declines were 6 to 5 on the NYSE and 11 to 8 on the Nasdaq, with up/down volume 3 to 2 on the NYSE and 7 to 3 on the Nasdaq. New highs/lows were 256/27 on the NYSE and 174/55 on the Nasdaq.

Most groups were higher, but only a few big movers: airlines (+3.1%), semiconductors (+1.6%), HMOs (+1.3%) and computer hardware (+1.2%). Retailers (-0.6%) led the short list of losers.

A second consecutive big drop in crude oil, which was down another buck to $58.58/barrel. Gasoline was down a penny to $1.55/gallon, but natural gas was higher to $7.89/mmBTU. The dollar index bounced up to 85.38, while gold slid a few bucks to $626/ounce and silver dropped to $12.87/ounce.

BMB Note: Not much to talk about. The Nasdaq snuck to new highs again, and some of the groups edged to new highs, but the action isn’t convincing yet at all. The moves aren’t big and volume has been light. I’m looking for a little more confirmation before I get too excited about looking for new opportunities on the long side.

I’m not big on change. At all. But since I run this web site, it does make some sense for me to check out browser updates as they come along and make sure the site looks ok.

As everyone probably knows by now, Microsoft is busily rolling out Internet Explorer 7. When my ‘turn’ came in the update queue, I went ahead and installed it.

Wouldn’t you know it, when I went to launch IE, my home page failed to come up - and nothing else would either. Since I’m a Yahoo toolbar user, and I’ve already had some history with that piece of software, I figured it could be a possible problem. Sure enough - after disabling the Yahoo toolbar, IE came up fine. And after downloading the latest version of Yahoo toolbar, all is well once again - almost.

First reactions are ho-hum. I don’t expect much from my browser - just let me browse the web, be reasonably fast about it and don’t lock up or crash. IE7 seems to work fine - and in all honesty, it looks a lot like Firefox (version 1.5 - I haven’t loaded up the new 2.0 yet. That’s next on the experimentation list.). You know, the tabbed browsing (which I like a lot), the integrated search, the feed icon, etc. MSFT decided, for some reason, to take away the ‘File - Edit’ menu bar - I assume so that it isn’t always there taking up screen real estate. Makes some sense. You don’t need that bar all that often, and it pops up when you hit the ‘Alt’ key.

Bugs? One biggee so far: clicking on links that appear in emails (Outlook Express) won’t open up in IE7, whether it’s running or not. At least they won’t on my machine. Nothing happens at all. I’ve worked around that by making Firefox my default browser - those same links DO open up in FF, or will launch FF if it isn’t running. I’m not sure if this is an IE7 problem or not - but from where I’m sitting, it used to work with IE6, it works with FF, and it doesn’t work with IE7. You tell me where you think the problem might be.

Today’s auction results show no change in the yield on the 3-month Treasury (5.088%), and a slight drop in the 6-month yield from last week (5.153% this week vs. 5.180% last week).

At least these yields have stabilized above the 5% mark for the time being.

The CEO of KB Homes has retired, mainly due to fallout from just one of many options backdating scandals.

What I find amazing is the way Wall Street just yawns at this blatant ripoff, which has now been discovered, affects numerous companies in various industries:

Susquehanna Financial Group analyst Stephen East in a research note Monday called Karatz’s retirement a “mixed blessing.”

He wrote that putting the scandal behind it will allow management to focus on the critical business of steering the company through the housing slump.

“Unfortunately, the flip side of the equation is that Karatz is also carrying away from KB Home a tremendous amount of experience and vision that has actually served KB Home very well, not only during the boom, but also in the early phase of the downturn,” the analyst said.

“Ya know, he was a good guy and he really knew the business. Yeah, sure, he was ripping the company and shareholders off and pocketing the profits, but geez - we’ll miss him. Too bad he got caught, isn’t it?”

Takes one to know one. The flippant attitude toward this huge, pervasive corporate ripoff just pisses me off to no end.

Stocks have started out on a mostly positive note, with the major indices, advance/decline lines and most groups in the green thus far. In the groups, airlines, semiconductors, broker and computer hardware are leading the way, with the gold stocks and energies lagging the rest of the market. Bonds are lower, pushing yields up a bit.

Energy prices are lower across the board, with crude oil down about a buck at the moment. The dollar is a bit stronger, and gold and silver have pulled back.

While the Nasdaq / Nasdaq 100 snuck to new relative highs this morning, we have yet to see confirming moves out of other indices. We remain cautious on the long side until we get some better evidence that things can break out of their recent ranges.

Dr. Brett Steenbarger has a column this morning that describes some of the new tools and websites available for online investors to help them make more informed investment decisions. For example:

Suppose, however, you also want to see how the pros are trading BLDP. In that case, you move on over to the StockPickr site developed by James Altucher. This very worthwhile site tracks the holdings of major institutions and hedge funds, letting you know who is buying your stock. When we enter BLDP into the search engine, we get a chart of the stock, links to news items, and a list of pros and subscribers who own BLDP in their portfolios. As it happens, only 3 portfolios–none from the pros–track this stock. This suggests that the issue is under the radar at an institutional level. When I click on one of the portfolios, the TM Star Securities House Account, I find other stocks, some of which are related to BLDP and owned by institutions, such as Energy Conversion Devices (ENER). This provides yet another source of insight for trades.

Check out the column. Maybe you’ll find a site or two that will fit with your investment style and preferences. I’ll be spending some time looking them over myself.