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.

Stan Weinstein, author of “Secrets for Profiting in Bull and Bear Markets”, will be the guest Market Monitor on Nightly Business Report tomorrow (Friday) on PBS stations. If you can’t catch the broadcast, the Market Monitor segments are available on the nbr.com website in the week following the guest’s appearance (See ‘On Air’, ‘Streaming Videos’). After that time, you can find the transcripts available here.

Ivan Martchev of At These Levels has some opinions on today’s selling in the crude oil market:

The December futures will stop trading tomorrow, so traders are front-running the roll trade as passive index funds have to sell the December contract and buy the January contract. It’s quite a mess. There are also nervous longs in the market on top of that, as if it were only a roll issue–then the January contract wouldn’t be down as much as it is. But I’ve noted that oil futures weaken sharply around expiration and rebound afterward. Buy January oil futures? I can’t recommend that as this will be only for day traders.

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FYI, due to oil futures contango, the January contract is more than $2 higher than the December contract as we speak. That doesn’t mean oil will be up $2 on Monday, even though I saw it reported that way on a major TV network. That does mean, however, that holders of the US Oil fund (which invests in front-month futures) are royally screwed with every roll.

It ain’t over ’til it’s over. From TheDOCument.com today:

So, exactly how crazy can things get? Many people enjoy making references to 1999/2000 when the Nasdaq doubled in the six months preceding its infamous top. Few remember that in the last three months of 1998, the Nasdaq surged 75% without blinking. In the nine-month interim between those two surges, the Nasdaq tacked on a paltry 15%. Add it all up and you get a quadruple in 18 months.

I do not believe we are witnessing the same type of craziness as the tech bubble. The lesson to be drawn here is simply one of reference. The Nasdaq has gained nearly 25% since July. For that gain to quickly become 50% is not out of the question. Yes, we are entering a recession in the wake of the housing meltdown. You know the story. But craziness is not tamed by reason, only by exhaustion.

There isn’t an ounce of fear left to be wrung out of this market, as the VIX explores historically low levels.

Chart courtesy of StockCharts.com

A rather up and down day for stocks, as some big losses in the energy and commodity areas, on the heels of a big drop in oil prices, helped hold the indices back a bit. The Transports were the beneficiaries, while the small-caps lost a little ground:

Bonds gave up more ground, sending yields higher:
6-month: 5.15%   2-yr: 4.84%   5-yr: 4.67%    10-yr: 4.65%    30-yr: 4.73%.

Market internals were uninspiring, but volume was about on par with the past couple of days’ action. Advances/declines were 10 to 9 on the NYSE and flat on the Nasdaq, with up/down volume 3 to 2 on the NYSE and 5 to 4 on the Nasdaq. New highs/lows were 348/15 on the NYSE and 225/35 on the Nasdaq.

More groups were higher than lower, but there were not a lot of big gainers: transportation (+1.1%), homebuilders (+1.0%) and computer hardware (+1.0%). The losers list was short, but a pretty deep red, and concentrated in the commodities: gold and silver stocks (-3.8%), steel stocks (-3.8%), oil services (-3.7%), oil stocks (-2.5%), natural resources (-2.5%), natural gas stocks (-1.9%).

Energy prices got slammed, partially due to a build in natural gas inventories. I’m not sure if that contributed to the selloff in oil, or if it has something to do with tomorrow being the end of the December contract, but crude dropped $2.50 to $56.26/barrel. Gasoline fell 6 cents to $1.53/gallon, and natural gas dove to $7.76/mmBTU. The dollar index was slightly higher, to 85.49. Gold fell to $618/ounce and silver slipped to $12.75/ounce.

BMB Note: Not much to say. Most areas remain strong. The energies and commodities have struggled over the past few days - don’t know if this is a pullback or the end of their little run there. Some surprising moves lately in things like the airlines, and recoveries in the housing stocks and defense stocks. The health care stocks have bounced after their post-election selloff.

Oil prices remain a bit of a mystery to me. It sure looked like they were headed higher, and suddenly they are now back to test their lows of a couple of weeks ago. Today’s big move down makes you wonder if there could be yet another breakdown coming. I guess we’ll find out.

Another shot in the arm delivered between 20-30 minutes ago, sent the indices up another couple of notches. This market is bizarre - airlines and homebuilders were leading the way in the morning, now they are nowhere near the top, with the airlines now in the red, despite a move back below $57 in oil. Speaking of which, oil is getting hammered - could that be due to December contract expiration tomorrow? I’ve heard no other news.

Volatility? You can forget about it. I think the VIX is probably hitting all-time lows here. This is just amazing. And it makes me wonder if we aren’t building up to some parabolic move into a big blow-off top. Or blow UP top, depending on how you view it.

Nasdaq is up 48 of the past 68 days. 5 in a row again, and 8 of the last 9.

Update: Interesting though: the Nasdaq A/D line has been in the red most of the day, snuck just above the zero line during that big surge, and has now fallen back into negative territory - but the Nasdaq Composite remains positive, although it lags the Dow and S&P.

A very mildly positive open, with the major indices just above the flat line, NYSE A/D line in the green but the Nasdaq A/D flat. Bonds are flat as well.

In the groups, there aren’t many losers, but only the homebuilders are managing decent gains thus far. Energy prices are mixed, the dollar is just slightly higher, as are both gold and silver.

This little pullback in gold is looking pretty interesting. GLD broke its downtrend line and is holding above that important 60 mark. The chart would look even better if there wasn’t all that resistance in the July-September timeframe, but the moving averages are starting to shape up.

The market got what it wanted in the form of a relatively tame CPI report for October. The headline number shows a drop in consumer prices of 0.5%, and a rise of 0.1% ex-food and energy. Year-over-year, the headline CPI is up 1.3, while the core reading is up 2.7%.

Pre-market futures took a jump on the news.