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.

	Steel stocks took it on the chin today. The chart’s uptrend really hasn’t been broken yet, but I’d still be pretty careful around the steelies right now. Today was nasty.
	The Dow Transports are putting heavy pressure on that near term support level, and broke below the 50-day today. The chart has a bit of that ‘head and shoulders’ look to it as well.
	Another strong utility moving to new highs today. I just thought this was a nice looking chart. Too bad I don’t own it.

Charts courtesy of StockCharts.com

Not a great day for stocks. Some morning selling had the market a little bit on the ropes, but following the Fed announcement things bounced back somewhat and the day finished with the major indices taking only slight losses:

Bonds ignored the Fed’s tough talk on inflation and staged a little afternoon rally, sending yields lower:
6-month: 5.05%   2-yr: 4.62%   5-yr: 4.46%    10-yr: 4.49%    30-yr: 4.61%.

Market internals came well off their worst levels, but finished well in the red. Volume increased to its highest levels in a week on the NYSE and the highest in three days on the Nasdaq. Advances/declines were 4 to 5 on the NYSE and 7 to 12 on the Nasdaq, while up/down volume was 7 to 13 on the NYSE and 3 to 7 on the Nasdaq. New highs/lows were 274/23 on the NYSE and 113/47 on the Nasdaq.

In the groups, some of the numbers were big, but the list wasn’t real long. The steel stocks (-5.9%) got pounded (that hurt the whole metals and mining group, which was down 3.4%). They were followed down by the airlines (-2.5%), which gave back all of yesterday’s gains and more, computer hardware (-1.3%), transportation (-1.3%), gold and silver stocks (-1.0%) and disk drives (-1.0%). Telecom (+0.6%) led a very short list of winners.

Energy prices were pretty flat, with crude slipping 20 cents to $61.02/barrel, but gasoline and natural gas holding steady at $1.60/gallon and $7.43/mmBTU. The dollar gave up a little ground after the Fed announcement, and the dollar index fell to 82.94. Gold and silver barely budged, holding at $630/ounce and $13.82/ounce.

BMB Note: Well, the morning got a little ugly, especially for those in some of the commodity areas. The selling in the metals forced BMB to give up a few shares, but that’s the way it goes. When they start to drop, you gotta get out - you never know where the bottom is. As regular readers know, I never lose big.

In the indices, the Nasdaq and Dow remain stubborn and refuse to regain their recent highs. Of the three majors, the Nasdaq has been the clear underperformer. And like many other times, if the market starts to stumble, the Nasdaq is likely to fall first and hardest - so keep an eye out there for signs of trouble. The Transports had a rough day, although they got a little bit back by the close, but they look like they’re in a bit of trouble here and are starting to roll over. Another soft spot to watch.

As for the groups, energy stocks are holding up relatively well, as are the utilities. The pullback in the gold stocks has continued, but the precious metals themselves (GLD, SLV) are holding their ground. As for the other metals, steels and such, I think I’d be pretty careful around them after the shredding they took today. Some of the other groups are still looking like they’re going sideways or possibly rolling over - we finally got a breakdown today in the Transports.

All in all, I’m going to be pretty careful on the long side until the market looks a little firmer. The morning’s selling was catching a little enthusiasm, and it makes you wonder if there might be more where that came from. I’ll be keeping my eyes open for some of those transitional short opportunities that could begin to present themselves.

No change in rates - no surprise - but still some tough talk on inflation. And a dissenting vote from Lacker again, who still wants another 25 bp hike.

I have a feeling that the tough talk is just that - nothing but talk. I don’t see the Fed raising rates any time in the near future - the risks to the economy are just too great. On the flip side, I’m not so sure that rate cuts are right around the corner either- the risks to the dollar are too great for that. I think those looking for rate cuts in the near future are likely to be disappointed unless the dollar shows some unexpected strength. So, when it comes to the Fed, they’re stuck.

Stocks responded by gaining back some of the ground lost this morning. I guess that’s good news.

A mini-meltdown this morning, led by the metals, transports and retail. Dow Transports down 1.6%, Nasdaq 100 down nearly a percent, Russell 2000 down nearly a percent, and volume ticking up today so far. Not a good sign.

Maybe the Fed announcement at 2:15 ET will be a savior. But I wouldn’t count on it.

Dow Transports ($TRAN chart) breaking through near-term support and the 50-day today.

The metals are getting hammered today, in particular the steels and anything having to do with them. I suspect this warning from Nucor has a great deal to do with it.

Another day of little progress, as the major indices have been unable to budge, A/D lines have languished in negative territory and most groups are losing ground. Hardest hit have been the high-flying steel stocks and metals. The airlines have given back their gains of yesterday and the gold stocks, transportation stocks and retailers are also losing ground. Oil services are the only stocks to have posted decent gains thus far.

Treasuries are slightly higher, holding yields down. Energy prices are higher, the dollar is near flat, and gold and silver are near unchanged as well.

Deron Wagner is watching the Qs, and says that the Nasdaq is still a trouble spot for the market:

It’s positive for the S&P that the financials have rallied back to their highs, but the problem is that tech remains weak. The Semiconductor Index ($SOX) is in “no man’s land,” which certainly does not bode well for the Nasdaq. The S&P and Dow could easily break out to new highs from here, but the indices probably would not get very far without the Nasdaq leading the way. A mostly cash position still is not a bad idea, but you may want to position yourself on both sides of the market if you are heavily invested in the market right now. If the Nasdaq pulls the S&P below its uptrend line, you can quickly cut your long positions. Conversely, if the S&P pulls the Nasdaq back to its high, you can cover your shorts with minimal damage. Given the anticipated post-Fed volatility from today’s meeting on interest rates, this is one way to reduce your overall risk until the market makes up its mind.