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.

Energy stocks have been getting terribly beaten up lately, and broke down pretty big today. Stay away, and if you’re still in, any bounce looks sellable at this point.

The Nasdaq 100 has saved itself and moved back up into its trading range… oops, wait, no, look, it’s broken down below the recent previous lows. Hmm, no, that’s not right either. Oh, to heck with it. Never mind.

Charts courtesy of StockCharts.com

Whew. What a wild ride that was. Started off pretty strong, but by midday things had started to weaken, and it seemed that whatever the market saw in the Fed minutes just pushed it over the edge. The Dow traded as high as 12580 and as low as 12404 before settling down into the end of the day. The Transports hung onto some of their gains, thanks to a big drop in oil prices:

Bonds weren’t much quieter, rallying in the morning, then heading lower before bouncing back. Yields ended the day lower:
6-month: 5.07%   2-yr: 4.76%   5-yr: 4.65%    10-yr: 4.66%    30-yr: 4.76%.

Market internals were very positive early, but finished mostly flat. Volume spiked to the highest level we’ve seen in weeks, but with mixed price movement. Advances/declines were just better than flat on both exchanges, with up/down volume just below the flat line on the NYSE but a positive 11 to 8 on the Nasdaq. New highs/lows were 324/36 on the NYSE and 150/46 on the Nasdaq.

The groups were a mixed mess. Some groups hung onto their morning gains, with the transportation groups getting a big boost from the drop in oil prices: airlines (+3.9%), transportation (+3.8%), paper stocks (+1.6%), brokers (+1.5%), networkers (+1.4%). Energy and commodity stocks dominated the losers: oil services (-4.4%), natural resources (-3.6%), oil stocks (-3.0%), gold and silver (-3.1%), natural gas stocks (-2.6%), homebuilders (-2.4%), commodities (-2.2%), steel stocks (-1.4%).

Energy prices got hammered, along with just about every other commodity out there. Crude was crushed by well over two bucks - for no real reason that I could see - falling to $58.32/barrel. Gasoline fell to $1.55/gallon, and natural gas dropped to $6.16mmBTU. The dollar index moved up to 83.93. Precious metals joined in the commodity selloff, with gold sliding to $628/ounce and silver dipping to $12.55/ounce.

BMB Note: Wow. What do you say after a day like today? I hope you don’t think that I have some magic clue about what’s going on, or that I have any idea what’s going to happen next. I’ll be honest - I don’t.

But today could very well be important - it could be one of the “landscape changing” type of days. These big reversal days very often mean something - it’s just a matter of what. Could we have seen ‘the top’ today? If not, could it be very near?

Bottom line: I’m unwilling to be committed heavily on either side of this market right now. The big drop in oil took me out of a position there today, and the big move up early in the morning took me out of some of my short index position - but I hung onto some and got the nice afternoon reversal. I don’t like the way the commodities have crumbled of late - reminds me too much of what happened back in May.

So what do we do? Well, I think I’ll still be watching a little more closely for short opportunities here than longs - I have to believe that there is much more risk on the upside than on the down. I’m having a hard time getting excited about buying stocks at these levels, but that could change if we get a breakout to the upside on some of the range bound indices. In looking at the major indices, the Nasdaq / Nasdaq 100 look pretty shaky, along with the mid-caps. If we do get a move down, they are hinting pretty strongly that they would lead the way.

Then again, the Dow could be up 250 points tomorrow. Of course, then it might finish up only 20.

The Fed minutes from the December meeting are out, and it sounds as though the Fed is somewhat divided over the threat of inflation (you know, the inflation that they themselves have caused) and the health of the economy.

The market has reacted negatively since the release of the minutes, but the selling had already begun early in the afternoon, so it’s hard to say how much of the reversal can be attributed to the Fed minutes.

While much of the rest of the market is partying like it’s 1999 today - with the exception of energy stocks - the homebuilders are having a hard time of it. I guess people were paying attention yesterday when Lennar (LEN) said it had lost money in the fourth quarter:

The fourth-quarter preannouncement disappointed some investors who bet housing’s slide almost over. Lennar Chief Executive Stuart Miller said the housing market deteriorated throughout the quarter and he saw no signs of a recovery.

“The housing market’s lousy,” said JMP Securities analyst James F. Wilson. “Various people seem to be out there saying there’s stabilization or a bottoming. I don’t know where that would be coming from. It keeps getting worse.”

The stock market started off the new year with a bang this morning, with all of the major indices moving higher on strong advance/declines - I guess the ADP job loss report didn’t phase stocks. Or maybe that’s good news that people are losing their jobs (if true)?? The bond market initially thought it was bad news for the economy, and rallied big sending yields lower, but some of that move has moderated as the morning wore on.

Leading stocks up are the airlines and transports, as oil prices have taken a dive. Also higher are many of the tech stocks. Energy and commodity stocks are getting smashed, along with homebuilders.

Energy prices are lower, with crude oil down nearly 2 dollars. The dollar is higher, gold and silver are slightly lower, giving back early gains.

ADP, the payroll processing company, reports that “U.S. private-sector employment fell by 40,000 in December, the first decline in nearly four years”. Right away, the pundits on CNBC were ’skeptical’ of the number.

Well, so am I. Lately, ADP’s figures haven’t matched up well with the government’s figures, so it’s pretty hard to say who’s right:

The ADP report’s considered by some to be the best single predictor of the government’s nonfarm payroll report, but its record has been spotty since being rolled out in public in April.

The ADP report got it wrong in June, when it forecast private-sector gains of 368,000, while the government report showed just 107,000 new jobs created in the private sector and an additional 27,000 government jobs.

Who to believe?