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.

Intel profit down 39%, but that beats reduced expectations. RACK warns.

INTC down about 3%, RACK down more than 20%. Ouch.

Good ‘ol Hugo Chavez may have a number of his constituents convince that the stunts he’s pulling in Venezuela are good for the country, but the Venezuelan stock market is singing a different song. Here’s Ivan from At These Levels:

Looking at the big sector and market movers at the beginning of January I saw something that I have never seen before. Venezuela was the best performing market (+18.7%) in the world in early 2007 (ahead of Vietnam, the current leader), and then we had the nationalization speech and now it is the worst-performing market in the world (-20.1%). It has been only two weeks into 2007!

I have never seen such rapid rerating before, naturally, because this comes as complete surprise. Hugo has talked the talk before, but has never walked the walks. He seems to be walking here. You never know where this stops, but since Caracas has crashed already I would be surprised if the total damage is not well south of a 50 percent decline.

The Airlines are still flying high…

…along with the casino stocks.

	The Russell 2000 has failed three times to reach or exceed its highs of early December.
	Google matched its November highs to the penny today, but then reversed hard. Is this latest run-up over for now?

Charts courtesy of StockCharts.com

The Dow oozes to yet another new high, the Nasdaq slips a few points, and the airlines are taking the Transports to the moon - but the small-caps weren’t playing along today:

Bonds bounced a little bit today, and yields dropped slightly:
6-month: 5.14%   2-yr: 4.86%   5-yr: 4.73%    10-yr: 4.75%    30-yr: 4.84%.

Market internals didn’t support the new highs seen on the Dow, as advances/declines were 9 to 10 on the NYSE and 4 to 5 on the Nasdaq, with up/down volume 9 to 10 on the NYSE and nearly 5 to 6 on the Nasdaq. New highs/lows were 276/13 on the NYSE and 212/27 on the Nasdaq. Volume came in right around the same levels we’ve been seeing over the past week or so.

The groups were pretty evenly split. The airlines (+2.5%) continue to cruise, helped by lower oil prices. Also gaining ground today were the REITs (+1.4%), hospitals (+1.2%) and transportation stocks (+1.1%). Metals and mining led the losers (-1.7%), followed by oil stocks (-1.5%), gold and silver stocks (-1.3%), semiconductors (-1.3%), software (-1.2%, hurt by a warning from SYMC) and natural resources (-1.1%).

Energy prices were mixed, with crude oil tumbling back to $51.21/barrel and gasoline falling to $1.37/gallon, but natural gas edged up a few cents to $6.64/mmBTU. The dollar index was flat at 85.06. Gold held steady near $625/ounce but silver slid to $12.54/ounce.

BMB Note: Despite the new high in the Dow, it wasn’t a real impressive day for stocks, but not a terrible one either. I’m sure the bulls would prefer to see better internals, but it wasn’t exactly a broad-based selloff.

Not a lot of movement, so not a lot has changed. Weakness remains concentrated in the energies and metals, and the most strength is in the airlines and casinos.

Maybe we’ll start to get a bit of movement as earnings start to roll in. We get the PPI report tomorrow morning, and CPI on Wednesday, rolling into options expiration at the end of the week. If those things don’t juice volatility a bit, I’m not sure anything will.

Not a lot has changed from the majors’ perspective, as they linger just below the flat line, along with the advance/decline lines. The airlines and transportation stocks are getting another bump from a drop back in oil prices, and the energy stocks are getting hit for the same reason.

All in all, the market seems to be drifting a bit. Maybe we’ll get a little more action as the week progresses, with earnings reports and economic data ready to start hitting the air.

We saw the Dow and S&P move to new highs early, but that only lasted about a minute-and-a-half. Things have turned back down to near the UNCH line, and A/D lines are retreated back to the zero line as well. In the groups, airlines (of course) and hospitals are gaining ground, while gold stocks, oil services and metals are giving some up. Bonds are just slightly higher, yields down a few ticks.

Energy prices have given back some of Friday’s gains, especially crude oil, which is back down below $52. The dollar is down a bit from Friday’s levels, gold and silver are a little lower as well.

Deron Wagner has got his eye on the weakening emerging markets and China ETFs. As far as the broader market is concerned, it’s all about earnings - or to be more precise, about the reaction to those earnings:

The Nasdaq Composite finished last week convincingly at a fresh six-year high, but both the S&P and Dow closed right at resistance of their December 2006 highs. Will the latter indices follow in the footsteps of the Nasdaq by breaking out to new highs as well? The determining factor will be the market’s reaction to the deluge of quarterly corporate earnings reports scheduled to be released this week. We have learned from experience that quarterly earnings season often has the nasty effect of causing stocks to ignore their technical chart patterns. Be cognizant of the dates of corporate earnings reports in the coming weeks because a negative earnings surprise by a leading company this early in earnings season could have a rather negative impact on the state of the broad market. It’s also worth reminding you that the actual earnings numbers don’t matter. Rather, the only thing that matters is the market’s reaction to the numbers. Among many others, Intel’s report card is due out today. Apple’s numbers will be released tomorrow.