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.

Goldman Sachs is selling their famed (or infamous) commodity index, GSCI, to Standard & Poors.

The GSCI has been the subject of much discussion in recent months, especially with regard to the changes in the respective weightings of its energy components and the effects of those changes on energy commodity prices (see here and here). As Tim says at The Mess That Greenspan Made:

The question remains how an index that is supposed to be reweighted based on the “average quantity of production in the last five years of available data” would see such a precipitous decline in gasoline.

Apparently, that’s now a question that Goldman Sachs will never have to answer.

One group you might keep an eye on is the oil shippers, which look like they’re trying to turn the corner here after being down for quite a long time. A few of those names that are starting to look interesting: NAT, OSG, TK.

After seeing Billy Joel sing the national anthem before the Super Bowl on Sunday, I started to wonder: Has anyone seen Billy Joel and Jim Cramer together in the same room?

	Snooze. The S&P has been trading in an 8-point range for three days now.
	The REITs have been running hot, fueled in part by all the buyout talk. The DJR has been up the last 11 days in a row, 17 of the last 20.
	Utilities have put together a nice little run over the past week or so, after feigning a breakdown.
	The Nasdaq 100 continues to be a trouble spot, unable to make any headway for three months now, and saving itself today from another close below the 50-day moving average.
	Let’s take a look at a few of those big-cap tech names that had been helping to drive the market up, but have been back on their heels lately. Apple has tumbled considerably from its lofty perch.
	Google has been chopping around all over the place, and is in danger of putting in a big picture top. Those lows around 452 had better hold.
	Microsoft has now broken down below the 50-day, and has built up some sigificant overhead resistance in the process.

Charts courtesy of StockCharts.com

Doesn’t seem like there’s a lot to say about a market that trades in a range of only a few points for three straight days:

Bonds continue to bounce back, after getting trounced for a couple of months. That has yields on the retreat:
6-month: 5.15%    2-yr: 4.89%    5-yr: 4.75%    10-yr: 4.77%   30-yr: 4.87%.

Market internals were mixed, as the Nasdaq was a little shaky, especially earlier in the day. Volume picked up a little from the past two days, but without a lot of price movement, that doesn’t mean a whole lot. Advances/declines were 12 to 7 on the NYSE and 5 to 4 on the Nasdaq. Up/down volume was better than 5 to 4 on the NYSE but 4 to 5 on the Nasdaq. New highs/lows were 361/20 on the NYSE and 157/51 on the Nasdaq.

The groups were split, with a few more winners than losers. The green side was led by the airlines (+1.5%), REITs (+1.3%), paper stocks (+1.2%) and steel stocks (+1.1%), while computer hardware (-0.9%) led the losers.

Energy prices were mixed, with crude oil slightly higher at $58.88/barrel, and gasoline up a bit to $1.58/gallon, but natural gas slipping to $7.62/mmBTU. The dollar index fell to 84.78. Gold ends the day at $653/ounce, and silver at $13.59/ounce.

BMB Note: I haven’t been watching things that closely for a few days, but looking at the major indices, it seems pretty obvious that I haven’t missed anything at all since last week’s post-Fed rally. Friday, Monday and today haven’t provided much in the way of fireworks.

I’d really like to see a little more follow-through to last week’s rally - ok, a LOT more follow-through. It would be nice to see the market push higher and then pull back a little, instead of this grinding away and getting a few inches each day.

From an investment standpoint, the market seems to still be hanging on in fine shape. From a trading standpoint, it remains rather choppy and unpredictable, and as a result, a little frustrating.

If you haven’t been following the markets very closely the last few days - and I haven’t - it doesn’t appear that you’ve missed much. Following the little post-Fed bump last Wednesday-Thursday, the markets have traded in very narrow ranges for the past three days.

Today, we see the majors ever-so-slightly in the green, and A/D lines are positive, but no groups have been able to make a move of a percent or more in either direction so far. Paper stocks lead the winners, and computer hardware and semiconductors lead the losers - but since the moves aren’t large, that doesn’t mean a heck of a lot.

Bonds aren’t budging either. Energy prices are mixed, with crude and gasoline a bit higher, but natgas a little lower. The dollar is a little lower, and gold and silver are pulling back from their morning gains.

Deron Wagner has spent the last couple of days looking at the longer term charts of the three major indices. Yesterday, it was the S&P 500, today the Nasdaq and Dow Industrials.

In yesterday’s view of the S&P, his comments were somewhat interesting, particularly when he pointed out that the index has now moved higher for eight consecutive months - the first time it’s done that in more than ten years!

…the S&P has been trending steadily higher for nearly four years, since about the middle of 2003. From 2003 through 2006, a clearly defined trend channel developed, which is illustrated on the chart above. Until the end of 2006, every rally into resistance of the upper channel was followed by an eventual move down to support of the lower trend channel. But since November 2006, the S&P has been trading above resistance of the upper trend channel. Furthermore, January marked the eighth consecutive month the index has closed higher. The last time the S&P managed to gain for eight months in a row was from November 1995 through June 1996, more than ten years ago! During that period, the S&P 500 rallied 15%, but the ninth month was nasty. In July of 1996, the index plummeted as much as 9.7%, more than 60% of its eight-month gain, before closing the month with a 4.6% loss. Curiously, the current eight-month winning streak in the S&P stands at a very similar 14% gain.

Obviously, we have no way of knowing if this history will repeat itself this month, but this historical information should at least serve as a reality check for bulls who are fearlessly buying at current levels. The parabolic rally above the upper channel of the long-term uptrend, combined with the fact that the S&P has not seen a meaningful correction in nine months, should serve as a yellow flag for astute traders. We’re not advocating fighting the long-term uptrend, but merely warning against a stock market killer named “complacency.”