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.

News Corp. plans to launch the Fox Business Channel by the fourth quarter of this year.

Finally a little competition for CNBC. I’m hoping they can do a much better job - with much less rah-rah - than CNBC. But if the Saturday morning business shows on FNC are any indication of what’s to come, I won’t get my hopes up.

From today’s entry at TheDOCument.com:

Just in case you didn’t get the memo 7 months ago: stocks are not allowed to go down. Despite today’s weak opening, the lows of the day were met within the first hour of trading. The S&P 500 lingered until about mid-session at a support level tested twice before in the last 5 days, then turned north and erased the morning losses. The Russell 2000, which is up more than 5% in the last 10 days, moved into new record territory.

The amazing part of today’s recovery is the reason behind the early swoon. New Century Financial spooked the financial world by announcing it will have to restate three quarters of last year’s financials in order to “correct errors” in its accounting for early-payment defaults. HSBC also announced it will have to increase expenses to cover sub-prime loans that have gone bad. In other words, the sub-prime market is in a world of hurt. New Century shares lost a third of their value on the news and drug down shares of other companies with sub-prime exposure, such as Novastar, Washington Mutual, and Countrywide Financial.

Naturally, erosion in the sub-prime market has nothing to do with the rest of the economy, right? Wrong! The housing market is dragging down the economy very quickly. The writing has been on the wall for months, and the news in the sub-prime arena simply represents a few more bricks popping out of the dike. Adding to the sub-prime woes, Toll Brothers announced this morning that first-quarter orders plunged 33%. Note: there is no decimal point between those threes. That is thirty-three percent. Toll also revealed it would be increasing expenses related to land write-offs, and home builder shares got sold to the tune of 2%.

Despite incessant bottom-calling by vacuous twits passing as analysts, the news continues to deteriorate. Why people are not running for the hills is anyone’s guess. Maybe there is simply too much emotion and/or capital committed being long equities for anything to matter until we have a full economic breakdown. Certainly, we are no longer missing a catalyst for the return of volatility and proper risk accounting, but the catalyst has yet to induce a reaction.

I don’t get it either. But the market refuses to budge.

	No one has been talking about the paper stocks. Maybe they should be.
	Same goes for the defense stocks. One of the better looking group charts out there.
	Cisco helped give the networkers a bounce, but they were heading for the basement.

Charts courtesy of StockCharts.com

This is really getting dull. The market can’t even sell off 50 points without bouncing back - but it can’t make any headway on the upside either. A nothing day - again - for many stocks. Maybe they should schedule another Fed meeting or something. Obviously, this market is in desperate need of some sort of news to get it kick-started in one direction or the other, and more bad news in housing/lending today combined with retail sales figures wasnt enough:

Bonds recovered from a morning dip, and yields edged lower:
6-month: 5.15%    2-yr: 4.87%    5-yr: 4.73%    10-yr: 4.73%   30-yr: 4.84%.

Market internals don’t tell us much. They were pretty flat, and volume ticked up on the NYSE but lower on the Nasdaq. Advances/declines were 9 to 10 on the NYSE and just below flat on the Nasdaq. Up/down volume was just below the flat line on the NYSE but just above flat on the Nasdaq. New highs/lows were 299/22 on the NYSE and 176/41 on the Nasdaq.

The groups were pretty evenly split, led by the gold and silver stocks (+1.8%). Networking stocks (+1.6%) added to yesterday’s gains, followed by paper stocks (+1.2%), oil stocks (+1.1%) and commodities (+1.0%). Homebuilders (-2.2%) and HMOs (-1.0%) led the losers.

Energy prices moved higher. Crude oil jumped a couple of bucks to $59.71/barrel, and gasoline rose a nickel to $1.59/gallon. Natural gas was also higher, to $7.87/mmBTU. The dollar index gave up all its overnight gains, and slipped to 84.68. Gold and silver both moved higher again, gold to $660/ounce and silver to $13.74/ounce.

BMB Note: The market as a whole just can’t get anything moving. A few groups moved today - we’ve got the networkers up solidly two days in a row, but that’s coming off a big drop. The homebuilders took a hit, but those charts remain a mixed bag. The same can be said of the retailers, even though the RLX is edging to new highs, only some of the retail charts look good - there are quite a few stinkers too.

Gold and silver have been steadily climbing. The silver stocks have been stronger than the gold stocks, but some of the gold stocks are starting to perk up a bit. That might be an area to keep an eye on. These days, there just isn’t a lot of momentum to play, so you gotta do a little digging if you want to play at all.

As for me, I’ll continue to look for the type of setups I like - but they have been very few and far between. And I’m not thrilled with the market action at all, so I’m being even more fussy about trading. Or NOT trading, as the case may be.

Ho hum. Yet another snoozer. This market can’t even pull back with any enthusiasm - of course, much of the little morning dip has been bought up already. Wouldn’t you know it?

Only two groups showing moves of more than a percent at the moment - gold and silver stocks on the upside and the homebuilders on the downside. Wake me when it’s over.

A little bit of pullback this morning, as most of the major indices started off in the red, and A/D lines are negative as well. Only the DJ Utilities are holding up thus far. In the groups, the homebuilders, steel stocks and the brokers are leading the move down, while biotechs are a bit higher.

Bonds are a little lower after their multi-day bounce, sending yields up a few ticks. Energy prices are a little higher, the dollar is pulling back from an overnight advance, and gold and silver are slightly higher.

More admission of trouble in the subprime lending arena:

Two of the biggest lenders to Americans with poor credit histories said on Wednesday rising subprime mortgage defaults will weigh unexpectedly on results.

HSBC Holdings Plc (HBC), Europe’s biggest bank, said it plans to set aside $10.6 billion companywide for bad debts, 20 percent more than the $8.8 billion it said analysts expected on average, because of struggles in its HSBC Finance Corp. lending business.

Chief Executive Michael Geoghegan is directly involved in trying to fix the problems, it said.

Meanwhile, New Century Financial Corp. (NEW.N: Quote, Profile , Research) projected a fourth-quarter loss, and said it expects to restate each of the previous three quarters’ earnings lower because it did not set aside enough money to buy back subprime loans that went bad. Analysts polled by Reuters Estimates had on average forecast a fourth-quarter profit of $1.06 per share.

The early action has NEW trading down more than 25% at 22.24, HBC down less than three percent at 89.64.