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.

Headline on The Drudge Report:

HEARING ON ‘WARMING OF PLANET’ CANCELED BECAUSE OF SNOWSTORM

	Gary Kaltbaum says we need to keep an eye on the leading stocks. Well, some of the leaders that got us here ain’t doin’ the job anymore. Here’s Apple - back where it was in November.
	And Google, threatening to complete a nasty double-top. A break below current levels could send investors scurrying.

Since they’re far too busy rooting for higher scores, here’s what CNBC doesn’t tell you about the 30 Dow Industrials - a full one-third of those stocks have been trading below their 50-day moving averages (the red line in these charts):

Charts courtesy of StockCharts.com

The bulletproof market bounces back with a positive performance, but with tech still dragging behind:

Bonds drifted lower for a third straight day, and yields snuck higher:
6-month: 5.16%    2-yr: 4.94%    5-yr: 4.80%    10-yr: 4.81%   30-yr: 4.90%.

Market internals were positive, but volume remains unimpressive - volume was higher than yesterday on the NYSE, but remained below last week’s levels. Advances/declines were 7 to 3 on the NYSE and 3 to 2 on the Nasdaq. Up/down volume was 3 to 1 on the NYSE but less than 2 to 1 on the Nasdaq. New highs/lows were 183/26 on the NYSE and 135/50 on the Nasdaq.

Most of the groups finished in the green, but despite CNBC’s claims of a “broad based rally”, most of the significant gains were confined to the commodity areas: steel stocks (+2.7%), paper stocks (+2.4%), commodities (+2.4%), gold and silver stocks (+1.8%), oil services (+1.8%), natural resources (+1.8%), REITs (+1.7%), housing stocks (+1.6%), oil stocks (+1.5%), chemicals (+1.1%) and telecoms (+1.1%).

Energy prices bounced back across the board. Crude oil recovered more than a buck to $58.90/barrel. Gasoline gained back the 6 cents it lost yesterday, to $1.61/gallon, and natural gas rose to $7.39/mmBTU. The dollar index got smacked back down to 84.69. Gold held fairly steady at $664/ounce, but silver got a nice bump back up to $13.83/ounce.

BMB Note: Well, how good was today? From the Dow and S&P standpoint, it wasn’t bad. Those indices finished near their highs of the day, but haven’t recovered the Friday/Monday drop yet. The Nasdaq is a different story - the Nasdaq 100 was edging right down near the UNCH mark with a little over an hour to go, but recovered some into the close. The underperformance of the Nasdaq / Nasdaq 100 remains a big concern for this market.

If I had to be buying this market, I’d stick close to the commodity areas, as those groups are the closest to anything that we could call “leaders” at this point. And that brings up another big question mark about this market - where is the leadership? If you have to ask, and it isn’t real obvious where the leadership is, I think that’s a problem.

We need to have some leadership groups, and we need the indices to bust to new highs - and STAY THERE! As Dave Landry would say: “Follow-through is key.”

So as the indices make a little move back up, how much of this can be attributed to options expiration? Here’s what Bernie Schaeffer had to say on the subject yesterday:

I think one potential reason for the upside bias in expiration weeks is the unwinding of heavy out-of-the-money puts that accelerates during that week. As these out-of-the-money puts are bought back to capture what little time value is left, those who took the other half of the trade and sold the puts are able to buy back the SPY shares they sold as a hedge against the short put position. This unwinding action in turn helps to add buying pressure to the SPY during expiration week

Since January 2006, the SPY finished only four expiration weeks in negative territory, while the average return during the week comes in at a gain of 0.55 percent.

Just a thought…

It seems like it took a while, but the Japanese Yen has been added to the list of CurrencyShares ETFs available from Rydex. The new Yen ETF (FXY) joins the current list that includes the Aussie dollar (FXA), British pound (FXB), Canadian dollar (FXC), the Euro (FXE), Mexican Peso (FXM), Swedish Krona (FXS) and Swiss Franc (FXF).

Hat tip to ETF Trends.

Do I trust them to actually go through with it? Well, no, and I’m sure I’m not the only one. But I guess it’s a start.

And of course, it shows that nuclear extortion works.

The major indices are hanging onto small gains that appeared right out of the gate, with the Dow being helped by AA (on buyout talk), MMM and GM. Advance/decline lines remain in positive territory. Most groups are green, but the larger gains are sticking in the commodity areas, like steel, metals, gold, paper and natural resources.

Bonds continue to trickle lower again, with yields sneaking back up. Energy prices are higher, the dollar is a lower, gold and silver higher.

The mortgage lending “Implode-O-Meter” reaches 21 this morning, as ResMae files for Chapter 11 bankruptcy protection, and Credit Suisse agrees to purchase certain of their assets.

You know, I don’t know who’s responsible for updating the web site at Trading Markets, but they must’ve either quit or they’ve been asleep at the wheel a lot lately.

I found this column from Gary Kaltbaum, posted yesterday, a link to which never made it to the TM front page. Along with his usual political jabs, he’s got a few opinions on the market:

Market time: We play recent action by the book:

The market experienced its 3rd distribution day in the past 3 weeks on Friday. The lagging NASDAQ and specifically the NDX were hit hard. Many leading stocks continue to get hit. It is never thrilling when a leader like MA gaps up $5 and finishes down $11. It is never thrilling to see LVS, WYNN, AAPL, GOOG going by the wayside. Since one of my main themes is to watch the leading names…then seeing leading names blasted could be meaningful. In fact, in the past, it has marked near-term tops every time this occurred.

To confirm a near-term top, I would have to see support levels taken out…specifically the NDX showing a very ugly head and shoulders pattern with a break below 1760…a classic pattern. The NASDAQ is stronger than the NDX with support at 50 day avg and then 2418. Will also be watching the DOW and S&Ps 50 day avg. The reason that will be important is because you have to go back to July 25 to when the DOW and S&P were below the 50 day. When a major index is above the line for a long time, it is that much more important when it breaks the line. Now…guess what….none of these support levels have been broken yet…but I am preparing for it if it occurs…and if there is anything we do know, a good correction is way overdue.

At the very least, extended stocks are going to be pulled in.. On top of that, there is a clear lack of bases to buy off of. There are still a ton of stocks above the 50 day…which means they are still in good technical shape…but my list of bad charts has skyrocketed in the past couple of days . To add one more word of caution to all this, the bond market’s recent anemic bounce looks to have stalled. A break below recent lows will turn me longer-term bearish on bonds…which means higher rates…which means potential headwinds for Mr. Market. Stay tuned kids. Things may start to get very interesting.