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.

Kathmandu gets first snowfall in 63 years.

I’ve seen this discussion in quite a few places now - that the next stab at Q4 GDP will be considerably lower than the initial hopeful guess estimate of 3.4%:

The U.S. economy was growing much slower in the fourth quarter of 2006 than the government’s first estimate of 3.4%, economists say.

Instead of fairly robust 3.4% annualized growth, the government’s next estimate will probably be closer to 2.2%, according to median forecast of economists surveyed by MarketWatch. Instead of bouncing back, the economy would have turned in its third quarter in a row of below-trend growth.

The first quarter also looks fairly tepid, with weak retail sales, falling homebuilding and growing signs that business investment isn’t picking up the slack.

But stocks continue to cruise, and the debate over the economy rages on:

Maybe it’s a Goldilocks economy, neither too hot nor too cold. Or maybe it’s the fabled soft landing, with growth slowing just enough to ease the inflationary pressures without leading to a hard landing, otherwise known as a recession.

Or maybe the economy is at its stall speed, just one shock away from a bumpy landing. The bulls scoff at the dire predictions: Even a stopped clock is right twice a day, but these guys haven’t been right in four years.

The bears counter that the Fed rarely achieves a soft landing; it almost always goes too far and pushes the economy over the cliff.

On the plus side: Employment continues to grow and real wages are actually rising. Profits are also up and corporate balance sheets are in excellent shape.

On the minus side: Consumers are strapped. They’re in debt to their eyeballs and their homes are losing value every month. The refinance ATM has closed. The factory sector is weakening.

A couple of new ETFs from First Trust launched on the Nasdaq today:

• First Trust NASDAQ® Clean Edge® U.S. Liquid Series Index Fund (symbol QCLN), which includes “companies that derive the majority of their revenue through alternative fuels, wind power, solar energy or other relatively ecological technologies”, and
• First Trust NASDAQ-100 Ex-Tech Sector Index Fund (symbol QQXT), which tracks the Nasdaq-100 non-tech companies.

	Not even a huge up day today could break the Nasdaq 100 free from its 3-month cage.
	Something awfully exciting must be going on at the hospitals these days.
	When the Transports have moved up, they’ve moved in big chunks.
	Geez. 13,000 layoffs and a plant closing. Sounds bad, doesn’t it? Oops, guess not - not in this no-bad-news market. Unless you’re one of those 13,000.
	We looked at Bear Stearns just a couple of days ago. It sure looked like it was in trouble. Nope. Not anymore. Saved by the ol’ upgrade. No wonder it’s been tough to trade this market.

Charts courtesy of StockCharts.com

Do I need to tell you again that it’s dangerous to try to short this market? How does the market react to three straight down days? Only by staging the biggest two day rally since last fall, and sending most of the major indices to new highs - though the small-caps played the role of the laggards today with the Russell giving up new highs and finishing with a gain of just over a point.

And don’t try to tell me you saw this coming:

Bonds rallied on the belief that a Fed rate hike is nothing but a bunch of hot air - and it probably is - sending yields smashing back down:
6-month: 5.14%    2-yr: 4.87%    5-yr: 4.72%    10-yr: 4.73%   30-yr: 4.83%.

Market internals were positive once again, and volume ticked up above yesterday’s levels. Advances/declines were unspectacular at 21 to 11 on the NYSE and 11 to 8 on the Nasdaq, but up/down volume was better at 3 to 1 on the NYSE and 5 to 1 on the Nasdaq. New highs/lows were 370/16 on the NYSE and 197/37 on the Nasdaq.

Winners were led by the semiconductors (+2.1%), followed by the brokers (+2.0%), networking stocks (+1.9%), internets (+1.6%), software (+1.4%), computer tech (+1.3%), transportation (+1.2%), airlines (+1.1%) ahd hospitals (+1.0%). The REITs (-0.6%) were one of the only groups to lose ground.

Energy prices were mixed. Crude oil fell back almost a buck to $58.00/barrel, but gasoline snuck up a penny to $1.62/gallon. Natural gas slipped to $7.24/mmBTU. The dollar plunged for the second consecutive day, sending the dollar index down to 84.18. That helped the precious metals maintain their uptrend, with gold moving to $669/ounce, and silver rising to $13.98/ounce.

BMB Note: These days, in the stock market, it’s all good. Everything is perfect. Absolutely nothing is, or can go wrong. Ever. Just ask Big Ben. He made everybody happy today.

Just be careful in your thinking. Because when everyone feels that way, you reach the top. Whenever that may be.

The weekly report shows drawdowns across the board:

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) declined by 0.6 million barrels compared to the previous week. At 323.9 million barrels, U.S. crude oil inventories are above the upper end of the average range for this time of year. Total motor gasoline inventories fell by 2.0 million barrels last week, but remain above the upper end of the average range. Distillate fuel inventories declined by 3.0 million barrels, but remain above the upper end of the average range for this time of year.

Refineries operated at 86.6 percent of capacity.

We’d better hope that supply holds up, because it doesn’t appear that demand is decreasing any:

Total products supplied over the last four-week period has averaged nearly 21.2 million barrels per day, or 5.0 percent above the same period last year. Over the last four weeks, motor gasoline demand has averaged nearly 9.1 million barrels per day, or 3.6 percent above the same period last year. Distillate fuel demand has averaged 4.5 million barrels per day over the last four weeks, or 7.0 percent above the same period last year. Jet fuel demand is up 5.6 percent over the last four weeks compared to the same four-week period last year.

As soon as we complain about the Nasdaq / Nasdaq 100 underperformance, the market takes a turn higher, and BAM! The Nasdaq 100 is leading the way.

That’s the way it’s gone lately…

So let me see if I’ve got this straight: the Fed says that inflation pressures are easing, and that reduces the threat of another rate hike. That sends bonds higher, yields lower, which in turn hurts the dollar. A weaker dollar means that prices for imported goods - a huge percentage of what we buy - will have to go up, which is inflationary.

Hmm.

Stocks muddled around for the first half-hour, but got a nice little pop when news of Big Ben’s testimony on Capitol Hill came out. That leaves the indices pushing new highs, with advance/decline lines well into the green, and the VIX down near historic lows once again.

The brokers, semiconductors, internets, networkers, homebuilders and gold stocks are leading the way. Bonds are rallying as the threat of a Fed rate hike seems to fade, sending yields down. Of course, those lower yields have the dollar on the run, and that has helped the precious metals move even higher. Energy prices are flat to lower, with inventory numbers just coming out now.

The American auto industry is already in recession. GM and Ford have been down this road, and now it’s Chrysler.

How many times do I have to tell you NOT to ‘guess’ what the market is going to do?

Apparently our friend Mr. Cramer (AKA, The Great Bald One) will never learn, for he keeps sending his minions to the guillotine. From a site that tracks his picks:

Daktronics Inc (DAKT) should be bought ahead and after reporting.

Yeah? Well, I hope you didn’t listen to him and buy DAKT ahead of earnings. Those earnings came out this morning. And it doesn’t matter whether the numbers were good or bad - what really matters is the market reaction.

DAKT closed at 38.09 yesterday, and is trading this morning pre-market at 30.63. So much for “Watch TV, Get Rich.”