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.

	The Russell 2000 spent quite a few days in January below the 50-day. But none of that matters anymore as the small/mid-cap index rockets to new highs.
	The Nasdaq has managed to climb back to better its January peak.
	If there were an economic slowdown around the corner, you’d never know it by looking at the Transports and the Retailers.
	An example of the bears’ frustration. MTW starts to roll over, then gaps down / breaks down badly the last day of January. Since then, it’s been straight back up to new highs.

Charts courtesy of StockCharts.com

You probably aren’t even wondering where the markets ended up today, since it can be pretty much assumed that they will go higher every day from now until the end of time. Oh sure, stocks were lower early on, but the buying begain mid-morning and proceeded throughout the day, and most of the major indices worked their way to new highs. Buying the dip continues to work, even if now the dips are measured in hours, not days:

Bonds reversed course and finished higher as well, yields lower by a tick or two:
6-month: 5.16%    2-yr: 4.82%    5-yr: 4.67%    10-yr: 4.68%   30-yr: 4.78%.

Market internals were positive. Volume was a little split, coming in about flat with last week’s levels on the NYSE, but increasing on the Nasdaq. Advances/declines were 3 to 2 on the NYSE and nearly 2 to 1 on the Nasdaq, with up/down volume 3 to 2 on the NYSE and 7 to 2 on the Nasdaq. New highs/lows were 389/17 on the NYSE and 256/37 on the Nasdaq.

More groups finished in the green than in the red, but there weren’t a lot of big movers. On the winning side were the transportation stocks (+1.2%), software (+1.1%) and retailers (+1.0%), while gold and silver stocks (-1.1%) led the losers.

Energy prices were mixed, with crude oil falling to $58.07/barrel, gasoline down only a penny to $1.64/gallon, and natural gas higher to $7.62/mmBTU. The dollar index was slightly higher, to 84.20, but the precious metals pulled back, with gold falling to $659/ounce and silver slipping to $13.79/ounce.

BMB Note: You don’t need my help when things just keep nudging higher every day. I think the whole thing is getting a little spooky, but I also feel like I’m one of the only people who feel that way. I just don’t know how long a market can keep going straight up without barely a hint of correction. How do you choose entry points? Or do you just jump aboard, eyes closed, and hope that you’re lucky enough to grab a handrail?

Most of the strong areas remain strong. The notable pullback action looks like it’s coming in the precious metals and energy stocks, and maybe we’ll start to see a little pullback in the other commodity areas as well.

The biggest economic news of the week (slow week!) is out tomorrow, with the CPI report before the bell and the minutes from the last Fed meeting out after lunch.

Launched today at the AMEX:

PowerShares DB US Dollar Bullish Fund (Symbol: UUP)
PowerShares DB US Dollar Bearish Fund (Symbol: UDN)

The new ETFs are based on the Deutsche Bank Long US Dollar Index (USDX®) Futures Index™ (DB Long USD Futures Index) and the Deutsche Bank Short US Dollar Index (USDX®) Futures Index™ (DB Short USD Futures Index).

Go to dbfunds.db.com for more info on the new issues.

Deron Wagner suggests looking to specific industry sectors, rather than the broader market, since the major indices continue to creep higher, without a great deal of conviciton:

As you may have noticed, all the above ETFs are correlated to industry sectors as opposed to the broad market. Simply put, we don’t trust the lack of momentum in the major indices. Although several indexes are at multi-year or record highs, the market has basically been at a standstill for the past few weeks. The overall lack of high volume explains why the market has lacked momentum on the way up. Trading specific industry sectors with relative strength is a good way to reduce your risk in the event of a rapid market reversal. Sector ETFs with relative strength will outperform the broad market on the “up” days, but will also be the last to fall when the stock market inevitably corrects.

A bit of a pullback to start the week, with the major indices slightly in the red on negative A/D lines and most groups giving up ground. Hardest hit at the moment are the gold stocks, steel stocks and energy stocks. Bonds have also dipped just slightly, moving yields up a few ticks.

Energy prices are lower, with crude oil down around two dollars right now. The dollar is a little higher, and gold and silver are both pulling back.

Gary Kaltbaum hasn’t changed his stance on the market - and there’s been no reason for him to do so:

As far as the market is concerned, I am just going to sound like a broken record. Until major indices break even short-term support and or moving averages, you must continue to give the market the bullish benefit of the doubt. And to add another positive, the lagging TRANSPORTS continue to play catch-up in a big way…moving to an all-time high. For weeks, this area had been lagging but no more as RAILS and TRUCKERS are smoking. Once again, we believe the talk of a recession and doom just ahead to be folly as there is no way the TRANSPORTS would be doing this before a recession occurs. The market remains the best forecaster.

The main issue is what to do with a market that is extended, overbought and becoming very bullish in sentiment. I say to take your time and pick your spots…as there are fewer and fewer sound bases to buy off of. This is not because the market is in bad shape but because many individual stocks remain extended from recent moves. Shorter-term, we could say the market is due to correct but the market had that chance a week or so ago when the BROKERS were breaking down while the NASDAQ and NDX were teetering. All have resolved themselves upwards as again, corrections remain affairs that last days…not even weeks. One day, this will change…here are those levels that would tell us potential problems could lie ahead…DOW 12500…S&P 1428 and NASDAQ 2450…all at the 50 day moving average. Until this report tells you it has occurred, it remains crazy to go overly bearish…and almost psychotic to short anything…as my friends who are nothing but short are almost closing shop.

And I’d tell you to go read the whole column to catch his rant on Henry Blodget and his new book, but it’s too good for you to miss:

Henry Blodget…yes Henry Blodget has written a book about investing. This is almost akin to Dr. Phil writing a book on how to lose weight. The title…get this…”The Wall Street Self-Defense Manual!” I have nothing against this man personally and yes, I believe in second chances. In fact, one of my favorite thoughts is that it is not what you do on the first try that counts…but what you do on the second and third try. I have had my own second chances. But…sorry…not Henry. Not Henry who slapped on STRONG BUY recommendations out to the public while telling his friends in emails that those companies were a “piece of crap!” Not Henry, the dude that made millions of dollars even though he couldn’t find Mount Everest on a map. Not Henry, the dude who made tens of millions only to pay back $4 million in a fine. Can I sign up for that? Pay me nearly $20 million…screw the public…pay a $4 million fine…then get hired to contribute to Fortune, Newsweek and others…and WRITE A BOOK. The sick thing is that people will buy this book. I don’t know what is in it…I don’t care what is in it. This man is a creep who got lucky in a mania…who is barred from my industry for life but now gets to sell HIS piece of crap to that same industry.