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.

I’ll be perfectly honest: I don’t know one REIT from another, nor do I really care to. The truth is that an awful lot of the REIT charts look the same - a big thrust downward, now followed by a light volume wedge up. If you’re looking to play the REITs short on the next move down, and don’t want to try to pick a single stock (or two), you could consider one of the more liquid REIT ETFs, like IYR.

Chart courtesy of StockCharts.com

	Most of the broad-based indices look like the S&P 500 - bouncing back up on diminishing volume, but nowhere near regaining the 50-day moving average yet.
	On the good side, the Utilities index is holding up rather well, compared to most other groups.
	On the bad side, it looks like the little bounce in the homebuilders is already over. Most of the builders got smacked around pretty roughly today.

Charts courtesy of StockCharts.com

More of the same light volume upward action. An early swoon was fought off, and stocks worked their way up to their best levels mid-afternoon, but that advance was sold off, and things got a slight bump into the close. As far as the major indices are concerned, the Utilities remain the strongest of the bunch:

Bonds recovered about half of Friday’s losses, sending yields lower:
6-month: 5.13%    2-yr: 4.63%    5-yr: 4.50%    10-yr: 4.55%   30-yr: 4.70%.

Market internals were positive, but volume disappointed on the light side, especially on the Nasdaq. Advances/declines were 12 to 7 on the NYSE and 17 to 13 on the Nasdaq, with up/down volume 3 to 2 on the NYSE and 7 to 3 on the Nasdaq. New highs/lows were 109/31 on the NYSE and 83/65 on the Nasdaq.

Group movement favored the gainers, but the list of big winners was short: HMOs (+2.6%), gold and silver stocks (+1.3%), airlines (+1.3%) and utilities (+1.1%). Housing stocks led a short list of losers, dropping 2.2%.

Energy prices were mixed. Crude oil prices fell again to $58.91/barrel, gasoline prices were up a penny to $1.91/gallon, but natural gas was lower, at $6.91/mmBTU. The dollar took a tumble, the dollar index falling back to 83.85. Gold index gained just a bit more ground, to 84.25. Gold hung around $650/ounce, and silver moved higher, to $12.97/ounce.

BMB Note: Not a lot of change. It looked like the market might dive earlier today, but it caught itself and pushed higher midday. Unfortunately, the volume remains very light and unconvincing. Until we see more conviction in the buying, it’s hard to think much of the price action, as it still looks like a bounce from severely oversold conditions. The S&P and Nasdaq were unable to even better Friday’s highs, and the major indices still have not retraced even 50% of the drop off the highs.

Unless things change, I’m still keeping my eyes open for setups on the short side, and even dipping my toes in the water there in a very small way. I mentioned that the brokers looked vulnerable, and they showed early weakness today, but I’m a little leery of jumping in there with some of the biggees reporting earnings this week. No need to get clubbed by surprises if I don’t have to.

Piper Jaffray says that NEW could be a big zero:

New Century Financial (NEW) will likely have to liquidate in the face of its mounting credit problems and it faces about $8 billion in claims, PiperJaffray said in a note to clients on Monday. “It appears unlikely New Century will get new financing,” PiperJaffray analyst Robert Napoli said in a note to clients. “While this is devastating for New Century and its employees, there is a much needed reduction of capacity for the subprime mortgage industry.” PiperJaffray cut its rating on the company to underperform from market perform and said lenders are accelerating claims of around $8 billion against the company. The downside risk on the stock could be $0, the broker said.

As far as I can tell, NEW is still not trading today, having closed last Friday at $3.21. The stock was $50 last May, and $30 at the beginning of this year.

The stress in the lending industry appears to have finally caught up, once again, with the homebuilding stocks. In addition to shares of LEND being down 23% today, the builders are all taking big hits as well: TOL, RYL, KBH, MTH, CTX, NVR, SPF, LEN, PHM, HOV, BZH, DHI and WCI all down between 3-6% on the day.

Gary Kaltbaum, on last week’s market bounce:

Markets have had a bounce the past week. This is normal after the carnage we saw off the top. Of course, the bounce buried the shorts as both Tuesday and Thursday gapped higher nicely. So far, there is one glaring problem. Volume has been heavy on the drops and light on the bounce. Let me be clear. If this market does not experience a follow through day (Monday is day 5) in the 4th through 10th day off the low, then expect another bout of selling to retest recent lows…at a minimum. If the market follows through, it will be respected. I believe we will know in the next week or so…if not any day. Markets are not just going to sit around.

BROKERS have rallied up a wee bit after experiencing bungee jumps. These stocks look shortable into resistance and believe will show the way if we get the next time down. They led down the first time.

WORLD MARKETS experienced the same type of top…all breaking trend lines as well as near-term support. I make note that Japan feels like it is the only country with good relative strength here.

No biggie at this point but believe the BOND MARKET put in another near term top on Friday. BONDS have been a non-factor trading in range for quite a while.

GOLD and SILVER continue to be a little too popular. Both are tracing out topping patterns as they wedged up on lighter volume in the past week.

Overall, this is a great time to kick back and let the market decide its next move. I suspect you won’t be waiting too long for the market to decide.

Quite a bit of uncertainty this morning. An early dip has been bought back up, leaving the majors all huddled around the flat line, along with the advance/decline lines. In the groups, the action is split, with HMOs leading the upside and the homebuilders and oil services heading lower.

Bonds have recovered a good portion of Friday’s losses, sending yields lower. Energy prices are lower. The dollar took a tumble overnight, but gold and silver have yet to move on that news.

Trading in New Century Financial (NEW) has been halted pending news - I can’t imagine that it’s good news, but you never know. It sounds as though their struggles have gotten rather large.

Update: On NEW:

NEW YORK (MarketWatch) — A New York Stock Exchange spokesman said the exchange was reviewing the latest filings from New Century (NEW) on problems with its creditors. The stock remains halted on the exchange. NYSE spokesman Brendan Intindola declined to comment further. New Century said in a filing with regulators it doesn’t expect to file its annual report prior to a March 16 deadline and that it could face delisting procedures under New York Stock Exchange rules, which allow an extension of up to six months for filing its financial report.

Deron Wagner this morning:

The market’s short-term uptrend has created numerous setups for short entry.

Hmm. Sounds familiar.

As for the long side:

On the long side of the market, there’s nothing we would touch except the inversely correlated ProShares ETFs we have been discussing extensively. If you’re a daytrader, go ahead and trade the long side of the market on the individual days with a decisive uptrend. However, if you’re a swing trader whose timeframe is longer than intraday, buying just about any stocks or ETFs right now carries very bad odds of profitability. Don’t fight the intermediate-term downtrend unless you are very nimble and can quickly reverse your positions.