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.

From ETF Trends yesterday:

XShares is launching nine new exchange traded funds (ETFs) adding to their HealthShares family of funds. XShares Group LLC Chairman and Founder, Jeffrey Feldman, rang the opening bell at the New York Stock Exchange this morning in celebration of the new ETFs. The ETFs are:

• Metabolic-Endocrine Disorders Index (HHM)
• Autoimmune-Inflammation Index (HHA)
• Cancer Index (HHK)
• Cardiology Index (HRD)
• Composite Index (HHQ)
• GI/Gender Health Index (HHU)
• Respiratory/Pulmonary Index (HHR)
• Neuroscience Index (HHN)
• Opthalmology Index (HHZ)

I don’t know, maybe it’s just me, but doesn’t this seem like it’s taking the whole ’specialty’ ETF concept a bit too far? I mean, c’mon - is it even possible to find enough stocks that trade with any real volume to build an ETF around “Autoimmune-Inflammation”?? If so, do you really expect the ETF to generate enough interest to provide any degree of liquidity at all? Something that only trades 2300 shares a day is of no use to me.

I still think that, within a few years or so, we’ll see a lot of these niche ETFs cease operations due to lack of interest or participation. And that includes a number of the broad based ones as well. The world only needs so many Russell 2000 ETFs, you know what I mean? I think just one for each index would be enough. Seems like the DIAs, SPYs and QQQQs have worked out pretty well, haven’t they?

It seems a little early for this yet, but we could see it coming from miles away: the Federal government will consider stepping in to play Daddy, and saving people from their own extreme levels of greed and stupidity:

U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.

“The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit, so we clearly want to look at that and legislate,” Dodd, a Democrat from Connecticut, told reporters in Washington after a speech to the National League of Cities.

Hmm. This doesn’t sound like a very good deal for those are have managed their finances responsibly, now, does it?

Federal aid “would come at a cost,” said Douglas Duncan, chief economist at the Mortgage Bankers Association. “It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?”

I have a very short and succinct answer for Mr. Duncan: NO!

Wait, let me make myself clear on this: HELL NO!!

Hey, Mr. Socialist Dodd, why stop there? Why not just go ahead and pay for their cell phones and cable bills while we’re at it? And throw in a nice flat-screen plasma TV to make them feel better? Oh but wait - most of them already have one of those, maybe two. That’s right, they ‘bought’ them on credit - debt they’re not going to pay back.

	Today’s big move down wipes out 4-5 days of gains off the lows for the major indices. Both the S&P and the Nasdaq find themselves back at their respective 150-day moving averages, and just a few points above the lows of last week. This potential area of support really needs to hold to prevent a further leg down.

A number of groups have already given up the lows put in early last week:

Charts courtesy of StockCharts.com

So much for the bounce. Today we got the next ‘thunk’ of that bowling ball. And it was butt ugly. Things started out poor right out of the gate, and a lunchtime lurch downward had investors running for the ’sell’ button. Nothing good to say about these numbers:

Bonds rallied as stocks fell, and pushed yields back down near last week’s lows:
6-month: 5.09%    2-yr: 4.51%    5-yr: 4.41%    10-yr: 4.49%   30-yr: 4.65%.

Market internals were horrible. Absolutely horrible. And volume picked up to levels higher than all of last week. High volume down, light volume up is NOT the type of action we want to see. Advances/declines were 1 to 5 on both exchanges. Up/down volume was nearly 1 to 19 on the NYSE and 1 to 9 on the Nasdaq. New highs/lows were 89/77 on the NYSE and 65/147 on the Nasdaq.

If you’re looking for winners in the groups, you’re dreaming. The numbers were big and bad: brokers (-4.4%), gold and silver stocks (-3.9%), steel stocks (-3.6%), housing stocks (-3.4%), banks (-3.3%), airlines (-2.8%), transports (-2.7%), commodities (-2.7%), REITs (-2.5%), chemicals (-2.5%), computer hardware (-2.4%), software (-2.3%), paper stocks (-2.2%), internets (-2.2%), computer tech (-2.2%), defense (-2.1%) and networking (-2.1%).

Energy prices were mixed once again. Crude oil continues to slide, falling to $57.93/barrel, but gasoline snuck up a couple of cents to $1.93/gallon, and natural gas fell only a few cents to $6.89/mmBTU. The dollar index fell to 83.74. Gold slipped only to $644/ounce but silver got hit harder, falling to $12.74/ounce.

BMB Note: We’ve been pretty leery of the recent bouncing action, and today we got an idea why. This market is not in good shape. Homebuilders and lenders have been getting destroyed, and the banks, brokers and financial services are now joining in with enthusiasm. That’s not good news for a country that finds itself doing a lot less manufacturing and a lot more of the ‘financial services’ business these days.

I shouldn’t have to tell you that this isn’t a market to be taken lightly. We went more than four years without a 2% down day in the S&P - now we’ve had two in the past two weeks. Not good news.

I’m certainly not looking at the long side (with the exception of the short index ETFs), and have been enjoying some success on the short side, though today’s meltdown blew by some of the good short entry points I had scoped out. I was looking at one of the brokers as a possibility, but it fell through the ice so fast all I could see was a blur, and I wasn’t about to go diving in after it.

Pick your own reasons for the market’s troubles - it doesn’t really matter what the reasons are. The fact is that the market is in some trouble here, and it’s up to you to decide how you’re going to handle it. For me, priority #1 is the protection of my capital, and after that comes any attempts to make money on the short side. You need to decide what your priorities are: consider the worst case scenarios, and try to plan what you’re going to do if we get there - and don’t think it can’t happen. I do know that if this does roll over into a bear market of significant depth and duration, it’s a lot easier to handle it when you’re watching from the outside looking in, rather then getting mauled.

As Gary Kaltbaum would say on his radio show: “I hope you’re listening.”

Mortgage delinquencies took a jump in the fourth quarter. Is anyone surprised?

CNBC is giving that as part of the reason for the midday market slide, now reaching -170 points on the Dow. It could be the reason, and it might not be. Doesn’t matter. A dive is a dive.

A pretty ugly move down just after lunch sent the Dow to a low of more than 140 points down, and things have relaxed only slightly since then. Volume picked up pretty quickly during that slide, which isn’t a real good sign.

That move has left nearly all the groups in the red, and many down more than a percent. The worst off are the homebuilders, brokers, gold stocks, transports, REITs and banks.

An initial selloff hasn’t snowballed into anything larger as of yet, but it hasn’t recovered much ground yet either. The major indices are showing mostly losses, led by the Transports. In the groups, the homebuilders, banks and REITs are getting the worst of it, while oil services are higher.

Bonds are higher again, pushing yields back down. The dollar got hit overnight, and is still lower. Energy prices are higher, with gasoline futures hitting $1.95/gallon. Gold is slightly higher, while silver is slightly lower.

I do NOT receive an advance copy of Deron Wagner’s column.

Honest.

February retail sales were a disappointment. In the ongoing lending saga, LEND looks to be following NEW off the cliff. Goldman puts up strong numbers, and Viacom sues Google/YouTube.