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.

As long as we’re playing the Blame Game, Doug Kass would like to have a chance to point some fingers of his own:

There are four main culprits responsible for the expanding subprime debacle that threatens to upset the ‘Goldlicks’ scenario so many are trumpeting. I’ve listed them in descending order of importance — and ranked by school grade!:

Culprit #1: Former Federal Reserve Chairman Alan Greenspan was no smarter than a fifth grader.
Culprit #2: Irrational lenders like Novastar, New Century, Fremont General, Option One, Accredited Home, OwnIt Mortgage Solutions and others were no smarter than a sixth grader.
Culprit #3: Wall Street was no smarter than a seventh grader.
Culprit #4: The rating agencies were no smarter than an eighth grader.

You’ll have to read the column to see the full explanations. But I think Doug pretty much nails it.

Thanks to the commenters at Calculated Risk.

	The Russell 2000 posted a bigger gain today than it did yesterday, and the small and mid-caps were the exceptions yesterday in that they failed to take out the lows of early last week. The $RUT now sits only about 7 points below Monday’s high.
	The Dow Jones Utilities have been holding up very well, especially when compared to the beating that other indices have taken over the past few weeks.

Charts courtesy of StockCharts.com

Those who were hoping for a big follow-on rally to yesterday’s reversal were greatly disappointed, as today turned out to be another one of those light volume drifts upward. Sure, prices edged higher and some of the most oversold stocks got a bounce, but the lack of interest was obvious. Major indices did manage to tack a few points on to yesterday’s gains, however:

Bonds were mixed, with yields up just a bit on the short end:
6-month: 5.11%    2-yr: 4.58%    5-yr: 4.45%    10-yr: 4.53%   30-yr: 4.69%.

Market internals were positive, but as we mentioned before, volume was very light. Advances/declines were 7 to 3 on the NYSE and 5 to 3 on the Nasdaq, with up/down volume 8 to 3 on the NYSE and 5 to 4 on the Nasdaq. New highs/lows were 84/26 on the NYSE and 70/63 on the Nasdaq.

Most groups were higher, but with less big winners than yesterday. Gold and silver stocks (+2.2%) led the way, followed by airlines (+1.8%), chemicals (-1.4%), metals and mining (+1.4%), utilities (+1.1%) and REITs (+1.0%).

Energy prices fell across the board, with crude oil dropping to $57.50/barrel, gasoline sliding a nickel to $1.88/gallon, and natural gas down to $6.95/mmBTU. The dollar index was flat at 83.64. Gold is still holding at $646/ounce, but silver was higher at $12.95/ounce.

BMB Note: Though there wasn’t anything wrong with today’s action, there wasn’t much to get excited about. Light volume bouncing type-stuff again.

So is this what we’re going to see tomorrow going into expiration - and do we see volume/movement pick up next week? We could see more light volume edging upward, in a setup for another smack downward. We could see stocks gather themselves and power higher in a big follow-through, confirming, at least in the short-term, that yesterday was the ‘bottom’ - for now. Or we could muddle around in a trading range here, with no real hints as to what might be lying ahead.

If I knew what was going to happen, I’d already be a very wealthy man, and I either wouldn’t be bothering to write this drivel, or you would be paying me a pretty penny to read it. Since neither of those is the case, your guess is as good as mine, maybe even better.

Another pretty weak economic report coming out of the Philly Fed, with activity slowing but prices paid rising. Bad combo.

From Reuters, via Calculated Risk:

Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.

“You can’t believe how bad it’s going to get before it gets any better,” the prominent U.S. fund manager told Reuters by telephone from New York.

“It’s going to be a disaster for many people who don’t have a clue about what happens when a real estate bubble pops.”

***

“When you have a financial crisis, it reverberates in other financial markets, especially in those with speculative excess,” he said.

“Right now, there is huge speculative excess in emerging markets around the world. There will be a lot of money coming out of emerging markets.”

***

“This is the end of the liquidity party,” said Rogers. “Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse.”

I wouldn’t bet too strongly against somebody like Jim Rogers. He’s no dummy.

We’ve got the indices a bit higher, A/D lines well in the green, and most groups higher, but there isn’t exactly a huge rush to get in the door - volume is very much on the light side at the moment. Gold stocks, chemicals, airlines and metals lead the winners for now.

Bonds are a little lower, yields higher. Energy prices pretty near flat, the dollar is flat, and gold and silver are slightly higher.

Deron Wagner this morning: “We Dipped Below The March Lows. . .Now What?”

On the near-term outlook for the market after yesterday’s big reversal:

In a strong market, yesterday’’s action would most likely lead to immediate follow-through in the coming week, but downtrending markets leave behind a lot of overhead supply that the market must first absorb. Stocks may bounce a little more today, but we would be surprised if the major indices pop back above their March 13 highs anytime soon. Nevertheless, we”re prepared either way by focusing on managing existing positions, while avoiding new short entries until we see how things play out over the next few days. Remember that tomorrow is “triple witching” options expiration day, which could result in even more erratic price action today and tomorrow.

Some mixed messages out this morning, with the PPI coming in way too hot for comfort, but the Empire State manufacturing index looking pretty sorry.

Hmm. That seems to make the box that the Fed finds itself in just that much tighter. I’d feel a little sorry for them if I didn’t believe that the problems weren’t of their own making, to a large degree.