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.

Well, we were right on one thing - we got a real snoozer of an expiration day. Man, what a dull day.

Bonds were just slightly lower, and yields were up just a few ticks:
6-month: 5.12%    2-yr: 4.59%    5-yr: 4.47%    10-yr: 4.55%   30-yr: 4.70%.

Market internals were negative. Volume was big, but that was due to big spikes at both the open and close on expiration - between those bookends, volume seemed light. Advances/declines were 2 to 3 on both exchanges, with up/down volume 1 to 2 on the NYSE and 2 to 3 on the Nasdaq. New highs/lows were 83/30 on the NYSE and 61/81 on the Nasdaq.

Most groups were lower, but only a few big movers: steel stocks (-1.5%), chemicals (-1.1%), airlines (-1.1%) and brokers (-1.0%).

Energy prices were flat to mixed: crude oil fell to $57.11/barrel, gasoline was higher by 3 cents to $1.91/gallon, and natural gas fell a few pennies to $6.92/mmBTU. The dollar index took a dive to 83.22. Gold and silver moved higher, gold to $653/ounce and silver to $13.10/ounce.

BMB Note: Today doesn’t tell us much at all, but I don’t really like the feel of the market here. Awfully light volume yesterday, and pretty lackluster stuff again today, but of course, it was expiration week. Let’s see how things shape up next week.

We’ve already got everybody and their mother calling Wednesday’s intra-day reversal ‘the bottom’. Was it? Could be. But it also might not be. We’ll know more in the near future. Until then, I will not be leaning one way or the other.

Larry McMillan says that this week’s successful - at least up until now - retest of the lows means that the worst could be over for this decline:

This week, the lows were successfully retested (so far). It is possible that the worst is over for this decline.

As for the $SPX chart, there is clear support and resistance. The support is the 1365-1375 area mentioned above. If there is another retest, we would expect that area to hold — and perhaps to see some of the other indicators, such as put-call ratios, turn bullish by then as well. Of course, if that support were to fail, then a whole new round of bottom-forming would have to take place…

In summary, we think there is a good chance that the lows are in, although they may be retested once more. Any sustainable rally will need to have buy signals from the equity-only put-call ratios — something that has not been forthcoming so far. For now, though, we remain somewhat neutral on the market until more pieces of the puzzle fall into place.

He’s right - the lows could be in. But I’m not all that confident of that fact just yet.

Kinda what we’ve been expecting for the expiration - not much movement. Indices are hovering right around UNCH, and most groups are doing the same. The few groups moving higher are the gold stocks and the banks.

Bonds are slightly lower, yields higher. Energy prices are higher, the dollar is lower, and gold and silver are higher.

Mixed results in the CPI report, with the headline number coming in a little hot, but the “core” rate in line with expectations.

Helping to drive that headline number were food prices:

Food prices jumped for the second straight month, rising 0.8% — the largest gain in nearly two years. Prices for fresh fruit rose 5.7%, the most in 19 years, while fresh vegetable prices also rose by 5.7%.

But, don’t worry. All we really need to watch is that “core” rate. Good thing no one has to actually buy food. Or energy, for that matter.