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.

Some homes in Detroit are going for next to nothing:

With bidding stalled on some of the least desirable residences in Detroit’s collapsing housing market, even the fast-talking auctioneer was feeling the stress.

“Folks, the ground underneath the house goes with it. You do know that, right?” he offered.

After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: “The lumber in the house is worth more than that!”

Anecdotal evidence of something - maybe just a lousy neighborhood, who knows?

On our everyday walk along the BM neighborhood streets, we’ve seen four houses go up for sale in the past week, five in the past two weeks. Two of those five are “for sale by owner”.

Another record month for margin debt, higher than in the dot-com days.

Why not? Consumers have been setting all kinds of borrowing and debt level records the last few years - why should their taking on of debt to trade stocks be any different?

With all of the recent focus on housing and the mortgage market, hardly anyone has paid much attention as gasoline prices have risen more than 40 percent since mid-January.

The sagging dollar has to be a bit of a concern for both the Fed and Treasury, as the buck tests some of its lowest levels in more than two years. Honestly, I don’t think the powers-that-be really mind a weaker dollar right now, as it means they pay back their debts with weaker dollars than they borrowed. But they really don’t want it to be too obvious - or investors might be much less interested in holding dollar-denominated assets, and the weaker dollar helps keep the inflation pot boiling by keeping import prices up.

Charts courtesy of StockCharts.com

These numbers will look good on the evening news, or in tomorrow’s newspaper headlines. But what you won’t be told is that there was virtually no conviction to the buying today:

Bonds were a little lower, moving yields up a bit:
6-month: 5.12%    2-yr: 4.63%    5-yr: 4.49%    10-yr: 4.57%   30-yr: 4.71%.

Market internals were positive, but as we mentioned, volume was very light. Advances/declines were 14 to 5 on the NYSE and 12 to 7 on the Nasdaq, with up/down volume nearly 5 to 1 on the NYSE but a more moderate 3 to 2 on the Nasdaq. New highs/lows were 111/24 on the NYSE and 97/72 on the Nasdaq.

Nearly all groups were higher, the exception being the semiconductors, which fell 0.7%. On the plus side, oil services (+2.7%) led the way, followed by steel stocks (+2.4%), metals and mining (+2.1%), natural resources (+1.8%), airlines (+1.7%), oil stocks (+1.7%), brokers (+1.7%), natural gas stocks (+1.5%), commodities (+1.5%), paper stocks (+1.5%), chemicals (+1.4%), software (+1.3%) and biotechs (+1.3%).

Energy prices were mixed: crude oil dropped to $56.59/barrel, but gasoline continues to cruise higher, rising another nickel to $1.96/gallon. Natural gas was lower by seven cents, at $6.85/mmBTU. The dollar index finally made a move up, to 83.38. Gold and silver were each just slightly higher, gold to $654/ounce and silver to $13.14/ounce.

BMB Note: Good numbers, but no volume. So what was this all about? A short covering rally? Just a ‘monkey see, monkey do’ follow-on to big gains overseas last night? Or will the big boys start buying soon? Tomorrow? The next day?

The bulls and bears are fighting it out, volatility certainly has picked up. We’ve continued to move higher off last Wednesday’s intra-day reversal, but today’s move doesn’t do much to convince me we’re out of the woods just yet. The majors still haven’t regained their recent highs, and the volume today was pretty pathetic. Then again, they’ve managed to make it pretty tough on the short sellers again, haven’t they?

The last time we saw volume this light was last Monday - the day before things got hammered on Tuesday. I’ll maintain a defensive posture until I see the big money ready to commit to the long side again.

Tomorrow morning we get data on housing starts and building permits, and the two-day Fed meeting gets started, but we don’t get their policy statement until Wednesday afternoon.

Maybe the reality of the housing problems is starting to ‘hit home’ with the builders, as the sentiment index falls for the first time in a few months.

It probably doesn’t make them feel any better to know that I’m right there with ‘em: I’m don’t have a great deal of confidence in the homebuilding business either.

Not that it mattered much to the market. Stocks didn’t even bat an eye when that report came out. Of course, hardly anyone is trading today - it feels like the Friday before a long weekend with the lack of volume out there.

Prices look good - major indices up a percent or more, A/D lines look solid, nearly all of the groups are in the green. But where is the volume? Volume seems lackluster at best. If volume doesn’t come in here, will the move fade? Is this just a short covering move? Or will the big buyers come in later in the day and drive things even higher with a big push?

Questions and more questions. Lots of chopping around, and lots of uncertainly at this point.

The indices jumped higher at the open, helped by higher markets in Asia and Europe, but the initial buying never saw much follow-through, and things have relaxed from their highs. While the indices have regained Friday’s losses, strong buying volume has yet to return. The groups are showing nearly all green, but with few big gainers.

Bonds are lower, yields are up. The dollar is trying edge higher, while energy prices are mixed near unchanged. Gold and silver are flat.