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.

More stats for the Implode-o-Meter.

	The Nasdaq has edged up just above the highs of a little over a week ago, and is now meeting up with its descending 20-day moving average. So what’s not to like?
	The past couple of days of the move have come on the second and third lowest volume days of the year. This isn’t something you would view as a ringing endorsement for the resumption of the bull market. You certainly can’t say that the big-money crowd is “all in” at this point.

Charts courtesy of StockCharts.com

What was that? An instant replay? Boy, today sure looked a lot like yesterday. Moves up pretty much across the board - but volume was almost nonexistent. Very quiet. Too quiet.

Bonds were a little higher, and yields moved lower:
6-month: 5.11%    2-yr: 4.60%    5-yr: 4.47%    10-yr: 4.55%   30-yr: 4.71%.

Market internals were again positive, but with volume very much on the weak side. Advances/declines were 7 to 3 on the NYSE and 12 to 7 on the Nasdaq, with up/down volume 7 to 3 on both exchanges. New highs/lows were 152/18 on the NYSE and 95/65 on the Nasdaq.

Most of the groups were winners, but the gains weren’t real large: airlines (+1.6%), utilities (+1.4%), transportation (+1.3%), paper (+1.2%), steel stocks (+1.1%), networkers (+1.1%), software (+1.1%) and oil stocks (+1.1%) led the list. Oil services (-1.1%) led a very short list of losers.

Energy prices were fairly flat: the April crude oil contract closed out at $56.73/barrel, gasoline slipped a penny to $1.95/gallon, and natural gas gained seven cents to $6.92/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: Very much a repeat of yesterday’s action: a definite positive bias, and some decent numbers, but no volume. Can we trust this move higher when it isn’t accompanied by decent volume? Is the market coiling for a big move higher - or is it sucking people in with a tease to the upside, only to bury them a few days later?

Some will try to go with it, but others will wait for some volume to confirm this so-called ‘rally’. I find myself in the second camp. If we get the ‘follow-through day’ - a big move up on big volume - we’ll have to respect that and start looking to see what we can find on the upside. For now, I’ll maintain my defensive posture.

Tomorrow is Fed day, so don’t expect a lot of early action. Things tend to hold in place a bit until the Fed announcement comes out at 2:15 Eastern. I’m not sure what the market will be waiting for, because I don’t expect much change. But last time we weren’t expecting much change either. And we didn’t get much change, but the market took off after the policy statement was released.

Of course, the market was in a much more bullish position at that time than it is now. Sit tight, and wait for some volume to return to help you determine policy.

Some mixed action at the open today, with the bulls getting just a slight advantage. The indices are a little higher and A/D lines are holding in the green, along with most of the groups. The moves aren’t big yet - airlines, steel stocks, gold stocks and transports are higher, while homebuilders are lower.

In energy, I’m not so sure that the folks trading transports and airlines on lower oil prices are paying a lot of attention to the usual ‘end of contract’ selloff taking place. The front-month contract (April) expires today, but prices for the next month are 2-3 bucks higher. Energy prices are fairly flat at the moment.

Bonds are slightly higher, yields lower. The dollar is lower, with gold and silver higher.

BMB mentioned that volume was disappointing in yesterday’s move. Here’s what Deron Wagner has to say this morning on that topic:

Although yesterday’s gains were impressive, it was the same old story of lighter volume “up” days that we have been seeing since the broad market’s downtrend began on February 27. Total volume in the NYSE fell 30%, while volume in the Nasdaq was 19% lighter than the previous day’s level. Granted, the previous session’s volume swelled more than usual due to the “quadruple witching” expiration of options. However, yesterday’s turnover was still well below average levels. Both exchanges registered their second lowest volume days of the calendar year. Since the February sell-off began, the S&P and Nasdaq have each had only one day of higher volume gains. Conversely, many of the “down” days continue to coincide with higher volume. Last Friday was the most recent such “distribution day.” Until stocks begin to see signs of institutional buying, we just can’t trust the market’s current rally attempt off the March lows.

Housing starts supposedly increased 9% in February, while building permits were down.

Keep in mind that housing starts are ’seasonally adjusted’, while building permits are not. Also keep in mind statements like these (we’ve been down this road before haven’t we?):

The government’s housing data are subject to large sampling and other statistical errors. It can take five months for a new trend in housing starts to emerge from the data.

Sampling and statistical errors? How about pure statistical insignificance? From the government’s report:

Privately-owned housing starts in February were at a seasonally adjusted annual rate of 1,525,000. This is 9.0 percent (±10.2%)* above the revised January estimate of 1,399,000, but is 28.5 percent (±6.2%) below the February 2006 rate of 2,132,000.

See that asterisk by the plus-minus percentage? Here’s what that means:

* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

And you gotta love this line on the 90-percent range actually including zero, as it does in this case:

All ranges given for percent changes are 90-percent confidence intervals and account only for sampling variability. If a range does not contain zero, the change is statistically significant. If it does contain zero, the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease.

Ok. So housing starts may have gone up. Then again, maybe they didn’t. They might have actually gone down. But we’ll say they went up. It sounds better, and a lot less wishy-washy.