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.

Since I saw this info at Random Roger’s site, I’ll just let him tell the story:

StateStreet listed six new ETFs today;

• SPDR China (GXC) like FXI it is heavy in financials
• SPDR Emerging Europe (GUR) a lot of Russian energy
• SPDR Latin America (GML) owns a lot of the mega cap usual suspects
• SPDR Emerging Market (GMM) different mix than EEM and cheaper than EEM
• SPDR Emerging Middle East & Africa (GAF) mostly South Africa followed by Israel
• SPDR Emerging Asia Pacific (GMF) lots of Taiwan and China and even 0.90% in Pakistan

Thanks Roger.

	This is how the market celebrated the end of the best week for the S&P in 3 years - with complete apathy.

Charts courtesy of StockCharts.com

Geez. I think I’ve seen holiday half-days of trading that were more exciting than this one was. That was excruciating. Oh yeah, but the Transports got a nice pop on some railroad CEO opening his mouth:

The S&P 100 was flat and the Nasdaq 100 down 5-6 points.

As stocks tried to creep higher, bonds continued to slip, and yields moved higher once again:
6-month: 5.08%    2-yr: 4.58%    5-yr: 4.48%    10-yr: 4.59%   30-yr: 4.78%.

Market internals were mixed, with a lean to the postive side, but volume was pathetic again. Advances/declines were 11 to 8 on the NYSE and 10 to 9 on the Nasdaq, with up/down volume 3 to 2 on the NYSE but just below flat on the Nasdaq. New highs/lows were 186/13 on the NYSE and 135/31 on the Nasdaq.

More winners than losers in the groups, but very little movment. SNDK helped lead the disk drives up 1.1%, while drug stocks (-0.7%) led the losers.

Energy prices were mostly higher, with crude oil up more than 50 cents to $62.28/barrel. Gasoline tagged the $2.00/gallon mark, but natural gas slipped a nickel to $7.27/mmBTU. The dollar index countinues to bounce back, rising to 83.29. Gold pulled back to $657/ounce while silver slipped to $13.13/ounce.

BMB Note: I guess nobody wanted to rock the boat after one of the biggest weeks for stocks in quite a while, but man, the last couple of days of non-action have been enough to put me to sleep - and haven’t done a lot to boost my confidence in the market. After the little move down out of the open and the runup after the housing data, some of the stocks I watch flat-lined so badly that I had to check and make sure my internet connection was working.

As I said earlier today, I would prefer to see an orderly, light volume pullback into support areas rather than this boring, grinding, no-volume move higher. Maybe things will change next week - but that will be going into the end of the month, so there might some toying around to hold things up. Who knows?

The indices still look mightily stretched after their big move up off the lows - they’re retraced 60-75 percent of the big drop, and they’ve done it in seven days. That sounds like near-term overbought conditions to me, and not an environment in which I’m dying to dive in and buy stocks. Not to mention that I’m not seeing any real attractive setups either.

Keep an eye on the bond market. Bonds are struggling here - and that’s not going to be good for stocks. Energy prices are also up - that’s good for the energy stocks, but I’m not sure how the rest of the market will react to $2.00 gasoline futures once again.

And then you’ve got this Iran thing with the UK sailors - and now I hear that the Iranian president (you know, Mr. Ahh, my-dinner-Jack), is cancelling his planned trip to the UN. Not that we really wanted him here again anyway. But you never know what’s going to come out of something like this, and I’m surprised that people were willing to hold onto stocks going into what could be an uncertain weekend.

Why can’t I be ridiculously complacent like everyone else? When will I ever get it through my head that nothing is ever, ever going to go wrong in the market again? Not in Iran, not in housing, not in consumer spending, not in derivatives, not in the Chinese stock market, anything. Ever.

Closing price on gasoline futures on CNBC: $1.9983. That’s rounds up to 2 bucks a gallon, up from the $1.35 area back in January.

Not a heckuva lot going on - more of the light volume drift upward. Frankly, I think it would be healthier for the market to go through a light volume pullback rather than this light volume wedging higher. But what do I know?

The markets got a little pop when the supposedly-good existing home sales number came out at 10 ET, but some of that move has faded, leaving the majors mixed around the flat line once again. The exception this morning are the Transports, which are higher despite a move up in oil prices, with the railroads making another move higher - just a follow-on to the buyout rumors of a few days ago, perhaps? Who knows? I don’t see any news.

A/D lines are still green, but almost back to flat on the Nasdaq. In the groups, the disk drives and oil stocks lead the winners, with drug stocks at the end of the train.

Bonds are flat to slightly lower, yields up a few ticks. Energy prices are mixed - crude up 60 cents or so. The dollar is bouncing a little higher after an early dip, gold and silver are pulling back.

The seasonally-adjusted number sounds good in the headlines:

Sales of existing homes unexpectedly rose 3.9% in February to a seasonally adjusted annual rate of 6.69 million, the National Association of Realtors reported Friday.

The sales pace is the highest since April.

The 3.9% gain was the largest since March 2004, exceeding expectations of a decline to about 6.35 million. January’s sales pace was revised down to 6.44 million from 6.46 million.

Ok. January was revised downward. But the trend is up, right?

Sales have risen three months in a row for the first time in three years. Sales are down 3.9% compared with a year ago.

Yup. The monthly trend is up - but sales are down nearly 4% YOY. Now what about prices and inventory? Well, that’s a little different story:

Inventories of unsold homes rose 5.9% to 3.75 million, representing a 6.7-month supply, up from 6.6 months in January. Inventories are not seasonally adjusted.

The median price of a home fell 1.3% year-over-year to $212,800, the seventh straight monthly decline.

The realtors’ take? Well, you can probably guess that they’re still calling a bottom - but they’re hedging:

“The recession in housing may have bottomed out in September,” Lereah said, adding that he’d need a few more months of data before making a call.

I’ve been hearing bits and pieces about this Cramer interview for a few days now. Here’s another story about it from the NY Post.

I haven’t seen the interview, and I guess I don’t really care if I do. I found a link to it in an article, but that link has been removed by YouTube “due to a copyright claim by TheStreet.com”.

Look. Wall Street - and other big traders - has been ‘manipulating’ stocks for years and years and years. Cramer’s supposed admission is no huge revelation. As a matter of fact, to me, it’s not news at all. (I still believe that Cramer’s TV show is a form of manipulation that he profits from, but that’s a whole ‘nother story.) Have you ever read “Reminiscences of a Stock Operator”? In the pseudo-biography, Jesse Livermore’s ‘character’ clearly talks about “creating a market” for a stock so that he can dump insiders’ shares for them when they’re looking to get out. Is that manipulation? Or just smart trading?

The bottom line is that the individual investor has to understand that this is all a part of the deal. Until the rules change - or Wall Street’s behavior changes (fat chance) - you have to live with it and accept it. If you don’t like it, you don’t have to play.

His role in manipulation, or whatever it was, should bring consequences. But that should be a minor concern compared to getting the true culprits in all this: regulators.

In the Web interview with TheStreet.com’s executive editor Aaron Task, which is on YouTube and has been blasted all around the Internet, Cramer gave advice on how to keep a profit on a short-position by driving a stock price down. He gave a number of different examples of manipulation, which he admitted might be illegal, but said it didn’t really matter because “the Securities and Exchange Commission never understands this.”

And that is the sad point of Cramer’s comments and this column: The people who are supposed to guard and protect the public’s trust in the markets are letting the people down. They simply aren’t doing their jobs effectively. For years the SEC tried to pin something, in a very public manner, on Cramer. But they could never really make anything stick; he ran circles around them.

There are now thousands of hedge fund managers playing tricks just like the old Cramer used to when he was running a hedge fund.

And regulators are looking on without making a call. And the public still continues to invest like they know better. And hedge fund managers continue to laugh all the way to the bank.

I wish it were different, but it’s not. I’m not sure it will ever be. The bottom line: Wall Street isn’t there to help you. The analysts told you to buy stocks all the way down in the dotcom bust, and in the next big downturn, the story will be the same. After all, when they’re looking to get out, they have to sell to somebody.

Update: Barry’s got a post on this topic at The Big Picture, with a link to the video clip at TSC. After listening to that, you’ll no longer have much doubt as to whether funds engage in the end-of-month, quarter and year “window dressing”. Of course, I never had any doubt in my mind. I think the big investment bank, brokers and hedge funds engage in an awful lot of activities that would just make your head explode if you knew what was really going on.

This news will have things rumbling and grumbling a bit. It already spiked oil prices up a bit.

Deron Wagner is keeping an eye on the oil services HOLDRS ETF (OIH).

As far as the major indices are concerned:

If Wednesday’s rally was sustainable and perhaps the start of a new uptrend, then we should expect the 50-day moving averages in both the S&P 500 and Nasdaq Composite to act as support over the next week. After both indices broke out above their 50-day MAs on Wednesday, the prior resistance should now have become new support. The Nasdaq Composite successfully tested and rebounded off support of its 50-day MA yesterday. However, resistance from the gap of February 27 may be tough for the index to rally above anytime soon. The 20-day moving average remaining crossed below the 50-day moving average will also provide further resistance. The S&P 500 has a similar chart pattern to the Nasdaq, except that it is further above its 50-day MA.

Of the “Big 3″ major market indexes, the Dow is the only one that still remains below its pivotal 50-day MA. It ran into it the past two days, but has not yet been able to close above it. Because the Dow is only comprised of a limited basket of thirty blue-chip stocks, it technically is not a very accurate indicator of the overall stock market’s health. Nevertheless, both the general public and financial news media devotes a lot of attention to the daily performance of the Dow. As such, we can’t ignore the importance of whether or not the index is able to move back above its 50-day MA. Of all the major indices, the Dow appears to be the weakest link.

What to look for?

On a technical level, the charts are certainly looking much more bullish than they were just a few days ago. But don’t ignore the fact that a lot of overhead supply remains from the February 27 sell-off. When traders and investors suddenly get trapped in a volatile, unexpected move and don’t immediately cut their losses, overhead supply is created. If the market subsequently attempts to recover back to that level, the people who created the overhead supply sell into the strength of the rally, just in an attempt to “break-even.” Wednesday’s upward surge undoubtedly absorbed a lot of supply, but there is still quite a distance to cover before the wake of the February 27 sell-off is no longer a factor. It’s okay to dip a toe in the water of the long side of the market, just be prepared to run for cover if a tidal wave sets in.