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.

It has been common practice for central banks to sell gold into commodity markets, to keep the price of gold down and make their own worthless paper currencies look like they have some real value.

But Tim over at The Mess That Greenspan Made says the central banks are much more reluctant to sell their gold these days, and some are even buying:

After months of steady decline for the U.S. Dollar when measured against other floating currencies, the battle against the world’s oldest currency is now escalating.

It is a battle for the hearts and minds of much of the world’s population as an alternative to the dollar is sought - choose another country’s paper money or go with the world’s oldest money.

In years past, central bank selling of gold could always be relied upon to stop the flight away from paper money - when investors swapped their fiat money for gold bars, then saw the price of the metal drop as central bank bullion was dumped onto commodity exchanges, the metal’s price would plummet and a lesson was learned.

This has gone on for decades, but with more central banks in developing economies now buying bullion and with organizations such Germany’s Bundesbank balking at any future sales (apparently not having forgotten the lessons of their Weimar days 84 years ago), this may be coming to an end.

For years, commodity bull Jim Rogers has stated that the reason he views the yellow metal as just another commodity is because the world’s central banks have too much of the stuff - they can continue to sell into the market to depress the price for many years.

Well, that may no longer be the case.

The current year of the European Central Bank Gold Sale Agreement allowing the sale of 500 tonnes looks like it will come up short again, this year by about 150 tonnes. Recent-seller France is rumored to be about done with what they had planned to unload and no other big sellers are on the horizon.

March foreclosure filings were up 47 percent from a year ago:

Banks began foreclosure proceedings against 47 percent more U.S. homeowners last month compared with a year ago as falling housing prices made it more difficult for borrowers to refinance mortgages.

More than 149,000 filings were posted in March, the highest number since RealtyTrac Inc. began collecting data in January 2005, the Irvine, California-based research company said today in a statement. California filings rose to 31,434, more than triple the number a year ago. Nevada and Colorado had the largest percentage gains.

Hat tip to At These Levels.

But wait — I thought all the glaciers were melting, hunters were falling through thin ice, and polar bears and seals were getting trapped on floating ice chunks (even though they can swim):

“Ice conditions are some of the most severe we’ve seen in 25 to 30 years,” said Frank Pinhorn, executive director of the Canadian Sealers Association. “I’ve talked to a lot of sealers and they’ve got holes punched in their new boats and they’re taking on water.”

The media really has to try to get their story straight.

It’s no wonder I’m shaking my head these days - here’s the type of action we’re dealing with. STI was a badly broken, 78 dollar stock just last Thursday. Today it is an 84 dollar stock, back above the 50-day moving average. It’s nuts. And it really does make you wonder who is saving these things.

Chart courtesy of StockCharts.com

Gary Kaltbaum, on his radio show today:

“…I must admit — I can make a call that I’m no longer bearish on Financials, Oils are going to pull back, I just don’t know how to play it, and I don’t know how long to play it for. That’s how spastic this market has been over the past few months.”

Glad to hear I’m not the only one who is dazed and confused. I can see what’s happening, but I have no idea what to do with it all - if anything.

	The Dow has now moved higher on 13 of the past 14 days, edging to new all-time highs, but also poking out the top of the 20-day Bollinger bands.
	China watch: I think the Dow is trying to catch up to the Shanghai Composite - which had a minor down day a couple of days ago, but is still up 21 of the past 23 days.
	The brokers were a part of the weak financial area, but have made a strong move in the last few days…
	…and the lowly homebuilders have bounced off their lows, catching a big bid today after an early dip. Where did that come from?
	The oil services have begun to pull back a bit, along with other energies and the metals groups.

Charts courtesy of StockCharts.com

Whoa. That was a weird one. The Dow runs up to new highs - on the backs of really only 3 stocks (Boeing was good for about 27 Dow points all by itself) - but gives back half the gains in the last half-hour. The Nasdaq flounders in the red nearly all day, and more stocks finished down than up. The Russell drops a half-percent. The Dow Transports are up 1.6%, but the Nasdaq Transportation index is up only 0.3%.

You try to make sense of it. I can’t:

Bonds were higher again, and yields edged lower:
6-month: 5.03%    2-yr: 4.64%    5-yr: 4.56%    10-yr: 4.65%   30-yr: 4.82%.

Internals all leaned to the negative side, and following the pattern, volume was higher on what could be viewed as a ‘down’ day, at least from an internals perspective. Advances/declines were 4 to 5 on the NYSE and 2 to 3 on the Nasdaq, with up/down volume just below flat on both exchanges. New highs/lows were 226/16 on the NYSE and 129/46 on the Nasdaq.

The groups were split, with more red than green, but bigger numbers on the green side. The semiconductors (+2.5%) led the winners, boosted by that screwy news from LLTC. The chips were followed by the bouncing homebuilders (+2.1%), airlines (+2.0%), brokers (+1.7%) and banks (+1.5%). Oil services (-1.4%) and metals and mining stocks (-1.2%) led the losers.

Energy prices edged higher, with crude oil up a few cents to $63.13/barrel, gasoline up to $2.08/gallon and natural gas to $7.50/mmBTU. The dollar weakness continues, with the dollar index slipping to 81.67. Gold moved back up to $690/ounce, and silver gained to $13.95/ounce.

BMB Note: Strange day. The Dow makes it 13 up days out of 14 - but the market bought up only a few Dow stocks, the resurgent financials, and beaten down homebuilders and airlines. The majority of stocks were lower. I’m not sure I understand this mess.

The Dow edges into new high territory to join the S&P - we have yet to see confirmation of those highs from the Nasdaq, which has lost a little ground each of the last two days. And the weak days are still showing better volume than the ’strong’ days - that still doesn’t look good to me.

I’m not sure what to make of what’s going on here, but it doesn’t feel all that stable to me. This last run-up, especially in the Dow, has been pretty steep and sharp. I’d really like to see things level off and go sideways for a while to form some support - but I’m not sure that’s going to happen.

Just take your time, and keep a close eye on things.

The Dow has snuck to new highs today, but it’s been an upside-down today. Only 10 of the 30 Dow stocks are higher at this point, and most of the move is coming from only 3 stocks: BA, JPM and CAT.

A look at the rest of the market shows more stocks down than up. Go figure.

Another screwy, split-up day. Most groups are lower, but the few that are higher are up a good amount, helping to confuse issues. Those groups doing well include the semiconductors, homebuilders, airlines, brokers and banks. A few other groups are up small amounts, with all the rest in the red. Advance/decline readings are in the red, and have been all morning.

Note that the groups doing well are mostly groups that had been performing poorly, as the money continues to rotate from best to worst. Or is it that these poorly performing stocks have to be lifted before expiration to save some of the put option writers?

The weekly EIA report shows drops in inventory levels across the board:

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.0 million barrels compared to the previous week. At 332.4 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories fell by 2.7 million barrels last week, and are below the lower end of the average range. Distillate fuel inventories declined by 0.8 million barrels, and are just below the upper end of the average range for this time of year.

“Refineries operated at 90.4 percent of their operable capacity”, and the demand picture looks like this:

Total products supplied over the last four-week period has averaged 20.8 million barrels per day, or 1.6 percent above the same period last year. Over the last four weeks, motor gasoline demand has averaged nearly 9.4 million barrels per day, or 2.5 percent above the same period last year. Distillate fuel demand has averaged over 4.3 million barrels per day over the last four weeks, up 0.9 percent compared to the same period last year. Jet fuel demand is down 1.3 percent over the last four weeks compared to the same four-week period last year.

Another mixed bag, as the majors hang around the zero line, with A/D lines submerged in the red for now. Groups are split as well, with moves up in the semis, brokers, airlines and banks, and moves down in disk drives, oil services and internets.

Bonds are up again, yields lower. Energy prices are fairly flat, and the dollar, gold and silver are all pretty flat as well.

LLTC is helping the semis today with a big 12% move up, and there are a few things about the move I don’t quite get. They reported a 10% decline in quarterly profit yesterday. But they announced an ‘accelerated’ stock buyback program. How are they going to pay for the stock? “Margin” debt - they’re going to borrow the money:

Linear will pay for the buyback with existing cash and funds it will gain from a $1.7 billion convertible note offering.

It would be hard for me to get excited about paying up another 12% for the stock of a company that’s going to go into debt to buy back its own stock. But that’s just me.

I guess it wasn’t bad enough that RIMM stock took a 10 dollar hit last week. Now their system is down.