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.

If the charts of these retailers are any indication, the market probably isn’t setting its expectations of Friday’s retail sales numbers very high.

Charts courtesy of StockCharts.com

	While the Dow continues its historic run, the Russell 2000 has yet to move convincingly above its February highs.
	Ditto for the Dow Transports, which edged up above those highs and got all the Dow theorists stirred up, only to tuck right back in below them again.
	You don’t hear much noise about Google these days, do ya? Why not? Because it’s been MIA - stuck at the same level as it was last October.

Charts courtesy of StockCharts.com

Another Dow Day. The big-caps lead the way again, with the Dow riding the backs of just a few stocks to post its 24th day of gains in the last 27. The S&P 500 also showed a gain, but add another divergent day to the ones we’d been seeing as the Nasdaq, Russell and Transports are left behind:

Bonds barely budged, leaving yields pretty much as they were:
6-month: 5.01%    2-yr: 4.67%    5-yr: 4.54%    10-yr: 4.63%   30-yr: 4.78%.

Market internals diverged with the indices - positive on the NYSE and negative on the Nasdaq. Volume came in well on the light side. Advances/declines were about 17 to 14 on the NYSE but 9 to 10 on the Nasdaq, with up/down volume nearly 3 to 2 on the NYSE but 4 to 5 on the Nasdaq. New highs/lows were 301/15 on the NYSE and 167/51 on the Nasdaq.

The group picture had more green than red, but not a lot of big movers. The commodities (+2.6%) got a big bump from the Alcoa deal. They were followed by steel stocks (+1.7%), metals and mining (+1.6%), insurance (+1.4%) and defense stocks (+1.1%). The homebuilders (-1.3%) led the losers.

Energy prices slipped, with crude oil backing off another 40 cents to $61.53/barrel, gasoline dropping a couple of cents to $2.19/gallon and natural gas falling a dime $7.78/mmBTU. The dollar index fell to 81.66, while gold edged up to $689/ounce and silver to $13.48/ounce.

BMB Note: This market’s divergent ways can’t continue. We said last week that the broader market had better start picking things up, and it did, but only for a day or two. Today we’re right back where we were last Monday, with the Dow leading the train by a mile, and the Russell and Nasdaq looking like Street Sense in the first half-mile of the Kentucky Derby on Saturday (was that some move along the rail or what?).

The market has to come back together sooner or later, and that can happen in either direction - the rest of the market starts gathering steam and catches up with the Dow, or the Dow gets dragged back down by the lack of breadth in the market. And I wouldn’t dare to guess which way it’ll go at this point.

So for now, it’s the same old song and dance. The Dow continues to be stretched way past its reasonable parameters, and the Nasdaq keeps putting in negative A/D days. Something’s going to give. The question is what, and when.

The big econ news won’t come until later in the week - Fed day on Wednesday, retail sales and PPI on Friday.

Listless. Very unenthusiastic trading - is there a holiday tomorrow that I wasn’t aware of?

Volume is light, and although the Dow (always, forever and ever) remains in the green, the other indices have slid back toward the UNCH mark, with the Russell, Mids and Transports just in the red. Nasdaq A/D line has also moving into negative territory.

A post at The Big Picture this morning ties in quite nicely with the discussion here last week on the relative price performance of stocks. The case can be made that while stock indices are setting new highs in dollar terms, they most certainly are not when measured in terms of other currencies and/or their real buying power in terms of commodities.

The charts show that while the S&P is near its all-time highs in dollar terms, it is actually doing better when based on the Yen - but not so well when measured in Euros, Pounds, gold, oil, corn or houses.

A rather quiet morning thus far, with the majors holding slightly in the green, but the Nasdaq A/D line has backed off to the flat line. Commodities, steel, insurance and metals are leading the way up (with help from the Alcoa/Alcan buyout news) and the homebuilders are leading the downside.

Bonds are flat to slightly higher. Energy prices are a little lower. The dollar is lower, gold and silver slightly higher.

Deron Wagner says you want to own stocks in a bull market - duh. But that doesn’t mean that you don’t look for good risk/reward entry points:

…the Dow has been hugging the upper channel resistance of its trend channel for the past two weeks. While we don’t know how long it will continue to do so, one thing remains certain — new long entries at current levels do not carry a very positive risk/reward ratio. Obviously, one needs to be buying strong stocks and ETFs in a bull market, but the most profitable and lowest risk point to do so is when the major indices retrace down to support of their uptrending channels. Since the Dow has not touched its lower channel for nearly a month and has been riding the upper channel resistance for two weeks, we can’t help but think that a correction at least down to the middle of its uptrending channel is bound to happen soon.