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.

An interesting look at commodities, foreign markets and the REITs in Frank Barbera’s market wrap tonight over at Financial Sense.

Trader Tim takes a look at what’s been a common theme lately: the parallel between the Dow today and the 1989 Nikkei.

What I would like you to take away from Tim’s discussion is not any sort of inference that today will end up just like 1989 - I think expecting two markets to act exactly the same nearly 20 years apart is a little silly - and I don’t think Tim expects that either. But rather, I would like you to consider the questions that Tim poses regarding the last days of the Nikkei’s rise:

Looking closer, you can see that practically every day was an up day. Now let me ask you - - and I’m directing this at the bulls. Where was the warning sign? Where did it show a top was in place? How could you tell that this was the end? Imagine you were massively long this market. How would you know the party was over?

As the saying goes, “they don’t ring a bell at the top.” And it isn’t always obvious on the charts either - take a look back at the Nasdaq in March of 2000. No hints of a top, no big sideways movement followed by a breakdown out of the range, no head and shoulders top, nothin’. Just, one day, POOF! — and it was over (BTW, I think that’s what will happen to the Chinese markets some day).

So at least give some thought as to what action you might take if ‘that day’ ever hits this market. Many of us thought that Feb. 27th was that day - I know I did - but it proved to be a fake-out. The next time might be the real thing. You just won’t know until it’s far too late. And waiting until you know ‘for sure’ can be quite expensive - the Nasdaq dropped 70% off those 2000 highs.

No, not that one (sorry Ray). We’re talking about the Dow’s recent winning ’streak’ - this is a market site, remember?

Thanks to The Big Picture for the pointer.

Well, that was a weird one. Stocks stumbled pretty hard out of the gate, but by the end of the day, the major indices had clawed their way back up to the flat line. But the advance/decline figures didn’t quite support that ‘even’ scoreboard, as they remained in the red.

Looking at the other indices, there was a mixed message, with the NYSE composite down 0.4% and the Utilities down 0.5%, but the Transports up 1.0%:

Bonds started higher this morning, but pulled back and yields were left pretty near where they ended yesterday:
6-month: 5.01%    2-yr: 4.67%    5-yr: 4.54%    10-yr: 4.63%   30-yr: 4.80%.

Market internals didn’t agree with the results put up by the indices, with the exception that Nasdaq up/down volume was quite the opposite of the advance/decline data. Volume also increased on what was a rather weak day for the market. Advances/declines were 2 to 3 on both exchanges. Up/down volume was 2 to 3 NYSE but a positive 11 to 8 on the Nasdaq. New highs/lows were 160/25 on the NYSE and 144/62 on the Nasdaq.

The group picture was split, with few big movers. The steel stocks (+2.3%) led the winners, while the gold and silver stocks (-1.0%) led the losing side.

Energy prices were mixed. Crude oil finished higher at $62.26/barrel, and gasoline got back a penny to $2.20/gallon, but natural gas slipped to $7.64/mmBTU. The dollar index bounced back above 82 today, but slipped back to finish at 81.94. Gold dropped a few bucks to $685/ounce and silver gave back a couple of cents to $13.46/ounce.

BMB Note: A messy day today. But the market had a chance to dive this morning, and it couldn’t even be kept down for an entire day. Obviously the indices are going to fight to stay up, even if we do see some shakiness under the surface, at least at this point. Internals were terrible out of the gate this morning, and still didn’t look very good in the early afternoon as the majors snuck back up to zero. But by the close, the internals had moved up to their best levels of the day.

For now, it seems as though the broader market has lost a bit of momentum, but it hasn’t hardly given back any ground to speak of as yet - meaning it’s still a little stretched.

Tomorrow is Fed day, and of course, anything can happen. I don’t expect the Fed to change rates, and I doubt that they’ll be leaving out any ‘critical’ parts of their release this time around. But who knows how the market will react?

I certainly don’t.

I don’t know if I’ve ever seen an insider trading case be brought forth this quickly:

The Securities and Exchange Commission Tuesday accused two Hong Kong residents of “widespread and unlawful trading activity” when they bought $15 million of Dow Jones & Co. stock ahead of an announcement that News Corp. was seeking to buy the company.

The lawsuit in U.S. District Court in Manhattan named as defendants Kan King Wong and Charlotte Ka On Wong Leung, a married couple. It alleged they made “highly profitable and highly suspicious” stock purchases based on inside information between April 13 and April 30.

***

According to the lawsuit, Wong and his wife bought 415,000 shares of Dow Jones stock in the two weeks prior to the May 1 announcement that News Corp. had offered to buy Dow Jones.

The purchases occurred while the couple possessed material non-public information about the offer of News Corp. to acquire Dow Jones, the lawsuit said.

With just over an hour-and-a-half to go in the trading day, the Nasdaq works its way back from being down 20 points to just above flat for the day, even though the Naz advance-decline percentage still sits well in the red at a minus 24 percent. That translates to roughly 38% of Nasdaq stocks up and 62% down.

Go figure.

A rough start for stocks this morning - all the positive vibes that had been feeding the Dow seem to have been forgotten, at least in this first hour. The major indices are all showing losses, with the lagging Russell 2000 getting hit the worst. Advance/declines are deep in the red, and all of the groups are red as well, with the exception of the steel stocks. Leading the drop are the energies, gold stocks, brokers, homebuilders, airlines and semiconductors.

Bonds are higher, pushing yields down. Energy prices are slightly lower. The dollar is higher - maybe that’s contributing to the weakness in stocks. Gold and silver are lower.

I was just wondering aloud to the BMWife the other day, “Why is it that we see all these mergers at or near the top? Wouldn’t it be a lot cheaper for companies to buy other companies when the market is low - when their stocks are cheap?”

That would seem to make a lot more sense to me. Apparently Barry feels the same way:

Here’s a question I have for all the students and fans of M&A alike: Why now, and not two, three, four years ago?

How much of the process of merger and acquisition is ego driven, psychology, sentiment — and how much of it is legitimate, intelligent strategy?

Recall that in 2001-03, there were a dearth of deals. Any buyers back then were getting bargains galore, at rock bottom prices, when the rest of the world HATED DEALS. Now, acquisitive corporate managements are paying premium prices, as profits decelerate and the economy slows.

Isn’t it better to buy low and sell high?