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.

Uncle Al joins Brother Ben in the ‘Not Me’ circus, as pointed out by The Mess That Greenspan Made:

The most fundamental flaws in nearly all contemporary economic thought are readily apparent in the first few paragraphs of former Fed Chief Alan Greenspan’s rebuttal to his recent critics in today’s Financial Times:

• If it doesn’t show up in standard economic data, it doesn’t exist
• If it can’t be modeled, it is not worthy of discussion

I can vouch for some of this: there are a bunch of brand new strip malls and small office buildings within just a few miles of BMB headquarters that are still flying “For Lease” signs, and have been since they were finished.

“If you build it, they will come” ain’t workin’ so good anymore.

	The major indices all have a similar look to them - a thrust up off the March lows, but now four days of indecision.
	The weekly chart of the S&P still shows a pretty major top in place.

Some of the strongest groups of late moved up nicely during the morning’s rally attempt, but ran into an afternoon buzzsaw:

Charts courtesy of StockCharts.com

Hmm. Another day, another failed rally. Another day where the story isn’t necessarily in the final numbers, but rather in the route things took to get there.

Stocks got a boost up from the start, and managed to put together another morning rally, only to hit a wall for the third day in a row and see it all fade away, again, by day’s end. The Dow gave up a 124 point gain to finish up only 3, the S&P was up 16 and finished up 2, and the Nasdaq was up 20, but finished down 6.

The bulls must be getting at least a little frustrated by now:

Treasuries slipped, and yield moved higher:
6-month: 1.59%    2-yr: 1.94%    5-yr: 2.75%    10-yr: 3.56%    30-yr: 4.36%.

Internals finished mixed, and the Nasdaq, overall, continues to look much weaker than the NYSE. Today’s volume looks to have been slightly higher on the NYSE, but lower on the Nasdaq. Advances/declines were 5 to 4 on the NYSE but 14 to 15 on the Nasdaq, with up/down volume 7 to 4 on the NYSE but 2 to 3 on the Nasdaq. New highs/lows told a similar story, 69/5 on the NYSE but 36/39 on the Nasdaq.

Many of the groups that had shown strong gains in the morning slipped back down, and only a few were left with gains of a percent or more: banks (+1.6%), brokers (+1.3%), steel stocks (+1.1%) and airlines (+1.1%). Networkers (-1.3%) and computer hardware (-0.9%) led the losers.

Energy prices continue to storm higher. Crude oil gained almost 3 bucks to $109.09/barrel, gasoline hit new all-time highs at $2.78/gallon, and natural gas jumped almost 50 cents to $9.80/mmBTU. The dollar index worked its way back up to 72.20, but that didn’t seem to hurt the precious metals - gold added 8 bucks to $922/ounce and silver made its way back above the $18 mark, to $18.07/ounce.

BMB Note:   Three days in a row: the bulls had their chance.

Dare we say it again? At least if the market does the same thing every day, it makes writing the closing wrap much easier: “I thought at one point, late in the morning, that the market might actually make a run for it and get out of this range. Things had recovered from early lows, and a few stocks were moving up and hitting new highs. But the momentum only lasted so long, and then not only did things not move higher from there, they completely fizzled into the close. Not a great sign.”

So here we sit. After Tuesday’s big move, we’ve gone four days trying to plow through the overhead resistance without much success. Each rally of the last three days has been met with selling, and one wonders which will give up first, the buyers or the sellers?

Also of some concern has to be the fact that the strongest areas, like the chemicals, metals and steel stocks got hit pretty hard today after their morning runup, and may have hit at least some short of short-term wall here. If that’s the case, then something else is going to have to step forward and take the reins if the indices are to push higher.

Lacking significant distribution to this point, one still has to give the market the benefit of the doubt in the near term. But the longer-term resistance at this point has proven to be quite formidable, and we’ve yet to see that market has sufficient fuel to push above it.

Only time will tell. Traders can probably maintain a cautious upside bias for now, but I see no reason to start putting any on longer-term bets at this point. I am still of the belief that the rally will eventually fail, and we will see another leg down as this bear market runs its course.

How can that be? And will it last? Here’s Gary Kaltbaum this morning:

Since the market’s follow through day, the market continues to act constructively off its recent lows as up days have been on heavier volume while down days have been on light volume. One also has to like that leadership is indeed starting to show up. In past reports, I have mentioned the better action in areas like HOUSING, RAILS, TRUCKERS and COMMODITIES. This includes my now favorite group… STEEL. Also turning up nicely are OILS, FERTILIZER and AGRICULTURE. I must also add that SOLARS are now coming on strong. On top of that, the down and out SEMICONDUCTORS have finally turned up after an excruciating drop punctuated by no rallies whatsoever.

This action finally got me investing on the long side in the past 2 weeks… and with last Tuesday’s follow-through of the NASDAQ and S&P, the market is now coming after a few high octane names. All this action is occurring while the news media reports we are already in a depression. Funny, some of these media outlets were negative when we had a 5% GDP quarter. Agendas anyone? Take your time and don’t try to be a hero. If this is for real, plenty more leadership will show up. If it is not, we will know it as distribution will show up. I make no prediction of which way things play out but will react to how things start to play out. Remember, bear markets have certain characteristics… just like bull markets.

I am incessantly asked how the market can rally in the face of more bad news like the job’s reports. Simple… and I will say it loud and clear for the umpteenth time. Markets lead the economy. The economy does not lead the market. FINANCIALS and REAL ESTATE topped out way in advance of any bad news.

The same occurred for RETAIL, SEMIS and the rest of the nausea we have seen over the past months. Does the recent action mean things will be better in a few months? Maybe- just remember in bear markets, intermediate-term rallies do occur. I remember several during the 2000-2003 carnage. But the bottom line is that I do not look past my headlights… and that is the evidence that is NOW at hand… not the evidence that may show up later.

After another futures-induced push out of the gate, things around bouncing around a bit this morning, but keeping that slight positive bias. Indices are holding onto slight gains, and A/D lines remain in the green as well. Some of the same old groups are leading the winners column: steel and metals, oil services, gold and silver, commodities, brokers, natural gas, homebuilders and banks. The networkers, utilities and retailers are dragging back near the UNCH line.

Treasuries are lower, yields higher. Energy prices are higher, the dollar index is slightly higher, with gold and silver higher as well.

Very little - so MarketWatch stretches to find “reasons” for the Dow futures being up 80 points:

“Bullish open beckons for Wall Street, playing in part off the latest Yahoo-Microsoft maneuverings. Washington Mutual looks on the verge of getting a $5 billion injection. Alcoa reports after the close.”