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.

	The Russell has given back all of last Tuesday’s big gains. And like the other major indices, it has been turned back from yet another attempt to break out of the multi-month trading range.
	The semis gave back two days worth of gains, and are in danger of slipping back into the muck.
	The retailers also coughed up yesterday’s rally.
	The brokers just continue to leak lower. This doesn’t look good - it must be almost time for another Fed ‘invention’.
	The airlines are in a world of hurt.

Charts courtesy of StockCharts.com

We weren’t really expecting that, were we? Especially not after the market seemed to put in a pretty decent performance yesterday. Well, it just goes to show, as we said earlier today - you can’t get comfortable with this market.

A lousy day for stocks, that started off bad and just got worse. About the only good thing I can say is that volume backed off slightly from yesterday’s levels, but that’s not a great deal of consolation considering the numbers today. Only the Utilities were able to sidestep the damage:

As you might expect, Treasuries moved higher, and yields fell:
6-month: 1.39%    2-yr: 1.74%    5-yr: 2.56%    10-yr: 3.46%    30-yr: 4.29%.

Internals were downright ugly. And even though today ‘officially’ won’t be termed a ‘distribution day’ because volume was a bit lighter, it sure ‘felt’ like a distribution day to me - or worse. Advances/declines were 3 to 11 on the NYSe and 4 to 15 on the Nasdaq, with up/down volume a pitiful 1 to 9 on the NYSE and 1 to 6 on the Nasdaq. And you guessed it, plenty more new lows than new highs: highs/lows were 21/47 on the NYSE and 10/114 on the Nasdaq.

The groups were bathed in red, with the already weak airlines getting hammered again (-7.6%). They were followed down by the semiconductors (-3.4%), brokers (-2.9%), computer tech (-2.9%), disk drives (-2.8%), internets (-2.8%), software (-2.8%), computer hardware (-2.7%), steel stocks (-2.7%), gold and silver (-2.5%), metals (-2.5%), networkers (-2.5%), defense (-2.4%), paper (-2.2%), housing (-2.0%) and retail (-2.0%).

Energy prices just don’t want to back down very badly. Crude oil was near flat at $110.14/barrel and gasoline up another couple of cents to $2.80/gallon, but we did see natural gas slip a bit to $9.89/mmBTU. The dollar index dropped back to 71.82. Gold gave up just a few bucks to $925/ounce and silver slipped to $17.72/ounce.

BMB Note:   Well, that was pretty interesting. You can blame it all on GE if you’d like - it doesn’t really matter what the reason is, it wasn’t good.

There are certainly more earnings reports to come over the next couple of weeks, and let’s face it, the stock market is all about earnings. If today is any indication, and there are more GE-type disappointments on the way, then the market could have a pretty rough time of it.

No matter what, today’s action deals a serious blow to this recent rally up off the ‘Bear Stearns’ lows in March. The big gains of last Tuesday are almost wiped out at this point, so the market’s going to have to find a way to pick itself up, dust itself off, and start to put things back together if it’s really going to make a run to higher ground. But I wouldn’t start counting on it just yet.

The action of the last three days is a good example of why I haven’t been real eager to jump in and try to trade in these choppy waters. There are many sharks, both up and down, that can eat you alive if you try to get too cute in this environment. So I will continue to watch from the shore to see who’s winning and losing, and work from there.

A couple of notes on the groups: the retailers which had been sagging, but got a nice pop yesterday, sunk right back down today. The semis, which have been trying to dig out of their hole, got stomped as well. And the brokers continue to leak lower, and as we mentioned yesterday, the financials will continue to be key players as we move forward.

Continue to tread lightly, or just stay at home where it’s safe - cuz it’s a jungle out there.

Just in case you aren’t yet convinced that analysts are totally useless, how’s this for talking out both sides of your mouth?

From a story on the departure of AMD’s ‘tech chief’:

“Any time you have a cook leaving the restaurant, you get chaos,” said David Wu, an analyst at Global Crown Capital in San Francisco. He rates the stock “overweight” and doesn’t own any. “The top chef has gone, that’s not good.”

So, you’ve got ‘chaos’, and ‘that’s not good’, but he still rates the stock ‘overweight’. Yeah, thanks dude - make note of the fact the HE doesn’t own any. Not to mention that the stock has dropped from 42 to 6 in the past two years, and is showing absolutely no signs of life.

At any rate, don’t listen to these people.

The credit markets are still far from calm, as was mentioned here in comment #1 and in this post at Calculated Risk.

And the losses are still mounting, as evidenced by these consecutive posts at CR:

Japan’s Mizuho: $5.5 Billion in Losses

From Reuters: Japan’s Mizuho stung by $5.5 billion in subprime pain (hat tip learning james)

Japan’s Mizuho Financial Group Inc (8411.T) cut a third off its earnings estimate for the year just ended, stung by $5.5 billion in subprime-related losses, mostly at its brokerage arm.

The losses are everywhere - from Wall Street, to a small town in Norway, to banks in Japan.

Goldman Estimates WaMu Losses at up to $23 Billion

From Bloomberg: Washington Mutual Falls on Short Sale Recommendation

“Given WaMu’s disproportionate exposure to states” where home prices are forecast to decline, Goldman expects losses between $17 billion and $23 billion, the analysts wrote. Washington Mutual may have a $14 billion provision charge in 2008 …

Yes - a rare ’short sale’ recommendation - but what really got my attention was the loss estimate!

The market hasn’t had a great morning, with news out on rising import prices (big surprise there), falling consumer sentiment (another big surprise…) and poor earnings from GE. The indices have bounced up off their lowest levels, but are still down in the neighborhood of a percent. A/D lines are running about 3 to 7.

Airlines, steel stocks, paper stocks, oil services, defense and metals are leading the groups down, with the banks and utilities holding up the best.

Treasuries are higher, yields lower. Energy prices are slightly lower. The dollar index has dipped back down from yesterday’s ramp up, and gold and silver are also lower.

The market probably wasn’t real thrilled with this news this morning, either. But it’s ok, despite what appears to be a continual increase in prices, there’s no inflation:

A surge in prices for imported petroleum pushed prices of goods imported into the U.S. higher by 2.8% in March, the most since November 2007, the Labor Department reported Friday.

Imported petroleum prices jumped by 9.1% last month, marking the biggest such increase since rising 12.4% in November 2007.
On a year-over-year basis, the price of imported petroleum has risen by a whopping 60%.

The price of imported natural gas also surged, higher by 7.7% in March, after rising 9.9% in February.

The weekly technical take on the market from Larry McMillan - click here to view column with charts:

The strong upside breakout by the broad stock market on April 1 propelled $SPX (and other indices) to rally to resistance levels. That resistance has proven to be formidable, and the indices have fallen back from there. For $SPX, this resistance is the 1390-1400 area, while for the Dow, it is 12,800. Until that is overcome, there can be no new bull market.

Meanwhile, the budding uptrend in $SPX that began with the March lows, has matured into a series of higher highs and higher lows. As long as this remains intact, the chart of $SPX (FIg. 1) can be given a bullish interpretation. Something will have to give soon, though, for the resistance level and the uptrend are destined to meet shortly, at the current rate.

The equity-only put-call ratios remain on buy signals (Figs 2 & 3). They will do so as long as the ratios continue to decline on their charts. These are strong, intermediate-term buy signals from indicators with a stellar track record.

All of our indicators had been bullish to one degree or another for a couple of weeks now. However, the first set of sell signals has arisen from breadth — just this week. Last year, we wouldn’t have given much thought to a leading breadth signal, but in recent months, these signals have been strong and accurate. So, this indicates some caution should be observed now.

Finally, the volatility indices ($VIX and $VXO) continue to remain subdued. Both are still in downtrends, and that is bullish.

In summary, the indicators are mixed. The equity-only put-call ratios are clearly bullish, while the breadth is clearly negative, and $VIX is in a downtrend (bullish). Finally, even the $SPX chart itself has a conflict arising from bearish overhead resistance as measured against the tentatively bullish uptrend that has been in place since the March lows.

The biggest news at the moment looks to be the poor earnings report from GE. Futures are pointing lower, -131 on the Dow.

There’s just no getting comfortable with this market, is there?