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.

	For the life of me, I will never understand this. The airlines are getting killed by higher oil prices…
	…but the rest of the Transports are rockin’ and rollin’.

A few of the hot stocks got rocked today, and might be starting to wobble just a bit:

Charts courtesy of StockCharts.com

Hmm. Another one of those days - where if you weren’t watching how it happened, you don’t get much of a sense for what really did happen.

The market started out strong, taking the usual suspects higher, and pushing the Transports to new all-time highs despite $125+ oil. But shortly after lunch, the bottom started to fall out, and the indices found themselves in the red with a half-hour to go. Then a few angels showed up, and pushed the Dow and S&P back into the green.

The Dow had been up 150 points, finishing up 41. The Nasdaq had been up 23, finished down 12:

In Treasury-land, yields were just slightly lower
6-month: 1.90%    2-yr: 2.39%    5-yr: 3.08%    10-yr: 3.82%    30-yr: 4.56%.

Internals fell along with stock prices, and finished mostly in the red. Volume was right around the levels we’ve been seeing, and didn’t catch up to Friday’s expiration levels. Advances/declines were 9 to 10 on the NYSE and 8 to 11 on the Nasdaq, with up/down volume just above flat on the NYSE but 2 to 3 on the Nasdaq. The Nasdaq almost got to the flat line in the new highs/lows game, but no cigar. Highs/lows were 162/14 on the NYSE but 62/64 on the Nasdaq.

The group picture turned around as the market turned, leaving only the utilities (+1.2%) and paper stocks (+1.1%) with healthy gains, while airlines (-3.0%), disk drives (-1.6%), chemicals (-1.5%), homebuilders (-1.4%), brokers (-1.3%) and networkers (-1.2%) led the losers.

Energy prices remain at very lofty levels. Crude closed the day at $127.05/barrel and gasoline at $3.24/gallon. Natural gas has backed off slightly, to $10.95/mmBTU. The dollar index bounced a bit after taking a beating on Friday, and stands at 73.04. Gold and silver held their ground, gold at $905/ounce and silver at $16.98/ounce.

BMB Note:   Ordinarily, I’d say that today’s action marked some sort of a top, but we’ve seen a few of these reversals lately, and none have stuck. There may be a bit of a difference today in that some of the leading stocks made big reversals, and we’re starting to see potential tops forming in a few. We’ll wait to see how that develops.

The energy leaders held up fairly well during the selling, but most of those are too extended to be buying here anyway.

We’ll have to see if today’s reversal turns into anything more. Volume still wasn’t heavy, so I’m not totally convinced that the bulls won’t try to make another run at it before this is all over.

Here’s Gary Kaltbaum’s latest look at market conditions:

26-year low in consumer confidence, talk of depression, housing continuing to plunge, oil at 127, commodities soaring… the list goes on and on about what is wrong. But the market continues to edge higher in the past couple of weeks. There has been improvement in some of the worst areas like the SEMIS while the strongest areas I have mentioned often, have continued higher… some straight up. In fact, OILS, STEEL, METALS, MINING, COAL have gone nuts. You must remember, these were the first groups to break out when the market turned. I have taught you throughout the years that what holds up best in the bear… and breaks out first, usually leads - and once again, that is the case.

I am hearing all kinds of worries for the short term. I am hearing that there has been massive call buying by the wrong way crowd. I am hearing we are seeing too much speculation already. I am hearing bullishness has picked up. I am hearing volume has been light all the way up. I care and don’t care about all this. What matters to me is whether things are working… and if there is one group working, I am good with it.

We are now seeing SOLARS, SHIPPERS and now even some left-for-dead big cap tech like QUALCOMM (QCOM) moving out. I am not so sure this is a bad thing. I am also seeing leaders like Baidu.com (BIDU), MasterCard (MA), Deckers Outdoor Corporation (DECK) and other growth names setting up in light volume tight bases. These are the types of patterns I love… of course, they have to move up out of these patterns to buy them. But usually when you get these set ups, they work.

While we have not seen heavy volume in the market when it has moved up, we have not seen heavy selling when it moves down. Until I see the type of distribution I saw to get you out back in October, I am going to continue to play the good set ups. Let this all be a lesson to you that markets can move up on bad news. That is the definition of a better market. Bad markets leave bread crumbs on their trail. Until I see those markings (and as I said last time, that would be more than just one bad day) you should continue to have your eyes out on the long side. As always, if things change, you will know it.

Pretty much the same ol’, same ol’, at least for now. A mild nudge higher in the indices, led by oils, steel, coal, and transports. A/D lines are in the green, but barely so on the Nasdaq. Leading the groups up are the paper stocks, metals, transports, steel and semiconductors. The homebuilders lead a short list of losers.

Treasuries are fairly flat. The dollar index has gotten a morning boost after a slight dip overnight. Energy prices are flat to slightly higher, gold and silver are higher.

Deron Wagner is watching the indices’ behavior here around the 200-day MA:

Now that the S&P and Dow have come this far, we could at least expect an intraday probe above their 200-day MAs. Whether or not they manage to close above their 200-day MAs is another story. Rarely will a breakout above the 200-day MA be successful on the first attempt. Rather, it’s common for indexes, stocks, and ETFs to close above their 200-day MAs for one or two days, attract the “late to the party” bulls, then fall back down a few sessions later. There’s a greater chance a breakout above the 200-day MA will “stick” on successive attempts. As such, it will be interesting to see the outcome of the Dow’s second test of its 200-day MA this month. Stay alert this week, as a confirmed breakout above the 200-day MAs could trigger substantial short covering in the market. Conversely, an inability of the S&P and Dow to bust through their 200-day MAs could quickly lead to substantial selling pressure. It’s time for the benchmark S&P 500 and Dow Jones Industrial Average to “make it or break it!”

Creative financing knows no limits.

From Andrew Jeffery:

The only thing more insatiable than American consumers’ desire for more credit is lenders’ ability to dream up new ways to extend it.

Online auctioneer eBay (EBAY) is teaming up with GE Money (GE) to offer instant credit access to customers using its PayPal payment solution. According to Dow Jones, GE Money CEO Margaret Keane said, “eBay buyers will find deferred payments to be an extremely easy way to buy what they really want now and plan their payments in a way that best fits their budgets.” Where exactly these new purchases will fit into those overstretched budgets isn’t entirely clear.

In a nod to personal responsibility, eBay expects the new program will encourage buyers to bid on items they otherwise couldn’t afford. The company said credit approval can happen in as little as 30 seconds and should lead to “increased sales and higher selling prices.” GE will reportedly retain the risk if payments aren’t made.

eBay isn’t the only retail company getting in on the credit extension act. Retailers like Macy’s (M), Kohls (KSS) and Gap (GPS) all offer their own credit cards to facilitate more shopping. But recently, as consumers have struggled to keep up with monthly payments, these once-profitable lending units have been jettisoned. JP Morgan (JPM) now owns Kohls’ and Circuit City’s (CC) card businesses. Just last week the bank made a deal to buy a piece of Target’s (TGT) floundering credit division.

Although the move may boost eBay’s sales, it won’t help America’s debt-dependent economy move toward more sustainable levels of consumption. Having tapped out home equity lines, credit cards and to some degree retirement accounts, consumers now have another way to spend money they don’t have.

I wonder if this was the Fed’s idea…