Bear Mountain Bull

Maybe the reason why there hasn’t been a great deal of panic in the market yet is because no one has even noticed that things are sliding…

From today’s Five Things:

2. The Stealth Bear Market

This barrage of economic non sequiturs has left us immune to any real measure of financial disaster beyond the amount of cash and coin in our pockets. We no longer even notice this process. We accept it and move on. That’s one reason financial disasters seem to skate along public consciousness generating only a vague sense of dumbfounded awareness; it’s a stealth bear market.

The New York Times tried to spell it out over the weekend - “Battered by Oil, Dow Touches Bear Territory” - but who can be bothered to pay attention to such things when there’s wine to be drunk and bill collectors at the door? What does it mean?

What we know is that through Friday the Dow Jones Industrial Average was down 20% from the October peak. But, really, it’s worse than that. The average stock in the Dow is off nearly 30%,  and some, like  American International Group (AIG) and Citigroup (C), are down more than 50%. Few on Main Street have noticed this, or even care anymore, mostly because they’re busy pawning jewelery to buy gas and groceries.

And then there’s this on the much-talked-about ‘housing help’ bill - which won’t be all that much ‘help’, when it comes right down to it:

4. Magnitude of Crisis Dwarfs Homeowner Rescue Bill 

As a native Kentuckian, there are two things I know with a deep cultural and regional certainty: the last race on the card at the track is called “The Widowmaker” for a reason, and, never offer up double-or-nothing to a reckless risk freak. I was reminded of these general principles when reading about the mortgage relief program slowly working its way through Congress.  

Gambling principles aside, the sad truth about this that proposal is it will only help some 400,000 borrowers. Meanwhile, more than 3,000,000 borrowers are in distress. Incredibly, as the New York Times noted this weekend (”As Bill Evolves, Mortgage Debt Is Snowballing“), there were 2,600,000 loans in trouble when Congress first began considering the issue. So essentially, by helping just 400,000 people, we’re right back where we started.

Some of those ‘defensive’ tech names are looking mighty toppy these days:

Charts courtesy of StockCharts.com

If that’s their idea of a ‘bounce’…they’re going to need some more air in that ball.

After a bit of a morning dip, the bulls tried to put together a little morning run, but that didn’t hold either. Things wandered around much of the day, leaving the indices mixed, but the market internals revealed some continued market weakness:

Treasuries showed little change:
6-month: 2.11%    2-yr: 2.61%    5-yr: 3.32%    10-yr: 3.96%    30-yr: 4.51%.

Internals stayed weak, with volume at or above last week’s levels - with the exception of Friday’s big rebalancing jump. Advances/declines were 2 to 3 on the NYSE and 10 to 19 on the Nasdaq, with up/down volume 4 to 5 on the NYSE and 3 to 11 on the Nasdaq. Though the big indices held up, there were still a pile of new lows: highs/lows were 52/402 on the NYSE and 25/367 on the Nasdaq.

The groups were split, with fewer big winners than losers by the end of the day. Leading the green team were the utilities (+2.5%), telecoms (+2.1%), natural gas stocks (+1.9%), oil stocks (+1.8%) and drug stocks (+1.3%). On the red side of the fence, we find the homebuilders (-4.8%), disk drives (-2.5%), computer hardware (-2.3%), brokers (-2.1%), banks (-1.9%), retail (-1.9%) and insurance (-1.6%).

Energy prices were mixed, as crude and gasoline settled down - crude slipped a few cents to $140.00/barrel, and gasoline dropped about a penny to $3.49/gallon - but natural gas scooted up some 18 cents to $13.38/mmBTU. The dollar index bounced back a bit, to 72.53. Gold lost only a buck to $926/ounce and silver gave up 12 cents to $17.40/ounce.

BMB Note:   Not much to talk about today, as things didn’t move a heck of a lot - and the day ended up being a bit worse than it looked like it might this morning. Those traders gearing up for a big bounce are still waiting. Some of the indices managed to finish in the green, and the groups were split, but the Nasdaq dragged all day, and we had more quite a few more losers than winners. Not a great tonic for improved market health.

From my view, even if we get some sort of a ‘big’ bounce, it isn’t likely to last. Unless something changes, I’ll stick with my short positions, and maybe even consider adding a bit, depending on the nature of whatever bounce we see - if we see it.

BMWife here. As most of you know, I’m a big fan of technology. When it comes to oil problems I’m a big believer that the way out of it is going to be technology–not price controls, not government anything, not even conservation ultimately. I often wonder why Oil Countries aren’t spending their windfall earnings now to educate their people and to develop ultra-cool technological wonders. There are a lot of good things to be done with technology–here’s one being talked about–possible help with cancer.

Bennet Sedacca, as he sees more and more financial institutions attempting to raise capital, and looks for the time when the deals just don’t fly anymore:

In short, I’m on the lookout for a wave of deals that are floated and that do not get completed. I believe that Stage 2 of the Credit Crisis is upon us and is being triggered by the market waking up and realizing that many of the largest financial concerns are insolvent and will either a) merge into some other entity at a huge discount to current prices, b) dilute current equity holders to the point that earnings wil disapear altogether or c) simply go away.

Frankly, I don’t think the Fed really wants them to all go under. Under a free market (with no government intervention), they would face bankruptcy or take-unders because they imprudently sold bonds to investors, were reckless with their own capital and had no concern for their clients. But I imagine the Fed doesn’t want this to happen and we will see a bit of a, b and c. One thing is for sure, it will not be pretty. I remain cautious and believe risks remain as high as ever.

To drive the point home a bit further, it is no coinidence that these firms have 1) written off the most capital 2) laid off the most workers, and 3) have the greatest amount of Level 3 assets. None of this inspires confidence.

In summary, I do not see a way out for many of them. The case in point was when Lehman told the market that it didn’t need to take write-downs and didn’t need to raise equity. The week after this announcement it fired its CFO and raised capital it said it didn’t need, in order to pay for write-downs it said it didn’t have. It shows the company’s inability to assess risk.

I really wonder why firms should get bailed out for that sort of behavior or be allowed to go to the Fed Discount Window. They should be allowed to fail. Period.

So far this morning, it looks as though those who have been gearing up for a market bounce are going to have to wait just a bit longer, The indices have slipped into the red as have the A/D lines, and we’ve already seen more than 400 new lows this morning. Among those new lows is GM stock, now trading in the $10 range, the lowest since 1954 according to CNBC.

There are a few winners in the groups, led by steel stocks, natural gas, oil stocks, oil services, metals and gold and silver - commodities. Leading the losers are many of the usual suspects: airlines, homebuilders, banks, disk drives, transportation and retail

Treasuries are mixed, with yields up slightly on the short end and down a little on the long end. Energy prices are higher, with crude having moved to a new record above $143 overnight, now trading just above $142. The dollar index bounced a bit this morning after a little overnight slippage. Gold and silver are slightly higher.

Via The Big Picture:

“In the average bear market, the Dow Jones Industrial Average has fallen 30% and sometimes much, much more. The Dow decline of 2000 through 2003 involved a loss of 55%, the bear of ‘73-’74 caused a 50% loss and the 1929 market wiped out a full 85% of the Dow’s value.”

“We think we’re still quite a ways from a bottom. Over the next year, the Dow could fall 30% to 50% from its October ‘07 top. The market could enjoy a few short-lived rallies during that span, like the one we experienced from March through May. But each rally is apt to result in a lower high and a lower low in the market.”

-Paul Desmond, Lowry Research, quoted in Barrron’s

Time will tell.

Notes on the latest moves in the industry groups:

• That ’smattering’ of groups above the 50-day (red line) has gotten even smaller, but the gold and silver stocks became new entries to that elite club this week.
• Groups at new six-month lows include the banks, paper, health care, insurance, housing, retail and airlines.
• Many of the tech groups are rolling over, but they are not alone - you can add in the REITs, defense and brokers, maybe even the chemicals and oil stocks.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page., or the Industry Group Tracker at WSJ Online.

Time for another ‘Faber fix’ for you fans out there.

The Federal Reserve should let the big investment banks go bust if they made unwise investment decisions, and investors should take refuge in gold, because the central bank has been “misleading” the markets, Marc Faber, editor and publisher of “The Gloom, Boom & Doom Report,” told “Worldwide Exchange.”

Fears that another major investment bank may get into trouble have hammered stocks recently but some analysts have said the major Wall Street banks were safe as the Fed cannot afford to let them fail.

“I think there’s a good chance that the Fed itself will fail one day if they say ‘We’re not going to let you fail,’ and the government will have to bail out the entire system,” Faber said.

“If I’m a bad businessman and I go out of business, who’s gong to help me?” he said. “But Bear Stearns and the Wall Street elite, because they are tied into the Treasury and the Federal Reserve and they have lunch together, it’s a club and so forth, they’re bailed out. It’s a joke!”

And you thought only the US was up to its eyeballs in debt:

British households are now more indebted than those of any other major country in recorded history, it has emerged.

Families in the UK now owe a record 173pc of their incomes in debts, official figures have shown. The ratio of debt to income is higher than any other country in the Group of Seven leading industrialised economies, and is sharply higher than the 129pc of incomes it was five years ago.

The figures, published by the Office for National Statistics as part of its National Accounts, underline the scale of the coming slowdown facing the UK, economists warned yesterday.

Michael Saunders of Citigroup warned that - at 173pc of household incomes - the debt burden is higher even than Japan’s when it peaked in 1990, before more than a decade of deflation.

“Not only are we the highest in the G7, we are the highest a G7 country has ever seen,” he said.

Thanks to Calculated Risk for the pointer.

Energy stocks stand alone above the 50-day (red line), but the XLE hasn’t moved much in the past month:

Materials, Tech, Staples and Utilities are starting to roll over:

Industrials and Discretionaries are falling off a cliff:

Financials and Health Care went over the cliff a long time ago:

Here are the numbers as the indices continue to break down:

Charts courtesy of StockCharts.com

This one was just too good to pass up - thanks Mish:

Looking at these charts and those of the rest of the Dow components, it’s pretty easy to see why the Dow is hitting new lows:

Charts courtesy of StockCharts.com

I think they could’ve just skipped that one.

A bit of a selloff after lunch was quickly bought back up, leaving the indices to flounder the rest of the day, wandering back and forth into the close.

The Transports managed to squeak out a small gain, and Naz-100 finished flat - the rest were red, with the Dow the worst again:

Treasuries rallied again as the ’scared’ money runs back into bonds, pulling yields back further:
6-month: 2.06%    2-yr: 2.64%    5-yr: 3.35%    10-yr: 3.97%    30-yr: 4.52%.

Internals stayed on the negative side. On an interesting note - volume looks like it went off the charts right at the close - closing out the books on the first half of the year?? Not sure what that was all about. Anyway, advances/declines were 3 to 5 on the NYSE and 2 to 3 on the Nasdaq, with up/down volume about 2 to 3 on both exchanges. The new highs/lows situation didn’t improve at all, coming in at 30/423 on the NYSE and 14/345 on the Nasdaq.

The groups got back some green, but the bigger winners were all from the commodity side of the fence: gold and silver stocks (+3.4%), metals and mining (+2.6%), steel stocks (+1.6%), natural gas stocks (+1.2%) and oil services (+1.0%). The losers were led by techs and financials: disk drives (-2.5%), computer hardware (-1.6%), banks (-1.5%), insurance (-1.2%) and brokers (-1.1%).

Energy prices looked like they might take off as crude jumped above $142 overnight, but things calmed down a bit, and oil finished just slightly higher at $140.21/barrel. Gasoline was flat at $3.50/gallon and natural gas edged up a few cents to $13.20/mmBTU. The dollar index slipped a few more notches to 72.30. Gold and silver added to yesterday’s big gains, with spot gold up 10 bucks to $927/ounce and silver adding another 34 cents to $17.52/ounce.

BMB Note:   Nothing’s changed. Indices mixed around the flat line, advance/decline lines in the red, only 44 new highs on the day compared to 770 new lows - and the VIX went down. This doesn’t look like a panic or ‘capitulation’ to me.

The commodity areas keep hanging around their highs, bouncing back a bit today, and are still holding up fairly well. Gold and silver followed through on their big gains of yesterday - now that the shorts have been squeezed, can the PMs hold up for a change?

Shortened holiday week next week. Hard to say what that will mean, if anything. Certainly, we’ve got oversold conditions, and we’re ripe for a bit of a bounce - but we’ve said that a lot lately. But at this point, it looks like any bounce will be nothing but that - a bounce - and it still looks like there’s a good chance things will head lower before hitting that ‘panic low’ that we’re looking for. McMillan said it pretty well this morning in his final paragraph:

…the bulls are worried but still bottom fishing. They need to capitulate before this market can bottom. At this point, there is nothing bullish except a deeply oversold condition. No true buy signals exist. Usually, the first one to fall in line is a spike peak in $VIX, but we don’t appear to be close to that happening at all. So, traders can take partial profits on long puts and can roll down to protect profits, but short positions should continue to be maintained until actual buy signals occur.

Until then, you know where we stand. Maybe you can take Gary’s advice, and just go to Hawaii.

Gary Kaltbaum isn’t thrilled with the Fed, nor with the recent market action - and we all know why.

His solution? Go to Hawaii - sounds good to me:

Well, if there was ever a week to be in Hawaii, this is it.

George Carlin was one of my 2 favorite comedians… the other being Rodney Dangerfield. George Carlin would rail against all the supposed smart people who turned out to be nothing more than a title and an empty head. With that thought in mind, I present to you the notes out of the Fed. George Carlin would have a great laugh as the Fed said nothing… took both sides of every issue and was uncertain about everything. Please recall, this is a Fed that told us for 2 years that housing was not a problem… subprime was not an issue… and to this day, says inflation is anchored and while energy and food is higher… dont worry because it will get better. The seven words you could not say on television should be yelled out whenever the Fed says anything. They are good at one thing… reporting the news after it already happened and always too late to do anything about. Oh yeah, and the other goof was out yesterday saying it was better than 50-50 we are going into recession…hey thanks! So here you go… Einstein couldn’t even decipher the following message:

“The Federal Open Market Committee decided today to keep its target for the Federal funds rate at 2 percent. Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters. The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high. The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.”

As you know, I believe the market is smarter than everyone. During the whole 2-month bounce off the lows, I took pains to make sure you knew the permabulls did not have a clue as everything consumer refused to rally and leadership was narrow with commodities and some big cap nasdaq-typed leading. That kind of narrow leadership almost always leads to lower prices…and you are now seeing it. The stock market, not only ours but all over the globe, is imploding as a major slowdown in economic growth and a good dousing of inflation is always a negative for equities. So…let’s go over some things I have been saying …to make sure you stay in gear.

First off, and most importantly, bear markets take things down farther than anyone can fathom. Typically the groups that led down - continue to lead down. That means FINANCIALS of all kinds as well as HOUSING. I have battled many over the past few months accusing me of being nuts when I went on TV to say there is nothing in the rulebook that says a CITIPUKE cannot go single digits or that many names would go under. Not many are battling me anymore. This same thing happened in the technology bear of 2000 as names like Lucent and Worldcom and others were destroyed. No one would ever believe Lucent would go to $2 or Worldcom would go bust. Continue to ignore the calls of cheap “value” or “oversold” by people who just don’t get it. Many of these financials made up their numbers because no one was watching. They lived in their own universe where no one could tell them what to do. They had financials where the footnotes were twice as large as the financial statements… where Lehman (LEH) can move a decimal or a product off the balance sheet at any time to make things look better, a world where they lobbied the FASB to come up with new rules so that they could just make up revenues and earnings. Very simply, there are not enough jail cells for all these people down the food chain at these companies. These are not business titans. These people are creeps… and they are doing a great job of destroying all trust and credibility in the financial markets.

As far as the rest of the market, the bear areas I have been telling you about continue to melt down and including anything consumer, such as AUTOS, AIRLINES, CRUISE LINES, GAMING, HOTELS, HOUSING, LENDERS, as well as anything RETAIL… well, you get the hint. Also of note:

I have been telling you the NASDAQ/NDX was being held up by a select few names and if they came down, then look out. Well… Research in Motion (RIMM), Apple (AAPL), Baidu.com (BIDU), Google (GOOG) and the like are now rolling over badly… meaning good night to the NASDAQ/NDX. Speaking of this, I have been beside myself as to how many people have been saying to buy tech because it was defensive.

I have also been telling you the DOW was the big laggard lately. The DOW has already broken into bear market lows…not good. Bottom line, when airlines fire pilots and cancel flights, there is no reason to buy more airplanes… so Boeing (BA) gets crushed… so United Technologies (UTX) gets crushed. American Express (AXP), American International Group (AIG), Bank of America (BAC), Citibank (C), JP Morgan (JPM)… does not help these 5 financials are in the DOW…you get the hint.

Other stuff:

GOLDMAN puts a SELL on CITI and General Motors (GM). Hey thanks. They watch CITI go from $57 to $18 and GM from $43 to $11 and then they say to sell. Yup… that’s why they get the big bucks.

Meredith Whitney… banking analyst for Oppenheimer (OPY)… should get the call of the decade. I still remember her initial bearish call on the financials and how so many other analysts stood up to blast her and to defend their prized companies. Nothing but kudos to her.

Many are calling for the Fed to raise rates in order to fight inflation. Everyone needs to know that the Fed cannot do anything to fend off inflation. Once inflation is in the system, it is like that movie…”The Blob!”

Bottom line… go to Hawaii. I have been in cash…and am staying in cash. I believe there is a real lack of trust and credibility in the people that should count the most… and looking forward, one has to worry about earnings as the double wallop of higher prices and lower spending will eat into earnings… and in case you dont know, when it is all said and done, it always comes back to earnings.

The only thing I have interest in is some of the commodity areas I have previously mentioned but only on pullbacks… as well as shorting into any bounces. Average bear markets take major indices down 25-30%… you add it up.

Heading to Maui this weekend. Wish you were here.

A bit of a negative bias to start this Friday, as the indices straddle the flat line, but A/D lines are hanging in the red for the time being. The groups are split, with the commodity areas holding up the best: gold and silver, steel, metals, natural gas, oil and oil services. Moving lower are the disk drives, computer hardware, airlines, homebuilders and networkers.

Treasuries are higher, yields lower. Energy prices are slightly higher, with crude pulling from its overnight jaunt above $142. The dollar index is just slightly lower, gold and silver are higher.

We’re not surprised to see that Larry McMillan’s indicators have yet to turn bullish - and he believes there is “more to come” on the downside. Click here to view column with charts:

Selling has continued on most days since the May top. However, many of the technical indicators don’t seem to be at extremely oversold levels, which indicates that there is more to come on the downside.

$SPX has resistance at 1370, and also at 1330-1335. There is support at 1270, which is both the January and March bottoms. That certainly seems destined to be tested, as $SPX closed at 1283 today. We don’t really expect the 1270 level to provide more than token support, unless the technical indicators manage to turn positive coincident with $SPX testing that level.

The equity-only put-call ratios remain on sell signals. They continue to rise as the market falls, which means they remain bearish. They will continue to be bearish until they roll over and begin to trend downward. That “roll over” can occur at any level on the chart, although after a decline this steep, we’d expect to see the put-call ratios probe their highest levels. However, they are not near the highs of their charts, so it appears there is more selling to come.

Market breadth has been abysmal, and has fallen into deeply oversold territory. Even though these very negative breadth readings might be able to spur a counter- trend rally, we would not cover shorts until buy signals are seen from the other indicators.

Volatility indices ($VIX and $VXO) have been laggards. The bottom line is that we expect to see $VIX spike up above 30 and peak before a true capitulation buy signal is registered for this move. Meanwhile, $VIX remains in an uptrend, despite a probe downward during the FOMC-generated rally on Wednesday. As long as $VIX is trending higher, that is bearish for the broad market.

In summary, the bulls are worried but still bottom fishing. They need to capitulate before this market can bottom. At this point, there is nothing bullish except a deeply oversold condition. No true buy signals exist. Usually, the first one to fall in line is a spike peak in $VIX, but we don’t appear to be close to that happening at all. So, traders can take partial profits on long puts and can roll down to protect profits, but short positions should continue to be maintained until actual buy signals occur.

If you’re new to the trading world - or even if you’re not - here’s some solid advice from Dave Landry. This is just the beginning - make sure you read the whole thing:

I don’t have any medical training whatsoever but I think tomorrow I’m going to be a surgeon. I’ll pick up some knives tonight and open an office in the morning.

Obviously, no one would ever attempt this (even if there weren’t laws in place to stop you). However, in trading, this happens all the time. The barrier to entry is very low. All you need is a computer and a trading account. That’s it! Now you’re a “trader!” Well, obviously, it’s a little more complicated than that. My point is, even though it’s easy to become a “trader”, it must be approached like any other profession. You’ll need education and more importantly, you’ll need experience.

Getting started:

You’ll need a methodology

Keep it simple

In spite of numerous claims, NO ONE knows exactly what a market will do next. It’s an odds game at best. Simple methods can and do work—but NO methods work ALL of the time.

I follow a fairly simple trend following methodology. It works very well when the market is trending and not so well when it’s not. This doesn’t mean its right for you. It’s just what works best for me after years of “chasing rainbows.” This brings us to our next point.

Study It

Study methods historically. Make sure you look at them in both good times and bad. I’m often approached by those who have discovered a “new methodology.” They’ll send me countless examples of how well it would have worked based on historical charts. However, when they go to implement it in the real world, they often lose money. Why? Assuming they are disciplined and using proper money management, it’s possible that they failed to observe all the times the methodology did not work. The historical big winners tended to “jump out” at them but the multiple small losing trades went un-noticed.

Make sure you can implement it

Once you do find something, make sure you can implement it. If you have a busy career, don’t attempt to day trade.

If you’re smart, I have some bad news

If you’re an Engineer, a Lawyer, a Doctor, or any other highly educated or skilled professional, I have some bad news: It’s going to take a little longer. Your profession was likely approached with a high degree of logic. Therefore, you’ll probably assume that markets are no different. However, often there is no logic. Markets trade off the emotions of the participants.

You’ll Need To Understand Psychology

Know yourself

The battle is often from within. Finding a methodology is (fairly) easy. Having the discipline to implement it is not. Once your money is “on the line” things become much more stressful. If a trade isn’t working out right away, you might be inclined to “pull the plug.” You then watch in agony as the market takes off without you. On the flip side, you might be inclined to stay with a losing position long after your methodology would have exited. You’ll then watch in agony as your losses grow and grow.

It’s beyond the scope of this article to cover all the psychological pitfalls you’ll face as a trader. Therefore, make sure you study trader’s psychology as hard as you study your charts.

Don’t forget to check out Dave’s daily “Market In A Minute” (produced every market morning) and weekly “The Week in Charts” video presentations, the links to which can be found on his website.

From today’s Five Things:

1. The Joke’s On Us. Also, the Tab.

You know that plan awaiting action in the Senate to help ease the foreclosure crisis and how it’s not really a bailout of banks? It turns out it’s really a bailout of banks, which makes sense considering it was actually proposed by banks. 

The Washington Post today takes a look at the mechanics of the proposal, first suggested by Credit Suisse (CS), which will essentially allow hundreds of thousands of homeowners to refinance their mortgages with lower-cost government-backed loans, very conveniently relieving the banks of the impaired debt. Bank of America (BAC) soon got in on the act with a more elaborate proposal of their own.

According to the Post article, lobbyists for the banks suggested banks take less than full payment for the distressed loans but, importantly, be allowed to take cash out of foreclosed properties that would otherwise sit on their books. “Since the new loans would be guaranteed by the Federal Housing Administration (FHA), taxpayers would ultimately pay for defaults,” the Post notes. The price tag, according to the Congressional Budget Office? $1.7 billion over five years.

“The alternative to having the banks as participants was a massive federal bailout,” House Financial Services Committee Chairman Rep. Barney Frank told the newspaper. “They [the banks] benefit, but they benefit by losing less.”

Here’s a link to the Washington Post column, if you’re interested.

	The big news of the day has to be the Dow’s taking out of - and closing below - both the January and March lows.
	That puts the Dow back where it was in the fall of ‘06, giving up about 21 months worth of gains, and putting in one heck of a top in the process.

The rest of the major indices haven’t yet taken out their spring lows, but they’re all rolling over pretty badly:

Gold and silver had strong days today, but have yet to really break free from their 3-month consolidation:

Charts courtesy of StockCharts.com

Well. That was pretty Nasty. With a capital ‘N’. Of course, we’re not all that shocked - we figured we’d see a day like this sooner or later. And we wouldn’t be all that surprised to see a few more like this.

Not too many places to hide today. Stocks were a wipeout, and about the only commodity stocks that fared well were the precious metals stocks. Even with new highs in oil today, the energy stocks still came under some pressure. And those tech stocks? How ’bout the Nasdaq 100 down more than 4 percent…?

In the indices, there was nothing but yuk from the word ‘go’:

Treasuries rallied and yields came down, but much more so on the short end than on the long end:
6-month: 2.10%    2-yr: 2.68%    5-yr: 3.42%    10-yr: 4.05%    30-yr: 4.61%.

Internals like everything else, were pretty ugly, and volume picked up over yesterday’s Fed-day action. Advances/declines were 1 to 6 on the NYSE and 4 to 15 on the Nasdaq, with up/down volume 1 to 9 on the NYSE and 1 to 8 on the Nasdaq. There were a whopping 21 new highs against more than 600 new lows: highs/lows were 11/338 on the NYSE and 10/294 on the Nasdaq.

The groups were big and red - except for the gold and silver stocks (4.4%), which posted a nice gain. Everything else fell on the other side of the fence, and most of them fell hard: homebuilders (-5.9%), airlines (-4.8%), semiconductors (-4.5%), brokers (-4.2%), banks (-3.9%), networking (-3.9%), disk drives (-3.9%), REITs (-3.8%), internets (-3.8%), computer hardware (-3.6%), paper (-3.6%), steel (-3.6%), chemicals (-3.6%), computer tech (-3.6%) and retail (-3.5%) - and there were plenty more where those came from.

Energy prices didn’t help matters any, as they zoomed right back up. Oil touched $140, closing at $139.64/barrel, up more than 5 bucks on the day. Gasoline jumped back up to $3.51/gallon and natural gas moved right back up to $13.13/mmBTU. The dollar index took another tumble, down to 72.49. The precious metals jumped out of their recent funk, with spot gold moving up by 32 bucks to $917/ounce and silver adding 45 cents to $17.18/ounce.

BMB Note:   The bad news is that the market crapped out big-time today - the good news is that we’ve pretty much seen it coming for a while now. Hope you’ve been playing along at home.

Stocks obviously got wiped out, from soup to nuts. The gold and silver stocks were about the only exceptions, getting a boost from a big rebound in gold and silver. Now those of us that have been watching and edging back into the precious metals can hope that, this time, some of this move can hold - and that the PMs won’t just get whacked right back down again. Of course, the PM stocks have been holding up fairly well the past few days - maybe that’s a good sign. It’s been a rocky road for the precious metals these last few months. Other commodities also did well, oil touched new highs, and some of the currencies look like they’re perking up too - is another dollar slide around the corner, or is the greenback just giving back the recent ‘Bernanke bump’?

Despite the move below both the Jan. and March lows for the Dow, and rollovers in progress on all the indices and in most groups, we still don’t see the VIX moving up above the levels of a couple of weeks ago, let alone spiking up as it did at both the January and March spike lows in stocks. I have a feeling there is likely more to go on the downside for stocks before we reach some sort of intermediate-term low. Obviously, since we didn’t get all that much of a bounce and then got whacked big today, things are still oversold. But as we can see from today’s action - oversold can become more oversold.

Needless to say, our position hasn’t changed - stay short or stay away. And keep that hard hat on.

More like late-day market at this point. We’d been pointing how the various areas of the market were getting weaker and weaker, and more groups were breaking down - we figured we’d see a day like this sooner or later.

Pretty ugly - hope you’ve been able to stay out of the way.

As always, for the best charts in the business, we turn to Calculated Risk, who sounds just a bit frustrated with the NAR:

Note: for the 2nd month in a row, the NAR didn’t release the Existing Home sales data online in a timely manner.

The first graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in May 2008 (4.99 million SAAR) were the weakest May since 1998 (4.77 million SAAR).

It’s important to note that a large percentage of these sales are for homes that were foreclosed during the previous year. Dataquick reported that in California in May, 38.3 percent of all sales were foreclosure resales!

More later, as CR says, “when the raw data is available…” Check back here for that link…and here it is.

The Dow, on today’s dip to 11588, has now violated both the March lows of 11731 and the January lows of 11634.

The market’s fallen and it can’t get up. The indices are down more than a percent, and the Dow has punched through those March lows. A/D lines are deep in the red as well, and nearly all the groups are under water on the day so far. Leading the decline are the homebuilders, airlines, semiconductors, banks, internets, brokers and disk drives. Only a few groups are showing green, led by the gold and silver stocks and oil services.

Treasuries are higher, yields lower. Energy prices are mixed - crude and gasoline higher. The dollar index is lower, gold and silver are getting a decent pop higher.