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.

Gary Kaltbaum, on his radio show today:

“…it feels like the market is now selling off everything and just piling on top fertilizers, oils, miscellaneous steel and metals and commodities, and a few of those leading names out there. And I’m not sure that’s healthy - but I’ll be watching.”

	Investors still seem to be a bit on the complacent side. The VIX has slipped from above 24 to touching 20 in the last week-and-a-half…
	…even though the major averages have gone absolutely nowhere during that same time.

The REITs and the brokers posted outside reversals today:

It’s rather tough to call a direction in ‘the market’ these days, with the tape doing the big-time splits.
You’ve got your winners:

And you’ve got your losers:

Speaking of losers - this stock was 70 bucks a little over a year ago, and 35 just this past February. The market clearly believes that some of these banks/S&Ls are going under:

Charts courtesy of StockCharts.com

Well, that was a mish-mash of a day. Lots of things fell on both sides of the fence, leaving the indices somewhat in the middle with a lean to the bad side, as some late selling in some area took the internals down to their lowest levels of the day.

The Transports got the worst of it, while the Utilities held their head above the surf:

Treasuries edged higher, and brought yields down:
6-month: 2.26%    2-yr: 2.91%    5-yr: 3.64%    10-yr: 4.21%    30-yr: 4.78%.

Internals turned negative, but volume drifted lower for a third day. Advances/declines were 2 to 3 on the NYSE and 7 to 12 on the Nasdaq, with up/down volume 4 to 7 on the NYSE and 3 to 7 on the Nasdaq. New highs/lows still shaky on the Nasdaq - 89/78 on the NYSE but 47/110 on the Nasdaq.

The groups were widely split, with some big numbers in both columns - but bigger on the red side. Leading the winners were the natgas stocks (+2.4%), oil services (+1.9%), chemicals (+1.6%), oil stocks (+1.4%), airlines (+1.4%) and commodities (+1.2%). On the losing side were the banks (-3.7%), brokers (-3.4%), REITs (-3.2%), insurance (-2.4%), housing (-1.7%), retail (-1.6%) and semiconductors (-1.5%).

Energy prices were fairly quiet on the day, with crude finishing at $134.01/barrel, and gasoline down a penny to $3.42/gallon, and natural gas up a few 30 cents to $12.95/mmBTU. The dollar index fell just slightly to 73.50. Gold and silver recovered from an early dip to finish flat/slightly lower, with spot gold at $884/ounce and silver at $17.07/ounce.

BMB Note:   Hmm. That was kind of a messy one. Lotsa stuff rolling around, and in different directions.

On the upside, we’ve still got the various energies, coals and fertilizers, some of which appear to have entered into some blow-off type action. As for how far that goes and how long it lasts, I have no idea, but in many cases the risks are too high there, so I’d chosen long ago not to participate.

In most other areas, I believe the risk remains to the downside, and that’s why I’ve been focusing my attention on select positions on the short side. Many groups (and indices) looked to be just bouncing up into resistance over the past few days (see yesterday’s charts), and some of those bounces started to let go already today, like in the financials and the REITs. Among those areas, I like the short potential in the REITs much better (long SRS), as I believe they’ve got more room to fall than the already-battered financials do.

So that’s the way I’m playing it. The tape remains very split, but I believe the potential is there for further declines for most stocks. So I’ll continue to add to short positions when opportunities are presented. Also, we’re seeing some better rates crop up on the cash front, so trying to earn a bit more than money market rates on your extra cash might not be a bad idea. Today I saw rates of 3.85% on 1-year CDs, and 4.00% on 18-months. Not tremendous, considering today’s inflation, but better than a kick in the head.

Not a lot happening, as the indices still dangle below the flat line, along with the A/D lines, and volume is starting to slack off. The melt-up in the fertilizers, coals and selected energy stocks is ongoing, but seeing as how those are about the only areas to run to right now, it could go on for a while yet. Look out below if those guys ever decide to let go…

Stocks didn’t open up nearly as strongly as the futures were indicating, and any early ’strength’ has already dissipated, as the indices hang right around the flat line, as do the A/D lines. The groups are split, with the airlines, natural gas, chemicals, oils, transports and metals picking up a little ground, while financials, builders and REITs are losing ground.

Treasuries/yields are near flat. Energy prices are near flat as well. The dollar index is right around where we last left it. Gold and silver are flat to slightly lower.

Oh, let’s see. We’ve got Goldman’s lies earnings report, housing starts and building permits lower, and a 1.4% jump in the PPI - up 7.2% YOY.

Those housing starts numbers are the lowest since 1991.