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.

No, not for the economy, silly. But maybe for the market - on the downside. Just a thought.

The recent choppy action and seemingly ‘calm’ reaction to this rather nasty decline makes me wonder if we don’t need some sort of an “event” to trigger the final phase/washout of this leg down.

You know - the January wipeout coincided with the SocGen/rogue trader incident, and the March meltdown was obviously tied to the Bear Stearns debacle. Right now, we have no news to “trigger” that needed round of panic selling.

Update:   Barry says he’s still seeing the ‘no fear’ attitude.

I liked this comment in today’s post at Finance Trends Matter:

1. OPEC president blames ethanol, weak dollar for oil price rise.

So as far as I can tell, according to OPEC officials and US politicians, everything except supply and demand fundamentals are behind the rise in oil prices.

Ain’t that the truth…

	The S&P has now broken - and closed below - the March lows.
	The NYSE Comp is right there…
	…and the Russell is thinking about it.

Charts courtesy of StockCharts.com

Another roller coaster of a day, that does little more than muddy the near-term picture.

The indices got off to a strong start, but the happiness didn’t last long, and a couple of selling surges took things down to their lows by early afternoon. At that point, stocks wandered around for a while before buckling up for their customary last-hour launch, which brought the indices back above the flat line. But that move, too, gave way, and things slipped a bit into the bell.

The Naz-100 and the Transports managed to hold the green:

Treasuries were just slightly higher, with yields coming down, but barely:
6-month: 2.02%    2-yr: 2.46%    5-yr: 3.22%    10-yr: 3.93%    30-yr: 4.51%.

While the indices bounced around, the internals turned red on the first rally failure and stayed there. Volume was, of course, higher than Thursday’s half-day, and about up there with Wednesday’s levels. Advances/declines were 11 to 20 on the NYSE and 7 to 12 on the Nasdaq, with up/down volume mixed at 2 to 3 on the NYSE but a positive 5 to 4 on the Nasdaq. New lows hit a new ‘high’ for this leg of the decline at more than 1000: highs/lows were 4/544 on the NYSE and 11/473 on the Nasdaq.

The groups were mixed, but with a lot more red than green. Leading the few winners were the steel stocks (+2.3%), small consolation after the trouncing they took last week. Also gaining ground were computer hardware (+1.3%) and telecoms (+1.0%). On the losing side of the page were the homebuilders (-4.6%), banks (-3.7%), natural gas stocks (-3.5%), brokers (-2.7%), REITs (-2.2%) and oil services (-2.0%).

Energy prices finally backed off for a day. Crude oil dropped back to $141.37/barrel, gasoline slipped to $3.48/gallon, and natural gas got smacked back down to $12.98/mmBTU. The dollar index gave up morning gains and finished back at 72.72. Gold gave up a few bucks to $924/ounce and silver took a dive back to $17.77/ounce.

BMB Note:   Another couple of intra-day reversals, which don’t tell us a heckuva lot. It looked this morning like the bulls might be able to get a bit of a bounce started, but that failed pretty quickly. The selling pressure this morning was a little intense in spots, but that didn’t last either, and the late-day reversal off the lows will probably have the ‘bottom callers’ out again. Though the indices got pushed back into the green, and the Naz-100 posted a gain as a few of the big tech stocks got some action, we still saw advances/declines finish pretty solidly in the red and registered more than 1000 new lows on the day. Not too healthy in my book.

I don’t see much change. The S&P is fighting to avoid cracking the May lows for good, and that’s to be expected. We still have a market that is oversold, and due to bounce - but that doesn’t mean it will, as was evidenced by the morning rally failure. Maybe today’s afternoon reversal will lead to more of a bounce, but we’ve said that before, haven’t we? We still have a nasty bear market decline in progress, no hard evidence that decline is ending, and virtually no market leadership to speak of.

What we really need is a big panic and a healthy washout to end this leg of the bear, and today was not it.

The Big Picture has a chart of yet another interesting ‘economic indicator’ - luggage sales, takin’ a dive.

Stocks are getting a bit of the bounce that everybody and their dog have been waiting for, but the initial move higher has faded somewhat, pulling the indices down off their early highs. A/D lines are still green, but are off their highs as well.

The leading ‘bouncers’ are the steel stocks, computer hardware, airlines, semiconductors and disk drives, while banks, gold stocks and homebuilders are lower.

Treasuries are slightly lower, yields up a few bps. Energy prices are lower. The dollar index is a little higher, gold and silver lower.

Gary Kaltbaum left us with these lessons, just before he departed the islands of Hawaii to come back and rejoin the real world:

Greetings from Maui. First off, let me state it is not my fault the market is being trashed.

Normally, markets go up while I am on vacation … but yikes this time! Here are the numbers since I left: The DOW is down almost 850 points, the S&P over 81 points and the NASDAQ a whopping 211 points.

I have a few random thoughts that I want you to pay attention to.

Did I hear Hank Paulson correctly? Something about putting things into motion that would allow a big bank to fail and not hurt the system. What does he know? Stay tuned!

Lesson #1: You should have learned by now: LOW WILL GO LOWER. I have been telling you that the FINANCIALS and HOUSING started this mess … and normally the areas that led the way down will go to prices unfathomable. This is continuing to a frightening level.

Lesson #2: You should have learned by now that all this loud sentiment talk is a bunch of hooey in a bear market. The problem with pundits is they have never taken the time to recognize that all the sentiment indicators change in bear markets. When sentiment turns bearish in bull markets, markets put in a low off the pullbacks and then ramp again. When sentiment turns bearish in bear markets, they serve only one purpose … to work off the oversold condition until sellers show up again. And to repeat a line - OVERSOLD WILL GET MUCH MORE OVERSOLD THAN ANYONE THINKS. I can’t tell you how many emails I have received recently about how things were too negative and the market has to turn back up.

Lesson #3: In bear markets, NEVER EVER EVER listen to Wall Street. Wall Streeet remains a product of bull markets. Wall Street never sees a bear coming until things are already ripped apart by it. Wall Street will give you no help - analysts have been downgrading a ton of stuff AFTER monstrous drops.

Lesson #4: In bear markets, they usually get everything. Words like “cheap” and “value” are meaningless. The market remains the final arbiter.

Speaking of lesson #4 I have been telling you for several months that the only game to play was some miscellaneous big cap NASDAQ-types which has now turned to dust as the narrow few are cratering along with COAL, STEEL, OILS, METALS, MINING and the like. Let me be clear on this, on Wednesday these areas were taken apart at the seams and some names were down on volume that was the highest ever. This was not Aunt Mary and Uncle Bob selling. This was the big boys getting the heck out of Dodge … and for me, this is a major sell signal for these areas that have led recently. It is these monstrous volume breaks that I have studied throughout the years, and again let me be clear, this action is a major sell signal … and for aggressive investors, potential shorts on their bounces up into resistance.

This leaves the market with literally no leadership. I do recognize that BIOTECHS and some MEDICAL areas have been acting better. But I promise you one thing, these areas are not going to lead the market out of oblivion. The one area that is showing good technical attributes is GOLD, and that is not bullish for the market.

Lastly, as you know, I have been out front of all the problems we are now seeing and experiencing. I was hoping upon hope that the market would right itself to tell me the economy would somehow hold up. As someone who believes the market is smarter than everyone, this is not a good thing to see the market crumble like this and to especially see so many consumer areas literally melt down.

And now to make matters worse, COMMODITY stocks have now topped badly. This action means that our economy is in dire straits, and not getting better. I don’t need to tell you where General Motors (GM) and Ford (F) are now trading, and I certainly don’t need to tell you about the Financials. I am in hopes you have been listening and letting this market pass as you sit in cash. I have been in cash for weeks…and thankfully so.

There are just simply times where it doesn’t pay to play.

Adding solar panels to the hybrid car. Now we’re talkin’…