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.

Frank Barbera today:

What a ridiculous sham. Every few weeks the financial community ‘heart beat’ stops for a few seconds to find out what pronouncements will be handed down from the mount at the latest Federal Reserve meeting. Every few weeks, the parsing begins dissecting each word to see if anything has been omitted, or added, or changed from the prior meeting’s text. Immediately, all kinds of wild trading ensues, in some cases, even before any sane person has had a chance to read and digest the intended meaning of the words. It is ironic that all of these fireworks occur following the pronouncement from an institution that stood back literally for years at a time and watched as an enormous credit bubble grew out of control, and then stood back again and watched as that bubble burst.

—

…we wonder at what point does an institution such as the Fed lose its credibility? At what point does an institution become irrelevant? The answer to that question is when events have taken on a life of their own, and when their words no longer have any real impact. We have fortunately not reached this point yet, but for all appearances seem to be heading in this direction at a rapid pace. The socialization of financial market bad debts has forced the Fed to act as the lender of last resort, placing its own balance sheet on the line for the ineptitudes which were sewn over so many years of the Greenspan Fed. How dare Mr. Greenspan comment on perils of the current collapse when he was the chief architect of the events now unfolding each and every week.

While the Fed is now focused on the cyclical inflation threat, there is almost no chance that the US economy is anywhere close to being out of the woods. At the present time, credit card companies are rolling over, signaling a likely deluge of rising bad debts, while at the same time both residential and now commercial real estate markets remain in deep trouble. The entire Auto industry is contracting with fresh layoffs announced last week, along with the financial services industry which resides atop a pile of Frankenstein derivatives, awaiting an ‘unknown/unknown’ trigger/catalyst which virtually no one can predict. It seems that against all of this declining tide, the Fed is quickly losing its credibility, and is running the risk of becoming irrelevant. In the days ahead, if foreign capital decides that investing in US Agency paper issued by Fannie Mae and Freddie Mac is no longer a great idea, we may just find out how irrelevant the Fed really is.

From Mish’s site:

Automakers Want A Handout

There is no way GM or Ford can raise money in this market. The “solution” of course is to ask for a taxpayer bailout just as Fannie Mae received. Indeed, the Detroit 3 ask up to $40 billion in loans.

Detroit’s three automakers are urging Congress to make as much as $35 billion to $40 billion in low-cost loans available during the next two to three years to assure that the companies survive long enough to retool and build a new generation of fuel-efficient vehicles.

Chief executives Rick Wagoner, Alan Mulally and Robert Nardelli — of General Motors Corp., Ford Motor Co. and Chrysler LLC, respectively — talked Friday and agreed that access to capital is their most critical short-term need during this volatile period of high fuel prices and slumping SUV and truck sales, sources told the Free Press.

Top lobbyists for GM, Ford and Chrysler followed up Sunday with phone calls to leaders of Michigan’s congressional delegation — including U.S. Sens. Debbie Stabenow and Carl Levin, plus Reps. John Dingell and Sander Levin — to drive the point home. All three Detroit companies are hemorrhaging cash and having trouble borrowing.

Keeping weak institutions alive at taxpayer expense cheapens the dollar and deprives other more legitimate businesses of the capital they need. This is one of the things that prolonged the Japanese deflation for what is now known as “The Lost Decade”.

More on ‘auto loans’ here.

After today’s big move, many of the major indices are teasing their recent highs:

But the NYSE Composite isn’t quite there yet:

Charts courtesy of StockCharts.com

A pre-Fed rally from nowhere, with the seeds sown in the wee hours of the morning in Europe. Add in a little panic buying in the last hour after the Fed announcement, and you get yet another triple-digit-plus move, this time to the upside.

Nothing this market does these days should surprise you, as it continues to routinely take out both the longs and the shorts as it thrashes around like a tattered flag in a hurricane.

Big numbers today - after a woefully weak day yesterday - does it mean anything? I have no idea:

Treasuries were lower, yields moved up:
6-month: 1.97%    2-yr: 2.55%    5-yr: 3.29%    10-yr: 4.02%    30-yr: 4.63%.

Internals, of course, were positive, and volume moved above yesterday’s levels. Advances/declines were 3 to 1 on the NYSE and 2 to 1 on the Nasdaq, with up/down volume 7 to 2 on the NYSE and 17 to 3 on the Nasdaq. But even with the Dow up 300+ points, we still had more new lows than new highs: highs/lows were 46/71 on the NYSE and 37/79 on the Nasdaq.

Nearly all of the groups were green, with those biggest ‘bear market’ areas leading the way once again: airlines (+9.4%), banks (+5.3%), retail (+5.3%), REITs (+4.8%), transportation (+4.5%), brokers (+4.4%), HMOs (+3.3%) and internets (+3.1%). Only a couple of the commodity areas finished red, with the gold and silver stocks (-5.0%) getting smashed again along with metals and mining (-1.3%).

Energy prices were mixed. Crude continues to get most of the attention, taking a late dip as the pits closed to fall to $119.17/barrel. Gasoline fell 4 cents to $2.96/gallon, but natural gas hung on for a change, gaining a nickel to $8.72/mmBTU. The dollar index looks its trying to retest the top of its multi-month range, rising to 73.89. Gold and silver, on the other hand, have fallen all the way back down to the bottom of their trading range that extends back to March, with spot gold falling to $874/ounce and silver to $16.44/ounce.

BMB Note:   Not much to say. As long as the market keeps making these wild swings, but stays in the range that it’s been in, I have no interest in trying to trade it.

Commodities continue to get smashed - I can’t help but believe that we’re getting close to the lows of that move, at least in the near-term, especially where oil and the precious metals are concerned. The market has gotten extremely negative on those areas, and I’ve got to believe that much more than just the ‘weak hands’ have already been flushed out. Corrections happen in bull markets, and when the commodities come under attack, it can get pretty vicious.

In stocks, we’ll see if today’s ‘rally’ can hold up, unlike the last 4 or 5 we’ve seen. I’d be more impressed if the indices could at least take out their highs of last week, which they failed to do today (and the highs of the week before are still just above those levels, with the declining 50-day averages curling down from above). If that happens, maybe the moving averages will start to turn up and the picture will improve some. But for now, I’m still of the opinion that we’re in a February-like ‘chop around’ period after the manufactured bounce up off the mid-July lows.

Seen on CNBC:

WSJ: General Motors board still supports CEO Wagoner.

That’s what they always say right before they fire the football coach, isn’t it?

No big surprise there.

It remains to be seen how the market reacts to the statement, not just today, but over the next few days.

These must be the headlines that got everybody hyped up to buy stocks in Europe - and the US - this morning (from MarketWatch):

Northern Rock reports $1.2 billion loss
Societe Generale profit falls 63%
Swiss Re profit is halved

You bet. I’m all in.

Let the chop continue.

Stocks got a boost from another slight drop in oil prices and a pop in stocks in Europe this morning, in preparation for today’s Fed non-announcement. The indices are all showing gains of better than a percent at the moment, with A/D lines solidly in the green.

Leading the way up are the airlines, retail, housing, steel, banks, REITs and brokers, while the gold and silver stocks lead a short list of losers.

Treasuries are lower, yields higher. Energy prices are flat to slightly lower. The dollar index is higher, gold and silver are lower.

And remember - it’s Fed day. Just about anything can and will happen, in any direction.