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.

I have no idea if Ambrose Evans-Pritchard is right or not, so don’t start attacking me as being a fanatical gold bug and stuff like that - though I do remain bullish on gold, oil and other commodities longer term, because I believe, along with Evans-Pritchard, that the world’s central banks will continue to devalue their currencies, simply because it’s the only thing they know how to do well.

But anyway, I thought some of the things he has to say in this column, titled “Stage two of the gold bull market is just beginning”, were pretty interesting - particularly about the future of the Euro.

Here’s how he wraps it up:

What we are about to see is a race to the bottom by the world’s major currencies as each tries to devalue against others in a beggar-thy-neighbour policy to shore up exports, or indeed simply because they have to cut rates frantically to stave off the consequences of debt-deleveraging and the risk of an outright Slump.

When that happens - if it is not already happening - it will become clear that the both pillars of the global monetary system are unstable, infested with the dry rot of excess debt.

The Fed has already invoked Article 13 (3) - the “unusual and exigent circumstances” clause last used in the Great Depression - to rescue Bear Stearns. The US Treasury has since had to shore up Fannie and Freddie, the world’s two biggest financial institutions.

Europe’s turn will come next. We will discover that Europe cannot conduct such rescues. There is no lender of last resort in the system. The ECB is prohibited by the Maastricht Treaty from carrying out direct bail-outs. There is no EU treasury. So the answer will be drift and paralysis.

When EU Single Market Commissioner Charlie McCreevy was asked at a dinner what Brussels would have done if the eurozone faced a crisis like Bear Stearns, he rolled his eyes and thanked the Heavens that so such crisis had yet happened.

It will.

Gold bugs, you ain’t seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder.

Pointer from the links at The Mess That Greenspan Made.

Don’t believe them when they tell you that other markets are ‘decoupled’ from the US markets. And if you’re wondering whether the current ‘global’ market environment is bullish or bearish, this page of charts should answer that question for you.

The S&P pulled right back to the recent uptrend line and bounced off, but volume has been shrinking.

Slippage in the financials is becoming a bit of a ‘concern’ again:

Though the commodity stocks bounced up today, they’ve still got quite a bit of work ahead to turn things around. Only the ‘big oils’ - the XOI - looks like it could have the beginnings of a near-term bottom working.

Charts courtesy of StockCharts.com

Stocks suffered much of the morning, though they tried to make a comeback in the afternoon. The S&P and the Nasdaq managed to rally back into the green with a little over an hour to go, but gave back some of those gains before closing time.

The indices finished pretty mixed up, with the Russell and the Naz-100 able to hold just above the surface:

Treasuries were mostly lower, with yields sneaking higher on the long end:
6-month: 1.94%    2-yr: 2.47%    5-yr: 3.20%    10-yr: 3.94%    30-yr: 4.56%.

Internals were mixed, with volume higher on the NYSE but just a bit lighter on the Nasdaq. Advances/declines were 2 to 3 on the NYSE but 10 to 9 on the Nasdaq, with up/down volume 2 to 3 on the NYSE and 4 to 5 on the Nasdaq. New highs/lows were mixed as well, at 27/55 on the NYSE and 57/55 on the Nasdaq.

Commodity stocks bounced back to the top of the leader board, after an extended absence. Steel stocks (+6.0%) took the top spot, followed by gold and silver stocks (+5.9%), metals and mining (+5.8%), oil services (+4.1%), natural gas stocks (+3.6%), oil stocks (+2.4%) and chemicals (+2.1%). Leading the losers were the ‘big July bouncers’: airlines (-6.1%), banks (-4.1%), retail (-2.4%), REITs (-1.5%) and brokers (-1.4%).

Energy prices finally moved higher after dropping nearly every day for weeks. Crude oil bounced up three bucks to $116.00/barrel, gasoline moved higher by 9 cents to $2.93/gallon, and natural gas gained 12 cents to $8.46/mmBTU. The dollar index edged up to 76.19. The precious metals also bounced, with spot gold gaining 16 bucks to $827/ounce and silver regaining 39 cents to $14.86/ounce.

BMB Note:   Well, the tables turned in the short-term today, with the commodities bouncing up and the rest of the market moving lower, following through a bit on yesterday’s reversal, but I’m not sure that there have really been any major changes in the big picture.

Commodities and commodity stocks came off their lows today, but considering how far and how fast they’ve fallen, it really can’t be viewed as much more than a normal bounce at this point. We’ll be watching to see if things start to turn around in those areas.

Things continue to chop around, with the move up off the July lows losing some steam as the indices run into some resistance. I expect the chop to continue (famous last words) into the end of the week, with the CPI report out tomorrow morning and options expiration looming. As Gary Kaltbaum has been saying, there just isn’t a lot to do here. On his radio show, he’s been using the analogy of waiting until you see a ‘perfect pitch’ thrown over the middle of the plate. And right now, it looks like we’re seeing a lot of junk - knucklers, curves, sinkers, changeups, and maybe even a spitter or two.

You don’t have to swing at anything and everything, because in this ballpark, the game never ends. The market will be still be open tomorrow, next week, and next month.

Foreclosures in California. Wow.

Gary Kaltbaum on his radio show yesterday:

“This is not going to be a hand-the-money-over to the investor/trader type of market. This is a market that is out to bludgeon you. And you may go home feeling so confident - and the next day you’re trashed. Or you may go home one day being short the market - and the next day the market ramps. It’s one of those times.”

—

“You have to recognize when the market’s not handing over anything.”

Further weakness in stocks this morning, and a bump up in energy prices is - as we expected it might - a negative effect on equity prices. The indices are showing losses of around one percent, except for the Nasdaq which is holding up better. A/D lines are red, with the NYSE A/D quite a bit redder than the Naz. In the groups, the airlines, financials, retailers and homebuilders are leading the way down, while the commodity stocks get a much-needed bounce, led by gold and silver stocks, metals, oil services and steel.

Treasuries are higher, yields lower. Energy prices are higher, and got a little jolt from the weekly inventory report which showed a larger-than-expected draw in gasoline. The dollar index is a bit higher, gold and silver are slightly higher as well.

Some short-term market advice from Deron Wagner this morning:

Yesterday’s broad pullback caused both the S&P 500 and Dow Jones Industrial Average to move back below their 50-day moving averages, after trading above them for just one day. As we alluded to in yesterday’s commentary, this was not surprising because the major indices are still in a primary bear market. This does not necessarily mean the counter-trend bounce off the July lows is already finished, but stocks may require a bit of price consolidation at current levels before moving much higher. Nevertheless, stay alert and don’t rule out the possibility that the main stock market indexes could drop back down to test last month’s lows, and do so without much notice.