Bear Mountain Bull

Four more on the floor:
First BankAmericano, Elizabeth NJ
Peoples Community Bank, West Chester OH
Integrity Bank, Jupiter FL
First State Bank of Altus, Altus OK

I guess it was time to throw another Illinois entry into the mix:
Mutual Bank, Harvey IL
Weird — it now looks like Mutual Bank has been “un-failed”. It’s disappeared from the list.
“I’m not dead yet!”
Oops! Now it’s back. Guess it got conked on the head like the guy in the movie.

The day seemed like a bit of a snoozer, until a late runup with about 45 minutes left, followed by a run-down with 15 minutes left.

Internals were mixed, with volume a bit lighter than yesterday. Advances/declines were 5 to 3 on the NYSE but just below flat on the Nasdaq, with up/down volume 7 to 3 on the NYSE but 4 to 5 on the Nasdaq. New highs/lows were 119/7 on the NYSE and 70/3 on the Nasdaq.

Leaders — Gold/Silver (+3.95%), Metals (+3.14%), Defense (+2.29%), Homebuilders (+2.13%), Steel (+1.74%), Commodities (+1.32%), Banks (+1.13%), Oil Services (+0.94%)
Laggards — Disk Drives (-2.54%), HMOs (-1.42%), Utilities (-1.17%), Hospitals (-1.15%), Biotechs (-0.90%), Health Care (-0.62%), Telecoms (-0.61%), Network (-0.59%)

Treasury Yields — 6-Month: .25%,  2-Year: 1.10%,  5-Year: 2.51%,  10-Year: 3.48%,  30-Year: 4.29%

Energy Prices — Crude oil: $69.45/barrel,  Gasoline: $2.0448/gallon,  Natural Gas: $3.653/mmBTU

US Dollar Index — 78.315

Precious Metals — Gold: $951.50/ounce,  Silver: $13.90/ounce,  Platinum: $1207.00/ounce

BMB Note:  
Hmm. I didn’t pay a great deal of attention to the goings-on today, one, because I was a little busy with some other stuff and, two, the market seemed rather dull. But the late gyrations were slightly interesting, and we’ve seen some selling showing up late in the past couple of days. That’s a little out of character for this market lately, so we’ll see if it turns into anything more serious starting next week. In addition, we’ve see some divergence between the internals on the two exchanges lately, with the Nasdaq acting just a bit weaker than the NYSE.

Another hint that things may be about to change a bit was a decent rally in bonds today, sending yields lower. Just something to keep an eye on…

Why not? It’s only money, right? Yeah, it’s your money, but you don’t mind…do ya?

From Zero Hedge:

Go Ahead, You Deserve a New Car…

Sure, why not? What’s another $2 billion more? The House voted Friday to rush $2 billion into the popular “Cash for Clunkers” CARS program.

The bill was approved on a vote of 316-109.

President Barrack Obama is pleased with the program and the decision to infuse more federal funding as the program “succeeded well beyond our expectations.”

Sure it did.

Not to mention all the tax revenue this is generating. Oh, and the publicity doesn’t hurt either… We wouldn’t want this to fail, oh no.

You think they would have let the party stop over a couple billion dollars?

They should do this with everything. Toasters… Whatever.

To quote an old Doritos snack commercial from the ’80s with Jay Leno- “Snack all you want… We’ll make more.”

I hate to say “I told you so”, but I told you so.

Yesterday, it was the magazine cover. Today, it’s the front page of Yahoo:

Note the use of past tense: “recession was deeper”…

I found this somewhat amusing:

Screaming constituents, protesters dragged out by the cops, congressmen fearful for their safety — welcome to the new town-hall-style meeting, the once-staid forum that is rapidly turning into a house of horrors for members of Congress.

On the eve of the August recess, members are reporting meetings that have gone terribly awry, marked by angry, sign-carrying mobs and disruptive behavior. In at least one case, a congressman has stopped holding town hall events because the situation has spiraled so far out of control.

“I had felt they would be pointless,” Rep. Tim Bishop (D-N.Y.) told POLITICO, referring to his recent decision to suspend the events in his Long Island district. “There is no point in meeting with my constituents and [to] listen to them and have them listen to you if what is basically an unruly mob prevents you from having an intelligent conversation.”

His constituents. Yet he doesn’t talk as though he represents THEM:

“I have no problem with someone disagreeing with positions I hold,” Bishop said, noting that, for the time being, he was using other platforms to communicate with his constituents. “But I also believe no one is served if you can’t talk through differences.”

I thought his use of the phrase “positions I hold” was rather interesting. So much for representation…

Peter Boockvar gives the quick rundown on this morning’s GDP report:

Q2 GDP fell 1%, .5% better than expected but the breakdown was very mixed as NOMINAL GDP fell more than expected as the deflator rose just .2% vs expectations of a gain of 1%. If the deflator was in line, REAL GDP would have fallen 1.8%.

But he also hits on one of the reasons why we don’t give these numbers much credence — ever:

Government spending added 1.1% to GDP.

Excuse me, but government spending should never be equated to economic growth. Spending either taxpayer dollars or borrowed money should not be considered ‘growth’.

Unless they somehow decide to expand the program, your contributions to your neighbors’ new car funds are already gone:

From Calculated Risk:

From the Detroit Free Press: Cash-for-clunkers program to be suspended (ht Basel Too)

The U.S. government will suspend the popular cash-for-clunkers program after less than four days in business, telling Congress that the plan would burn through its $950-million budget by midnight, several sources told the Free Press. … auto dealers may have already arranged the sale of more than the 250,000 vehicles that federal officials expected the plan to generate.

Well, that billion dollars didn’t last long. POOF! Seeing as how it was such a booming ’success’, they just might come and take some more of your money…

Danielle Park on her macro market view:

We accept that we are likely to be within a secular bear period for several more years to come. Although the magnitude of market declines has been significant since 2000 starting from the highest ever levels in history, the market cap of US stocks is still not quite back to the long-term mean. To revert to the long-term mean, prices would have to move below the mean over time.

—

Since the March 9 market lows, we have seen broad-based pessimism give way to a synchronous relief rally in risk assets around the world. We would like to believe that March 9 was “the” low of this bear market, but having studied more than 100 years of market cycles, we must acknowledge first, that there is no way to know a bottom in advance, and second, that bottoms have always been a process, not a day. Lasting bottoms each cycle are typically tested more than twice.

—

It will be interesting to see how much of recent gains this market may now need to retrace in the weeks ahead in order to confirm this cycle’s final low. If the correlation to the 2000-2003 contraction were to continue, the S&P may need to retest the 800 level by August to October this fall.

We are aware of the narrative fallacy of trying to forecast the future. Ignorance tends to breed confidence; and we are far from ignorant in this area. However, postulating scenarios for what may happen next is a requirement of this fascinating work.

The market that refuses to correct… is… um… still refusing to correct. But the day didn’t end so smoothly today…

The market ran up hard — very hard — early, but then leveled off and chopped sideways for pretty much the rest of the day, until the last half-hour when things dropped like a rock in a 10-minute span and cut the indices’ gains almost in half.

Internals were positive, with volume about the same on the NYSE but higher on the Nasdaq. Advances/declines were 7 to 2 on the NYSE and 13 to 6 on the Nasdaq, with up/down volume 7 to 3 on the NYSE and 7 to 4 on the Nasdaq. New highs/lows were 150/7 on the NYSE and 125/8 on the Nasdaq.

Leaders — REITs (+3.63%), Banks (+3.41%), Chemicals (+3.39%), Metals (+3.34%), Natural Gas (+2.96%), Gold/Silver (+2.88%), Steel (+2.82%), Oil Services (+2.65%)
Laggards — Software (-0.93%), Biotechs (-0.65%), Health Care Products (-0.56%), Semis (+0.13%), Health Care (+0.14%), Internet (+0.18%), Drugs (+0.21%), Comp. Tech (+0.56%)

Treasury Yields — 6-Month: .25%,  2-Year: 1.17%,  5-Year: 2.64%,  10-Year: 3.62%,  30-Year: 4.43%

Energy Prices — Crude oil: $66.94/barrel,  Gasoline: $1.9911/gallon,  Natural Gas: $3.743/mmBTU

US Dollar Index — 79.319

Precious Metals — Gold: $932.40/ounce,  Silver: $13.44/ounce,  Platinum: $1177.00/ounce

BMB Note:  
This has been a heckuva move up for the market over the past three weeks. The problem has been that it hasn’t done much in the way of providing decent entry points — if you wanted in, you didn’t have much choice other than to chase, which isn’t always the most prudent investment ’strategy’. Sometimes it works, and sometimes it doesn’t — sometimes you chase up in the morning and get hammered in the last hour.

The market won’t go straight up forever, although it might seem like it at the moment (and as soon as everyone believes that, it’ll stop). Just stick with your plan, whatever that may be, and let the market come to you.

End of month is now here, and earnings are winding down. We’ll see if today’s late reversal gets any follow-through. That looks like a ’shooting star’ on the Nasdaq chart, and with a gap — is it meaningful or not?

As Dave Landry would say, “one day at a time”.

The ol’ “magazine cover” indicator…

From AusTexTrader via Twitter:

#1 Rule for Trading Choppy Days: Don’t trade choppy days.

#2 Rule for Trading Choppy Days: Don’t trade choppy days.

#3 Rule for Trading Choppy Days: Don’t trade choppy days.

Deron Wagner on the recent market action:

We concluded yesterday’s commentary by saying, “Overall, the stock market has been a bit confused and nervous over the past three days. . .With such indecisive and choppy price action, a sharp move could be on tap in the near-term. But in which direction, you might ask? Frankly, either direction wouldn’t surprise us. A substantial pullback would not be out of the norm, and would certainly be healthy for the longer-term of the market’s current rally. Yet, with no significant overhead resistance to contend with near current levels, the major indices could just as easily rocket higher again. This is a good time to be alert, keeping your left hand on the sell button, and at least a few fingers of your right hand on the buy button.” Since yesterday’s action did not change the current technical picture, our overall thoughts remain the same going into today.

Dave Landry also feels like his hand might be forced if the market moves — from his free newsletter today:

I was hoping for a bona fide pullback in the indices. At the least, I was hoping that this market would continue its sideways drift so it could “walk off” its overbought condition.

Unfortunately, with the futures very strong pre-market it doesn’t look like this is going to happen just yet.

End of month fun and games?

As trend followers, I think we are forced in. Just wait for entries and exercise extreme caution because it remains a dangerous overbought environment. On a micro level, watch for a possible opening gap reversal.

Be careful out there.

Chris Whalen challenges Jim Cramer’s bank views:

It is especially scary when Jim talks banks because, like most generalists, the only thing he knows about banks is how to use the ATM.

More sources for the Paul Tudor Jones video mentioned here yesterday.

The trading world has kinda picked up the ball and run with it. The video is now available by direct http download and/or via your torrent client.

Tip from Finance Trends Matter via Twitter.

The major indices have barely budged…

…but the commodity areas have been pulled back somewhat sharply:

Charts courtesy of StockCharts.com

The market pullback is still virtually undetectable, except for a few areas — like the commodiities.

The indices bounced back up — again — from some early selling:

Internals were negative, with volume backing off slightly. Advances/declines were 2 to 3 on both exchanges, with up/down volume near 4 to 5 on each. New highs/lows were 96/1 on the NYSE and 57/5 on the Nasdaq.

Leaders — Hospitals (+1.96%), Airlines (+1.35%), Broker Dealers (+0.70%), Homebuilders (+0.58%), Biotechs (+0.53%), Banks (+0.39%), Health Care Products (+0.34%), Health Care (+0.27%)
Laggards — Steel (-5.80%), Metals (-4.35%), Oil Services (-3.31%), Gold/Silver (-2.76%), Natural Gas (-2.40%), Commodities (-2.39%), Oil (-2.03%), Chemicals (-1.51%)

Treasury Yields — 6-Month: .25%,  2-Year: 1.17%,  5-Year: 2.64%,  10-Year: 3.66%,  30-Year: 4.52%

Crude oil dove almost 4 bucks:
Energy Prices — Crude oil: $63.35/barrel,  Gasoline: $1.8550/gallon,  Natural Gas: $3.379/mmBTU

US Dollar Index — 79.514

Precious Metals — Gold: $929.20/ounce,  Silver: $13.31/ounce,  Platinum: $1172.00/ounce

BMB Note:  
The dollar bounced today, and it’s possible that the dollar index is trying to hammer out some sort of double bottom here. If it’s successful, that’ll be bad news for commodity prices/stocks, and probably for stocks in general. We’ll see if that happens — we saw a hefty drop in crude prices today.

As for the rest of the market, the indices have yet to even pull back — they’ve gone pretty much sideways for the past four days now. We’ll continue to let the database guide us, and right now it’s not pulling up many opportunities in either direction. Sometimes, in trading, it’s “A strange game. The only winning move is not to play”. YMMV.

…but that’s not necessarily bad.

I was a little caught up in some other things yesterday, so I missed this latest commentary from Gary Kaltbaum:

Everyone knows the market is extended, stretched and overbought in the near term. This recent move caught many looking at mini-head and shoulder tops and instead, we got a follow-through day on July 13th and no let up from that day as shorts were squeezed and buyers came in. Markets hate people. That is why it is so important to follow the tape daily. This move occurred even though earnings were not out yet… just when most investors/traders thought it was going to be quiet. The market has spoken up and for me, it is nothing but bullish. The DOW, S&P, SMALL CAPS, MID CAPS, RUSSELL, TRANSPORTS… all have broken above multi-month resistance. I do believe the lagging FINANCIALS could be next… as they are just sitting tight and ready to move represented by the FINANCIAL ETFS.The NASDAQ/NDX moved out earlier as they have been stronger. The SOX is the same. Just imagine the 100s and 100s of stocks that now look like these indices. So ignore all and watch the market.

Back to the overbought and extended conditions. This is the end of the month so not sure it matters, but eventually it will, so expect pullbacks but I think any pullbacks will pull those major averages toward support, maybe undercut a smidgen, but that is it. As of this second, I see very little risk below the 940-950 S&P area… but as always, will deal with the evidence coming in. Now we know anything can happen and we will always adhere to what the market gives us in the present but all evidence is that the market is in gear… and on a note of overbought. It is actually bullish that the market can get this overbought. Until distribution shows up in a meaningful fashion, the market gets the benefit… and I am not talking about one bad day.

So… how does one buy into this move now? It is very tough. I don’t have that answer. As stated, markets are stretched, markets are extended and markets are overbought. It is a matter of feel and where you are at. No one likes letting the market get away from them just like no one likes being in while the market is being trashed. I personally have my list of leading names that have moved too far, too quickly as I did not want to play with earnings reports. The problem with waiting is many of the leaders moved out of SECONDARY bases… which studies show are the most powerful. Sometimes, the market just doesn’t let you in . Friday and yesterday is a case in point to what a bull is like… overbought, extended, stretched, bad earnings in a few important names… along with bad reactions… and the market ignores it.

I hope you are getting my point. I deal with the evidence the market is giving… nothing more. We are talking serious multi-month breakouts in major areas… as well as world markets. Until things change, I wouldn’t be arguing. Please stay in close contact with the NEW HIGH LIST as all big leaders show up there. If not, one has to wait for another chance which eventually you get but from where and when is anyone’s guess.

I give no targets though one could say the longer the base, the better the move. Away from leaders, FINANCIALS look ready and seeing a few BIOTECH names setting up also.

I don’t know if you’ve been following the “Memoirs of a Minyan” series from Todd Harrison, but you might find it interesting to wander over there and start browsing through the collection of stories, as Todd describes what it’s like for those that are living and breathing Wall Street all day every day.

I believe the series is planned to be 18 weeks long, with one release each Wednesday — today’s column is number eight. Here’s a sampler:

I remember my moment of clarity as if it happened yesterday. Tech stocks were ramping 10, 30, 50 points in a single day and I awoke in the middle of the night with a disturbing epiphany. It wasn’t the first time I had the thought but it was different that time, a clarity that seemed obvious, a crystallization that would define my career.

The technology bubble was about to burst.

One of the toughest disciplines when trading is to sell a stock that is making money. Multiply that dynamic by a large portfolio, add a slew of zeros and factor in the emotional context of our office and you’ll get a sense of the task at hand.

I won’t say I was the lone bear—Jeff also sensed wreckage on the horizon—but the timing, coupled with the intensely competitive landscape, made for prickly friction with a razor thin margin of error. I believe Jim summed it up in his first book, Confessions of a Street Addict, when he wrote:

“When April came in, and the NASDAQ was still in the 4500 area, Todd suggested that we were on the verge of a collapse of titanic proportions, that the whole NASDAQ bubble was about to burst and would shortly be at 1,500.”

Now, you’ve got to understand Jim. He has a genuinely kind heart but could make your life miserable if you’re on the wrong side of his mind.

Jeff used to say that if Jim hit someone with a car and you politely informed him of the accident, he would drive the victim to the hospital and buy the family dinner. If you told Jim he screwed up, he would raise his arms and scream, “Shut up or I’ll hit you too!”

Such was life at Cramer Berkowitz in the weeks before what proved to be the largest car crash in financial history.

If nothing else, you get a sense of what the guys that do this stuff for a living are thinking and feeling.

Good stuff — thanks Todd.

Didn’t we hear this same stuff happening as the China stock market was soaring to the moon — on its way to the eventual crash?

Sounds like deja vu all over again:

After an amazing 100% run from the early Nov ‘08 lows, the Shanghai index took its biggest one day hit since the rally began, by 5%. There is talk that the Chinese may raise bank reserve requirements and the stamp duty tax on stock executions to prevent overheating in the economy. To quantify, new Yuan loans totaled 7.36T Yuan in the first 6 months of ‘09 compared to 4.9T Yuan for all of 2008 and highlights the peddle to the meddle stimulus plan that has lifted China off the mat. Since China has been the main catalyst in the global stabilization in equities and commodity prices over the past 8 months, where Chinese stocks go from here will have implications for many other markets.

Not to nitpick, but isn’t the expression “pedal to the metal”?

This market simply refuses to correct, even a little bit. Every dip is bought up. I’m not sure if that’s good or bad at this point.

Weird day today, as a morning selloff (Dow down 100 points) was bought up into the afternoon, sending the indices back onto positive ground, and another late afternoon dip was bought up into the close.

Internals were mixed, with volume a bit higher. Advances/declines were just below flat on the NYSE and 13 to 11 on the Nasdaq, with up/down volume flat on the NYSE and 5 to 4 on the Nasdaq. New highs/lows were 94/1 on the NYSE and 75/6 on the Nasdaq.

In the groups, health care good, commodities bad:

Leaders — HMOs (+6.51%), Hospitals (+3.84%), Airlines (+2.32%), Disk Drives (+1.49%), Biotechs (+1.30%), Paper (+1.17%), Defense (+0.69%), Retailers (+0.62%)
Laggards — Gold/Silver (-4.02%), Oil Services (-2.59%), Commodities (-1.93%), Utilities (-1.86%), Natural Gas (-1.61%), Broker Dealers (-1.43%), Oil (-1.36%), Network (-1.35%)

Treasury Yields — 6-Month: .26%,  2-Year: 1.08%,  5-Year: 2.60%,  10-Year: 3.68%,  30-Year: 4.54%

Energy Prices — Crude oil: $67.23/barrel,  Gasoline: $1.9106/gallon,  Natural Gas: $3.535/mmBTU

US Dollar Index — 78.900

Precious Metals — Gold: $937.20/ounce,  Silver: $13.71/ounce,  Platinum: $1195.00/ounce

BMB Note:  
The groups were split today, with some health care issues up big, but the commodities taking a hit. The market, as a whole, isn’t correcting the way quite the way we’d like to see, so we remain cautious. Looking at a pullback or two in some individual names, and we’ll have to decide whether or not to jump in if the trades ‘trigger’.

Plenty of good stuff coming from David Rosenberg, compliments of John Mauldin’s Outside The Box this week.

Here’s just a starter:

MARKET THOUGHTS

The Dow is coming off its best weekly performance since March 2000, and if memory serves us correctly, that month was marking the beginning of the end of the great bull market at that time. While the bear market rally has been of 1930 proportions, from our lens, that is what it remains and what is lacking in this extremely flashy runup in equity prices are: (i) leadership, (ii) quality, and (iii) volume. There were some very useful statistics in Barron’s (despite the fact that the headline in the ‘The Trader’ column is Why the Rally Should Keep Rolling … for Now):

The 50 smallest stocks have rebounded 17.2% from their nearby July 10th lows, outperforming the largest 50 stocks by 750 basis points.

The 50 most shorted stocks have rallied 17.6%, outperforming the 50 least shorted stocks by 880 basis points (over the same time frame).

The 50 stocks with the lowest analyst ratings have outperformed the 50 with the highest ratings by 380 basis points.

85% of the market has already broken above their 50-day moving averages, which in some sense highlights an overbought market, but the other three factoids still attest to a low-quality rally, which is best left for traders and speculators. As tempting as it is to jump in, history is replete with examples of these sorts of short-covering rallies ending very quickly and with no advance notice from analysts, strategists or economists for that matter.

The story of the current ‘earnings’ season…

A 1987 PBS documentary on trader Paul Tudor Jones. All seven segments assembled for your viewing pleasure by Tim Knight over at Slope Of Hope.

Zero Hedge says:

The mythical “TRADER – The Documentary” is finally available on You Tube. Relevant “full frontal” insights on the making of a hedge fund legend, and a paleolithic market dominated by monochrome PCs (what, no Bloomberg?), running to the municipal library for that 10-K, and no Flash orders frontrunning every trade.

Michael Kahn on the leveraged ETF bans cropping up:

What we should be watching, however, is the growing trend for brokers not to let retail use leveraged ETFs. I suppose it is a good thing for a broker to know if their customer is fully aware of what these things are but a blanket rule seems like taking the meat for the big boys and letting retail have the bread.

What may be worse is that Nanny (I mean the government – specifically FINRA) says that they are too dangerous and should not be allowed for retail. While I concur that they are time bombs, so is smoking. Let anyone kill themselves if that’s what they want as long as they don’t take anyone down with them. I don’t want to pay for smokers’ health issues and I don’t want to suffer because someone lost money trading FAZ. But everyone has the right to hurt themselves if they choose to be so stupid (pulling no punches on this one).

What’s next? Commodities ETFs? Options? How about all stocks not in the S&P 500 to eliminate more risk for us poor retail slobs?

How much more meddling will they do? How about fostering an atmosphere where creating this derivative crap is not profitable. A strong economy might be nice.