Bear Mountain Bull

Same ol’ pattern — an early move, then not much else until a run-up in the last half-hour.

This is getting old. And very boring.

Internals were negative, on lighter volume. Advances/declines were 5 to 14 on the NYSE and 3 to 7 on the Nasdaq, with up/down volume 1 to 4 on the NYSE and 2 to 3 on the Nasdaq. New highs/lows were 69/1 on the NYSE and 32/9 on the Nasdaq.

Leaders — Paper (+1.97%), Broker Dealers (+1.05%), Biotechs (+0.49%), Defense (+0.37%), Health Care Products (+0.14%), Drugs (-0.20%), Health Care (-0.23%), Insurance (-0.26%)
Laggards — Metals (-3.56%), Steel (-3.14%), Oil Services (-2.85%), Airlines (-2.57%), Homebuilders (-2.52%), Natural Gas (-2.40%), Gold/Silver (-2.29%), Commodities (-1.90%)

Treasury Yields — 6-Month: .22%,  2-Year: .97%,  5-Year: 2.38%,  10-Year: 3.40%,  30-Year: 4.18%

Energy Prices — Crude oil: $69.96/barrel,  Gasoline: $1.9859/gallon,  Natural Gas: $2.977/mmBTU

US Dollar Index — 78.190

Precious Metals — Gold: $950.80/ounce,  Silver: $14.87/ounce,  Platinum: $1239.00/ounce

BMB Note:  
Not much to talk about. August is now over, but we’re still waiting for ‘traffic’ in stocks to pick up. Jobs report on Friday.

Dr. Brett Steenbarger:

Reader Brian adds a very interesting perspective, indicating that he’s watched TRIN and C side by side and has seen a very strong correlation. When C flips from up to down (or vice versa), there is a corresponding huge move in TRIN. This could only be the case if a stock like C comprised a large share of total NYSE volume, which indeed seems to be the case, as noted by The Big Picture blog.

—

Recently, however, the volume in these three stocks has hit astronomical levels relative to total NYSE trading, as all three have made phenomenal percentage gains during August. Indeed, the composite volume of these three stocks alone has recently doubled total NYSE volume. If we look at just the NYSE trading of these firms, they are accounting for about 40% of NYSE volume. It is not surprising that Brian would notice TRIN flipping up and down as these stocks change direction.

Again, the question is what all this means. There is no way that mom and pop trader and investor are involved in any meaningful way in generating these kind of daily trading volumes. Nor are proprietary trading shops capable of generating volumes that exceed those of the entire New York Stock Exchange. While I have no doubt that the algorithmic trade close to the market is participating in this movement, the directionality of the involvement suggests that large financial institutions are systematically buying the beaten-up shares of the poster children for TARP: C, FNM, FRE, AIG, and the like.

It is worth noting in this regard that other major (healthy) financial firms, such as GS and JPM, have seen no such surge in their volume or their trading prices.

My best guess? We’re seeing a massive infusion of capital into very troubled financial institutions, no doubt aided by short covering and the participation of program traders and proprietary daytrading firms. Where is the capital coming from? Why has it poured in so suddenly (the really large infusions began in early August)? Why is it coming in at such a pace that it is dominating NYSE volume? Zero Hedge rightly wonders why this hasn’t triggered alarms at the exchange. And why is it happening with only the weakest financial institutions?

If you were the government and you saw that these institutions were on the verge of a major fail, with billions of taxpayer dollars at risk, I’m not sure you’d announce that to the world. Nor, at this point politically, could you ask for yet another bailout package. But you would only pour money into those stocks at a frantic pace (capable of detection) if you perceived a dire need for the capital.

I’m not inclined toward conspiracy theories, but it’s difficult to imagine a scenario in which this is not a (frighteningly necessary) coordinated capital infusion, with taxpayer dollars ultimately at work in financial markets.

Hmm. Even Dr. Brett thinks this market is rigged.

Emphasis added.

Think it doesn’t happen?

Think again.

Shanghai Composite down 6.7% overnight.

“How is it possible?”

From The Big Picture:

In this week’s Barron’s, Mike Santoli asks:

“How is it possible, though, that Citigroup (ticker: C), Fannie Mae (FNM), Freddie Mac (FRE), Bank of America (BAC) and AIG (AIG) — with a combined market value near $200 billion-could “drive” a stock market worth more than $10 trillion and that has added about $1 trillion in value this month, as measured by the Wilshire 5000?”

A friend who runs a hedge fund suggests a better query:

“I think another question to consider might be, How is it possible that those 5 stocks have a combined $200 billion market cap?”

BMB is not alone in his desire to see the ‘PURGE’ button in the voting booth.

If they could vote to keep or replace the entire Congress, just 25% of voters nationwide would keep the current batch of legislators.

A new Rasmussen Reports national telephone survey finds that 57% would vote to replace the entire Congress and start all over again. Eighteen percent (18%) are not sure how they would vote.

Maybe that’s because we keep hearing stuff like this and this.

Update: Add this one too.

Links via Instapundit.

From John Mauldin this week:

As a culture, the current mix of generations, especially in the US, has made some choices. Choices which, in hindsight, leave the adult in us asking, “What were we thinking?”

In a way, we were like teenagers. We made the easy choice, not thinking of the consequences. We never absorbed the lessons of the Depression from our grandparents. We quickly forgot the sobering malaise of the ’70s as the bull market of the ’80s and ’90s gave us the illusion of wealth and an easy future. Even the crash of Black Friday seemed a mere bump on the path to success, passing so quickly. And as interest rates came down and money became easier, our propensity to acquire things took over.

And then something really bad happened. Our homes started to rise in value and we learned through new methods of financial engineering that we could borrow against what seemed like their ever-rising value, to finance consumption today.

We became Blimpie from the Popeye cartoons of our youth: “I will gladly repay you Tuesday for a hamburger today.”

Not for us the lay-away programs of our parents, patiently paying something each week or month until the desired object could be taken home. Come to think of it, I am not sure if my kids (15 through 32) have ever even heard of a lay-away program, not with credit cards so easy to obtain. Next family brunch, I will explain this quaint concept. (Interestingly, I heard about a revival of the concept on CNBC radio, coming back from dropping Trey off at school this morning. Everything old is new again.)

—

There are no good choices. Nouriel (Roubini), optimist that he is (note sarcasm), suggests that there is a possibility that the government can manage expectations by showing a clear path to fiscal responsibility that can be believed. And thus the bond markets do not force rates higher, thereby thwarting recovery.

And technically he is right. If there were adults supervising the party, it might be possible. But there are not. The teenagers are in control. Instead of fiscal discipline, we are hearing increased demands for more spending. Please note that the very rosy future-deficit assumptions assume the end of the Bush tax cuts at the close of 2010. But raising taxes back to the level of 2000 does not make the projected future budget deficits go away.

I mean, seriously, does anyone think Pelosi or Reid are going to lead us to fiscal constraint? Obama talks a good game, but he has not offered a serious deficit-reduction proposal, other than further tax increases. And by serious, I mean we need cuts on the order of several hundred billion dollars. The Republicans lost their way and their power (deservedly, in my opinion). Just as at the high school prom, the very few adults are being ignored.

It is the proverbial rock and the hard place. Cut the stimulus too soon and we slide back into a deeper recession. Let the budget spin out of control for a few years and we will see inflation return, with higher rates and a recession. Raise taxes by 1.5-2% of GDP in 2010 and we are shoved back into recession.

There are no good choices. If we do the right thing and cut the deficit, it means very hard choices. Can we keep our commitments to two wars and our massive defense budget? Medicare and Social Security reform are not painless. Education? Research? The “stimulus”? But cutting the deficit by hundreds of billions while raising taxes by even more than is already in the works, is not the formula for sustainable recovery.

Have we grown up? Are there adults in the room? Sadly, I don’t think there are enough. We are still a nation of teenagers. We will do whatever we can to avoid the pain today. We will kick the can down the road, hoping for a miracle. Will we grow up? Yes, but the lessons learned will be hard.

Notes on the latest moves in the industry groups:

• Still not much in the way of weakness to be found in the group charts, as you can see be browsing through them here: set #1 — set #2 — set #3 — set #4.
• There is one area that has its share of names showing some near-term weakness, that being food/restaurants. Here are a few examples of food stocks that have not been keeping up with the rest of the market
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page., the Industry Group Tracker at WSJ Online, or the industry group tools at Finviz.com.

The Federal Reserve: Instigating Crisis Since 1913

“Meet the system responsible for the major financial blunders of the last century.”

“The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either. Buying up the bad debt of privileged institutions and dumping worthless assets on the American people is morally wrong and economically futile.”
–Representative from Texas Ron Paul questioning Federal Reserve Chairman Ben Bernanke

—

The last two Fed Chairmen have brought the country to the brink of disaster.

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”
–Alan Greenspan, from an article written in 1966 entitled “Gold and Economic Freedom”

The quote above would indicate a man whose principles in sound economic theory couldn’t be compromised. That proved to be dreadfully wrong, as Alan Greenspan turned out to be the most political, Wall Street-pleasing, bubble-inducing Chairman of all time. His reign of power set the stage for the greatest financial collapse in US history.

—

Alan Greenspan sold his soul to the devil of Washington DC power and influence. He loved the accolades and headlines he received as the most powerful man in the world. The Maestro could pull the levers and make markets do as he wished. The man who knew that Federal Reserve manipulation caused the Great Depression disregarded his own words from 1966 and caused the worst economic calamity since the Great Depression.

—

Despite his Ivy League education and all of the supposed brilliant resources at his disposal, Bernanke has shown a remarkable ability to not see the housing bubble or the collapse of the financial system. He was convinced in 2005 that the housing market was strong and healthy. He was sure that the subprime problems were confined and wouldn’t spread into the greater economy. He now assures the public that he’ll know the proper time to withdraw the monstrous amount of stimulus he’s pumped into the world economy before hyperinflation takes hold. Does his track record give you comfort that he’ll correctly figure out the right time to withdraw the stimulus?

After promising a more transparent Fed, Bernanke has done the complete opposite. He continues to withhold the names of all financial institutions that have borrowed from the Fed and won’t reveal the worthless collateral that they’ve put up for those loans. The Fed has lent in excess of $2.2 trillion to banks, yet they’ve refused to reveal any information regarding these loans. Bloomberg News has sued the Fed under the Freedom of Information Act to force them to reveal where $2.2 trillion of taxpayer money has gone. Investment Manager Ted Forstmann’s opinion was, “It’s your money; it’s not the Fed’s money. Of course there should be transparency.”

—

The facts prove beyond a shadow of a doubt that the Federal Reserve has failed in every one of its mandates: Inflation has destroyed the value of the dollar. Interest rates and employment have been violently erratic. The Fed has been manipulated by politicians, showing a complete lack of independence. And only two of the fourteen Chairmen have been truly independent and competent — Paul Volcker and William McChesney Martin. The incompetence and arrogance of the other Chairmen have brought the country to its knees.

The final chapter is about to be written.

Our fiat currency system has proved to be a wretched failure. Within the next five years, a final crisis will bring an end to this diabolical experiment in hubris. Man is not smarter than the free markets. The US dollar is a piece of paper. It only has value because people have trust that the government issuing the paper is financially stable with rational fiscal policies.

This doesn’t describe the United States of today. When the next crisis causes the dollar to collapse and uncontrollable inflation to result, abolition of the Federal Reserve will become feasible. Average Americans have been victims of the boom and bust caused by the Federal Reserve policies. The sole beneficiaries have been bankers, politicians, the military industrial complex, and the super-rich elite.

Emphasis added — BMB.

After watching this week’s action — or inaction, as the case may be — it isn’t too surprising to find that not much has changed in the sector picture.

The Energies remain the only sector SPDR to be short of 6-month highs:

Here are the numbers as we, hopefully, near the end of the ‘dog days’:

Charts courtesy of StockCharts.com

To get warmed up for the real failures, you might want to browse through the unofficial list of problem banks over at Calculated Risk. Hopefully your bank isn’t on it.

First one, in Washington’s shadow:
Bradford Bank, Baltimore, MD

And another one, from the land o’ lakes:
Mainstreet Bank, Forest Lake, MN

How ’bout a late entry from the west:
Affinity Bank, Ventura, CA

A gap up was quickly sold off, sliding into midday lows, then bouncing back up for breakeven or minimal losses in the indices. For the week the indices went virtually nowhere — take a look at last Friday’s numbers, and compare them to these:

Internals were mixed on a pickup in volume. Advances/declines were just better than flat on the NYSE but a poor 11 to 20 on the Nasdaq, with up/down volume 3 to 2 on the NYSE and 11 to 5 on the Nasdaq. New highs/lows were 82/2 on the NYSE and 75/9 on the Nasdaq.

Leaders — Semis (+2.44%), Steel (+2.38%), Gold/Silver (+1.82%), Metals (+1.73%), Broker Dealers (+1.10%), Disk Drives (+0.93%), Commodities (+0.67%), Banks (+0.66%)
Laggards — HMOs (-2.03%), Software (-0.93%), Health Care (-0.91%), Health Care Products (-0.80%), Insurance (-0.77%), Drugs (-0.71%), Airlines (-0.53%), Oil (-0.35%)

Treasury Yields — 6-Month: .23%,  2-Year: 1.01%,  5-Year: 2.44%,  10-Year: 3.44%,  30-Year: 4.20%

Energy Prices — Crude oil: $72.74/barrel,  Gasoline: $2.0618/gallon,  Natural Gas: $3.033/mmBTU

US Dollar Index — 78.330

Precious Metals — Gold: $956.10/ounce,  Silver: $14.76/ounce,  Platinum: $1245.00/ounce

BMB Note:  
How ’bout that Nasdaq? A/D line 1 to 2 negative, up/down volume 2 to 1 positive. Hard to make sense of stuff like that.

Tough trading — I’m seeing potential longs gap up and slide back, and potential shorts dive down and bounce back up. Gotta watch your step or sit on your hands.

So says Doug Kass:

My view is that investors will shortly see through the current sugar high and the better-than-expected earnings cycle and will begin to look over the valley at the chronic and secular issues that have emerged from the past cycle and from policy decisions aimed at returning the domestic economy toward self-sustaining growth.

My view is also that there is no free lunch to remedying past indiscretions in leverage, borrowing and lending; in the fullness of time, a price must be paid.

As my friend, Kevin Ferry, recently wrote, the situation is delicate and the consequences have yet to arrive. The easy part has been achieved — namely, a global injection of fiscal and monetary liquidity against the backdrop of a seized-up credit market and gun-shy lenders. What surprises Kevin, myself and other skeptics is that market participants, the Fed and the President’s cabal have accepted the notion that China and the other central banks’ investments in our fixed income are a given, not a variable. Refundings are not only shockingly large, and they now show up more frequently than “Seinfeld” and “Cheers” repeats.

Kevin ended a recent commentary by writing: “The floor might be warm and safe for now, but the hard part of getting up is ahead of us.”

And I couldn’t agree more.

Neither could we.

Hey! Look who showed up on a Friday morning for a change — it’s Larry McMillan and his merry band of indicators (click here to view column with charts):

Since we last published, $SPX has broken out to new highs once again. It has held the breakout level, trading more or less sideways this week. Overall, the intermediate-term indicators are generally bullish, with the possible — and important — exception of the equity-only put-call ratios.

Short-term, there is support at 1010 and at 980 below there. There is an uptrend line connecting the March and June lows, and that is the demarcation line for bull/bear arguments. As long as $SPX remains above there, the bulls are still in charge. That line is currently near $SPX 960.

The equity-only put-call ratios are beginning to waver. If they roll over to sell signals, that would be significant for these can be leading indicators.

Market breadth has been positive — extremely so. This is bullish for the intermediate-term because it signifies that the rally is broad. However, when stocks are this overbought, sharp but short-lived corrections are possible at any time.

Volatility indices ($VIX and $VXO) remain subdued and thus they are still in downtrends. That is bullish for the stock market. $VIX slipped back below 25, and thus a new downtrend line can be drawn on its chart (Figure 4).

In the short term, as long as $SPX holds above 1010, the bulls are in charge. However, if $SPX slips below there — and certainly if it slips below 980 — and the equity-only put-call ratios have turned to sell signals by that time, then a bearish stance would be warranted.

From ElliottWave International:

Imagine you don’t know anything about the stock market. Let’s say you’re an alien sent to this planet to study collective human behavior. Your task: the stock market. Millions of humans participate in it. Anything we can learn by watching them invest their money into a collective pot?

Your first observation: Most humans get their information about the stock market from the mainstream news media. Second observation: Regardless of what financial news outlet you turn to — CNBC; The Wall Street Journal; Google Finance, etc. — everyone seems to be glued to the news headlines, trying to interpret what it means for the market’s turns and trends.

So you, the alien, decide to do the same.

On the morning of Wednesday, August 26, you sit down in front of your super-advanced alien computer and check the economic news release calendar for the United States. Aha! 8:30 AM — Durable Goods Orders report; 10 AM — New Home Sales report. Should be an interesting day!

Although human economists were looking for a 3% rise in the Durable Goods Orders, the 8:30 AM report comes in 4.9% higher — biggest rise in two years! Excited, you expect the stock market to open strong.

But at 9:30 AM the DJIA opens lower.

You scratch your pointy green head and check the headlines for an explanation. “US Stocks Slip Despite Upbeat Durable Goods Data,” says one on Marketwatch.com. “Despite upbeat data, hmm,” you say to yourself. “I thought stocks always went up when the news was good? Must be an exception of some sort, never mind. Let’s keep watching.”

—

At the end of the day, with the Dow closing up 4 points (“Whoo-hoo! Strong durable goods!”), you sit down to write your daily report.

“My initial findings show that despite their rational capacity, the absolute majority of human stock market investors exhibit strong herding tendencies and a false understanding of causality. They are absolutely convinced that the stock market reacts negatively to bad economic news and positively to good news, but preliminary data clearly do not support either premise. More study is needed.”

“If I invested like that on my planet,” you think to yourself as your super-advanced alien bed cuddles you to sleep, “I’d be broke long time ago.” The lights go dark inside the ship and you fall asleep. Tomorrow is another day of research.

The bill could pass in October. That could start an interesting squabble between Congress and the Fed, couldn’t it?

I saw this quote in the comments on another site, and from what I’ve found by searching around, it is attributed to the late Dr. Adrian Rogers:

“You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else.

When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.”

So true. If only we could get that idea through our heads.

A sequel to Michael Kahn’s observations comes to us today from RobotTrader:

Hilarious. Unemployed bums now becoming expert “daytraders”. Two days in a row, during my lunch break at Starbucks, I found young, slacker, unemployeds huddled around a table with their laptops daytrading stocks.

—

Today, I saw two surfer/skateboard slackers, complete with flatbill caps, sunglasses worn backwards, “Affliction” t-shirts, etc. One guy was clearly the fast talker, teaching his friend how to daytrade using “resistance” and “support” on a 5-minute chart. Wanna bet what stocks he was talking about? Yep. AIG and Vonage. It was all I could do to keep from bursting out laughing.

Just goes to show how hordes of unemployeds have been suckered into “how to work from home” schemes by trading FX, stocks, options, etc. Radio stations here in L.A. are blasting ads for trading seminars and webinars 24/7 from various brokerage houses, and some of the online trading academies.

Would not surprise me in the least to see stocks really take off if Joe Six really starts bragging on how he got laid off, but is now making money hand over fist by gunning stocks on a computer.

Always watching sentiment… I ask — do these things happen at market bottoms?

So, the market dives hard in the first half-hour. No big deal. Bounce it right back up, carry the ramp until after lunch, and then smash the dollar to give stocks that extra boost that makes sure the move back up sticks into the close.

Internals were mixed again but leaned positive, with volume just above yesterday’s levels. Advances/declines were 10 to 9 on the NYSE but 9 to 10 on the Nasdaq, with up/down volume 7 to 3 on the NYSE and 5 to 3 on the Nasdaq. New highs/lows were 72/2 on the NYSE and 50/6 on the Nasdaq.

Leaders — Paper (+3.96%), Disk Drives (+2.42%), Gold/Silver (+1.88%), Comp. Hardware (+1.63%), Banks (+1.33%), Hospitals (+1.11%), REITs (+1.02%), Commodities (+0.77%)
Laggards — Biotechs (-2.21%), Airlines (-1.48%), Homebuilders (-0.69%), Natural Gas (-0.58%), Telecoms (-0.34%), Transport (-0.30%), Utilities (-0.20%), Chemicals (-0.18%)

Treasury Yields — 6-Month: .24%,  2-Year: 1.05%,  5-Year: 2.48%,  10-Year: 3.46%,  30-Year: 4.23%

Energy Prices — Crude oil: $72.49/barrel,  Gasoline: $2.0314/gallon,  Natural Gas: $2.843/mmBTU

US Dollar Index — 78.058

Precious Metals — Gold: $949.40/ounce,  Silver: $14.29/ounce,  Platinum: $1241.00/ounce

BMB Note:  
I have no clue. Short setups have been appearing in things like the restaurants, but no triggers yet, and no help from the market as a whole in terms of downward momentum. Pullbacks on the long side last night were predominantly in the energies.

As a couple of commenters at ZH said:

“Is it me, or has the world (specifically the financial world) gone completely insane?”

“No, the markets have zero integrity now. I haven’t a clue what they represent any more, they are just numbers with the heavy hand of government all over them.”

It ain’t pretty, but it is what it is.

From The King Report, via The Big Picture:

Let’s say that an aging baseball slugger who had abused performance-enhancing drugs for over a decade had a horrendous collapse in his hitting statistics. So the team put him on even stronger doses of steroids, HGH, testosterone, dianabol, insulin, protein shakes, creatine, glutamine and unknown powerful designer pharmaceuticals.

The team had him do Olympic and ballistic [weight] lifts, plyometrics and intense ‘core’ training. Though the slugger’s home runs and RBIs had fallen over 30% from the previous year, he started to hit one more HR per month and a few more RBIs.

This is the US economy and financial system. Trillions of dollars have been poured into the system and economy and trillions more have been pledged to buttress troubled entities. There have been nationalizations, record stimulus and various inducements for consumer to spend more money. And all this is producing is modest m/m gains or smaller losses!

At some point the US, like the slugger, must come off the juice, or the artificial boosts will blow them up.

Or the dollar will go into free fall, and that will be finally be seen as bad news instead of good news.

‘Clunkers’ may be gone. But the silliness now moves off the road and into the kitchen.

‘Cash for Refrigerators’ Debuts in Fall. Really.

Not.

From Karl Denninger:

You knew it wouldn’t be that easy…..

Aug. 27 (Bloomberg) — The Federal Reserve argued yesterday that identifying the financial institutions that benefited from its emergency loans would harm the companies and render the central bank’s planned appeal of a court ruling moot.

“Harm the companies” eh?  You mean reveal that they are and have been insolvent, and The Fed has been engaged in covering them up?

“What has the Fed got to hide?” said Senator Bernie Sanders, a Vermont independent who sponsored a bill to require the Fed to submit to an audit by the Government Accountability Office. “The time has come for the Fed to stop stonewalling and hand this information over to the public,” he said in an e-mail.

The Fed is hiding the insolvency of banks.  They, along with their handmaidens in Congress (which is where you work Mr. Sanders) even went further and twisted the arm of FASB to legalize intentional accounting distortions that I argue amount to fraud.

The truth of what has been done keeps peeking around the corner in the form of bank failures and FDIC deposit insurance fund losses, with the latest charade being Colonial Bank that was carrying assets thirty seven percent above where its acquiring bank believes is a reasonable mark on the day prior to being taken over, and which in the FDIC’s last published release was considered “well-capitalized!

Audit the Fed? Good luck. Heck, you can’t even get them to release any information that they don’t think looks like ‘green shoots’.

From Christopher Gurkovic:

One of my best teachers, Alan Shaw, had a saying that always stuck in my head.

If a storm blows by and knocks a few shingles off your roof, then it’s no big deal. If a wrecker and a crane bash your house in, it is going to be a long time before it is back to normal.

I think the decline from 2007 would qualify as a wrecker and a crane, since it was the worst decline since 1929. Alan would expand upon the quote and say “the bigger the drop the longer the need for time of repair”. A foundation must be built if the market is to be sustained, and the current rate of advancement does not make for a well built foundation. To start with the knocked down wreckage has not even been cleaned up. The best thing that could have happened to the market is for it to have sat around flat on the low for many months, and then begin to rally. The market however, is energy in motion illustrated with charts. The current advance is a counter action that is following a primary action. The speed and magnitude of this counter action is indicating rough times ahead. In fact, the strength of the ascent will only further power the strength of the descent. I have been cautious all along, but with Hyper Exuberance running rampant, now is definitely the time to remember the old saying Buyer Beware.

For the Fib fans, Deron Wagner’s got the charts of the S&P (38.2%) and Nasdaq (50%) retracements.

The point of the objective charts above is not to scare you into watching for a sudden plunge back to the March 2009 lows (though it certainly is not out of the question). Rather, the long-term charts merely provide traders and investors with a grounded perspective of reality, at times when typical media hype stirs emotions. Maybe the dominant downtrend resumes and leads to an eventual test of the March 2009 lows, or maybe the Nasdaq breaks higher and begins a new, long-term bull market. We certainly can’t, and don’t attempt to, predict the future. But based on on the present facts, we only know the five-month rally off this year’s lows is still nothing more than a (rather impressive) bear market rally.

:snooze:

We interrupt our nap just long enough to bring you today’s incredibly dull market wrap.

Internals were mixed, with volume lighter on the NYSE but up a bit on the Nasdaq. Advances/declines were 9 to 10 on the NYSE but 10 to 9 on the Nasdaq, with up/down volume 4 to 5 on the NYSE but 10 to 9 on the Nasdaq. New highs/lows were 110/3 on the NYSE and 67/7 on the Nasdaq.

Leaders — Biotechs (+3.13%), Homebuilders (+1.99%), Disk Drives (+1.39%), Airlines (+1.30%), Comp. Hardware (+1.26%), Network (+1.06%), Semis (+0.82%), Paper (+0.72%)
Laggards — Steel (-1.62%), Gold/Silver (-1.27%), Metals (-1.11%), HMOs (-0.83%), Transport (-0.73%), Hospitals (-0.67%), Natural Gas (-0.41%), Software (-0.29%)

Treasury Yields — 6-Month: .25%,  2-Year: 1.06%,  5-Year: 2.44%,  10-Year: 3.43%,  30-Year: 4.19%

Energy Prices — Crude oil: $71.43/barrel,  Gasoline: $1.9826/gallon,  Natural Gas: $2.910/mmBTU

US Dollar Index — 78.632

Precious Metals — Gold: $945.50/ounce,  Silver: $14.29/ounce,  Platinum: $1232.00/ounce

BMB Note:  
Hopefully things will get a little more interesting sometime soon. They can’t get much duller.