Bear Mountain Bull

Quote seen at The Oil Drum (one of the best resources for info on the oil spill, BTW):

“We have only two modes—complacency and panic.”
—James R. Schlesinger, the first energy secretary, in 1977, on the country’s approach to energy

Sounds a lot like our financial system as well.

• Browse through a selection of group charts by using these links: set #1 — set #2 — set #3 — set #4.
• For a more detailed breakdown of group movement over various time periods, try the Industry Group Tracker at WSJ Online, the industry group tools at Finviz.com, or the list of Morningstar industry groups at FreeStockCharts.com.

A bounce up off the lows for the Sector SPDRs, but not much more than that at this point — the charts are still in pretty poor shape:

The numbers as the market tries to recover from the mess of May:

Charts courtesy of StockCharts.com

A trio from Florida:
Bank of Florida – Tampa Bay, Tampa, FL
Bank of Florida – Southwest, Naples, FL
Bank of Florida – Southeast, Ft. Lauderdale, FL

And a couple more for the long weekend:
Sun West Bank, Las Vegas, NV
Granite Community Bank, N.A., Granite Bay, CA

Internals were negative, with volume light. Advances/declines were near 6 to 13 on both exchanges, with up/down volume 1 to 5 on the NYSE and 2 to 7 on the Nasdaq. New highs/lows were 30/12 on the NYSE and 30/32 on the Nasdaq.

Leaders — HMOs (+0.07%), Utilities (-0.14%), Drugs (-0.49%), Defense (-0.49%), Software (-0.50%), Biotechs (-0.56%), Health Care (-0.63%), Natural Gas (-0.75%)
Laggards — Oil Services (-5.22%), Paper (-2.74%), Steel (-2.27%), Banks (-2.25%), Commodities (-2.16%), Network (-2.14%), Chemicals (-2.03%), Oil (-1.85%)

Treasury Yields — 6-Month: .22%,  2-Year: .77%,  5-Year: 2.09%,  10-Year: 3.28%,  30-Year: 4.20%

Energy Prices — Crude oil: $74.09/barrel,  Gasoline: $2.02/gallon,  Natural Gas: $4.36/mmBTU

US Dollar Index — 86.642

Precious Metals — Gold: $1214.50/ounce,  Silver: $18.37/ounce,  Platinum: $1546.00/ounce

BMB Note:  
Yes, it was a light-volume day going into a long weekend, but I’m sure it wasn’t the type of day the bulls were looking for as follow-up to yesterday’s big move up. Apparently, those who ‘bought ‘em’ yesterday weren’t willing to ‘hold ‘em’ over the three-day shutdown.

Is the ‘bounce’ over already? Who knows? I think they’ll give it another shot, but as we said yesterday, unless things change, this just looks like an oversold bounce that will (hopefully) set up some short entries. We’ll see.

They want your money, but they’re willing to keep paying you NOT to work.

What’s wrong with this picture?

Larry McMillan’s market observations for the holiday weekend (click here for column with charts):

The long-awaited oversold rally finally appears to be occurring, so let’s see how that affects the intermediate-term indicators, which have universally been on sell signals.

$SPX remains in a downtrend, as there continues to be lower highs and lower lows. Also, the 20-day moving average continues to decline. Thus, its intermediate-term trend is still bearish.

The equity-only put-call ratios have continued to race higher as the selling persisted over the past few weeks. As a result, these ratios have reached a rather high level on their charts, making them oversold. Now, the standard ratio has possibly begun to roll over (see Figure 2). This could be the beginning of a buy signal.

Market breadth had reached extremely oversold levels. Now, breadth indicators could move to buy signals soon.

Volatility indices ($VIX and $VXO) spiked upwards a week ago, but that was their peak (at 48, on May 21st). $VIX declined sharply from that peak of a week ago, and that is an oversold buy signal.

In summary, things are taking on a much more bullish tone. The oversold conditions that had become quite extreme have finally spurred the rally we are seeing now. The most bearish indicator, though, is price — the chart of $SPX. So for now, enjoy the oversold rally. Just don’t become married to it.

We’ve talked about FreeStockCharts.com here at BMB before — now they’ve added mutual funds and bulletin board stocks to their symbol catalog. Have a look at their intro video.

Internals were very positive, with volume slacking off. Advances/declines were 13 to 1 on the NYSE and 7 to 1 on the Nasdaq, with up/down volume better near 19 to 1 on both exchanges. New highs/lows were 25/11 on the NYSE and 28/19 on the Nasdaq.

Leaders — Disk Drives (+7.27%), Paper (+7.08%), Steel (+6.16%), Metals (+5.93%), REITs (+5.51%), Oil (+5.38%), Semis (+5.17%), Comp. Hardware (+4.86%)
Laggards — Health Care Products (+1.91%), Health Care (+1.92%), Utilities (+1.93%), Biotechs (+2.19%), Drugs (+2.30%), Defense (+2.47%), Oil Services (+2.54%), HMOs (+2.77%)

Treasury Yields — 6-Month: .23%,  2-Year: .87%,  5-Year: 2.18%,  10-Year: 3.35%,  30-Year: 4.24%

Energy Prices — Crude oil: $74.71/barrel,  Gasoline: $2.04/gallon,  Natural Gas: $4.32/mmBTU

US Dollar Index — 86.249

Precious Metals — Gold: $1211.50/ounce,  Silver: $18.46/ounce,  Platinum: $1561.00/ounce

BMB Note:  
Well, it looks like stocks finally got a bounce to stick, at least for a day, though volume fell off considerably — back to Monday’s levels or lower.

So, we’ve been expecting a bounce, and it looks like we may finally get that bounce — how far, how long is unknown. But, as Dave Landry would say, a bounce from oversold conditions is hardly a reason to buy (your view may differ). Until the market tells us differently, we’ll be looking for opportunities to re-enter on the short side.

Tomorrow is the last trading day before a three-day weekend. Beware the light-volume shenanigans.

We haven’t talked much about the Gulf oil spill — probably because there isn’t much to be said. It’s obviously an enormous disaster, in so many ways.

Some interesting stuff from Mish this morning — if the info is correct, the situation is like so many others: some folks knew there were problems, but were told to proceed anyway.

…the problem is debt:

How did it come to this point of staring into the abyss and, perhaps, falling in?

In a word, the problem is “debt”.

Too much of it.

—

There is far too little admission of the basic problem here.

The entire West has become a group of debt addicts – governments, corporations, and individuals – and, instead of trying to have an intervention, we’re just giving lip service to the idea that we’ve spent too much money that we didn’t have and that we can’t continue to do so.

—

The current path is clearly unsustainable.

Why doesn’t someone just stand up and say, “Let’s just have a miserable next five years and clean up this mess rather than relegating the entire developed world to a lost decade … or two?”

Why?

Because the path back to a more reasonable lifestyle – where income better matches up with outlays and printing presses need not be run so often – is believed to be too hard.

Politicians have made promises that they can’t keep but they keep getting reelected because a lot of people in the world really believe that there is such a thing as a free lunch.

—

We’ve come to a crossroads where an unsustainable system of expanding credit and debt seems to have reached its upper bound and there are no pain-free ways to make the system sustainable again.

The problem is too much debt and the solution involves pain.

It’s time that we all got used to that idea.

The 10200 area has been the ceiling for the Dow on three of the past four trading days.

Chart courtesy of StockCharts.com

Internals were mixed, with volume lighter on the NYSE but heavier on the Nasdaq. Advances/declines were 3 to 2 on the NYSE and 5 to 4 on the Nasdaq, with up/down volume 5 to 4 on the NYSE but 2 to 3 on the Nasdaq. New highs/lows were 24/26 on the NYSE and 19/57 on the Nasdaq.

Leaders — Airlines (+2.21%), Oil Services (+1.43%), HMOs (+1.38%), Transport (+0.94%), Hospitals (+0.93%), Natural Gas (+0.46%), Homebuilders (+0.30%), Paper (+0.27%)
Laggards — Comp. Tech (-1.26%), Retailers (-1.22%), Comp. Hardware (-1.12%), Drugs (-1.02%), Steel (-0.98%), Oil (-0.98%), Disk Drives (-0.93%), Network (-0.90%)

Treasury Yields — 6-Month: .23%,  2-Year: .81%,  5-Year: 2.01%,  10-Year: 3.19%,  30-Year: 4.09%

Energy Prices — Crude oil: $70.90/barrel,  Gasoline: $1.96/gallon,  Natural Gas: $4.13/mmBTU

US Dollar Index — 87.173

Precious Metals — Gold: $1212.70/ounce,  Silver: $18.08/ounce,  Platinum: $1521.00/ounce

BMB Note:  
If you like volatility, you’re loving this. But along with volatility, much of the time, comes unpredictability. And that can drive you nuts.

Everyone thought for sure that ‘the bounce’ was starting today, as the indices jumped out of the gate. They held positive most of the day, but fell off a cliff in the last hour, and dove back into the red (although the Trannies and the Russell did finish green).

If the market can’t put together a rally when things are this oversold, it could be in worse shape than we thought. Maybe it’ll have better luck next time…

New home sales got a boost at the tax credits run out — Calculated Risk has the story and the updated charts, but adds this warning:

New home sales are counted when the contract is signed, so this pickup in activity is related to the tax credit.

For new home sales, the tax credit selling ended in April and sales will probably decline sharply in May.

Peter Boockvar adds:

In the last home sales figure to reflect the home buying tax credit, the masses came out as April New Home Sales, a measure of contract signings, totaled 504k, 79k higher than expected and at the highest level since May ‘08. However, as seen with the purchase component of the weekly MBA data, the May data will show a sharp decline. We know a hangover is coming but we don’t know what happens after.

Trading advice from Deron Wagner:

Patience and discipline are prerequisites to the business of stock trading. We’re always actively monitoring for the next opportunity with a positive reward-risk ratio, but we don’t force them when they’re not there. As they did two days ago, stocks are again trying to bounce off their lows, but there are not yet buyable patterns that excite us. Instead, we’re more inclined to wait for the bounce to carry us into major levels of resistance, then initiate new short positions again. If something major happens that changes the scenario, we have no problem changing our bias. As always, we will focus on trading what we see, not what we think.

What he said.

The S&P danced around those February lows, but bounced back up. The index is a long way down from that 50-day, and that gap will have to shrink at some point — either prices bounce up or the average falls, or most likely, some combination of the two.

Chart courtesy of StockCharts.com

Internals were mixed, leaning negative, with volume heavier than yesterday. Advances/declines were 7 to 12 on the NYSE and 1 to 2 on the Nasdaq, with up/down volume a positive 5 to 4 on the NYSE but 8 to 11 on the Nasdaq. New lows are picking up, with highs/lows at 17/133 on the NYSE and 8/178 on the Nasdaq.

Leaders — Steel (+3.25%), Gold/Silver (+3.10%), Metals (+3.04%), Airlines (+2.26%), Oil Services (+1.70%), Paper (+1.58%), Retailers (+1.38%), Banks (+1.03%)
Laggards — HMOs (-0.94%), Utilities (-0.70%), Health Care (-0.50%), Hospitals (-0.47%), Software (-0.38%), Comp. Hardware (-0.26%), Disk Drives (-0.25%), Insurance (-0.20%)

Treasury Yields — 6-Month: .22%,  2-Year: .75%,  5-Year: 1.98%,  10-Year: 3.17%,  30-Year: 4.07%

Energy Prices — Crude oil: $69.42/barrel,  Gasoline: $1.94/gallon,  Natural Gas: $4.07/mmBTU

US Dollar Index — 86.537

Precious Metals — Gold: $1199.90/ounce,  Silver: $17.88/ounce,  Platinum: $1511.00/ounce

BMB Note:  
Another up-and-down down-and-up day as the indices sold off hard out of the gate, then clawed their way back up throughout the day, and a few indices touched green just before the bell. Things remain oversold, with the indices stretched far away from the 50-day moving average to the downside. So we expect we’ll see a bounce sooner or later, but that hasn’t materialized yet.

It’s almost sure that the ‘bottom-callers’ will be out after today’s ‘reversal’, but the action was hardly ‘climactic’, and the internals were still mostly negative. But maybe it’s a spot for that bounce to get started — we’ll see.

We’ve been snagging short-side profits on the spikes down — like this morning — and if that bounce ever gets here, will probably look to reload those short positions.

From Peter Boockvar, re: Fedspeak:

I’m sorry if this sounds too cynical. I’m actually a very happy person. Fed Pres Bullard in the Q&A of today’s speech said their quantitative easing program has been “very successful,” that they will remove it in a “reasonable time frame” and the Fed could use the quantitative easing tool again in the future. He also said deflation is not a risk right now as higher inflation is more likely than deflation (I’m quoting Bloomberg). Translation: money printing works to temporarily fix and paper over a financial crisis as we got a huge rise in asset prices, we don’t want to give it up so soon and if things turn south again, we’ll knock down more trees and ramp up the printing press again. Also, printing money will eventually lead to inflation and the more disinflation/deflation we see in the short term, the more we will print.

Peter Navarro:

Plan A is in effect for retail investors – remain in cash until the trend reestablishes itself. The big question now is whether we have “merely” a major correction OR the beginning of a downward bearish trend.

The answer to this question lies in the economic tea leaves. Will the U.S. recovery start to falter, as some regional data is suggesting? Will the European economic slowdown and crisis spread to the rest of the world? Is the 20% drop in the Chinese stock market in the last five weeks a harbinger of a bubble economy bursting or “merely” a Chinese style correction? Is the drop in long term yields the beginning of a flattening of the yield curve and a signal of trouble ahead?

Since no one really knows the answers to these questions, there is much uncertainty, which is reflected in higher volatility in the financial markets. Ergo, being in the market now is a roulette-wheel gamble rather than a poker-style speculation.

Remember: The institutional investment managers who go on the tube will tell you that “this is a great buying opportunity.” They do so because they are stuck on the long side and forced to be in the market by their rules. Don’t be their patsy. As they tell you to “buy, buy, buy”, they use your purchases to sell, sell, sell.

From Calculated Risk:

“This is a market purely on life support, sustained by the federal government. Having FHA do this much volume is a sign of a very sick system.”
Federal Housing Commissioner David Stevens at Mortgage Bankers Association Government Housing Conference (see Bloomberg, the FHA was involved in more transactions in Q1 than Fannie and Freddie combined)

No kidding…

…streaming into the ‘dark pools’:

…six investment banks have finally started providing some modicum of transparency into how much trading actually occurs in their dark pool venues. Today, MarkIt will start disclosing European trades matched in the internal crossing engines of Citigroup, Morgan Stanley, Credit Suisse, JPMorgan, UBS and Deutsche Bank.

Just one more tiny morsel of transparency.

Internals were negative, with volume on the light side. Since the WSJ data page isn’t complete, my best guess is that advances/declines were 2 to 3 on the NYSE and 1 to 2 on the Nasdaq, with up/down volume about 1 to 3 on each exchange. New highs/lows? How ’bout 12/29 on the NYSE and 12/51 on the Nasdaq. Those numbers may not even be close…

Leaders — Telecoms (+0.29%), HMOs (+0.04%), Gold/Silver (-0.03%), Health Care Products (-0.06%), Biotechs (-0.11%), Health Care (-0.22%), Internet (-0.31%), Retailers (-0.41%)
Laggards — Oil Services (-3.95%), Banks (-3.29%), Oil (-2.52%), Broker Dealers (-2.47%), REITs (-2.33%), Natural Gas (-2.14%), Paper (-2.10%), Semis (-1.88%)

Treasury Yields — 6-Month: .21%,  2-Year: .74%,  5-Year: 2.01%,  10-Year: 3.21%,  30-Year: 4.10%

Energy Prices — Crude oil: $70.03/barrel,  Gasoline: $1.96/gallon,  Natural Gas: $4.04/mmBTU

US Dollar Index — 86.330

Precious Metals — Gold: $1193.20/ounce,  Silver: $17.92/ounce,  Platinum: $1530.00/ounce

BMB Note:  
The market didn’t do much to help itself today, especially late — instead of ramping in the final hour, things sold off instead. We’ll still be looking for possibilities on the short side, but we’d like to see a little bounce to set things up better. Maybe we get it, and maybe we don’t.

Ron Sen, author of the Technically Speaking blog, with another classic on Twitter:

The market? Like pushing a basketball uphill…with your nose. Even if you can do it, it’s a waste of time and energy.