NEXT BIG THING

The SPX "bounced" from the 200 day SMA yesterday afternoon after briefly kissing it and perhaps setting us up for a little bounce back rally early next week. Stochastic and MACD are both overbought and indicating an eventual trip lower and the next thing one may here from market technicians is the cross of the 50 day under the 200 day. That cross is called by some market technicians as the kiss of death and it may accelerate a move out of stocks by various market timers.

SUPPORT UPCOMING

After revisiting the Iran situation, and taking the cue from crude, the markets have turned south and are again nearing their 200 day SMA support levels at 1263 on the SPX. Those morning comments about volatility being mean reverting are also coming to fruition as today's SPY range is about $1.50 (equivalent to the range of the last four days) if one includes the premarket activity. NYSE internals (-700) however, aren't bad in light of the price action so we may get a bounce in the last hour. Traders may also want to cover shorts and square positions into the close.

THE ACTION

The markets seem to have flipped the switch to neutral on the hope of a cooperative Iran. Seems that these guys flip the switch every other day changing their position as the winds blow and I am not sure that I would buy stocks long term based on today's speak. The flip has also caused crude to turn tail back under $75 so be careful as the markets and crude generally trade in lock step.

Winning sectors today include biotechs, airlines and oil majors. Losers include semis, brokers and cyclicals. Market internals are flat with the better action on the NYSE as the fixed income instruments help the fray with rates back down to 5.13% on the ten year.

I am not going to read too much into today's action and will wait for next week for hopefully a clearer picture of where this market is headed. For now focused on Bags and Nadal and hopefully they will provide some afternoon entertainment.

THE REV

Revshark on realmoney.com seems excited about the action today in the semis. Not sure I agree as every move higher seems to be sold. The chart above is my take, here is his take:

"I'm much more concerned about how the market deals with the estimate cuts from Advanced Micro (AMD:NYSE). Semiconductors have been badly abused for months now, and if they can hold up in the face of more bad news, that will be an indication that the worst has already been priced in. I'm looking closely at some of my small-cap favorites in the chip sector, such as BTU International (BTUI:Nasdaq) and LTX (LTXX:Nasdaq). If the SOX continues to improve, I will be adding to my positions."

CONGRATULATIONS

The markets open in the red with 1,500 more losing stocks than winners and best performing sectors include biotechs, drugs and oils. Worst groups are techs, internets, metals and brokers. DJIA is worst performing major market index thanks to MMM as eleven components are higher and nineteen lower.


John Succo nailed it selling the futures ramp in the premarket and maybe my preponderance of evidence call also wasn't so bad. Unfortunately, the gap fill trade worked before 9:30 so no chance to put that one on with equity ETF's. And maybe a thank you is in order to MMM as they lower Q2 guidance. Are they telling us something meaningful as they are a pretty good tell for the economy in general as they sell thousands and thousands of products. Is it that oil prices eventually do matter?



Oh, and one other fact to add to my preponderance of evidence take, the QQQQ SMH and IWM have been the weakest sectors of late. They lead on the way up and they lead on the way down is the way it usually works.

SHOCKING

The numbers come and shockingly the ADP numbers were way off as the economy grew non farm payrolls by 121K vs the consensus of 160K. The ADP numbers were well into the 200's so it just goes to show that trying to predict these numbers is not a great idea. After all, 50,000 jobs in an economy that employs over 100,000,000?.

Of course the futures ramped higher on the "bad news" and the Friday gap is in play as is my earlier preponderance of evidence best guess .

John Succo of Minyanville.com fame is out with his take on the numbers:

"We cannot speak for market participants buying futures after this employment number. We don't understand what they like as they bid up stock futures. This to us was a bad number, indicating stagflation. The wage component indicates pressures at the same time that employment continues to be below expectations. We sold as many stock futures as we could."

On another note, according to "the book," the odds of a Friday gap fill are about 78%. And how about the new odds of an August Fed rate hike down to 58% from a pre employment number reading at 68%.

BIG MORNING

The big employments number is due out at 8:30 AM and all eyes are focused on it as it will no doubt move the markets and based on the charts its going to move the markets in a big way. Why? Because the markets have traded in a very tight range since last Thursday's rip and the markets are due for a period of higher volatility as volatility is mean reverting.

Which way? Well we are right at the downwardly sloping 50 day SMA and a bit above the 200 day SMA support level (126.2) so a test back down would not be surprising.

The Volatility indexes are also quite oversold at levels equivalent to where they broke out from in the middle of May.

Stochastics and MACD, as noted on the chart above, are also at overbought levels so the preponderance of evidence says lower.

CRAMER TIME

The markets have given up much of the morning gains with the DJIA performing the best in light of MO (accounting for half the DJIA rally). SMH QQQQ IWM all bringing up the rear with the oil sector. Any chance the oils will be bought tomorrow after today's inventory news is digested?

Jimmy positive on HD over LOW and apologizing for Nardelli, eh, who cares. Stealth rally in Bios; Jimmy, they are up for about two or three days in a row, he likes CELG and DNA, whatever you say Jimmy. Oh and Jimmy, the BTK is up .4% as I type. I know there is always a bull market somewhere but I don't think the chart of BTK or IBB qualifies.

And I loved Jimmy's talk with the guy on the beach about KRY. In short, Jimmy told him you have to sell those higher. Of course, as Adam proves, it wasn't that easy. Thanks James.

AFTERNOON LOOK

The markets continue higher but some dark clouds certaintly look like they are about to set in on the days trading. NYSE breath is still bullish with 600 more issues higher than lower, but the NAZ breath is unchanged with the NAZ IWM and SMH all flat to lower. So it is all big caps today and they may not be a good thing for the near term.

The 10 year Bond is back down to the 5.19% area and that is probably adding jig to the NYSE internals.

Sector leaders today include metals, drugs, brokers and retailers. Oils are mixed with transports and internets bringing up the rear.

As mentioned earlier, the 50 day SMA on the SPX is probably causing some selling today and I really don't expect much of a ramp into the end of the day as many will be nervous about tomrorrow's job numbers.

BIG MO

The markets have gotten a boost (temporary?) from the Court ruling on the Engle case in Florida. MO is flying to a new all time high in the 78/79 area and folks are saying that the company can now be busted up and the true value can be realized. That may very well be true but I think market bulls ought to be watching the QQQQ and the TECH/SEMI space as it continues to act poorly in relation to the Major Market indexes.

Strongest sectors today are the metals, drugs and bios. Market internals continue to act well with 1,300 more winners than losers. Also keep in your front view the fact that the SPX is sitting at its 50 day (downwardly sloping?) SMA and tomorrow is Jobs news day.

EARLY PEEK

Markets open with a bullish slant with the DJIA being the best performer as 23 out of 30 are green. The NAZ /QQQQ /TECH continues to underperform and that is not longer term bullish.

Market internals on the early read show 1,500 more ups than downs and sector leaders include drugs and metals. Oils are slightly lower but dip buyers showing in that sector would hardly be a surprise.

My plan for the day is buy the dips and sell the high ticks.

TECHNICALS - SPY

The markets seem to be in the middle of the most recent activity with the 10 and 200 day SMA's pointing up and the 50 day pointing lower. The 2 day RSI on the SPY is also in the middle at 43 with the VIX not offering much help either as it stands a bit below its 10 day SMA.

Like I said yesterday, for now it looks like daytrading is the way to go and I will be focusing on the internals, the financials, the techs and the pivots.

The Pivot on the SPY today is 127 with support at 126.6 and resistance at 127.5. The DIA pivot is 111.5 with resistance at 111.8 and support at 111.15. I doubt we see a wide ranging day as many participants are still away and many will be waiting for tomorrow's employment numbers. Today however does bring the oil crop so heads up in the oil patch at 10:30 eastern time.

ONLY PLAY OF THE DAY

Ugh, he is back and how nice was it with him on vacation? He is offering up JCP VLO and steel stocks so thanks much Jim.

The markets tried to rally and the DJIA managed to get within 35 points of the flatline, but no, the market internals, the QQQQ and the SMH all acted as the tell, and told that the rally was not going to stick. Maybe a better question for the afternoon is why the NAZ and the techs/semi's act so poorly and can't get off the floor.

My DIA short trade was not a homerun (covered too early at 111.35) , but in the low volatility environment of this afternoon I will take it, as someone I used to know used to say, its better than a kick in the head.

On a longer term basis, the Volatility indexes have come off the floor but are only trading at their 10 day SMA's so no short term buy signals from them. Short term RSI indicators on SPY DIA etc are also middle of the road so cash and daytrading seem to be the play until we get some better signals.

NO NUKES?

Not sure if the markets are now dismissing the NK threat or the markets are going about their same old ways and following the price of crude. Just as T Boone goes on bubblevision and discusses $80 crude the markets put on the brakes and reverse as the oil stocks, which were leading on the way down, have flipped to green.

Internals have barely recovered and show 3,100 more losers than winners. The TRIN has also improved to almost flat and that adage of markets that are weak most of the day tend to close at or near their lows will be tested. I am following that adage and have shorted the DIA here at 111.6. Not sure I am going to make a windfall profit on that trade as a quick flip is all I am looking at.

BAD BREATH

The markets remain lower and my guess is the trade of the day will be to short any of the pullups as the old adage is "markets that are weak all day tend to close at/near their lows."

Market internals remain as bad as they generally get with 3,800 more losers than winners and all sectors are lower with the worst being metals, oils, semis and small caps. Brokers and banks are also pretty ugly down 2% and 1% respectively.

I sold some OIH puts into the carnage and will probably add on further weakness.

Hopefully the tennis and the cycling will provide a little diversion from the ugly market action, unfortunately similar to the every day occurrence in the north east, it is also raining in London.

THE OPENING LOOK

The buy the dip crowd is no where to be found (yet) as the markets stair step lower from the outset. Market internals showing 3,600 more losers than winners with the big sectors losers being gold, oils, semi's and small caps.

Five of the 30 DJIA components are green with HPQ T and IBM the best of the bunch. Biggest losers are BA CAT and AA.

Volatility indexes ramping higher, with VIX and VXN up 11% and 15% on the VXO. So the oversold conditions on these pups quickly abates.

RSI indicator on DIA and SPY also now back in the 35/40 area.

MORE ARMS

So the markets are upset that North Korea launched missiles that landed in the Sea of Japan. Seems to me it should be bullish as the "long range" missiles went about as far as a Chad Pennington down and out.

I am not itching to do the fade the gap trade today without some "confirmation" such as a strong financial sector or rapidly improving market internals. I don't see it now but I will be watching closely.

The markets are fairly overbought with both the Volatility indexes and the 2 day RSI indicators flashing sell signals. The question market watchers are going to want an answer to is, will the buy the dip crowd step up after many sold lower and may be itching to get back into the newest bull market.

Dick Arms on realmoney.com has some interesting comments this morning in a column that he titles "Stay Long But Be Wary" and goes on to say "I would suggest to stay with long positions established on the June lows, but with a wary eye."

Last week he wrote that "profit taking and even some shorting may be in order." Not sure if he realizes that he is giving mixed signals but I find it kind of disingenuous. Maybe he is just following the lead of the RM chief forecaster.

ONE AND DONE

Done with trading as the DIA went in a straight line from the Pivot at 111.9 to resistance at 112.2 and I am done. I suspected the floor traders would jump right on the pivot and so they did.

Keep in mind for Wednesday, when more folks will be involved with trading, that the VIX and the VXO are nearly 20% below their 10 day SMA's, and the 2 day RSI on the SPY and IWM are 94 and 95 respectively. Trail stops closely as we are due for a short term pullback.

IWM V SPY

DJIA now up 58 SPX up 7.5 and the IWM up .8% so it continues. I bought some ETF's at the DIA pivot point and don't expect to hold em for long, probably until I see another ramp up on the ticks or a buy program and then out for the day. Internals continue to show bulls with the advantage with 1,300 more winners than losers.

Every day we are bombarded on bubblevision about how it is the Large cap's turn to outperform and many probably feel its happening now. Well, not so fast. Since the bottom or perceived bottom on June 14, the Russell 2K is up 8.8% (670 to 729) and the SPX is up 4.8% (1219 to 1278). I said it before and I will say it again, if you expect the SPX to outperform, it will only be because it does less worse than the Small Caps. Bottom line, if you anticipate a large cap outperformance, move to cash.

MONDAY FLIP

I was a bit surprised on Friday when I saw that the DJIA closed down 40 after being up slightly or down slightly for most of the trading day. Could not have imagined what happened in the last few minutes. Well the answer is nothing as the DJIA gains the 40 right back on the open. Programs? Futures? Don't know why Russell rebalancing would impact but who knows.

Anyhow, the market internals are a bit bullish this morning with 700 more winners than losers with the best performing sectors being metals, semi's,oils, brokers and banks. Biotechs the only red I see other than the Volatility indexes.

My plan of the day, not much except maybe buy some dips if they show to flip.