CLOSING BELL THOUGHTS

The markets managed an end of day buying spree although not quite enough to bring them back to the Pivots or the unchanged lines; but nevertheless well off their lows.

A look at the SPX chart shows that over the last 14 days we have been stuck in a tight trading range between 1260 (bought for me) and 1280 (sold to you). The QQQQ also trades in a tight range and doesn't seem to want to stay under the $36.25 level; of course $37.25 also seems to be the top of the range.

It seems like the dog days of summer have caused the VIX/VXO tandem to remain depressed in spite of lower equity prices which is not helping with any SPX buy signals.

The NAZ volatility indexes, VXN/QQV act even worse as they are considerably below their 10 day SMA's in spite of the relative underperformance of the NAZ/QQQQ.

My overbought/oversold breath indicators are giving pretty good buy signals as they are as oversold as they have been since mid July.

I bought some SMH today, which was down 3.5%, and anticipate a bounce early next week in tech and the overall markets.

On a final note, Greg Valliere, the often interviewed CNBC guest, tells Maria that if the Republicans lose the House in November, investors will not want to own Pharma stocks. Have the pharmas ever done worse in any six year period than they have under W?

DRIFTING LOWER

So much for another attempt at the Pivot levels as the markets continue their southerly direction leaving yesterday's "buoyant and resilient" markets a distant memory.

The good news is that we are heading back to the 1260 support level on the SPX and a low 2 day RSI reading of 20; the bad news, the Volatility indexes have barely flinched and still trade near their 10 day SMA's. The 90 day SMA at 1275 has again provided resistance and hopefully the 50 day SMA at 1260 will provide support.

Just about all major market sectors are red with the worst being airlines, semis, metals, trannies and oils. The only green as far as indexes, the ISL, yes, the Israel country fund.

Market internals still ugly with 2,500 more losers than winners.

SLOW TRADING

The markets continue to trade lower with the worst performers being semis, trannies, small caps and oils. The only group in the green, the retailers and that is by fractions.

Market internals continue to be bearish with about 2,000 more losers than winners.

SMH is one of the worst performing ETF's based on the trade in ADI and I have taken a long shot in light of the 2.5% drubbing .

Also, note that the Pivot Points of the SPY (127.05), QQQQ (36.66), and DIA (111.1), have been initial resistance and the area of rejection this morning, my guess is another attempt at the those levels may be successful.

TRADER LOOK

The Market that offered "buoyancy and resilience" yesterday seems to have faded at the open as DJIA opens -20, NAZ-7 and SPX-3. The market seem to be taking its cue from the SMH, which is down 2% on the ADI miss and if the markets gets jiggy, it will probably show in that sector first along with the IWM small cap group.

Market internals following the SMH as they show 1,700 more losers than winners.

The sector list shows airlines, metals, small caps and techs underperforming and if you are looking for higher prices, that is not an encouraging list.

TECHNICALS-SPX

Checking the SPX chart, support appears to be the 1260 area (50 day EMA) and resistance seems to be at 1280 and 1290. Right now, smack in the middle at 1270 and its an August Friday, so don't expect much movement.

MACD Histogram looks to be rolling over (negative divergence) along with Stochastics, so don't be surprised by lower prices next week. Unless we get more RESILIENCE of course.

MORE RESILIENCE

Markets closed up on the day after bottoming in the morning trade but hardly a barnburner as the SPY was higher by 26 cents, DIA +26 cents, QQQQ+22 cents and the flight to quality trade, the IWM was higher by 53 cents or about double the big cappers.

The early hint that the market would try a move higher was the action in the SMH, which was higher from the get go. Other winning sectors included internets, retailers, airlines and trannies. The worst of the groups were metals, oils and biotechs.

No buy signals tonight as Volatility indexes and major market ETF's trade near the middle of their recent ranges.

Oil and metals sold off and if that continues tomorrow, I will be buying.

CUP AND HANDLE

The above chart, DBC, the commodity ETF which holds crude oil (35%), heating oil(20%), aluminum(12.5%), corn and wheat(11.25% each) and gold (10%).

Oil and gold are down big today so it may be time to own this commodity ETF. I was contemplating USO, the crude oil ETF, but I prefer to diversify among the various commodities so this looks good for today. Corn and Wheat could be good in the future as in addition to gassing up all the BRIC's, someone will have to feed them. And is that a cup and handle on the chart?

RESILIENT

The network that used to be known as CNBC, also known as bubblevision, has a new name, RESILIENT.

The markets aren't all that resilient as they have gone straight down since Friday's jobs numbers were announced. Remember, worse than expected job growth and the market rallied on the theory that the Fed would pause (bad was good). And it did pause and the markets again sold off (bad not so good), and after being down since Friday the market is all of a sudden resilient because it hasn't gone down today on a failed terror attack in London.

Retailers, small caps, airlines and semis are higher while metals, oils and biotechs are lower.

Market internals are positive with 500 more winners than losers.

What do I expect the rest of the day? More of the same with a drift up.

NOON UPDATE

The markets continue to bounce around the unchanged levels with internals showing a slight bearish tilt (-200).

Sector winners include semis, airlines, retailers and internets; losing sectors are metals, biotechs and oils.

DJIA components are about 50/50 between winners and losers with the best being AIG DIS INTC DD and MCD; losers are BA PFE MRK T XOM and JPM.

The markets look like they want to drift higher as the IWM is outperforming the bigger brethren and the SMH is higher by almost 2% as the NAZ is near the unchanged line.

Crude is way lower on any of a number of items including, fears of less air travel, a slowing economy, comments from OPEC saying do not worry about supply, "we will take care of you."

The OIH, chart above, is starting to look a bit tenuous as lower highs dominate. I am short the index and will trail my stop closely as this ETF always manage to turn higher just when it looks like it will crater.

OPENING CHECK

The markets have opened mostly lower and are meandering giving mixed signals.

How so: internals are bearish although improving with 1,200 more losers than winners; SMH/AAPL higher which is bullish; biotechs, oils, metals, airlines, GOOG, GS, brokers and banks all lower, which is bearish.

I have covered some of my QQQQ short but will look to redeploy at higher prices such as the pivot of 36.75.

Love Liz and her remarks about the remarkable resilience of the equity markets. Someone should remind Liz how the markets acted all the way back to yesterday.

CHATTER

Markets getting ready to open and lots of CNBC chatter about how the markets have recovered much of the early morning losses; and on days when terror has struck, the markets tend to open at their lows and finish up on the day. I would like to know if those events happened during the period after March 2003, when the real new bull market began. We are in a pretty ugly downtrend, so don't bet the farm that it will play out that way today.

WHAT PROBLEMS?

That is a picture of the Transportation Index- if you think the economy is not slowing, the trannies are telling a different story.

THE CLOSE

An ugly day for the bull as the markets opened on a big gap up and sold down for most of the day. Market internals never confirmed the rally as they opened at their best levels and sold down as the indexes moderated indicating lower prices are likely. Banks, brokers and small caps underperformed most of the day which also emboldened the bears.

I have read in a few places that the easy trade was the fade of the open and every one knew it. I guess most trades are easy after they work.

Anyhow, the SPX is back in its trading range with resistance at 1290 and support at 1240, and now you have the next easy trade (lol).

The Volatility indexes are not giving any buy signals as they trade just a few percentage points above their 10 day SMA's; the 2 day RSI is giving a buy signal with a reading of 5 on the SPX. My plan is to hold off on any long index trades as there isn't much reason to buy stocks when every rally gets sold. I plan to wait for the lower end of the SPX range which could happen by Friday.

Continue to watch the IWM, the banks and the brokers as they continue to be the best market tells.

AFTERNOON LOOK

Markets drifting around this afternoon after a morning rip in the NAZ/tech sector thanks to Johnny sunshine.

Seems like there are some structural problems as the NAZ internals show only 300 more winners than losers and that is not a number that tech bulls are going to like when the NAZ is up 21 points.

Banks, Brokers and small caps acting doggy, and when all those "tells" line up, its hard for the markets to run the other way. Shorting strength looks like the ticket for now.

GOOG AAPL and internets also acting poorly so keep a tight leash on tech winners.


I shorted QQQQ near the 37.2 mark and will be watching closely, but if they dip down near the close, I will hold em overnight.

MORNING MADNESS

The NAZ and tech continues to trade higher as they dwarf the increases in the SPY/DIA/IWM triumverate. Some resistance may kick in on the QQQQ at the 37.2 level; also be aware that the NAZ internals opened the day with over 1,400 more winners than losers but has shrunk as the market has rallied to only 900 more winners.

I daytraded some DIA on the dip back to the pivot but have since sold and now am looking for a short QQQQ entry

The XLE, the integrated oil ETF is giving some ominous signs that Oil may trade lower before it hits the often talked about $100 price target. There are negative divergences on MACD Histogram and on stochastics so just a heads up to the oil longs.

OPENING TAKE

The markets open at/near their highs with the NAZ being the best performer. Market internals opened way bullish, but have already dropped from 3k more winners to less than 2k, so keep a close eye on any long positions as the gap faders may rule the morning.

Some tells to watch- GOOG and AAPL which have already flipped to red and GS which is hanging near the unchanged line. Note the BKX and XBD are barely green, also indicating some hesitation to the rally.

IWM continues to be the best tell of the market imvho and if that starts to dive lower, you can assume the other indexes will follow.

Best performing sectors include tech, SOX, metals and oils; worst include homies, airlines, trannies and internets.

And did anyone catch Chambers' comments on the backdating of options "its our policy not to backdate options" which of course sounds like we might have, but we didn't mean it, or, if we did, we hope no one finds out, and its our policy not to break the laws. Great stuff Johnny.

CHAMBERS OF EUPHORIA

Its Wednesday, which means a 79% chance of a gap fill. Well not sure it will happen today with the large gap as I type (NAZ +14, SPX+7), but probably some of it will, so a short entry near the open may be a profitable play.

Why the gap up? A fade of fed pause reaction and guidance from Johnny Chambers. Certaintly a good thing that there are no backdating problems at CSCO.

THE CLOSE

CSCO not only beats by a penny, but they beat by two pennies and yikes the stock is trading up a dime in the after markets. I would like to know who exactly cares about CSCO's numbers besides the reporters covering them.

More importantly, I see FTO trading up over 6% today as the OIH and XLE were both down.

I mentioned earlier that the markets are getting a bit oversold here on a short term basis. I have not acted yet, but I may look to add SPY/QQQQ/SMH on weakness tomorrow.

And Happy Birthday wishes to The Graduate, Dustin Hoffman, who turns 69 years young today.

NUMBERS

The market sell off is accelerating as I type and anyone who thought the market would love the news of the pause and dovish language, pull up the afternoon charts of the brokers and the banks, STRAIGHT DOWN, also check GS and C.

IWM, the best market tell around, is at its worst levels of the day after being down earlier when the other major indexes were higher.

Market internals have also gone to ugly red with about 1,500 more losers than winners.

DJIA components also telling an interesting story with MRK PFE PG the best of the green and UTX CAT and BA the worst of the red. Anything interesting there as the soaps/drugs lead.

Among the sectors, GOOG and the internets remain green while homies, retailers, oils and small caps are the worst of the red.

The silver lining behind the dark cloud is the 2 day RSI on SPY/QQQQ/IWM all getting to buyable territory near 10. Volatility indexes not confirming yet as they still trade at about 5% above their 10 day SMA. I will be covering some QQQQ into the close and will trail the rest closely as tomorrow may be turnaround Wednesday.

FINALLY OVER

Thank goodness all the blather is over and Big Ben did the expected and paused while giving us more dovish language in that he expects inflation to moderate.

Even with all the good news from Ben the markets have turned south to new lows for the day after an initial trade higher. I will take full credit for those who shorted before the news and don't remind me of any prior lousy advice.

Final note, we can now go on vacation for the rest of the summer without the fear of missing something important.

TECHNICALS-IWM

The IWM is conspicuously lower today and the market internals have flipped to flat even though the DJIA is +35 and the NAZ IS +4. Oils has flipped to green and is back over $77. No inflation here.

Technically, the IWM does not look very good as Stochastics and MACD are turning down after making a lower high. It looks like a trading range and I never heard Bob Pisani make so much sense noting the market is near recent highs and hawkish language would not be surprising.
On a final note, if you think big caps will out perform small caps, go to cash as they will only do less worse.

SLOW START

Markets open slightly higher with about 900 more winning stocks than losers. Best sectors include homies, consumers, defense, banks and brokers; weakest include AAPL, YHOO, metals, retailers, airlines and drugs.

GOOG is trading higher by 5 on the deal with News corp and if it fades later in the day, we may have a clue of future market direction.

My guess is still that the market has already priced in a fed pause and bulls have bought ahead of the news.

Shockingly, I expect slow trading this morning as traders await Big Ben.

CLUES

Looking at the charts trying to find something telling; MACD Histogram may be giving us a Negative Divergence as it is making a lower high. Stochastics looking like it wants to head lower, and Art Cashin's 90 day SMA may again be a resistance line which is directly above today's close.

BIG BEN AT BAT

The markets meandered through most of the day with dips being bought and rallies being sold and the usual suspects, metals and oils, the winners with biotechs, brokers and trannies the losers. My take is that those sectors are not pointing in a bullish direction.

Lots of chatter everywhere about Big Ben and I am anxious for it to be over. My guess is the longs are in front of much anticipated "bullish news" but if Ben dissappoints it could be ugly.

One final note, Maria all excited about earnings growth of 16% on the SPX, unfortunately, no one reminds her how much of the increase is from oil companies and higher oil prices. Shocking.
And what are those numbers going to look like going forward when oil companies have tougher comps?

SNOOZE FESTIVAL

Markets continue to trade lower meandering off their lows and highs, in a narrow range in anticipation of tomorrows fed decision. Some will say not to short this dull market and my reaction is not to play this market as there is very little edge.

Internals are not suggesting any great turnaround, and market leadership is not what a bull would want as metals and oils lead while biotechs, trannies and brokers are to the downside. C and GS were higher earlier and have now flipped red and that is not a bullish tell.

As for tomorrow, if I were long, my biggest fear would be a rate rise and hawkish commentary. If I were short, my worry would be a pause, but since most are expecting the pause, my guess is most have acted and those longs will be selling.

WHAT IF

Yes, what if Uncle Ben decides to raise again tomorrow; will the sellers overwhelm us? My guess is yes and check out Revshark who says:

"I'm using the opening weakness to start a QQQQ long position for a trade prior to the FOMC interest rate announcement. I believe we'll get a higher level of optimism and some short-covering that will boost us at least a little before the news hits. I'm going to try to catch that and have started averaging into the QQQQ this morning."

If they raise tomorrow, there will be lots of folks jumping out of stocks and that may be a pretty good time to buy. Right now, the sidelines looks like a pretty good place to be.

Market internals still bearish with 1,800 more losers than winners; biotechs, techs, airlines, small caps and brokers the worst groups with oils/metals and GOOG being the best. AAPL has gotten a bid and that may be something worth watching.

OPENING CHATTER

Markets open lower and oil, which was way up on the BP news, is falling back on OPEC's comments that they are "willing and capable" to meet any gap from the Alaska outage.

Market internals show 2k more losers than winners and best performing sectors include oils and metals; worst performers are airlines, internets, biotechs, small caps and trannies.

SMH is trading higher out of the gate and my be an interesting early tell.

Volatility indexes are higher VIX+5.4% and VXO+3.2% but not high enough to generate any trading signals.

Someone commented the other day about using QLD or QID, the double weighted QQQQ, my initial reaction; bad spreads.