GONE FISHING

BACK ON TUESDAY

JOBS JOBS JOBS

The markets are mixed with the big caps higher and the small caps and tech stocks generally mixed to lower. The two sore thumbs sticking out today are the semis and the brokers. Neither are participating in today's rally and they are probably giving some pretty good clues of the future direction of the major market indexes.

Sector leaders today are internets, oils, biotechs and consumers. Metals, airlines and brokers are bringing up the rear along with the small caps and the semis.

Market internals are slightly bullish on NYSE (+600) and about flat on NAZ.

The NAZ has already filled its gap by going red earlier this morning and I suspect the major indexes may close that color.

Barry Ritholtz with some terrific analysis of the latest NFP numbers and he is none to optimistic. Here are some of the highlights:

1) Job growth remains skewed toward lower paying jobs;

2) Retail is weak and has stopped growing;

3) Almost 1/2 the rise occurred in health and social assistance industries;

4) Job growth since 2004 has slowed substantially.

Not exactly a resounding BOO YAH for fellow Syosset graduate Secretary of Labor Elaine Chao.

UP UP AND AWAY

Bullish news everywhere as the employment numbers are spun to be great, a not to hot not to cold number. Futures up in the premarket and Pisani falling all over himself bullish about the great month of August yadda yadda yadda.

Now for the real news; the brokers are all lower led down by GS MER LEH and LM. Semi's down about 1% on the great news and if you remember what led the markets higher it was the semis; so will they lead lower? IWM is lower on the great news and it led the markets recent rally contrary to what you might have heard on bubblevision.

Market internals started the morning with over 2,000 more winners than losers but that has been whittled down to about 900.

My take, I am keeping my eye open for the gap fill trade and then will go from there.

Don't be surprised if they ask Pisani within the next couple of hours - What Happened to the Rally Bob?

TECHNICALS-QQQQ

Similar pattern on the QQQQ chart as the SPX as the ROC indicator is much lower than where it was when the QQQQ price was lower and MACD Histogram also lower and downtrending as the price is higher. This is the same negative/ bearish divergence that was on the SPX. Also, note the gap that remains to be filled at the 37.75.

So with all the "new blah blah high" chatter on bubblevision, we have similar or slightly higher prices to two weeks ago but falling momentum indicators.

TECHNICALS -SPX

The picture of the SPX is telling quite a bit in my opinion. Note the lower highs on the MACD Histogram and the Rate of Change oscillator's as the markets have moved up. This is a bearish divergence suggesting the market is going to head lower shortly. A line from May 22 to July 17 on the MACD Histogram (below) and you have the positive divergence and a line from July 12 through today (above) and you will clearly see the negative divergence.

One can see the opposite happened back in May, June and July when the market was making lower lows or equivalent lows and the MACD Histogram and the Rate of Change oscillator's were making higher lows as the markets were bottoming.

BORING

Markets closed pretty much where they began the day with lots of CNBC cheerleading in between. Note to the CNBC crew, the SPX is exactly where it was on August 18 as is the QQQQ so enough with the blah blah blah X week/month highs.

Big winners on the day were the silver stocks as both PAAS and SSRI close up over 6.5% with brokers finally getting a bid as GS finished up over 1%.

Losers on the day included tech, oils, biotech and internets.

I would be careful here with the oils as I suspect few will want to be short the group over the long weekend. And is the slump finally over?

HI HO

Markets are putting most participants to sleep but there are some equities worth watching and yes, my old fav SSRI is back on the radar screen. SLV, the silver ETF is up almost 3% today and SSRI, one of my precious favorites is up almost 6%. PAAS is up over 6% as it plays catch up since it has underperformed of late. I am taking some off and will look to add back at lower prices.

Back to regular equities, markets have barely moved as the SPY has stayed in a 37 cent range and QQQQ remains in a 27 cent range. Market internals still hang tough with 1,000 more gainers than decliners.

Sector winners include metals, oil, brokers GS(+$1.40) and trannies; to the downside include semis, internets, tech and biotechs.

I anticipate some kind of late lift to be sold as folks wait for tomorrow's somewhat important jobs number.

QUICK HITS

Markets continue to trade near the unchanged level with a hair more stocks up than down with NYSE outdoing NAZ.

Metals and oils are leading with tech, semis and internets lagging.

While feed reading this morning, I found this little review of team CNBC. I concur and wish it was written by someone on this site but its a good thing that it is out there as it hits the spot.

Just wondering if oils are the place to be for now as few will want to be short this weekend.

Oh and just on the wires-"BUSH says must be consequences for Iran's defiance on nuclear program."

And for those who think they have missed a huge rally in the SPX, on August 18 the SPX closed at 1302- current quote on SPX 1302- Why does Pisani make me think that I have just missed a huge move over the last two weeks?

OPENING TAKE

As usual, the markets open mixed with internals mildly bullish as 1,100 more issues are higher than lower.

Best performing sectors are metals, biotechs and small caps with laggards being internets, oils, semis and techs. Brokers and banks trade flat with the GS MER BSC LEH all trading near the unchanged lines.

The DJIA is a tad higher with the winners being DD AA WMT BA and T; losers include INTC XOM MCD DIS and GE.

I am/will/would watch the SMH and the TECHS for market direction as they have been leading and if they break lower expect the major market indexes to follow and vice versa.

TECHNICALS-HHH

One of the worst performing industry groups for 2006 has been the internet sector as Bill Miller at the Legg Mason group of funds can attest. The ETF HHH is down 25% for the year and its largest holdings are YHOO EBAY TWX AMZN ET and AMTD. It is probably worth a shot as it has turned up over the 50 day SMA which has been significant resistance. The 45 area looks like a good stop out area and the trade on a risk to reward basis looks pretty good.

THE CLOSE

Interesting day in the markets as it seemed like the bulls spent a lot ammunition trying to get the markets higher but only got them up a little as buy program after buy program (high ticks) couldn't get the job done. The small cap IWM index was the big winner up .65% but fading into the close and SMH up 1.25% helping the NDX which was up 1/2%, or 18 cents on the QQQQ.

If you thought it was a tiring day watching the action, you are not alone as the SPY range was 49 cents and the QQQQ range was 36 cents.

Market internals were positive all day (+1,600) and gave participants the hint that the day would end in the green. The financials acted better although still lethargic as GS MER and MS all close near the unchanged line.

Best performing sectors today were semis, internets, airlines, techs, and small caps; worst were oils, trannies and retailers.

Mark Haines gave us a great buy signal in crude as he was trying to find the break in the trend line this morning. So congrats to all who faded him. And how bout that Liz Ann Sonders and the way she nailed the markets a few months ago.

THE RIDDLE

Not sure what to make of it, but, the Market internals are back to a bullish +1,800, some very high tick readings (near +1,200) and the IWM is + .75% (the leading major market index today), but the SPX is flat and the QQQQ is higher by a dime, so it is kind of an enigma as to why the major indexes aren't doing better. Obviously the 10% weighting of the energy complex is a bit of a drag as is the flat performance of the banking group.

It is also mark up day for the big funds so they will probably get the markets higher before the day is over but it is going to take a lot of ammunition if the first four hours of the day is any indication.

And are there any news stats on the rotation out of big caps as the little guys outperform the SPX today by almost a percent.

PIANO GUY

In light of the uninspiring trading day, I suggest THIS for a little early afternoon amusement.

OILY TV

Markets continue to trade near the flat line but the internals have come in from the 2,000 more winners to the more neutral number of plus 1,200. Leading sectors today include internets, semis, airlines and small caps. Energy continues to be a drag on the SPX and its probably a time to dip into the energy patch on a scale basis. Any chance of a hurricane or two in September? OIH and XLE probably both at good spots to dip or sell puts.


Comical debate on CNBC between a guy from the American Petroleum Institute, John Felmy, and a woman, whose name I didn't catch, about the pay of the CEO's of the guys in the oil industry. John's claim is the guys deserve $50,000,000 plus pay packages because the value of the stocks soared over 50% during the past year. When Maria CC asks whether the increase in value has to do with the increase in the price of oil the answer is, NO WAY, these guys have to manage the companies.

Well if any 0ne remembers, Lee Raymond, one of the CEO's whose pay package is in question and the ex CEO of XOM, every time he came on CNBC to discuss the price of oil he said "I really don't understand why the price is so high and I expect the price to go back down to the $28 area." So either he was deliberately lying to the public or had no clue about the market for crude oil. My guess, the latter.

OPENING LOOK

Markets open mixed with some of the recent leaders starting lower including SMH and IWM. I would watch those two ETF's as they led the rally yesterday afternoon and they will probably be a pretty good tell today of which way this market is going.

Banks and brokers are trading flat while metals and drugs are higher. Oils, airlines, biotechs, retailers, semis and trannies lower. Market internals are fairly flat with NYSE a bit green with NAZ slightly red.

Mark Haines is back on the oil kick hoping crude is rolling over; please don't tell Mark that the game is to buy low and sell high and right now its probably a time to buy.

TECHNICALS-SPX

Markets closed near their highs yesterday but the technicals on the SPX chart are still giving a bit of a bronx cheer to the rally.

Notice how as the SPX continues to make higher highs, the MACD Histogram continues to make lower highs on each climb.

Stochastics still overbought, but note again a lower high on the markets newest higher high.

The 2 day RSI also overbought at the plus 90 reading.

My basic little ETF strategy, buy (scaling in) the major market indexes when RSI level hits near the 10 level and sell them (scaling out) when they get over 80; and if the Volatility indexes confirm the buy and sell signals as they get overbought or oversold (10% above/below the 10 day SMA's) so much the better.

Trading markets (available for free from the site) has an analysis of a similar system and it is a consistent winner following a buy lower sell higher philosophy.

CUCKOO

The markets close near the highs as the manic action continues.

Lots of sell signals as the SPY DIA QQQQ SMH all trade at 2 day RSI's over 90. My guess is end of the month mark ups kicked in on the FED minutes news and the drip lower in the bond yields.

Tomorrow brings news from the oil patch and Thursday has a look at the retail sales numbers so more excitement definitely before the long weekend.

Sectors up the most today were internets, semis, oil services, small caps, techs and airlines. Bottom groups still include financials, GOOG, APPL, trannies and metals.

Market internals flipped bullish on the FED MINUTE news as approximately 2,100 more issues were higher than lower. Remember, the name of the game is to buy lower and sell higher, not to buy higher and sell even higher, that is a low odds game.

MORE ROTATION

The schizophrenic day in the market continues as an initial selloff on the FED minutes has reversed to euphoria. I will just blame it on light volume as that excuse can be used for any incorrect directional call.

Speaking of wrong directional calls, check the IWM as it leaves the SPY and DIA in its dust along with the SMH. The rotation into Large caps is again on the back burners and lets see if the bubble lights at CNBC mention the doggy action in the brokers led lower by GS and MER.

Market internals have flipped the green switch in a hurry and now show a bullish 1,200 more issues higher than lower. Sector winners include semis, small caps, drugs, internets and retailers. The big losers are the brokers followed by oils, metals, trannies and Reits. The 10 year has also flipped and now trades near the recent low yield of 4.78%, perhaps a catalyst for the latest little rally.

Volatility indexes have been fairly unuseable lately as they hang in at there recent lows and trade near their 10 day SMA's.

I would look at this most recent lift as a time to sell longs and reload some shorts as I anticipate lower prices in the short term.

NOON AMUSEMENT

Interesting conversation between Pisani ( the market doctor) and Haines ( the market something); Hey Bob why is the market down? crude is lower, shouldn't the market be up? are all the traders running out to fill up their tanks? Well Mark keep in mind that this is a low volume selloff and cheer up the market has had a terrific run in the unfriendly month of August and we are just 2% below the four year high on the SPX. In my opinion a real journalist would have asked the inquiring question of; Shouldn't we then sell some stocks since we are so close to the highs and aren't we heading into the real market unfriendly month of September? No such luck as real journalists are not employed at bubblevision.

Anyhow, the real action today is in the brokers as GS MER MS LEH BSC all get crushed on little news. CNBC of course is looking for the soft landing and noting the great action in drugs and consumers such as PG KO PEP etc. In light of the recent run up in those stocks they are probably much closer to sells than buys or holds.

Market internals show about 900 more losers than winners with winning sectors being semis, drugs, airlines and retail; leading losers are financials, metals, trannies and AAPL.

I have a downside target of NDX 1535/QQQQ 37.75 and will be covering shorts in that area should we get there today.

OPENING LOOK

Markets open mixed with breath positive as there are about 1,000 more issues gaining than losing.

Airlines are again accruing the dividends of lower oil prices as crude slips under the $70 level. Other winning sectors include SOX, drugs, retail and the consumers; losers are led again by oils, metals, banks and brokers.

All the major brokerage houses are lower led down by BSC MER and GS. I view this as a big warning that the major market indexes are going to run into a head wind. Maybe not today's business, but I would watch this group closely.

DEEP THOUGHTS

Generally buying 10 day highs and selling 10 day lows is not a profitable experience, witness these results as studied by Connors and Sen.

I am just wondering if this time is different as stocks approach the May highs on the heels of lower gasoline prices. My question, what happens if retail sales pick up on the increased cash in consumers pockets as gas prices fall. Will the retail sector reverse and be the place to invest over the next few months? The chart of the retailers isn't giving a screaming buy signal and I will go back to the lousy looking charts of the banks and brokers; until they start acting better, the market is going to have trouble moving higher.

One other thing, it is the end of the month and we may get some month end "markups" today and tomorrow as some managers try to gun their stocks.

COMPLACENCY RULES

The markets lost about one third of their gains in the afternoon trade as complacency seems to be the word. The VXO trades under 11 and lost about 4% on the day.

Market internals held firm as they closed with about 2,000 more issues higher than lower. On a sour note, the brokers still do not act well as GS MS MER and BSC all closed in the red.

The major sector gainers on the day were airlines, homies, retailers, semis, trannies and internets; oils metals and brokers were the laggards.

Indian favorites, CTSH and INFY are approaching new 52 Week highs and those are a couple that I will be keeping for a while, maybe a long while.

Sell signals did hit the SPY today as it traded with a 2 day RSI over 90 at mid session. I expect lower prices into the rest of the week as traders start to disappear into the three day holiday.

ONE MORE THING

Markets continue higher with the IWM+1.25%, DIA+.85%, NQ+1.1% AND SPY+.7%. So, no rotation today out of small caps as the oils weigh on the big caps.

Best sectors today, airlines, trannies, retailers, internets with the laggards being oils, metals and financials. My tell, GS is unchanged on the day as it has bounced from the morning lows.

Market internals with 2,100 more winners than losers but the semi/ techs are starting to lose a little gusto.

I am taking off some longs into the ramp here as I expect the markets to have a tough go for the rest of the week as we move into resistance and probably the end of the oil selloff.

Barry Ritholtz, on his blog, has the WSJ data on second quarter earnings and it is an interesting read.

Bottom line, of the 3,834 Russell 5k reporting second quarter results, 49% of the total Net Income came from financials and oil/gas companies and those profits rose 17% and 51% respectively 2nd q 2006 vs. 2nd q 2005. Any chance these industries will find their earnings growth decelerating? And if you do, it may be time to trim the longs as they have a disproportionate amount of the growth and the market cap.

NOON LOOK

Markets have moved up this morning on the heels of lower oil prices; and is the relationship between oil and the markets finally reverting back to the old days when they did not go up together?

Anyhow, we are running up to the major resistance areas of 1310 on SPY, 11,400 on DJIA and 1,585 on the NAZ 100.

The first ETF selling off this morning after leading higher is the SMH as it is down 1/2% from it's morning high. I expect the dips to be bought as long as the market internals stay strong; now with 1,800 more winners than losers.

Sectors outperforming today include airlines, trannies, retailers, homies, internets, semis and small caps. Oils and metals continue to be losers while banks and brokers trade near the unchanged level.

Be aware that the SPY has moved up to a high 80's reading on the 2 day RSI and that is usually a pretty good sell signal. I think we may get a few spikes into the close, but today is probably a good day to sell down some inventory.

On the trading radar is the action in the SPX over the last nine trading days. A whole 17 points is the range and small ranges eventually break one way or the other. My guess is we go lower as September is near and we know what kind of track record that month brings.

THE OPEN

The markets are off an running, well maybe more like crawling as the SPX is +2 and the NAZ COMP is up about six.

Market internals have flipped to green with the trannies, airlines, retailers, internets and drugs leading the way while the oils, metals and brokers trail.

Keep an eye on those BKX and Brokers with my main tell, GS, lower again and under the 149 line. I maintain it will be difficult for the markets to get traction with the financials not participating.

Small Caps also moving a bit higher.

SHORT TERM TECHNICALS

There is an excellent article on realmoney.com by Harry Schiller that describes the gaps, traps, trends and everything else possible on the SPX and NDX charts over the last few weeks.

Bottom line from Harry is that he thinks the NDX is leading the SPX around by the nose and he expects the recent gaps from August 15 to fill. Here is some of his commentary on what he expects:

"On the NDX's downside remains the Aug. 16 gap from 1539.59 down to 1534.43 (QQQQ 37.75) . This gap will get filled, and if I were a gambling man (which of course I am not), I'd have to bet it will get filled next week. Watch Thursday's low of 1542.47; a break of that level should signify that the NDX is headed for that gap."

"On the upside, if the S&P futures can get above the recent high of 1307.50 -- especially on a closing basis -- in the process filling the gap at 1307.10, then it's got a shot at getting back to the other remaining overhead gap from May 12 at 1311.70. That's probably the best-case scenario in this time frame."

As I have mentioned before, I expect the gaps from August 15 to fill and at that point I would look to cover shorts. I also expect the upside to be tested and that should be a point to sell some longs into the the 130.5/131.5 on the SPY.

The SPY chart is showing us a bearish divergence on the MACD Histogram as the SPY has moved higher but the MACD continues to make lower highs. Stochastics also pointing to lower prices in the short term. The gap fill on the SPY would be the 128.8 area or about one dollar lower than Friday's close.