TECHNICALS-SPX/VIX

Just wanted to quickly mention an observation from one of the Minyanville.com profs, Steve Shobin, he points out another Negative Divergence (top chart) as the VIX is higher now as the markets are also higher. Generally, as the markets go higher, the VIX goes lower, so just a heads up as another Neg Divergence appears.

It seems like I have been looking at Negative Divergences since the lower highs starting showing up on the MACD Histogram in August. And if you shorted the SPX starting at that point, well you aren't doing nearly as well as the folks who went long that divergence. In addition, the stochastics have been twisting above the 80 line (typical sell signal) for about a month, so again, the markets can move against a position for longer than a trader can stay solvent.

For the Yankee fans, be advised that they have now lost 8 out of their last 10 play off games and are probably due to win two in a row. If they don't win this series, I will go out on the limb and predict Torre and lots of the other regular season stars will not be back.

And as I type the A's go up 4-1 on the Twinkies and who would have thought after the season the Twins had that they would be such an easy sweep out of the playoffs. Who can't wait for an A's vs. Tigers ALCS?

PIVOTS

If your not a big believer in Pivot Points, today is not your day as they kind of acted in an uncanny way.

The YM opened lower, steadily climbing throughout the morning to the Pivot of 11,915, immediately reversed and sold down to the second level of support at 11,865 on the GM news and then steadily climbed again to the 11,915 pivot area before turning tail again. Also check the action at the first level of support, 11,893.

The NAZ internals climbed steadily from their opening lows and eventually made it to break even giving plenty of folks a clue that the markets wanted to try to climb back.

GS has been green most of the day while C MER and MS have been slightly lower (pink) and also gave the clue that the market was going to try and snap back.

My trade (ugh) was to short the DJIA Futures in the morning on the heels of the lousy internals. Stop out- and then long near the pivot as the market seemed to want to go higher. Wrong, stop out on the GM news, thanks Kirk. Not so bad as its been a great week and I did buy the NAZ Futures on the afternoon dip and sold them near the 1,705 high.

NOON LOOK

Markets are actually acting pretty well in light of the crummy jobs numbers. Market internals hint at afternoon weakness with about 2,300 more losers than winners but some of that can be attributed to fixed income funds which are getting clobbered on the spike in rates. The 10 year Bond is back to 4.68%, which is the highest in a while.

The banks and brokers however are hanging in well near the unchanged line as most of the major brokers are slightly red.

NAZ 100 has been the best acting major market index with a break to green a few already this morning.

KLAC WMT CSCO YHOO GOOG all green while the worst performing sectors include oils, metals, trannies and airlines.

Breaking news, Kirk's guy York resigns from GM and Kirk says he is no longer interested in purchasing more GM shares. Hmmm, just wondering if Kirk was playing everyone for a fool as he may now take his profits and run and leave all including our favorite carnival barker holding the bag. GM down $1.6 as I type.

BREAKING NEWS

Shockingly the markets have opened red on the heels of the lousy jobs numbers which showed an increase of about 25k jobs once one eliminates the birth/death adjustment for new businesses. So maybe the soft/hard landing debate is still up for grabs.

Anyhow, my bet is that this dip gets bought before long as many under invested bulls who have been screaming for a pullback finally have one.

Market internals are very bearish with 1,500 more losers than winners on the NYSE and 1,100 more losers than winners on the NAZ.

My screens are all red except for VIX VXO MO KLAC ORCL GOOG CSCO YHOO and MMM. Sectors acting the worst include metals, oils, retail, semis, trannies, brokers and small caps.

VSL, a favored Indian stock of the good folks at GTS, is ripping higher on news it will probably be unloading a chunk of highly valued real estate.

TRADER CHECK

For what its worth, one of my favorite authors, John Carter, is BULLISH, although expecting a few pullbacks (who isn't). And if you forgot what the SQUEEEEEEZE is, its when the Bollinger Bands move outside the Keltner Channels.

WE HAVE QUESTIONS

The markets finished green with DJIA+16, NAZ+15 and SPX+3.

On the NYSE, advancers beat decliners 2,223 to 1,045 or +1,178 - very bullish.

Up volume to Down volume closed at 1.1 BILL UP and 586Mill DOWN

The TRIN closed at 1.13- a bearish reading since the TRIN is defined as:

((adv issues/decl issues))/((volume of adv issues)/(volume of dec issues))

Just seems that with the advancers overwhelming the decliners, the volume should be lots heavier to the plus side but for whatever reason, no.

DONE TRADING

Markets continue to chop around with DJIA flat and NDX higher by 5. Best acting major market index is the IWM or small caps.

I mentioned yesterday that days after trend days tend to be choppy, well today fits the bill (so far) as the DJIA Futures have traded in a 40 point range between 11,927 and 11,887.

The market internals may have said trade with a bullish tone as they have improved all day long and now are at the high water mark for the day of 2,000.

Semis have been weak all day and financials have been bouncing around with a bullish tilt.

Biotechs, internets, oils and metals remain the best performing groups while retail, airlines, semis and drugs continue to lag.

Also, check out this quote from Alan Farley at realmoney.com:

"Technicians are taught that big-cap rallies signal "last-gasp" moves in aging bull markets. The theory is that big money tosses capital into these old behemoths in a flight to safety that precedes major downturns. Will it be any different this time around? Sure it will, and Santa Claus is a real person living way up in the Arctic Circle."

Food for thought. And congratulation to Johnny Damon, who is now offically on the yankee for life list.

CHOP CHOP

Markets are bouncing around this morning with big caps having a negative bias and small caps a positive look. The NAZ is also a tad green and that is without the help of the SEMIS which are down about 1% as I type.

The sector list shows green for metals, oils, biotechs, trannies and internets while the retailers, semis, drugs and consumers are leading the loser list.

Market internals are still slightly bullish with about 900 more winners than losers. Upside volume is leading downside volume by a small margin and the TRIN is non committal at 1.02.

The financials have done an about face and are now fairly flat after starting the day in the red.

Pisani squawking all morning about the great retail numbers. And gee any idea why as gasoline tumbles by a bout $.50 per gallon in six weeks. And I just wish he would mention how most of the retailers are selling off on the great numbers with WMT KSS RTH and RLX all lower.

Best performers on the DJIA include CAT MMM XOM MO AA and UTX while WMT T VZ PFE and MRK lead to the downside.

I mentioned yesterday that today would probably be a choppy day and so far it is right on key as I have bought and shorted the YM Futures three times and three for three as rallies are sold and dips are bought. No guarantee it will continue for the rest of the day.

TECHNICALS-GS

One of the fine writers at minyanville.com Bennet Sedacca is out with commentary on GS and mentions that it has probably become a market proxy. Also, for the folks who haven't followed the stock, it has gone straight up as one can tell by 1) the picture and 2) the ADX reading- an indicator which measures the strength of the current trend. Bennet says that when the readings gets between 40 and 60 the chances are pretty good that the tide is going to turn and the equity may be a good short.

I always keep a close eye on GS and have been long for most of this recent rally. However, it is now on a tight leash and I will sell if it gets below the 174.5 level. Of course that doesn't mean I can't buy it back the next day.

TUG OF WAR

The markets have opened mixed with the sectors that have been the weakest of late, the strongest including GLD, OIH, XLE, HUI and GDX. In the non commodity group, best sectors are internets, biotechs and small caps. Worst groups are KSS, KLAC, airlines, GS, drugs, consumers, banks and retail.

Market internals are a bit bullish with about 500 more winners than losers on both NYSE and NAZ.

The banks and the brokers have led the recent rally and I am staying focused on them as they are currently red and appear to be getting redder.

I am also interested to see if this 1,350 line on the SPX is going to be resistance as many have mentioned. It would not be surprising although I bet the BUY THE DIP crowd is chomping at the bit to BUY.

On the DJIA, XOM CAT AA UTX MMM are leading while the telephone crowd is lagging along with perennial favorites GM and HPQ.

PRE OPEN STUFF

Yesterday, the markets continued their unabated march higher to what I would consider uncharted territory. Lots of folks have discussed the 1350 area as significant resistance and it might be; I just don't know why. What I do know is that every sale has been bad and every covered short was a godsend.

Generally I find Jeff Cooper's commentary on realmoney.com to be fairly unusable. Today however there is something that I found interesting. Here it is:

"The Dow broke to another new record high, but some poo-poohed the move, and in my opinion for good reason. It is what it is, but things are not always what they seem:
The average Dow stock is 31% off its all-time high.

The median Dow stock is 36% off its all-time high.

The Dow's move to a record new high on Wednesday may yet prove that the emperor has no clothes.

Although the breakout is obviously affecting sentiment, and it is hard to tell how far sentiment can carry, it is also creating the kind of psychology emblematic of the optimism necessary for tops -- if that in fact is what the agenda is.

Although the Dow record is somewhat phony, the divergence between other broader indices, as well as the Dow Industrial and Dow Transportation indices, is real.

Moreover, despite an ISM service sector report that came in weaker than expected on Wednesday, the market rallied. That raises some questions.

In addition, the market was quick to rally off Fed Chairman Ben Bernanke's comments on Wednesday about the housing market slicing 1% off GDP. The interpretation was that the Fed would be cutting rates sooner rather than later. The drop-off in housing is hardly news. It seems to me a stretch to interpret that simply because Bernanke mentioned it that he was somehow telegraphing a cut in interest rates.

Yet the market ran with the ball, and traders will ask questions later. That is the nature of bull runs. The market has its own internal agenda.

And one very good possible target for that agenda is 1350 S&P."

Cooper goes on and on about square outs and fancy calculators but the bottom line is he sees this area as major resistance.


My take, how bout this, we are in a strong uptrend and the markets are overbought and the major market indexes are doing better than the typical stock. Pure gold in those words. Now technically, all the momentum indicators are overbought and the 2 day RSI on the SPX is back to a way oversold 92 after taking a short breather for a few days.

Volatility indexes are not giving buy or sell signals as they are at and have been at levels where they generally do not go lower. The VXO is at the 11 and the low over the past several weeks was 10.34. The 10 day SMA of the VXO is 11.18 and getting oversold from here will be tough without another 200 point DJIA rally.

DONE

I guess once in a while the "tells" actually work as the DJIA Futures have ramped about 50 points since the last post was written.

Again, regardless of what one may think, one must trade what one sees and today it was plenty clear that these markets wanted to move higher.

The internals have strengthened all day and are now +1,700 on NYSE and +1,260 on NAZ. Semis have also gotten a bid and are up almost 2% while the NAZ Futures have ripped to their typical best of +40. Banks and brokers were also strong all day and have moved to new highs while GS and MER lead the way. Even the crummy oil stocks have moved higher by 1%+ on OIH and +1.45% on XLE.

The VXO is back under 11 and the VIX is back to 11.6 so a temporary top could be in for now.

I did buy DJIA Futures at 11,840 (post time) and sold em a few moments ago at 11,883, the double resistance on the DJIA pivot.

Tomorrow, I expect a day where we bounce around as that is typical after a strong trend day.

On a final note, one indicator that I have been watching for several months now that I find invaluable is the TICK, just watch if it spends most of its time above or below the zero line. I put lines on ZERO +800 and +1,000. Strong ticks are lots of buying power and that is what this market is about for now anyway.

EARLY AFTERNOON CHECK

Big Ben out with breaking news that the country has a little problem known as social security. My suggestion, tell George W. Bush to cut taxes and we will grow our way out of it.

Anyhow, back to the markets, they continue higher with hardly a dip while the day trading "tells" remain bullish and shout that a few more decent rallies will ensue before the day is over.

Market internals very strong +1,900; banks straight up; brokers straight up; GS MER BAC TRANNIES, RETAIL, SMALL CAPS all strong.

Semis are higher but not nearly as green as the rest of the NAZ and any further deterioration in that group may be a preliminary signal to head for the exits.

I SEE

One old rule of trading is trade what you see and not what you think. I guess just about everyone see's that this market refuses to let any bad news get in its way of higher prices. So what if WMT can't boost sales by more than 1% in spite of lower gas. So what if we just go up everyday why shouldn't we go up every day as oil gets crushed and gold has no bottom.

So what do I see for now, strong market internals with +900 on the both the NYSE and the NAZ.

Strong internets led by EBAY YHOO and MSFT; strong airlines, semis, small caps, brokers, banks, biotechs and retail. Weak sectors are oils and metals.

Volatility indexes continue to hang in at 11/12, so nothing new there.

Not sure what will change the psychology and knock the market lower, but I bet it is nothing we see today.

YOU ARE NOT ALONE

Yesterday, I mentioned how a few things bothered me about the recent market advance. Breadth was negative on the NAZ (-275) and barely green on the NYSE (+135) and the TRIN was a bearish 1.14 indicating stocks were being distributed on the day the DJIA closed at an all time record. The up/down volume on the NYSE was also negative with 820 million up vs. 869 million down.

Both Cooper and Revshark at realmoney.com are also showing concern about this market. Cooper said:

"Finally, the Dow scored a record closing high on Tuesday. Did a new age for equities dawn?
At this new high, it is interesting to note that the trade into big-cap, blue-chip liquid names was precipitated by concerns over rising interest rates and rising crude oil. Now that oil has been hammered and the Fed is our friend again and yields have gone south, will the trade into big-cap names unwind?

Despite the new record on the Dow, the rally marked what appears to be a break of interim support in the Russell 2000 and the Nasdaq.

In addition, down volume on Tuesday was greater than up volume. This is not the picture of a healthy advance, and is symptomatic of the masking of distribution seen at/near the end of advances. "

Revshark noted the following:

"What is it that is bothering me? The No. 1 thing continues to be the lame action in the individual charts. I can't find much I want to buy, and my feeling is that this is a sign that the buying that is driving the indices is suspect and not likely to last. If that is indeed the case, the smaller stocks that have been just treading water lately are going to break support.

Today we had an additional issue that caused me concern, which is that the bounce in the Nasdaq, which failed to recoup yesterday's loss, came on negative breadth. Also, a big drop in crude oil didn't seem to boost the action in consumer-related stocks to the same degree it did last week, when it was around the same levels. I'm growing more concerned that weak oil may be indicative of a weak economy and may not be a major positive."

Yes, interesting how Rev now looks at lower oil and lower rates as perhaps a preview of a slowing economy. I would be very careful protecting gains at this point and watching for what could be a nasty selloff. That downdraft in the middle of the day on Monday still bothers me as I have no clue as to why but just wonder when it comes back to bite.

I will be out for most of the morning as MTB (the bird) has a doctors appointment.

JIMMY STRIKES AGAIN

I see my favorite carnival barker is out yapping about a $40 price target for GM after stating on January 6, 2006, that it was going to zero. I don't have a problem with someone changing their mind because that is required in this business. My problem is that he pretends to have always liked the stock and he certaintly never wrote an article explaining why he changed. It just appeared. I guess he had to do something with that zero valuation for GM matzah ball hanging out there for all to see.

Now, Adam points out an article Jimmy wrote last week about defense stocks ripping because democrats are going to get smoked in November. If history is any guide, how long before he writes a column pretending to have always loved FNM and FRE because the democrats are about to sweep the elections. And could someone please tell me what NAZ 5,000 was telling me in March of 2000, because Jimmy tells me how the markets know all. The only know all it seems is Jimmy and that is because he is entitled to opinions on stocks depending on the direction of the day. If only trading were that easy.

Its a long 35 days to the election and the polls are showing a little different take as the odds for a democratic house are pretty good and a take of the senate smaller but much better than last week as now about all of the ten contested Senate races are led by or tied by the dems. Interesting how the major market indexes refuse to fall on this news.

THE CLOSE

There you have it, DJIA +57, SPX+4, NDX+7.5, the average stock- lower as 140 more issues closed in the red than in the green. More down volume than up volume on the NYSE. TRIN closed at 1.15, a pretty high reading on a day when the major market indexes are all higher. Why? Yes, that is what I want to know-

Sector leaders were airlines, retailers, internets, brokers and banks. To the downside and crushed were metals, oils and semis.

Volatility indexes closed lower although far from any buy or sell signals.

DIVERGE

Bad news folks, this rally does not pass the smell test as the DJIA goes to new highs, the SPX is up 7.5 and the NAZ is up 12. The problems, when you look at your mutual funds tonight, you will probably find they are losing the battle against the big cap indexes.

Today we have about 30 more losing issues than winners on the NAZ and about 400 more winners than losers on the NYSE. That is not what one would call a broad based rally. Also, the up/down volume on the NYSE is equal and the TRIN on the NYSE is 1.2- One doesn't expect these readings when the DJIA and the SPX are trading up like they are today.

The banks and the brokers are leading the way with each higher by about 1%. GS is up almost $3, MER is up $1.5 while all the major banking issues such as JPM and C are also higher.

On the DJIA, the only issues in red are AA XOM HPQ MO and GM.

I don't know how long the divergence can last but I do know that I have sold the last of my DJIA YM futures as divergences like this do not last forever.

STOCK PICKERS MARKET

For those wondering why there portfolio has not kept up with the DJIA, please be advised that as the BIG 30 hit new all time highs, the only stock at a new all time high in the index is JPM. The only stock in the DJIA that is making a new 52 week high today, again JPM. This news all according to Scott Reamer at minyanville.com.

Now, of course one could own the DJIA through DIA and not have to worry about all this nonsense, but that wouldn't be any fun and don't forget, ITS A STOCKPICKER'S MARKET.

Also, for today, note the market internals are hardly bullish with 500 more winners than losers. So on top of it being a stock pickers market, the rally is very limited and narrow, for today anyway.

LATE MORNING FLIP

Markets have apparently shaken off the lower crude prices and have rallied as predicted by the green in the financials. The DJIA is still the standout index up 40+ as I type. Soon we will hear the talking heads yap about new record highs on the DJIA as they are now just 10 away from the closing high and 38 or so away from the all time high.

So maybe the markets have rallied because the stock market is a closet democrat? Sure. Anhow, sector leaders include airlines, retail, banks, brokers, drugs and consumers. To the downside are metals, oil and semis (thanks MRVL).

Market internals have flipped to flat and for today the best market tell seems to be the financials and the brokers. So keep a close eye on GS MER JPM C and BAC.

Volatility indexes also back to flat as fear has dissappeared about as soon as it showed.

DOWN OPEN

Markets open mostly lower with SPX outperforming NAZ with the DJIA index acting best as it is bolstered by BA AIG PG AXP and C.

Winning sectors so far today include airlines, banks and brokers. Worst of the groups include the oils on the heels of downgrades galore and metals.

Market internals a bearish 2,000 more losers than winners and Alan Farley would probably call it a day to short rallies.

Volatility indexes continue to remain in the low territory of 12/13 indicating fear refuses to exist in the financial markets.

I have a rule of not trading when not completely healthy and today is one of those days so I am in watch mode. My take, the short side may not be it today as the banks and brokers are trading in the green and that may be a preclude to a little snap back. Also watch the semis and see if they can shake off the MRVL warning and poor acting NAZ.

PRE OPEN

Sorry for no posts yesterday but a bit under the weather (like today), holiday and technical issues. I did however watch and there were some things of interest.

Lower crude didn't give us higher markets. The NAZ was red in the morning as the DJIA rallied and then got worse as the day went on. And finally, what really happened when the DJIA fell about 50 points in a few moments around 1:30 PM eastern yesterday.

Briefing noted a big SP Futures sell program knocked the market down and some others have mentioned the Foley matter heated up at that time. I don't know but I haven't seen the market get knocked down so quickly in quite some time.

I think the markets may see some weakness in the near term as new polls show the dems tied or leading in the ten contested Senate races. A lot has to do with Foley and George "macacca" Allen. Also lots of chatter about the typical year end rally being accelerated into August and September and making the last quarter down or flat.