OVER?

Markets had a pretty nasty selloff this afternoon on the heels of some bearish semi news out of GS from an overseas analyst.

Best sectors included metals, biotechs, integrated oils and big caps. The worst - semis, GOOG, brokers, tech, software and the NAZ.

The OIH has not been a pretty site since it hit the magic 139+ mark a few days ago, but I suspect the rally is not over and this pullback will be bought.

Stocks on the move lower include INTC, ORCL, KLAC, BSC, AAPL, WMT and GE. MER defies gravity and continues to trade near its highs while GS finally found some profit takers.

Market internals not so terrible with about 1,000 red on each of NAZ and NYSE.

The obvious question for the weekend - Is the rally over?

My guess, the dippers will be back bright and early Monday to take another shot as the day before month end is usually pretty good for the bulls. The SPX has come back to the 8 day SMA which has been a pretty good buying area on other touches since this rally began but then again any dip has been a good buying area.

Be advised that the YM closed on Monday at 12,143 and closed today at 12,130, so not really a great week for the DJIA regardless of how it feels without looking at the numbers.

Pivots on Monday for the YM are support at 12,095, resistance at 12,170, and the pivot, the 12,140 area.

THE GURUS GURU

Jimmy Cramer going out on a limb this morning identifying his three favorite speculative plays. Usually Jimmy hems and haws and hedges and throws 10,000 lbs. of something against a wall and hopes some of it sticks so he can crow. But not today he is out there and we at The Shark Report will track it and see how great a guru he really may be.

Here is what he wrote:

"My three faves right now are Qwest (Q) , Level 3 (LVLT) and Arena Pharmaceuticals (ARNA) . Let me explain why these can work and work big here.

First, Qwest is turning around so fast that I think people don't even realize how strong the numbers are. The broadband revolution finally has hit the old-fashioned telcos with a vengeance. We saw the same thing with the BellSouth (BLS) and AT&T (T) quarters, and Qwest is gaining share and growing again. I don't think anyone realizes how much cash these companies can throw off.

Meanwhile, while lots of people want to play the growth of the Internet through an F5 Networks (FFIV) or an Akamai (AKAM) -- both very worthy choices -- I think the best way to play it is with Level 3. It's growing as fast as many of these companies when it comes to the Internet, at least, but it needs to fix its capital structure. It will, and the stock could double in 18 months when it does.

Finally, I like Arena Pharma because it has not one but two drugs in formulation, one for diabetes and one for obesity. It cut its revenue forecast this week and freaked everyone out. That's an opportunity. I don't like it because of its revenue, I like it for the approval of the drugs.

I think that these are among the best speculative plays out there and I thought that rather than just haphazardly mentioning them every other week on radio, I should just spell them out here."

I will update these on a regular basis as I am entitled to some amusement.

Opening morning prices as follows:

ARNA 15.41

LVLT 5.41

Q 8.61

DOWN OPEN

Markets have opened lower on the heels of profit taking/weak GDP news. DJIA -38, SPX-5, and NAZ-5.

Market internals are -200 on NYSE and -400 on NAZ.

Sector winners include internets and biotechs with biggest losers being drugs, oil service, retail, airlines, cyclicals and tech. Stock winners include MSFT EBAY AMGN PAAS and AAPL. To the red include ORCL INTC LEH GE TGT and GS.

The 10 year Bond is trading higher on the heels of the lower than expected GDP with the rate now down to 4.685. This may be reason for another move higher for equities. Also the outlook for a rate cut has improved and the only question is how much is built into current prices.

Congratulations to Bloomberg TV for actually asking tough meaningful questions to their guests. Quite a change from the bubblites who insist on cheerleading every new high on the DJIA.

Note also how the YM made an about turn at 12,140 (support) and has give 20 points in a few short minutes to anyone paying attention to the pivots.

PRE OPEN SPX

Futures are trading lower in the pre market with SPX-2.75, NDX-4 and DJIA-21, all on the heels of overnight weakness and lower 3 q GDP at 1.6% vs. 2.1% consensus. So if the markets are going to pullback is this the excuse? Of is there no way the markets pull back as all the under invested folks want to jump in on any move lower?

The markets have been as strong as they get with a Direction Index reading of 34 and a 2 day RSI reading of 99.6. A directional index reading of 34 for a major market index is about as high as it gets and a 2 day RSI can go no higher than 100 so just maybe a pullback is in the cards.

Here are some data points that may come into play. A pullback to the 8 day SMA on the SPX is 1,377, to the 21 day is 1,361 and the 50 day 1,332.

Remember the markets do what one generally least suspects- another push higher? a pullback way lower?

YM Futures opening in the 12,165 area and the Pivot is 12,180, support 12,140 and resistance 12,215. Just wondering if today is the day where the pullback buy won't work.

DONE TRADING

As usual the market sold off early in the day and staged a mid day turnaround. I bought some YM near the pivot point and have since sold it all into the ramp between 12190/12200 and am a happy camper.

GS ($3 higher than when I nailed it this morning) and IWM have been very good performers while the BIG CAPS and the DJIA have lagged. The OIH continues to impress as it looks to close near/at the highs despite crude being down by a buck.

Sector winners continue to be internets, biotechs, airlines, brokers, retail, tech and small caps. Losers on the day include drugs, metals, oils and GOOG.

Market internals turned bullish early in the morning and have steadily improved and now show about 2,000 more winners than losers.

The markets continue to defy logic as every whiff of a sell off is immediately bought taking the markets ever higher. It will end one day and there will be more than one unhappy trader holding the bag. For now its straight up from here.

TECHNICALS-GS

Markets continue to flop around but generally down a bit with the DJIA being the worst of the major market indexes (-15).

Market internals may be hinting at an afternoon rally showing about 300 more winners than losers with S's over N's.

Key sectors have brokers up a tad (see chart above), banks down a bit and semis unchanged. Strongest sectors include internets, retail and cyclicals. Worst include drugs, metals, software, and trannies. Oils stocks are lower on the heels of lower crude as it was due to take a rest and the outstanding numbers for XOM were probably baked in the cake.

I certaintly mention GS a lot but by the looks of the chart is probably not enough. This equity just goes up about every day as witnessed by it 57 ADX reading. ADX is an indicator that measures the strength of the recent trend and generally anything over 30 is an indication of a strongly trending stock. For a mega cap stock like GS to have an ADX reading over 50 is highly unusual. It is up about $3 today and there is not much question that it will be pulled to $200. Usually, stocks get pulled to $100 numbers but I bet the same rules apply to $200.

THE OPEN

Markets open mixed with the much discussed DJIA acting the worst of the major indexes. The DJIA futures traded near the 12,220 mark early this morning but have now given back about 80 of those points quite rapidly. Generally the day after Fed Day finds the markets doing the opposite and today may find that general rule applicable.

Sector leaders, metals, airlines, retail, oils, oil service, biotech and brokers. Losing sectors include drugs, software, semis, tech, trannies, small caps and banks.

Stocks on the move include GS KLAC BBY MSFT and GOOG.

Market internals act ok despite the downturn in the major indexes. 200+ on NYSE and 140- on the NAZ.

The selloff may not be much of a surprise to traders as the SPY came into the day with a 2 day RSI of 99, DJIA of 96, IWM of 87 AND QQQQ of 72. These numbers haven't meant much recently but eventually there needs to be profit taking.

Pivot point on the YM is 12,166 with support at 12140 and resistance at 12215. So some trades may come into play with the pivots.

TECHNICALS-IWM

Markets are set to gap open higher this morning with the SPX Futures +3, NDX Futures+3.5 and DJIA Futures +14. I bet buying pullbacks will work as it has worked every time since mid summer. Of course the market is up 6 days in a row so how high can it go? Well ask some folks who starting shorting the "extended" markets 100 SPX points ago.

I mentioned yesterday that the RUSSELL 2000 looked like a cup and handle on the weekly pattern; well guess again -as it is a more defined cup and handle on a daily chart.

It is the best performing major market index for the month of October but lagging a bit since the May highs so it may now be time to play catch up and really outperform as folks get tired of the DJIA and the big caps.

END OF THE DAY

As expected, the Fed trading day found stocks all over the map but closing near their highs.
Was there ever a doubt?

Sectors shining the brightest included internets on the heels of the bullish AMZN news, OIH, on the heels of higher crude and lower inventories, Semis, on the heels of good news from KLAC, and metals on the heels of higher prices for GOLD and SILVER. Other winning sectors included tech, GOOG, trannies, drugs and consumers. To the downside, retail and airlines.

Market internals flipped back to the morning highs as NYSE was +1,100 and NAZ +400 and the bull market looks intact as the buy the dip in bull markets continues to be the trade.

It has obviously been a great week for the oil service group and HAL is up another 6.5% while the OIH is back to 138. Also a new all time high for XOM over 71 as they seem to be printing money faster than Hank at Treasury.

The VXO back at 10.4 so we probably are nearing the end of the rally on a short term basis. Of course the low Volatility indexes haven't signaled anything lately but higher prices so who knows how low the index can go.

On a final note, congratulations to Kurt Cobain for being named the highest earning dead guy. Congrats to Courtney too.

PRE FED LOOK

Markets are mixed with the NAZ higher by 4, the SPX higher by 1 and the DJIA lower by 23. The forgotten but best performing ETF of the month, IWM is lower by nine cents as I type with the SEMI'S being the story of the day with the oil service group. Notice to XOM holders, the stock is now trading near the all time high as crude has traded down from 78 to 57 and now hanging at 61. Hmmmmm.

Market internals are flat on the NAZ and slightly green on the NYSE with 400 more winners than losers after being +1,000 earlier this morning.

Best sector of the day is OIH as it is higher by another $4 or 3%. Internets, semis, metals, tech and trannies also acting well. Losers include airlines, retailers, brokers, biotechs and banks. My question is why are the airlines on the bottom of the list with trannies near the top with higher oil? Yeah its always a question about something.

Pivot point trading was not very good on the YM as the futures went through support and has since rebounded after hanging near the pivot for much of the morning. No idea what the afternoon trade yields, but probably lots of volatility due to the Fed head.

The trade in the oil service sector becomes the current focus as the ETF is now up about 20 points or more than 15% since the initial suggestion back in late September. The target is right around the corner but my concern is that it goes lots higher and I will miss it so trailing stops are now the best course of action.

OPENING OBSERVATIONS

Low and behold a flip flop kind of morning as the market internals point up and the big cap indexes don't. The IWM is higher by .3% while the DJIA and the SPX are lower although just a tad.

Finally the SMH is moving higher (+1.8%) on the heels of a rippin KLAC ADI and NVLS.

The DJIA is being held back by GM MO BA and XOM. Leaders on the DJIA include INTC AXP VZ and JPM as 18 of the 30 are higher. My bet is the DJIA will play a little catch up and the opening gap will be closed.

Strongest sectors/stocks include KLAC HHH YHOO SMH EBAY trannies, GOOG, techs, AAPL, airlines, internets and consumers. Weakest stuff, metals, biotechs, and oils with oil service unchanged.

Martket internals point higher with 1,300 more stocks higher than lower with NYSE a bit better than NAZ. Banks and brokers trade unchanged with GS acting best as it continues it march to $200.

TECHNICALS-SMALL CAPS

DJIA Futures set to open lower by 20 points and right at/near the YM Pivot Point- so maybe a quick trade is in the offing; is there any doubt that the dip buyers buy the gap lower?

The Russell 2000 continues to do well and is approaching its May highs. Also the chart has the beginning look of a cup and handle on the weekly chart. It has had this look before and every time was a good time to pick up some shares. And with all the talk of the big caps and the DJIA, of course the IWM is the big winner for the month of October.

My philosophy, if you think stocks will do well and you want to buy an index, buy the IWM, as they will outperform (IMVHO) if stocks go up. If you think stocks are going lower go to cash and don't follow the logic of the bubble lights, the big caps will outperform buy going down less. Revshark at realmoney.com had a nice little peace on why investors are generally better off with small caps and it is worth reading.

THE CLOSE

After going out on a limb earlier, and declaring the market would go back up today, I decided to put some money on the line and bought some YM DJIA Futures earlier this afternoon. Well low and behold, can anyone believe that the market and the DJIA has rallied to new all time highs this afternoon? Yes, seems like an every day occurrence lately having the DJIA close at/near all time highs. Today I get very lucky again as the OIH and the oil stocks in general rip higher to target number one of $135 on the OIH.

Besides oils and metals, best acting stuff was AMGN, trannies, GS, cyclicals, brokers and big caps. To the downside, find the ever lower SOX, GOOG lower on a Cramer top tick yesterday, biotechs, software, tech, NAZ, drugs, and AAPL down a bit today after a tremendous run.

TECHNICALS-OIH

The best performing sectors on my screens today are the metals and the oil services group. The OIH ETF appears to have bottomed in late September and now it seems like the weekly chart has ticked up. I have mentioned this group several times in the past citing an excellent risk reward. I am looking at a short term target of 135/140 on the OIH and I know that I am on the same side as Cramer with this one now, but I suspect if we wait long enough that will change as he will know doubt buy the low and sell the high. Thank goodness he has our back's.

MIDDAY UPDATE

Markets continue to meander mixed with Big Cap DJIA stocks outperforming Small Caps and the Tech group and NAZ.

Market internals are flat on the big board while red to the tune of about 600 losers on the NAZ.

Sector leaders include oil service, metals, cyclicals, trannies and brokers. To the downside, find airlines, GGOG, software, semis, drugs, biotechs and consumers.

Stocks higher include AMGN, PAAS, SSRI AND GS; those lower include ORCL GOOG MSFT JPM EBAY BAC and QQQQ. SMH and SWH are battling it out to see which will do worse and as I type its SMH.

Volatility indexes are flat while the 10 year Bond hangs in at 4.83%, which is considerably up off its recent lows of 4.55% at the end of September.

My trading for the day has been virtually non existent as I don't trust either side. The YM, my vehicle of choice has been trading in between its resistance and pivot point all day and until we get to one or the other I will probably sit it out.

The question to ponder now is will the NAZ bring down the other markets as it starts to under perform? And are we seeing the a rally starting to emerge in the oil service group?

MIXED OPEN

Markets open mixed with the DJIA leading the way on an initial spurt to a new high. The index has since pulled back but my screen tells indicate it won't be long before they are right back at the highs.

Market internals are mixed with slightly more losers than winners and sector acting best include internets, semis, cyclicals and retail. Losers include metals, drugs, banks, brokers and trannies.

Stock wise, AMGN INTC OIH GS YHOO BBY KLAC all acting well with JPM GOOG KSS AAPL and MSFT in the dog house.

ANOTHER RECORD

The DJIA closed with another record tacking on another 105 points or so. The average stock probably didn't fare as well as only about 400 more stocks gained ground than lost.

Neither the Naz nor the IWM faired as well as the DJIA or the SPX as both hit their highs early this morning.

Stock/Sector winners included GOOG EBAY WMT KSS TGT GS AAPL retail, brokers, consumers, cyclicals and airlines. Lagging and red included GOLD SILVER trannies, oils, oil service, drugs and biotechs.

The question on many a trader's mind is what exactly are the crummy market internals saying?


I am not bearish but I am hardly ready to back up the truck and buy everything. Semis, software and tech not exactly hitting the ball out of the park so I think it may be time to be a little cautious regardless of the market that refuses to pullback.

VIX/VXO tandem trading near 11/10.5 so again no movement there despite another four days of trading in front of us before the two day weekend.

We also get to hear from Big Ben later in the week and that may get a little reaction.

DOGGY INTERNALS

Why are the market internals so doggy with the DJIA +90, SPX+6 and the NAZ +15? No clue as there are about 600 more gaining issues than losing combined on the NYSE and the NAZ. Generally, when the markets are this strong, the internals are generally +1,500 to +2,000, so maybe a little hint of an afternoon selloff.

Sectorwise, the winners are where you want them, GOOG, retail, airlines, AAPL, GS, SOX, brokers, internets and tech. Losers also where you want them if you are bullish on the major market indexes, with oils and metals lagging.

DJIA winners include WMT CAT GM MMM HPQ C and IBM. Losers include DIS MRK T UTX AA and AXP.

OPENING LOOK

Markets open slightly weaker this morning but quickly ripped higher on the heels of a large demand for equities

The demand for small caps (IWM+.7%) is outstripping the demand for large caps (SPX +.44%) and the demand for NAZ 100 stocks is out doing both as the QQQQ is +1.1%.

I have no clue why and it really doens't matter, just trade what you see on the screens.

The market internals are no quite confirming the major market indexes with only about 1,200 more winners than losers.

The TICK has had a few readings of well above 1,000 already this morning and is one indicator confirming an overwhelming demand for stocks.

Looks like investors have finally decided that WMT is cheap enough as the stock is up over 5% while the retail sector is up about 1.75%.

Sectors acting well today include retail, airlines, oil service, brokers, semis, small caps, tech, internets and financials. To the downside, metals, drugs and integrated oils.

And for the reversion to the mean traders, SMH+.92% and SWH +.51%.

INDICATOR UPDATE

The BUY LOW SELL HIGH indicators have not been very helpful of late and my stats indicate we are neither in buy or sell territory. Obviously, the trend up has been very strong and each and every pullback since the summer lows have been quickly bought.

The 2 day RSI on the SPX is 83, IWM 25, DJIA 64 and QQQQ 61 so no signals there and no question that this is a big cap rally, yeah sure.

The last quote on the VXO is about 3% under the 10 day SMA so no signal on that volatility index or any of the others either.

The 5 day RSI on the VXO is above 30 so a confirmation of the no sell signal on the VXO.

In the past few months, I have done mainly daytrading of the YM DJIA Futures using daily pivots, resistance and supports. I must admit, they work great and I intend to stay with the program.