THE ANALYSIS

Every shrewd analyst that comes on bubblevision now bashes the drug stocks with the same theory, they will be tough to own during a democratically controlled Congress. Well note to all the shrewd sell siders, under George W. Bush (1/2001) and a Republican controlled Congress, the PPH drug index ETF went all the way from about 100 to a current quote of 75. About a negative 25% return over a 5+ year time period. They will probably tell you that there were some extenuating circumstances during this time period (overvaluation, MRK lawsuits etc) and that is why they underperformed. I will tell you that trying to predict what will do well based upon who is running Congress or the Oval office before they get there and even after they get there is meaningless. There are always extenuating circumstances- its called - Investing.

MORE GURU

Markets continue to flop around as NAZ over SPX trade continues with some pockets of strength in some selected sectors.

The strongest airlines, brokers, trannies, semis, retail and small caps; to the downside- metals, oils and drugs

Heading out early today as I don't expect much to happen in the markets between now and the close so a quick update on Cramer's speculative picks from last week:

Q- down 4.5% on the week

ARNA- down 6% on the week

LVLT- up 2% on the week

As I type, the IWM is +2%, SPX +1.2%, NAZ COMPQ +2.3% and the DJIA +1%.

So for the week, Jimmy has given you high risk and negative return while the major indexes are all up at least 1%. One week does not make a guru, but he is of to his typical start IMHO. Remember, Jimmy throws thousands of stock against the wall and then he lets the CNBC shills crow about what sticks.

AFTERNOON LOOK

Markets continue to flop around with no clear direction; strongest index is the NAZ followed by the IWM and then the SPX and the DJIA.

Best sectors are the airlines, brokers, semis, homies and trannies with oils, metals and drugs lagging.

The 10 year Bond is back under the 4.6% level at 4.586% and the lower rates are giving a boost to the homebuilders as both PHM and HOV are up over 3%. The brokers are catching a bid also on the heels of the recent sell off.

Market internals are slightly bullish at a NYSE reading of +600, no doubt impacted by the fixed income skew. NAZ internals probably a bit more telling at +225. AIG is the big DJIA winner with DIS the biggest loser.

It always seems difficult for the markets to put on much of a rally on Friday's and today seems to be no exception. Monday will be more telling as I expect buying today's weakness will seem smart next week. Oils and metals may also be a smart buy in front of next week as today's weakness will probably be bought as both sectors are now in decent uptrend and a "buy the dip" mentality may indeed reappear.

OPENING NOTES

Markets have opened fairly flat with a slight positive tint to the trade. The DJIA is +4, NAZ COMP +5, and the SPX is +1.

Market internals show +600 on NYSE and +400 on the NAZ.

Sector leaders include airlines, semis, brokers, drugs and finanicials. Leading lower are metals, oils and biotechs.

Winners on the DJIA include AIG BA C and HPQ while DIS T VZ AA and HD lag.

Jim Cramer out this morning with a bullish call on the drug stocks. A way to play if you agree, is PPH or buy JNJ PFE and MRK and you will probably duplicate a drug index.

Don't forget that Jim is also bullish on oils, tech, retail, brokers, financials, internets, small caps, gold stocks, silver stocks, biotechs and probably all other sectors that trade on an exchange. So if you agree with him you can just buy the SPY/IWM /QQQQ and just like him, you will also have all your bases covered. And if you don't believe me, see how well he has made some "mad money" over on this site, which tracks his performance and even gives him the benefit of built in gains and no commisions. I didn't even realize he has lagged the DJIA big time and that is without the dividends.

THE HINT

The markets are lower in the afternoon trade after a strong morning for the NAZ which has now also turned red. The biggest clue that the markets would have trouble today was the action in brokers and the semis. Both the SMH and GS/MER/IAI group have been red all day and the move has accelerated into the afternoon.

The DJIA has been weak on a relative basis yesterday and today due to the crummy action in the three drug stocks, JNJ MRK and PFE on the heels of the Dem victory in the House and Senate. Regardless of the constant hedging and hawing on Bubblevision, its true and its over, the Dems control both Houses of Congress.

Sector winners this afternoon are Metals, oils, some tech and internets. Leading lower are drugs, biotechs, airlines, brokers and small caps.

Market internals show about 1,200 more losers than winners with a NYSE over NAZ bias, which is completely different than the bias among the major market indexes, NAZ over SPX.

The VXO has jumped all the way to 10.9 (4%) on this slight selloff but nothing to get excited about.

The XLE/OIH tandem has moved to recent highs but has pulled back a bit. I suspect a little pullback in oil and oil stocks and then higher prices later in the month on the heels of colder weather in the northeast.

TECHNICALS-GS/SPX

There, you have the SPX chart and a chart of GS, now I have no clue if there is any correlation, but I do know that GS had been doing great until about 10 days ago when it hit a wall at approximately the 195 level. The SPX also hit a wall at the 1,390 level and retraced but has since recovered. So I have no great answer, but it seems odd that the SPX has gotten back to the old highs while GS has not. FWIW.

BOUNCING AROUND

Big caps continue to hover near recent resistance (1,390 SPX, 12,200 DJIA), while the "tech heavy" NAZ continues to move higher on the heels of the good news out of CSCO.

Sector leaders this morning include metals, tech, internets, semis and oils. To the downside, airlines, drugs, trannies, biotechs, brokers and retail.

Market internals slightly red with about 600 more losers than winners.

DJIA componenets evenly split between winners and losers with HPQ MSFT and BA leading while MRK JNJ PG UTX and PFE are the biggest losers.

GS is starting to underperform the major indexes and may be giving a signal that the market is due for a correction/pullback. So far this morning its down over a buck.

Natty gas inventory coming out at 10:30 (heads up) and silver stocks are starting to move higher again.

Volatility indexes again refuse to budge from the 10.7 area and complacency continues.

TECHNICALS-OIH

One of the best performing sectors of the fourth quarter has been the energy patch. Check the chart on the OIH and it looks like resistance should be right here at 140, a prior stopping point. If we get above it, the 150 level looks like it could be the next stop.

Crude also looks like it may be turning up. According to all the pundits, this is a seasonally strong period for Crude (colder weather in winter months). Next stop, I really have no clue, but it looks like it wants to go higher just because it stopped going lower.

CLOSING THOUGHTS

Markets close slightly higher on the heels of the stunning Democratic victories in yesterdays elections; and all the thoughts of oh my goodness the markets are going to get crushed fell by the wayside.

The other big news of the day, the Rummy resignation, also gave the markets a boost as market players figured the dems won't have Rummy to kick around anymore.

Sector winners included oils, oil service, internets, small caps, retail and financials. Lower were DRUGS, airlines, metals and brokers.

The OIH has hit the magic $140 level I have been yapping about for a while and I intend to trail it closely here anticipating another sell off and a buy lower.

Market internals were about 1,400 to the green after starting the day a very bearish 2,000 to the red.

Volatility indexes have sold down again to the mid 10 range and are again near their recent lows. They haven't been able to go lower than these levels and the markets haven't been able to go higher than these levels. Go figure.

The President was a statesman in his press conference and I admire him for doing the right thing. I anticipate that over the next several months he will start to bring the troops home from Iraq as it is the only viable solution.

If they would have brought in enough troops after the war was won in 2003 they could have fought off the insurgency (2020). However, in my opinion, Rummy refused to go the Colin Powell way with overwhelming force and we all suffered. The only way to beat the insurgency now is with another 200k/300k troops and that is not going to happen. The American people will not stand for the casualties. The only option, bring the troops home and leave the mess to the Iraqi people. The Kurds, Sunni and Shia have been fighting for many many years and they will not stop on our account.

UTURN

Markets are trading right back at the resistance level highs of the past few weeks as the markets make a UTURN on the news of the Rummy resignation. Just wonder what Colin Powell is saying about that (lol).

The small caps are the leading index today and it has been green for most of the trading day. Not sure what ever happened to the big caps over small caps but it is pretty clear that if the markets are going to move higher the small stocks will outperform. I guess clear to all but the CNBC journalists.

Sector leaders- oils, GOOG, internets, retail, tech and small caps. Losers include drugs, airlines and metals.

Market internals have flipped to 1,600 to the green and every strategist on TV now says "I am bullish." If you would have said to them yesterday would you be bullish if the dems took over both the House and the Senate, I bet they would have said something different. Of course its always good as they want you buying stocks. Its good for bonuses.

I don't know why I ever switched back to CNBC from Bloomberg, but who writes this stuff for the anchors. Erin asks the a political guy, after the Tester call-Do you think the democrats will take over the Senate? Memo to Erin- its done- George "Macacca" Allen has the same chance of winning his old Virginia seat as I do- Tradesports odds for a Dem winner in Virginia now at 97%- odds on Montana 99%.

Cramer's single best idea FNM- Note to all the folks who want to buy stocks/sectors on the heels of new politicians- check the chart of the DRG index since the republicans took over all three branches in 2000 elections. Yes, they have gone nowhere in six years. Just FWIW.

NOON SWOON

Markets continue to trade a bit lower with oil stocks being the stand out to the upside. Who would have thought that the dems would take over both houses (foregone conclusion in my opinion), OOPS Tester wins, and MO and XOM would be the DJIA upside leaders?

Other sector winners are internets and retail while drugs, airlines, brokers and biotech lead to the downside.

Market internals hang tough near the unchanged line and I suspect (gut only) that the markets will rally late in the day.

Volatility indexes continue to trade flat and hover near the 11 level.

THE OPEN

Markets opened lower but have come back near the flat line as the worst fears of investors/traders have not been realized (still early).

Checking the sectors that were supposed to sell off on a dem takeover of congress, the oils and oil service (XLE/OIH) are trading higher along with retail, internets, tech and semis. The worst groups are drugs (-1.65%), airlines, trannies, biotechs and metals.

Market internals started opened with about 2,000 more losers than winners and have flipped to near flat.

The losers on the DJIA are PFE and MRK with AXP MO and XOM the biggest gainers.

I don't think this is what most "CNBC EXPERTS" expected, but it is what it is and the bottom line in my opinion, there continues to be a demand by investors for equities.

QUICK TAKE

My take; the big winner of the night, besides the democrats/Schumer/Pelosi/Rham/CNN etc, is TRADESPORTS.COM which if Virginia and Montana fall to the democrats, as appears likely, they will have called each and every Senate race correctly. In 2004, they called each and every state correctly, so why bother vote, just watch the gamblers.

Take number 2, the futures are not exactly getting crushed this morning, the DJIA Futures are down 24, SPX Futures lower by 5.25 and NDX lower by 6.75. Hardly a watershed event.

I suppose if you polled CNBC "journalists" yesterday and told them the republicans would lose the House by 35 and the Senate would flip 51/49 they would NOT have responded "DJIA Futures would be down 24." The important point will be where the major market indexes close at the end of the week and the end of the month. I suspect that the numbers this morning are a sale.

Did the market know this was going to happen? Not sure as the Markets went to NAZ 5,000 six + years ago, so I am not so sure the markets are all knowing as most like to believe.

THE CLOSE

Markets close with the major indexes giving back about half the mornings gains. The DJIA closed +51, SPX +3 and the NAZ +10.

The key tell that the markets weren't going to continue to rip higher, the brokers, which were having trouble all day finished about 1/4% higher but key components GS and MS finished red as did key financial player JPM.

The market internals finished in the green by about 600 after being much more bullish earlier in the day. I find that when the market rallies without the internals there is a pretty good chance it won't stick and today was one of those days.

Sector leaders, semis, airlines, biotech and drugs with losers being internets and oils.

I suspect the markets will have trouble the rest of the week regardless of the election results. Hopefully the results will be known early and there will be no legal challenges. I need the sleep.

AFTERNOON SALE

So far no sign of any exit poll data but the markets again look like they have hit a wall at the DJIA 12,200/SPX 1,390 levels.

The brokers gave the first sign of weakness as they failed to confirm the rally by underperforming the major indexes. Of course its still only 2:00 PM EST, so the markets could still turn and rip higher in the final two hours, but I don't think so. I dumped 1/2 of my YM Futures at the 12,220 level (luck), and will not let the rest fall much further.

Market internals have been weakening for most of the day with a current showing of +1,250 after being +2,000 earlier.

Sectors doing the best include SOX, airlines, biotechs, software, drugs and retail. Oils, GOOG, and some brokers remain weak.

The DJIA still has 25 components higher and 5 lower with BA HON PFE PG and DIS leading with MO XOME GM VZ and JPM trailing.

The TRIN is a bearish 1.14 and up to down volume 625/435 is fairly tight in light of a +70 day on the DJIA.

TECHNICALS- MAJOR MARKET INDEXES

Major market indexes have put on a rather significant rally over the past two days after pulling back all last week.

The DJIA SPX and IWM all have 2 day RSI readings over 90 and the VIX and VXO have drifted back down below 11. So it maybe a good time to take some inventory off the table as better buying opportunities will probably appear later in the week on the what has become typical Friday selloff. I intend to take some of my ETF's off the table into the anticipated high TICK readings this afternoon and will trail stops on another tranche. This current level on the DJIA and the SPX was prior resistance so lets see what happens this afternoon.

Market internals still bullish but have fallen from earlier highs. Current readings are +1,130 on NYSE and +1,100 on the NAZ.

The brokers and GS especially is not doing as well as I would like and may be giving the beginning signal of a selloff. On the other hand, the SEMIS, are doing quite well and the SMH is higher by over 2%.

Airlines, biotechs, internets, tech, trannies and drugs all doing well while the oils, GS LEH and BSC are all lagging and red.

On the election front, tradesports.com has elevated the chances for Webb in Virginia to near 70% and is also showing greater odds for democratic victories in NJ, Montana and MO.

Those exit polls mentioned earlier and yesterday may not be available to the public today as many are talking of a "clamp down" so the results don't get early. We will see.

Markets open higher this morning with the Russell Small Cap Index (IWM) leading the way. IWM is higher by .75%, or the equivalent of 91 DJIA points. The DJIA is actually up 31, NAZ+6 and the SPX +1.5.

Sector leaders include airlines, metals, semis, small caps, drugs, brokers and biotechs. Biggest losers include oils, retail and trannies. Interesting how the SOX is up 1% while the NDX is only higher by .2%, so maybe a little allocation into semis over the last few days.

Market internals are bullish with a +800 reading on NYSE and +700 on the NAZ.

The 10 year Bond rate is back down to 4.66% and don't be surprised if more alligator's switch out of fixed income and buy equities.

DJIA stocks higher include PFE BA HD GE and INTC with lower prices on DD VZ MO XOM and T. A bullish 21 up and 9 down a I type. Always as I type.

DA BEARS

The bears had a rough day today and yesterday (Chicago Bears) as the DJIA closed up about 120 points on the heels of an oversold market, merger Monday and probably a foregone conclusion on the elections (no surprises).

The 2 day RSI on the DJIA has climbed back over 80 while the quotes on the VIX/VXO tandem has drifted back down to the 10 day SMA levels.

Any further ramp in equities will probably give off some sell signals, but I don't expect it to happen until later in the week. The day after a big trend day in the markets is usually choppy, so don't expect much tomorrow unless the exit polls provide fireworks.

THE CLOSE

Markets close near the highs with DJIA +117, SPX +15 and the NAZ+34.

Market internals were very bullish all day and closed with about 3,000 more winners than losers. On the NYSE, about 2500 green and 800 red or better than 3/1.

Just about all sectors were winners with airlines, brokers, semis, trannies, tech and small caps leading the way. Metals finished in the red and consumers, retail and drugs lagged although still very green.

Tomorrow is the election and prevailing wisdom is the dems take the House and the Repubs narrowly hold the Senate. Any other scenario may send a shock wave through the markets in one direction or another and I suggest checking Drudge for updates during the day as he seems to get his hands on exit polls and has a pretty good record of calling close races before the polls close.

NOON CHECK

Markets continue to move higher into the mid day with the DJIA +100, SPX +13 and NAZ +31.

The recent buy signals with the SPX DJIA etc all with 2 day RSI's under 5 proved to be a plenty good entry point. I was probably a few days early with my "asset alligator" call but it seems like today is the day the allocators realized, hmm, a trade out of bonds and into equities may be good, BUY LOWER SELL HIGHER, as the 10 year had rallied to the 4.5% rate a few days ago. I expect the rates will continue to rise and probably hit the 5% rate before the end of the first quarter.

Sector leaders continue to be perfecto for the bulls as airlines, semis (flipped and ignored the downgrade), brokers, biotechs, tech, internets and small caps lead the way higher. To the downside, gold, MO HD CAT and HD.

Market internals continue uber bullish with +1,550 on NYSE and +1,080 on the NAZ.

Funny how fast they forgot about the crummy retail sales on Thursday. I guess a bull market that is oversold cures all.

TECHNICALS-SENATE ELECTION

Time for some political trading - Currently the Democrats need a pickup of 6 seats to take control of the senate. In order to take over the majority, they need to win all but one of the "contested" races. Here is the current betting on tradesports.com.

Maryland- 75%-30% that the Democratic candidate wins.

Missouri- 56%-44% that the Democratic candidate wins.

Rhode Island- 78%-22% that the Democratic candidate wins.

Montana- 69%-25% that the Democratic candidate wins.

Virginia- 50%-50%- Webb and Allen fighting down to the end and tradesports does not give an edge to either.

I believe the other commonly discussed "toss ups" such as Tenn and New Jersey are not really contested and will be split with Corker and Menendez winning.

So if all goes according to the current odds - and if George Allen pulls it out in VA, we have 50-50 with Dick Cheney running the senate. If Ford and Webb win, which I don't see as likely, then we probably get the 51/49 with the Dems taking control.

Keep in mind that tradesports predicted every single state correctly in the 2004 election.

Interesting how tradesports.com has the republicans retaining power at a 75% probability.

Looks like the best trade on the site is taking the dems for controlling the House of Representatives. The trade there is 20% for the repubs keeping it. I think that is a sell and probably the best bet on the site.

HIGHER OPEN- SMELLY SOX

Markets open higher led by the NAZ and the Small Caps.

Market breadth is minty fresh on the NYSE with about 1,300 more winners than losers and bullish also on the NAZ with +1,000.

In addition to the uber bullish breadth, we are getting several TICK readings above 800 so looks like the demand for equities is back as of now.

Fly in the ointment this morning, the SOX. SMH and SOX indexes are trading flat on the heels of downgrades of the sector and INTC from Bernstein this AM.

Sector winners include brokers, GS/MS/MER, biotechs, trannies, metals, airlines, internets and financials. The weakest groups on a relative basis include semis, oil service, gold and silver.

OPENING THOUGHTS

Futures markets are pointing to a higher open this morning on the heels of lower crude, a tightening of the political races, an oversold market or just maybe, folks want to buy stocks.

John Carter, the author of the fine book "Mastering The Trade" is looking for the DJIA to pullback to the 50 day SMA and then higher highs. I suspect lots of traders are looking for that kind of pullback but I don't think the markets are going to satisfy all those folks. Either much lower or we never get that low. For now, I am in the "we are gonna rally" camp.

The VIX refuses to budge from the 11 area and trades close to its 10 day SMA while the 2 day RSI on the DJIA is at 1. The DJIA has been pretty weak during the most recent selloff (6 down days in a row) so maybe its time for it to outperform for a few days.