TRADING THE MARKETS

Tony Crescenzi of realmoney.com with a wonderful article on why he thinks yesterday's sell off was different than what occurred in August:

"There is a major difference between the cause of the anxieties apparent in the equities and credit markets this week and those that led to major erosion in markets in August. The performance of the markets this time looks more a function of economic circumstance than financial circumstance, which was the driving force behind the August rout.

This week's market performance was driven more by lowered expectations of future cash flows than by renewed concerns about system risks. Cash-flow expectations were driven lower by this week's bad news on housing (the homebuilders survey reached a record low and housing starts fell to a 14-year low) and from a few negative corporate earnings reports. In August, the financials' negative performance was related mostly to a sharp change in perceptions about systemic risks.

Modifications to cash-flow projections, so long as they are not sharp, which is the case so far, are not likely to lead to any more than run-of-the mill changes in stock and bond prices. This week's action fits this mold, and should not be mistaken as a sign of deeper distress.

If concerns were deep, and if there were worries about the financial system, commercial paper rates and LIBOR would be spiking higher, as was the case in August, rather than falling to new lows as they have this week.

Some concern has developed this week regarding systemic risks, but these concerns are not nearly as high as they were in August. What has changed is the projection about future cash flows, with earnings expectations and expectations for interest coverage ratios driven down. These are run-of-the-mill concerns, not like the concerns expressed in August. "

I agree 100% with Tony and am looking to buy this week. Markets are oversold, VIX/VXO stretched to the upside, RSI (2) way down near the 1 level and the TRIN now up 5 days in a row.

Trading Markets had this article about the TRIN in 2006 and it fits right in with a buy lower sell higher philosophy. Trading Markets rules the TRIN trade:

Buy if SPX is above the 200 day SMA;

TRIN closes above 1.0 three consecutive days;

Exit the trade when the SPX trades above the 5 day SMA;

Looks like their are some other bloggers who are bullish for a trade here, Bill and the good Doctor who expects the trading range to hold.

As I have mentioned, I like to buy when the signals are aligned and now appears to be that time and if we sell off on Monday morning I will be dipping.

SPX UGLY

Markets closed at the lows of the day and sank further after the close as the YM futures ended down 400 while the DJIA was only down 367. The SPX closed near the 50 day SMA (1,497) and it will probably be probed on Monday.

Anyhow, as mentioned, I expect a sell off to open on Monday morning and that will probably be the dip to buy.

VIX/VXO closed about 25% above the 10 day SMA although not near the August high of 37.5. I don't expect we will see those VIX numbers any time soon as we probably get some encouraging earnings/guidance news next week. Also, before long the October 31 rate cut will be on the front burner and will probably lead to higher prices.

Finally, I suggest that anyone reading take a good luck at the relationship between the VIX and SPX above. It tells a pretty good story.

SINKING SHIP

Markets continue to trade lower and are at the worst levels of the day with the DJIA down 300, NAZ down 57 and SPX -31. So volatility and fear have reappeared.

The math is saying its a better time to buy than sell as have all sell offs since the beginning of the bull market in October of 2002 and I suspect this time will be no different.

Start with the 50 day SMA's which are 13,560 on the DJIA - we are approaching that number, 1500 on the SPX has been a key area in the past and I suspect it will be an area of support yet again. The 50 day SMA on SPX 1497 and we trade about 10 above as I type.

VIX/VXO up close to 20% and about 20% above their respective 10 day SMA's. My guess is one can do worse than putting some work here although I expect a down open on Monday and then the buyers dip in and buy that lower open.

Two day RSI numbers on major indexes (amusement):

DJIA 1

SPX 3

MID 6

RUT 2

NDX 20

COMPQ 15

Twice as many as new lows as new highs on that list today, but it may pay to take a look at whats on the list:

Highs:

AKS APA AUO BK CHK CNQ KO FST MDG PDA STT SU TUP UPL WWY;

Lows:

C CBG CAB CMA GCI HSY LIZ MER JCP SOV TM WM;

I dipped and and bought some emerging market mutual funds FEMKX QFFOX. Any shot at a rate cut on October 31? And check out how Jimmy made out today with his SLB play.

THE CRUSH

Markets are way down as memories of 20 years back are fresh in traders minds. Well maybe not, but less than stellar news from CAT SLB MMM HON and WB are not sitting well and I suspect some loser selling by mutual funds also isn't helping.

Best of the bad sectors inlclude drugs, utils, banks, retail, airlines and biotech while oil service, china, semis, oils, emerging markets and internets are crushed.

Key stocks show three winners out of 40 led by ISRG NYX and GOOG while MTW NVDA CAT UA LVS CROX GS act the worst.

NYSE internals 1,900 net losers;

NAZ internals 1,500 net losers;

OEX -8 WINNERS;

NDX - 7 WINNERS;

IBD 100- 8 WINNERS;

Gainers- ISRG GOOG S INFY AMLN BIIB ESRX CKFR ABT PG AVP MRK CL CSC JPM T TRAK CRNT GMCR PDA CF;

Biggest Losers- OMCL SLB SLT SII TBSI EXM FTI FSTR ICOC SSRX NOV DRYS CNH HALL MMM HON COF BHI CAT GM F SNDK MICC RYAAY PCAR LOGI MNST BRCM;

Volatility indexes higher by 10% but hardly rip roaring the 20% number that we have seen on very ugly down days.

Other stuff:

Agricultural stocks all lower with the biggest losers being MTW CNH CAT AG;

Banks - JPM MI MTB all green while BAC CFC WB in the biggest losers category;

Brokers/Xchanges- BSC ICE NYX all green while big losers include BEN GS LM MER TROW;

Oils all lower with VLO SLB HP HOC HAL the biggest losers;

AFTERNOON LOOK

Markets have flipped to flat after opening lower with the RUT/NDX/NAZ is again leading the way while the SPX and Value are lagging.

Strongest sectors- Australia, metals, real estate, reits, trannies, drugs and defense while china, internets, airlines, banks, homies and biotechs lag.

Market internals flat on NYSE and NAZ;

IBD 100 - strong with about 65 winners;

NDX/OEX -each with about 50 winners;

Biggest winners- LOGI ISRG LVLT MNST ADBE RIMM BAX BNI IP GM DELL ATI NSC GSOL DSX TBSI ARGN MR LWAY SNHY EXM SLT;

Biggest losers- SNP ACM VDSI LFC EJ CHL MBT SSRX BTJ ALL RF BAC WFC AXP TXN MER C EBAY AMAT CTXS ERIC UAUA LAMR SIAL WYNN ROST KLAC;

VIX/VXO unchanged;

Crude trading over $89 and the market remains a tad over sold in light of the recent dips on the major indexes. I suspect we move higher over the next few sessions since the lousy numbers out of BAC and couldn't get us down I doubt there is much out there that will. GOOG later today probably beats and trades higher dragging the rest of the market with it.

MORNING LOOK

Markets are trading down on the heels of the not so stellar BAC earnings report which is also impacting many of the big banks. BAC is lower by 3.6%, C -1.5%, WB and WFC, each down about 2%.

DJIA down 20, NAZ down 10 and SPX down 4.

Strongest sectors include metals, aussies, oil service, trannies and drugs while chinese stocks, internets, biotechs, homies and brokers act the worst.

Key stocks, about 8 up and 32 down with ISRG TIF ICE BIDU POT MO XOM RIMM higher and BAC DECKKLAC LVS NVDA MS UA CROX WYNN and MER leading the losers.

Market internals not that bad with NYSE at 570 net losers, NAZ at 500 net losers;

OEX -35 WINNERS;

NDX -35 WINNERS;

IBD 100-50 WINNERS;

Gainers- GSOL DSX ISRG GMCR WMS CMED CRNT TRAK SLT LOGI LVLT APOL AKAM DELL FLEX BAX BNI IP NSC ATI ABT AA F WMB;

Losers- ALL BAC COF RF WM TXN WFC AXP LEH HIG JPM EBAY CTXS AMAT KLAC LRCX CTSH SNP ACM LFC SSRX CHL BTJ EJ MORN MBT;

Down volume almost double up volume and the TRIN again over 1 at 1.09- if it closes there it will be four days in a row and that is typically a buy signal.

Volatility indexes hanging in and only up about 2%;

The markets appear to be range bound and I will take it as a positive as they don't go down much on the bad news. They also don't go up on good news as that information is quickly sold, note yesterday morning.

STRANGE RECAP

Markets seem a bit disjointed as the NAZ/NDX closed up over 1% while the DJIA/SPX/RUT/MID's all closed near the flat line with the DJIA ending lower after being up and down over 100 points on the day. Value stocks were the laggards again as both small and large cap value stocks closed in the red.

Strong sectors included Chinese stocks (FXI) which was up almost 10% and has doubled since the August lows, internets, semis, tech, airlines and trannies while metals, oil service, defense, homies, retail and utils lagged.

Key stocks - 29 up and 11 down led by NVDA INTC RIMM GOOG and KLAC while UA ISRG POT MA MER BG CAT BAM C all closed red;

Market internals were flat on NYSE/NAZ while NDX was a hair green and OEX flat; IBD 100 very strong with 2/3's of the stocks closing in the green.

Biggest winners included SNP LFC CHL TKC ANSS PDA GOOG CI JPM DELL MSFT HPQ KO YHOO EBAY INFY FLEX SNDK and MRVL;

A very strange day as the markets opened way up, went way down and closed near unchanged on the DJIA/SPX and up 29 on the NAZ. Even more interesting was the action in the VIX which was red as the DJIA was down 100 points. Not sure why but definitely odd.

Two day RSI numbers all over the board as the different sectors trade in their own separate way:

SPX 30

DJIA 12

NDX 75

COMPQ 67

LARGE VALUE 6

SMALL VALUE 6

RUT 27

MID 10

Final note, for now its all about tech and hopefully they eventually pull the rest of the market up.

NOON LOOK

The early turnaround continues as the DJIA has flipped to red while the NAZ is the place to be up 23. Growth also outpacing value as growth is up about half a percent while value is red. Oil was also a big story hitting near $89 a barrel before turning south.

Key stocks about 28 up and 12 down with NVDA INTC JPM RIMM KLAC CROX the winners while UA ISRG POT BG MA XOM CELG the losers.

Market internals have also weekend considerably with NYSE showing 325 net winners and NAZ with about 300 net winners.

NDX/OEX both with a hair more than 50 winners.

IBD 100 much stronger with about 70 winners.

Biggest winners- SNP LFC CHL HDB NVDA VSEA CTRP MT GES SDA INTC JPM CI DELL MSFT HPQ KO BMY NXY TXN YHOO INFY SNDK CTSH AMAT FLEX KLAC;

Biggest losers- PCAR DISH ERIC ISRG LLTC FAST TLAB LOW APOL UTX IBM BDK AVP RF HD WFC MDT ORCL GM DOWN SII CMED TBSI HDNG GLNG VDSI ATW NILE;

IBM and UTX are the drag on the DJIA as there an equal amount of winners and losers on the big index. I am surprised that this sell off hasn't been bought although a few attempts have been made. Not betting big on either direction today as markets have already done what I didn't think they would.

Finally, FOX business channel remains way behind bloomberg and CNBC imvho and I am about done trying it out.

OPENING LOOK

Markets gap open higher but have given back much of the early gains as 14,000 on the DJIA was sold pretty hard. Never the less, market internals look very strong and push back to those levels before the close would not be surprising.

Strongest sectors include china, internets, emerging markets, semis, tech, trannies and gaming while oil service, real estate and reits are all lower.

Key stocks- 36 of 40 higher led by NVDA INTC JPM BIDU KLAC RIMM MTW LVS and DECK while ISRG C UA and BAC are lower;

NYSE internals +1,400;

NAZ internals +1,075;

NDX - 75 WINNERS;

OEX -80 WINNERS;

IBD 100-80 WINNERS;

Biggest Winners- SNP LFC CHL HDB VSEA NVDA SDA PDA MT BIDU JPM DELL CI LTD NXY HPQ MSFT XRX YHOO INFY CTSH AMAT KLAC EBAY;

Biggest Losers- PCAR DISH LLTC ERIC FAST ADSK ISRG LVLT UTX IBM GM ATI DOW CSC RTN BHI SII TBSI GLNG GSOL CLB SCHN;

VIX/VXO down about 8% and back to neutral after the morning ramp;

I still suspect some mutual fund selling as the years losers such as financials, real estate and reits continue to act poorly and fund year ends of October 31 are rapidly approaching.

CLOSING LOOK

Markets closed the day lower but well off the worst levels of the day as crude was the real story as it was up another $1.5 to $87.5. The DJIA closed down 71, NAZ -16 and SPX down 10.

Strongest sectors were oils, airlines, semis and gaming while financials, homies, emerging markets and china were the worst.

Key stocks mostly lower (25 out of 40), worst were C ISRG BIDU MER JPM BAC BAM DECK GS while BG WYNN POT AAPL KLAC NVDA MSFT MO MGM and RIMM were green;

Market internals ugly again with a net 2,250 losers between the NYSE and NAZ.

NDX - 35 WINNERS led by DISH VRSN UAUA LRCX WYNN ESRX FLEX APOL AAPL XRAY- LOSERS- ERIC INFY AMLN AKAM BIIB YHOO SNDK WFMI JAVA;

OEX- 25 WINNERS- led by AES COP CVX CMCSA NSM BA MCD MSFT NXY SLB -LOSERS- WFC GM C WY EK LEH JPM AXP MER AA F WB;

IBD 100- 25 WINNERS- TBSI NILE GPOR TEF POT PCP FLIR LAYN EXLS AAPL - LOSERS- HDB TRAK PKX SLT SSRX SNP DRYS EJ BTJ MR CRNT;

VIX higher by 4% and in Buy territory for major indexes;

Down volume about 3X Up volume- TRIN 1.31;

The worst performing indexes of late with their 2 day RSI's:

LARGE VALUE -7

MIDS -6

SMALL VALUE -6

OEX -11

RUT -12

I am looking for SPX 1535 to hold as it was prior resistance and my become current support. Most major indexes now at/near their 20 day SMA's so also curious to see if they hold.

INTC out with numbers and the stock is now trading up and near 26.25. Hopefully it gets the SOX/SMH some juice tomorrow and gives those with trepidation a little relief.

After watching FOX BUS channel for parts of the last 2 days I have come to one important conclusion. I underestimated how good CNBC actually is. In the last 15 minutes of the trading day on FOX, the journalists were discussing the fact that it is open season on health care at lots of corps and folks need to make these important decisions now. Exactly how many folks have full time jobs at big corps and watch the markets/business news all day long? Yeah, not many so not sure who they think there audience is or will be. My guess is that it will be republicans who allocate their retirement funds 60% to SPX stocks and 40% to long term bonds. Not sure why they will be watching business news channels all day long but, whatever.

EARLY NOON STUFF

Markets continue to trade lower but there have been some signs of life as the NDX briefly turned green before turning back to the dark side. As I type, the DJIA is lower by 63, NAZ -7 and SPX lower by 7.

Strong sectors include oils, semis, utils and airlines while homies, financials, emerging markets, metals and internets lag.

Key stocks, 14 out of 40 lower with C MER JPM UA BAC JPM TIF ISRG the worst and BG WYNN POT KLAC AAPL MSFT and NVDA the best.

Market internals find about 1,000 net losers on the NYSE and 600 on the NAZ.

NDX -45 WINNERS led by DISH VRSN WYNN FLEX ESRX APOL while ERIC INFY AKAM YHOO RYAAY and NIHD are the worst;

OEX -30 WINNERS with AES MSFT CMCSA BHI NSM EP MCD the best and WFC GM WY C MER CSCO AA the worst;

IBD 100 - 25 WINNERS- TBSI BTJ CHL FLIR CMG TEF NILE SNDA POT EXM- losers- PKX SLT TRAK SNP HDB SSRX TISI;

Financials are acting punk again today while tech has some winners including AAPL GOOG BIDU HPQ MSFT IBM KLAC TXN; Semis also in the green up about .22% on the SOX;

VIX/VXO higher by about 3% and in buy territory;

Down Volume about 3X Up volume;

Other stuff:

Ags have BG and POT up nicely;

Banks all lower;

Brokers/Xchanges/Asset Managers lower with the exception of BSC and STT;

Biotech all lower;

Consumers green including K KMB KO MCD MO PEP PG SBUX;

Defense red;

Gaming- the usual suspects are green such as MGM LVS and WYNN;

Drugs- ugly;

Metals all red and perhaps a dip is warranted into RIO FCX GDX GG;

Retail- red with WRNC UA TIF M LTD HD CWTR CROX all ugly;

OPENING LOOK

Markets open lower as oil moves up and folks probably have added trepidation about third quarter earnings. Major indexes from best to worst- NDX COMPQ SPX DJIA MID RUT;

Strongest sectors include oils, gaming, utils and semis while homies, financials, banks internets and real estate lag.

Key stocks 10 out of 40 higher led by BG MSFT KLAC NVDA MO CELG AAPL POT; laggards BIDU MER ICE TIF NYX CROX GRMN;

NYSE internals 1,500 net losers;

NAZ internals 1,000 net losers;

IBD 100 -14 WINNERS;

NDX - 35 WINNERS;

OEX -25 WINNERS;

Biggest winners- TBSI TEF CHL CPLA BTJ GPOR CMG SLB AES HPQ MSFT NSM SLE BHI CMCSA TXN DISH ESRX BRCM SIRI MICC APOL VRSN;

Biggest losers- ERIC YHOO INFY AKAM JAVA SNDK RYAAY WFC GM LEH WB CSCO WY GS BAC TRAK SNP PKX SDA PDA CYNO RIO MR SID;

VIX up about 8% and about 15% above the 10 day SMA; DIP?

Down volume 4x Up volume and more new lows than new highs this morning - first time in a while;

Two day RSI numbers heading to buy territory as follows:

SPX 11

OEX 10

DJIA 13

RUT 12

NDX 28

General rule, buy major market indexes when the 2 day RSI hits under 10 - sell over 75;

IBD 100

Futures are pointing lower yet again with the NQ down 16 ES down 8 and YM down 59 as European markets trade down.

FWIW here are some of the top IBD 100 stocks:

1- BIDU

3- RIMM

5- POT

11- RIO

13- CMG

18- ISRG

19-NOV

22- PCLN

25-GRMN

28-AAPL

38-SNP

41-BHP

44-AMZN

60-SLB

62-CAM

69-CELG

72-MA

84-NVDA

96-GES

98-GOOG

CAM has been in the top 100 and has had quite a run and I have had it since it was around 60. Pullbacks in this sector are for buying and with crude up to $87.5 this morning it probably trades to $110 shortly.

Happy hunting.

THE CLOSE

Markets closed off the worst levels of the day as the DJIA was down 108, NAZ -26 and the SPX -13. The RUT and specifically the value portion of the RUT were the worst of the bad indexes today.

Strongest sectors were metals, oils and biotechs while financials, reits, real estate, gaming and homies were the worst.

Key stocks- 8 out of 40 GREEN - leaders- CROX XOM TIF INTC NVDA DECK IBB MO; losers- RIMM C MA WYNN POT LVS ICE GOOG COST NYX MGM CELG;

NYSE internals - 1,450 net losers;

NAZ internals -1,255 net losers;

NDX 20 WINNERS;

OEX 15 WINNERS;

DJIA 6 WINNERS- led by XOM INTC DD MO MMM losers- GM C AXP VZ BA;

Biggest Winners- BHI EK XOM SLB CVX HAL INTC TBSI EDU SNP CMED VSEC EXM SNDA FSTR BIIB TLAB GENZ BRCM NTAP SIRI XMSR;

Biggest Losers- LVLT AKAM RIMM XRAY SHLD VMED GILD ROST MDT ATI GM C TYC COF LEH GOOG NILE PDA TNE WMS GLNG RIMM POT;

VIX closed lower by about 9% and while VXO/VXD VXN were all higher by about 12% and all are trading above 110% of the 10 day SMA.

So a little fear ahead of earnings which could be a good thing if companies in general meet or beat the street. I expect they will and dipped in and bought.

THE DIP

So with the DJIA down more than 150 points at its session lows, is it Mutual Funds selling to generate end of the fiscal period losses. Could be as the sectors that are acting the worst today are also the sectors that have done the worst on the year, banks, airlines, brokers, real estate and retail.

Best stuff on the year, metals and oils also the best performing on the day.

My suspicion is that dips are a buy in this market and its dipping and I am scaling in to funds/etf's.

FEAR HERE

A little anxiousness as markets are trading lower on the heels of some crummy C numbers, rude crude trading above $85 and big layoffs at TWX as the DJIA trades down 115, NAZ -19 and SPX lower by 11.

The VIX/VXO now higher by about 10% and at/near the magic 10% above the 10 day SMA buy signal.

Two day RSI numbers not quite at buy signals but definitely over sold near the 20 level for the major indexes.

Market internals getting worse as the day goes on and financials about the worse performing sector along with internets, real estate and airlines. Sox/semis hold up surprisingly well while other techs such as AAPL GOOG BIDU AMZN HPQ RIMM are all lower.

Down volume also about 3x Up volume.

THE OPEN

Markets open lower on the heels of higher crude and an over bought market. The DJIA is -40, NAZ -1 and SPX -3.

Strong sectors incude oil service, metals, biotech, china and semis while real estate, reits, financials and airlines lag.

Key stocks - 16 up 24 down - WINNERS- CROX DECK INTC XOM IBB ISRG TIF; LOSERS- C CAT BIDU MS RIMM ICE BAM MER;

NYSE internals 800 net red;

NAZ internals 640 net red;

OEX -30 WINNERS;

NDX 25 WINNERS;

WINNERS -BIIB GENZ NTAP BRCM INTC SLB EK BHI CVX XOM HAL EDU SNP CMED SLT TBSI CLB;

LOSERS- NILE TEX PDA WMS TDG HMSY WHQ MDT ATI GM COF C F CAT AXP LVLT ROST UAUA XRAY ESRX SHLD CTSH INTU;

VIX/VXO higher by about 3% and now trading a few percentage points above the respective 10 day SMA's.

Other stuff:

Two day RSI's on major indexes:

DJIA 39

SPX 43

RUT 32

MID 24

NDX 70

COMPQ 59

Banks and brokers all lower with AIB C NDAQ BSC BEN IAI among the worst performers;

Biotechs good with GENZ BIIB both with 2 day RSI's near 100;

Metals and oils the best performers led by OIH APA APC DO HP NFX SLB SU XOM XTO GBN GG GSS PAAS SSRI;

FIRST LOOK

Futures are trading near the unchanged level while crude is up over a buck and trading over $85 a bbl. while most European indexes are down a bit.

Other stuff:

BIIB trading up $13 on the late Friday news of the company being put up for sale;

Indian Sensex index closes up 640 points;

DHR to buy TEK for $2.8 B or $38 per share;

Positive mentions in Barrons included CVS and NOV while Fund Manager Putnam was bullish on NT JDSU ZHNE CNXT MSPD BKHM SUP ARM AXL HAYZ PKD NR and GW.

The Fox Business Channel started this morning and its seems to be off to a lackluster start at best. How so:

Friday's stocks quotes including CCU identified as Circus Circus. Hmmm, I believe that stock was taken out years ago and the symbol now belongs to Clear Channel. Fact Checking?

A reporter located in Englewood Cliffs, New Jersey (home of CNBC) giving news updates and "chasing" peacocks. Tacky?

An interview with Carly Fiorina where Alexis Glick identifies her as the woman who turned around HPQ. Comical?