WEEKEND PICKING

Barrons has more good stuff this week and I am going to talk my book and cherry pick the longer term bullish stuff.

Mike Santoli with the following from his Inbox:

• Prior to the onset of recession, there's typically at least a 25% one-year rise in weekly unemployment claims. The increase in claims in December was less than 7%. So a recession is not imminent.

• The average decline in the S&P 500 from a pre-recession peak to a trough since 1945 has been 25%, just a few percent more than the index had lost from its 2007 peak to its intraday low Wednesday of last week. So, maybe the market has mostly discounted a typical recession scenario?

• Every one of the 23 times since 1987 that the ratio of bears to bulls in the weekly American Association of Individual Investors poll has exceeded two (as now), the market was up 12 months later, by an average of 21%.

But stocks have already been repriced to reflect expectations that published estimates are too high. The current S&P 500 forecast could be chopped by 10% and still market valuations wouldn't appear extreme at current prices. But the market's real-time response to muted corporate outlooks will deliver the true verdict on whether the market has built in enough fear.

Bear Beaters (10) from Andrew Bary via Mark Boyar:

The 10 liked by Boyar include:

COP FCX CBS DIS MO CB MOT CMI BA GE - I will go with COP FCX DIS MO CMI as my favorites in the group-

More rationale for why stocks are cheap-

At midweek there were nearly 70 companies in the S&P 500 with price/earnings ratios below 10, including Pfizer (PFE), Liz Claiborne (LIZ), Harley-Davidson (HOG), Dow Chemical (DOW) and MetLife (MET). Nearly 50 companies were trading at or below book value. These included home builders, a bunch of banks and some surprising names such as Time Warner (TWX), CBS (CBS), Citi, Fannie Mae (FNM), Gannett (GCI) and Barry Diller's IAC/InterActiveCorp (IACI). The ranks of stocks with such low price/earnings and price/book ratios historically have proven a good place to find value.

In the overall market, shares appear reasonably priced, barring a sustained economic downturn. The stocks in the Standard & Poor's 500 stock index are now valued at 14 times estimated 2008 profits. That makes for a return, or earnings yield, of about 7%, which is roughly double the 3.6% yield on the 10-year Treasury bond.

Little wonder Tom McManus, the equity strategist at Bank of America, raised his recommended equity allocation to 65% from 60% last week, telling clients stocks look good versus bonds. He and other Wall Street strategists maintain that the S&P 500 can jump around 10% this year from its current level. And that doesn't include an added 2% in dividends.

The key risk is that the U.S. could slip into recession, causing profits to disappoint. But at least some of that danger seems to be priced into stocks at current levels.

However, be advised that McManus gave a year end SPX target of 1,625 about three weeks ago, (10% from here- approximately 1,465- how come this stuff doesn't ever get mentioned).

Finally, Forbes columnist Laszlo Birinyi on what a recession may mean for stocks:

"Many bears expect a recession, which they assume is poison for market performance. Not quite. In the 11 recessions since World War II the market has averaged a 3% gain, despite the inclusion in that data set of the 23% decline in 1974. During 6 of those downturns the S&P went up. If 2008 is a recession year, it is not automatically fated to be bad for stocks."

And for the Bears, here is Random Roger with some bearish factoids.

THE STRETCHED NUMBERS

After the big sell off - some key numbers as follows:

SPX - 7.5% or 108 points under the 50 SMA; RSI (2) 35

DJIA 6.3% or 825 points under the 50 SMA; RSI (2) 39

QQQQ 11% and $5.55 under the 50 SMA; RSI (2) 28

VIX- 9% above the 10 SMA;

VXO -11% above the 10 SMA;

NYSE New Highs- 20

NYSE New Lows- 34

NAZ New Highs- 12

NAZ New Lows- 79

New lows peaked on Tuesday with 1,114 on NYSE and 877 on NAZ;

PRE CLOSE

Markets have recouped about half their losses as I type and I have covered/sold my QID long position I put on earlier in the afternoon. Unfortuneately, I didn't short the gap open but did make dough on the move lower.

Strongest sectors - ags, materials, trannies, homies, industrials, metals and defense while retail, insurance, drugs, gaming semis, brokers and health care lag.

Key stocks- 10 out of 40 higher- leaders- POT MTW CAT KLAC MCD BG CME ISRG - losers- DECK MS WYNN MER GRMN UA GS TIF MGM AAPL LVS RIMM ICE;

NDX/OEX 30 winners each;

NYSE/NAZ internals not far from the flat line;

This is now a pretty pretty good day trading environment and I intend to get more aggressive next week. Remember, the primary trend is down so for now rallies will probably be sold and the QID is a very good vehicle for shorting.

One other thing, the OIH was being sold big time through Wednesday morning and then all of a sudden it has been on a tear and it is trading flat today with the DJIA -120. Just saying.

MORNING SWOON

Markets trading lower with strength in ags, oils, materials, homies, gold and trannies with weakness in semis, banks, drugs, retail and insurance.

Market internals decent on the NYSE/NAZ but flattish to red on the NDX/OEX- IBD 100 with 75 winners as metals, ags and oils dominate the list.

Some interesting links as BESPOKE looks at P/E's of SPX sectors; Bernie looks at longer term support and resistance areas; some financials worth buying at Seeking Alpha; and Peggy Noonan with some Republican insight.

THE OPEN

Markets hanging on to the gap open but a lot of the early gains have disappeared. The DJIA +63, NAZ +22 and SPX +10. RUT and Small Cap Value the biggest winners up over 1%.

Strongest sectors- homies, ags, materials, oils, metals, emerging markets and trannies- laggards- biotech, semis, drugs, healthcare and staples;

Key stocks- 27 out of 40 higher led by POT BIDU BG MTW MSFT ICE RIMM AMZN UA laggards- DECK CELG KO SMH MO TIF WYNN GE GS;

NYSE- 1335 net winners;

NAZ- 900 net winners;

NDX-50 WINNERS;

OEX- 65 WINNERS;

IBD 100- 80 WINNERS;

VIX- 26.19 and down about 6% and AT the 10 SMA;

Up volume about 3X Down;

TRIN- 1.04;

As I suspected, the gap open led to some intense early selling as the NQ futures have already lost about 30 handles- the SPX about 10 from the highs. Volatility is here for a while.

The OIH with some interesting action as it has already at its 50% retracement from Wednesday's lows, a gain of 25 handles in less than 2 days. Yikes. The 200 SMA also right here at 170.

PRE MARKETS

Art Cashen offering his opinion on CNBC, and that is to watch for volume drying up- if/when that happens this market will be heading lower. Just wondering if this gap up in futures will give the folks who bought the big selloffs earlier in the week a pretty good opportunity to "sell the rip".

Its a Friday and with some big gains by some smart traders it wouldn't shock me.

RSI (2) levels:

ES 82

YM 86

NQ 85

SPY 77

QQQQ 66

IWM 75

THE CLOSE

Buy the dip was certaintly the play of the day as the DJIA closed +100, NAZ +45 and SPX +13.

Best sectors-

metals+5%, MOO+5%, oils+3%, tech (MSH)+3%, semis+2.5%, internets (HHH) +2.2% and banks +2%-

Lagging- airlines-3%, reits -2%, utils-2%, retail-1%;

Key stocks- 25 out of 40 higher- leaders- BIDU RIMM POT BG NVDA ICE GRMN CME AMZN MSFT; losers- CELG AAPL LVS BAC MER WYNN TIF IBB MS MA GE ISRG KLAC PG;

NYSE- 800 net winners;

NAZ- 450 net winners;

NDX-60 WINNERS;

OEX-55 WINNERS;

IBD 100- 60 WINNERS;

WINNERS- MOS TKC CF AGU CAM BIDU MICC AKAM QCOM CTXS NTAP COF AMGN MSFT GD;

LOSERS- EXC AEP TGT SO T BDK WMT APPL CNH GENZ SONO EBAY PETM UAUA EXPD VRTX AMLN CELG;

VIX- down 5%;

TRIN- .96

Up volume about double Down volume- total about 2.1 B which is pretty fair;

Everything back to normal as oils, metals, big cap tech lead higher while airlines, real estate and retail lag.

Technically, looks a bit difficult as we continue to bounce off the short term bottom. We could get to 1,380 as that was a prior support area.

NUMBER UPDATE

The SPX earnings number for 2008 has been updated at the S&P site and the earnings has been reduced again to $99.21 yielding a P/E of about 13.4 for 2008 as I type.

An election update-

Hillary to win nomination 66% Election 46%

McCain to win nomination 50% Election 18%

Obama to win nomination 32% Election 15%

Romney to win nomination 30% Election 9%

Hound to win nomination 3% Election 1%

Rudy to win nomination 14% Election 6%

And looks like a buy the dip day for daytraders.

MUST SEE

This is MUST SEE VIDEO- CRAMER V SANTELLI. Thank you Doggie.

MORNING MARKETS

Markets are strong at the open as the NAZ is +37, DJIA +67 and SPX +9.

Strongest sectors - metals+4.5%, oil service+3% with the OIH about $20 off of yesterdays bottom, semis+1.7%, tech+1.7% and trannies+1.7%- losers- utils-2.1%, airlines-1.6% and internets HHH-1%;

SPX sectors-

XLB +2.1%

XLE+2.1%

XLI+1%

XLK+1%

XLY+.6%

XLU-1.25%

XLP-.6%

XLV -FLAT

Key stocks- 35 out of 40 higher- leaders- BIDU DECK POT GRMN UA RIMM BG NVDA GOOG CME ICE MTW MGM INTC- laggards- PG CELG MS GE MA BAC GS;

NYSE- 1,200 net winners;

NAZ-1125 net winners;

NDX-65 GREEN;

OEX-60 GREEN;

IBD 100-85 WINNERS;

Market move yesterday continues as stocks are still way oversold with the NDX about 12% below its 50 SMA, SPX 6% below and DJIA 5% under;

Return to normalcy also as oils, metals and big cap tech lead the way;

YOWAZ

OK, I will declare that call earlier today to be pretty pretty good as the DJIA did a 600 point turnaround. Hard to believe that the DJIA could be +300 and the NDX/QQQQ could close red - but it is what it is.

Strongest sectors- homies +9%, reits+9%, banks+8%, airlines+8%, trannies+7%, retail+4% and utils+4%- losers- gold bugs-2.2%, biotech-2%, drugs-1% and tech-.4%;

Key stocks- yikes 27/40 green led by UA LVS WYNN GRMN BAC C INTC MS MER MA- losers- AAPL GOOG AMZN VMW RIMM POT BG BIDU DECK BG;

NYSE- 1500 net winners;

NAZ-630 net winners;

OEX-75 WINNERS;

NDX-70 WINNERS;

IBD 100-45 WINNERS- (lotsa metals/oils)

VIX- down only 7% which is actually pretty encouraging;

Up volume about 3X down volume on a total of 2.7B;

TRIN- 1 EVEN;

And how bout that near $14 turnaround on the OIH- not giving up on oils yet- I suspect there will be continued demand in emerging markets for the balance of the 21st century.

WINNERS- TTES WMS SONO SXE MA UAUA EXPD WFMI EBAY WYNN SIRI GRMN SHLD PCAR BBBY JPM COF WB RF WFC NSC BAC C TYC BDK STT NYX ORCL GILD;

LOSERS- FSLR VMW XTO CNH AMZN MTL DLB FSIN HMSY KOP AAPL GOOG EMC ATI MRK CI AVP VRTX NTAP BRCM LEAP SNDK VRSN;

So a big HIP HIP HOORAY for the NYS Insurance department as the rumor of a bailout causes "some" of the market rip.

First stop on the SPX - could be the 1345 area which is the first FIB retracement area off the 1,270 low of earlier today. GS also at 205, 50% retracement.

And how about this one from Jimmy, exactly incorrect - bullish on tech bearish on retail. The usual.

MORE NOON SWOON

Well if you shorted Haines's nonsense you now have food money for a month. Comical how these guys see a bottom every time the DJIA is "off the lows."

Speaking of off the lows,the NAZ/NDX is having a tough time keeping up with the bigger indexes as safe haven big cap tech stocks are trading as follows-today:

RIMM-9.6%

AAPL-16%

GOOG-8% (bubble like)

AMZN-8.5%

So any chance these stocks were owned for long term fundamentals or Cramer momentum? From the highs - their performance is as follows:

AAPL -36%

AMZN-30%

GOOG-28%

RIMM-40%

Anyhow, the DJIA is -175 and SPX -23 - the RUT/IWM, which has been the hardest hit major index since the swoon began is actually acting the best the last few days and only down 1.3% on the day.

My take is bottoms are processes and this process is taking its time working it out- all in good time and I think we are near the end of the carnage in light of the biggest winners now crushed.

I am gonna sell the last of my QID before the day is over and will look to slowly scale into some longs.

MORNING MARKETS

Markets opened way down but are now way off their lows -25 on the DJIA -18 on the NAZ and -3 on the SPX.

Strongest sectors- banks, real estate, reits, trannies, homies, retail, airlines and brokers while emerging markets, biotech, tech, oils, telecom and ags act the worst.

Key stocks- mixed with BAC C INTC GRMN MER NVDA MS GS TIF NYX higher while AAPL RIMM DECK GOOG AMZN KLAC KO MTW VMW lead lower-

NYSE- 525 net red;

NAZ- 600 net red;

NDX- 40 GREEN;

OEX-35 GREEN;

IBD 100- 15 GREEN;

Winners- SXE MOS LKQX OMCL BRK.A SONO AUY RF NSC WFC WB BAC JPM HD USB BNI C UTX LINTA EXPD BBBY SBUX NVDA SPLS;

Losers- AAPL PETM RIMM CTXS VRTX FWLT LOGI SNDK ERTS ATI S DELL XRX GOOG HPQ KO CSC;

VIX- near the flat line;

Up and Down volume about equal;

Are we out of the woods, I doubt it- remember in 2002- we hit bottom on October 10 went straight up only to retest in March of 2003. Not sure if it will happen again that way but I bet there are plenty of folks who want to get out higher.

Finally, don't ever listen to the guy pictured, he is always bullish and always looking for why the markets are going to rally from here.

THE CLOSE

Bill Griffith on CNBC calling a bottom since the VIX has spiked and of course the bottom in financials since they went up today. Well not sure on any of the above but the DJIA did come off the lows and manage to only be down by 128, NAZ -48 and SPX -15 after wicked early losses.

Strongest sectors- retail, real estate, reits, banks, homies, metals and brokers while emerging markets, utils, drugs, tech, biotech and oils lagged.

Key stocks- 14 out of 40 in the green led by UA MS LVS MA DECK CME MER MGM BAC RIMM and GS- lower- GRMN NVDA CELG BG IBB KO PG AAPL MSFT XOM and MO;

NYSE- 450 net losers;

NAZ- 1060 net losers;

NDX-20 WINNERS;

OEX-15 WINNERS;

IBD 100- 20 WINNERS;

WINNERS- DE CNH MA SXE FAST SHLD BBBY COST RIMM TGT MS HD WFC RF MER BAC WB;

LOSERS- CCU UNH BMY ORCL DELL AEP CSCO BAX MRK SIAL LEAP ESRX SRCL SIRI GRMN LOGI BRCM DLB GMCR CTRP HRBN TEF TKC KOP;

VIX- higher by 14% and over bought;

TRIN -.97;

Volume- 1.1B Up and 1.44 Down and a very high overall;

Markets churned after they came off the lows oscillating between down 200 and down 50 on the DJIA before the close. I suspect the way to trade for now will be to sell rips and buy dips as I doubt we go much higher or much lower from these levels for a while.

And it was just the other day we got this from the Chief. Funny how stuff changes so quickly.

NOTHING BUT THE BEST

Abbey Joseph Cohen, not in the picture but acting like the guy in the picture just gave us an end of year target (CNBC) on the DJIA (tricky) of 14,750 or a 23% gain from the 11,980 number at hand. Funny how it works as she gave us 1,675 on the SPX in barrons the other day which would be a 28% gain from here (1,310).

Has she downgraded the markets or lowered her outlook without telling anyone? Same old Wall Street.

NOON LULL

Markets have begun to oscillate between down 50 and down 200 on the DJIA- The RUT (IWM) and Small Cap Value are green as I type although no notice on CNBC.

Strongest sectors-retail, real estate, banks, brokers, homies, metals and gaming (all green), while emerging markets, tech, drugs, semis, utils, ags and oils all ugly red;

Key stocks- 12 out of 40 green led higher by UA MS BAC MER DECK MA GS MGM CME CAT- lower- VMW NVDA GRMN CELG MSFT AAPL MTW KO PG GOOG;

Up vol-514

Down vol- 840

TRIN-.95

VIX +14%;

SPX sectors from best to worst:

XLF +2%

XLY +1.3%

XLI FLAT;

XLB -1.4%

XLP -1.6%

XLK-2.5%

XLE -2.5%

XLV -3.1%

XLU -3.25%

NYSE - 825 net red;

NAZ- 1,000 net red;

OEX- 25 GREEN;

NDX-10 GREEN;

IBD 100- 20 GREEN;

If you think the lows are in on stocks - some FIBS to look at on the SPX (1576 to 1,274)-

23.6 1,345

38.2 1,390

50 1,425

61.8 1,460

76.4 1,505

And my strategy here- buying QID higher as I suspect strength will be sold a few times before its done.

MORE MORNING MARKETS

Apologies to all as some of my screen were down and I couldn't update some of the MARKET INTERNALS and KEY STOCKS.

Key stocks- UA MS BAC MER DECK CME MA LVS green while MTW VMW NVDA GRMN CELG MSFT KO XOM AAPL red;

NDX- 10 GREEN- SHLD FAST BBBY PETM AKAM WFMI COST SPLS MICC RYAAY; RED- FMCN ORCL LOGI BRCM MCHP DELL MRVL LEAP SIAL JAVA NVDA SNDK;

OEX- 20 GREEN- HD WFC TGT MS RF MER BAC JPM LEH IP DD LEH NSC WMT USB - RED- CCU ORCL BMY DELL BMY EP EMC WMB UNH VZ S;

IBD 100-15 GREEN- CNH DE CLB OMCL AUY WMS CMG ISYS MA PFWD- RED- FSIN DLB SLT FMCN HRBN TEF CTRP NGS;

Some good stuff on other sites:

Dr. Brett

BESPOKE-

BIG PICTURE

ADAM

And after the loss on Sunday - how bout some Yankee baseball.

MORNING MARKETS

Big Ben finally decides to cut 75 BPS this AM and markets are pricing another 50 BPS cut next week. The DJIA is only down 250, NAZ-60 and SPX -27 as I type. Not so horrible.

Strongest sectors- retail, trannies, real estate, homies, banks and metals while FXI EWA EFA MOO EEM tech, oils and telecom are the weakest.

Market internals- 4,100 net losers;

VIX a little panic as it was up over 25% earlier;

Strategy for now- buy what YOU think is good for the longer term as folks who bought GOOD stocks/funds on panics in 87, 98, 01, 02 etc. were eventually pretty pretty happy about it.

Short term- hard to say but my guess is strength will be sold/shorted by traders until it stops working.

Finally, if you own stocks and didn't expect there would be times like now, you shouldn't own stocks.

Congrats to Rick Santelli for finally telling the truth on TV about Jim Cramer-

THE FIBS

Futures are ripping higher as I type, YM +55, NQ +6 and SPX+5. The next numbers to look at- how about some Fibs from the October 2002 lows to the October 2007 highs:

SPX- High-1,576
Low- 769

38% Retracement- 1,270
50% Retracement- 1,175

DJIA- High- 14,198
Low- 7,197

38% Retracement- 11,540
50% Retracement- 10,700

NDX High- 2,239
Low- 795

38% Retracement-1,690
50% Retracement-1,515

NAZ High-2,862
Low-1,108

38% Retracement-2,195
50% Retracement-1,985

DONE

If the fearless forecasters from Barrons, mentioned here, are anywhere near correct, it will be a terrific 11 months for investors. Lets see, as I type SPX expected to open near 1,260:

DB says 1,640 close for a 30%;

MER at a mere 1,525 or only a 21% gain;

UBS at 1,700, or a 35% gain;

MS at 1,525 -21% gain;

GS (AJC) - 1,675 or 33%;

BSC- 1,700 or 35%;

JPM only 1,590, but still a nice 26%;

C- Tobias at 1,675 or +33%;

ISI - the biggest of the bunch at 1,750 or almost 40%;

Almost all also forecasted bond rate near 4.5% - so far also exactly wrong- then again 11 months plus to go;

KABOOM

Here we go again- the markets are crashing down and they aren't even open- well futures are open and the NQ down 60+, SPX down 50 and the DJIA YM down 350+. For now, the Trend is our friend.

COMINGS AND GOINGS

More "strategists" weigh in on whether the time is now for stocks to rally as they "look cheap."

Ed Yardeni, not so sure- "I don't think there is much upside over the next few months," he says. "The mess just keeps spreading."

Michael Darda of MKM Partners- who was on CNBC this week saying stocks were cheap says- "You can't take some of these indicators too literally (fed model) ... but any way you measure it, at this juncture stocks are the cheapest asset class around,"

Howard Simons of Bianco Research- the earnings variable, which is based on the forecasts of Wall Street analysts, undermines the reliability of the Fed model at this point. Given the uncertain economic outlook, he says, "stock analysts really have no idea what they are talking about in terms of forward-looking expectations."

Greg Fedorinchik of UBS Global Asset MGT- "We see U.S. equities as being about 10% to 15% too cheap," he says. U.S. Treasurys, meanwhile, are about 7% overvalued, UBS believes.

And check out what is new on the IBD 100- BRK.A- yup Warren has made the list- I am sure he will be happy to hear this.

Some pretty famous ones removed from the list including:


AAPL

BHP

BIDU

FCX

GIGM

GOOG

POT

RIMM

STP

NOV