STRETCHING

Markets bounced around most of the day with the DJIA closing down 107, NAZ 6 and SPX 5.

Sector strength was found in metals, steel, oil service and shipping while gaming, financials, banks and internets lagged.

Market intenals were red but not horrible and the action in the NDX was actually ok as it closed flat but lots of stocks like AAPL RIMM GOOG etc closed at/near their highs.

So next week could bring a nice over sold bounce as we are again stretched far away from the SMA 50 on the SPX- about 7%- similar to the stretches back in January and March- the prior lows.

In addition check the action in the DXD- the 2X inverse DJIA- volume spiking to prior highs -(the market lows) and check the RSI (2) - a bit over bought in reverse. And going long on the volume spikes in double inverse ETF's seems to be a pretty good strategy in the past- and just imagine if we could get crude back down a few bucks- which is probably not a horrible bet.

Cramer also may be setting up for a good contra tell as he wants to sell at DJIA 12K and buy em back at DJIA 10K- not so easy - especially if we don't get there- and check the VIDEO on the TG site- comic relief from the real King of Comedy.

AFTERNOON PLAY

Markets has come back after being down this morning on the heels of higher oil and over all crummy sentiment for equities.

Would not surprise me if a further rally develops with more short covering as its been a banner week for the shorts.

Market internals have improved with about 1400 net losers on the NYSE/NAZ while the OEX/NDX show about 40% of stocks in the green.

VIX back to the flat line- but over bought on a short term basis well over the SMA 10;

Down volume a bit ahead of up - but closing the gap- on light volume;

Probably should start to look at long candidates for next week as the markets rarely go straight down for long periods of time.

And Kramer looking for selling here and getting set to buy at DJIA 10K- rarely does it work out like that.

MORNING TRADE

As happens many times after a big trend day (up or down) the markets are just bouncing around between green and red. Strength is found in the metals, steel, emerging markets and oil while gaming, internets, semis and tech lag.

NYSE/NAZ flattish internals;

NDX/OEX- flattish internals;

VIX- down 1.5% at/near 23.5- and note that most Volatility indexes now trade in overbought areas near the 110% of the SMA 10- VXO VXN VXD;

Up volume slightly better than down;

Not sure how much I will day trade today as markets probably chop up many participants - only areas looking interesting is oil - buying dips may work there.

LATE AFTERNOON TRADE

Short covering probably into the close as down 300 on the dopey DJIA was enough for me to cover- and down 70 on the NAZ/NDX - also good enough for the day.

How about Sue Herera on CNBC looking like she was going to cry as she didn't like that GS downgrade GM/C way too late in her opinion despite the 10%/5% price reduction just today.

And she also wanted the Fed to raise rates so the dollar wouldn't be clobbered- Sue, breaking news- they aren't going to raise rates while the economy is poor and while a big election looms.

More breaking news- the VIX at/near 23.75- and only 12/15 points off the recent highs - could be a real ugly tell of lower lows in the near future.

RSI (2) levels near the close:

SPX 10

NAZ 18

RUT 18

MID 12

XLE 20

DIG 23

DJIA 1

EFA 0

And how about Bob Pisani nailing the bottom in financials yet again (a new bottom most days) and the top in oil (new all time high today).

Anyhow, closing out all short positions and waiting for what tomorrow will bring. Maybe a long in DIG XLE OIH.

THE SHORTS

Markets continue to struggle although off their worst levels.

I am still hanging on to some DXD/TWM but have sold SKF for a decent gain-

Metals the only sector in the green with very very bearish internals as their are about 3800 net losers on the NYSE/NAZ and about 10 out of 200 green on the NDX/OEX;

VIX higher by 10% but still well off the recent highs at 23.35;

Down volume about 11/1 of up volume;

Again, markets that are weak all day tend to close at/near the lows and if we bounce I will be buying more DXD QID TWM.

MORNING TRADES

Markets not so good this morning on the heels of the GS downgrade of the brokers/banks- the final horseman RIMM getting chopped and probably some regret by folks who thought the FED was going to raise rates some time soon.

The DJIA -140, NAZ -44 and the SPX 16.5 and at the 1305 support level which probably gets breached today.

Strongest sectors- metals, shipping and oil service while gaming, semis and homies lag.

NYSE- 1500 net losers;

NAZ -1150 net loses;

NDX - 6 GREEN;

OEX -12 GREEN;

VIX 22.5 and higher by 6.4% and still only trading at/near the SMA 10;

Down volume 6X the up volume;

TRIN- 1.45;

I suspect an initial bounce near the 1305 level - but that eventually gets sold and the DJIA/SPX close below major support areas- just a trading theory for the day.

So far - long DXD QID and waiting for that SKF entry.

THE THOUGHT

Markets set to open way down with commodities way up led by gold +$27 and oil +$3.43 and did any one really think the fed was going to raise rates while the economy remains very weak. Good luck to those traders.

And don't I wish that I bought that SKF yesterday- anyhow, on my list this morning for buying pullbacks- SKF QID DXD SDS TWM UNG USO GLD DIG XLE OIH-

One other think- keep in mind that markets that are weak all day tend to close at/near the lows and the DJIA is more heavily weighted to the financials than other indexes with AXP AIG JPM C BAC- think DXD.

THE CLOSE

So just as Kramer declares the FED got it right because the markets are higher- well you guessed it - we closed well off the best levels on the NAZ/SPX and flattish on the DJIA.

Strong sectors included semis, shipping, tech, retail and biotech while ags, defense, oils and metals lagged.

Note however the energy patch came way off the lows and actually flipped to green at the afternoon highs.

Market internals closed near the worse levels of the day with 1700 net winners on the NYSE/NAZ;

VIX- lower by 6% and about 4% below the SMA 10;

Hopefully some folks made more than I did on the DIG/XLE long- and for now looking at a SKF long for tomorrow as I suspect the game remains the same.

And of course with all the trading above 1325 (most of the day) we close below as it becomes pretty pretty tough resistance.

PRE FED

DIG is gone with a nice profit as I suspect the afternoon session will be a bit volatile and trying to get it right will not be easy.

Currently the DJIA +53, NAZ +35 and the SPX +11.

NDX/OEX internals still hanging tough with 170 out of 200 in the green;

NYSE/NAZ also good with 2200+ net winners;

VIX down 6% and heading to over sold territory;

Up volume still 3X down volume;

TRIN- .81;

Retail, semis, homies and financials still leading the way while oils metals and ags still lag;

SPX 1325 also hanging as market resistance but lots can/will change at 2:15.

THE DIG

FWIW - just bought some DIG/XLE as oil tanks on the inventory numbers- this trade has worked out well over the past few years - just like selling the financials into strength - go with the major trends.

Note also the NDX/OEX internals very very strong with 170 out of 200 components in the green;

VIX dipping 5% - so watch that for some over sold levels- such as near 19;

Up volume still 3X down;

THE OPEN

Markets open higher with strength in the financials, semis, retail and homies while energy, metals and ags lag.

The DJIA +46, NAZ +22 and SPX +10.

NYSE- 1150 net winners;

NAZ -780 net winners;

NDX- 85 GREEN;

OEX- 80 GREEN;

IBD- 45 GREEN;

VIX down 3% at 21.7;

Up volume 3X down volume;

First area of resistance on the SPX seems near the 1325 level but no clue how the markets will react to the fed after 2:15- strong action in the financials probably makes it a buy the dip day although big near term resistance on GS at/near the 189 level - so you know.

AFTERNOON SWOON

An ugly 2:00 turn around in the markets and the overall down trend reemerged rather quickly- However, anyone buying the QLD at /near the $78 level had plenty of opportunity to book a nice quick profit-I am ending the day flat the index etf's.

The next issue to be addressed is if the 1305 level will hold - my guess is yes and if its tested I will probably jump on it - although not today's business.

Market internals on the NYSE/NAZ never went green and they probably gave many a trader a reason to stay off the long side.

DIG XLE OIH etc getting hit and with a little more downside they may make nice longs-

MIDDAY FEEL

Feels like the markets may get a decent bounce this afternoon as the financials are the leading sector as I type. The NDX also looks pretty good and I have dipped into a QLD long near the $78 level- and will look to add on the dips.

Market internals improving and if they flip to green on the NYSE/NAZ it could be a telling day in the short term.

VIX heading lower;

TRIN- .44- HMMMMM;

Up volume a hair better than down;

RSI (2) levels at the noon hour:

SPX 25

DJIA 21

NDX 25

RUT 9

MID 8

And has anyone noticed Pisani has called the top in oil stocks for about the 100th time- it remains a buy the dip area for me DIG XLE OIH. Oh and the bottom in financials for about the 200th time- that remains a stay away except for GS for now.

THE OPEN

Another day in paradise as the markets dip down yet again with the recent lows almost tagged on the DJIA- SPX a little further to go as the energy patch helps the relative strength of the SPX.





Strong sectors include semis, drugs and biotech while gaming, oils, internets and homies lag.





NYSE- 1800 net losers;


NAZ- 1300 net losers;


NDX- 15 GREEN;


OEX- 20 GREEN;


IBD- 7 GREEN;


VIX- closing in on 23.5 and higher by 3.5%;


Down volume 5x up;

Tom Friedman with an interesting oped in the sunday NYTIMES;

Had a little QID left and have finally sold it and expect a bounce at/near 1300 on the SPX- as it seems like the selling is getting way over done on this consumer confidence news DJIA retest news.


So going to buy some index ETF's some time today - Note GS green in this ocean of red.

THE CLOSE

Not much today as I was out most of the afternoon with personal stuff- anyhow the SPX closed up 7 cents the DJIA -.33 cents and the NAZ was the worst of all down 20.

Strong sectors included oils, ags, steel, drugs, utils and metals while financials, insurance, gaming and brokers lagged as usual.

NYSE- 1060 net losers;

NAZ- 1175 net losers;

NDX- 30 GREEN;

OEX- 45 GREEN;

IBD- 70 GREEN;

VIX- flattish 22.6;

TRIN- .88 down volume almost 2x up and very light volume overall;

Seems like energy/ags the only space to be long for now - while the VIX continues to flat line causing many traders to question a big rally from these levels.

MORNING TRADE

Markets are trading near the flat line with most of the strength to be found in the energy patch while the weakness is in the usual place - the financials.

The DJIA +10, NAZ -2 and the SPX +2.

Strongest sectors oil, utils, drugs, steel, telecom and ags while banks, brokers, metals, internets and gaming the worst.

NYSE 175 net winners;

NAZ- 300 net losers;

NDX- 59 GREEN;

OEX- 58 GREEN;

IBD -80 GREEN;

Key stocks- CME XOM DECK UA CAT AMGN GE green and BG MER GS MS BAC C NYX NVDA all red.

VIX- down a bit at 22.5;

Up and down volume about equal;

So as suspected - no rush to buy - except in the oil patch and with the financials acting this poorly my guess is the oil patch may sell off before the day is over.

THE WEEKEND

Everyone waiting for the news out of Saudi Arabia this weekend and the first bit I found says the Saudi's will increase their daily production form 9 million bpd to 9.7 bpd. OK not bad - lets just wait and see if they have the capability to do it - my guess is that at $135 pr bbl - they already produce as much as they possibly can.

Barron's with their cover story on why the price of oil is/has peaked at/near $135 - don't know if they are correct but this most important peace of information in the article was this:

"The rally has emboldened oil bulls, who argue the world is bumping up against oil-supply constraints, and that demand will rise inexorably, despite sharply higher prices, as the four billion to five billion people in emerging economies like China and India get a taste of the energy-intensive good life, replete with the cars, air conditioners, refrigerators and computers that Americans and Western Europeans have long enjoyed.

Statistics support their view that demand growth is in its infancy in the developing world: U.S. per-capita oil consumption is 25 barrels annually, while Japan uses 14 barrels per person. China's 1.3 billion people consume just two barrels each per year, however, and India's 1.1 billion use less than a barrel a year."

So what happens if/when their life style approaches any where near our's?

Back to the markets, they are oversold as one can see by checking the RSI (2) levels at near 10 on the SPX/DJIA/RUT and 20 on the NAZ/NDX/MID-

The problem- the Volatility indexes no where near the over bought levels we have seen over the past several months at other major market bottoms- (check the charts above).

Note the VIX- barely above the SMA 10;

Another indicator - the number of stocks above on the SPX above their respective 50 SMA- no where near prior recovery levels.

The SPX is stretched pretty far from the 50 SMA - but until the other indicators get similarly stretched I will watch from the sidelines.