MIDDAY SNOOZE

Markets have turned lower as the financial leaders head down after a very strong week. The NAZ/NDX was key and it looks like the SPX/DJIA will be following-

Strong sector is oil while internets, biotechs, retail, homies and large growth lags.

NYSE/NAZ with about 1,000 net losers;

VIX- near the flat line at 24.6;

Crude -$130.5 and gyrating;

Gold- $960;

Up and down volume about equal;

TRIN 1.07;

Finished trading for the week and will revisit on Monday - with markets a bit over bought and VIX a little low here.

THE NUMBERS

Markets are set to open near the flat line with the exception of the NAZ/NDX which is being preassured by the GOOG/MSFT reports from yesterday.

RSI (2) levels in sell territory near 90 on most indexes and the VIX heading to oversold area as most VIX/VXO/VXN/VXD- at/near the 5% below the SMA 10 levels.

On the news front:

One group honoring dubya;

BESPOKE on Bear Market territory;

Barron's on XTO;

THE CLOSE

Quoting something I haven't heard in a while - markets are resilient as they looked like they wanted to take them down a few times today but no as the DJIA closed near the high while the NAZ/NDX not nearly as good.

Strong sectors- the usual banks, brokers, homies and retail while oils, steel, internets and metals lagged.

NYSE/NAZ internals strong at +2300;

VIX down 2%;

Crude crushed and now at the $130 level - as demand destruction seems to be the new world order- I suspect it will get bought eventually and be back in the mid 130's before too long- just like I believe this is a rally in a bear market.

Big resistance on the SPX at 1275/1260 area and with C MER reporting before tomorrow's open - it will be interesting- don-t be surprised with anything that happens.

MORNING CHOP

Markets are higher but they seem to be fooling both bulls and bears this morning as the fake out so far is the trade of the morning. And why didn't the market move up on the Natty Gas number?

NYSE- 880 net winners;

NAZ-340 net winners;

Strongest secors include banks, brokers, oil service and metals while internets, steel and utils lag.

VIX- flat near the 25 level;

Gold and crude higher;

The 1245 level on the SPX should be an important area- a good place for the bulls to defend their turf - if not it could get ugly in a hurry.

THE CLOSE

Nice day for the bulls as the markets rally to the 1245 level on the SPX +30 and almost 4% off of the recent lows.

Strongest sectors the most heavily shorted including banks, brokers, homies, real estate and reits while oils, metals, utils and ags lagged.

NYSE- 1650 net winners;

NAZ- 1600 net winners;

VIX down 12% at/near 25;

Crude down to $135 and gold at $960- is it over for commodities -I doubt it;

Next level on the charts is SPX 1250 - although fair value is already way below the close on some earnings numbers - question is do they buy the dip tomorrow is this a one day wonder? The guess here - they buy em.

WHAT WORRY

Markets are moving on up on large builds in oil inventory (demand destruction) as most folks are probably driving less after realizing they are burning up about $4.5 every time they drive 18/20 miles on average.

Strong sectors include banks, brokers, trannies, retail and homies while oils, ags, steel, metals and telecom lag.

NYSE- 600 net winners;

NAZ- 870 net winners;

NDX- 80 GREEN;

OEX- 80 GREEN;

IBD- 34 GREEN;

VIX - down 5% at/near 27;

Up volume greater than 2x down;

Crude 134;

Gold -970

Watching yesterday's highs as I suspect the sellers will come in at those levels- 1235 SPX and after that 1250.

THE LINKS

Lots of terrific writing on the net the last day or two so without further stuff here goes:

Ron Sen on TELLS;

VIX + on a great find in the OIL pits;

The Quant on the New Low list;

ADAM on the new FEAR INDEX;

SPX Dividend yield news;

More on NAKED SHORTS;

Roger back in the news on All Star night- shocking;

Same old same old irrelevancy;

MARKET TIMING

Visited the library last night and read Bob Brinker's latest letter and he is now suggesting "dollar cost averaging" rather than buying the market in the low 1300's (prior advice) as this time he seems to have missed the right call (selling high 1,500's).

He is still bullish and expects the markets to trade at PE's of 16.5/17 on SPX earnings of $87 for 2008 (SPX 1457) and $97 for 2009 (SPX 1625).

He cautions that his forecast is subject to a "stabilization or decline in oil prices." He goes on with "if oil prices stop rising or decline, low short term interest rates have the potential to provide the stimulus for improved economic growth next year."

He seems focused on oil prices and gives short shrift to the financial crisis which is now the major issue facing the markets. Just try trading SKF for a day or two.

Anyhow, unlike 2000 and 2003 when he got it exactly correct he is now lowering his stops since he appears to have gotten it wrong.

THE LONGS

Wild day in the markets as the DJIA turned around a few times closing down 100 with a 300 point range, SPX -13.5 and 35 point range and the NAZ slightly higher with a 70 point range- and that is with a $6.5 sell off in the price of crude.

Suspected getting long was a bit of a stretch and just glad I didn't pull the trigger - markets were moving to fast to make any real intelligent decision- and tomorrow another day.

Banks and brokers were again sold big in the final hour as the BKX closed down 3% and the XBD down .67% after trading higher a good part of the day.

And thank goodness they will make naked short selling illegal- oh it is already illegal - what a joke;

NYSE- 1600 net losers;

NAZ- 600 net losers;

VIX - hit a high near 31 but closed at 28.5- hardly a big blow off top;

TRIN- .84;

FRE/FNM - both down more than 25%;

Everyone no doubt watching the SPX lows of 1200- probably lots of longs with stops below that level and if it doesn't hold it could get ugly - down to 1170 the 50% retracement.

And INTC trading up 3% after doing better than expected- lets see how long it takes to fade that;

MIDDAY RALLY

Markets finally bouncing as the SPX 1200 level and the crash in crude provide a good reason for the bulls to get long.

Crude down over $8 and just wondering if this is the down $15/$20 day that causes the market to blast higher;

NAZ internals have flipped to flat while the NYSE numbers are still way red at 900 more losers than winners;

Strongest sectors are biotech, banks, brokers and real estate while oils, steel, ags and metals lag.

VIX already down 4% near the 27 level and wasn't that 30 level short lived;

Up volume a bit ahead of down and TRIN at .46;

House dems planning another $50B in stimulus for middle income earners;

I would be a little careful about getting long here as there are many folks who want to short a blip- especially if we get at /near SPX 1250 - I guess still a long way away in this ugly market.

THE OPEN

Markets are weak yet again but a bounce from SPX 1200 may be in the front view.

Market internal about as bad as they get withe NYSE at 2500 net losers and NAZ at 1450 net red;

NDX/OEX with 35 green stocks combined;

VIX up 8% near the 31 level;

Down volume about 8X the up;

GOLD- near the 990 level while crude is lower at 144.665;

Lots of fear in the markets and another short term low may be at hand near the SPX 1200 level and VIX 31-

In addition - the 50% retracement areas from the 2002 lows is getting close SPX 1170 and DJIA 10,700- keep those lines on the charts;

THE CLOSE

Markets close lower giving both the longs and shorts ample opportunity to coin some trading dough. DJIA closed -45, SPX -11 and NAZ -26.

Strongest sectors metals, oils, ags, steel and homies while banks, brokers, reits, real estate and gaming lagged.

NYSE- 1600 net losers;

NAZ- 1200 net losers;

NDX- 33 GREEN;

OEX- 35 GREEN;

VIX- 28.5 higher by 3.5%;

Crude- near the unchanged line at $145;

Gold- up $15 at $975;

EURO - 1.59;

Markets don't look like they know what they want to do and with Tuesday coming up it could be a turnaround higher yet again- and if it does I suspect many a trader will be shorting.

One area to watch - the regional banks which the market is telling us are going bankrupt- probably true-

MIDDAY THOUGHT

Markets continue to trade poorly as the regional banks continue to get crushed- FHN WM NCC etc-

Strong sectors include metals, oils and steel while banks, brokers, internets, real estate and gaming lag.

NYSE- 1600 net losers and straight down all day;

NAZ- 1210 net loses and straight down all day;

NDX- 23 GREEN;

OEX- 35 GREEN;

IBD- 50 GREEN;

VIX- 29 and higher by 5%;

Crude- 145 and holding steady;

GOLD- $974 and moving up;

Down volume about 3X up;

Hard to see how any rally sticks today with these sour market internals- looks like shorts will put em out every time there is a slight rally and they are probably correct for now. Remember markets that are weak all day tend to close near the lows and these internals are awful.

THE OPEN

I guess the market is telling us right out of the shoot that no one has any confidence in Washingoton as FRE/FNM start the day +30% and twenty minutes after trading begins they flip to flat- financials all around see big short covering at the open and that is it as they all sink back to the unchanged level- and check the action in SKF- almost a 20 point move off the bottom in less than half an hour.

Strong sectors- oil service, metals, homies, steel, drugs and telecom while banks, internets, brokers, gaming and real estate lags.

NYSE- flat internals;

NAZ- 280 net losers;

NDX- 40 GREEN;

OEX- 55 GREEN;

IBD- 75 GREEN;

VIX- flat at 27.5;

TRIN- .88 with equal up and down volume;

CRUDE- $146;

GOLD- creeping up and now $970;

EURO -159;

Markets not giving lots of confidence as most traders seem to be giggling at Paulson, Bush and Bernanke-

Haven't taken any trades yet but the RUT looks pretty weak and a TWM long may work for the day -

THE INDEXES

For those whose who were watching the markets at the end of the 90's beginning of the 00's probably remember NAZ/NDX 5000 which seems like a long ways ago and interesting how those indexes never got near those highs while the SPX RUT DJIA all made new highs in 2007.

Easy to see why as the following components of those "tech heavy" indexes now stand as follows:

INTC -73%

YHOO -80%

MSFT -53%

BRCM -85%

QCOM -50%

CSCO -73%

EBAY- 53%

ORCL -54%

DELL -63%

VRSN- 86%

MRVL -60%

SNDK -80%

AMGN -41%

NTAP-66%

GRMN -70%

NVDA -64%

SHLD -64%

AKAM-90%

AMAT -70%

Those are primarily tech stocks and they never got any where near the old high prices hit at the "bubble."

Just wondering if we now are facing the same type of issue with the SPX/DJIA as many of the stalwarts in those indexes have cratered and will probably never reach anywhere near their old highs again:

GE -53%

HD-69%

HIG -45%

HOG -56%

HOT -55%

ICE -55%

JPM -55%

LEH -84%

M -68%

MBI -95%

MCO -59%

AIG -80%

BAC -60%

C -73%

CME -57%

EK -85%

FDX -37%

FHN-86%

FTIB 83%

FNM -90%

FRE -90%

GCI -90%

GM -90%

MOT -89%

MS -65%

NCC -90%

NYT -75%

PFE -64%

T-63%

WFC-40%

USB -46%

WB -80%

TWX -85%

That is clearly a small sample and the energy stocks were a small counter balance to the crushing illustrated above- just don't think we are getting anywhere near those old highs any time in the short/intermediate term.

THE MOVES

Cutting to the chase, the markets are very ugly and it seems to get worse as they are now lower six weeks in a row- any chance of a decent bounce/bottom any time soon?

Fib retracement may come into play soon as the DJIA hit a high of 14,200 in September of 2007 and a low of 7,200 in October of 2002- 50% retracement at the 10,700 area- not that far away;

SPX 1575 high in October of 2007 and 770 low in October 2002- 50% retracement near 1175- not that far away;

RUT - 856 high in June 2007 and low of 325 October of 2002- 61.8 retracement at/near 655 area;

RSI (2) levels:

SPX 24

DJIA 24

NAZ 34

NDX 28

RUT 65

MID 38

DJIA 9.3% below the SMA 50 while the SPX is 8.5% under;

VIX 10% above the SMA 10 but did trade at 29.44 on Friday or about 18% above- note still far away from the JAN/MAR highs at/near 37;

Note the volume pick up in the SDS - double short SPX etf- could be the real fear indicator;

A wild ride on Friday as rumors about FRE/FNM getting access to the FED window made the rounds- maybe before long they let us all get new cars using the FED window.