SMOKING SELL SIGNALS

Markets are near the highs of the day (as expected) and the sell signals abound.

RSI (2) levels near 98 on the major indexes;

VIX- about 15% under the SMA 10;

Overhead resistance galore and expect the sellers to appear next week as they ring the register on their 850 SPX buys.

THE OVER BOUGHT

The joy continues as markets trade near their highs without much in the way of pull backs.

Strongest sectors- gaming, oils, shipping, ags and internets while real estate, gold, metals and junk bonds lag.

NYSE- 2000 net green;

NAZ- 1160 net green;

NDX- 90 GREEN;

OEX- 95 GREEN;

VIX- down 6% at/near 37.6;

TRIN- .61;

Crude higher by $1.5 and starting to look like the lows are in for awhile;

EURO 1.39;

Looking to put out shorts - but not today - markets are very over bought short term with very high RSI (2) levels- a VIX stretched to the downside- and lots of overhead resistance- so perfect shorting territory - but waiting for next week as we probably close near the highs today.

MORNING MARKETS

Stocks are trading higher after a lack luster open. The DJIA +100, NAZ +19 and the SPX +8.

Strong sectors include oils, shipping, gaming, ags and internets while homies, real estate and financials lag.

NYSE- 1350 net winners;

NAZ- 770 net winners;

OEX- 80 GREEN;

NDX- 85 GREEN;

DJIA - 24 GREEN led by GM AA C HD WMT MSFT;

VIX- lower by 4.3% at/near 38;

Be happy seems to be the motto so far for the year with the markets moving up on high ticks- however, lots of overhead resistance near here with 910/920 on the SPX the first line as is 8,900/9,000 on the DJIA.

Note also the way over bought levels on the RSI (2) levels 97 on the SPX- and 94 on the NAZ/NDX;

So if you are long - trail those stops as lots of sell signals are aggregating on a short term basis.

OUT WITH THE UGLY IN WITH THE NEW

The year is over thank goodness and a look back at 2008 numbers:

SPX -38.5%

DJIA -34%

NDX -42%

COMPQ -40%

RUT -35%

MID -37%

XBD -63%

BKX -50%

GS -61%

DRG -19.4%

OIH -61%

XLE -40%

HUI -26%

GLD +5%

MSH -45%

AAPL -57%

GOOG -56%

SOX -43%

EFA -43%

Who said what in 2008:

A very powerful and durable rally is in the works. But it may need another couple of days to lift off. Hold the fort and keep the faith!" —Richard Band, editor, Profitable Investing Letter, Mar. 27, 2008;

AIG (AIG) "could have huge gains in the second quarter." —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008;

I think this is a case where Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound. They're not in danger of going under…I think they are in good shape going forward." —Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008;

"I think Bob Steel's the one guy I trust to turn this bank around, which is why I've told you on weakness to buy Wachovia." —Jim Cramer, CNBC commentator, Mar. 11, 2008;

Two weeks later, Wachovia came within hours of failure as depositors fled. Steel eventually agreed to a takeover by Wells Fargo. Wachovia shares lost half their value from Sept. 15 to Dec. 29;

"Existing-Home Sales to Trend Up in 2008" —Headline of a National Association of Realtors press release, Dec. 9, 2007 ;

"I think you'll see [oil prices at] $150 a barrel by the end of the year" —T. Boone Pickens, June 20, 2008;

In today's regulatory environment, it's virtually impossible to violate rules." —Bernard Madoff, money manager, Oct. 20, 2007;

"There's growing evidence that parts of the debt markets…are coming back to life." —Peter Coy and Mara Der Hovanesian, BusinessWeek, Oct. 1, 2007;

Dick Bove- LEH is a takeover target..... I upgrade to BUY- August 21, 2008 (within 3 weeks the stocks went to $0);

"We had $17 billion of cash" at the end of last year, and "that liquidity cushion has been virtually unchanged."—Bear Stearns CEO Alan Schwartz telling CNBC in a March 12, 2008, interview that he is not aware of any liquidity problems at the firm. Two days later, Bear Stearns, the fifth largest U.S. investment bank, was forced to seek emergency funds from the Federal Reserve and JPMorgan Chase. The firm was taken over by JPMorgan that weekend for $2 a share, which was later raised to $10.

Jon Birger, senior writer, Fortune’s Investors Guide 2008: “Question: What do you call it when an $8 billion asset write-down translates into a $30 billion loss in market cap? Answer: an overreaction … Smart investors should buy [Merrill Lynch] stock before everyone else comes to their senses.

Elaine Garzarelli, president of Garzarelli Capital, in Business Week's Investment Outlook 2008 - “Garzarelli is advising investors to buy some of the most beaten-down stocks, including those of giant financial institutions such as Lehman Brothers, Bear Stearns, and Merrill Lynch. What would cause her to turn bearish? Not much. ‘Our indicators are extremely bullish.’”What we know now: As of January 1, none of these firms will still exist. Lehman went bankrupt. JPMorgan and Chase bought Bear Stearns in a fire sale. We all know Merrill’s fate;

Sarah Ketterer, CEO of Causeway Capital Management in Fortune’s Investors Guide 2008- Q: “Sarah, where to you see value?” A: “There are [financial firms] that have been tainted by this huge credit problem … Fannie Mae and Freddie Mac have been pummeled. Our stress-test analysis indicates those stocks are at bargain basement prices.”

Jon Birger, senior writer, in Fortune’s Investors Guide 2008- “CEO Jeffrey Immelt has been leading a successful makeover at General Electric, though you wouldn't know it from GE’s flaccid stock price. Our bet is that in a stormy market investors will gravitate toward the ultimate blue chip.”

James J. Cramer, contributing editor, in his "Future of Business" column in New York Magazine "Goldman Sachs makes more money than every other brokerage firm in New York combined and finishes the year at $300 a share. Not a prediction — an inevitability.” What we know now: In mid-December, Goldman Sachs’ share price was $78. The firm also announced a $2.2 billion quarterly loss, its first since going public nine years ago.

And how did the always visible Bob Doll do with his 2008 predictions?

The folks in the financial world were not the only ones with shrewd forecasts- check out the political gurus:

Bill Kristol, "Fox News Sunday" -- Dec. 17, 2006
"If [Hillary Clinton] gets a race against John Edwards and Barack Obama, she's going to be the nominee. Gore is the only threat to her ... Barack Obama is not going to beat Hillary Clinton in a single democratic primary. I'll predict that right now."

Peter Mulhern, Real Clear Politics -- Oct. 1, 2007"In this case conventional wisdom is not just wrong but comically so. [Fred] Thompson will win the Republican nomination for two reasons. First, he's a very impressive candidate. Second, there's no realistic alternative. He will win the general election for the same two reasons."

Ann Coulter, "Hannity & Colmes" on Fox News -- Dec. 20, 2007"I think it's probably going to be Romney for the Republicans, Hillary for the Democrats."

Tom Ridge, CNN -- Oct. 28, 2008"I believe we need to prevail in Pennsylvania for John to win. And I think we will … I think John made an excellent choice. I've been with Gov. Palin. I've seen her energize the crowds. I know how the Republican Party and the base feels about her. John wasn't looking for a candidate to help in one state, he was looking for a candidate to help in all 50. I think he found that running mate."

Rush Limbaugh, interview with London Telegraph and on his radio program -- Oct. 31, 2008To London Telegraph: "I think [Obama has] been dead in the water since the primaries. He is going to need to be up 10 to 12 points to win by 3 or 4 … Don't forget that Hillary winning was a foregone conclusion, too. If the polls had been right it would have been Giuliani versus Hillary. That's why polls a year out are worthless."On his radio program: "My gut hadn't been giving me any indication on this race, but it started talking to me last night … Barack is headed back to Iowa. That should be a lock; it’s a dead heat … Florida, Ohio and Nevada look like pretty good McCain certainties here. Obama still has to run ads in California."

Dick MorrisMorris released a book in October 2005 titled "Condi vs. Hillary: The Next Great Presidential Race."

And if you aren't happy with those - check out some of the worst peredictions of all time;

And 10 investments to watch in 2009;

THE OPEN

Equities continue to move higher with the DJIA 60+, NAZ +15 and SPX +6.

Best sectors- shipping, trannies, ags, defense, midcaps and junk bonds while metals, internets and oils lag.

NYSE-- 1100 net green;

NAZ- 770 net green;

NDX - 75 GREEN;

OEX- 75 GREEN;

DJIA - 25 GREEN - with GM C PFE BAC JPM trading red;

VIX- down another 3.5% at near- 40;

Up volume 2.5X the down;

Gold down $15 while the EURO moves up - sold some DGP this morning;

Crude down 80 cents with inventory numbers out this morning;

Markets look to continue the move higher as the internals flipped to green fairly quickly- usually the best tell so long SSO UWM QLD DDM- and watching as there is still plenty of resistance overhead at 895 and 905 and 915/920 on the SPX-

TECHNICALS- SPX

Equity markets roared into the close yesterday and the SPX slammed into the SMA 50 which should provide for a first line of resistance - note also the range as we continue to be bounded by 850 on the low end and 920.

Stochastics, however, could be telling a different story as they look like an uptick could be on the horizon.

RSI (2) may bring out the sellers as we are overbought on many of the major markets - note the numbers:

SPX 89

DJIA 89

NAZ 78

RUT 75

NDX 79

MID 81

Note the VIX also pointing to a sell signal as the index is now about 9% below the SMA 10 while the RSI 2 on the VIX is also under 10.

Doubt we get a big selloff this week but next week many of the folks who bought the low end of the range may decide to ring the register.

Links:

Under the radar rebound;

The LOW VIX;

Trading the NEWS;

The RIGHT IRA;

CHIP RECOVERY;

THE RIP

Hopefully some one reading this caught some of that move-

Anyhow, buying dips looks like the strategy for the balance of the day-

Some good links:

The short answer NO;

Bill with his top posts for 2008;

The Bearish case for Gold;

Kiplinger's best funds for 2009;

BESPOKE with the worst of the DJIA;

THE CHOP

Markets open higher with the SPX near the middle of the recent range at 875.

Strong sectors include real estate, defense, semis, ags, drugs and small caps while metals, gaming, oils and homies lag.

NYSE- 860 net winners;

NAZ- 525 net winners;

NDX- 65 GREEN;

OEX- 75 GREEN;

VIX- flat at 44;

TRIN- 1.12;

Up volume 1.5x the down;

Markets look like they are set for another choppy day although the internals may be saying something a bit different- higher- financials also starting to get a little jig with GS UYG JPM BKX all in the green- so maybe a shot on the long side before too long.

NON MIDDAY MADNESS

Markets still lower but off their worst levels as the NAZ/RUT lag while SPX/DJIA are doing not quite as poorly.

Strong sectors include metals, oils and corporate bonds while real estate, gaming, internets, homies and brokers lag.

NYSE- 1270 net losers;

NAZ- 1425 net losers;

DJIA- 4 GREEN including CVX HPQ PFE and XOM while GM BAC DIS DD GE MRK lag.

VIX- higher by 6% at 46;

Very low volume with 4X shares lower as higher;

Not much to write except its dripping lower with support at 855 and for now resistance at 865- not going to try longs or shorts here just watching.

THE OUTS

Markets are drifting lower on little news with the DJIA -26, NAZ 12 and SPX 4.

Strongest sectors include metals, oils, ags and semis while junk bonds, real estate, gaming, homies and retail lags.

NYSE- 500 net losers;

NAZ- 800 net losers;

NDX- 15 GREEN;

OEX- 25 GREEN;

VIX- flat at 44.6;

Down volume 1.5x the up;

TRIN- 1.06;

Markets are drifting lower and a slow drip down today would not be surprising- Gold moving on up and now approaching $885 while crude is up at the $39 level.

GOOG under $300 RIMM under $40 EURO 1.42 and moving up;

I probably should be somewhere else today I doubt this market moves very much in either direction.

Mangenious out, Crennel out and hard to believe the Lions coach also out- Cowboys- whole team probably out.

THE BARRON'S

Barron's with some pretty good stuff this weekend- starting with Andrew Barry and his predictions for 2009:

Total return for the DJIA for 2009---- +40% according to Barry and a number at 12,001;

Battered emerging market equity to perform the best in 2009-------BRAZIL;

SPX sector to do the best----- TECH;

Biggest financial surprise - GOLD to close over $1,200;

Newspapers to make a big comeback;

Pandit to be gone at C;

ERTS to be taken out;

MS to be a big winner;

Worst performing DJIA stock-- HD;

Commodities to outperform;

GM files for bankruptcy;

Hillary doesn't survive the year as Secy of State;

Oil the top performing commodity;

The 30 year T Bond ends the year above 4%;

Some pretty surprising predictions from Barry but who would have guessed SPX 875 and crude under $40 for this year-

I don't see DJIA 12,000 , Hillary being out as SS but the other stuff seems logical- well newspapers- nah;

Mark Roberts at a short sellers research shop with some pretty good number for 2008- shorts for 2009:

HRC SYK PSYS;

Longs- BRS PHH ASML;

DOGS of the DJIA - not doing so great of late as from the beginning of 2007, the kennel included C PFE MO GM VZ DD T HD JPM GE with yields ranging from 3.1% to 7.34% collectively were off about 42% as of last week- the 2009 canines include BAC GE PFE AA DD T VZ MRK JPM and KFT- all yielding between 4.32 and 9.31%.