TECHNICALS-SPX/VIX

Just wanted to quickly mention an observation from one of the Minyanville.com profs, Steve Shobin, he points out another Negative Divergence (top chart) as the VIX is higher now as the markets are also higher. Generally, as the markets go higher, the VIX goes lower, so just a heads up as another Neg Divergence appears.

It seems like I have been looking at Negative Divergences since the lower highs starting showing up on the MACD Histogram in August. And if you shorted the SPX starting at that point, well you aren't doing nearly as well as the folks who went long that divergence. In addition, the stochastics have been twisting above the 80 line (typical sell signal) for about a month, so again, the markets can move against a position for longer than a trader can stay solvent.

For the Yankee fans, be advised that they have now lost 8 out of their last 10 play off games and are probably due to win two in a row. If they don't win this series, I will go out on the limb and predict Torre and lots of the other regular season stars will not be back.

And as I type the A's go up 4-1 on the Twinkies and who would have thought after the season the Twins had that they would be such an easy sweep out of the playoffs. Who can't wait for an A's vs. Tigers ALCS?

PRE OPEN

Futures markets trading way up in anticipation of no voting irregularities and the hope of election results finalized before the start of midnight.

A video from Mike Santoli of Barrons on why the markets can rally and I suspect some folks are starting to focus on the $2 drop in gasoline which for a 20,000 mile a year driver could save $2,000 per - and with a similar drop in heating oil - the consumer may have some extra dough to do some holiday shopping. I never under estimate the shopping drive of the American consumer.

Two shockers yesterday- the ISM index coming in at the worst number ever and auto sales in October about the worst since World War II- and the markets barely flinched. And of course more bailouts to be announced.

And of course Morris still waiting for the quake, and Limbaugh out on the limb while Rove is a hair more realistic- we will see.

This fish standing by the 52/45 of the other day.

Finally- I suspect Sarah has had her 15 minutes and we will hear little from her in the future.

MORE BARRON'S

More stuff from Barron's like an answer to one important question:

Why have price earnings multiples around the world skidded?

Answer:

Higher interest rates, inflation fears and last but not least imvho earnings concerns.

According to Byron Wien, now from Pequot, "growth is hard to come by in the U.S., Europe and Japan, and the markets are also being held back by the fact that investors sense that we're in a more uncertain environment caused by an erosion of economic power in the U.S., a migration of scientific innovation to other countries and terrorism. The Iraq war might have made U.S. stocks appear to be riskier than they once seemed and thus made investors unwilling to pay as much for them as they would if peace prevailed."

Wien apparently went out on a limb at the beginning of the year according to barron's by predicting the SP 500 would drop to 1200. Not sure why that is a risky bet as the year started at 1248, a whopping 4% drop to get to the target branch.

My take, prices have come down and will probably come down further due to geopolitical tensions, higher rates, SLOWING EARNINGS GROWTH and the new Fed head.

Last question; how much of the earnings growth is due to the record earnings at the oil/ oil service companies. If the earnings growth of those companies were removed the overall earnings growth of the SP500 would be?

PRE BIG BEN

Markets have been trading near the flat line for a few hours with the RUT/MIDS and Large cap Value out performing.

Strong sectors include gaming, brokers, homies, oil service, internets and banks while software, semis, tech, metals and retail lag.

Winners- WYNN VRTX EXPD XMSR PTEN SIRI ADSK JOYG EBAY ROST LEH BHI ABT AIG USB AA MER GS GM MS NILE GMCR MR TLVT GSOL STP CMG DRYS GME ATN.

Losers- HURN UEIC CYNO PCR LAYN CHE OPY SPEC AXE KCI TRAK AES AVP EMC ORCL ATI GD HD DELL BUD AMGN RTN BEAS TLAB QCOM LVLT BRCM GENZ INTU ORCL SYMC.

Market internals flat on the NYSE/NAZ.

The OEX about even between winners and loser while the NDX is about 3 /2 losers to winners.

Other stuff:

Big Banks all green in front of Ben;

Big Brokers all green in front of Ben- CME in the red;

Gaming- green with rumors that Captain Kirk is back in the hunt for MGM;

Media continues to act crummy with DIS higher and the rest lower;

Oils generally green despite lower crude- Winners- CAM CVX DO EAC HAL HP RIG XOM XTO- losers- FTO PXD PWE TSO;

Retail primarily green with CROX COH DECK GES UA acting best;

Tech lagging with AMAT BRCM IBM MSFT TXN leading lower;

Up volume moving ahead of down volume 600/433 and Volatility indexes mixed with VIX down 2% and VXO up 5%.

GS and OIH both heading higher and FWIW the 50% retracement line is about $205 on GS and $176 on OIH. The 50% retracement on the SPX is 1,492, so rally probably has more to go although I bet with lots of volatility.

The 50 day SMA is only about 90 points above on the DJIA; 40 above on the SPX and only 6 above on the NDX.

Going out on a limb with a call for volatile trading this afternoon as Big Ben does his thing which will probably be very little.

THE GURUS GURU

Jimmy Cramer going out on a limb this morning identifying his three favorite speculative plays. Usually Jimmy hems and haws and hedges and throws 10,000 lbs. of something against a wall and hopes some of it sticks so he can crow. But not today he is out there and we at The Shark Report will track it and see how great a guru he really may be.

Here is what he wrote:

"My three faves right now are Qwest (Q) , Level 3 (LVLT) and Arena Pharmaceuticals (ARNA) . Let me explain why these can work and work big here.

First, Qwest is turning around so fast that I think people don't even realize how strong the numbers are. The broadband revolution finally has hit the old-fashioned telcos with a vengeance. We saw the same thing with the BellSouth (BLS) and AT&T (T) quarters, and Qwest is gaining share and growing again. I don't think anyone realizes how much cash these companies can throw off.

Meanwhile, while lots of people want to play the growth of the Internet through an F5 Networks (FFIV) or an Akamai (AKAM) -- both very worthy choices -- I think the best way to play it is with Level 3. It's growing as fast as many of these companies when it comes to the Internet, at least, but it needs to fix its capital structure. It will, and the stock could double in 18 months when it does.

Finally, I like Arena Pharma because it has not one but two drugs in formulation, one for diabetes and one for obesity. It cut its revenue forecast this week and freaked everyone out. That's an opportunity. I don't like it because of its revenue, I like it for the approval of the drugs.

I think that these are among the best speculative plays out there and I thought that rather than just haphazardly mentioning them every other week on radio, I should just spell them out here."

I will update these on a regular basis as I am entitled to some amusement.

Opening morning prices as follows:

ARNA 15.41

LVLT 5.41

Q 8.61

THE LIMB

OK, with the VIX up at 37+ and higher by 20%+, I am declaring a buying opportunity as it feels like a little capitulation in the markets. Besides, if Acampora is correct and the VIX gets to 50, how much lower is that?

Strongest sectors include banks, reits, small cap value and real estate while metals, gaming, homies, oil service and brokers are the worst.

WINNERS- USB WFC BAC DIS WB PEP NTAP INTU ROST ERTS PETM PDCO XRAY SIAL HURC PRFT CPLA CEDC.

LOSERS- TBSI PDE CPL DRYS DSX RIO ACH CF ICE STP POT ATI AA GM AES SLB F BNI NSC FDX CAT AKAM MICC NIHD PCAR WYNN MGM LVLT AAPL DISCA NVDA RIMM.

VIX up 21% and trading at 37 - start buying. 50 not far away.

Market internals - -2555 on the NYSE and -1730 on the NAZ;

IBD 100 with 3 winners - HURC PRFT MORN;

NDX with 10 winners- NTAP INTU ERTS ROST PDCO SIAL SUNW XRAY LLTC;

OEX with 12 winners- USB WFC BAC WB ALL DD RF DIS PEP PG SO WMT;

The 2 day RSI on major indexes (lol):

All at 1 or 2;

No where to run no where to hide. Looking for Cramer to tell me where the bull market has been the past month. Thanks. Oh and check the Xchanges- CME -31; ICE-13; NYX -4 and now trading at 66 after being Jimmy's favorite growth stock for the year when it was at/near 100.

Anyhow, scaling into some ETF's and finally selling some QID.

SEEING GREEN

Markets all over the board again and giving updates is not all that beneficial. I am not daytrading as one could get wiped out trying to figure out the way of the trend but I am continuing to buy for the intermediate term (EWA IWM) and a green close to the day's trade would not surprise me at all as we went under Tuesday's low and traded higher wiping out those stops.

Strongest sectors (not necessarily green) include the OEX/DJIA biggest caps, gold, software, silver, drugs, oils, defense and large cap value. Weakest are gaming, biotech, brokers, reits, emerging markets, retail and small caps.


Market internals are rapidly turning green as the OEX big caps started out with zero green now showing 20 up. The SPX also rapidly flipping with about 50 green and the NDX doing the worst with 10 up.

Big caps in the green as I type include ORCL S EP MDT COP BMY PEP MRK BA MO KO GE PG and BA.

Biggest losers include GM IBM AA UTX LTD AMGN NSM ATI AES F CAT and COF.

Volatility indexes way off their highs with VXO/VIX combo now only up about 15% after being up about 25% earlier.

I guarantee nothing but I will go out on a limb and say we close in the green on the OEX/DJIA/SPX complex, you know the flight to quality group.

THE OPEN

Markets continue to trade near the flatline with oils and metals the stars. The OIH is back near the $140 level and silver is approaching the $13 area with favorites PAAS (+2.5%) and SSRI (+3.4%) nicely higher.

Sector winners aside from those include internets, brokers and tech. To the downside, small caps. biotech, airlines, finanicials and drugs.

Winners and losers are about equal with +200 on NYSE and -300 on the NAZ.

The DJIA shows 13 winners and 17 losers with VZ CAT AA BA and XOM the winners and GM T JNJ DD HD INTC the losers.

GOOG is trading near 504 and GS has not hit $200, but did hit $199.78, so probably does it today as I go out on the limb and give you $200 before $190.

POST OPEN

Markets open higher with the big caps leading which is right in line with what every CNBC TV guru says of late.

Strongest sectors include oils, internets, airlines, retail, trannies small cap growth and homies; leading lower are utilities, biotechs, drugs, small cap value and tech.

Key stocks generally higher with GS C TIF BIDU GOOG AAPL VLO TSO XTO DNA FDX solidly green and PVH JOE BAM JPM CME ICE NYX NMX all red.

Big cap winners include BA EMC HNZ BHI AA S EK DELL PDCO RIMM UAUA ISRG LOGI EBAY and AMZN.

Losers include NTAP MRVL XMSR ROST VRTX ABT TWX ATI HIG GM ETR INTC MR TBSI CTRP ICE PTNR PCLN and TWIN.

Market internals have flipped to green after opening pretty ugly. The NYSE has 300 net winners while the NAZ has about 150. Much better numbers on the major indexes with the OEX at 80/20 up to down while the NDX is at 70/30.

The IBD 100 is led by RIMM PCR CRDN BTJ CHE ISDA AND VSEA and shows about 75 up and 25 down.

Volatility indexes down about 1.5% and with out signals.

The markets have moved higher as I have typed with the DJIA now +80 and the SPX +6. I will go out on a limb and say the demand for equities trumps just about all other theories and it will keep the markets moving higher.

In addition, from watching markets over many years, comments like those from Greenie yesterday do not generally have much staying power and usually are good buying opportunities.

THE DOUBTER

Markets did what they usually do on day like this -close at/near the highs with the SPX +27, NAZ +63 and the DJIA +257.

Strongest sectors- Brazil, materials, metals, semis, homies, banks and techs while bonds, drugs, junk, retail and trannies lagged.

NYSE- 2450 net green;

NAZ- 1700 net green;

SPX - 477 GREEN;

NDX- 94 GREEN;

VIX - higher by 3% at 25.9- VERY STRANGE;

TRIN- .35- with up volume about 25x the down and heavy at 1.4b shares.

Everyone asking if the rally has legs- - prediction from this fish -- SPX 899 before SPX 1075- out on the limb-

Markets over bought and way so - try to take some off before the week ends as the jobs number is coming up and we are bound to have some ugly earnings numbers- and of course talk of health care and another stimulus- straight up highly doubtful.

WEIRD MARKET STUFF

Markets are offering up one of their stranger days in quite a while as we have these facts:


DJIA lower by 36 or .2%.

NAZ COMPQ lower by 8 or .3%.

NAZ breath slightly green.

NYSE breath red by 350 with a negative skew from the fixed income stuff.

IWM green.

DJIA has 7 stocks higher and 23 stocks lower.

Whoever has this figured out today has my sincere congratulations.

Otherwise, the oil patch is excelling with the OIH back over the $135 level and probably getting set to retest the $140 level next week. Colder weather in the Northeast in November, the reappearance of some geo political tensions after the election and finally my (going out on a limb) prediction of $60 crude before $50 crude.

Sector winners include oils, metals, small caps and semis (barely). The biggest losers include software, brokers, retail, biotechs, drugs and consumers.


And of course to top of our market day, we have all the Volatility indexes lower on the day.

THE CLOSE

After going out on a limb earlier, and declaring the market would go back up today, I decided to put some money on the line and bought some YM DJIA Futures earlier this afternoon. Well low and behold, can anyone believe that the market and the DJIA has rallied to new all time highs this afternoon? Yes, seems like an every day occurrence lately having the DJIA close at/near all time highs. Today I get very lucky again as the OIH and the oil stocks in general rip higher to target number one of $135 on the OIH.

Besides oils and metals, best acting stuff was AMGN, trannies, GS, cyclicals, brokers and big caps. To the downside, find the ever lower SOX, GOOG lower on a Cramer top tick yesterday, biotechs, software, tech, NAZ, drugs, and AAPL down a bit today after a tremendous run.

ANOTHER SHOCKER

Looks like I was wrong again as the markets managed some afternoon jig as the NAZ came all the way from -15 to +6. Market internals also improved all day and finished at +620.

SPX 1,300 back in the rear view mirror and Monday's action should be interesting. I am looking for an early morning high and then selloff. That is out on a limb but it is my thought for now.

Winning sectors included oils, internets, techs and small caps; losers included brokers, GOOG, trannies, airlines and retailers.


Also note how the SMH came back after being way down at the open on the heels of DELL and AMD. DIA owners, be aware that the ETF went ex today with a 25 cent dividend.

Volatility indexes smacked again and now close to 20% below their respective 10 day SMA's. Please keep the longs on a tight leash as sell signals abound in this strongly upward trending market.

And great job by the yanks so far, and if they win this one all they really need is one out of the next four.

WEEKEND UPDATE

Ok- the start of a new year and a new decade - good grief - Twenty ten and the 10's I predict will be ok for most-

I am expecting a good year for equities and will go out on a limb with an expectation of a 15% gain on the SPX.

No idea on where the dollar is going but I do expect that before the year ends gold will touch $1,500 per ounce- and will revisit the price next year at the same time.

In barron's this week- they are bullish on CVX and expecting decent returns from a big winner in 2009- junk bonds - they are thinking the spread between junk and Treasuries remains the same - so a pretty good yield -and a good return even if prices fall a bit.

Barry with a look at job disappearance by County.

One reason for my bullishness- money coming into funds.

The NYTIMES- with a look at food stamps.

BIG BOONE

Hope every one caught Boone Pickens this morning on CNBC. He really put it out there with a prediction of $70 oil before $50. Of course that is up $11 before it goes down 9 - so not sure how much of limb.

Anyhow the DJIA is set up down about 45 and I bet (trade) it won't be long before the bulls step in and buy this dip. There are some pretty well defined entry areas for the YM DJIA futures at the 11,860 and 11,880 levels.

One big reason I think this dip gets bought pretty quickly is the action in the NAZ futures. They are hardly red on the heels of the DJIA dip on the AA miss. GS also indicated lower and it will be a pretty good tell for when /if the market will turn.

THE CLOSE

Don't know if that was short covering/window dressing or buying in the energy complex - but they sure were the place to be today- hopefully folks wont be saying the easy trade was oil at $125 for the ramp back to $145- but could be.

Anyhow, markets closed near the highs after giving a few fakeouts- stong sectors were energy, steel, ags, brokers and banks while real estate, internets, retail and biotech lagged.

Market internals were solid on the NYSE at +100 but near flat on the NAZ which lagged all day;

VIX- 21.2 and down about 4%;

Going out on a limb declaring I have no idea about tomorrow's trade- they wont mark em up again but the interesting trade will be energy - maybe some follow through.

Noon Move

Back to the March 25 highs near 1360 on the SPX and don't be surprised to some selling at /near these levels. Question everyone has - does this last /is the bottom in? Going out on the limb here- NO IDEA- bad news could come back tomorrow from the Wrestlers wife- or somewhere else.

Commodity DBA- may be worth a dip near here as seems to be making a double/triple bottom near these levels.

USO also could be good here as it seems to have a floor near the $100 level on crude.

VIX down more than 11% and with the DJIA up 300+ I am not looking for many more points higher this week. I suspect we get some comments like "too far too soon/ financials still have lots of bad news"/etc etc.

THE OPEN

Markets open mixed with strength in the midcap/smallcap area while the DJIA trades red. Also some red flags in the financials as most trade red including GS JPM C WFCD LM MER MS BEN BLK TROW CME ICE NDAQ- so I wouldn't get too excited until those start to flip.

NYSE- 800 net winners;

NAZ- 400 net winners;

NDX- 70 GREEN;

OEX- 50 GREEN;

IBD- 75 GREEN;

VIX- flat at 20.5;

Up volume double the down;

WINNERS- GMXR AZZ KNDL ARD PVA TITN SYUT MEE NTAP STLD FMCN FWLT LEAP EXPE EP WMB ATI LEH S COP ORCL;

LOSERS- BMY TGT BK JPM ALL GS PFE AMLN UAUA JAVA SHLD BIIB GENZ AMGN GOOG CME DECK MA CELG;

Probably time to go back out on the limb for a range/choppy day call as lots of cross currents with good numbers in the energy sector while financials and big cap are lagging.

And FWIW Joe Lieberman surging on intrade for VP selection by McCain- last trade at about 15%.

MIDDAY MUCK

Markets continue to bend but not break as every time it looks like they are going to head lower the buyers step up.

SPX -5.5 and NAZ -16.

Strong sectors- metals, banks, gaming and brokers while semis, real estate, homies and trannies lag.

NYSE- 750 net red;

NAZ- 820 net red;

NDX- 20 GREEN;

OEX - 30 GREEN;

WINNERS- ESRX YHOO BIDU CEPH FMCN CELG VRTX C AXP BAC GE RF COF GS;

LOSERS- BA XRX HON S TWX EMC WMB UTX LOGI SYMC NVDA MRVL FLEX JAVA;

VIX- up 4% at 38;

TRIN- .48 as up volume still 1.5X the down;

Lots of cross currents still and a rally into the close is probably the way the markets finish today (out on little limb) as for now all the dips in the fins get bought.

Kass seeing a cloudy future;

BESPOKE looking at over bought levels;

VIX +MORE on the VIX;

NEW LOW

That is a new low on the VIX as it tries to become a single digit midget. My guess is for a selloff into tomorrow and then it all starts again next week as the Thanksgiving week is typically strong for equities.

It is surprising that stocks aren't doing better in light of the trashing that oil (new low) and oil stocks are getting. The market internals are exactly flat as oil is crushed so maybe a bit overbought here. I will however, go out on a limb and predict the OIH hits 150 before year end as winter brings in some cold days in the northeast. OIH is very volatile as it is now trading at 136+ after hitting the 142 level yesterday.

Back to the VIX, it is down to 10.1 and trading at about 7% below its 10 day SMA and a 5 day RSI near 20. It is going to be hard for it to go much lower even with a big holiday week in front of us but I will go with lower prices tomorrow and then I will figure out next week as I may take a day or two off.