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The Wilderhill Clean Energy Index has bottomed and is starting to make a run toward 190.
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The Philadelphia Oil Service Index (OSX) looks to have managed to remain above the 180area.
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The Amex Oil Index (XOI) is back above 1100, and has recresed its recent down trend.
Technical Summary:
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Technicals Still Point To Higher Prices
The NYSE advance decline and the number of stocks making new 52 week highs, both reliablemeasures of market momentum, are still pointing to higher prices.
As earnings season has progressed, the market has been able to absorb the air pockets andcontinue its climb.
The election, and oil prices, among other external influences, such as the war in Iraq,North Korea, and Iran, are still possible problems ahead. But for now, the market isignoring them.
Small stocks are showing some improvment, as are biotech and large drug stocks.
One thing to watch remains volume. If volume starts to swell on down days, and it happenstoo often, it could be a sign that big money is getting out. So far it has not been aterribly bad situation.
The key is still to remain in areas of themarket that are working, and to nimbly trade out of those that aren't.
What this means is that every position still needs to be reviewed on its own merits. Sellstops should be meticulously adjusted. And sell rules should be observed with no deviationfrom comfort levels.
What To Do Now
The key to success in any market or sector at the current time, remains to review eachopen position individually on a daily basis. If it’s not working, it’s time tosell it.
Weak stocks should be sold, and strong stocks should be monitored for growing signs ofweakness.
Remember, our Fallen Angels portfolio is designed for those seeking a potentiallydiversified portfolio with a longer term time frame, and offers both long and shortrecommendations.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems forthe latest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, andtechnology have also been updated.
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Sentiment Summary:
Options Remain Subdued
Option traders remained fairly neutral.
The CBOE Put/Call ratio checked in at 0.80. A consistent string of low readings can be asign of excessive optimism and often signals a top in the markets. Readings below 0.5 areof concern, but not as serious as readings below 0.40. Readings above 1.0 are bullish. Thenumbers cited here are meant to be evaluated on a closing basis.
The CBOE P/C ratio for indexes checked in at 1.26. Numbers above 2.0 as the market sellsoff, often lead to rallies. Readings below 0.9 suggest too much bullish sentiment, just asreadings above 2 are usually required to mark major bottoms.
The VIX and VXN had readings of 10.63 and 16.70. A fall near or below 20 on VIX and 30-40on VXN is considered negative, a fact that is usually confirmed when the volatilityindexes begin to rise. Readings above 40 and 50, respectively, are often signs that abottom may be close to developing.
The Duarte Overbought-Oversold Gauge (DOOG) remained at 75 for the second week. Thisremains an overbought market, as the sell signal from 10-9 is still in play.
NYSE insiders were buyers of stock for the week of 9-29-06. NYSE insider short sales arestill at very low levels. When NYSE specialists raise their short sales, and sell stocks,risk increases dramatically. There is a two week lag for these figures.
Market Vane's Bullish Consensus checked in at 72% on on 10-20-06. This is the fifth weekabove 70%, which is a sell signal.
Market Moves
Report: Buffet Behind Utilities Break Out
The Utilities HOLDRS Trust (AMEX: UTH) has broken out, as FPL Group (NYSE: FPL) and DukeEnergy (NYSE: DUK) show some muscle.
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Utility stocks are putting on a show on Wall Street, and it is difficult to understandwhy.
The usual reasons for a utility rally are expectations of lower interest rates, orexpectations of a cold winter leading to higher earnings for the utilities.
In this case, there is a possibility of both, but not as high as one might expect.
What may be happening is that big money, more specifically, Warren Buffet is buyingutility stocks.
According to several reports, Buffet likes the cash generating power of electricutilities, and is buying stocks in the sector.
Among the major reasons for Buffet's interest is the repeal of a Depression era law thatmade it difficult for utilities to buy other utilities.
So, if the reports are correct, the latest merger and acquisition craze may involve theutility sector.
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The Amex Biotech Index (BTK) is showing signs of renewed strength trading well over the750 area.
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The Amex Pharmaceuticals Index (DRG) delivered a multi year break out on 10-18, closingabove 360.
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The Philadelphia Semiconductor Index (SOX) has been showing some weakness of late.
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Small stocks are starting to show signs of regaining momentum.
