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The Wilderhill Clean Energy Index looks to have rolled over with the 180 area now becomingsupport.
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Crude oil prices are testing the $58-$60 area. A rally above $62 would reverse the shortterm down trend.
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The Philadelphia Oil Service Index (OSX) failed in its latest attemtpt rise above 200, buthas not fallen apart altogether.
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The Amex Oil Index (XOI) is now looking to test the 1100 area as support.
Technical Summary:
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Betting On Gridlock
Wall Street is betting that gridlock will return to Congress, and that the halcion days ofthe dot.com boom will follow.
If the Democrats win enough seats to have a majority, but not so many that they can trulyrule the roost, Wall Street thinks that is the best of all worlds.
This would be the reverse of the Clinton years, a President willing to make deals, with aCongress controlled by the opposition.
The logic, is that only those things that are really necessary will get done, while thepols spend the rest fo the time fighting each other, letting business take care ofbusiness.
It's a risky bet, in our eyes, and one that raises the hair on the back of our neck, giventhe increasing hostility between both parties.
Othewise, we remain concerned, as volume trends in the stock market are increasinglydisturbing, as rallies of late have come on weak volume, and declines on rising volume.
Also important is the fact that sectors that have led the way up are starting to showweakness. Witness the recent sloppy trading in large drug stocks and in the biotechsector.
More impressive is the fact that the tendency for stocks to rally at the start of a newmonth has yet to be seen in November, where the market has actually sold off with risingvolume.
What's to blame? For one thing the market has been in rally mode since the summer. Sobased on time, the rally had to take a break.
But more important is the fact that the economy is starting to slow, at least in someareas, and the Fed is still threatening to raise interest rates to fight inflation, whenit is possible that they should be considering easing rates.
What to do? Bond holders got crushed on Friday, so it looks as if it's time to raise alittle cash and wait to see what happens next.
Otherwise, don't make any big bets.
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
Think of this market as one that may be forming a top.
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:
Moderate Concern Ahead Of Employment Report
Editor's note: Due to travel delays and deadline pressures, this section will be updatedon Tuesday's IQ.
Option traders are a bit too optimistic ahead of the employment report, providing thepotential for a big move if the numbers are a big surprise.
Frankly, we would have expected the put/call ratios to be higher that the actual numbers.
The CBOE Put/Call ratio checked in at 0.91. 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 1.93. 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 11.42 and 18.04. 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) rose to 77.5%. This remains an overboughtmarket, as the sell signal from 10-9 is still in play.
NYSE insiders were sellers of stock for the week of 10-6-06. 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 74% on on 10-27-06. This is the sixth weekabove 70%, which is a sell signal.
Market Moves
Citigroup Shows Weakness As Bonds Tank
Citigroup (NYSE: C) looks top heavy, as the potential for higher interest rates increases.
Chart Courtesy of StockCharts.com
Citigroup is a good bellwether for the financial sector, since it's a bank, a credit cardcompany, and a broker among other things.
It is also an international company with big bets in China, giving the stock a globalfeel.
Above all, though, it's a good bet that big stockholders of Citigroup, such as mutualfunds and hedge funds, have a pretty good idea of what the Fed might or might not be up tonext.
Thus, when the stock topped out in September, we started watching the S & P 500, whichstarted looking tired in October.
The lag time is not too bad, as Citi may have given traders a one month warning about thepotential for a top in the market.
Citi fell below the 50 area and its 50 day moving average recently, reversing itsintermediate term up trend. A break below 48 on Citigroup would be a negative sign for thestock market.
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The Amex Biotech Index (BTK) may be looking to add to recent gains.
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The Amex Pharmaceuticals Index (DRG) has been struggling lately after delivering a breakout a few weeks ago.
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The Philadelphia Semiconductor Index (SOX) has been showing some weakness of late, with450-460 being a tough resistance band.
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Small stocks are starting to show signs of regaining momentum.
