PRE MARKET

Futures up a wee bit but strong day yesterday. NASDAQ got back in one day what it lost in 5 days…and the 5 days wasn’t that much. If they can only correct the market 1% while internals headed south…you can fill in the blank.

Gaps to upside:

FL…not as bad as expected. Stock had been trashed. GPS, ANF, HIBB, ROST,SCVL…notice some RETAIL.

Also SPLK and AMAT. Semiconductor numbers and reactions remain strong.

Only seeing WSM down on numbers.

OILS have been on the pullback but strong oil prices today. Watching reaction as names set up.

PRE PRE MARKET

Yesterday’s bear market already over.

Nice gap to the upside today…as bear markets last one day these days. CSCO up nicely this morning on a 2% drop in sales and flat earnings.

The clue yesterday is what we wrote to you midday…FINANCIALS held and rallied right off the 50 day.

That said…internals have headed south with more and more names breaking support…BUT UNTIL MAJOR INDICES TAKE OUT EVEN SHORT-TERM MINOR SUPPORT…you know the next line!

MIDDAY NOTES

Market way off early lows. Look where BAC, JPM and the whole XLF held this morning…right at the all-important 50 day moving average…a place in bull phases where the big boys stand up and defend the turf. This will be vital to the market that this area holds. When you have a chance scan those names as well as many other financials that are doing the same. BUT…it is early.

Also, very weak and under the longer-term 200 day average BIOTECHS finally bouncing today…but no leadership there.

Other than that…blah!

EARLY PRE MARKET

Futures down decently. My goodness. We may just get that whopping 1% bear market. (sarcasm)

Just remember what we have reported to you:

Our sentiment indicators have been flashing red for a few weeks. Bullishness and speculation have been rampant. Again, that does not mean a correction is ahead. Sentiment is a secondary indicator. It just means you are on the lookout.

Internals have been heading south. Again, this does not mean the end of the world is at hand but it means you are on watch.

New lows have been higher than new highs. This is amazing considering major indices have not budged.

TRANSPORTS have broken down at a minimum, on a short term basis.

Small caps have again started to under-perform.

Junk bonds have rolled over.

Financials have put in small to medium-size tops.

Again, all this with major indices not budging.

Just know these are the type of characteristics that lead to corrections of unknown price and time. One may or may not be at hand.

At this juncture, play it sector by sector, stock by stock. All kidding aside, we haven’t even seen a 3% correction since before the election. We are quite overdue.

We will be watching shorter term support levels on the majors as well as leading stocks and how they react to any selling. The 50 day average is 2-3% below these levels for the majors…so a little daylight to cover.