Near term, markets remain stretched and extended to the upside…except as usual, the Russell 2000 and small caps. Bullishness remains rampant with some numbers off the charts. We are now past the Thanksgiving seasonal bias so with the negative divergence late in the week, don’t be surprised if markets do indeed settle down a bit in here. The divergence was the normal underperformance by the Russell and the small caps. Nothing has changed there as we believe any correction will be led by this area as the small caps have been relatively weak for many months. But the real story is underneath the surface as the meltdown in energy prices continues to produce big winners but at the same time…big losers.

The same areas we have been telling you to avoid have simply…just got worse as the energy markets opened wide and swallowed on Friday. There are those that believe that type of move may be the end of the move down. We would rather stick with the big picture. So…continue to avoid everything Energy, Oil & Gas and most anything involved. On top of that, continue to avoid most commodity areas as they remain bearish. This includes Gold, Silver, Coal, Steel, Solars, mining, ores, construction mining, commodity countries like Russia and Brazil, Emerging markets and now would start to be wary about Rails. Of course, Rails move the oil. Gaming also remains bearish.

On the other end, the continued beneficiaries are Airlines, Air freight, Truckers, Cruise Lines, Travel and Retail…but also Semiconductors, Biotech, Insurance, Managed Care,Restaurants, Food, Drugs, Beverages, Tobacco, Household Products remain bullish.

As you can see, a very much two-sided market Stay in gear.

Just keep in mind, since the lows, Fedheads yapped that more QE may be needed, Japan, Europe and even China announce more easing…some massive. So the agenda is still out there. They do not want markets going down and are doing everything possible to stop even a double digit drop. The agenda was successful again heading into the end of the year.

I have been amazed to read many articles by pundits saying lower oil prices are a bad thing. Their contention is based on lower prices are forecasting a major global recession. I have news for them. That is just a guess. If they were smart, they would just deal in the facts…and the facts are simple. Oil prices have plunged…which means gas prices have plunged…which means the cost of energy has plunged…and due to the fact the cost of energy is involved in everything we do, it is a huge expense cut to the consumer and business.

Very simply…a 10 cent drop in gas prices is equivalent to $10 billion staying in consumer’s pockets which potentially gets spent into the economy. Of course, this is based on prices staying down. Due to the fact that prices are down at least 50 cents at the pump in recent months, that is a $50 billion expense cut. This is huge.

There is a reason why retailing stocks have moved nicely in the past few weeks even though past numbers have stunk. The market is looking forward to a better holiday based on gas prices. Look at the charts of WMT and TGT for example. Their recent numbers were blah but the gas price story was good enough to break them out of range. Now add in the expense cut for business. This expense cut adds to the bottom line…especially for companies that are big consumers of gas. Is it any wonder the TRANSPORTS are soaring…especially the airlines.

So when reading about the “opinions” of some that say lower prices are not a good thing, throw out opinion and just look at fact. Nothing bad happens if energy prices come down and stay down…of course, unless you are in the energy business.