the longs do not want to lose this opening.

nasdaq is holding up which has lately been uncharacteristic. the stumbling block is again the DJTR - an index hard wired to the strength of the base economy, an index that attracted faster money in the last couple of years and an index which has broken support.

it is also an index that is on an hourly r.s.i. chart in the oversold region. the bulls have got to defend this index if they want to win today's battle. UNP is a tell.

homebuilders getting shelled hard now.

but that's o.k. it's a soft landing.

mtzion, TOL reported an astounding 47% drop in orders. The sub-prime lenders are also getting their comeuppance, with LEND leading the charge downhill. Other stocks are showing some strength -- thank you CSCO -- so maybe we're seeing some reallocation?

number2son, reallocation. that's a point to consider.

are we in a rolling correction where at the end of this period, smart money has shifted into other sectors which then become the new market leaders?

in that case, do we skip the large washout days but instead grind out a multi-month bear something similar to say, 1994?

i'll keep my mind open.

<OR

NDX, MID, RUT

1) not what the bulls want to see

2) another example of why you don't trade before the Opening Range sets up

CAT weighing down the Dow. Trannies in the trash. So are the Homies. What happened to their big rally? (Laughs) As stockman knows, I am not a believer in the soft landing for real estate fairy tale and TOL is bigtime confirmation. Non-housing REITs are next.

Cisco chief rather known for his practices so I am amused the market is using his comments to take Tech back up. Shine on you crazy diamonds!

Paging Elaine Garzarelli............Paging Elaine G............About 6 months ago you told Bill the new market leader would be tech, but is there big capital IT spending in the US on the horizon or just stock buybacks with more outsourcing coming?

MarkM-

I was thinking of you as I read this:

http://www.contraryinvestor.com/mo.htm

The move higher in oil appears to be supporting the bond market... unfortunately not the OIH; now also back below it's opening range.

i'm sitting here watching this and wondering how is the market away from transports and builders holding up? is it something orchestrated? it could be but for a second, let me assume that the market is a discounting mechanism that shows at least some ability to forecast the future.

is the strength in the dow and the s&p saying that we are about to get a bullish headline for planes and trains? could we about to get a cease-fire in the middle east which would tag the price of oil and create a short term but hard rally in the DJTR?

the broader market is shrugging transport's weakness off here and if the broader market is correct, i will need to cover some stuff quickly.

stockman-

Money quote from Toll:

"As a result of the slower demand and building pace, Toll said it expects to walk away from land options set to expire, and announce a write-down when it reports its results August 22 if it can't renegotiate the price"

So they need to revisit the "book value" of those contracts. Next it will be write down of land inventories. That's the story that isn't out there yet. They will be a) holding land for years that they have financed and b)writing down the value of it b/c no one will be building on it for some time.

MarkM, you're exactly right. When it gets down to revaluing land they bought at the height of the bubble, it gets really ugly. It's even worse for the HBs with the highest debt-to-cap ratios.

The bulls have been clinging to the idea that these stocks were trading near book or below. As these assets decrease in value, the book value proposition doesn't look so good.

stockman,

Thanks for posting that link. Those two final charts are doozys.

Re: "new market leader would be tech,"

Technology shall lead the way. Observers of the American economy report that Technology (including medical, bio, IT, computer, internet,etc.)is the only sector to generate any interest worldwide. The other sectors are ignored or competed against downright.

The fundamental question is: when to trade? Cisco may just be an earnings bounce or the beginning of the upward trend in Techs. Stay tuned...

Number2son: Revaluing land and houses down would be like the late 80's, deja vu all over again. A lower dollar would maybe seal the deal. But what is Ben doing? Read that the foreclosure rate is now up to 1%, the average over the last 30 years, but that the number of foreclosures for June was down from May, including Florida, and also today that the weekly mortgage applications were strong.

alan, good points to consider, as always. Mortgage apps were up -- as expected given the 2-week downtrend in rates. But still I wouldn't call it strong, especially if you're comparing it to the previous week, which was the least market activity since May 2002.

I haven't been watching bonds today. Are they responding to the FOMC action yet? I know that yesterday there was some consternation that the yields did not react as expected.

Anyway, I still believe that rates are a subordinate to the unprecedented inventory levels and low affordability (despite very low interest rates).

Clearly there is severe market confusion:

Some traders are still trying to play the commodities...
Others are playing the "slowdown"
Others are trying to "pick bottoms" in tech etc...

The question is: is this chaos orchestrated confusion - to keep the index's afloat? - if this is so - short selling index's is a waste of time.

But most likely it is just "trader behaviour"
- everyone is bullish on something it seems.

I also wonder if the big investment houses - unable to use their "trend following systems" any more - are making their money on volatility - in effect have they become day/swing traders?

Maybe in the end Bill will be right - and there will be some big scare - that 800-1000 point drop that will put an end to all this - scare the crap out of everyone - and we will then be back to a normal market.

Until then - as a trader - all I can do is play the current game: sell what's pumped - buy what's dumped.

tradesman

Re: "Until then - as a trader - all I can do is play the current game: sell what's pumped - buy what's dumped."

Excellent commentary!

SPY Liquidity Premium (5dma) is back in the red zone over the past few days. This is a measure of volume in the SPY vs. the pieces and tends to be elevated when traders are wanting to avoid company specific risk (and liquidity issues). The same sentiment shows up in the MID/SPX ratio and RUT/SPX ratio currently. Just another warning sign that all is not well.

Breadth is not good on this rally: energy, health care and..... TECH! Yippee! The rest have decided not to come out and play. Conclusion? This is the "Cisco Happy Days Guidance Rally" and nothing else.

CSCO-

If traders begin focusing on the macro environment looking forward... they may not feel so optimistic about the growth prospects/guidance in CSCO. In a slowing world many companies can disappoint vs expectations.

no position

Again Bill, right on the money, to borrow a phrase, The oracle of Ontario? In a previous article i believe you said that you didnt want to even think of a hard landing or something to that effect, does the US housing market appear to be doing so, can you expand your thoughts on a hard landing, thanks, hope you are feeling better.

CSCO-

"If traders begin focusing on the macro environment looking forward... they may not feel so optimistic about the growth prospects/guidance in CSCO. In a slowing world many companies can disappoint vs expectations.

no position"

I think this is stockman's diplomatic way of saying "What a bunch of crap".

If you think the homebuilders don't have much more to fall, about 70% of REAL book value should be the floor.That's where they fell to last go round. Not getting there any time soon. Look at 2002 levels on your charts and see where THAT puts your favorites. If they are carrying lots of debt, better go back a little further.

If hard landing in housing, the much ballyhooed "save" from CAPEX is a little late in arriving.

the market is always tough. if it was easy......

but this is looking like the third serious bearish reversal/distribution day in a row. usually this is a prelude to a few hours of high high TRIN's and deep TICK's.

well, there's still some time left. the plunge protection team may be getting back from the hampton's any minute now. ben let them borrow some b.m.w.'s to drive out there yesterday because he figured that we'd rally for awhile after the announcement.

stockman,

any chance for a link to a chart on the SPY liquidity premium? i've read about it but haven't followed it. it sounds nice and tape based.

Not to pick on TOL, but to illustrate Mark's point, TOL was up over 600% in the little over 2 years from 2003-2005. Now, it's at some critical support levels.

http://stockcharts.com/h-sc/ui?s=TOL&p=M&b=3&g=0&id=p86735389489&a=82205330

I honestly can't think of a good reason to try to catch the bottom of these stocks, despite what some maroon said about buying TOL from anyone who would sell it to him at the open on this morning's usual fine CNBC viewing.

As Bill's mentioned many times, it's a pity CNBC doesn't record their shows for later viewing as ROBTv does. It would be fun to do a weekly top 10 highlight clip.

Someone get THE DONALD, you're fired!, on the phone. We need to know the truth about the real estate market from a pro's pro. Would he tell the home builders they're f.......

doug11-

THAT IS BEAUTIFUL. CNBC was pumping the homebuilders here! I didn't catch that. God those people are shameless.

Some of my screens are starting to hint that the coming slowdown is global. I need to think about those NatGas longs since commodities don't look good risk/reward under that scenario. Any opinions here on the coupling/decoupling of U.S. and International?

Mark, good post as usual. What confuses me is that after the Alaskan fiasco, Saudi Arabia and Mexico said that they will pump MORE oil to make up for the short fall. Are we at "peak oil" or are we dealing with a "cartel"? Someone get da Sheik on da phone please!

I think mt zion already pointed this out but those are three REALLY BEARISH candles on the dailies, four really with the doji.

Would someone please send me some bullish charts to view because everything that I have looked at today-- funds, stocks, currency, commodity-- has me thinking we go back to Square One here. Maybe I just need some chocolate or something.

MarkM:

re:
"Some of my screens are starting to hint that the coming slowdown is global. I need to think about those NatGas longs since commodities don't look good risk/reward under that scenario. Any opinions here on the coupling/decoupling of U.S. and International?"

What is interesting is that the commodity sensitve TSX has not confirmed any "slowdown" yet - (although it often lags - with energy the last to roll over...)

As of today - it is still in "happy" land above 12000 again... (although there has been a reversal this afternoon and this may not hold...)

If the TSX does NOT roll over - perhaps this is indicative of your "stagflation" theme?

If it does - this index would be the ultimate short - would it not?

a really mean gap down opening tomorrow would cure them there bearish candlestick thingie dingies but if they gap us up - as is their wont of late - they will only trap another layer of longs who will in turn grow frustrated when they notice that someone is trying to lock them up in a burning building and their get-me-out mentality will add to the selling pressure.

a hard gap down tomorrow and i will have to cover some.

a gap up? c'mon gnomes - y'all wanna get the bear over with or drag it out for six months? let the boys stay in the hamptons for another couple of days and let fear and greed take their course.

Mark, after being down this morning, the dollar is now up. Maybe, your negative gold position will ring true.

alan-

I just don't like all the overbought stochastics I am seeing. As a group the miners look set to retreat for awhile. They need a push, volume included, to stay where they are. Just sayin'

Long:Miners