In this weeks wrap-up -

In this weekends wrap-up we will cover

1. Fundamentals - General Market Thoughts
2. The Current Technical Outlook -
     2.a. Short term Perspective - Channels, Indicators,Counts
     2.b. Long term Perspective - Elliott Counts, and sometargets
     2.c. Gold and Silver
     2.d. Leaders and Shakers
3. Sentiment Indicators
     3.a. Volatility Studies - VIX
     3.b. Put / Call Ratio
     3.c. Commitment of Traders
4. Conclusion

1. Fundamentals

Although the market began the week with a rallying effort, the sellers came into the market full force by weeks end and slammed the markets down two days in a row. Moreover, we fell despite the relatively good news out this week including an upside jobs report and a decent CPI. Although the CPI was dominated by Energy and Healthcare, we have certainly bought the market up on worse news than this.

The buy on the rumor, sell on the news has turned into hold on the rumor, sell on the news it seems. Both earnings and news events have to be pretty darn good for the market to even give it the time of day on the buy side. Although some may disagree, this is exactly one of the indicators I use to measure the maturity of a trend. Just like people were buying on news that was bad, but not that bad, as the October rally rose like a phoenix out of the ashes, we now see the reverse mentality taking hold on the flip side of the coin.

As for the state of the economy, after reading John Mauldin's report, I can not say that I have much to add. The most prominent problem facing out economy today is the overwhelming trade and budget deficits, and the job market. Many have also spoken of how a weak dollar would increase exports, and diminish imports, but this is also not happening. Many expected that jobs would pick up along with all the stimulus and easy credit, yet we are barely replacing the people we are losing. Coming down from the 2000 top, the Fed cut rates countless number of times, which supposedly got this recovery to where it is today. With rates still close to 0%, and no increase in site, when exactly are we going to raise them again in order to be ready for the next crisis? The FED is definitely between a rock and a hard place, where raising rates could be very detrimental, and not raising them, leaving us without any ammunition for a fight that could be just around the corner. We are certainly at an interesting time in our economy.

Now for a little trader talk. I made the call last week that I felt that 85 was a solid bottom for the dollar index, and this proved to be the case - quite dramatically. What pushes me to remain bullish on the dollar is the renowned bearishness that still ensues, and, taking a lesson from above, the way the dollar seemed to rise on nothing but a "kind of maybe" rumor, in the face of more bearish dollar remarks from all those involved. Moreover, there are a lot of people short the dollar at the moment, and hardly a soul is long - what a perfect short squeeze scenario as everyone is going to want to "ease out" at the same time. The Euro Contract is definitely going to be my favorite play for the time being.

On with the techs!

2. The Current Technical Outlook -

2.a. Short term Perspective

Last weeks weakness certainly forewarned us about this decline, as the market made a slight double top and fell weeks end. If we didn't already go below it, we are pretty much sitting right on the supporting trend line with falling CMF, OBV, DI+, and RSI below 50. It's without a doubt do or die time for the market as a whole. The SP and the DOW formed double tops before falling.

The break of the channel was a great aggressive short being that it was also breaking into gap territory at the same time. Support was slim as the NASDAQ fell 60 points, bouncing off the 2025 level, and then back down from the 2050. Therefore, my market call goes as follows, a solid break of the 2050 level would be relatively bullish for the short term, and could indicate that a much slower upward trend is taking place. A break of 2090 would confirm this. What I will be more partial too, is a break of 2025, with confirmation of pretty serious downside occurring on the break of the low at about 2010.

Charts of Interest

Transports fell some more this week although not as drastically as they ended the week before. Since the decline has been a bit slow, I wouldn't be surprised to see some bouncing action in the transports, however, we have just made a drastically lower low, and bounced right off 50%. Along with rising crude oil prices, a negative for the transports, it's not the most attractive investment to me at the present time - but that's just me. Below we have the NASDAQ / TRIN ratio comparing extremes in selling pressure. This has been the first solid spike below the green line in a while, so although it shows some strength by the sellers, it may point to some buying over the next few days. Nothing concrete here though, just an experimental indicator.

Oil did another bounce off the 35 dollar level.  Not to sound "conspiritory" but apparently the exchange shut down with technical glitches right as we were going over 35 this week, after which bearish oil news was released (or so I heard.) I'm still bullish on the resource sectors however, and think it could very well break out on the next run to the upside.

2.c. Gold and Silver

Disappointing week for the bugs as Gold followed the Euro lower. Depending on how far the dollar rally goes, when Gold will bounce is still questionable.

Big bounce for the dollar as the positive divergence played itself out. Still beating myself up for not taking more advantage of spotting it. Anyways, we are very close to the latest top of 87.5, a point that could see a good deal of short covering I suspect.

3.b. Put / Call Ratio

We have yet to reach bullish levels on the P/C ratio.

3.c. Commitment of Traders

To say it simply, all three parties of the COT index have been very wrong at one time or another in the past couple months. No one displaying any sort of edge at all over the other. Therefore, I'm going to keep an eye on it for a while, but not report anything about it while it remains useless. The link to access the charts is posted below.

Charts available from www.vtoreport.com.**

4. Conclusion

You can feel the excitement in the air with the relatively few bears that are left out there. Yes, even the famous stockcharts.com chart-board has been bear hunting. Although I don't see us dropping like rocks here, the setup is looking suspicious at the moment, with a lot of people jumping in to buy it "since it's so low," and averaging in on the downside of their small cap tech stocks. They might make a killing for sure, but historically, they sure are setting themselves up to get killed one day.

Here's a quote I heard recently that made me reminisce about the old 2000 days...

"Man, I just got all these calls on some guaranteed small cap winners that have dropped recently - this is so easy."