The market is having a great start to 2011

The QQQQ is up 7.30% and SPY is up 5.85% in 2011.The model in NASDAQ is up 26 weeks in a row wow! That is an awesome move. In the next morning are the economic numbers and expiration. By 10EST Friday after Philly Fed we should know if we are going to go to 1343 and 1355. If we do, then we unwind next week. I will be very light by Thursdays Close.

The market is acting great, yet if an inflection point is about to come it would about in this time frame. In June everyone thought I was nuts for saying the economy is better and market is fine. All we have right now is perhaps a short term top. You can't find a BEAR anywhere. Transports sure act well. Will they act so well if oil takes off to the up side? There is a very good chance we get to 1343 in the am.

By this point we will be very over bought short term.

ES---- WHAT ARE THE OPTIONS AND PROBABILITIES

• 1306.00 YOU BUY.
• GAP DOWN IS PERFECT FOR TOMORROW
• VOLUME HAS SLOWED
• EGYPT ETF NOT MOVING NO ONE CARES NOR SHOULD THEY. OIL WILL NOT GET DISRUPTED.
• SPREAD BETWEEN BRENT AND SWEET LIGHT MAY NARROW FROM ITS WIDEST POINT.
• BRENT CRUDE 102.39 IS HOURLY PIVOT
• MAYBE BRENT IS THE BEST GUAGE OF STOCK MARKET DIRECTION FOR NEXT 48 HOURS.
• LOWER BRENT- HIGHER MARKET .
• NARROWER SPREAD WITH LIGHT CRUDE- HIGHER MARKET.

XLF put/ call

203k puts were bought today on XLF vs. 8k calls. Bullish for bank sector.

Are S&P 500 All Time Highs Possible in 2011?

The pace of play has certainly slowed down ever since the monthly model went into a sell on the VIX index. The VIX is currently at 15.93 and is looking to bounce from current levels. The look is of the VIX is one of working its way to all time lows of 9.31. The stock market is literally doing the best job I have ever seen of self correction. It is pulling shorts in and spitting them out.

It really is a tremendous testament to the power of the secular move higher in stocks and the economy. The Economic recovery is coming along nicely and the break out in the NOB spread is telling us to look for further improvement in the economic and unemployment data. The back drop is firmly secure and we continue to trend higher.

The investment environment has changed considerably since the bottom in 2008. The world has gone from massive fear to one of optimism and new confidence. The public has once again started buying equities. The exodus from the bond market is now in full force.

Market Outlook 12-27-2010

Sentiment readings were very bullish across a range of indicators this week. To begin, Investors Intelligence Advisor Sentiment had its highest percentage of bulls (58.8) since the October 2007 market top. The American Association of Individual Investors poll had the highest percentage of bulls (63) since October 2004, and the lowest percentage of bears (16) since October 2005. Finally, the National Association of Active Investment Managers (NAAIM) shows that on average they are 81.83% invested. Market Vane posted a 75% bulls for Nasdaq reading last
week the highs since the 2007 top. This is in the high end of the ranges of these surveys and shows that these managers are quite bullish.

The put call levels have run in the 70's for the last three weeks on the CBOE that is extreme also. Volume is very light and open interest is also contracting so not allot of good news on the sentiment front. I have no desire to buy equities right now. It's defense mode selling into the rallies. The clear lack of volume and sentiment is overtly bullish. The market is trying to stay together into the last day of the year. December 31st to January 3rd looks to be the time frame of the short term top. 1230.50 is the massive support area.

The Market is a bit tired and the next 3-5 weeks will be sloppy (Defense Mode)

HINDENBERG SELL SIGNAL

December 14, 2010: 113 New Lows, 179 New Highs, 3063 Advancers+Decliners, McClellan Oscillator was negative (-5.36), NYSE Composite Index closed at 7855.22 vs 7272.53 50 trading days prior (October 4, 2010), and the 10 week moving average was rising.

Why do I care about it more than last time? Because the set up is the exact opposite of the last signal which was wrong.

Here it may be very right.

Basically, housing is not getting worse-but there is not much improvement either. Looking ahead, not much can be read into the dip in housing permits as the multifamily component is lumpy and volatile on a monthly basis. Until home sales pick up along with household formation (which depends on job growth), starts are going to remain sluggish. But again, the good news is that at least housing appears to have stabilized. Jobless claims improved slightly to an as-expected level of 420,000 in the December 11 week. This extends a run of improvement evidenced by the four-week average which has fallen for six weeks in a row. The average, at 422,750, is down more than 20,000 from a month ago in what is a positive signal for payroll growth. The four-week average for continuing claims, at 4.186 million, has been falling at 150,000 to 200,000 month-to-month clips to also signal payroll strength. Note this is a tricky time of year for adjustments and the Bureau of Labor Statistics warns that unadjusted claims will, starting next week, begin to build to an annual peak in the second week of January. Still, claims data continue to signal improvement in the labor market. NASDAQ futures have completed a five way advance from the November 2008 lows. The weekly RSI on NASDAQ futures has created a bearish divergence. Higher highs reached in the index last week but not in the RSI. The FXI is looking to go to test its 200dma at 41.98. I believe the United States stock market is going to have the same type of decline toward its 200 day moving average in the S&P futures. First comes the 20dma at 1214.00. Below that we work toward the Globex numbers at 1202.25 and 1176.25. The open interest contracted last Friday in the S&P & NASDAQ futures which is a sign of weakness. The 200/60 is 1232.56 currently and under this level pressure will continue on the market. A close under 1229.00 is the key to get the correction started in full force. Monday night is the next full moon and the next inflection point in the market.

Anything can and will happen we are now in MAX DEFENSIVE MODE.

NEXT 3 DAYS IN STOCKS MARKET....

The bears might get a chance to be happy for a very short time. The market right now is trying to get to the end of the month. All I really care about here is closing the month above 1118.75 in the ES futures. The market has no volume no news of any real consequence. The market only traded 128 million shares yesterday which is extremely light. The bond market is up on the week but I don't think it has very far to move on the up side..

I think the next 3 days set up is very sideways to slightly lower. Need to just be patient and wait.