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Market Wrap

Going Batty!

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After a blood curdling 4.9% gain last week, spurred by a stronger-than-forecasted jobs number, the small caps of the Russell 2000 (RUT.X) 840.14 -0.56% found modest profit taking to start the week, but the NASDAQ-100 Tracker (NASDAQ:QQQQ) $53.15 +0.62% continued it outperformance with heavyweight's Apple (NASDAQ:AAPL) $167.91 +4.00% and Google (NASDAQ:GOOG) $609.62 +2.62% leading the charge.

Decliners outnumbered advancers at both the NYSE and NASDAQ from the opening bell, but bullish leadership as depicted by the NH/NL ratios remains steady.

Shares of Sun Microsystems (NASDAQ:JAVA) $6.05 +4.31% were atop today's list of most actively traded and provided a lift after a bullish test of their 200-day SMA ($5.59) in late September.

Shares of Vonage (NYSE:VG) $2.57 +123.47% more-than doubled and were today's most actively traded at the big board. The VOIP (voice over Internet protocol) service provider said it had settled a patent suit filed by Sprint Nextel (NYSE:S) $18.50 -2.68%.

On September 25th, a jury in the U.S. District Court in Kansas City, Kansas, found that Vonage infringed on six Sprint patents, and ordered Vonage to pay $69.5 million in damages. The settlement today resolved all claims in that suit for $80 million, the companies said.

Sprint also agreed to license Vonage its portfolio of more than 100 patents on connecting calls between a regular telephone network and a packet-switched network such as the Internet. The settlement does not put all of Vonage's legal troubles behind it. In March, another jury awarded Verizon (NYSE:VZ) $44.96 -0.57%, $58 million in damages, plus 5.5% royalties on future revenues after finding that Vonage violated 3 Verizon patents. Litigation continues in that suit. Vonage denies infringement and says it has deployed workarounds for two of the patented technologies.

U.S. Market Watch - 10/08/2007 Close

November Crude Oil (cl07x) futures settled down $2.20, or -2.71% at $79.02 with traders citing a rebound in the US$ and diminishing weather-related activity to U.S. Gulf of Mexico production as a catalyst for today's weakness.

Refiners such as Valero Energy (NYSE:VLO) $70.77 +3.54% bucked broader energy sector weakness as the crack spread widened between November Crude Oil and Reformulated Gasoline for a fifth-straight session.

Brokers and banks gave back some of last weeks gains after the NYSE fined 14 member firms and 1 former member firm $10.43 million for failing to deliver prospectus to investors. Dow Jones reported that the largest fines were assessed to Citigroup Global Markets, Deutsche Bank Securities and Lehman Bros.

Shares of Citigroup (NYSE:C) $47.80 -1.03%, Deutsche Bank (NYSE:DB) $133.61 -1.14% and Lehman Bros. (NYSE:LEH) $62.78
-1.87% finished lower on the session.

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M&A activity presented itself with Germany's SAP AG (NYSE:SAP) $56.36 -4.84% saying it had agreed to buy France's Business Objects (NASDAQ:BOBJ) $57.83 +15.03% in a deal valued at $6.8 billion.

Unmanned aircraft maker United Industries (NYSE:UIC) $80.39 +6.30% said it had agreed to be acquired by Textron (NYSE:TXT) $64.01 -2.09% for $1.1 billion.

Spooky!

Having witnessed BIG and NARROW leading and advance, and now observing that strength is BROADENING out to the economically sensitive small caps, I can no longer look in the mirror and straddle the fence of denial should the S&P 500 Index (SPX.X) 1,552.58 -0.32% find a close above 1,565.

Besides, as Halloween nears, when I look in the mirror, I see no reflection.

S&P 500 Index (SPX.X) - Daily Intervals

A bullish close much above 1,564 (say 1,565) has the SPX breaking to all-time highs and would likely have this market void of many sellers until the institutionally computer-derived MONTHLY R2 of 1,601.04.

According to the StockTrader's Almanac, tomorrow (Tuesday) and Wednesday are historically "bearish," but after that October tends to be a real "bear killer," and has been the "best month" for bulls since 1998.

Dow Transports (TRAN) - Daily Intervals

This week's "key sector," or index may well be the transports. I've made the above chart as "bearish" as I can. A further "easing" or lower trade in oil prices may have the transports getting into gear on a move above 5,021.
 

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