So much for stabilization!  I had mentioned in the weekend report that the market was showing some signs of improvement and was beginning to stabilize around key support levels but Goldman Sachs took the legs out with a downgrade of Citigroup.  The downgrade in and of itself wasn’t enough to derail the market.  These kinds of downgrades are routine nowadays and news of banks coming out with statements about a couple billion in write downs is commonplace.  That much has been priced into the market for the most part.  What isn’t priced in is a prolonging of the credit crunch with a magnitude of double digit billions.  Clearly the Goldman Sachs estimate of 15 billion in write-offs in Citigroup over the next two quarters was a bit too much to stomach and spooked traders into heading for the exits today.  It certainly didn’t help that the National Association of Homebuilders confidence levels didn’t improve over October readings with a score of 19.  It’s the lowest level since this reading began in 1985, but on the bright side it didin’t drop over last month.  With 22 year record low levels and no drop over last month, perhaps this is a sign that the homebuilders are near a bottom. 

Get all the sentiment data here.

So now what?  Today’s move certainly puts a kink in the plans for a pre Thanksgiving rally but I still feel like we’re going to get a decent sized relief rally sustained over at least a few weeks very, very soon.  We just may need to see some more capitulation before that happens.  I discussed the key support levels in the S&P and Nasdaq in the weekend report which are are the last lines of defense before testing those August lows.  Both indices barely held at those levels today, but they did hold and volume levels didn’t indicate a tremendous amount of conviction behind today’s move.  That is encouraging but there is still significant downside risk tomomorrow.  The Dow took out and closed below 13,000 today and in all likilihood needs to retest the next level of support.  I failed to include this level of support at 12800, so wanted to highlight it here tonight.  It’s support at the February 07 highs and the close of that big August capitulation day and the last line of defense before testing the August lows.  I would imagine there is a very good chance of testing this level tomorrow but it probably depends on the housing numbers (starts, permits) as well as the FOMC minutes later in the day.  The HP quarter should help keep the market afloat at the open and the Fed will probably do everything it can to keep from roiling the market in its Fed minutes tomorrow, but it remains a dangerous market and one that can eat into capital in a hurry if you’re not careful!  I’ve been dabbling in a few of the strongest positions on the long side and profiting here and there but I will not get aggressive until we get a big day of accumulation or some kind of capitulation day.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day November 19th 2007

Nasdaq: DOWN 1.66% today with volume 8% BELOW average
Nasdaq ETF (QQQQ) DOWN 1.15 %, volume 27% ABOVE average
Dow: DOWN 1.66%, with volume 10% ABOVE the average
Dow ETF (DIA): DOWN 1.4%, with volume 50% ABOVE the average
S&P ETF (SPY): DOWN 1.39%,  with volume 42% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 1.98%, with volume 31% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks were hit much harder than the general market today but there wasn’t much conviction behind the selling.

Summary:

* Decliners led Advancers 264 to 38
* Advancers were up an average of 1.51% today, with volume 30% ABOVE average
* Decliners were down an average of 3.22% with volume 4% ABOVE average
* The total SI Leading Stocks Index was DOWN 2.62% today with volume 7% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Internet Infrastructure, Bonds, Agriculture
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Semis, Retail, Internet, Networking, Utilities

* Today’s Market Moving Industries/Sectors (UP):
Commodities, Bonds

* Today’s Market Moving Industries/Sectors (DOWN):
Home Construction, Basic Materials, Gold Miners, Retail, Financials

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Sorry, short on time tonight so no stock of the day today.  However, you may like to take a look at these SelfInvestors Leading stocks the moved up with volume today and are above both the 50 day and 200 day moving averages.

Stocks are listed in order of total rank (fundamentals + technicals), with best at the top.

IntercontinentalExchange (ICE)
TransDigm Group (TDG)
Astronics (ATRO)
HMS Holdings (HMSY)
Interactive Intelligence (ININ)
Darling International (DAR)