• I am going to call it a day and a week.

Thanks for reading my Diary. I hope it added value.

Most importantly, please say a big prayer for Uncle Vinnie at church or temple this weekend, unfortunately he really needs our help.

Get some rest. We will all need it because next will be another Thrilla in Manila!  

• Riddle!

Mark Cuban goes on CNBC to say he was buying Netflix (NFLX) because it is really cheap compared to other media companies. What other media companies? Netflix trades at 100x earnings. 

• Relieved.

As I mentioned earlier today, I didn't expect Maverick to re-engage.THat siad, I am on target thus far, on my reshorting expedition. The Russell 2000's weakness was an accurate negative market tell, as was the declining price of crude, and the rise in bond prices. The easy part of the day's trade is likely upon us, but I am considering going home short.

• Further commentary from Sir Arthur Cashin.

Crude dipped negative by a few pennies and stock indices ease off highs.  Now oil back in plus territory and stock bids return.

Run rate at 12:30 projects to any NYSE final of 970/1.050 billion shares.

• The short end, that is!

I shorted SPDR S&P 500 (SPY) up to $189.25 and have a scale to short more now.

• These are not good reasons to buy Netflix.

The business media is now filled with traders who are buying Netflix (NFLX) because investor Mark Cuban is buying the shares.

This, to me -- and written respectfully -- is not a very good or rigorous reason to purchase Netflix.

Nor is the promise of a potential takeover a very good reason to buy a company.

From my perch.

• Even though so many are.

Besides being in a confirmed mode of buying the dips and shorting the rips, my interest in shorting the market -- apart from the outsized gain since Wednesday -- lies in the faltering Russell 2000 Index. Many are now ignoring this underperformance.

That said, I am still small in my Russell 2000 index shorts at this time.

TGIF.

• I'm shorting you, too.

Now I am shorting SPDR S&P 500 (SPY) at $189.05.

• QQQ wins it.

My first short of the day is PowerShares QQQ (QQQ) at $93.71.

• From Sir Arthur Cashin.

Europe comments (and hopes) gave retro-rockets to this rally.  (Greece up 1170 Dow equivalent points.)

At noon, we are pausing at Tuesday's highs as they try to gather strength in front of the presumed solid resistance at S&P 1900/1910.

Watch WTI, if it goes negative, it could put pressure on stocks.

Run rate later.

• Not fighting this rally, but still intermediate-term bearish.

Since Wednesday I have been playing on the long rental side.

I chose SPDR funds as my favorite vehicle based on the following:

1. A capitulation low has possibly been put in.

2. Members of the hedge fund community were positioned long their favorite stocks, and were short S&P 500 futures.

Obviously I should have held on, but I didn't anticipate the magnitude of the rally today -- which I am not fighting.

I remain bearish over the intermediate term and plan to short again on a continued ramp for numerousreasons.  

I am market neutral now. 

• From Peter Boockvar.

Here is a terrific summation of the important macroeconomic events of the week from Peter Boockvar: 

Positives,

1) Initial jobless claims fell to 264k, the lowest since April 2000. The Labor Dept said there were not unusual factors.

2) UoM October consumer confidence shrugs off stock market weakness and rises to 86.4 from 84.6, the best since 2007 led by the Outlook as Current Conditions stay unchanged. One year inflation expectations, reflecting the continued drop in gasoline prices, fell to 2.8%, the lowest since October '10 from 3% in September. Hooray for lower prices!

3) Housing starts in September were a touch above the estimate at 1.017mm led mostly by multi family starts which rose by 54k. Single family was up just 7k to 646k, near the 12 month average of 634k. The trend was also seen in permits where multi family was up by 18k while single family was down by 3k to a 4 month low.

4) The lowest average mortgage rate since June helped to juice refi applications by 10.6% to the highest since June (still down 27% y/o/y).

5) Industrial production in September rose 1% m/o/m, well more than expectations of up .4%. Most of the upside though was in utility output but manufacturing IP ex auto's were higher by .5% and mining was strong (thank you shale).

6) Philly manufacturing in October held steady at 20.7, a touch above the estimate and is above 20 for the 4th straight month for the first time since 2004.

7) Wholesale prices in September fell .1% m/o/m and were flat ex food and energy, both one tenth less than expected. The y/o/y gain for both was 1.6%. The drop in food and energy prices was off course the catalyst for the headline drop but services inflation (which has been sticky) fell by .1% m/o/m but only after rising .3% in August. The supply/demand curve is what it is.

8) In China, aggregate loan growth in September rose to a 3 month high at 1.050T yuan vs 957.4b in August but that was 100m yuan less than expected and still down 25% y/o/y. M2 money supply growth was 12.9% vs 12.8% in August and compares with the estimate of 13%. Slower credit growth is a painful necessity.

9) Chinese foreign direct investment in September rose 1.9% y/o/y vs the estimate of down 14%.

10) China's CPI in September rose just 1.6% y/o/y, the slowest rate of gain since January '10 and was driven mostly by a slowdown in food price increases. PPI was negative again by 1.8% y/o/y.

11) Chinese exports in September rose 15.3% y/o/y vs the estimate of 12%. It's the best since February '13 and was helped by iphone shipments as well as another strange 34% export increase to Hong Kong. Imports rose by 7% vs the estimate of down 2%.

12) For the 3 months ended August, UK's unemployment rate fell to 6%, the lowest since October '08 from 6.2%. For the 3 months ended August wages rose .9% y/o/y ex bonuses which is the best read since March '14 and is close to catching up to the recent CPI gain of 1.2%.

Negatives

1) September US retail sales were weak. Sales ex auto's and gasoline were down .1% m/o/m, well worse than expectations of a gain of .4%. The core rate of sales was lower by .2% vs the estimated rise of .4%.

2) After rising 4 pts in September, the October NAHB home builder index fell by 5 pts to 54. Both the present and future expectations components were down and Prospective Buyers Traffic was down by 6 pts after rising 5 pts in September.

3)The NY manufacturing index for October fell to 6.2 from 27.5, well below expectations of 20.3. It's the weakest since April as new orders went negative for the first time since April at -1.7 from +16.9.

4) The lowest average mortgage rate since June did nothing to increase mortgage applications to buy a home as they fell by .7% w/o/w.

5) The NFIB small business optimism index in September fell to 95.3 from 96.1, a 3 month low. Plans To Hire fell 1 pt to the lowest since April and those that have Plans To Increase Capital Spending fell 5 pts to 22%, matching the lowest since January '13. The NFIB said, "Overall, small business owners are still stuck in a rut that has been difficult to escape."

6) Business inventories in August rose just .2% m/o/m, half of what was expected and the slowest rate of gain since June '13 and leads to a trim of Q3 GDP estimates.

7) James Bullard does nothing but confuse the markets by saying lower gasoline prices is supportive of economic growth but he is unhappy with lower inflation expectations. He proposes halting the taper even with just $15b left but also says his forecasts are unchanged which includes a March rate hike. This continued faith in QE joins Williams and Evans public comments.

8) Yellen today said "the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. It is appropriate to ask whether this trend is compatible with values rooted in our nation's history." I agree but the Greenspan wealth effect thesis began in the late 1990's and since September 30th 2012 when QE 3/4 was about to get started, nominal GDP has grown by $1.275T thru Q3 '14 (our estimate) vs an increase of $5.085T in the market capitalization of the US stock market ($6.9T increase at the market peak).

9)Antonis Samaras is told to go back to his room by the markets after the Greek PM said he's ready to move out of the house with no more allowance. The Greek 10 yr yield jumps 146 bps on the week (intraweek spike was 230 bps) and the Athens stock market drops by 7% (down 13.5% at bottom) by today's close on the week.

10) German ZEW fell to -3.6 from +6.9, the weakest since November '12.

11) EU IP in August falls 1.8% m/o/m vs the estimate of down 1.6%. This gives back more than the July gain and therefore this area is likely back in contraction.

12) UK jobless claims fell by another 18.6k but that was less than the expected drop of 35k.

13) Home prices in the UK in August rose 11.7% y/o/y, matching the fastest rate of gain since July '07 as London prices were up a whopping 19.6% y/o/y and 9.1% ex London. When wages are rising by less than 1% in the UK, asset price inflation is still inflation.

• Or I might be scaling into a SPY short.

If I weren't so exhausted from the week, I might be scaling in now -- around $189.30 -- into a short position on the SPDR S&P 500 (SPY) short solely based on the reaffirmation of the Russell 2000's weakness.

But, for now, I am not fighting the advance, given the two charts I previously exhibited. These could signal a bona fide equity capitulation low, as seems to have been put in on Wednesday. (See "A Potential Capitulation Low on Wednesday" below.)

• I've unloaded the rest.

I have sold out the balance of my ProShares Short 20+ Year Treasury ETF (TBF) long and I am taking the name off my Best Ideas list now at $26.55.

• A number of German firms may be set to fail.

My gnome is hearing that next week's European bank stress test will conclude that four reasonably large German banks will fail the test.

• It's a bona fide rip-your-face-off rally.

Staying away, far away, right now -- from an expected rip-your-face-apart-rally.

I'm not shorting, and I'm not buying (much).

• Four of 'em, to be precise.

I covered some of my Ford (F) and General Motors (GM) short positions.

And I am bidding for Oaktree Capital (OAK) and Yahoo! (YHOO).

• For a $0.40 chop.

I covered my SPDR S&P 500 (SPY) short for a $0.40 chop.

• As signaled by inverse ETF volume.

Here is a potential sign of equity capitulation on Sukkot -- er, Wednesday.

Relative Inverse ETF Volume Spikes to Record High

Source: J. Lyons Fund Management

View Chart »View in New Window »

More Than Half of Indicators Signaling 'Bottom'

Source: SentimenTrader

View Chart »View in New Window »

• Ending an excellent trading week on a restful note.

Question: "Double hernia."

Answer: "What do you see if you hold your hernia up to a mirror?"

 --The Great Carnac (Johnny Carson)   

I have had an excellent week trading.

The pace has been frenetic.

Today, I will rest -- I plan to do little, almost regardless of the random action.

• 'Hit the wall and bounce!'

From Sir Mark J. Grant:

The ten year Treasury spiked through 2.00%. Yesterday morning it was flat-lining around 2.00%. This morning Bloomberg is flashing almost 2.20%. What is happening?

At the beginning of the week equities were getting slammed. They were down big in Asia, Europe and the United States. Fear had returned to the stock markets. This morning the S&P futures are up big. What is happening?

I have said a number of times that the world's central banks are dominating the markets; all of the markets. I do not like to use the word, 'control' because it sounds so awful. I do not even like to say 'dominate' but their actions leave no choice. They have bulked-up their balance sheets and are the 'Masters of the Universe' now in the Great Game.

What happened, what changed the world, was one single pronouncement by one of the 'Masters of the Universe' whose name is James Bullard. He is President of the St. Louis Fed. Also, as Fed members go, he is considered to be in the middle, neither a hawk nor a dove. Bullard said, according to the New York Times, that the Fed should consider delaying plans to end its bond-buying program at the end of this month to halt a decline in expected inflation. 

'We said the taper was data dependent. We are watching and we're ready and we are willing to do things to defend our inflation target.'

--James Bullard

I suspect that the change in attitude is being caused by the European malaise. Eurostat reported out yesterday that inflation was 0.3% year-over-year which was the lowest reading in five years. I would guess that the members of the Fed looked out into the harbor and could visualize the boat from the Continent arriving in the American port. Hence the reaction. Hence the surprise pronouncement that set the markets bouncing off the walls. 

The last time we had such a magnanimous announcement was Mr. Draghi's 'We will Save the World' speech. Just the hint of QE4, the slightest mention of its possibility, and off we go in the opposite direction. 

Hit the wall and bounce!

All of the talk about the 'Taper' and then the end of it just got blown out the window. All of the concentration about the Fed winding down its balance sheet just got tossed out into the streets like confetti from some New York window during the Saint Patrick's Day parade. We have hit the wall and bounced and, to be quite square with each of you, I am just not sure yet how far we are going to go. For every action there is a reaction but the speed of the velocity will take some time to measure.

'The Big Nurse is able to set the wall clock at whatever speed she wants by just turning one of those dials in the steel door; she takes a notion to hurry things up, she turns the speed up, and those hands whip around that disk like spokes in a wheel.'

--Ken Kesey, One Flew over the Cuckoo's Nest

The jig isn't up. The die has not been cast. But the Pixie Dust has certainly been tossed out once again. 

• 'To the pain!'

What is more painful?

Listening to Fed heads or watching the New York Jets football team?

It's close.

• Here it is.

Some ECB members today again are calling on European politicians to step up. ECB member Coeure said 'talking vaguely about structural reforms, but not doing them, is the worst of all worlds.' Weidmann of the Bundesbank said 'the biggest bottleneck for growth in the euro area is not monetary policy, nor is it the lack of fiscal stimulus, it is the structural barriers that impede competition, innovation and productivity.' He also today criticized the ECB ABS program. Nowotny said 'monetary policy can help but it can't bring about an economic upturn on its own.' Mersch said 'non conventional monetary policy, in particular large scale asset purchases, seem to widen income inequality.' I believe the calls for the ECB to step up and do Fed/BoJ style QE is completely misguided with no evidence at all that there is any transmission to the real economy. The wealth effect concept should be put to rest. It's surely easy to turn on QE but it's become a central bank nightmare in getting out, just ask the Fed. That said, the ECB is still doing its own form of QE and that continues within days with the purchase of covered bonds and ABS. 

Greek bonds are bouncing back with a 74 bp drop in the 10 yr yield and the Athens stock market is up by about 6% which in turn is helping to lift European markets. Hopefully if there is one thing Prime Minister Samaras learned this week from the markets is that it's not time yet to leave the nest of the EU and IMF bailout. His main problem though remains of winning reelection against the very far left Syriza party possibly early next year who want to renege on half the country's debt. 

Of note today was the meeting between Putin and Poroshenko at a summit in Milan and Merkel said afterward that she 'can't see any sign of Ukraine breakthrough' citing 'great differences' with Putin. The ruble is making a fresh record low vs the US$. 

Janet Yellen speaks today with a speech titled 'Inequality of Economic Opportunity' and I wish she would just stick to the topic because after Bullard spoke outside of many sides of his mouth yesterday, too much communication is not helpful.

• Where it began.

The rundown:

• U.S. futures are very strong: S&P 500 futures are up 24 points, and Nasdaq futures are higher by 54 handles.

• Europe is broadly higher -- by around 1.7%.

• The Nikkei in Japan is down 1.40% on little news. However, the Bank of Japan failed to meet its bond-buying goal for the first time in more than two years. According to JPMorgan, "The dollar weakness (thanks to Bullard) is preventing the yen from selling off (it is down small Friday morning)." All major groups, save energy, are lower on the Nikkei.

• China is down 0.65% ahead of an important week filled with economic data starting Monday night. All groups, save for consumer staples, were lower.

• Foreign-exchange action is muted: The U.S. dollar is down 0.05%, and the euro is up 0.05%.

• Gold is down $4 per ounce. Crude oil is extending yesterday's gains and is up $1.40 per barrel. Copper is down 0.17%.

• The yield on the 10-year U.S. note is up 3 basis points to 2.19%. Sovereign-debt yields are mixed to slightly higher.

Global markets, except Asia, are strong -- though there is not much specific news. It shouldn't be a surprise to hear remarks from European Central Bank executive board member Benoît Coeuré.

I would describe buying as "tentative."

Earnings after the close Thursday were mixed. SanDisk (SNDK) and Google (GOOG) disappointed, and Xilinx (XLNX) and Schlumberger (SLB) strong. Urban Outfitters (URBN) and Rolls-Royce issued pre-earnings warnings. General Electric (GE) looks fine and orchestrated (see "Once More, the Jump of a Lifetime" post below).

Today's focus will be a talk from Federal Reserve Chair Janet Yellen on income inequality at 8:30 a.m. EDT in Boston.

Building-permits data are due at 8:30 a.m., as are housing-starts figures, and results from the University of Michigan's sentiment survey are scheduled for 9:55 a.m.

Bank of New York Mellon (BK), Comerica (CMA), Honeywell (HON), Morgan Stanley (MS) and Textron (TXT) have all reported earnings this morning, and Huntington Bancshares (HBAN) numbers are still due for release. 

On Thursday I traded quite actively, opportunistically and well. It was my best day of the year from a performance standpoint. I mostly profited from my ETF trades. 

This morning I moved my portfolio from market-neutral to slightly net short on the large gap higher in market futures.

I shorted SPDR funds at an average cost of $188.24 (see "Scaled Up on My SPY Short" below).

• Do pardon my skepticism.

But remember, consensus EPS [earnings-per-share] expectations are essentially manipulated and based on the guidance from investor relations departments and managements. They are framed to be beaten. As such, it's like Monty Python's Upper Class Twit of the Year Competition where one of the events is for the contestants to jump over matchboxes. . . . So, when the business media is all a flutter with this week's 'important' earnings releases, pay them no mind as beating EPS consensus (which typically occurs about 65% to 70% of the time) is the 'Upper Class Twit of the Year.'

--Kass Diary, 2012 

Pardon my skepticism -- but, from cycle to cycle, some things never change. 

As earnings season continues, General Electric (GE) jumps over analyst-consensus match covers as EPS beats estimates by a "choreographed" penny per share. 

As I have written in the past, GE -- and other corporations -- beating consensus expectations is much like Monty Python's Upper Class Twit of the Year,in which contestants jump over the matchbook covers. 

Next contestant is Nigel Incubator-Jones. His best friend is a tree, and in his spare time he is a stockbroker. 

• Yes indeed.

I scaled up to $188.37 on my SPDR S&P 500 (SPY) short just now. Average cost on this short is $188.24.

• The rally creates opportunity.

After a 60-handle rally from Thursday morning's lows, I am taking a small short rental in SPYDERS at $188.08 (and scaling higher).