Who would have thunk that trading action the day before the Fed's interest rate decision would have been so bullish? Pas de moi, that's for sure. It's unclear why the bulls have started to party early unless someone knows for sure that the word "taper" won't even be hinted at tomorrow. But if it is, I do expect the bears to do some serious gate-crashing. One thing that may concern the bulls is today's lack of participation in the VIX. A one percent move in the Dow Transport Index (DTX) should have triggered a big drop in volatility but we didn't get that. What the bulls want to see is the VIX move back under 15...or do they?

While an elevated VIX seems bearish on the surface, if you look at it from a contrarian point of view you might realize that a high VIX gives any potential rally a lot more room to run than a VIX that is already low. Well, whatever the real reason turns out to be, one thing we can likely count on is volatile trading following the Fed's decision coming out at 2:00pm ET and especially during Bernanke's press conference that will follow.

Market Highlights: Semiconductors are lighting up
It's been a while since the semis have been in the spotlight but it looks as if it's their turn to shine as evidenced by today's breakout in one semiconductor etf (SOXX, $65). The larger players in this industry group all rallied with Applied Micro (AMCC, $9.7) and Vitesse (VTSS, $2.75)heading up the leader board with 20% gains. There was no official news to account for the move other than a rumor of a possible bid for AMCC.

Surfing the charts of others in the industry I found two that look especially technically compelling: Micron Technology (MU, $13.75) and Applied Materials (AMAT, $15.97). Both stocks have been rising steadily since the middle of November with AMAT gaining 60% and MU gaining 165% during this time frame. MU recently hurdled $12 resistance to hit a new six year high while AMAT is currently testing $16 resistance. A break above that should propel it to the $17 level in the area of its previous high. Of the two charts, I prefer Micron's and am putting a technical price target of $17 on it (based on its 2009 inverse head and shoulders pattern). That's an increase of nearly 25% over today's price.

Note that many players in this group are undervalued compared with the rest of the stocks in the trading universe including industry leader Intel (INTC, $25.47) whose trailing P/E is a measly 12. Intel has recently become somewhat of a media darling and if you'd like to pick up some shares in this tech giant I would wait until it clears $26, a point of resistance. Also in the plus column is the company's juicy 3.5% dividend. As always, do your own research before investing!

***Important Note***: Dr. Kris will be out of town for the rest of the week attending her nephew's college graduation. Because of this, there will be no blogs or Subscriber Updates until next Monday.

Subscriber Notes: There are two new Channeling Stocks.

The bulls and the bears are still duking it out over who will ultimately gain control of the market. Today's action began with the Bull being the clear winner of Round 1 on the open. The dazed Bear played rope-a-dope until the bond market closed at 2pm ET when he was able to regain his footing. He came out of the corner delivering punches which sent the Bull reeling. But the damage inflicted was only skin deep as the Bull was able to summon up some momentum in the final hour of trading. Although the Dow Industrials (DJIA) and the S&P (SPX) managed to hang onto gains, the market-leading Dow Transports (DTX) closed in the red--not a good sign for tomorrow's open.

Really, though, all things are rather moot until the conclusion of the FOMC meeting mid-Wednesday. I'm expecting similar to even more muted market action tomorrow but all heck could break loose again should the Fed give any inclination as to when it might end its current phase of monetary easing. I'm expecting the post-FOMC interest rate decision trading action to be volatile.

Today's Market Highlights: Aerospace & Defense stocks take flight
Although sector action was generally positive, the only one that managed to creep into new high territory was the Aerospace & Defense etf (PPA, $25). The heavyweights in this sector (Lockheed-Martin (LMT), Boeing (BA), Honeywell (HON), United Tech (UTX), Precision Castparts (PCP), General Dynamics (GD), etc.--all dividend paying, BTW) have been doing well but not to the extent of some of the smaller-cap stocks: Gencorp (GY, $16), Safran SA (SAFRY, $55), Engility (EGL, $28), and Digital Globe (DGI, $31). Both GY and SAFRY (a French company that trades here as an ADR) are hardware manufacturers involved in engines and propulsion systems. EGL provides systems engineering support to the US government and DGI provides earth imagery products for use in commercial and military applications as well as intelligence gathering. Technically, I find the charts of GY and SAFRY to be the most compelling.

One reason I think this group is sprouting wings is by the number of start-ups popping up, so much so that it's beginning to look like the biotech space--and that's exciting. One reason (I think) for the proliferation in start-ups is that with most governments virtually giving up on space exploration, private enterprise is looking to take up the slack. Hence the increase in the number of companies hoping to cash in down the road. Because of the current market turmoil, I don't think that right now is the optimum time to jump into this industry group with both feet. I would, however, keep a watch list and maybe take a few nibbles here and there in companies that are showing strength (like GY or SAFRY). Until the dust settles, I'd rather hold off before making any major purchases. Just my two cents...

Subscriber Notes: There are no new entries today.

It appears as if the bears weren't able to deliver that one-two punch needed to knock the bulls from the ring. The bullish engulfing candlesticks in the one day charts of most of the major averages (excepting the Nasdaq) and a bounce off recent support levels indicate a second wind for the bulls. On top of that, the Trin still has a ways to fall before entering contrarian land showing that today's rally could easily last through tomorrow. It will take more than a day or two, though, for the bulls to declare victory as the overall direction of the market is still trending down.

Commodities Highlight: One piece of market data that isn't being widely reported is that sugar (SGG, $57.50)continues to slide. It's been falling steadily for about two years, shedding 45% of its value from its July 2011. Recently, the exchange-traded note (ETN) fell beneath $58, a major support level. There's minor support around $55 but it sure doesn't appear as if that's likely to hold. Should it not, the stock could easily continue on down to retest its all-time lows in the $35-$40 range. There are options on this vehicle but they're not heavily traded, although there is some action at the $60 put strikes.

Subscriber Notes: There are no new entries but please read today's trading note.

In regards to the recent bull/bear sparring match, it appears as if the bears are gaining the upperhand. Elevated negative VWAPs, an indication of institutional selling, are confirming the bearish shift as is the rise in the VIX. The only thing left to complete the victory for the bears would be a break in near-term support levels which are 620 on the Dow Transports (DTX), 1600 on the S&P (SPX), and 3400 on the Nasdaq. The Dow Industrials (DJIA) closed the day under their 15000 support level which is also another nail in the bulls' coffin.

It's no surprise that today's market action was fairly muted towards the upside. On the downside, strong selling continues in the fixed income space with bonds and preferred stocks plunging to new lows. I'm no expert in this area and cannot give you any fundamental reasons why this sell-off is so strong (other than that the investing public believes the Fed is going to be halting its QE policies sooner rather than later). But strong it is judging from a purely technical point of view. If you're a holder in this space, you may wish to lighten up your positions and/or find a way to protect them. There are inverse bond exchanged traded vehicles that you may wish to research as a way of insuring your portfolio. To get you started, check out direxionfunds.com and proshares.com for possible candidates. Note that levered funds are not designed to replicate the inverse (or double or triple inverse) of the underlying index over any period of more than a day, so please bear that in mind. In general, unleveraged funds are a lot less risky than their levered counterparts. The Direxions website is the most user friendly and provides a wealth of useful information in this area, FYI.

Subscriber Notes: Because of changing market conditions, there are no new recommendations. You bears should take a look at yesterday's blog (scroll down) to see some possible short plays in the coal mining space.

The SPX appears to be forming a downward trending channel with 1650 turning into a key resistance level. If it can't manage to break through that shortly, a retest of 1600 is in order. A drop below this level would signal that the bears have gained control meaning that this summer's market road trip could be a bumpy ride indeed. Today's jump in volatility is indicating that the bears are indeed gaining the upper hand. Unless there's some unexpected good news looming on the horizon, I expect a retest of 1600 before 1650. All of you short-sellers should be gearing up for a breakdown because if it's to happen, it appears as if it will occur sooner rather than later.

One place to look to take on short positions is in coal mining stocks such as Peabody Energy (BTU, $18) and Yanzhou Coal (YZC, $9), both of which gapped below major support levels today to hit new multi-year lows. The coal-based energy era is waning and is being replaced by natural gas and renewable energy sources. Remember what happened to buggy whip makers when the Model T began rolling off the assembly lines!

That's it for now.

Subscriber Notes: There is one new Stock Darling.

The market wasn't sure what it wanted to do today as the major averages remained range bound. But that doesn't mean that the bulls and the bears are on vacation--au contraire mes amis. Heightened VWAPS on both the positive and negative sides indicate that the bulls and bears are sparring with each other. Right now, neither side has the upper hand. A falling VIX indicates increasing complacency but the fact that the VIX hasn't dropped back below 15 shows that the bears still wield considerable influence. Should this sparring match turn into a full fledged fight, the results could likely set the trading tone for the rest of the summer. This is one main event traders won't want to miss!

Today's Highlights: Investors eschewing bonds/eating up restaurant stocks
Okay, my apologies for the lame title--sometimes the obvious pun is too tempting. But it is true. Bond funds across the board are tanking with the stinkiest sock in the laundry basket being the inflation-protection treasury bond (TIPs) funds. Two of the more popular TIPs funds are the SPDR TIPs (IPE) and the iShare TIPs (TIP), both of which not only broke major support levels on Friday but fell another 0.7% today (that's a big loss in the bond world). I'm no bond expert by any means, but might the recent sell-off in bonds indicate that the Fed really is getting close to ending its QE policies?

Well, if "Helicopter Ben" is slated to close the door on easy money and fly high into the sky, don't tell that to the consumer who is apparently feeling flush enough to eat out more. Consider shares of Burger King (BKW, $20), Chuy's (CHUY, $37), Starbuck's (SBUX, $66), and Cheesecake Factory (CAKE, $42) which all broke out to new all-time highs in recent days on heavier than normal volume. Also hitting new yearly highs are Jamba Juice (JMBA, $17) and Sonic (SONC, $14). None of these stocks show signs of slowing down and if you're hungry to add some growth to your portfolio, you may want to nibble on one or more of these issues. Technically, Tex-Mex flavored Chuy's sports one of the juicier charts. On a fundamental note, though, the P/E is a spicy 77 which is much higher than those of its peers. It appears as if investors are pricing in big growth but if something happens such as a worse than expected earnings report, declining foot traffic, or a negative turn in the economy, then the stock could fall hard. Just a few thoughts to savor...

Subscriber Notes: There is one new Channeling Stock.