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Glad to see our risky suggestion of ZNGA yesterday played out quite nicely today. The biggest maker of social games, surged after posting third-quarter sales that topped analysts' estimates and unveiling plans to buy back stock and move into real-money gambling. Remember what I said in yesterday's edition regarding online casino gaming? No, I didn't have insider information, I simply read between the lines. The results were well received this morning as shares of Zynga ran as high as $2.60 before pulling back as I type. That represented an overnight 18% return based on an entry price of $2.20, however, if you happened to pick up shares of ZNGA yesterday just prior to the close, you picked up as much as 23% this morning. Regardless, both return percentages are more than the S&P 500 has delivered investors in a year! That's the beauty of small caps. If you're still holding ZNGA, just remember, there's an awful lot of bag holders out there who are going to want to get out of the stock as it continue to move higher, so decide now if you're a long-term believer in this deal, or simply out to scalp a trade. Today's move up is an excellent start but one day does not a reversal make. The stock still has a lot of mending to do before it would be considered a strong growth play. Excellent start to a potential turnaround though, that's for sure.

The bulls are definitely trying to do their part to form some sort of bottom this week. Although we've mentioned any potential rally at this point would be suspect, it's still would be a welcomed change since the longest rally over the last month has only lasted three days on two separate occasions. Definitely a common pattern in a downward trending market. This morning, news that unemployment claims have been dropping seems to be a feeble attempt to provide a catalyst for the markets to work with. Here's my quick two cents on unemployment claims and housing.

It's been clear to us that unemployment has actually been a big driver of corporate earnings since the major indexes hit bottom in the spring of '09. How so? Through job cutting and a strong effort to improve efficiencies, that's how corporate America managed to deliver the numbers they have. Basically, layoffs drove growth. As Dr. Seuss once said, "Business and business and business must grow, regardless of crummies and tummies you know." So, to me, lower unemployment claims doesn't mean all that much, because it's more of a function of less layoffs than it is increased hiring. However, if unemployment claims going forward start to increase from here on out, that is going to be a very concerning issue because if we start to experience a large wave of new claims, that's going to suggest companies are laying off because they have no choice, not because they have ways to improve their bottom lines.

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Yesterday, during Apple's keynote presentation, Zynga CEO, Mark Pincus, leaked information to Reuters with a copy of a memo to employees in which it announced Zynga would "sunset" 13 older games and significantly pull back its investment in "The Ville" game - a major recent initiative - as it sought to cut costs. The Company also cut its work force by roughly 5% by laying off about 150 full-time employees. This all came a day before the struggling social game maker was due to report third-quarter earnings.

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Now the media says the recent selloff is all about earnings. Isn't that what we've been saying ever since the end of the second quarter? I read an article this morning suggesting that corporations are now going to have to cut jobs and create more efficiencies in order to combat lower revenues and earnings. Sorry, that's simply not the case. That's exactly what they've been doing for the last few years now, which is exactly how they've managed to beat estimates and provide investors with improved bottom lines up till now. If you read between the lines of what's been going on with third quarter numbers over the last few weeks, corporate America has run out of tricks, and I mean that with all due respect. What companies have managed to accomplish in previous quarters is a testament to good solid management at the highest levels. What's taking place now is although corporate America has done their job, the work now is up to the consumer. I doubt we're going to see a tremendous amount of job cuts because we're about as lean and mean as we can get here at home already. There's likely nothing more to cut or they're going to start cutting in a way that further lowers the probability of even just meeting guidance going forward, let alone beating estimates.

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Good Monday to you. The major indexes today appear to be picking up where they left off last week... with further weakness as I type. However, with the last two days of last week being about as ugly as ugly gets, I wouldn't be surprise if we get at least another very short-term dead cat bounce before the markets really figure out what they want to do going forward. I'll caution you not to get too excited if things improve today or tomorrow, because inevitably what happens by the end of the week is more important than anything else right now. With another week behind us, it gives us a bit of a better picture of what the weekly charts are telling us now, and unless things change dramatically, it isn't good. We'll get to the mid-term picture in a bit though.

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As I got started with today's edition, there didn't appear to be anything new with our current analysis of the major indexes today. We'd pretty much drawn our lines in the sand with our previous editions this week and weren't seeing much change in the way the markets were behaving. Options are expiring tomorrow, so the confluence area of where stocks have traded since last month's options expiration would have put the NASDAQ Composite roughly 20 points higher from yesterday's close, which would have represented a complete 50% retracement from the September 21^st high to the recent low. And guess what? The September 21^st high was exactly the day options expired last month. See how efficient the markets can be? Or, should I say see how market makers can put things right smack where they want them after a bunch of meaningless jostling for four weeks? Up, down and back up again putting the markets in the middle. Just a classic example of how divided the markets really are right now.

However, news hit the wires just a few minutes ago that Google missed. Probably not the most expected or brightest piece of news the markets could have gotten today, so now we've got the NASDAQ falling like a rock, which again makes the current picture look even more interesting on a very short-term basis. While investors are fleeing the markets this hour and market makers are loving the smell of fear, let's try and keep things in perspective. Does Google ever really miss? Not really, but let's face it, although they do make up a big piece of the NASDAQ 100, they are human and they're entitled to miss from time-to-time.

Basically, if you like GOOG, which I do very much, then wait until the dust settles and pick some up for your long-term conservative portion of your portfolio. What a deal. The stock has almost perfectly retraced 50% of its who leg up that started with the June low, all within an hour. Games, games and more games. It takes a stock five months to amass gains, which are 50% wiped out in 45 minutes! OK... The complete 50% retracement would put the stock at $666 bucks. I'm not a fan of that number (and you probably shouldn't be either), but it wouldn't be a bad place to buy the stock and tuck it away for your kid's college education. In the best interest of superstition, $665 or even $667 would be better. Just my two cents.