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. It's a cyclical thing right now. Higher claims going forward now would strongly suggest a whole new cycle of even slower growth than we're now getting here with third quarter numbers. On the flip side, if and when companies do start hiring, that's going to be a strong signal things are on the mend, so let's not pay too much attention to the data we've seen in previous months. Let's stay focused on what happens from here on out. I'm still going to stick to my guns going forward. It's all about consumer spending and sentiment. Just watch. As for housing, this is just another example of why I love charts. Charts can be applied to just about anything, not just an individual stock or a major market index. You could chart your child's school performance over the course of years, or even a horse's past racing performances and you'd be surprised just how accurate the forecasting of results can be depending on what you use for your technical tools. It's no secret we're huge fans of Fibonacci retracement levels. If you want to learn the premise Fib retracements were built on, do a little reading on this guy: http://en.wikipedia.org/wiki/Fibonacci. I think the more you learn about what he discovered, the more interesting you'll find all of his work and how it translates to stocks, since the movement of stocks is in large part due to human emotion. I've included a monthly long-term chart of the Philly Housing Index. To be honest, whenever housing data comes out, I actually don't pay a whole lot of attention to it these days. Why? Because until I see things change dramatically, I simply chalk up the data to either a continued downward trend or minor relief in a long-term downward trending market, depending on the results, of course. I've drawn Fib retracements from the most logical points in the chart you see here. There's a confluence area between 179 and 202 there, which is where I believe housing will once again run into issues. It's important to remember there's a fairly strong argument out there suggesting the worst for housing isn't over, so if you think you're going to bargain shop home builders etc... you're on your own. Even if the index retraces a complete 5/8 of its whole leg down, which started in '06, I'd be getting short at that point, not long. And for the record, we did call the top of the housing market when it was actually happening. It's obvious what housing was doing prior to 2006 when it topped out. I remember running into so many people who were bragging about how they flip houses now for a living. I always thought that was a business for people who knew real estate as well as I knew the markets. I'd also wonder how some of my long-time friends were buying multi-million dollar houses when I knew I made twice as much money as they did. I'd sit there and ask myself, what the heck am I doing wrong? Well, we all know what happened. They no longer have those houses, and those who were flipping homes are now working for someone. Now sure, the perception is homes are again on the cheap, but just because you want something that's cheap doesn't mean you can afford it, right? My point is this. Yes, borrowing is very inexpensive right now, but how many people out there can actually get a loan?? And, how easy is it for young families to come up with the down payments? Homes may be much less expensive than they were in 2005, but are they affordable for the average family yet? That's the big question. I'd stay away from housing for a good while if I were you. Again, just my two cents.