Exxon Mobil (NYSE: XOM) closed at $77.57. Crude oil futures are recently down 5.88% to $38.43 according to Bloomberg. The WSJ says: "XOM is poised to grow even bigger by acquiring a rival energy company or entering a partnership with an oil-rich nation in need of capital." February option implied volatility of 47 is above its 26-week average of 36, according to Track Data, suggesting larger price fluctuations.

Royal Dutch Shell (NYSE: RDS.A) closed at $53.98. The WSJ says one of the many scenarios suggested by observers is XOM buying RDS.A. RDS.A overall option implied volatility of 41 is near its 26-week average according to Track Data, suggesting non-directional fluctuations.

Amex Energy Select - XLE closed at $48.64. XLE February option implied volatility of 55 is above its 26-week average of 48, according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Minyanville Professor Quint Tatro dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

There are a few things I am watching for today to give me better clues as to the internal character of the market.

Wal-Mart (NYSE: WMT): It's off on retail numbers after the stock broke out of a four-month consolidation pattern on good volume. If the stock catches a bid, it is an indication that institutional investors are back stalking retail plays and would be bullish for the general market.

Energy ETF (AMEX: XLE): Energy has recently broken a longer term trend going back to mid-2006. It is bouncing off recent lows on very light volume. If money continues to rotate out of this sector, finding a home in the likes of retail, housing and financials, again a bullish sign. I initiated a short position in XLE this morning.

Financial ETF (AMEX: XLF): Financials have been and will continue to be the key to the market's future. After recapturing the 50-day moving average, this ETF is being brought down by AIG (AIG) and needs to regain its footing. Some consolidation is fine, but anything back below $20 would have me heading back towards the bunker.

Homebuilders ETF (AMEX: XHB): The homebuilders continue to perk up and also remain a key to the future of the tape. They are probing green today above their 50-day moving average on decent early volume. A break here above yesterday's high going on to attack the $19.00 level is also a bullish sign.

These are things I am watching for which will give me my clues to start wading back into the market with real capital.

(Prof. Tatro has positions in WMT, XLE, XLF, XHB).

In Gold: play the shares, not the metal?, I noted the apparent disconnect between the performance of mining stocks and gold and suggested that the shares may represent a better bet in the near term.

However, there seems to be an even greater disparity in another part of the commodity universe. Over the past 10 months or so, crude oil prices have soared by more than 70%, while energy sector shares have only risen about 5%.

To be sure, there are valid reasons why the stocks might not always track moves in the underlying commodity.

For one thing, the largest energy firms (with the heaviest sector weightings) have fully integrated operations (e.g. they explore for, pump, refine and market petroleum-related products), so a rise in the price of crude oil may not flow directly through to their bottom lines.

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"The commodity markets have been rising strongly in recent years, propelled by growing demand," says Mary Anne Aden, editor of The Aden Forecast.

"The ongoing boom in China and other emerging markets has been driving these markets higher and there's no sign this will end any time soon. This has consistently placed commodity-related stocks like energy, natural resource and precious metals into the top performing stock category. The same will likely apply in 2008.

"My favorite conservative idea for 2008 for investors to take advantage of the rise in precious metals is by buying the StreetTracks Gold Trust (NYSE: GLD), an exchange-traded fund. Since gold's rise still appears to be in its early phase, it should do well in the year ahead based on demand alone.

"The same is also true of energy. China's demand has been a primary factor driving the oil price higher. With the Olympics coming to China this Summer, this demand is unlikely to diminish. A good way to benefit is to buy the Energy Select SPDR (ASE: XLE), my favorite speculative ideas for 2008."

Over the past six months, the S&P energy sector has risen by 8.3%, outpacing the 5.5% fall in the S&P 500 index by a substantial margin.

Of course, the gains in energy-related shares are modest in comparison to the 51% rise in the price of crude over that same span. History suggests, however, that while the two can slip out of sync for a while, they tend to loosely track one another over the longer term

Under the circumstances, the recent sharp slide in the ratio of the energy index to the price of crude oil suggests the shares may be poised for at least a short-term technical bounce relative to the underlying commodity.

One way to play it (depending on risk tolerance): buy the Energy Select Sector SPDR Fund ETF (AMEX: XLE) and sell (or sell short) the United States Oil Fund LP ETF (AMEX: USO).

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Airline shares have long been in the doldrums. So far this year, the AMEX Airline Index has lost more than 25%.

However, recent price action suggests the group could be forming a short-term technical bottom. With growing speculation about consolidation in the industry -- just this afternoon, Delta Airlines Inc. (NYSE: DAL) denied rumors that it was in merger talks with UAL Corporation (NASDAQ: UAUA) -- and the busy holiday travel season approaching, investors could warm to the group. That could be just the sort of catalyst to get things moving.

Meanwhile, oil (and oil shares) remain overextended (even though today saw a knee-jerk bounce following the downside correction of the past 48 hours). That bearish view seems especially true given yesterday's news that the International Energy Agency had cut its forecast for global energy demand as result of the recent high prices. Of course, airlines are big users of petroleum-based fuel.

Depending on your risk tolerance, it might be worth either buying the airline group outright or, perhaps better still, selling (or shorting) oil shares -- or the Energy Select Sector SPDR Fund ETF (AMEX: XLE) -- against it.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

"The asset boom continues," say Mary Anne and Pamela Aden in The Aden Forecast. "All of the pieces have fallen into place. Following the Fed's move to lower interest rates, a recession is now less likely than it was a month ago, while inflation is now more likely.

"There is really every reason why oil should stay strong. Tensions in the Middle East with the threat of possible supply disruptions alone will keep pressure on the oil price. Then we still have the chance for hurricanes threatening the Gulf of Mexico's platforms, refineries, and pipelines.

"The reason this is so sensitive is because the world is dependent on oil and this demand is growing by leaps. As our good friend Doug Casey notes, The International Energy Agency reported that they see an oil supply crunch within five years that will force up prices to record levels and increase the West's dependence on the OPEC cartel.

"This is a very real possibility and in spite of temporary dips as we saw with the credit crunch, high oil is here to stay. Our first technical target has been $90, with a further move to $100 after that.

For new energy positions, the Aden sisters recommend Schlumberger Ltd. (NYSE: SLB), Diamond Offshore Drilling Inc. (NYSE: DO), and Transocean Inc. (NYSE: RIG). For investors who want a diversified portfolio of energy holdings, they recommend the Energy Select SPDR (AMEX: XLE) and the iShares S&P Global Energy Fund (NYSE: IXC).

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment commentary and favorite stocks of the nation's leading financial newsletter advisors.

What are the best energy investments for long-term investors? To answer this question, I surveyed 20 of the nation's leading financial newsletter advisors to find their current favorite ideas in the energy sector.

Interestingly, the advisors see the best opportunities in areas well beyond traditional oil firms; indeed, no one included in this report chose a major integrated oil company. Rather, the advisors have shown a preference for various oil services sectors, non-oil energy sources, and developing alternative technologies.

Some focus on areas such as deep-sea operations with Diamond Offshore Drilling Inc. (NYSE: DO), Transocean Inc. (NYSE: RIG) and Oceaneering International (NYSE: OII), while others look toward oil shippers such as Nordic American Tanker Shipping (NYSE: NAT) and refiners such as Valero Energy Corp. (NYSE: VLO).

Others chose companies that make specific products needed by the oil & gas industries such as NATCO Group Inc. (NYSE: NTG), which makes a wide range of oil & gas processing systems; Dresser-Rand Group Inc. (NYSE: DRC), a maker of control systems; Gardner Denver Inc. (NYSE: GDI), which makes compressor and fluid transfer systems; Tenaris (NYSE: TS), a maker of pipes and tublar products and Schlumberger Ltd. (NYSE: SLB), the largest and most diversified of the oil services companies.

At the beginning of May, I suggested one group might be due for a decent correction in a post entitled, "Utility sector: poised to blow a short-term fuse?"

Since then, the group (which has an equivalent exchange-traded fund, or ETF (AMEX: XLU)) has fallen by 7.66%, while the S&P 500 index has gained 1.09%. Quarter-to-date, utilities are down 2.79% and the S&P 500 is up 5.97% (all data through last Friday).

Now, with the latest 3-month reporting period coming to an end this week, it might be worth thinking about going the other way. Not on an outright basis, however, but by switching out of another sector, energy (AMEX: XLE), that has gotten very over-extended.

This seems especially apparent when one graphs the ratio of one sector to the other. As the accompanying chart illustrates, relative to S&P utilities, the energy group has gone up in a straight line, and is near the key overhead resistance levels seen in April 2006.

History suggests that the energy sector is not only influenced by swings in the overall equity market, but by moves in the price of oil itself. How the shares have performed with respect to those two key drivers can sometimes offer clues as to what might happen next.

Recently, the S&P 500 Energy Index (which has an equivalent exchange-traded fund, or ETF (AMEX: XLE)) has approached a key technical resistance level relative to the price of light, sweet crude oil futures, one that was last seen in late January. The sector is also nearing its August 2006 high relative to the S&P 500 index.

In both instances, those prior relative peaks marked the beginning of a multi-week period of significant underperformance by oil and other energy-related shares.

Given that the sector has had a decent move to the upside over the past few months, the looming appearance of two potential technical roadblocks could serve as a catalyst for a noteworthy short-term correction.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.

Today's early rally brings the S&P 500 index a step closer to the March 24, 2000 record closing high of 1527.36. Despite all the hoopla, it's worth keeping in mind that the benchmark measure is essentially unchanged over the course of the past seven years.

Still, the round trip from the bubble's peak does mask a dramatic contrast in the fortunes of the index's 10 underlying sectors. For example, energy shares (which have an equivalent exchange-traded fund, or ETF (AMEX: XLE)) have more than doubled over the period, while the information technology group (AMEX: XLK) has lost nearly two-thirds of its value.

This should drive home the point that while moves in the major indices offer insights on the "pulse" of the overall market, it's often what occurs below the surface -- at the sector and individual share level -- that matters most to investors in the longer run.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.

In "GDP data adds to negative outlook for stocks," I noted that various measures are signaling that a recession is imminent and that it would be bad for stocks, at least in the short run.

Under the circumstances, one course of action is to eliminate or reduce exposure to equities to minimize the risk of loss. For investors who must or prefer to remain invested, the best strategy is to avoid vulnerable sectors and favor those characterized as "defensive."

Based on what happened during the last two recessions, in 1990 and 2001, the two sectors that would best serve as safe havens during an economic storm are Consumer Staples (which has an equivalent exchange-traded fund, or ETF (AMEX: XLP) and Health Care (AMEX: XLV) . Both ended up in the black six months after those downturns began, in contrast to the overall market.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Although advisors participating in the Top Picks Report were limited to two stock picks, we allowed John Bollinger to select three, in compliance with the strategy employed in his The Capital Growth Letter.

He explains, "My strategy is not about stock picking in the sense of what will do best in 2007. Rather we ask what is doing well now, invest in that, hold for as long as the performance is satisfactory and then move on. This method is known as the cast-out method of relative-strength investing.

"As an example, let's take a look at our ETF Sector Portfolio. After a careful screening process we have selected 27 sector ETFs as candidates for this portfolio. Let's suppose that we are just starting out. To get going we would purchase the top three ranked ETFs and hold them for as long as they are ranked better than the middle of the list.

"When one of the funds drops below the midpoint of the ranking, it will be sold and replaced with the highest-ranked fund that is not already held in the portfolio. We use daily data and conduct reviews on a weekly basis. There are several other rules, but that's the essence of the program.

"We have found this cast-out approach to relative-strength investing delivers the sort of performance that we are after in our practice, and that it has an acceptable risk-reward relationship. As of December 18th, our top three ranked sector funds are: iShares Global Telecom (ASE: IXP), iShares Select Energy (ASE: XLE), and Powershares Dynamic Media (ASE: PBS)."