Shortly after 11 a.m. ET this morning, Herbalife Ltd. (NYSE: HLF) announced the KPMG had resigned effective immediately as the nutritional food maker’s accounting firm. Shares of Herbalife did not open this morning, and an earlier report had indicated that an insider trading allegation at the accounting firm was the reason.

In its statement, Herbalife said:

KPMG advised the Company it resigned as Herbalife’s independent accountant solely due to the impairment of KPMG’s independence resulting from its now former partner’s alleged unlawful activities and not for any reason related to Herbalife’s financial statements, its accounting practices, the integrity of Herbalife’s management or for any other reason.

While Herbalife goes into some detail about the reasons for KPMG’s resignation, the food maker also notes:

[KPMG] had no option but to withdraw its audit reports on Herbalife’s financial statements for the fiscal years ended December 31, 2010, 2011 and 2012 and the effectiveness of internal control over financial reporting as of December 31, 2010, 2011 and 2012 and that such reports should no longer be relied upon as a result of KPMG’s lack of independence created by the circumstances described above.

Herbalife goes on to say that its own audit committee and its board of directors are accurate, but the fact remains that a new accounting firm will need to review KPMG’s work and swear to its accuracy. Such a review opens up Herbalife’s past financial statements and makes them and the new accounting firm a target for William Ackman, who has taken a huge short position in Herbalife and charged the company with being a pyramid scheme.

You can almost hear Ackman’s question now: “Are we supposed to take the word of an accounting firm that employed at least one crook and accept the assurances of the pyramid schemer itself that the financial statements are truthful?” This could still get very ugly for Herbalife and is not what the company’s investors wanted to hear right now.

Shares of Herbalife have not started trading as of about 11:25 a.m. ET.

Herbalife’s statement is available here.

Earlier this morning, shares of nutritional food maker and multilevel marketer Herbalife Ltd. (NYSE: HLF) were halted at opening amid speculation that its shares also were involved in the insider trading scheme.

So far there has been no announcement from either Skechers or Herbalife.

Shares of Skechers were up nearly 2% in morning trading today, at $21.87 in a 52-week range of $12.56 to $22.61.

The first reaction was that William Ackman and his hedge fund, Pershing Square Capital Management, had managed to pull a rabbit out of the hat. Ackman has accused Herbalife of being a pyramid scheme and taken a massive short position in the nutritional foods company. While no official investigation has been started, the general feeling is that any shadow cast over Herbalife and its multilevel marketing business could sink the shares like a stone.

In a press release yesterday, KPMG said it had immediately fired a senior partner “for providing non-public information to a third party, who then used that information in stock trades involving several West Coast companies.” Herbalife is based in Los Angeles.

KPMG said it was resigning from two clients “after concluding today that the firm’s independence has been impacted as a result of this individual’s behavior, and we have informed those companies it is necessary to withdraw our auditor reports. We have no reason to believe that the financial statements of these companies have been materially misstated.”

Herbalife shares closed at $39.39 last night, in a 52-week range of $24.24 to $73.00. As of 10:25 a.m. ET, shares are still halted.

Acura Pharmaceuticals Inc. (NASDAQ: ACUR) shares are surging on its Nexafed pharmacy deal, where its new next generation pseudoephedrine with abuse deterrent technology will now be stocked by chain drug store KERR DRUG. Shares are up a whopping 60% at $3.25 versus a 52-week range of $1.06 to $4.50, The share volume of more than 6.8 million shares compares to average volume of only about 530,000 shares. That is a 13X volume spike with about 3 hours until the close.

American Apparel Inc. (NYSEMKT: APP) is actually trading up after earnings and shares have now doubled off of the 52-week low. The 14% gain to $1.47 is on more than 1.27 million shares, representing a 3.5-times volume spike. This is currently the third most active day of 2013.

Chuy’s Holdings Inc. (NASDAQ: CHUY) is at it again, with big gains of 7% to $31.20 and shares hit a new all-time high of $32.00 today. The 335,000 shares is already close to twice the normal trading volume, and it is on no formal news.

Cree Inc. (NASDAQ: CREE) is up 15% after an analyst upgrade today at $51.40. What is so unusual is that Cree’s 8.7 million shares is more than a 4X volume spike as the average volume each day is about 1.97 million shares.

Himax Technologies Inc. (NASDAQ: HIMX) is up a whopping 32% at $4.55 to a new 52-week high by just over $1.00 per share. A Seeking Alpha article said shares could triple on Monday. The 11.1 million shares with about 3 hours to go is on more than 11.1 million shares. That represents more than 19-times normal daily share volume. Count that as a 20X volume spike already.

Read Also: 11 Stocks Analysts Think Will Rise 50% to 100% (or Even More)

Impax Laboratories Inc. (NASDAQ: IPXL) is down a sharp 24% at $15.08 after the FDA identified manufacturing issues at the company. What is odd here outside of the drop taking it well under the prior 52-week low of $18.90 is that the 7.5+ million shares represents a 12X volume spike.

J. C. Penney Company Inc. (NYSE: JCP) is down yet another 9% at $15.20 after Vornado is unloading shares; but the volume of 29 million shares with about 3 hours to go is already almost a 3X volume spike. The is the second most active day of 2013 after the 48 million shares traded after earnings.

MGIC Investment Corp. (NYSE: MTG) is at it yet again for days in a row of gains. With 40 million shares traded, that is more than a 6X volume spike. Shares are up 24% at $5.20 after an analyst upgrade. Radian Group Inc. (NYSE: RDN) was also in the upgrade and its 6% gain to $10.47 is on more than 22 million shares, representing a 3X volume spike.

Williams Partners L.P. (NYSE: WPZ) is seeing a massive volume spike after a secondary offering of 11.25 million units at $49.14 per unit. Its units are down 3.4% at $48.83, but the 9.2 million units traded already with about 3 hours until the close is more than 11X volume spike against an average daily volume of 813,000 units.

The iShares Dow Jones Transportation Average (NYSEMKT: IYT) shows this as well in the chart below.

The market’s rise is supposed to be confirmed by the rise in transportation stocks. After all, how can there be a great recovery boom if goods (and now services) are not being shipped all around the country (or even the globe).

We would caution that this is a very old notion, and perhaps there are many more factors to consider now as the markets are global and as the services sector now rules the roost.

That being said, it is probably worth watching. If transports break down, the media will start giving this more and more attention.

JON C. OGG

It is important to keep in mind that a whopping 150,649,800 shares traded hands on Thursday. If that is not a record, it sure sounds like it could have been.

Friday’s gain had been up as much as 30%, but at 9:38 AM EST we have shares trading up 22% at $3.15 with over 10 million shares having traded hands, if you count the premarket.

We do not want to pass on any rumors or fuel any fire, but there are some who believe that Knight cannot survive, as the loss of $440 million (without shareholder and outside lawsuits) is actually almost four-times the $115 million in net income that Knight Capital generated for all of 2011. Knight only made $91 million for all of 2010. To lose that much in a single day is nothing short of a high-speed tire blowout on a motorcycle. No matter what happens, the end result is not pretty.

JON C. OGG

Perhaps the most interesting trading action is in the put and call options. The August 12, 2012 expiration date $2.50 PUT options have traded over 40,000 contracts as of now.  At $3.13, this is a bet that things are going to get worse for Knight Capital.  Perhaps far worse, and at this point it is only prudent to consider that Knight Capital’s future is very much at risk.

We hate to use the term bankruptcy before any filings because it can be catastrophic to shareholders, trading partners, and clients.  That being said, there is no assurance that Knight can survive this fiasco.  The good news is that the trading in those $2.50 PUTS does not signal an automatic pricing-in of a bankruptcy.  With the contract’s last offer at $0.55, that implies a $1.95 breakeven price in the stock on an intrinsic value basis.

Those same $2.50 PUT strike prices for the month of September are trading at $0.70 on last look.

JON C. OGG

Bloomberg TV showed that the call options are trading twice as many contracts as the puts but it noted that Gilead’s rise was on signing deals with Indian drug companies to take more versions of its AIDS drugs into India.

At $58.00, Gilead shares are up $4.37 or 8.15% on the news. Keep in mind that the prior 52-week range was $34.45 to $56.50 and this appears to be challenging all-time highs now. We have a prior printed high of $57.63 back in August of 2008.

In the world of options trading, we have seen over 6,000 call options in the active contracts trade for August expiration and over 3,600 for the active September calls.

For the speculative contracts to pay off in intrinsic value in August, Gilead shares have to rise to above $60.40 by August 17.  For the same $60 strike call in September to be profitable in intrinsic value for traders, the price of Gilead’s stock has to rise to above $61.25 by September 21, 2012.

• Update at 12:00 PM EST: Barclays has now raised Gilead to Overweight and downgraded Bristol-Myers to Equal-weight.

JON C. OGG

We already highlighted how First Solar Inc. (NASDAQ: FSLR) managed to post considerably better-than-expected earnings. Shares were up big for a two-month-plus high in the afterhours trading session on Wednesday night. Now the gain has grown even more, and you know the report has to be sending the short sellers into the shadows. First Solar’s gain is up 25% at $18.50 so far today, and that will mark the highest share price in this battered solar leader going back to May 4.

The halo-effect is alive and well, if you just look at some of the moves in some of the key solar players today:

SunPower Corp. (NASDAQ: SPWR) is up 5.3% at $3.98, against a 52-week range of $3.71 to $18.28.

MEMC Electronic Materials Inc. (NYSE: WFR) is up 4.0% at $2.07, against a 52-week range of $1.44 to $7.26.

LDK Solar Co. Ltd. (NYSE: LDK) is up 7.5% at $1.375, against a 52-week range of $1.26 to $6.98.

The key solar ETF of Guggenheim Solar (NYSEMKT: TAN) is up 3.1% at $15.64, against a 52-week range of $2.42 to $34.12.

Unfortunately, the halo-effect is not lifting Suntech Power Holdings Co. Ltd. (NYSE: STP) due to its internal woes, which may be unrecoverable. Its shares are down about 6% more to $0.949 today.

JON C. OGG

Erlanger Value Lines are designed to identify key levels for the intraday trader or for anyone trying to establish a new position during trading hours. The Value Lines fall into three categories: Support and Resistance, Extreme values and Range values. From a practical point of view, the Value Lines can act as targets and triggers for short-term trades.

Some think it is uncanny how these levels stop or turn back short-term price swings. We do not. Why? Because both high frequency traders and program trades have built these levels into their models that cause them to gravitate to resistance, pivot or support along with range values like the 5 and 60 minute ranges. We have compiled here the daily chart, the daily analysis for traders to use, and then we have followed it with a general guideline after the daily commentary along with a sample chart.

For Thursday’s S&P 500 SPDR chart analysis, Phil Erlanger said, “Wednesday we were trading pivot to resistance. We noted that Wednesday was a tough one to call as the FOMC announcement was coming out at 2:15 p.m. EDT. We prefered to wait until the dust settled were watching for a break of resistance if the SPY was above resistance at 2:15 p.m. Resistance was $138.48. SPY never made it to resistance and ultimately broke support. SPY is weak today on lack of follow through by ECB head Mario Draghi from his week ago comments. We are below support at $137.08. Wait for support to hold for at least 15 minutes today before buying as it appears SPY might challenge support throughout the day. Ultimately, SPY has a good change to break the five minute low of $136.21.”

The Erlanger Value Lines can be accessed via Erlanger Chart Room. The daily service gives investors and traders access to critical buy/sell levels on the S&P 500, NASDAQ, DJIA, Oil Services Index, gold & silver, any index or equity, as well as analyzing short-squeeze opportunities and more. For more information we direct you to sign up here.

General Notes:

• If price moves above the red Resistance value line, then the intraday bias turns positive:
• A positive bias reflects times when only long trades are considered.
• If price moves below the green Support value line, then the intraday bias turns negative:
• A negative bias reflects times when only short trades are considered.
• If price remains within the green Support and red Resistance value lines, then the bias is neutral. The pivot line can be used to establish an intra Value Lines bias. Pivot to Support is negative and Pivot to Resistance is positive.
• If price remains within the first hour high and low value lines, then the bias can also be viewed as neutral. This is especially true if the first hour range is inside the range set by the support and resistance value lines:
• A neutral bias reflects times when both long and short trades may be considered or (depending on the traders style) a time for no trading. All Erlanger Value Lines can be used as short-term target levels. This is especially true if a few are clustered together.

AUGUST 2, 2012