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Index Wrap

Olive Oyl

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Just how, I'm not sure, but the major indices managed to post gains as stronger-than-expected July housing starts and building permits, some very tame July consumer prices, and a dash of industrial production, mixed in with some back-to-back bullish outlooks from building product retailers Lowes Companies (NYSE:LOW) $49.69 +1.11% and Home Depot (NYSE:HD) $35.10 +3.29%, helped to offset another bullish session for oil.

Just after the open, when September Oil futures (cl04u) $46.77 +1.56% looked poised to break below their WEEKLY Pivot of $45.48, oil bulls stepped in and started buying the black gold early at $45.60.

It was an "Olive Oyl" session for sure. While green was the predominant color throughout the session, not unlike the cartoon character Olivee Oyl, the gains were "thin" as bulls and bears fought like Popeye and Bluto throughout.

U.S. Market Watch - 08/17/04 Close

Sentiment seems notably improved, but I would have to say the retailers depicted a sentimental fade as oil began its march higher from the morning trade.

I had an upside alert set on Dow component Home Depot (NYSE:HD) $35.45 from a couple of week's ago, and it was triggered to the upside this morning. While HD gapped higher to open at $35.78, HD's eventual close and session trade faded with oil's rise.

In the afternoon session, I lined up a bullish trade for discount broker Amertitrade (NASDAQ:AMTD) $10.95 +2.52% for a break back above $11.04, as the Broker Dealer Index (XBD.X) 121.46 +1.72%, which trades above its WEEKLY R2 of 119.69 was threatening to pop the lid off the proverbial spinach can as it hovered at its DAILY R2 of 121.95. Certainly AMTD would give a late session "pop" back to its opening highs of $11.21 into the close for a nifty bullish day trade. Nope.... not the case as oil sludged higher to its close.

July's CPI data put a strong bid in bonds. Treasuries finished higher on price with the benchmark 10-year yield ($TNX.X) falling 5.2 basis points to 4.206%. Meanwhile our "junk bond" Pacholder High Yield (AMEX:PHF) $9.30 +0.64% worked its way higher with bidders firm above $9.00. Tonight, I think of the Pacholder High Yield as Mr. Whimpy. Kind of quiet. Will gladly pay you tomorrow for a hamburger today.

Market Snapshot / Internals - 08/17/04

I don't currently track oil prices in our intra-day Market Snapshot / Internals, but today's methodical move higher in the CRB Index truly depicts today's trade in oil.

Tonight I want to spend a little time with the TRIN, as it could be a key indicator for tomorrow's trade. Those that read this weekend's "Ask the Analyst" column will perhaps understand how tomorrow's trade could play out. The TRIN opened at

Up until the final hours of trade, the NASDAQ's 10-day NH/NL ratio was green, but as the number of new lows built versus the number the new highs, you get the feel that bears that may have been locking in some gains on stocks that have been hitting new lows, started having second thoughts as oil prices pressed higher.

Who can blame a bear? Trade the pattern until it no longer holds true. I think computers did.

Pivot Analysis Matrix -

The S&P Banks (BIX.X) 353.15 +0.54% closed above their WEEKLY R2, and of those equity-based indices we follow in the Matrix, its not a surprise that the BIX.X would be able to show this ability, let alone be first to trade their MONTHLY R1. That's been recent pattern at least.

Declines among energy stocks in today's session, as well as higher oil prices that can weight on market sentiment kept things in check for S&P 500 Index (SPX.X) 1,081.71 +0.21% as it kissed its WEEKLY R2. How long has it been since we've seen the SPX at a WEEKLY R2? My records show it was the week of 06/07-06/11 when the SPX.X traded its WEEKLY R2 of 1,137.52. (Make note of August MONTHLY R1 at 1,135.42 just in case oil reverses course.)

Some individual stocks listed on the NASDAQ that I've been following and trading on my own and in the Market Monitor have been showing some trade UP to their August "Max Pains." I can not be certain that this is truly in play, but may partially explain some of today's more bullish trade in the afternoon for the NDX/QQQ compared to the INDU, SPX and OEX.

Traders have asked that I add the TRIN to our DAILY and WEEKLY Pivot Matrix. I'm doing so tonight, and here's one thing we'll want to monitor tomorrow.

IF TRIN above 1.11, prepare for declines. Oil most likely sets the tone. A TRIN break below 0.85, then bears beware as Popeye might open not only a can of spinach, but a can of home cooked southern whoop @ss. Remember, its Option Expiration week, and August "Max Pain" levels are .... S&P 500 (SPX.X) 1,100, OEX "Max Pain" 525 and why TRIN above 1.11 could be important, QQQ "Max Pain" $34.00 (usually have to give or take $0.50 either side) and DIA "Max Pain" is $101.00 (usually give $0.50 either side).

The TRIN - 10-minute intervals

TRIN may be a very useful tool tomorrow. Today, I said I felt "great pressure building," and I think the TRIN trade today adds a picture of "pressure" as TRIN slowly moved higher, while stocks seemed hard pressed to extend morning gains, but still finished in positive territory, as TRIN stayed below the 1.0 level all session. Note, TRIN has been below 1.0 the last two sessions.

Tomorrow, we start anew, and I would think we have a pretty good feeling that based on what Oil does overnight, and where it is at tomorrow morning, could dictate where TRIN opens. That is, is there some BUY side pressure on LOWER oil, which would have TRIN opening BELOW 1.0? If so, then bullish, and IF below the TRIN Daily Pivot of 0.85 as I have calculated (using high of 1.10 and low of 0.60 and close of 0.86) bullish pressure could quickly build to TRIN 0.61, where I would have to think, this has SPX.X immediately challenging today's highs and WEEKLY R2. Get the feel? All heck could break loose should TRIN try and press 0.35.

That's the BULLISH scenario.

Now... with oil closing at its highs of the session, and so near contract highs, lets face it. Overhead supply is LIMITED and that's where a TRIN open above 1.0 is bearish, and givebacks of this weeks gains could really begin above TRIN 1.11.

Do you feel like you're sitting in a car, with its gears in "neutral" right now. Neutral being 1.00 at the open, and if bulls are going higher, then its a shift into first gear at TRIN below 1.0, second gear DAILY Pivot 0.85, third gear 0.61 and overdrive at 0.35. It's REVERSE on TRIN above 1.0, another reverse gear at 1.11, and "overdrive reverse" to 1.35.

I have a feeling that QCharts' DAILY TRIN pivot levels will be derived from high of 1.24, low of 0.59 and close of 0.86. That's OK, but I wanted to try and tie in this weekend's Ask the Analyst column where we now have TRIN moving back up toward 1.0 by today's close (see how low it was by Monday's close?) in a session where I really felt that Popeye and Bluto were fighting it out, with "Oyl" in the balance.

Jeff Bailey

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