Option Investor
Market Wrap


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While the major averages don't show it, stocks actually finished mixed to higher as this quarter's triple witch expiration draws ever closer, and when things "don't make sense," or you start seeing/hearing that a once deemed important indicator is "of now use today," its usually a time to start expecting the unexpected.

No, it doesn't make sense that the Market Volatility Index (VIX.X) 49.84 -4.83% opened flat and then trended lower to the close as put sellers/call buyers outnumbered put buyers/call sellers, yet the S&P 500 Index (SPX.X) traded rather "flat" today, only to finish off just less than 1%.

No, it doesn't make sense that TRIN was somewhat bearish above 1.00 for the bulk of the day, yet the NYSE advance decline line turned positive with advancers outnumbering decliners nearly 2:1 by 2:00 PM ET, and still finishing with positive breadth by the close.

And when there's SO MUCH that "doesn't make sense," that usually spells of some type of short-term manipulation (for lack of a better term), before all heck breaks loose, and the cat sitting on the top of the couch, which has been gagging for just about a week, coughs up the fur ball.

Honey! Is Felix acting funny?

U.S. Market Watch -

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Now that's a very mixed picture a red and green today, and we probably get the sense the Felix's stomach is churning in Friday's expiration.

Maybe we could say Felix coughed up a short position in Treasuries since our last visit when the Fed slashed its target for Fed funds to 0%-0.25%.

The reason I think shorts coughed up the fur ball is that I personally don't find a 3.00%, a 2.50%, let alone a 2.19% per year for 10-years overly attractive from the BULL side of things.

Heck, if you shop around a little, you'll find a 1-year Certificate of Deposit (CD) paying more than that right now!

Last Wednesday I noted NDX.X resistance at 1,231 and that was my "chart of the week." We saw that probed to the upside today, but buyers still don't have the conviction to make a bolder move much above that level.

NASDAQ-100 Index (NDX.X) - Daily Intervals

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The "support building" at 1,195.75 has been more of a "pivot" or mid-point since Wednesday's wrap, and since that's this month's pivot, I'll at least say "that makes sense."

As time progresses, about the only "technical" difference at this point is the starting to curl up 21-day SMA.

In the above chart of the NDX.X itself, I highlight some action that ended BEARISH as the NDX fell back BELOW the then FLATTENING out 21-day SMA.

The break above the near-term DOWNWARD trend is encouraging to a bull, now they want to see CONVICTION.

We're seeing NASDAQ new lows somewhat steady and new highs building back up a tad. Over the last 21-days, the broader NASDAQ Composite has been averaging 5 new highs and 286 new lows.

February Crude Oil Futures (cl09g) - Daily Intervals

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Despite a sharp recover in the euro, which I depict with the Euro CurrencyShares (FXE) $144.18 +1.87% since our last visit (+10.62) that hasn't helped the price of oil as we head into Friday's termination for the Jan'09 contract, which settled down $3.54, or -8.12% today at $40.06.

The above chart is the Feb'09 contract, where on Thursday (12/11/08) as the euro broke out of that nice base, it looked like oil prices were going to follow.

Now, this near-term action "doesn't make sense" either as the euro broke down hard on 08/08/08 and oil prices followed, or moved in unison with the euro.

Perhaps things have changed and the once blamed "weak dollar vs. euro" for higher oil prices no longer holds true.

The technicals for crude look bearish below $51 (as depicted by the Feb'09 futures) and today's EIA data didn't do a lot on the fundamental side of things to say different.

Just know that there were more than a few that "ignored" the euro's decline and were still big bulls in oil from August until about a week ago. Some were "big bears" in oil from $100 to $140 as the euro surged from 1.30 to 1.60.

I will also confess I was near-term bullish heading into today's EIA report, LARGELY due to the euro's rise. But I thought I needed a MODESTLY bullish inventory/refinery report to bring in the buyers above last month's termination benchmark ($50.41 above) and that simply didn't happen.

So I'm suggesting flat, to LIGHT short (if at all). If SHORT, be very disciplined should crude oil bid much above $51.00.

Global Economic Calendar -

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I can't say that I see anything in the above global calendar that would have the EURo pushing further higher again today, and the U.S. calendar was light.

No big "surprises" for the current account, or actual crude oil inventory.

Not shown was the EIA reporting the crude oil inputs fell by 415,000 barrels/day in the latest week to 14.55 million barrels/day and they used just 84.12% of refining capacity.

That's NOT a BULLISH near-term demand picture on a U.S.-basis.

The number of days of crude oil supply was flat at 21.8 days.

Well, as I constantly look for something that may be "the chart" or technical that creates "the trigger" for some further sign of strength, or the abatement of the rebound from the November lows, I'm going to turn to the Point and Figure charts, where we'll step out and look things over a bit further.

In my last couple of Wednesday wraps I've noted PRICE levels of support/resistance.

Let's go back to the "Guinea Pig Market" wrap from 12/03/08.

Take a look at that SPX and VIX 30-minute interval montage I put in the wrap, and just go back up to tonight's U.S. Market Watch.

Now this is something that I saw late this afternoon.

VIX.X - 1.00 Point Box

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I've never been much of a VIX.X "trader" but simply view it as a measure that tells me if ... RISING= more put buyers/call seller than FALLING= more put sellers/call buyers.

In September, the VIX.X broke above its BEARISH resistance trend about the time the SEC implemented the "no short" rule some many of the financials. (Rule since removed)

With the VIX.X now at its BULLISH support trend, a BREAK of this trend could shift market participants to a more BULLISH bias. HOLDING of this trend, or BOUNCE higher, BEARISH bias may become renewed.

S&P 500 Index (SPX.X) - 5-point box

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Resistance still showing up below 920, but a trade there a spread triple top buy and short could come in strong with some buying.

First sign of further weakness a break below 850.

If VIX.X were to break below trend, then may be a SIGNAL from that indicator, that "fear" is subsiding.

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