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  OI Technical Staff   1/10/200,  9:20:09 PM

Only 5 days left. Lock in your subscription rate NOW!: Link

  Jeff Bailey   1/10/200,  8:27:37 PM
Pivot Matrix for tomorrow at this Link

  Linda Piazza   1/10/200,  6:50:13 PM
After tumbling from its January high, the OEX consolidates in a rough rectangular range bounded roughly by the 50-sma on the bottom and the 30-sma on the top. The last four trading days have produced daily candles that pierced the 30-sma but then fell back, leaving behind an upper shadow. The consolidation form looks like a "b" distribution pattern and those upper shadows would suggest weakness. Traditionally, these "b" patterns break to the downside and have downside targets roughly equal to the plunge before the consolidation began. During May and August, however, we saw two similar formations break to the upside, so we must remain aware of a similar possibility this time, while giving greater credence to the potential for a downside break. The evening-star pattern produced on the weekly chart corroborates that bias. So does a potential H&S on the 60-minute chart, with that formation beginning to take shape about a month ago and now perhaps in the process of building a right shoulder. That right shoulder might easily extend as high as 572-574 and maybe slightly higher and still be within appropriate parameters for a right shoulder. A sustained breakout above 569.50 could set up an upside target near 574, but I would consider it dangerous at this point to enter a bullish play on an upside breakout. Today's experience was one example of likely behavior--an upside breakout that doesn't gain much territory.

Entering a bearish play on a rollover beneath the 569.50-ish top of the rectangular consolidation pattern or beneath today's 60-minute Keltner resistance didn't fare a lot better, but certainly better than going long on an upside breakout. Internals did not lend support to the rollover play today, as several writers mentioned on the Monitor, so anyone entering a bearish play was someone who wanted to play the likely range, understanding that there would be little corroboration while the OEX is within a consolidation pattern. Bears would like to see more corroboration from internals, but for now, bearish plays on rollovers beneath 570-570.75 appear to be the best game in town. If the OEX sustains levels above the Keltner line currently at 570.75, especially on a 60-minute close, then stand aside and look for a rollover beneath 572-574. On a push above the 12/16 high, something is wrong with this picture and it would need to be reassessed.

  Mark Davis   1/10/200,  4:22:31 PM
Personally I wouldn't hold anything overnight... too much risk for a downside push to stop out longs who bought toward the end of the day, hoping a short-term bottom is in. There was buying into the close as I thought there might be and a case could be made for either side depending upon which timeframe you look at. The 5-min chart looks like it is about to flash a buy signal but the 30-min chart looks like a bear flag... the jury is still out. Nothing of any significance happened today. The SPX cash index is inconclusive and the ES futures have moved right up to short-term resistance @ 1192. Anything could happen overnight. The short-term bias appears to be bullish but that's what we said this morning (and for the last few trading days). We keep thinking it has to bounce soon, but............ it hasn't (so far).
Short-term appears to be leaning to the bullish side but intermediate-term still looks bearish until/if we get well above SPX 1200. That might sound like a tall order right now but don't underestimate the market's ability to fake you right out of your socks... either way. Keep your focus short-term and take profits whenever you get a chance. Once you take profits they can't take them back. Also don't forget the edges of the cliffs and how high the odds are for long plays right at the edges. Having said that you may have missed the edge of the cliff already today unless you went long at SPX 1185.

  Jeff Bailey   1/10/200,  4:06:14 PM
Current OPEN MM Profiles at this Link

Today's Activity ....

Swing trade bullish stopped on 1/2 bullish position in JDS Uniphase (JDSU) at the bid of $2.90. This was acquired through the exercise of Dec. $3.00 calls, which were profiled at $0.75 per contract in July. ($-0.85, or -22.67%).

  Linda Piazza   1/10/200,  4:03:06 PM
What a day. As Jonathan remarked earlier with regard to the QQQQ's, on a closing basis, there's been hardly any movement in the OEX since Tuesday's 566.77 close. The OEX trades in either a bear flag (there's a slight rise to the rectangular pattern) or just a rectangular pattern that may be part of a "b" distribution pattern. It may be forming the right shoulder of a H&S formation. All these have bearish implications, but we must consider the possibility, too, that the OEX is just basing prior to an upside breakout.

  Mark Davis   1/10/200,  3:56:34 PM
I wouldn't be surprised to see some buying into the close, just to keep everyone totally confused. It has been a day of stop runs and emotional trading and the only thing you can count on is the market will probably do what you least expect it to do.

  Linda Piazza   1/10/200,  3:50:50 PM
Scanning other indices, I see that the RLX has not yet been able to convincingly create a morning-star pattern. Although it rose above a 50% retracement of Thursday's range, it's below that 447.44 level now. I needed to have closed in the upper half of Thursday's range to convincingly create a morning-star pattern, IMO.

  Jonathan Levinson   1/10/200,  3:47:16 PM
QQQQ is back to its opening levels, currently -.02 at 38.53. QQQQ is virtually unchanged since Tuesday. If this is just a distribution zone, then it warrants a strong golfclap.

  Jonathan Levinson   1/10/200,  3:41:31 PM
The bounce has just exceeded the previous deadcat-bounce high at 38.53 and is now coming in for a test of 38.60-.65 confluence resistance.

  Linda Piazza   1/10/200,  3:41:26 PM
The OEX has approached the bottom of its rectangular trading range. It broke through the rising trendline off the 1/07 low, but bounces right back above it. Overhead Keltner resistance looks stronger than support right now, but that doesn't mean that resistance won't be tested. Bears want to see continued fifteen-minute closes beneath the Keltner line currently at 568.35. The five-minute chart shows resistance trying to firm up near that level, too, with several Keltner lines already beginning to converge there. If the OEX bounces too strongly, it will scatter those lines. Those hoping for a test of the bottom of the range, from 565.25-566, have a decision to make, as the OEX didn't get quite that far before buying started. Everyone can see where that support exists. It's not just us, unfortunately.

  Jonathan Levinson   1/10/200,  3:31:30 PM
QQQQ bottomed for that drop at 38.45 and is losing the bounce attempt as I type. 30 min cycle support is down to 38.40, but the cycle has plenty of potential to downside from here, provided that it stays below 38.60-.65 confluence.

  Jeff Bailey   1/10/200,  3:30:54 PM
03:15 Market Watch at this Link

  Linda Piazza   1/10/200,  3:26:54 PM
Here's a description of what there is to be seen on the OEX's daily chart: a strong decline followed by consolidation that's roughly rectangular. It's also roughly bounded by the 50-dma on the bottom and the 30-dma on the top. All daily candles have upper shadows (depending on what happens today, of course). The shape (steep decline followed by rectangular consolidation) appears take the form of a likely "b" distribution pattern. In the case of a strong rally, these can and do break to the upside. (Look at early August, for example.) However, they are typically a sign of controlled or measured distribution prior to another fall of about equal length to that which preceded the rectangular consolidation. Trading is likely to be choppy and not particularly amenable to technical analysis within the formation. Trading the rectangular range (bearish plays on tests of resistance, for example) without benefit of trustworthy indicators is about the only play available until there's a breakout, but I'd be wary of those upside breakouts and of bullish plays on bounces from support. Expect some fake-out moves followed by reversals, which happened today.

  Jeff Bailey   1/10/200,  3:25:05 PM
Bullish Swing Trade Stop alert ... for JDS Uniphase (JDSU) $3.90 -1.02%.

  Linda Piazza   1/10/200,  3:19:48 PM
Bearish OEX traders: know what you're going to do as (if?) 565.25-566 is tested. Remember the 50-sma just below that, at 564.42.

  Jonathan Levinson   1/10/200,  3:19:44 PM
Here's the test of lower channel support. The 7200-tick SMA for QQQQ has just turned down for the first time all day.

  Linda Piazza   1/10/200,  3:17:33 PM
The OEX's 15-minute support may be giving way with only a truncated right shoulder to go with that H&S on the five-minute chart. (This is not the larger H&S I've discussed.) This one would have a downside target near 566.70. That's if it's a valid formation and if the OEX doesn't bounce right back.

  Jonathan Levinson   1/10/200,  3:11:37 PM
QQQQ's drop has done its thing vis-a-vis the 30 min cycle, which is has seen resistance drop from 38.95 to 38.86 here. A short cycle downphase is in progress, but it's been weaker than those we saw last week- a break below 38.60 could change that, but so far this is looking like a weak intraday decline.

  Jeff Bailey   1/10/200,  3:06:21 PM
03:00 Market Watch at this Link

  Linda Piazza   1/10/200,  2:57:44 PM
Potential H&S forming at the top of the OEX's five-minute chart. If so, there's still a right shoulder to be formed, perhaps on a bounce up to 569.50 or so. The left shoulder took a long time to form, so if this is going to be a symmetrical formation, even if it's going to confirm, it could take into tomorrow to finish forming that right shoulder and do so. This is not the big H&S I've discussed, the one displayed on the 60-minute chart. Talking about symmetry: that one needs to confirm in another few hours--perhaps up to another day--or that right shoulder is going to extend too long, time-wise.

  Jeff Bailey   1/10/200,  2:54:28 PM
Dow Industrials (INDU) 10,637 +0.31% ... with updated WEEKLY Pivot retracement at this Link

Alcoa (AA) kicks of earnings season, while MMM and MO are percentage gainers.

Verizon (VZ) $38.89 -1.31%, SBC Communications (SBC) $24.77 -1.23% percentage losers.

  Linda Piazza   1/10/200,  2:51:55 PM
If you entered a bearish OEX play on hopes of a rollover from the top of the rectangular trading range or below the 60-minute Keltner resistance, decide ahead of time what you'll do as the bottom of that range is tested again, if it is. The bottom of the range is a little more ragged than the top, but is roughly at about 565.25. Will you automatically take profits as the bottom is approached? Exit only part of your position, keeping a partial position with a breakeven stop in case the OEX just continues lower? Make a decision based on how that level is approached? For example, if the OEX plunges straight through that level and the 50-sma at 564.44 (important, don't forget that average lurking below) without pausing, you'd obviously make a different decision that you would if it approached with candles all showing lower shadows springing up from each test of the support. Make a decision ahead of time, however. While inside that trading range, trading might be choppy and the bottom might not be approached again today, but have a plan in mind if it is.

  Mark Davis   1/10/200,  2:48:22 PM
If we're going to bounce it should be right about here... much more downside and fear could grab the reins. This could also be a stop run to the downside before moving higher. Like I said earlier, watch out for stop runs and keep one foot in the doorway to avoid being locked inside (holding the bag)... these guys do not play fair and there is no telling what they will do today, other than play dirty tricks... that's the one thing we can count on.

  Jonathan Levinson   1/10/200,  2:48:09 PM
Here's another test of 38.70, with a nominal break just now to 38.69 as I type. 30 and 60 min support are now at 39.60, and we're looking for a few minutes below 38.70 to decisively roll over the 30 minute cycle channel.

  Linda Piazza   1/10/200,  2:46:04 PM
Once again, the OEX didn't get far above its five-minute 100/130-ema's. It's back testing them as I type.

  Linda Piazza   1/10/200,  2:42:08 PM
Fifteen-minute Keltner support never really firmed up as it suggested it would. There's support beneath the current OEX position at about 568.40, but it doesn't look particularly firm, especially when measured against the 60-minute Keltner resistance just overhead. The OEX currently clings to mid-channel S/R on the 15-minute chart, trying to hang on and not dip.

  Linda Piazza   1/10/200,  2:38:45 PM
So far, the OEX's 60-minute Keltner resistance holds firm. The advdec line ambles along near the day's high, not retreating. The TRIN, despite it's ups and downs, still generally climbs off the day's low and is currently climbing. The VIX doesn't do much of anything.

  Jonathan Levinson   1/10/200,  2:36:17 PM
QQQQ failed on a doji spike to a lower high, possibly a bad tick, but it lined up with a rollover in the short cycle channel. 38.80 is the highest support level currently being tested from above, below which next support is 38.65. 10 minutes or better below 38.70 will roll the 30 min cycle channel back down.

  Linda Piazza   1/10/200,  2:34:26 PM
The OEX has fallen back below its 30-sma.

  Jeff Bailey   1/10/200,  2:04:45 PM
02:00 Market Watch at this Link

  Jeff Bailey   1/10/200,  2:01:32 PM
SanDisk (SNDK) $24.85 +3.71% ... gathers momentum

  Linda Piazza   1/10/200,  1:57:43 PM
The OEX pauses. No stop-running push just yet. That 15-minute Keltner support is slower to firm than I expected, however, and isn't as firm as bulls might hope. See my 13:44 post for more information. On a 60-minute basis, the OEX hasn't been able to push above firm resistance. I've been afraid all day that any upside breakout would be immediately met by resistance, and that's happened so far.

  Jeff Bailey   1/10/200,  1:56:18 PM
3M (MMM) $83.98 +2.04% Link ... deeper cyclicals getting some bullish attention of late.

X gets the square today with trade at $84.01.

A reading of 79.00 would have MMM giving a relative strength buy signal versus the Dow Industrials. Link

  Jeff Bailey   1/10/200,  1:51:23 PM
MSCI Canada iShares (AMEX:EWC) $16.43 +0.98% ... one of last week's worst performing iShares (-5.89%), not getting as much of an oversold bounce as one might have though.

Russell 2000 iShares (AMEX:IWM) $124.11 +1.84% ... was also down 5.89% last week.

  Linda Piazza   1/10/200,  1:44:57 PM
Here's the story that the OEX's 15-minute Keltner chart tells: The OEX is likely to encounter resistance near 570.63 (on a 15-minute closing basis). If it can pause between there and 569.10 long enough, Keltner support is going to firm up near 568.50 and 569.25. If the OEX sees a stop-run to the downside, however, especially if it occurs soon and if it's strong enough, that support won't have time to firm and the OEX is vulnerable to a downturn through that recent rectangular consolidation zone again.

  Jonathan Levinson   1/10/200,  1:36:10 PM
QQQQ is trying to make a new home above 38.80, former resistance. The 30 min channel has crept up 2 cents to 38.90. Volume is slightly higher but still light overall.

  Linda Piazza   1/10/200,  1:36:09 PM
The last three trading days of last week, the OEX pushed above the 30-sma during intraday trading but fell back to close beneath that average. Bulls don't want to see that performance repeated today. The 30-sma is at 569.25.

  Linda Piazza   1/10/200,  1:28:53 PM
The advdec line did a little fake-out move of its own today, confirming a H&S on the three-minute chart only to turn right around and make a new HOD.

  Jeff Bailey   1/10/200,  1:26:00 PM
01:00 Update at this Link

  Linda Piazza   1/10/200,  1:25:32 PM
The OEX is pushing above the top of the recent four-point consolidation range, but immediately faces Keltner resistance that looks significant, and it's breaking out during the lunchtime lull. This push should give the OEX about a four-point upside target but bulls don't want to see the OEX quickly slapped back, as that smacks of a trap.

  Mark Davis   1/10/200,  1:23:48 PM
Here we go with the first stop run (to the upside)... a broad based rally with everyone joining in the party but still in overthrow territory. Be careful and keep one foot in the doorway to prevent getting locked inside.

  Linda Piazza   1/10/200,  1:21:46 PM
The RLX has pushed up into potential horizontal resistance from 447.90-450 or so, with the RLX at 448.56 as I type.

  Jonathan Levinson   1/10/200,  1:17:59 PM
Session high for QQQQ at 38.84, reaching for the 30 and 60 min channel bands that converge at 38.90.

  Linda Piazza   1/10/200,  1:16:03 PM
The OEX pushes at the upper boundary of its rectangular trading band. Keltner resistance is just above, up to 570.65. That Keltner resistance does look a little less firm than earlier, but still firm enough to possibly stop the OEX, at least temporarily.

  Jonathan Levinson   1/10/200,  1:14:15 PM
QQQQ has gone nowhere, despite a 500K buy program a few minutes ago. The range has narrowed to 38.67-38.80, which lines up with the now sideways short cycle channel bands. The 60 min channel has not yet abandoned its rise, however, and so this is still a range that could break to the upside. 30 and 60 min channel support line up at 38.57, and QQQQ needs to challenge that level to abort the sideways upphase still in place.

  Mark Davis   1/10/200,  1:08:09 PM
Taser, Intl. (TASR)... Down another 11% today and currently printing 20.20 after the recent 33.45 high, a 39.6% loss in just 7 trading days. Ouch!
This is a prime example of people taking chips off the table in a stock that has had a great runup... Link
Bad link, sorry, but you get the idea.

  Jonathan Levinson   1/10/200,  1:06:31 PM
Nymex crude broke 47 and is currently trading 46.90, +3.255.

  Linda Piazza   1/10/200,  1:06:19 PM
The SOX joins other indices in having a potential inverse H&S on the five-minute chart, but like those others, it's a continuation-form one. Instead of confirming it by moving along the neckline, the SOX trades sideways just beneath the 410-ish neckline. Not exactly a picture of strength just yet.

  Jeff Bailey   1/10/200,  1:02:45 PM
12:55 Market Watch at this Link

  Jeff Bailey   1/10/200,  12:55:24 PM
NASDAQ-100 Index (NDX.X) 1,571.11 +0.53% .... with updated WEEKLY Pivot retracement at this Link

  Linda Piazza   1/10/200,  12:48:52 PM
The advdec line has just confirmed that little H&S. Sometimes these developments on the advdec line's chart are significant, but this was a formation seen on a three-minute chart, so may not have much lasting power.

  Mark Davis   1/10/200,  12:41:01 PM
The market is running on emotion today... always a dangerous proposition. The expectation is for a bounce but it seems everyone is too timid to commit. This is fertile ground for the big money to play a dirty trick that catches everyone flat-footed. Be careful whatever your bias is. The rug could be pulled at any moment whether you are long or short. I am expecting a stop run today... I just don't know in which direction (maybe both directions).

  Linda Piazza   1/10/200,  12:37:03 PM
On the OEX's chart, we see a second 60-minute candle that's a doji under resistance. Keltner resistance on that chart creeps lower, now up to 570.65. As the Keltner charts are currently aligned, that resistance looks firm. If we should get a strong stop-running push to the upside, it might scatter those lines, but that's how they're configured as I type. The advdec line has so far resistance confirming that little H&S on the three-minute chart.

  Jonathan Levinson   1/10/200,  12:32:30 PM
Stepping away for 20 minutes here.

  Linda Piazza   1/10/200,  12:31:15 PM
Since last Tuesday, the OEX has pretty much hugged its five-minute 100/130-ema's, trading a little bit above them and then a little bit below them. Just anecdotally, it does appear to dip a little further away from them than it does to climb away from them.

  Mark Davis   1/10/200,  12:28:30 PM
SPX has just flashed a sell signal on the 5-min chart, complete with slight bearish MACD divergence but it has to be taken in the context of an uptrending market, meaning it could be a false sell signal on a short-term chart... jury is still out.

  Mark Davis   1/10/200,  12:24:09 PM
I found a photo of the guy I mentioned in an earlier post who was long the market on full margin waiting for Santa to appear. Evidently he still has enough capital left to do a little sunbathing but it looks like he is trying to put a good face on things... Link

  Jonathan Levinson   1/10/200,  12:20:44 PM
QQQQ volume is very light here, with price holding within a long rectangle between 38.65 and 38.80. The 30 min cycle channel is drifting sideways as the 60 min continues it slow rise.

  Linda Piazza   1/10/200,  12:13:49 PM
I mentioned in a previous post that if the TRIN were an equity, I'd say that its climb off the low looked like a bear flag and that it was likely to break to the downside. That did happen, but now TRIN zooms right back up again. The advdec line still rounds over, and has a bit of a H&S look to it on the three-minute chart.

  Mark Davis   1/10/200,  12:12:15 PM
SPX now rises to test the 1193 neckline of the inverse H&S pattern... everybody is holding their breath waiting to see if it can break through or will be rejected. An upside break would seem to be the likely outcome considering all the recent selling but a rejection would be very bearish indeed. Traders also need to keep an upside headfake in the back of their minds.
Just as SPX cannot go up every day it also cannot go down every day and the 50sma is certainly a natural bounce point. The 1193 neckline is being tested as I type but I wouldn't expect serious buyers to appear until there is confirmation. Bulls will be hesitant to buy a potential headfake after taking a serious hit to their portfolios in the last week.
SPX is being slapped back from the neckline as I type this post. It doesn't mean it won't eventually break through but it is a sign there are still sellers waiting for opportunitites to take more chips off the table.

  Tab Gilles   1/10/200,  12:00:40 PM
James Stack of InvesTech was just interviewed on CNBC by Consuelo Mack. He stated that this current bull market is in the later 3rd stage and the best sectors he feels to be in are energy and health care. Those are 2 of the 3 sectors I'm concentrating on for '05 as I mentioned on MM 12/31 12:53PM post. SMH (INTC), XLE (MUR), PPH (PFE)

Mr. Stack went onto say the PFE is trading at a historically low p/e ratio of 15 and that 20 has been the norm, definitely undervalued.

XLE Jan '06 35 LEAPS are up today.Link

  Jonathan Levinson   1/10/200,  11:55:14 AM
The 30 min cycle oscillators have rolled over (again) for QQQQ, but I'll want to see a move below 38.48 at minimum before thinking it's anything more than the chop we've been getting since Wednesday. 38.85-.90 could prove to be a reverse head and shoulders neckline on the 30 min chart, but again, the chop of the past 3 and half days is muddying the water. Much safer to wait for a range break before guessing at direction- bearish below 38.35-.40, bullish above 38.90, confirmed by a volume surge.

  Linda Piazza   1/10/200,  11:53:44 AM
OEX's 60-minute chart, depicting H&S formation forming since the middle of December, as well as the recent rectangular trading band: Link

  Linda Piazza   1/10/200,  11:48:15 AM
Mark, there's a similar inverse H&S on the OEX's chart, too. Nice to see corroboration from another writer and another index. In the OEX's case, I'm not worrying too much about whether it's an inverse H&S or just squiggling around within a consolidation band, though, because the upside target would be about the same since it's forming within the OEX's rectangular trading band. The rejection level would be the same, too. There's still a potential for a rollover down through that rectangular trading band on the OEX.

  Tab Gilles   1/10/200,  11:46:40 AM
The Iraqi election and possibility of oil facility sabotage, approaching refinery maintenance/turnaround and the possibility the upcoming OPEC meeting will endorse further cuts have rallied the oil market.

A 61.8% retracement on the $WTIC from Oct. high and Dec low would put it around $50.

Murphy Oil (MUR)...Looks ready to rally to $85. Link

  Jeff Bailey   1/10/200,  11:43:27 AM
11:00 Internals at this Link

  Linda Piazza   1/10/200,  11:42:12 AM
On the OEX, the last 60-minute candle was a doji at the top of the recent consolidation band and the current candle turns down a small amount from there. The Keltner chart shows massive resistance just above, up to 570.67, so that if the OEX did try to break out, the Keltner chart hints that it would be stopped. Chart characteristics aren't entirely supported by internals, however. I do note a potential rounding-over in the advdec line, but it's tentative. The TRIN is see-sawing its way back up after dropping dramatically off the high of the day, but it's action is tenative, too. In fact, if that were an equity, I'd say that move off the low was a likely bear flag, likely to break to the downside again.

In my opinion, this is the kind of mixed-up stuff we should expect to see while the OEX and other indices are in consolidation bands. They're there because bulls and bears can't sort out where to send the indices next, so we shouldn't expect clarity from anything, including internals. Either trade the band or wait for more clarity.

  Jonathan Levinson   1/10/200,  11:41:36 AM
Natural gas is sharply higher, up 7.82% and testing the 6.50 level. Nymex crude is up 3.14% to 46.85.

  Mark Davis   1/10/200,  11:41:00 AM
Is this a developing Inverse H&S pattern on the SPX 5-min chart? Link
Possibly, but SPX needs to get above the 1193 neckline first. If it does the upside target would be 1202 but I would suspect 1200 to provide resistance first.

  Jonathan Levinson   1/10/200,  11:39:59 AM
This decline has just broken 7200-tick SMA support, turning the 30 min channel lower. Support is down to 38.56, resistance holding at 38.90 for the time being on QQQQ.

  Jeff Bailey   1/10/200,  11:32:34 AM
Toll Brother (TOL) $69.44 +3.45% Link ... all-time high and achieves its point and figure chart bullish vertical count of $69.00.

  Jonathan Levinson   1/10/200,  11:29:56 AM
Fighting with my beloved router over here, and actually fixed the problem by replacing a wire. Didn't know that they could "just blow".

Gold has pulled back off its earlier highs, up .31% at 420.80. Despite the weak advance, HUI is up 1.33% at 205.04 and XAU is up 1.11% at 94.43 currently. Ten year notes are up slightly as well, TNX down 1 bp at 4.275%.

  Mark Davis   1/10/200,  11:25:35 AM
Good morning...
While looking over the SPX daily chart over the weekend I noticed a trading pattern similar to the June and October tops. Both times SPX dropped through the 50 and 200sma. The big difference I see this time is the huge bearish MACD divergence over the last two months as SPX topped out again. SPX has now dropped back to test the 50sma but I don't expect it to hold. I could be completely off base in my thinking but right now I see SPX in a very precarious and vulnerable position, possibly to sub 1100 or even lower. A lot of psychological damage has been done with the failure of the Santa rally and it will take some serious buying over an extended period of time to repair the damage. Followers of the CANSLIM method of trading are seeing red flags all over the place with worrisome clustering of distribution days confirmed by follow through days. As recently as last week I saw posts by CANSLIM traders saying they were 200% invested (on full margin) and I suspect they are suffering from serious buyers remorse at this point and rethinking the entire scenario for 2005 (while selling like crazy). We shall see what develops but I am expecting a weak bounce and then a big white-knuckle plunge. All depends on whether the funds decide if this is a buying opportunity or a time to just let the market fall and come in later and pick up the pieces.

  Linda Piazza   1/10/200,  11:25:34 AM
The OEX's 60-minute chart is showing a likely doji just under resistance at the top of the recent rectangular consolidation zone. Still six minutes to go, though, in this 60-minute period and much might change.

  Jeff Bailey   1/10/200,  11:25:29 AM
11:00 Update at this Link

  Linda Piazza   1/10/200,  11:23:07 AM
Reader Request: When you have a minute could you please give your thoughts on KMRT? It's taken quite a hit and I'm trying to figure out if this might be a good time to get in or if there is more downside to go.

Response: First, a disclaimer. I don't follow KMRT, so any comments made here will be on chart characteristics and not on fundamentals. Check KMRT's reporting date before committing money to a play, either bullish or bearish. I went first to a P&F chart and noted a descending triple bottom breakdown signal given today, with a downside objective (so far) of $88.00. It will take a trade of $98.00 to reverse that signal. I checked the RLX, too, to see how retailers are faring on a P&F basis and noted a double-bottom breakdown signal on that chart, too, with a downside target of $420. That signal was given last week. The bearish signals on both KMRT and retailers in general don't support bullish entries just yet, do they?

Studying the daily chart reveals that KMRT does perhaps approach a level from which it might bounce. That bounce must be considered a countertrend one until KMRT erases that P&F sell signal, however. Link The bearish MACD also gives pause to those considering a bullish play. There's enough support in the $90-91 zone that it's likely that KMRT will bounce, but only aggressive bulls should consider playing such a bounce. Bears might look for a bounce and rollover play anywhere under $98.00, keeping in mind that a trade above $98 erases that P&F sell signal, so that a rollover that begins between $98-100 becomes more worrisome. This means that right now KMRT is in an odd zone that might see some choppy trading behavior. All this is complicated by the fact that OBV (on-balance volume) has stayed relatively steady while KMRT declined. Bears would have liked to have seen it decline more. There may be better plays out there, either bullish or bearish.

  Jeff Bailey   1/10/200,  11:13:44 AM
SanDisk (SNDK) $24.32 +1.5% ... upgraded to "buy" from "market perform" at CE Unterberg.

  Linda Piazza   1/10/200,  11:07:20 AM
The OEX's last completed 15-minute candle was a bearish engulfing one. The OEX isn't noticing, though, climbing again toward the top of that recent consolidation range.

  Jim Brown   1/10/200,  11:00:54 AM
Speech by Governor Donald L. Kohn
Central bank communication Link

  Jonathan Levinson   1/10/200,  10:59:35 AM
38.70 has emerged as range support, and the 30 min keltner channel has climbed to a new resistance level of 38.90. If 38.80, the current high, fails, then it should be a quick run to the 38.90 level. A break of 38.70 should see a retest of 38.62 support, followed by current 30 min support at 38.55.

  Jeff Bailey   1/10/200,  10:59:01 AM
10:55 Market Watch at this Link

  Jeff Bailey   1/10/200,  10:54:15 AM
S&P 500 Index (SPX.X) with updated WEEKLY Pivot retracement/levels at this Link

  Linda Piazza   1/10/200,  10:53:58 AM
The OEX tests the top of its recent rectangular consolidation range. If you'd like to try Keene's tactic of testing the top of the range with a bearish trade (see Keene's 10:39 post on the Futures side of the Monitor), here's the place to do it with an account appropriate stop in case the OEX breaks to the upside. Internals don't really give a sense of a rollover in progress, though, so you'd have to be the kind of trader who jumped in ahead of a signal. Note: This is more dangerous for an index options trader than for a Futures trader because of the wider spreads, options pricing methods and other factors. I really don't have a good sense of whether the OEX will turn over here or punch through to the upside. Traditionally, it should turn over here. Recently, it would be more likely to punch through to the upside. I think it's in a right-shoulder-building exercise, but whether that right shoulder will be at 570 or 572-574, or even if the formation is to be ultimately rejected, I just can't say yet. If I did say anything about short-term direction, I'd be guessing, because nothing on the chart tells us. Intermediate-term, the evening-star formation on the weekly chart gives us a bearish bias.

  Jeff Bailey   1/10/200,  10:44:17 AM
Pulte Home (PHM) $63.23 +2.98% ... said late Friday that it sold its Argentina operations to Argentine real estate developer Grupo Farallon SA.

Putle said the sale will result in a Q4 discontinued operations charge of $25-$30 million.

Pulte scheduled to release earnings after the market's close on Feb. 2.

  Linda Piazza   1/10/200,  10:43:58 AM
The RLX is a strong performer today, climbing from its doji level reached Friday, presenting the possibility of creating a morning-star formation today. However, as it climbs, it's climbing toward 448-450 resistance, with the RLX at 447.51 as I type.

  Jonathan Levinson   1/10/200,  10:43:52 AM
The current session high printed at 38.745 QQQQ, and the lack of a significant drop following that print has the channel rising higher, with 30 min channel resistance now up to 38.80. Look for support now at 38.60-.62.

  Linda Piazza   1/10/200,  10:42:39 AM
The TRAN climbs today, but will soon face the 50-dma at 5668.60, with the TRAN at 3649.20 as I type.

  Linda Piazza   1/10/200,  10:41:00 AM
The OEX has not yet broken out of its recent rectangular consolidation range. Keltner resistance looks strong at 570.10-570.71, but the advdec line looks strong now, too. Internals looked weak just before the bounce this morning; I hope they aren't looking stronger now just before a rollover. The advdec line still looks strong, however.

  Jeff Bailey   1/10/200,  10:40:16 AM
Current OPEN MM Profiles at this Link

  Linda Piazza   1/10/200,  10:30:31 AM
Advdec line still climbing.

  Linda Piazza   1/10/200,  10:29:54 AM
The OEX moves up toward the top of its four-point consolidation zone. The top is a little better defined than the bottom, with the top at about 569.50. As I type, the OEX looks as if it's going to charge straight through that level, but appearances can be deceiving. The 60-minute chart shows resistance firming near 570.30-570.74, so there's danger of a breakout trapping bulls, only to see that resistance hold.

  Jeff Bailey   1/10/200,  10:27:58 AM
North American Telecom Index (XTC.X) 653.31 -7.67% ... quote looks correct (same as AMEX market site), but after reviewing components, don't see anything to explain percentage decline. No news from AMEX regarding an reweighting either.

Components sorted by AMEX weighting at this Link

Q 7.96% weighting to SBC 5.79% weighting as of 01/06/05.

  Jonathan Levinson   1/10/200,  10:18:45 AM
QQQQ is having a tough time choosing direction today, back below the 7200 tick SMA at 38.55 within the sideways/positive 30 min channel. A break above 38.65 or below 38.40 should produce a test of 30 min channel resistance of 38.73 or support of 38.34. The 30 min cycle has much farther to run to the downside than to the up, but that assumes that the cycle won't trend- a big assumption.

  Linda Piazza   1/10/200,  10:17:55 AM
Have you noticed all the news over the weekend about new models of hybrid cars or fuel cell cars and moved-up production of hybrid cars? That corroborates some of the concerns that Jim has been pointing out about fuel supply, because U.S. manufacturers in particular don't seem to have been greatly responsive to those concerns in the past.

  Jeff Bailey   1/10/200,  10:17:06 AM
Buy Program Premium .... SPX 1,188.59 , QQQQ $38.62

  Jeff Bailey   1/10/200,  10:16:10 AM
10:00 Internals at this Link

  Linda Piazza   1/10/200,  10:14:54 AM
As Keene said earlier on the Futures side, internals don't give us any clearer a picture of direction than the action on the indices. They're squiggling around, too.

  Jeff Bailey   1/10/200,  10:12:25 AM
Pulte Home (PHM) $62.96 +2.54% ....

  Jeff Bailey   1/10/200,  10:12:00 AM
Dow Jones Home Construction (DJUSHB) 776.83 +1.91% .... sector winner early.

  Linda Piazza   1/10/200,  10:11:52 AM
I'd like to see the OEX chop its way up to 569-570 and roll over from there, with internals supporting the idea of a bearish play. Have to realize that within that rectangular four-point consolidation range, though, the OEX sets up a possible inverse H&S on the 15-minute chart. There's a possibility that the range will be broken to the upside and the OEX will rise toward 572-574, into a taller right shoulder for its 60- and 120-minute H&S.

  Jeff Bailey   1/10/200,  10:11:13 AM
Amerco (UHAL) $46.73 +5.4% ... new 52-weeker

  Jeff Bailey   1/10/200,  10:03:18 AM
10:00 Market Watch at this Link

Checking on the North American Telecom Index (XTC.X) 652.29 -7.81%

  Jonathan Levinson   1/10/200,  10:02:18 AM





  Jim Brown   1/10/200,  10:01:40 AM
Wholesale Trade Inventories = +1.1%, est +0.7%, last +1.1%

  Jonathan Levinson   1/10/200,  9:59:36 AM
30 min channel resistance is just overhead at 38.66. With the move back above 7200-tick SMA resistance, the 30 min cycle has lost its bearish stance.

  Jeff Bailey   1/10/200,  9:59:27 AM
VIX.X 13.74 +1.85% ... Daily Pivot Levels ... 12.71, 13.06, Piv=13.29, 13.63, 13.86

  Jane Fox   1/10/200,  9:59:04 AM
Wholesale Inventories in 2 minutes. Usually not a market mover but I always cancel any unfilled orders just before these reports.

  Linda Piazza   1/10/200,  9:56:58 AM
Advdec line climbing now.

  Jonathan Levinson   1/10/200,  9:56:07 AM
A 7.25B overnight repo from the Fed's open market desk replaces 8.5B expiring, for a net drain of 1.25B.

  Linda Piazza   1/10/200,  9:54:52 AM
I'm watching a three-minute Keltner chart to show me some short-term trends, and resistance lines are thinning out there, suggesting that we may see a bounce begin . . . and may be beginning as I type. Don't know that I'd suggest going long OEX options on such a bounce, however. Might be wildly profitable . . . you never can tell . . . but internals don't give a good sense that they will be.

  Jonathan Levinson   1/10/200,  9:51:34 AM
9 minutes until the Wholesale Inventories data.

  Linda Piazza   1/10/200,  9:49:46 AM
Following Jane's comments about TRIN in her 9:48 post on the Futures side, I wouldn't find TRIN supporting the idea of buying bounces just yet.

  Linda Piazza   1/10/200,  9:46:32 AM
For reference as the first reversal of the day possibly gets underway (a bounce), the OEX's five-minute 100/130-ema's are at 567.48 and 567.59, respectively, and they could likely provide resistance.

  Linda Piazza   1/10/200,  9:42:45 AM
I no sooner typed those posts about the SOX before it turned down again into the consolidation zone. Like the OEX, the SOX's daily chart presents a possible "b" distribution pattern. Though traditionally a bearish formation showing consolidation at the bottom of a steep plunge, these often broke to the upside during the rally. If the rally is over . . .

  Jonathan Levinson   1/10/200,  9:42:13 AM
QQQQ is showing short cycle channel support at 38.39, with declining 7200-tick SMA resistance at 38.45.

  Linda Piazza   1/10/200,  9:40:24 AM
Here's the information now on Deutsche Bank's decision regarding the semiconductors' growth forecasts: The firm cited pricing concerns and in particular is looking at the impact of stock option expensing. It named Xilinx (XLNX), Altera (ALTR) and Nvidia (NVDA) as most affected.

  Linda Piazza   1/10/200,  9:35:56 AM
So far, the SOX isn't hurting any from Deutsche Bank's triming of forecasts for growth of semiconductor companies. I couldn't find any explanation of their cutting of forecasts or further information on the companies or regions involved.

  Linda Piazza   1/10/200,  9:34:35 AM
The OEX is dropping into a possible support zone just above 565. Watching for internals to show us a direction.

  Jeff Bailey   1/10/200,  9:32:13 AM
February Crude Oil futures (cl05g) $46.25 +1.80% .... updated bar chart at this Link

Weekly Pivot Levels ... $39.30, $42.30, Piv = $44.20, $47.20, $49.10.

  Linda Piazza   1/10/200,  9:31:57 AM
As expected, the OEX opens nearer the bottom of its 4-point rectangular consolidation range than near the top. Watching for a drop toward 565.35.

  Jonathan Levinson   1/10/200,  9:25:45 AM
The decline on Friday left a steep 30 minute cycle downphase in progress for the NQ futures, and nothing this morning has reversed the downward bias in this timeframe. QQQQ is lagging that NQ downphase, and a break below 38.30 should confirm that it will be following the NQ this morning.

  Jeff Bailey   1/10/200,  9:24:33 AM
Altell (NYSE:AT) $56.12 to buy Western Wireless (NASDAQ:WWCA) $36.52 in a stock and cash deal valued at about $6 billion. The transaction will create the 5th-largest U.S. wireless carrier serving 10 million domestic wireless customers. Shares of Western Wireless (WWCA) rose to $37.42 in Monday's pre-market trade.

After the transaction, Alltel will have nearly $10 billion in annual revenue and nearly $4 billion of operating income before depreciation and amortization.

Alltel estimated at $800 million the net present value of the operating synergies and interest and tax savings that it expects from the deal.

The companies expect to close the purchase by mid-year 2005. Alltel said the deal would add to its earnings in 2006.

  Linda Piazza   1/10/200,  9:22:06 AM
Futures are at or near the flat-line level. If cash markets follow through, they'll open near the flat-line level, too. That means that the OEX will open nearer the bottom of the 60-minute trading range than the top. Sixty-minute Keltner charts suggest that the OEX is likely to approach the bottom of that range, or Keltner support near 565.14, before it approaches the top of the range, or Keltner resistance near 569.83-570.79. Sixty-minute Keltner support looks strong enough to perhaps prompt a bounce when it's touched, but until and unless the OEX maintains 60-minute closes above the Keltner line currently at 567.49, it's vulnerable to lowest 60-minute support at 559.50. That target is lower than the 561 downside target projected by a breakdown below a four-point-wide rectangular consolidation band. Fifteen-minute Keltner charts suggest an even higher downside target, just under 563. All this is complicated by the presence of the 50-dma at 565.40.

A breakdown bearish entry is problematic, then, as various possible downside targets could be projected, and it's difficult to know where to set profit targets. The pattern on the daily chart is a potential bearish "b" distribution pattern. Many of these have broken to the upside during the rally, as Mark Davis pointed out a few months ago, but they're traditionally viewed as a bearish pattern with a projected breakdown to the downside. The pattern on the weekly chart is an evening-star pattern. Therefore, there's support for the idea of bearish entries on a breakdown, but new bears should be aware of the risks they undertake and make sure they're ready to jump out again on a strong bounce. A bounce and rollover entry would be far better, if offered.

The possibility of an upside break through that consolidation zone must be considered, too.

  Jeff Bailey   1/10/200,  9:17:56 AM
09:00 Update at this Link

  Jonathan Levinson   1/10/200,  9:15:11 AM
Equity futures are catching up to QQQQ, currently -.09 to 38.46 with R2K and Dow futures slipping negative, at new session lows.

  Jonathan Levinson   1/10/200,  8:03:53 AM
Futures are higher, ES trading 1187, NQ 1568.5, YM 10607 and QQQQ -.06 at 38.49. Gold is up 2 at 421.5, silver +.048 at 6.497 and ten year notes up .09 to 111.47. Crude oil is higher by .55 at 45.975.

We await the 10:00 AM release of Wholesale Inventories for Nov., est. .8%.

  Linda Piazza   1/10/200,  6:35:10 AM
Good morning. The Nikkei was closed overnight for a holiday, and other Asian markets turned in mixed performances. More closed positive than negative, but many European markets turn lower this morning. Our futures ramped up as European markets opened, but then turned down again with the weak performance in Europe and are near the flat-line level as this report is prepared. As of 6:20 EST, gold was up $2.60, and crude, up $0.59. More detail about Asian and European markets follows in succeeding paragraphs.

The Nikkei was closed overnight for a holiday. Other Asian markets turned in mixed performances, but more closed in positive than in negative territory. The Taiwan Weighted gained 0.12%. South Korea's December Consumer Confidence fell to 85.1, to its lowest level in four years. Kookmin Bank led early decliners. In early trading LG Electronics was flat. The Kospi recouped early losses, however, and closed up by 0.38%. Singapore's Straits Times closed higher by 0.20%, but Hong Kong's Hang Seng lost 0.32%. China's Shanghai Composite gained 0.61%.

Many European markets trade in the red. In the U.K., December's producer prices fell 0.4% against an expectation of a gain. Core producer prices (ex-food, drink, tobacco and petroleum produces) declined 0.3%. This prompted renewed discussions about the possibility that the Bank of England might cut interest rates. The housing market has begun cooling down, an impression corroborated by housing and development company Taylor Woodrow's outlook on full-year profits.

Also in the U.K., lender Standard Chartered settled on a $3.3 billion offer for Korea First Bank. Standard Chartered shares were lower in London trading. Barclays is being talked about as a takeover target again, with the revelation that Barclays and Wells Fargo held merger talks last year. A slew of broker calls across Europe saw brokers changing ratings on European insurers and financials. Merrill Lynch upgraded French insurer AXA while Credit Suisse First Boston upgraded Deutsche Bank and Commerzbank and downgraded ABN Amro and several others. CSFB does not expect significant revenue growth among European banks this year.

Outside the banking sector, news hits the wires that Deutsche Bank trimmed its forecasts for growth of semiconductor companies. Better news in the tech arena came when Credit Suisse First Boston and J.P. Morgan upgraded Nokia. European drug companies also gained attention this morning, with GlaxoSmithKline saying that outside the U.S., Bayer will take over its co-promotion rights on Levitra.

As of 6:20 EST, the FTSE 100 had declined 16.50 points or 0.34%, to 4,837.60. The CAC 40 had fallen 16.99 points or 0.44%, to 3,860.97. The DAX had declined 22.95 points or 0.53%, to 4,293.45.

  Linda Piazza   1/9/2005,  7:34:55 PM
Last week, the OEX completed a three-candle reversal signal known as an evening-star formation on the weekly chart. That's not good. No bull wants to see a completed reversal signal on a weekly chart. In early November, a two-candle tweezer-top reversal signal was followed by the climb into last week's high, so there's not always follow-through on reversal signals on the weekly charts. However, we can't count on a reversal signal being negated or not showing follow-through. For now, we're on the watch for rollovers from which to enter bearish positions, with that evening-star pattern giving us a bias toward the markets.

The OEX's 60-minute chart gives us a fairly good benchmark to watch, too. The OEX has been consolidating in a rectangular 4-point range. Those who want to risk trading the range could sell the top near 569.50 and buy the bottom near 565.40, but a four-point range doesn't give you much leeway in which to be profitable when buying OEX options and paying spreads, even if you split them, and commissions. I'd feel a bit better about entering bearish positions near the top if internals corroborated the entry since we're looking for a rollover point, but there's a danger that the OEX could still move up to 572-574 and roll over from there. An upside break of that rectangular consolidation pattern would set just such an upside target, too, near the likely level for a right shoulder to go with the rest of the potential H&S. So, a rollover from the 570-571 level, from the 572-574 level, or even a breakdown below 565 (although riskier) would be possible bearish entries, depending on how internals looked at the time such an entry was offered.

A move much above 575 would suggest a failure of the H&S and would warn bearish traders to step aside and see where the rebound ended.

  Jeff Bailey   1/9/2005,  12:50:01 PM
Pivot Matrix for next week at this Link

Note: Friday morning (08:30 AM), the 10-year yield ($TNX.X) showed an intra-day spike to as low as 42.80, or 4.280%. I believe this "knee-jerk" spike low came after a now corrected yield spike high of 43.14, or 4.314% after a major newswire briefly reported incorrect December nonfarm payroll data. As such, I did use Friday's 09:20 AM EST yield low of 42.34, or 4.234% as Friday's low.

  OI Technical Staff   1/8/2005,  7:07:49 PM
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