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OI Technical Staff : 9/6/2005 9:59:59 PM

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Linda Piazza : 9/6/2005 9:54:23 PM

I'm doing research for the Asia/Europe report tomorrow morning and have just come across a Bloomberg article that mentions that figures are being computed today that show that the number of shares on the Nikkei (or in Japan?) bought on margin has reached levels not seen since "at least 1990," and perhaps not since the Nikkei was reaching for those record 1989 highs, before the Nikkei's long, long tumble into 2003's low.

Keene Little : 9/6/2005 5:39:00 PM

Jonathan, I don't trade my beliefs of what the market should do based on other factors, be it oil price, earnings, Katrina, or any other slew of things that should have an impact on the market. I learned long ago, through too many losses, to give up on trading those things. I trade strictly the charts. But one counter argument to the belief that oil will continue to rise is the possibility that Katrina, and maybe 1 or 2 more behind her this year, will knock the stuffing out of our economy and trip it over into recession.

If that were to happen, the demand for oil would lessen significantly. That in turn could cause a longer term decline in the price of oil. Equities would get a whiff of this and then start to sell off with oil. But as I said, this is all conjecture on my part and quite frankly untradeable. I'll stick with the charts and the charts are telling me this rally will likely continue higher. If I can just get my Fib target of SPX 1263-1267 by September 16th, I'll be a happy camper looking for an excellent long term shorting opportunity. I'm also looking for evidence that that probably won't happen. So far the pattern is on course to getting there so we'll see.

Jonathan Levinson : 9/6/2005 5:04:55 PM

Marc, my own intraday indicators agree with you, and a symmetric "a-b-c" from last week hit the target area I noted earlier for QQQQ. The bullish argument is based on the daily chart, with QQQQ/NQ bouncing from its daily rising support. As you, I'm not persuaded by the drop in oil, particularly as it's based on a release from the SPR. Jim discusses the significance of Katrina for energy in great detail in this weekend's Wrap, which is a must-read for all. In any event, only an intraday trending move for the 30/60 min cycles will drive the price higher, which would be caused by a dominant daily cycle upphase. That's the more bullish/less likely scenario, because those longer intraday cycles rarely trend. So long as QQQQ 39.50 doesn't get violated, the next move should be to the downside. But to turn the daily cycle back down, it will take a close below Friday's low at minimum.

Linda Piazza : 9/6/2005 4:01:21 PM

I've been saying that I'm looking at charts and not fundamentals. All day, in keeping with that, I've been warning bulls to follow the OEX higher with their stops, but not until a few minutes ago, near the close, suggesting that they consider taking partial profits. I've been saying all day that there weren't definitive signs yet of a rollover. So, I have been following the charts here in the MM. Yet, I find myself amazed that markets are performing this way after Katrina. We know we're going to take some kind of a hit from Katrina. We know the GDP will suffer some. Other countries are worried that we're going to drag their economies down, and we've done nothing but climb, climb, climb. Amazing.

Linda Piazza : 9/6/2005 3:58:21 PM

Well, the OEX's 15-minute upside target was like a carrot held in front of horse's nose. The horse kept trotting forward, but the Keltner target did, too. Will the new 570.97 target be reached tomorrow morning? Perhaps. A thrust forward and then pullback would fit with the possible doji-day type of pattern. There's another possibility. If the OEX maintains 30-minute closes above the Keltner line currently at 569.11, it's setting an upside target of 573.60. So, bears want an opening preferably below 569, and bulls want the OEX to stay above that.

Jonathan Levinson : 9/6/2005 3:45:38 PM

Those who weren't long at Friday's close at the session low were treated to a gap up that decayed until the 9:55AM repo announcement, following which a brief dip into the 10AM ISM announcement, and then the flagpole rally which took out the Friday high and rocketed to today's highs in just over 20 minutes. Since there, price has been drifting sideways. I see no reason to expect that 5 hour range to suddenly reverse in the final minutes of the session. QQQQ will leave off with all intraday cycles maxxed out, with the exception of the short cycle which is drifting sideways-higher. 39.20-.40 remains the operative range.

Linda Piazza : 9/6/2005 3:44:11 PM

Okay, OEX bulls, you've got a decision to make in the last few minutes of trading. Are you going to hold overnight? That's a tough one. My study of the advdec line leads me to wonder if there hasn't been just enough juice to move the markets higher and then to keep it there, sort of like treading water, when it tended to dip a little. However, that could well continue tomorrow, too, if the PPT is truly at work. I think it's possible that the OEX will open slightly lower than today's close, but then possibly even see another push higher before a pullback. A doji day tomorrow wouldn't be unexpected once again after such a big range day, and so that pullback could be a choppy, difficult to trade move. If bulls have their way, it will definitely be a choppy, corrective-type pullback. I don't know that any of this is going to happen, of course, but that's a possible scenario.

One alternative view is a strong white candle tomorrow, a la that of July 11 after the July 8 extra-tall white candle. If the OEX opens above today's close and moves up, that's certainly a possibility. Of course, the other possibility is a down day. I'd actually expect a bull flag pullback over the next day or couple of days, but am not sure about a strong down day's potential for tomorrow. As we move into the close, the OEX has risen into possible strong resistance, into a retest of that former rising regression channel off April's low. I think I'd at least take something off the table if I had participated in today's gains.

Linda Piazza : 9/6/2005 3:32:36 PM

On 15-minute closes, the OEX is vacillating between Keltner support, currently at 569.47, and nearest resistance, now at 570.18. Both lines still climb. Keltner target and next resistance at 570.92.

Linda Piazza : 9/6/2005 3:30:14 PM

The SOX approaches 474 resistance from last week and the week before, with the SOX at 473.64 as I type.

Jonathan Levinson : 9/6/2005 3:28:45 PM

The break of the previous session high got all of 2 cents' followthrough on QQQQ, not the type of bullish fiesta one would have expected. Price has been acting heavy since its initial 39.35 print this morning. Not heavy enough to acually decline, but heavy nonetheless.

Linda Piazza : 9/6/2005 3:24:58 PM

OEX upside target now 570.91 on the 15-minute Keltner chart. That coincides with the 571-ish level that sees the top resistance of the current rising regression channel meet with the former support of the larger rising regression channel off the April low. So all of this so far has just constituted a retest of that former rising regression channel. It's been impressive, especially today, but I'd be watchful for potential strong resistance in that 571 zone.

Linda Piazza : 9/6/2005 3:18:40 PM

OEX moving up again toward that current 570.87 upside target.

Jonathan Levinson : 9/6/2005 3:18:02 PM

QQQQQ's back to 39.33, 2 cents off the high. 30 and 60 min channel resistance are holding at 39.42.

Jane Fox : 9/6/2005 3:18:00 PM

Jonathan I totally agree (3:09 post). Eventually the market forces will overtake the market.

Jonathan Levinson : 9/6/2005 3:16:41 PM

Volume breadth is back up to +3.93:1 for the NYSE and +4.07:1 for the Nasdaq. Price will lead volume, but there's no sign of weakness here.

Jonathan Levinson : 9/6/2005 3:09:22 PM

Jane and Linda, I agree with your conclusion. Philosophically, one can wonder whether a market is truly a market if it doesn't respond to external events or traditional market forces. That doesn't concern us here, but my own philosophic belief is that intervention can delay or obfuscate, but nothing can overcome longer term trends.

Jonathan Levinson : 9/6/2005 3:06:59 PM

If the leg up from the QQQQ 38.25 lows last week was the 1st leg of a 3 leg pattern, with the Thursday-Friday decline a corrective bull flag decline, then an equal extension would target the mid 39.40-.50 area, which lines up with the current 30 and 60 min channel tops. What happens next is anyone's guess, but the 30 and 60 min cycles don't trend easily in overbought or oversold, and they're due for a downphase. 39.20 remains key support.

Linda Piazza : 9/6/2005 3:06:55 PM

That article is chilling, isn't it, Jonathan? But I suspect that it's not a big surprise to our readers.

Jane Fox : 9/6/2005 3:01:44 PM

Jonathan thank you very much for that article (2:51 post). All the more reason to follow the charts and forget about anything else. If the government has its hand in the markets then there is abslouetly no way you can predict direction and only follow.

Linda Piazza : 9/6/2005 3:01:06 PM

I see a possibility for the OEX's action to resolve either direction into the close--a spring up toward the 570.77 target on the Keltner chart or a pullback. But I think that we're getting closer to at least a short-term topping-out process. I'm just not sure it's here yet, but I'd certainly look at the possibility of a short-term top being reached at about 571, if not before. That's where the current rising regression channel off last week's low meets up with the longer-term rising regression channel that the OEX broke out of on August 22.

Jane Fox : 9/6/2005 2:53:28 PM

Dateline CNN Actor Bob Denver, 70, of TV's "Gilligan's Island" fame has died, his agent tells The Associated Press.

Jonathan Levinson : 9/6/2005 2:51:21 PM

Fans of Eric Sprott and John Embry may be interested in Embry's recent article on the PPT. Link For those unfamiliar with the Canadian investment scene, both are very well respected managers and mainstream financial authorities. Embry was a top manager at Royal Bank's leading Precious Metals Fund before moving over to Sprott.

Linda Piazza : 9/6/2005 2:50:49 PM

OEX still clinging to the Keltner line signaling a breakout, but "clinging" still remains the operative word. As long as it does so, however, it maintains that potential upside target. That target has risen to 570.76. As I said earlier, the OEX doesn't have a spectacular record of meeting those particular breakout targets, but it at least did a good job of approaching the original target set this morning on the first breakout.

Jonathan Levinson : 9/6/2005 2:46:34 PM

QQQQ has exceeded Friday's light volume of 53.3M shares already, 59.7M shares traded so far. The average is 73.7M for the day.

Linda Piazza : 9/6/2005 2:39:01 PM

The OEX so far clings to the Keltner breakout level, but "cling" is the right word. It doesn't make much difference to bulls as long as it keeps clinging that still-rising Keltner line, except that support is thinning underneath that line. Bulls want to see that line currently at 568.97 maintained on 15-minute closes. OEX at 569.15 as I type.

Jonathan Levinson : 9/6/2005 2:37:33 PM

Classic flagpole rally action today, with price ramping straight up, then tracing a less-than 10-cent range for going on 4 hours. For QQQQ, it's left all intraday cycles topped out, with the short cycle now chopped up after trying a short-lived downphase. The daily cycle upphase got a new lease on life with today's vertical move after stalling out from last week's sideways drift. A move abouce 39.40 or below 39.20 should be directional from here.

Jonathan Levinson : 9/6/2005 2:26:28 PM

GE continues its upward march, now +1.92% at 33.97.

Linda Piazza : 9/6/2005 2:21:07 PM

The OEX again tests its breakout level on the 15-minute chart, with bulls wanting to see 15-minute closes at or above the Keltner line currently at 568.89. The OEX is at 568.97 as I type.

Jonathan Levinson : 9/6/2005 2:09:15 PM

Natural gas has moved back to positive, +.03 at 11.72. Crude oil is down 1.575 at 66.00, off a low of 65.50.

Linda Piazza : 9/6/2005 2:08:55 PM

New OEX upside target 570.66 on the Keltner 15-minute chart. Testing the 61.8% retracement of the decline off the August high now. These Fib levels have had some apparent relevance, so bulls should consider whether they want to weather a possible pullback to retest the 50% level's support, at about 567.53, if that should occur. There's no guarantee that it will, but it wouldn't be an unusual occurrence, especially as it would also constitute a retest of the 240-minute 100/130-ema's, and almost a retest of the 200-sma.

Linda Piazza : 9/6/2005 2:03:12 PM

Hmm. Advdec line still not breaking out on the 30-minute Keltner chart. It's not climbing in tandem with the equities; at least, not yet or not yet into a new high. May be beginning to pick up as I type. Earlier, there were a lot of comparisons in the way the advdec line was acting today and the way it had acted last Wednesday, but those comparisons are not as apt now.

OEX approaching the 61.8% retracement of the decline off the August high. Bears don't want to see the OEX maintain values above that 570-ish Fib level.

Jonathan Levinson : 9/6/2005 2:00:27 PM

Session highs for GE and ES futures here, QQQQ back above 39.30 but not yet testing the previous 39.33 high.

Linda Piazza : 9/6/2005 1:55:34 PM

Only a minimal close below the breakout level on the OEX's 15-mintue Keltner channel and then this immediate push up again. Bulls want to see a 15-minute close back above that line currently at 568.62, however. OEX at 568.98 as I type.

Jonathan Levinson : 9/6/2005 1:55:16 PM

QQQQ 39.21 was just touched and was bought immediately.

Jonathan Levinson : 9/6/2005 1:52:18 PM

QQQQ's 60 min channel has not yet flattened, but the sideways price action should be the weightless interval as that longer channel tops out. The wildcard is the large amount of money added by the Fed this morning, but it could be that we've already seen its effect.

Jane Fox : 9/6/2005 1:48:30 PM

Dateline CNN New Orleans flood waters contaminated with e. coli, official in office of Mayor Ray Nagin tells CNN.

Linda Piazza : 9/6/2005 1:34:38 PM

Some tentative signs of a potential pullback, at least. Tentative only, however, and countered by last Wednesday's example, when such tentative signals were reversed in a late-day gain.

Jonathan Levinson : 9/6/2005 1:31:47 PM

Volume breadth is down to +3.13:1 on the NYSE and +3.94:1 on the Nasdaq- still comfortably in bull territory.

Linda Piazza : 9/6/2005 1:29:52 PM

OEX testing the breakout level on the 15-minute Keltner chart, with bulls wanting to see the line currently at 568.56 maintained on 15-minute closes, to maintain the current 570.49 upside target. Beneath that 568.56 Keltner line, support thins, but can be found at 567.76 and 566.27, and then stronger near 563.92-564.35. OEX at 568.61 as I type.

Jonathan Levinson : 9/6/2005 1:27:35 PM

QQQQ is testing 72 SMA support for the first time today. Look for a break below 39.20 support to signal the first downturn in the 30 min channel if it's going to happen. Link

Linda Piazza : 9/6/2005 1:24:18 PM

OEX bulls want continued 15-minute closes above a Keltner line currently at 568.62 to maintain the current 570.44 upside target. Those sure are some puny 15-minute candles on the OEX, though.

Jonathan Levinson : 9/6/2005 1:19:27 PM

It's a strange day. The Fed's big net add completely missed bonds and commodities, while equities remain very firm. If this is Fed money goosing equities, I wouldn't rule out a resumption of this morning's advance. This goes counter to the intraday oscillator setup, which is calling for a top and a decline from here.

Linda Piazza : 9/6/2005 1:13:25 PM

The OEX has another Fib level to watch: the 61.8% retracement of the decline off the August high. That's near 570, with the OEX currently at 568.95.

Linda Piazza : 9/6/2005 1:08:50 PM

I keep watching the advdec line. It's not at a new HOD, unlike some indices. It may be following rather than leading, but it's also having trouble breaking out on the 30-minute Keltner channel, a resistance level I watch with the advdec line. Wednesday, it was having difficulty breaking out about this time of day, too, and then zoomed up the rest of the day, so that's not a definitive enough sign to say that there's going to be a pullback, soon, but it is enough to suggest that bulls keep those profit-protecting plans in place. The OEX did see a pullback when the advdec line started turning down through this same Keltner channel Thursday morning, although it wasn't a steep pullback on the daily chart. There could be a pullback--should be one--at some time to retest the 566-567.50-ish resistance from multiple sources.

Jonathan Levinson : 9/6/2005 1:08:28 PM

The 28B auctions of 13-week and 26-week bills were bought by foreign central banks to the extent of 7.76B, a solid participation. The 13-week bills sold at 3.435%, with a bid-to-cover of 1.94. The 26-week bills sold at 3.57%, with a bid to cover of 1.95.

Linda Piazza : 9/6/2005 1:01:57 PM

The OEX may not have a good record at hitting that upside Keltner target, now at 570.40, but it's doing a good job at approaching it, isn't it? Smile. OEX currently at 569.53. Bulls, keep moving that stops up, following the OEX higher. It needs to maintain 15-minute closes above 568.55 to maintain its breakout signal, but so far, it's had no difficulty doing that.

Jonathan Levinson : 9/6/2005 12:56:56 PM

Awaiting the 3 and 6 month t-bill auction results in the next few minutes.

Jonathan Levinson : 9/6/2005 12:56:23 PM

Volume breadth is as firm as the price here, with 3.18 advancing shares for each declining on the NYSE. On the Nasdaq, it's 4.49:1. The TRIN and TRINQ remain neutral-bullish, not extreme. Crued oil is holding a 1.725 loss at 65.85, natgas 14.5 cents off its low at 11.60. Bonds remain weak, however, and the yield curve has flattened- TNX is up 1.46% or 5.9 bps at 4.088%, while the 13-week bill rate is up .98% or 3.3 bps at 3.41%.

Linda Piazza : 9/6/2005 12:55:29 PM

The OEX's 15-minute Keltner target has now risen to 570.35, and the target has so far been preserved all morning. Still, the OEX doesn't have a good record at hitting these targets, so bulls should just keep moving their stops up if the OEX should move higher again. One different in today's movement and Wednesday's is that on Wednesday, the OEX was moving up toward the channel line that usually contains it, not starting the day by moving above it. So far, though, there's no sign of a rollover.

Jonathan Levinson : 9/6/2005 12:41:13 PM

BOSTON (MarketWatch) -- The New York Stock Exchange said Tuesday that as of Sept. 1, it has approved amendments removing order size and frequency restrictions for all exchange-traded funds trading on the Big Board. Previously, the NYSE had a 10,000 share size restriction of automatic execution orders in ETFs, and a 30-second frequency restriction. The exchange is home to 22 ETFs, and in July Barclays Global Investors announced it would move 61 of its iShares ETFs to the NYSE.

Linda Piazza : 9/6/2005 12:35:11 PM

OEX bulls so far have not needed to enact those profit-protecting plans, and the OEX so far maintains the support of the 200-sma, the 72-ema, the 240-minute 100/130-ema's, historical support near 567, and even the Keltner breakout level, at 568.19-568.31 on a 15-minute closing basis. Bulls still need to keep those profit-protecting plans in place, however. Today could be another day like last Wednesday, but, like last Wednesday afternoon, some signs exist that gains might be tempered from here. That didn't turn out to be true last Wednesday, but that doesn't mean that the possibility doesn't exist. So far, it's still a time for bulls to be protecting profits, but not yet a time for bears to have any confidence in entering.

Jonathan Levinson : 9/6/2005 12:30:51 PM

QQQQ's 30 min cycle channel has finally begun to flatten as seen in the previous chart, the top currently at 39.41. So far, the bounce is at a lower high, but it's only pennies away from violating the 39.35 high. The 60 min channel still rises, but the top is only up to 39.30. I'm not eager to try it short yet- I'd prefer to hit a spike to 30 min channel resistance to allow for a narrower stop.

Jonathan Levinson : 9/6/2005 12:19:52 PM

QQQQ's wavelet bounce is toppy here, and it's only now beginning to challenge the short cycle downphase: Link

Linda Piazza : 9/6/2005 12:01:33 PM

Still possible that temporary support could be found, and that there could be another attempt to move up.

Linda Piazza : 9/6/2005 11:52:01 AM

Still on the telephone. The OEX remains above the 240-minute 100/130-ema's, at 567.37 and 567.24.

Linda Piazza : 9/6/2005 11:48:22 AM

Caught on the telephone.

Jonathan Levinson : 9/6/2005 11:46:46 AM

QQQQ's volume has fallen considerably during the past hour, and the wavelet bottom is only now turning up (2nd oscillator pane from the bottom): Link . 39.20 support has yet to be tested- that will be the key level for any pullback.

Linda Piazza : 9/6/2005 11:31:42 AM

The conclusion from watching the OEX's three- and five-minute charts is that bears don't yet have the upper hand, even over the very short term. They haven't been able to drive the OEX lower, even into confirmation of a tiny H&S. The OEX hasn't climbed past the right-shoulder level, but is extending too far to the side so that the formation has dissolved.

Jonathan Levinson : 9/6/2005 11:30:51 AM

GE has pressed to new highs even as QQQQ hits its head at a lower high of 39.30. This is trading a rough sideways head and shoulder at the top, and 39.25 would be the neckline. The 30 and 60 min channels have yet to stall their rise, however, and so far the new short cycle downphase is looking weak: Link

Linda Piazza : 9/6/2005 11:21:32 AM

Something to watch: A tiny H&S on the OEX's three-minute chart, head at the day's high, neckline at about 568 and shoulders at about 568.75. Right shoulder is getting a bit extended to the side, though, so needs to confirm or it will be invalidated soon because of that extension. This has a miniscule downside target, but I'm mentioning it only because of what it might tell us about short-term bearish and bullish strength.

Linda Piazza : 9/6/2005 11:15:28 AM

I haven't seen definitive evidence yet that the OEX is in the process of a rollover. It might be, but the evidence just isn't there yet. It's edging down toward Keltner and other types of support and that could hold, sending the OEX up to retest the day's high. There is plenty of evidence that bulls should continue to ratchet up their stops, however.

Linda Piazza : 9/6/2005 11:06:59 AM

Benchmarking again: The OEX's important 240-minute 100/130-ema's are at 567.37 and 567.28, respectively. There hasn't yet been a 240-minute close above those averages, so bulls want to see the OEX remain above them on pullbacks. Otherwise, this morning's top was just a spike above them. The 72-ema is at 567 and the 200-sma at 566.45. Bulls want those to hold on pullbacks, too.

Jonathan Levinson : 9/6/2005 11:04:31 AM

I need to step away for an hour. The 30 min channel top is down to 39.35, and the wavelet cycle is bottoming. This is the time for a terminal bounce to cap off the short and 30 min cycle upphase, and possibly the 60 as well. 39.35 should be the number, and swing shorts would seek to enter there with a tight stop in the mid 39.40s. Link

Jonathan Levinson : 9/6/2005 11:00:21 AM

Session low for natgas, -.14 at 11.55, crude oil -1.25 at 66.325.

Linda Piazza : 9/6/2005 10:57:17 AM

Current OEX 30-minute candle is a doji at the top of a climb. Bulls don't want to see a 30-minute candle in the next period that reverses the tall white candle that preceded the doji.

Jonathan Levinson : 9/6/2005 10:52:37 AM

If it is a short squeeze, then the still-current +5.2:1 volume breadth is a blowoff. I agree with Marc's entry- a tight enough stop entered at resistance limits risk considerably. I'll try likewise if we get a last surge to the 30 min channel top at QQQQ 39.37- which, according to the maxxed out short cycle upphase, should be the top for at least this morning. Link

Linda Piazza : 9/6/2005 10:49:17 AM

Tentative bearish OEX price/RSI divergence still exists on the 15-minute chart, with today's high as compared to Thursdays, but it so far has not made a whit of difference. Just continues to offer a warning to bulls, but one so far not realized. Bulls would like for the OEX to maintain 15-minute closes above a Keltner line currently at 567.75 on any pullbacks. Upside target now 570.16, but these upside targets just aren't often achieved lately.

Jonathan Levinson : 9/6/2005 10:45:54 AM

Volume breadth +2.88:1 on the NYSE, and +5.38:1 on the Nasdaq. The persistence above 30 min channel resistance and the strong breadth suggest either a short squeeze, or the beginning of a mammoth move. I'm thinking the former, but above 39.20, the benefit of the doubt goes to the bulls.

Linda Piazza : 9/6/2005 10:38:44 AM

There's the possibility of a day like last Wednesday's, so bears should not consider an entry until there's clear evidence that it's a good idea, but there are also signs that the move is getting extended, so it's really just a matter of bulls continuing to hitch up their stops as the OEX moves higher. I still would not necessarily count on that new 570.05 upside target being hit, however.

Linda Piazza : 9/6/2005 10:31:31 AM

On any pullbacks, OEX bulls want to see the OEX hold above a Keltner line currently at 567.53 on 15-minute closes. No appreciable pullback yet, however, and the OEX is at 568.45, with a new 570.03 Keltner target. Again, though, these Keltner breakouts have not been particularly reliable lately, so just keep following the OEX higher with your stops.

Jonathan Levinson : 9/6/2005 10:30:27 AM

The SOX is strong here, printing 471.64 and finally clearning the 470 level. QQQQ is holding 2 pennies off the 39.29 high, above R2 at 39.20.

Jonathan Levinson : 9/6/2005 10:28:05 AM

Crude oil is down .55 at 67.025, back to pre-Katrina levels.

Linda Piazza : 9/6/2005 10:26:36 AM

The OEX so far maintain its breakout signal on the 15-minute chart, but these breakout signals are iffy at best, lately. Bulls should follow the OEX higher with their stops, but should not necessarily bank on that 569.95 upside target being met.

Jonathan Levinson : 9/6/2005 10:26:08 AM

Stopped out at 39.23, -.05.

Jonathan Levinson : 9/6/2005 10:25:15 AM

QQQQ - Entry Point Alert -

Short QQQQ at 39.18, stop 39.23

Jonathan Levinson : 9/6/2005 10:22:18 AM

It's either a bull flag or a small "p" distribution at the top for QQQQ, with price still holding above the 30 min channel top at 39.11. The longer it holds, the longer the short cycle oscillators will have to undraw that potential bearish divergence caused by the quick price spike. Link

Linda Piazza : 9/6/2005 10:20:21 AM

OEX creating a breakout signal with a new upside target of 569.95. These upside targets have been untrustworthy lately, however.

Jonathan Levinson : 9/6/2005 10:08:29 AM

Price surges past 30 min channel resistance again, but the short cycle upphase is young and could have more gas in the tank. R2 at 39.20 should provide better resistance for a tight stop if we can get it.

Linda Piazza : 9/6/2005 10:08:04 AM

So far, there's tentative bearish price/RSI divergence as the OEX pushes to a new high, as compared to last week's high, but that can still be erased if the RSI continues climbing. That's not a sign that a bearish entry should be made, in any case, but only a warning to bulls to keep those profit-protecting plans in mind.

Linda Piazza : 9/6/2005 10:06:35 AM

OEX attempting to push above the 240-minute 100-ema now, easing just above it as I type, but still testing.

Jonathan Levinson : 9/6/2005 10:05:40 AM

QQQQ breaks Friday's high. Link

Linda Piazza : 9/6/2005 10:05:34 AM

OEX bulls would rather that the advdec line not drop substantially below about +1270. Advdec line (QCharts "advdec") now at 1912. I would expect that the advdec line would find support somewhere in the 1250-1400 zone, however, and then attempt to push higher again.

OEX shooting higher as I type, but not the advdec line as yet.

Jonathan Levinson : 9/6/2005 10:01:52 AM

The markets like the ISM data, QQQQ back up above 39.00 but volume breadth remains off its earlier highs.

Jonathan Levinson : 9/6/2005 10:00:56 AM


09/06/2005 10:00 *DJ US ISM Aug Non-Mfg Business Index 65.0 Vs Jul 60.5

Linda Piazza : 9/6/2005 9:57:40 AM

Signs remain that this morning's move higher was reaching an extreme for that particular move, but signs still point to the possibility (but perhaps not probability) that there could be a minor pullback and then another attempt to move higher. Bears would then want to see a lower or equal high with bearish price/RSI divergence.

Jonathan Levinson : 9/6/2005 9:57:35 AM

QQQQ has challenged Friday's high but not Thursday's upside spikes above 39.10. So far, this is commensurate with a 30 min cycle top, but the 60 min cycle upphase was not overbought and has not yet stalled, which makes it riskier than usual to try for new shorts. Still awaiting the ISM announcement.

Linda Piazza : 9/6/2005 9:55:34 AM

Here's the part the 240-minute 100/130-ema's has played as S/R over the last few months, with the OEX's former rising regression channel and Fib chart off the August high also included: Link This is why I think this might be one level for a possible rollover. Note that the 61.8% Fib level would actually bring the OEX up into a complete retest of the former rising regression channel, too, if the OEX should punch higher through the current level, so that marks another spot where bulls ought to have profit-protecting plans.

Jonathan Levinson : 9/6/2005 9:55:09 AM

The Fed announced an 8B overnight repo for a net add in that amount.

Jonathan Levinson : 9/6/2005 9:51:24 AM

Don't forget ISM services at 10AM, est. 61.3.

Linda Piazza : 9/6/2005 9:50:31 AM

Some signs that the move higher is getting extreme over the short term: no signs of a pullback in the making just yet, though. Just some signs to warn bulls to protect their profits, so far. Could still be a minor pullback and a push to a new high on this move, so there just aren't any signs yet to encourage a new bearish entry other than if you're the kind of trader who just hits a certain resistance level with a trial bearish entry. Wish there were, because the OEX hit the level I'm watching for possible signs of a rollover.

Jonathan Levinson : 9/6/2005 9:48:32 AM

Volume breadth has strengthened further, up to +4.16:1 for the NYSE and +4.91:1 for the Nasdaq.

Linda Piazza : 9/6/2005 9:46:58 AM

OEX at the 240-minute 100/130-ema's, also just below the 50% retracement of the decline off August's high and testing last week's high.

Linda Piazza : 9/6/2005 9:46:07 AM

Jim mentioned some of the costs of Katrina in his Wrap this weekend. I'm proud of my state of Texas for taking in, as of this weekend, 239,000 neighbors evacuated from areas devastated by Katrina, but the costs to the state of Texas must also be factored in. This morning, for example, many Louisiana and Mississippi children will be enrolled in Texas schools in Houston, Dallas, San Antonio, Mesquite, and other cities, hopefully giving them the opportunity to make new friends and establish new routines, as well as continue their schooling, but those school districts now face increased costs, for example.

Jonathan Levinson : 9/6/2005 9:43:11 AM

The Fed has no repos expiring today, so the stage is set for a net add on the 10AM announcement. Only the size is at issue.

Linda Piazza : 9/6/2005 9:41:06 AM

The OEX is also at the top of that same old channel that's mostly contained its prices on the 15-minute chart. That's at 566.89 on 15-minute closes, at least currently. More reason for bulls to have their profit-protecting plans in place. The Keltner charts suggest that a 15-mintue close above that level (which will move up slightly as the OEX does) sets an upside target of 569.68, but the OEX has not performed well on these breakout or breakdown plays lately. Some bulls who have been playing these channels from one side to the other would now be taking partial profit at least and resetting stops on the rest of their position.

Linda Piazza : 9/6/2005 9:38:24 AM

OEX inching just above the 200-sma, toward the 72-ema (just as important lately), with the 240-minute 100/130-ema's and historical S/R just above that. No definitive signs that it's time to jump in with a bearish play, but bulls need to have their profit-protecting plans in place. This doesn't mean that you have to bail, of course, but you do need to know how you're going to treat this test, especially with an important economic number coming at 10:00.

Jonathan Levinson : 9/6/2005 9:35:35 AM

Volume breadth +4.05:1 on both the NYSE and the Nasdaq here, TRIN and TRINQ bullish at .6 and .43.

Linda Piazza : 9/6/2005 9:35:23 AM

Benchmarks to watch on the OEX if it should continue to rise. The OEX's important 240-minute 100/130-ema's, important for many months now, are at 567.32 and 567.24, respectively. The 200-sma is at 566.44 and the 72-ema is at 566.93. Last week's 567.21 high is within that range. OEX at 565.80 as I type.

Linda Piazza : 9/6/2005 9:32:02 AM

OEX opens near Friday's close and then rises. The OEX will soon test the new descending trendline off Thursday's high, at about 565.25, and then there's the 200-sma not so very far above that, but be careful, bulls, of the possibility of a pop-and-drop day. Have profit-protecting plans in place now, up to the 566-567 levels.

Jonathan Levinson : 9/6/2005 9:27:55 AM

On a trading basis, bears holding short from last week's 39.09 entry will still be in, with stops at breakeven. If they've been chasing the price down, then they've been stopped out on the overnight surge above 38.90 if they didn't take profits when noted just before Friday's close below 38.80. I will be scoping for new plays once the cycles get back in synch. Altnerately, I'll be assessing a new swing short if price makes it back up to the 39.17 area.

Jonathan Levinson : 9/6/2005 9:17:45 AM

QQQQ's daily cycle points up, but the lack of price traction last week has the 10-day stochastic hesitating. The 30 min cycle appears to be maxxed out in overbought territory, while the 60 min still points up. Meanwhile, the short cycle downphase from Friday's close is only now turning up on the light overnight volume. As you can tell, this is a choppy mess, cycle-wise. The cherry on top is that the price is currently above the 30 and 60 min channel tops in the 38.95 area. I intend to wait out the first half hour and let the dust settle. Price-wise, bulls need to clear 39.17 to invalidate the bearish case for the time being. Bears need a break of 38.74.

Linda Piazza : 9/6/2005 9:00:58 AM

For some time now, the OEX has been following the BIX's example, first trading down to the 200-sma and testing that, then falling beneath that average and consolidating again. The BIX consolidated several days between the 200-sma and the 200-ema, and the OEX has been doing that, too. The BIX's next step was to fall out of that consolidation pattern and to test the bottom of the broadening formation on the daily chart, with an analogous broadening formation on the OEX's chart. That broadening formation's support on the OEX is just below 550.

The trouble with assuming that the OEX will follow the BIX's example in this last step is that the BIX has reached that bottom support and is currently trying to bounce from that support. The bounce currently looks corrective, but if the BIX were to continue to bounce a while, that might support the OEX, too. The RLX, another index that sometimes impacts the OEX, spent last week rattling between the support of the 200-sma and the resistance of the 72-ema. Both these key indices currently show mixed signs, and that's what the OEX has been showing, too. The OEX is rising, but rising in a choppy pattern, finding resistance at the converging 72-ema and 200-sma's, at 566.97 and 566.44, respectively. As long as that resistance holds on daily closes, it looks as if bounces up to and rollovers from that resistance make the best bearish entries. Support exists at the 200-ema at 563.07 and at the 561.23 level that marks the 38.2% retracement of the entire bear-market decline, so any bear making a new rollover entry should have profit-protecting plans in place for tests of those two levels, if they should occur.

Late last week, the OEX pulled back, very nearly confirming an evening star formation on the daily chart. The formation didn't quite confirm in my opinion because Friday's close was not midway through Wednesday's range or even through the real body of Wednesday's candle. Still, overall, the daily candle outlook is more bearish than bullish, I'd have to say at this point. Today's close will likely be important in determining whether that remains true.

Let's look at a contrary possibility. That late-week pullback took the form of a descending regression channel that could be a bull flag forming prior to another test of Thursday's high and another attempt to push above the 200-sma and 72-ema. Obviously, the OEX was testing important support as Friday closed, with further support just below, and bears obviously need to have their profit-protecting plans in place, if they didn't already exit their positions Friday afternoon. If there's a bounce, as futures currently suggest there could be, bears can look for a new entry up near the 200-sma, but make sure that internals support such an entry. I'll tell you what I see, but consider the possibility that there could be a strong bounce pre-10:00 numbers, and that disappointment could lead to a rollover. If so, there might not be a good signal, but I wouldn't suggest jumping in ahead of a good signal, either. Another good trade will always come along.

If there's not a bounce and is a decline instead, Keltner channels suggest that a 15-minute close beneath 561.82 will set a new downside target of 556.76. Breakout or breakdown plays have not been good percentage risks to take on the OEX for quite a while, so I'm not going to suggest that as a new entry, but rather just tell you what the Keltner chart says. Recent history suggests that support will be found anywhere from Friday's close to that 561.82 level, however, and so this morning's task might be to wait for a bounce and rollover entry. As long as the OEX is below the 200-sma on daily closes and below the 50% retracement much less the 61.8% retracement of the decline off the August high, we should still be looking for bearish entries, I think.

Jonathan Levinson : 9/6/2005 8:25:33 AM

Bonds are holding their losses at the cash open, with ten year note yields up 3.4 bps at 4.063% and 13-week bill rates up 3.8 bps to 3.415%. Equities have pulled back slightly, QQQQ at a 19 cent gain at 38.96.

Jonathan Levinson : 9/6/2005 7:28:48 AM

Equities are up, ES trading 1225.25, NQ 1584, YM 10508 and QQQQ +.23 at 39.00. Gold is flat at 448.40, silver -.001 at 7.079, ten year notes -3/16 at 112 55/64, crude oil is down .50 at 67.075 and natural gas is +.16 at 11.84.

We await the 10AM release of ISM services, est. 61.3.

Linda Piazza : 9/6/2005 7:23:04 AM

Good morning. For those of our readers from the areas affected by Hurricane Katrina, and who might now be signing on for the first time since the storm hit, our thoughts and sympathies go out to you.

The Nikkei started out with a gain last night, but then tumbled more than 130 points off its high of the day to end in negative territory. Other Asian markets were mixed. European markets continue the gains made yesterday. This morning, the OECD released its revised 2005 Economic Growth Forecasts. The US forecast was unchanged. The UK's projection was downgraded, and Japan's and the Eurozone's upgraded. As of 7:05 EST, gold was down $0.30, and crude, down $0.28 to $67.29. Our futures were higher at that time. More detail about Asian and European markets follows in succeeding paragraphs.

After a positive day Monday, the Nikkei gapped higher Tuesday and climbed in the morning session, but the afternoon session was a different matter entirely. The Nikkei tumbled most of the afternoon, closing down 35.45 points or 0.28%, at 12,599.43. It closed more than 130 points off its high of the day. In early trading, exporters again benefited from a drop in oil prices. T&D Holdings Inc., an insurer to be added to the Nikkei 225, gained in early trading. It's the only publicly traded insurer in Japan, according to Bloomberg. Nippon Telegraph & Telephone Corp. also gained in early trading after it announced a plan to buy back its own shares, trimming the government's position to the minimum one-third.

What happened in the afternoon? The time stamps I have on newspaper articles about other developments don't always make it clear whether such developments occurred in the afternoon session or after the close, but there were many developments. A newspaper article noted that the approval rating for Prime Minister Koizumi's cabinet had dropped to 45.8% from its previous 49.9%. His party's rating fell 2.9 points while the opposing party's rating climbed 5.3%. One article noted, however, that this converging of the two parties' ratings just prior to the election is a normally seen historical trend. The election is September 11. Another article discussed the Bank of Japan's new worry that deteriorating conditions in the U.S. could drag down Japan's economy, which until now has been resilient. When Japan's July All Households Real Spending number was released, it was worse than expected according to one article and in line with expectations according to another. It fell 3.7% year over year, far more than the 0.1% decline the previous month, and more than the anticipated 3.2% decline. All Households Real Consumption declined 4.3% month over month. However, Consumer Confidence rose to 48.1 in July, up from June's 46.6. All four categories used to compute the number rose. Another figure showed sales of foreign brands of cars in Japan increasing in August, while sales of vehicles made overseas by Japanese manufacturers dropping. Also, in developments away from the pure economic arena, Japan was undergoing its own storm at the end of the day, with a typhoon hitting southern Japan and more than 100,000 ordered to evacuate.

Other Asian markets were mixed. The Taiwan Weighted gained 0.68%, and South Korea's Kospi rose 0.73%. Singapore's Straits Times fell 0.20%, and Hong Kong's Hang Seng dropped 0.44%. China's Shanghai Composite lost 1.91%.

European markets add to yesterday's gains. Economic developments showed mixed evidence. In Italy, pressure is being applied for the Bank of Italy's governor to resign. In France, the Jan-Jul Budget Deficit widened, with that widening caused in part by increased government spending. The widening threw doubt on the Finance Minister's avowal that France's numbers would meet EU Stability standards in its overall 2005 numbers. For the Eurozone, Bloomberg's August Retail PMI, released ahead of June's sales data, rose to 51.9 from July's 50.0, with Germany's number the strongest of the countries covered. When June's Retail Sales were released, that number rose a bit higher than economists had projected that it would, but expectations are for a decline again in July. In the U.K., July's Industrial Production fell 0.3% month over month and 1.6% year over year. Coal production, mining and quarrying output slowed, impacting the number. Electricity, gas and water supply, and oil and gas production all dropped. Manufacturing Output rose 0.1% month over month and 0.2% year over year, however, against expectations for a decline. Lastly, Germany's July Factory Orders rose 2.4% month over month from June's revised-lower 2.2% rate. The orders component rose to 52.1. The Economy and Labour Ministry warned, however, that purchases of big-ticket items plumped up the number and that a decline might be expected in August.

In Europe, Volkswagen's restructuring plan, announced yesterday, continued to boost Germany's DAX. European utilities gained as a result of M&A activity. Spain's Gas Natural has a deal to buy Endessa, and E.ON announced that it might bid on Scottish Power.

As of 7:11 EST, the FTSE 100 was higher by 20.00 points or 0.37%, at 5,357.80. The CAC 40 was higher by 33.27 points or 0.75%, at 4,463.36. The DAX was higher by 30.15 points or 0.61%, at 4,940.04. These gains extend those made yesterday. Developments yesterday include the following. In the twelve eurozone countries, August's services industries index, dropped to 53.3 from July's 53.5. In contrast to this morning's OECD announcement, last week the ECB, Goldman Sachs and JPMorgan Chase & Co. had lowered their estimates for European growth due to higher crude costs. The services number was another indication that growth might be slowing. Yesterday, the DAX in particular made a strong 1.5% gain, rising above 4,900 again. Although the services industry index dropped for the twelve EU nations, it beat expectations, and Germany's actually rose to its highest figure in 19 months, boosting the DAX. Gains yesterday were also at least in part due to enthusiasm ahead of September 18 elections, with Schroeder's lead increasing. Chancellor Schroeder and his rival held a televised debate. Volkswagen's decision to cut jobs boosted that stock and the DAX. A further decline in crude also had helped as did an increase in German car registrations for August.

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