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OI Technical Staff : 11/18/2005 9:59:58 PM

The Market Monitor has been archived. You may view it and any previous days here: Link

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Jeff Bailey : 11/18/2005 5:51:10 PM

Closing Internals found at this Link

Jeff Bailey : 11/18/2005 5:39:49 PM

Swing trade put option alert ... Monday morning, as long as the QQQQ does not GAP ABOVE $41.64 (DAILY R1) place an order to buy three (3) of the QQQQ Jan $42 Puts (QQQ-MP) limit $1.25. A stop can be placed at $0.85 and will MAX TARGET $39.90 in the underlying.

I will be out of the office on Monday, but plan on returning by Tuesday's opening tick.

Jeff Bailey : 11/18/2005 5:31:31 PM

Last 3 week's Pivot Matrix found at this Link

Jeff Bailey : 11/18/2005 5:09:29 PM

Pivot Matrix for next week at this Link

Jeff Bailey : 11/18/2005 4:30:50 PM

Closing QQQQ Options Chains with today's most active (top) and December's roll at this Link ... Congratulations to November Call buyers, put sellers and underlying QQQQ bulls. I hope this month's unfolding option action had you on the right side of this market!

Linda Piazza : 11/18/2005 4:02:12 PM

The OEX has managed a climb into the close, which avoids leaving that long candle shadow on the daily chart. It has essentially created a double-top formation with the 9/09 high or 575.16 and today's high of 575.21. It has risen into daily Keltner resistance at 575.49 on a daily close.

What next? I don't know. That depends a lot on the TRAN, I think. As I type, the TRAN charges higher, up toward that envelope at 4206.49, an envelope that it has never violated since mid 1997 other than a few points intra-week. This next week could bring us the first time, of course, but that envelope has had clear relevance on the swing high late last year and then the one early this year.

So, I think the TRAN approaches strong resistance, but may not quite be there. It has created a continuation-form inverse H&S on its weekly chart, and has sprung up strongly from that, with that providing an even higher upside target of about 4290 or perhaps a little lower.

Until the TRAN pulls back, I don't think we see other markets collapse, so we're on the TRAN watch again next week.

Jonathan Levinson : 11/18/2005 4:00:16 PM

As discussed ad nauseum, the cycle picture is suggestive of tops being hit in numerous timeframes, while already hit and trending in others. It means that bulls should be snugging their stops, and that new longs are a higher risk proposition from current levels. It also suggests that shorts are becoming a better play, but that's still quite risky in light of the ongoing rising price pattern. Another issue to consider is that retail investors who don't follow the intraday tape will be seeing big booming headlines this weekend after what has been a very bullish week. It could contribute to opening strength on Monday.

Jeff Bailey : 11/18/2005 3:59:06 PM

Merck (MRK) $30.45 +2.83% ... busting a move back toward its jury verdict highs.

Jonathan Levinson : 11/18/2005 3:50:31 PM

Rough daily chart incl. 5 and 13 day SMAs of the put to call ratio on Stockcharts at this Link .

Jeff Bailey : 11/18/2005 3:42:19 PM

MSFT $28.08 +0.35% ...

Jeff Bailey : 11/18/2005 3:42:00 PM

Intel (INTC) $25.30 +0.71% ... might not be able to pin it to $25.00

Linda Piazza : 11/18/2005 3:37:16 PM

The descending line off the OEX's March 7 high appears to cross at about 572.13, if I've drawn that trendline correctly. I bet there will be an effort to keep the OEX above that trendline into the close, with the OEX currently at 573.03 and right in the middle of the day's range. Regardless of whether the OEX remains above that trendline or not, a close below the midpoint of the day's range (573.05) would not be short-term bullish. If the OEX manages a climb at the end of the day, closing near the high of the day, the candle will of course be more bullish, but high volume on upside moves can mean distribution, so any pullback that does occur, if one ever does, would need to occur on small volume to indicate that the overhead supply has been exhausted. Otherwise, that high volume could be problematic.

Jonathan Levinson : 11/18/2005 3:34:44 PM

Volume breadth holds at +1.5:1 on the NYSE, +1.45:1 on the Nasdaq. There's been a pickup in volume during the past 20 minutes, with the day's total up to 97.1M, on track to at least meet the 102M average daily volume.

Jeff Bailey : 11/18/2005 3:26:04 PM

Sell Program Premium ... DIA $107.29, SPY $124.73, QQQQ $41.35

Linda Piazza : 11/18/2005 3:18:58 PM

I said a few minutes ago that it was about the right time for the TRAN to try a higher move, and it did. It's retesting the previous 4137.15 high of the day with a just-reached high of 4315.93. The bearish divergences continue, and they continue not to matter today.

Jonathan Levinson : 11/18/2005 3:16:06 PM

QQQQ bounces again from the 40.29 support level. Declinign support connecting the most recent high is at 41.43. The intraday cycles are opposed, the wavelet rising as the short cycle crests, but at this point, the tractor-beam trade seems to be in the bag, with price not deviating from this long, light-volume range. Link

Jeff Bailey : 11/18/2005 3:12:50 PM

Bearish day trade stop alert ... for the QQQQ $41.36

Jeff Bailey : 11/18/2005 3:12:14 PM

03:00 Internals found at this Link

Jane Fox : 11/18/2005 3:09:56 PM

TICKS +800

Linda Piazza : 11/18/2005 3:02:13 PM

The TRAN is doing its thing, rising strongly and then trading sideways. If it's going to zoom up again, it's about the time of day when it often does so. As I type, it's testing resistance in the 4130 range.

Jeff Bailey : 11/18/2005 3:02:01 PM

03:00 Market Watch found at this Link

Jeff Bailey : 11/18/2005 2:56:31 PM

Bearish day trade lower stop alert ... on the QQQQ $41.32 +0.01% ... to break even. 1 hr. 5-minutes until expiration.

Jonathan Levinson : 11/18/2005 2:55:34 PM

Volume breadth +1.4:1 on the NYSE and the Nasdaq.

Linda Piazza : 11/18/2005 2:44:45 PM

The OEX just coils. Nothing new.

Jeff Bailey : 11/18/2005 2:41:28 PM

Not so sure I want to be short the QQQQ right now. That will change if we can get the move back below the apex of today's pennant. Day trade buyers might flinch, see the DIVERGENCE to the past, start thinking $41.00.

Jonathan Levinson : 11/18/2005 2:40:44 PM

QQQQ holds within its sideways range, the short cycle upphase still in progress but getting poor net traction as price holds back below 40.40. Volume breadth is holdong at +1.6:1 on the Nasdaq, but overall volume has fallen off precipitously after the heavy morning, 85.8M shares traded so far. Link

Jeff Bailey : 11/18/2005 2:39:23 PM

Check out the $TRINQ with DAILY/WEEKLY Pivot levels turned on. DAILY Pivot of 0.80 has held all day.

I'm pretty darned sure I don't want to be short the QQQQ above $41.48 this afternoon.

Linda Piazza : 11/18/2005 2:30:43 PM

The TRAN tests 4126 support, with the TRAN at 4126.87, having produced major bearish divergence at that equal high.

Jeff Bailey : 11/18/2005 2:29:08 PM

Sell Program Premium DIA $107.15, SPY $124.67, QQQQ $41.37

Jeff Bailey : 11/18/2005 2:28:24 PM

QQQQ $41.36 ... Dec. $40 Call (QQQ-LN) jumps to most active

Jonathan Levinson : 11/18/2005 2:24:44 PM

Stepping away for a few minutes.

Linda Piazza : 11/18/2005 2:22:00 PM

Advdec line caught between support and resistance, testing resitance near 1200 as I type.

Jonathan Levinson : 11/18/2005 2:19:50 PM

Just lost my IB feed, East-Coast server.

Jeff Bailey : 11/18/2005 2:15:47 PM

02:00 Internals found at this Link

Linda Piazza : 11/18/2005 2:14:17 PM

Advdec line still climbing and one chart shows the possibility of a further climb while another shows it jammed up again resistance. Only slightly different time frames (3- and 5-minute) and they give a completely different picture. What are you going to conclude from evidence like that?

Jonathan Levinson : 11/18/2005 2:13:50 PM

Volume breadth is up to +1.6:1 on the NYSE, +1.67:1 on the Nasdaq.

Linda Piazza : 11/18/2005 2:11:07 PM

I'm not saying much this afternoon because I don't think there's much to say, with opex Friday action going on. Right now, the OEX is testing Keltner resistance at 572.74 on 15-minute closes, and, although that resistance had looked relatively strong and had been tested previously and had held, the OEX is trying hard to press above it now. I'm not sure whether it's going to be successful.

There have been opex Fridays when I have happily traded expiring OEX options all day and others when there are such mixed signals that I'm staying out of the action, and that's what I'm doing now. The OEX looks as if it's possible that the resistance being tested will hold, but the advdec line is still bouncing and the OEX's confirmed H&S produced no downside action at all, and the TRAN is still trying to climb despite major bearish divergences.

Instead, I'm using the day to do research, studying lots of charts. I'm a person who has always believed that volume patterns are important, too, and that webinar I attended a couple of weeks ago (see this weekend's Traders Corner article for more information) really impacted me because it combined volume studies with price bar studies in a way that makes a lot of sense. I'm a neophyte, but I've been studying charts for a while now, seeing if those studies might help me determine some longer-term strategies that might be useful to you. Studying charts last night, I realized that LU's chart showed that LU was likely to rise today. If I were really using those studies correctly, I would have entered long at yesterday's close. Instead, I bought about 800 shares this morning, at a less favorable price than yesterday's and have since sold them for a small profit. I was just putting my own money to work to see if the information I'd gleaned really did work in real-time trading. This wouldn't be a daytrading strategy, but rather a swing strategy, and I'd usually be looking for options since this is an options-trading site, but this was a first test.

Unfortunately, I don't have those volume studies for the OEX, which is why I've been trying to use the advdec line as a sort of general guide to what's going on with volume in the markets, to some success before this opex cycle. That's a scalper's tool, though, so if I do get to the point of introducing this other strategy for swing trading, we'll probably have to do it on the spiders, QQQQ's or diamonds.

Jane Fox : 11/18/2005 2:06:17 PM

ES has not broken its red trendline yet but the VIX has, which is bullish. Internals are hard to read today which, for the month of November, is nothing new. Link

Jeff Bailey : 11/18/2005 2:06:01 PM

MSFT $28.00 +0.10% ($27.50 OI) ...

INTC $25.19 +0.31% ($25.00 OI) ...

CSCO $17.00 -2.13% ($17.50 OI) ... Not looking QQQQ $40.05 at this point.

Jeff Bailey : 11/18/2005 2:03:41 PM

02:00 Market Watch found at this Link

Jane Fox : 11/18/2005 2:00:00 PM

BTW I missed a TICK +1000 at 1:40

Jonathan Levinson : 11/18/2005 1:59:27 PM

QQQQ - Exit Point Alert -

Stopped out QQQQ at 41.45, -.06

Jonathan Levinson : 11/18/2005 1:59:19 PM

Once again, QQQQ's wavelet cycle is topping as the short cycle tries to turn up. The last such attempt failed around 12:30PM, but this bid feels more persistent. Link

Jane Fox : 11/18/2005 2:03:08 PM

The AD volume is back to new daily highs and it is time for shorts to take their fishing poles out of the water.

Jeff Bailey : 11/18/2005 1:59:52 PM

Bearish day trade adjust stop alert back off my bearish stop to $41.48 on the QQQQ. ... Slap a "dynamic" on today's range, $41.46 is 50%

Linda Piazza : 11/18/2005 1:57:05 PM

The TRAN is testing the 4133.78 high of the day, edging just past it as I began typing this post. The TRAN is at 4135.31 as I type, and gaining fast.

Linda Piazza : 11/18/2005 1:49:13 PM

The advdec line is climbing again, as I suggested it might be getting ready to do in my 1:26:05 post. The OEX is climbing with it, up now past the top of this morning's gap, but not past the neckline of that H&S yet. It's paralleling it. As I've said too many times today, you can't count on anything happening the way it appears it will happen on an opex Friday.

Jane Fox : 11/18/2005 1:38:49 PM

TICKS +1000 right out of the blue.

Jeff Bailey : 11/18/2005 1:37:00 PM

Bearish day trade lower stop alert ... on the QQQQ to $41.46.

Jonathan Levinson : 11/18/2005 1:36:52 PM

Ten year notes are bouncing, TNX down to a 1.9 bp gain at 4.478% here. IRX is flat at 3.912%.

Jeff Bailey : 11/18/2005 1:32:55 PM

speaking of pennants .... Updated QQQQ day trader's chart at this Link

Jonathan Levinson : 11/18/2005 1:25:30 PM

Volume breadth +1.15:1 on the NYSE, +1.5:1 on the Nasdaq.

Linda Piazza : 11/18/2005 1:26:04 PM

The advdec line is printing 30-minute candles right along support now at -50 to +60 and is printing those bars right below resistance now at 550 and up to 885.

For the first time since early morning, however, it has broken above a line now at 330, so unless it quickly reverses, it looks as if it's going to try to break through resistance. "Try to" doesn't mean "will," of course, but there's been a short-term improvement in how it looks on a Keltner basis. Advdec line now at 465.

Jeff Bailey : 11/18/2005 1:25:05 PM

Jane (12:58:40) ... Yes! That makes sense doesn't it. Like a pennant pattern. Wide (high/low) days ago, then narrows in, compressing, ever compressing as the time table ticks nearer.

Jonathan noted a pennant in the QQQQ a couple of days ago. It unleashed to the upside. Powerful, powerful they are.

Jeff Bailey : 11/18/2005 1:20:32 PM

Did anyone find the DnTickVol/UpTickVol on those Jan. $40 Puts (QQQ-MN) $0.40, which is today's currently most active QQQQ option (50,477:100,801) a bit suspicious? The dn/up volume strongly suggests selling of that option, hidden, yes hidden by the VXN.X measure of near-term Nov. $40/$41 Call selling.

Keene Little : 11/18/2005 1:18:05 PM

Just looking at the move up from Wednesday's low, it looks like the TRAN needs another high to give us a clean 5-wave move up. It should then be ready for a deeper pullback after that.

Jeff Bailey : 11/18/2005 1:16:36 PM

Note today's VIX.X and VXN.X measures. Also a "relief of pressure" type of action.

Jeff Bailey : 11/18/2005 1:15:49 PM

01:00 Internals found at this Link ... Anyone noticing today's NYSE NH/NL indications? Did you read Keene's Market Wrap from last night? Great discussion regarding NYSE NH/NL.

Today looks more like something we see AFTER an expiration. A "release of pressure" from, well, from artificial selling to keep something pinned under a key level.

Linda Piazza : 11/18/2005 1:12:53 PM

The OEX's five-minute Keltner chart shows it again ringed by support and resistance that look about equally weighted. It needs a strong push one direction or the other to break through that. I think the pattern could have been a retest of the H&S neckline that it broke through earlier, but on opex Friday thinks can look like a duck and quack like a duck, but not be a duck or anything else but an illusion meant to fool you. Be careful.

Jonathan Levinson : 11/18/2005 1:11:26 PM

5-day 3-min view of QQQQ. If this is a descending triangle (as the cycles would suggest), then today's print is bearish. If that slight rising slope off the intraday low is valid, however, then a neutral pennant here would tend to be a continuation pattern (bullish). A break of 40.29 or 40.40 on volume could be enough to resolve as price continues to wedge itself into the apex: Link

Linda Piazza : 11/18/2005 1:04:19 PM

And there goes the TRAN, bouncing right back across that S/R line, on its first test of the line after sinking beneath it.

Jeff Bailey : 11/18/2005 1:03:22 PM

01:00 Market Watch found at this Link

Linda Piazza : 11/18/2005 1:01:45 PM

The advdec line is beginning to show some bullish divergences, but as long as its staying beneath a line currnetly at about 410 on each bounce, it's maintaining its downward trend. Advdec line now at 116, QCharts value.

Jane Fox : 11/18/2005 12:58:40 PM

To tell you the truth Jeff the TICKS are not as bad today as they have been on some days this month. Take a look at Nov 9th they ranged from +1080 to -1052 Link

Linda Piazza : 11/18/2005 12:53:00 PM

The OEX did not fall sharply after confirming that H&S. This is typical action for an opex Friday and the reason I warned that you not be too confident of any formation fulfilling its target from this point on. The current rise could be part of a retest of resistance, up near 572 but extending as low at 571.56.

Jeff Bailey : 11/18/2005 12:55:39 PM

Goldcorp (GG) $20.19 -1.41% ... pulled away from its $20.00 Call/Put resistance yesterday, gravitates back toward today? Session low $20.03.

Yesterday's high juuuuust above WEEKLY R2 of $20.68.

Not a component of the QQQQ.

Jeff Bailey : 11/18/2005 12:48:16 PM

Jane ... It is option expiration as you and everyone knows. Ticks will be all over the place as institutions try to square things up. You're right though, the tick gives credence to how expiration can impact trade.

Linda Piazza : 11/18/2005 12:46:43 PM

TRAN dropping beneath support that held earlier today. This is just a first and perhaps temporary chink in its armor, but my weekly chart, posted earlier, tells me that the TRAN came within 75 points of a major swing high, one that it doesn't always achieve fully.

Jane Fox : 11/18/2005 12:43:33 PM

The TRIN has been on a steady climb all day and continues to make higher highs and lows but its range from 0.42 to 0.92 is anything but bearish.

Jane Fox : 11/18/2005 12:40:36 PM

Well the bulls tried to muster the troops but the bears were just too strong and pushed them back. How far they can push remains to be seen so for now all we have is pushing and shoving. Both AD volume and line are now below 0 (for sure) and falling.

Jane Fox : 11/18/2005 12:38:47 PM

Egads now we have TICKS -800. THis is not the kind of environment to be trading.

Jonathan Levinson : 11/18/2005 12:38:45 PM

Session lows for ES and YM, not yet for QQQQ (2 cents away). Volume breadth is down to -1.07:1 on the NYSE, +1.2:1 on the Nasdaq.

Linda Piazza : 11/18/2005 12:37:25 PM

The TRAN today has been bouncing from Keltner support now at 4120. You want to see that violated strongly before you believe that the TRAN is doing anything but just consolidating. TRAN at 4123.63 as I type.

Linda Piazza : 11/18/2005 12:36:30 PM

The OEX may be in the process of confirming a H&S on its five-minute chart, downside target 567.42. You want to see the OEX drop sharply now before you believe in this too strongly. If opex Friday is noted for anything, it's noted for formations that set up, but never go anywhere.

Jeff Bailey : 11/18/2005 12:34:08 PM

QQQQ Options Chain with most active on top, and same Nov/Dec strikes some traders have been monitoring for weeks at this Link ... I'm thinking the near-term "bear squeeze" takes a little rest. $41/$40 call selling hints of gravitation toward $40.00 settlement.

Linda Piazza : 11/18/2005 12:32:55 PM

Mark's comments earlier pointed to his frustration. I have talked to every accomplished trader I know over the last week, and all have had a tough time the last week or two. Mark, you're not alone! Shall I tell how I had an SPX 1240/1250 bear call spread for this opex cycle, and how I decided as the sold call was violated yesterday to take my chances with holding it over unless the SPX closed above 1243 yesterday, as that was my cutoff point? And how I don't even want to look at the SPX's settlement value this morning?

It takes a lot of courage to trade out in public. It takes a lot of ability to multi-task, too, as my attempts this month changed my strategy from a profitable one into an unprofitable one for me last month. Congratulations, Mark, for having that courage.

You readers don't have to take all our trades, but perhaps you should benefit from our frustrations. I absolutely am going to have to caution people not to take mine right way, because what I've discovered this week while working in isolation is that when I began posting trades, I tried to turn true scalps into longer plays to milk a little extra out of them for the readers who might not be skilled at getting between the bid and the ask or who might not have enough money to buy deep-in-the-money options. My plays work as scalps, but not as anything else, and that means that a lot of you won't be able to benefit from them. The play that makes me $14.10 per contract (or even, occasionally $4.10) might be a losing play for you by the time I get the entry and exit uploaded. Of course, some plays make far more than that, but a surprising number of them make small profits. You have to paper trade them when I start posting again to see if they work for you.

Jonathan Levinson : 11/18/2005 12:29:48 PM

QQQQ volume has slowed considerably here, though it's already surpassed yesterday's total. Currently, 72.2M shares have traded, 30M shares below the average daily volume.

Jonathan Levinson : 11/18/2005 12:24:08 PM

LONDON (Reuters) - Copper prices rose again to record highs above $4,200 a tonne on Friday as investors gambled that China cannot ship enough metal to cover a trading position that might expose it to losses of $200 million.

Traders believe a looming December delivery deadline on contracts to supply between 150,000 and 200,000 tonnes of copper placed by a Chinese trader will be impossible to meet. The trader has since vanished.

"The Chinese have just added to the nervousness of a market that was already nervous. This market is flying on vapour now," Angus MacMillan, metals strategist with Bache Financial said.

Link

Jeff Bailey : 11/18/2005 12:21:19 PM

QQQQ Day trader's chart with QCharts' WEEKLY/DAILY Pivot Levels at this Link

Jonathan Levinson : 11/18/2005 12:21:10 PM

Volume breadth +1.4:1 on the NYSE, +1.6:1 on the Nasdaq.

Jane Fox : 11/18/2005 12:17:56 PM

And the bulls are trying to ramp this up again TICKS +800.

Jonathan Levinson : 11/18/2005 12:15:46 PM

QQQQ has broken the descending resistance line off the session highs, but the wavelet cycle is overbought and due to roll over: Link

Jane Fox : 11/18/2005 12:12:35 PM

The day started out to be a good trading day but has fallen into a non directional mess again. The kind of day we have seen most of November.

Jeff Bailey : 11/18/2005 12:11:24 PM

12:00 Internals found at this Link

Jonathan Levinson : 11/18/2005 12:07:23 PM

IB reports a trading halt in effect on the NYMEX: Link

Linda Piazza : 11/18/2005 12:08:32 PM

The OEX is testing the top of the descending regression channel in which it's traded lower today, with the top of that channel at about the current 571.84 level. After the last test of the channel's resistance, it did not swing all the way to the bottom of the channel, a sign of short-term strength, and it's looking as if it may either trade sideways out of the channel or else bounce. Most of the day it's been finding resistance on five-minute closes at a line at 571.91, so you can use a five-minute close above or below that as evidence of a short-term change in trend. The five-minute chart shows the OEX settling between roughly matched resistance and support. Barring a strong push one direction or the other to shake up the lines, we may have settled into the typical opex tight-range chop.

Jane Fox : 11/18/2005 12:03:58 PM

The AD volume is now testing its daily lows but still above 0. The AD line is below 0 but not by much and we have entered the "Chop Zone." So much for a good trading day.

Jeff Bailey : 11/18/2005 12:03:03 PM

12:00 Market Watch found at this Link

Jonathan Levinson : 11/18/2005 12:01:50 PM

QQQQ - Entry Point Alert -

Short QQQQ at 41.39 stop 41.45

The stop stays tight because of the potential for a new short cycle upphase on a break of current short cycle resistance.

Linda Piazza : 11/18/2005 11:55:42 AM

The TRAN's pullback looks a little bull flag-ish. Another shot higher is not yet precluded for the TRAN. It's balancing on support a 4117.63 on a 30-minute basis, with next support at 4099.80, but strongest support way down at 4081.96. As long as it's staying above the 4099.80 support on 30-minute closes, it hasn't changed its pattern, though.

Jonathan Levinson : 11/18/2005 11:53:32 AM

The Fed has announced a coupon pass deliverable on Monday, in the amount of 1.095B. This will be a permanent add, effectively a repo that never expires, and will reduce the amount of Monday's expiry by that amount.

Jane Fox : 11/18/2005 11:53:24 AM

I would not be surprised to see the bulls ramp it up again so I have drawn where I think ES should find resistance and VIX support (red trendlines). If both these lines break then you know the bulls are gaining momentum. Link

Linda Piazza : 11/18/2005 11:49:48 AM

After punching through the 30-minute upper Keltner resistance and then falling back to that resistance this morning, the OEX has since fallen through another level of Keltner support/resistance on that chart. It's clinging to support at 571.60 on a 30-minute close. As long as it's doing that, it will go on challenging resistance, with first resistance at 572.34 on 30-minute closes. If the OEX loses that support on a 30-minute close, it looks vulnerable to 569-569.74, the next support. The OEX has a way often of clinging to that support/resistance level now at 573.34, however, trading just either side of it, and that would fit with an opex scenario, so be careful of assumptions from here on out.

Jane Fox : 11/18/2005 11:49:38 AM

Egads I stand corrected AD volume never did get below 0 so the bearish picture is not complete and remains a little murky.

Jonathan Levinson : 11/18/2005 11:46:48 AM

QQQQ has descending trendline resistance off the intraday high at 41.41: Link

Linda Piazza : 11/18/2005 11:41:11 AM

The OEX has dropped through the support that held it up earlier, the 2-minute 100/130-ema's.

I said early on today that the potential for a pop-and-drop day was there, and it showed up in all the particulars except one--the TRAN. The advdec line's support and resistance lines were so skewed early on, too, that it was difficult to give strong credence to what I was seeing. I'm not taking credit for a play that I did not post (or take myself), because I wouldn't have posted it, even if not taking a hiatus this week, because of the TRAN's conflicting evidence. Rather, what I'm saying is that the evidence is clear that "they" ran the indices higher into opex (this morning was settlement for the SPX options) and then prices were allowed to do what they had been set to do. It's a manipulation game. I bet lots went long this morning when indices climbed, and I was trying to stop that from happening among our readers when I warned of the pop-and-drop possibility.

Jane Fox : 11/18/2005 11:40:38 AM

TNotes are as flat as a pancake but have just recently made a new daily low but not by much.

Jane Fox : 11/18/2005 11:38:41 AM

AD volume/line are below 0 and making new daily lows. VIX and TRIN are making new daily highs. The bearish picture is now complete and the bears are in control.

Jeff Bailey : 11/18/2005 11:36:22 AM

Intel (INTC) $25.16 +0.15% ...

Jeff Bailey : 11/18/2005 11:36:01 AM

Microsoft (MSFT) $27.90 -0.25% ...

Linda Piazza : 11/18/2005 11:35:52 AM

The TRAN just trades sideways. There was a rough H&S-ish formation, but the TRAN is extending the right shoulder too far. The neckline would be at about 4116, with the TRAN now at 4117.38 and coming down fast toward that neckline to retest it.

Jonathan Levinson : 11/18/2005 11:35:09 AM

QQQQ has reversed course from a lower high at 41.47, trading back to 41.35 here, +.04 for the day. The short cycle downphase stalled when the bounce exceeded 41.40, and is currently chopping and flopping below the midpoint of its range. Below 72 SMA support in play here at 41.30, the bears should resume control. Link

Jeff Bailey : 11/18/2005 11:33:48 AM

Bearish day trade short alert ... for the QQQQ $41.35 here, stop $41.52, target $41.05.

Jane Fox : 11/18/2005 11:25:27 AM

Here are the charts to go along with Larry's commentary. Link Link

Jane Fox : 11/18/2005 11:20:31 AM

And the rest of the storyEquity-only put-call ratios remain bullish. Both have made new lows for this move, and that is bullish for the broad market (a falling put- call ratio accompanies a rising market). As you can see from the charts in Figures 2 and 3, these ratios are only about halfway down their recent charts. That certainly doesn't qualify as 'overbought' something near the bottom of the chart might, but that's still a ways off in the future. Market breadth has arguably been the weakest of our group of indicators. Advances just haven't outpaced declines by much.

Finally, let's discuss volatility ($VIX). It made a new relative low, confirming the bullish nature of this market. As with the put-call ratios, a declining $VIX is bullish. $VIX has only closed this low on one other day, dating back to July. Thus, we might concede the point that $VIX is indeed overbought.

In summary, we look for higher prices, fueled by traders who are short or who have not bought yet, even though they wish they had. The market is only modestly overbought, in our opinion, and thus that is not a major problem. The first real challenge lies ahead on the near term: $SPX at the 1145 level. A breakout above there should generate a torrent of buying as $SPX surges to catch up with QQQQ.

Jane Fox : 11/18/2005 11:19:17 AM

Larry McMillan's Friday Commentary So the rally continues, much to the consternation of the bears and the confoundment of erstwhile bulls who are looking for a correction. The ironic thing is, the market really can't pull back that much because these groups are buyers on any slight dip. That's why, for the second straight week, what some were calling an overbought condition was worked off by sideways action with the market then blasting higher, leaving a stairstep pattern on the charts . Shorts and underinvested institutions comprise this group of eager buyers (not to say there aren't plenty of 'regular' buyers who are already long and are adding to positions -- there are, but they aren't the majority group at the moment). Eventually, the underinvested will be sated and then market will top but probably not for a while yet.

The charts of the major indices remain very positive in an uptrend, above support, and above rising moving averages. $SPX, $OEX, $DJX (the Dow), and NASDAQ (QQQQ) all made new relative highs for this move, with $DJX making a new yearly high, and QQQQ registering its highest levels since early 2001. Regarding $SPX, a new high seems likely. However, considering that it has failed in the 1245 area twice before, some speculative sellers will probably take positions near that level again. A breakthrough to new highs, though, will turn those traders into short-covering buyers along with the other buyers mentioned above.

Many analysts continue to call this market 'overbought.' We just don't agree. Our technical indicators usually pick up on these things, and yet we really haven't seen any extreme overbought conditions so far. We'll elaborate below...

Linda Piazza : 11/18/2005 11:16:29 AM

The OEX dipped a little lower than the open and the target for its H&S this morning, right to the two-minute 100/130-ema's at 571.88 and 571.49, and then it bounced. I had anticipated the bounce beginning somewhere in that zone, but thought nearer 572 might be the bounce point, rather than the low of 571.59.

Now what? The OEX is straddling Keltner support at 572.23 on 15-minute closes, so it hasn't really proven that it can bounce much higher. If it does, look for resistance at 573.42-573.58, if it rises that high. Remember that this is opex Friday and I wouldn't be surprised to see the OEX find some Keltner support/resistance line to hug the rest of the day. OEX at 572.55 as I type, though, so perhaps it's going to rise into that resistance after all.

Jeff Bailey : 11/18/2005 11:14:31 AM

11:00 Internals found at this Link

Jane Fox : 11/18/2005 11:12:13 AM

TICKS +800

Jonathan Levinson : 11/18/2005 11:09:49 AM

Volume breadth +1.30:1 on the NYSE, +1.13:1 on the Nasdaq.

Jane Fox : 11/18/2005 11:05:47 AM

Bears are gaining momentum. The AD line is almost below 0 but we need the AD volume below 0 before the picture is complete and the bears have grabbed the reins and are in control.

Jeff Bailey : 11/18/2005 11:04:36 AM

11:00 Market Watch found at this Link

Jonathan Levinson : 11/18/2005 11:04:20 AM

Session low for ten year notes and QQQQ here.

Linda Piazza : 11/18/2005 11:01:16 AM

The OEX approaches its downside target for its H&S, the two-minute 100/130-ema's and this morning's open. Potential short-term support.

Jeff Bailey : 11/18/2005 11:01:17 AM

Sharper Image (SHRP) $9.35 +5.05% Link ... consistent 52-week low on the NASDAQ finding a bid today.

Jonathan Levinson : 11/18/2005 10:57:07 AM

The move to gap support bottomed the shortest cycle (the wavelet, middle oscillator pane) while triggering a rollover in teh short cycle (pane just above it). The 30 and 60 min cycle channels haven't even stalled their rise yet, so although it feels bearish, the bulls are clearly finished just yet. A lower high on this wavelet bounce is the next goal for bears- bulls need to break 40.41 resistance on this bounce. Link

Linda Piazza : 11/18/2005 10:52:21 AM

Advdec line dropping. OEX attempting to steady now that it's almost met its downside target for its H&S on its two-minute chart, with that target at 571.95, just above the location of the two-minute 100/130-ema's at 571.82 and 571.37. That's of course also near this morning's open, so I wouldn't be surprised to see a bounce attempt somewhere between the OEX's current 572.44 level and this morning's open. Then, bears wanting a new entry should be watching for divergences, with resistance hopefully in the 573.05-563.60 region, with bearish attributes on the advdec line and the VIX still rising and the TRAN turning over. That's a lot to ask, but you want a lot in your favor if you're going to trade after the early morning period on opex Friday, when action often slows.

Jeff Bailey : 11/18/2005 10:54:42 AM

Dow Jones Home Construction (DJUSHB) 927.85 +0.88% Link ... retraces 38.2% (for second time, see yesterday's 200-day SMA observation) of its July-October decline.

Bullish implications as MACD moves above zero for first time since falling below in August.

Jane Fox : 11/18/2005 10:51:25 AM

AD line is falling but still above 0 and although AD volume is falling it has not yet made a new daily low. Taking into consideration the bearish VIX though I am no longer bullish but have not yet moved to the bear's corner.

Jeff Bailey : 11/18/2005 10:49:34 AM

As the near-term December Unleaded Gas contract slips below its 80.9% retracement, this would likely be the "equity" index that market participants will monitor closely next week. S&P Retail Index (RLX.X) with May-July range of retracement at this Link

Jonathan Levinson : 11/18/2005 10:47:17 AM

QQQQ testomg gap support at S1 here, 41.31 as the short cycle begins to roll over. Link

Linda Piazza : 11/18/2005 10:47:15 AM

TRAN turning down, but not significantly yet. As shown in that chart linked to my 10:42 post, I believe the TRAN is approaching the top of this swing high . . . unless it's just going to climb that envelope line. Smile.

As far back as QCharts carries TRAN charts, back in the middle of 1997, the TRAN has never violated that envelope other than on a mild, intra-week violation of a few points last December.

Jonathan Levinson : 11/18/2005 10:45:49 AM

The realtime p/c ratio is up to .53, still an extremely low reading for the total p/c ratio. QQV is back up to flat, +.01 at 12.80, suggesting a slowing in the sale of calls noted earlier.

Jeff Bailey : 11/18/2005 10:45:10 AM

Continuous Unleaded ($GASO) and $0.01 box size at this Link

Linda Piazza : 11/18/2005 10:43:46 AM

Strong bounce on the VIX. I mentioned this morning a couple of times that it was in territory that should see a bounce, and it is, so far.

Jonathan Levinson : 11/18/2005 10:43:28 AM

Looks a mistype just now resulting in a bad tick to QQQQ 39.40: Link . Quotetracker users can zap it out by clicking the chart and pressing ctrl-shift-L.

Linda Piazza : 11/18/2005 10:43:07 AM

The OEX is dropping through that Keltner support that should have been strong enough to support it, at least for a bounce attempt. Watching to see if it tries to bounce during this five-minute period.

Linda Piazza : 11/18/2005 10:42:04 AM

I've been searching through archived Market Monitors looking for the copy of the TRAN chart I posted last week and so many times during the last year. I had accidentally deleted it. Now I've recreated it, showing that the TRAN is approaching but not quiet yet at resistance that usually stops it cold. Link

Jeff Bailey : 11/18/2005 10:40:58 AM

December Unleaded (hu05z) alert $1.44 -1.36% ... breaks under 80.9% retracement of May ($1.31)-September ($2.06) surge.

Linda Piazza : 11/18/2005 10:38:40 AM

OEX dropping toward Keltner support at 572.61-572.94. Its little H&S has a lower downside target, but I expect some kind of bounce attempt from there.

Jeff Bailey : 11/18/2005 10:37:18 AM

Cisco Systems (CSCO) $17.02 -2.01% Link ... #3 most heavily weighted NDX/QQQQ component lower after the company said it plans to acquire television set top box maker Scientific-Atlanta (SFA $42.04 +1.42% Link for $6.9 billion.

Jonathan Levinson : 11/18/2005 10:34:15 AM

QQQQ update at this Link with volume declining on the pullback. The red dots over each candle are 30-min keltner channel violations, which I've been ignoring because that cycle is clearly in trending mode. The declining volume on the pullback looks bullish to me here, but the toppy/trending cycles noted earlier suggest that a reversal is out there somewhere, overdue.

Tab Gilles : 11/18/2005 10:35:54 AM

Nasdaq 100 ($NDX)/ UOPIX UPDATE- As per 11/3 11:51 AM & 11/3 12:45 PM posts.

Entered 1/2 positions on 10/26 $22.66 & 11/2 $23.66; yesterday's closing NAV $25.57. Link

With the the RSI & Stochs in overbought, I'm initiating a trailing stop using the 10-ema on 1/2 position. Link

$NASI Weekly Is still in bull mode. Link ...Daily $NASI... Link Link

On the upside for the NDX, I'm targeting resistance nearterm at 1735...with 1800 as a longside peak. Link

Linda Piazza : 11/18/2005 10:31:38 AM

There's a lot of potential Keltner support for the OEX in the 572.57-572.95 region. OEX at 573.38 as I type.

Jane Fox : 11/18/2005 10:25:36 AM

Being an OPEX Friday I expected the VIX to be "spikey" today but so far it has been totally behaving itself. With that said I see the VIX is making new daily high, which bulls should be a bit concerned about.

Linda Piazza : 11/18/2005 10:23:56 AM

TRAN still climbing, at 4131.86 as I type.

Linda Piazza : 11/18/2005 10:23:39 AM

It's rough and you have to ignore the spike on the first two-minute candle, but the OEX has a possible H&S on its two-minute chart, head at about 574.70 and shoulder level at about 574.15, neckline at about 573.25, and still lacking a right shoulder. The VIX has an inverse H&S on its chart, still lacking a right shoulder.

Jeff Bailey : 11/18/2005 10:22:54 AM

10:00 Internals found at this Link

Jonathan Levinson : 11/18/2005 10:21:42 AM

With NDX volatility (QQV) down 3.05% or .39 to 12.4 and the very low total p/c ratio, my guess is that we're seeing an excess of calls being sold. Were they being bought, the QQV should be higher instead of lower. Are insitutions selling calls here, either taking profits or shorting? The strong volume in QQQQ suggests institutional buying in the underlying, however. Perhaps the same players selling calls against their QQQQ buys.

Keene Little : 11/18/2005 10:17:15 AM

The TRAN is at a vulnerable point here. If today's spike above the upper trend line along the highs since March 2002 is then reversed, it will leave a negative divegence on the oscillators. A collapse back under the trend line after leaving a negative divergence would be a ringing of the bell to get short. At least short the Trannies that is. We may still see the broader index rally which would then be further confirmation that we've got a rally that's on its last legs. Link

Jonathan Levinson : 11/18/2005 10:16:03 AM

DTN reports the realtine total CBOE put to call ratio at .49 (total, not just equity component), which is an extremely low reading, and the lowest I've seen in weeks, possibly months. The first 1/2 hour's reading was .57 Link . Being op-ex week, extreme readings are more common than usual, but it still shows a strong imbalance to the call side.

Jonathan Levinson : 11/18/2005 10:12:49 AM

Nothing extreme about the NYSE or Nasdaq TRINs at .62 and 1.06 respectively, and advancing vol is leading +3:1 and +2.2:1, strong but not extreme. Overall volume is still strong for the Qs at 35.4M shares now, more than half of yesterday's volume. If these gains don't hold, as the cycles suggest they shouldn't, then it will leave a high volume doji for the day. But it will take at least a failure of gap support at 41.31 to suggest anything more than bullish consolidation on the pullback- the price trend has been stronger than all the cycles and internals combined. Link

Linda Piazza : 11/18/2005 10:12:27 AM

Bearish divergence on the OEX's last swing high on the five-minute chart. At least so far. VIX starting to bounce now. TRAN just pausing, not really pulling back.

Linda Piazza : 11/18/2005 10:10:46 AM

The advdec line has broken above the resistance that held it earlier. It's not yet at an extreme for the upside move on the short-term chart. TRAN still climbing.

Jane Fox : 11/18/2005 10:09:59 AM

As long as these two remain this bullish it is NOT time to be short. Link

Linda Piazza : 11/18/2005 10:09:45 AM

VIX still headed lower.

Linda Piazza : 11/18/2005 10:07:59 AM

TRAN still climbing. I wish I hadn't erased that TRAN envelope chart I had so long. I believe the upside target on that chart was something like 4165 (likely a little higher now), with the TRAN now at 4127.09.

Jeff Bailey : 11/18/2005 10:07:30 AM

QQQQ $41.64 +0.79% ....

Jeff Bailey : 11/18/2005 10:07:12 AM

SOX.X 480.34 +2.90% ....

Linda Piazza : 11/18/2005 10:07:00 AM

The OEX ended at the 30-minute Keltner line, just a little above it, still leaving a long candle shadow above it. That doesn't look healthy. I have to go back to June 17 to find a 30-minute candle at the top of a climb that even approximates something like that. After the June 17 candle, though--An opex Friday, by the way, that punched to 574.37!--the OEX dipped to a low of 571.09, but essentially traded sidways all day, dipping a bit further that Monday, and then trading sideways all the way until June 23, when it finally began falling.

Jane Fox : 11/18/2005 10:06:59 AM

TICKS +800 it is dangerous for shorts out there.

Jeff Bailey : 11/18/2005 10:06:34 AM

KLA-Tencor (KLAC) $51.82 +1.82% ... sets up for test of 52-week high.

Jonathan Levinson : 11/18/2005 10:06:15 AM

Session low for crude oil, -.525 at 56.625.

Jeff Bailey : 11/18/2005 10:05:20 AM

10:00 Market Watch found at this Link

Jonathan Levinson : 11/18/2005 10:03:37 AM

QQQQ is back to its premarket highs, bonds recovering slightly and volume breadth rising back above +2:1 for the Nasdaq.

Jane Fox : 11/18/2005 10:03:04 AM

The AD line is not as bullish as it was yesterday, which one should have expected, but AD volume is now making new daily highs and you should be very careful shorting.

Linda Piazza : 11/18/2005 10:02:58 AM

Advdec line coiling now beneath that resistance, now up to about 1930 with the advdec line now at 1647, QCharts value.

Linda Piazza : 11/18/2005 10:02:13 AM

TRAN still climbing.

Linda Piazza : 11/18/2005 10:01:32 AM

Watch the VIX. It punched way down this morning, but is on Keltner support.

Linda Piazza : 11/18/2005 9:59:09 AM

Just so you know, if I were not on hiatus from making play calls this week, I would still not be doing anything right now, because I see a mixture of evidence.

Jonathan Levinson : 11/18/2005 9:58:01 AM

QQQQ just drifts sideways from its partial opening gap fill, a repeat of the majority of pullbacks we've seen this week. Link

Linda Piazza : 11/18/2005 9:57:12 AM

OEX 30-minute Keltner picture: The OEX's 30-minute Keltner resistance is at 573.44 on 30-minute closes and the OEX hovers near there as this 30-minute period approaches its close, after piercing that channel line. That's not healthy, but the TRAN hovers near its high, not pulling back, and I'm not making any bearish assumptions while the TRAN does that. That's unfortunate, because the advdec line is pulling back, at least for now, from the resistance that it approached.

Jonathan Levinson : 11/18/2005 9:53:20 AM

A 2B weekend repo results in a 2.25B net drain for the day, but demand for the money was predictably lower than yesterday, the stop out rate 3.96, 2 bps below yesterday's 3.98 and 4 bps below the overnight target rate.

Jane Fox : 11/18/2005 9:51:06 AM

I see bearishness creeping in. The AD line is making new daily lows and volume is falling but both are above 0 and with the AD line at +550 you can't give the reins to the bears just yet.

Linda Piazza : 11/18/2005 9:50:59 AM

TRAN pausing but not pulling back yet.

Jonathan Levinson : 11/18/2005 9:49:57 AM

Strong volume so far this morning, with 20.4M QQQQs traded already- almost 1/3 of yesterday's 65.9M share total.

Jonathan Levinson : 11/18/2005 9:47:14 AM

Volume breadth +2.5:1 on the NYSE, +1.7:1 on the Nasdaq.

Linda Piazza : 11/18/2005 9:47:22 AM

Advdec line finding resistance at a line currently at 1945. The OEX's first 15-minute candle left a long candle-shadow behind. Definite possibility of a pop-and-drop day, but the TRAN has to cooperate and it's still climbing.

Jonathan Levinson : 11/18/2005 9:45:14 AM

Ten year note yields are up 4.1 bps here at 4.5 bps, 13-week rates +1 bps at 3.922%, steepening the yield curve. Awaiting the Fed's repo announcement regarding the 4.25B overnight repo expiring today.

Jane Fox : 11/18/2005 9:43:21 AM

AD line is +851 and AD volume climbing so the bulls certainly have the reins this morning.

Linda Piazza : 11/18/2005 9:41:33 AM

TRAN at 4110.34 as I type, and unless it drops sharply this first hour, leaving only a candle shadow behind at this high level, it's invalidated the H&S on its 60-minute charts, sharply rising neckline or not.

Linda Piazza : 11/18/2005 9:40:31 AM

OEX Keltner picture, moving up to the 30-minute chart. The OEX has punched through Keltner resistance on that that chart, at 573.44 on 15-minute closes. However, it pulls back sharply toward that Keltner line as I type. If it should close the 30-minute period below that line, it not only will not create a breakout, but it will show that resistance to be strong. OEX at 574.02 as I type. The advdec line's lower open this morning has skewed the very short-term charts, but it, too pulls back from the early high. The skewing of the lines doesn't give me a good read on this, but there's the possibility, not yet proven, of a pop-and-drop open. I don't see firm enough evidence yet to say that's what it is, but it remains a possibility.

Jeff Bailey : 11/18/2005 9:41:31 AM

Semiconductor Index (SOX.X) 473.88 +1.51% Link ... gaps above prior Nov. $460 Put open interest.

Jonathan Levinson : 11/18/2005 9:39:30 AM

Volume breadth is down to +4.3:1 on the NYSE, +1.7:1 on the Nasdaq. QQQQ's pullback is steeper than we saw yesterday, though volume is decreasing on the decline so far this morning. All the cycles are looking for downphases, from short all the way out to weekly, but in the strongest moves, they can just continue trending.

Linda Piazza : 11/18/2005 9:36:42 AM

That is not a healthy first five-minute candle on the OEX. Advdec line turns lower now, but lines are skewed, so it's difficult to make an assessment as to whether this is just a small pullback or something more.

Jonathan Levinson : 11/18/2005 9:34:37 AM

QQQQ 3 min chart updated at this Link with price well above top channel resistance at 41.30. Bears need to see an immediate gap fill- so far, all of these setups have been consolidating in weak sideways bull flags, and then popping to new higher highs.

Jeff Bailey : 11/18/2005 9:37:14 AM

General Electric (GE) $35.42 +2.19% ... Conglomerate with its finger in just about every piece of the global economy forecasted sharper earnings growth for 2006, boosted its dividend and stock buyback plan and agreed to sell most of its reinsurance business to Swiss Re for $6.8 billion.

The company said it now expects earnings, excluding the insurance business, of $1.92 to $2.02 a share for 2006, up 12-17% from prior forecast.

Linda Piazza : 11/18/2005 9:34:21 AM

The OEX has punched above that descending trendline off the March high. It needs to hold that into the close today, but it's currently getting sold. The advdec line is climbing, however.

Marc Eckelberry : 11/18/2005 9:34:04 AM

Stopped out of Jan 41 puts for -.30.
It's a shame, as I think it will get back to 1 on Monday, but I raised that stop and that is it.

Jonathan Levinson : 11/18/2005 9:32:57 AM

Must be bad data, but DTN just showed +11:1 volume breadth on the NYSE, already pulling down to +6.72:1.

Jeff Bailey : 11/18/2005 9:31:24 AM

Program Trading Levels for Friday ... HL Camp & Company has their computers set for program buying at $+3.53 and set for program selling at $+1.61.

Jonathan Levinson : 11/18/2005 9:26:42 AM

Volume breadth is +4.16:1 on the NYSE, +3.54:1 on the Nasdaq at the open.

Jonathan Levinson : 11/18/2005 9:22:13 AM

Nov. 18 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the bank is ready to raise interest rates to stem inflation in the 12 nations sharing the euro.

"The governing council is ready to take a decision to move interest rates," Trichet said in a speech to a banking conference in Frankfurt today. The ECB will "withdraw some of the accommodation" of its current policy stance.

It is the first time Trichet has explicitly said the ECB will raise interest rates from their six-decade low of 2 percent, and suggests the bank will move at its next policy meeting on Dec. 1. The ECB last raised rates in October 2000.

Link

Jonathan Levinson : 11/18/2005 9:20:30 AM

Updated daily chart of Dec. e-mini gold, with gold trading +1.2 at 488.10 here. Session high has been 489.60. Link

Linda Piazza : 11/18/2005 9:01:11 AM

This is going to be a long-winded update on the OEX. If you don't want to read it all, just skip to the end. I should have listened to my own advice from Wednesday night's Wrap and just gone long yesterday, with the TRAN bouncing from its 10-sma and crude turning down below its converging 10-sma and 200-sma. I had mentioned those as benchmarks in that Wednesday night Wrap.

However, the day set up in such a way that while it could have produced a climb-all-day effect, which was actually seen, it was also showing extreme levels from early in the day, begging for a pullback that never came. I watched the advdec line and TRAN all day, and although the TRAN did pull back, the advdec line bounced all day from support at an extreme level.

We're back to watching the TRAN, with its equal high test at the close yesterday. That equal high could be part of a H&S seen on its 60-minute chart. Since the right shoulder rose sharply and the neckline rises, too, that equal high does not yet invalidate the formation.

As far as the OEX is concerned, it ended the day just a little above a best-fit descending trendline off the 7/28 high (three points of contact, but cutting off some of the shadow from 8/10) and below the descending trendline off the 3/06/05 high. It was between the two, with the higher and longer-term of those two at about 572.33, if I've drawn it correctly. This line has only two points of contact so far, although there have been other close approaches.

It had been my thought that the OEX was likely to set up another chop zone between the 200-sma and the previous high from this week, but the OEX broke a little higher, and now I see that we've got another terrible broadening formation at the top of the OEX's climb. So, was it a breakout or just a move up toward the top of that broadening formation?

On every intraday chart I study, there's price/RSI divergence as these news highs are met, with those divergences carrying on all month in the case of the 60-minute chart. Obviously, the OEX can climb higher with those divergence still showing up. It happened from about May 19-June 17 of this year, too. The OEX did fall back steeply from the May high, but not so very far below the point at which it had begun the process in mid May. It was producing such divergences from February 7-March 7, too, and the decline, when it finally began, was prolonged and steep. So, you can see why technicians are afraid of those divergences when they show up on 60-minute charts, and that the longer they go on, the more worrisome they become. I'm seeing some Keltner-style bearish divergences show up, too.

When I mentioned my bullish-if-the-TRAN-bounces-from-10-sma, etc. thesis in the Wrap Wednesday night, I cautioned that bulls should protect profits near recent highs, and that's still my conclusion, although the OEX created that broadening formation. Although after my study of the charts in preparation for writing that Wrap Wednesday night led me to conclude that a crude rollover beneath its 200-sma and a TRAN bounce from its 10-sma would lead to bullish sentiment, my study of charts last night didn't lead me into any strong conclusions about what happens next. Even when charts are showing those divergences and other signs that pullback are due, momentum can carry price further, as I believe it did yesterday.

I wonder how much the impending rollover in futures contracts on crude impacted its move. I study the crude contract and I see that on a 60-minute Keltner basis, it's reached a point at which it might bounce, but that doesn't preclude a day or two of sliding lower along the Keltner support before it bounces, something it sometimes does. A bounce might be equity negative. I see the VIX also at a point at which it usually bounces, with a bounce there likely equity negative, too, but with those charts not precluding a slide along that channel for a day or two before it bounces, either. Looking at the 240-minute channel, I see the VIX touching that channel line on 7/15 and then again on 7/20, creating bullish divergence, before bouncing strongly; approaching it on 9/12 and then again on 9/16, creating bullish divergence, before bouncing again strongly; and then touching it on 11/11, and then again yesterday, creating bullish divergence so far, before . . . ? Is it going to begin a bounce immediately today and will the OEX even react immediately if it does?

In this paragraph, I want to tie some of those VIX moves into what was happening with the OEX. On 7/15 and 7/20, the OEX was establishing a consolidation zone at the top of its 240-minute channel. It actually punched higher on 7/28 and 8/10, before tumbling from those 577.80-ish highs into the 556.80 low reached on 8/29. On 9/12 and 9/16, the OEX was consolidating, too, but this time, not near the top of its 240-minute channel, and the 9/16 high was a lower high, with the OEX falling from the 9/12 high of 574.85 all the way to its 9/22 low of 558.99, bouncing hard but into a lower high, and then tumbling the rest of the way into its October low of 542.77.

So, you can see that although the VIX's approach to that channel line and those VIX bullish divergences, and the OEX's approach to the upper channel line and those bearish divergences are not exact market-timing devices, they certainly scare technicians out of believing too fully in too much more upside. And all the time, momentum carries markets higher.

I do expect a punch higher today, some follow-through to yesterday's exuberance. After that, though, I unfortunately remain wary. That doesn't mean that I want to commit a lot of money to the downside right now, but I'm certainly wary about the upside, and interested in seeing how volume patterns play out on any pullback, if it does occur. Here's a VIX chart that shows some of what I've noted: Link

I'll let you know what I see today as the trading develops. If you're long going into today and especially if you've got November at-the-money or out-of-the-money options, remember that you may get your highest prices near the open if the OEX is to open and climb quickly in early trading and then stall or drift slightly sideways up. If it turns down, your calls are going to decay quickly. If there's an early climb when options are still priced highly, you'll only benefit from holding onto those ATM or OTM calls if the OEX climbs sharply the rest of the day. Any other outcome--sideways the rest of the day, a slight gain the rest of the day or an actual downturn--would probably see you garnering less money than you would after an opening move higher. There are no guarantees. Of course the day that you elect to be conservative and sell on an opening bounce, the OEX is going to climb all day. And the day you elect to play a wait-and-see tactic, the OEX will climb sharply, then reverse just as sharply and tumble all day. I can't tell you ahead of the opening which is most likely, but I'll tell you what I see after the open.

Jonathan Levinson : 11/18/2005 8:49:41 AM

Session low for ten year notes at 108 13/16, with TNX +2.7 bps at 4.486%. IRX is up 1 bp at 3.922%.

Jane Fox : 11/18/2005 8:33:44 AM

Dateline WSJ Cisco Systems Inc. agreed to purchase cable-television-technology concern Scientific-Atlanta Inc., paying $43 per share in a cash deal valued at about $6.9 billion that comes as equipment makers respond to evaporating lines between the Internet, television and telephone industries.

Long a cornerstone of big corporate and government data networks, Cisco is now pushing its products directly to consumers. It is doing that just as the nation's big telephone companies begin rolling out fiber-optic systems to send television to homes using Internet technology.

The deal, announced Friday, offers Scientific-Atlanta stockholders a 4% premium over where the shares traded Thursday. The price represents a premium of about 20% since rumors about a potential sale first surfaced in early November. Cisco said the net cost of the purchase would be $5.3 billion when taking into account Scientific-Atlanta's existing cash balance.

Jonathan Levinson : 11/18/2005 8:27:44 AM

Natural gas falls to a session low, -.285 at 11.655 here. Crude oil trades +.225 at 57.375.

Jonathan Levinson : 11/18/2005 8:21:15 AM

Ten year notes are down 1/4 here at 108 29/32, with TNX quoted -.2 bps at 4.457%, in the middle of yesterday's range. Link

Jonathan Levinson : 11/18/2005 8:19:34 AM

LONDON (MarketWatch) -- General Electric Co. (GE: news, chart, profile) said it's agreed to sell most of its insurance solutions division, save its U.S. life reinsurance unit, to Swiss Re (ZZ:001233237: news, chart, profile) for $8.5 billion, comprising $3.7 billion in cash and notes, $1.7 billion in assumed debt and the rest in Swiss Re shares. "Insurance Solutions has been a tough strategic fit for GE," said CEO Jeff Immelt. GE will up its share buyback plan to $25 billion through 2008, from an earlier plan of $15 billion through 2007, and will lift its quarterly dividend to 25 cents from 22 cents a share. Swiss Re shares were suspended.

GE trades +2.48% or +.86 at 35.52 in the premarket.

Jonathan Levinson : 11/18/2005 8:01:44 AM

This morning's strong open has QQQQ's weekly, daily, and 60 min cycles all maxxed out in overbought territory and, in the case of the daily cycle, already trending. The 30 min cycle reversed its downphase from just below the ceiling and turned back up. The price trend is strongly up, as it has been for the past two weeks, while breadth and volume have been lacklustre. This rally has been a fine example of the "Price is Everything" maxim- it's been on apparently borrowed time and mediocre internals, but persistently strong in its primary trend.

Jonathan Levinson : 11/18/2005 7:34:05 AM

Equities are up, ES trading 1246.25, NQ 1685, YM 10751 and QQQQ +.08 at 41.39. Ten year notes are down 5/32 at 108 7/8, gold is up 1.8 at 488.70, silver is up .037 at 8.133, crude oil is up .125 at 57.275 and natgas is down .11 at 11.83.

There are no major economic reports scheduled for release today.

Linda Piazza : 11/18/2005 7:12:29 AM

Good morning. All the globe's bourses were green last night. As of 7:05 EST, gold was higher by $1.40 to $488.30 and crude, lower by $0.09, to $56.25. More details about Asian and European markets follows in succeeding paragraphs.

The Nikkei saw strong early gains last night, zooming up to its high of the day within the first hour, and then churning in a tight range near that high the rest of the day. The Nikkei gained 211.33 points or 1.47%, to close at 14,623.12. The Bank of Japan concluded a two-day meeting, leaving the monetary policy unchanged. The central bank reiterated its intention of providing liquidity when needed, no matter what the liquidity target might be, but also in allowing a temporary decline in the balance of current accounts when the demand for liquidity was weak. The Bank of Japan's November report on the economy was released, with the statement reading essentially the same as it had in October, with October's reassuring comments on the economy's recovery. However, the statement did leave out the phrase "and a modest improvement in business sentiment." The statement also mentioned the yen's depreciation, something it hadn't mentioned in October's report, and that depreciation's likely effect on increasing the prices of domestic corporate goods. There's perhaps been a difference of opinion growing in Japan between the central bank's members, including Governor Fukui, and the government over when quantitative easing will end. Recent articles have qualified the government as wanting a more cautious stance about ending that policy, so Fukui's statement was anxiously awaited, too. When he spoke, he vowed to maintain quantitative easing until consumer prices had risen and maintained stability. He did not believe that a rise in CPI was the only sign that the Bank of Japan needed to see to prove that deflation has ended. The central bank does believe that holding onto quantitative easing for too long would cost the economy, too, and believes that policy shifts will probably begin next year.

Yesterday, Mitsubishi UFJ Financial Group raised its earnings estimates for the fiscal year, with banks beginning to report next week. Techs and carmakers gained in early trading, with carmakers benefiting from currency action and lower crude prices.

All other Asian markets turned in positive performances, too. The Taiwan Weighted gained 1.43%, and South Korea's Kospi increased 0.23%. Singapore's Straits Times rose 1.40%, and Hong Kong's Hang Seng climbed 0.64%. China's Shanghai Composite gained 1.98%.

All European markets are in the green, too. In Germany, October's PPI moderated from August's number, rising 4.6% year over year, down from August's 4.9% number. However, that moderation wasn't as much as some had anticipated and input prices rose despite decreasing crude costs. Core PPI rose 1.5% year over year. In France, the preliminary third-quarter GDP showed a 0.7% growth quarter over quarter and a 1.8% growth year over year, with the rise prompted by an increase in consumer spending. Recent riots may impact next quarter's GDP, however. In an interview with Bloomberg News, the ECB's hawkish Weber maintains concern about inflation next year, and the International Monetary Fund's Rato spoke in favor of a near-term rate hike by the ECB, if the ECB believed that step to be appropriate. He said only headline prices rather than core prices are increasing, but that he supports the ECB's cautionary stance against inflation although he does seem some relative weakness in economic growth in the Eurozone.

Yesterday's decline in crude prices also helped European carmakers and airlines, with Renault recouping some of yesterday's losses after the company issued a profit warning. Miners benefited from the strong metals prices. Infineon announced earnings and was easing as this report was prepared. Nestle gained in early trading after announcing a stock buy-back plan.

As of 7:02 EST, the FTSE 100 was higher by 56.30 points or 1.03%, at 5,516.30. The CAC 40 was higher by 47.52 points or 1.05%, at 4,570.70. The DAX was higher by 54.95 points or 1.08%, at 5,154.67.

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