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OI Technical Staff : 12/9/2005 9:59:59 PM

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Jeff Bailey : 12/9/2005 5:19:36 PM

SPX 1,259.37 +0.28% ... WEEKLY Pivot Levels for next week are 1,239.08 , 1,249.22, Piv= 1,261.06, 1,271.20, 1,283.04.

OK, we see the S2/Monthly Pivot correlation, that's a MAX DECLINE for next week in my mind, before the Santa Claus rally where institutions mark everything up for the year (laying out the scenario).

Envisioning the trade: On Monday, a trade scenario for the still-to-be filled SPX Dec 1,250 puts is for a slightly bullish open. Just as the SPX rose to Daily R1, then slipped back below the WEEKLY Pivot on Friday (today) where we were bid $2.40, but didn't get filled despite a 500 block crossing the wire, look for the SPX to edge above the WEEKLY Pivot, maybe Nat. Gas prices a little lower, market psychology becomes "all is well." Then, Nat. Gas begins to creep back from morning lows as momentum bulls and jittery bears in the complex position for Thursday's EIA data. You know, I know how cold it was this week, which the EIA data will comprise.

Then, the SPX starts to slip a bit, we are filled on the SPX 1,250 puts on the slight rise above WEEKLY Pivot, and just as the SPX slips under WEEKLY Pivot a sell program premium is generated. Boom! The move is on and just like that SPX trades WEEKLY S1.

If at WEEKLY S1 another sell program premium is generated, then perhaps, 1,240 is in the cards. Yeah... maybe. VIX really goes wild as options traders close out positions. Oh my! Is it natural gas? Is the Fed about to drop a bomb on Tuesday? Where's the SPX/SPY open interest? What's been the more active puts and calls any particular day? Uncertainty runs amuck!

Trading call/put options is great for risk management (as long as you don't overleverage) when uncertainty runs amuck! Can you think of a better week for uncertainty? FOMC on Tuesday, then an EIA nat gas report (after a week like we had this week) the same day as equity index expiration?

SPX plunging, plunging I tell you. As soon as we hear an "I told you so" from a bear (1,248, or 1,240) an SPX Dec. 1,250 PUT holders says "sold to you Mr. Magoo."

All those sell program premiums that were generated earlier this week on futures roll, the better part of that money rushes in. Yes, a happy holiday by year's end begins to take hold.

Tab Gilles : 12/9/2005 4:39:48 PM

Jeff, I agree with your 4:03:06 PM on energy. I prefer the black gold over the yellow one. I spent a good part of the day today going over this years past posts. It's always insightful when you one looks back at past speculations and tries to learn from them. I've been looking at the dollar/gold relationship specifically. I've also been looking at multi year trends, such as hot sectors, drugs, tech, bonds, oil, real estate, now gold.

Back on 7/8 2:10 PM I posted this chart of AIG. Link Targeting the $68/$70 level. current chart Link

$NDX Expect volatility as the NASDAQ100 rebalances at the end of the year. Link Link Link Link

Enjoy the weekend everyone...and get that holiday shopping done :).

Tab Gilles : 12/9/2005 4:18:00 PM

+20 Year Teasury Bond iShares (TLT) update to 12/8 post. Well as I expected TLT did move up yesterday hitting 90.34. Today we saw that 200-ema daily level give way again. If you look not just at the daily but the 60 minute as well as a weekly, you'll see that TLT is testing the bottom of an upward channel. I'm playing this as a Fed play in the next few months. The scenario I see is the fed, under Bernanke perhaps ending the rate hikes and the economy slowing down. Should the equity markets selloff into the new year, some money will flow into bonds. I'm looking at the March 89 Call (TLTCK) and the June 90 Call (TLTFL)...not entered as of yet, but on my radar screen. Link Link

TLT 60 minute Link TLT daily Link TLT weekly Link

Jane Fox : 12/9/2005 4:11:53 PM

Everyone have a great weekend and we will see you all on Monday.

Jeff Bailey : 12/9/2005 4:03:06 PM

Goldcorp (GG) alert $20.78 -2.44% ... I had an e-mail question earlier this week and same trader with a follow up today about buying some longer-term calls on GG.

I'd be looking for the pullback entry somewhere near the $20.50 level, but would be partial at this point. Maybe get a feel for any new FOMC comments next week.

In a response e-mail to the trader, and in this week's Market Monitor, I posted PnF charts of GG, NEM and the Gold Futures. I had hoped to write an "Ask the Analyst" column for this weekend's newsletter, but at this point, I've got to get my computer working better so I can get get some bar charts.

At the same time, I'm out of town this weekend, thus my intra-day on/off efforts to work on my computer.

To be truthful, I'm more bullish on energy stocks after seeing some of this weeks sector bullish percent action.

Jane Fox : 12/9/2005 3:57:08 PM

Dateline WSJ (This doesn't have a lot to do with the market but it is interesting on a slow Friday afternoon) At a time when American politicians are up in arms about China's trade surplus with the rest of the world, China prepared to open the first phase of a megaport that could help its exports flow more easily than ever.

China plans to open the first five berths of the Yanghsan container port, near Shanghai, tomorrow. The next phase is scheduled to begin construction next year; if all goes according to schedule, by 2020 the port will have 50 deep-water berths and could be the biggest in the world. It is designed to take some of the pressure off Shanghai, the world's No. 3 port, which handles exports from the critical Yangtze River Delta region, which produces about 30% of China's fast-growing gross domestic product. Shipment volume there has grown some 25% in the past five years, raising the risk of bottlenecks that could slow down the exports fueling China's breakneck economic growth.

Linda Piazza : 12/9/2005 3:55:59 PM

OEX closed a five-minute period just below the five-minute 100/130-ema's, so there's further confirmation of that H&S.

Jane Fox : 12/9/2005 3:54:02 PM

Both these look like they are making bullish flags but with a low volume late friday afternoon I wouldn't be betting on too much action if they are. Link

Linda Piazza : 12/9/2005 3:51:31 PM

End-of-day decisions: At the excellent suggestion of one of the readers, I'm trying to post this a little sooner than usual. There's a risk in that, however, as a lot of positioning can occur in the last few minutes of the day. I'm typing fast, too, so there are bound to be some typos here, but I don't want to edit and change the time stamp.

First is the caution that front-month options are going to lose a lot of money over the weekend, so factor that into your decision. Other than that, the OEX still could be considered to be roughly holding to a descending regression channel on its daily chart, boundaries roughly at 572 on the bottom and 579.35 on the top, but there have been a couple of spikes outside that formation. The OEX is currently below the midline of that formation, seeming to find resistance there, and is also closing the week below the 577-578.40-ish long-term support/resistance level. It's unclear as yet whether it will close above or below the 21-sma but it looks likely to close well below the 10-sma.

There's just not a lot of clarity right now as to whether the OEX is more likely to round down through that regression channel again or push up, at least further into the 577-578.40 level and perhaps to 579.13. The OEX is closing 30-minute periods below a Keltner line currently at 576.81, suggesting that resistance is holding, but it's also maintaining support at 574.91 on 30-minute closes, suggesting that it's not through challenging that resistance just yet. A close today below that support, particularly if significantly below, would give more weight to the possibility that the OEX would roll down through the channel again, toward 573.50 or perhaps even 572.42. Barring that close, however, the outcome isn't know.

Jane Fox : 12/9/2005 3:50:57 PM

These are still choppy but with a bullish flavor. Link

Jeff Bailey : 12/9/2005 3:53:57 PM

SPX 1,260.48 +0.37% ... here's the deal. With an anticipated close at WEEKLY Pivot (1,260.97), next week's Pivot Levels ... 1,239.61, 1,250.30, Piv= 1,261.59, 1,272.28, 1,283.57.

Monday's Daily Pivot levels would be ... 1,250.59, 1,255.79, Piv= 1,259.43, 1,264.63, 1,268.27

Jonathan Levinson : 12/9/2005 3:47:03 PM

At 52M shares traded so far, QQQQ has yet to make it halfway to yesterday's 112M volume. The average is 85M. On the weekly chart, this week's candle is headed for a negative close but still pinned to the ceiling at converging upper linear channel resistance lines: Link

Linda Piazza : 12/9/2005 3:42:15 PM

OEX through the neckline now on its H&S, but not yet closing a five-minute period below its five-minute 100/130-ema's at 574.82 and 574.74, respectively. Still has bounce potential, and it's bouncing as I type, up toward that neckline again, at about 575.

Jeff Bailey : 12/9/2005 4:07:02 PM

National Weather Temperatures with 02:30 PM EST January Nat Gas and Heating Oil prices.

"Hot" compared to the past couple of days.

Temperature Link

Linda Piazza : 12/9/2005 3:36:52 PM

If the OEX is going to confirm that H&S, it's taking its time doing it. Market-on-close orders will be out soon, and it will matter more how traders want to position themselves ahead of the weekend than what I'm seeing on the charts.

Jeff Bailey : 12/9/2005 3:31:13 PM

I looked at the SPY $125.00 puts SPY-XU for an op-ex trade, but I'm showing implied vol 14.40 vs. 10.5 for the SPX 1,250.00.

Jonathan Levinson : 12/9/2005 3:34:53 PM

QQQQ's bounce hasn't yet started the short cycle trending in overbought, and it's still ticking lower. The current wavelet bounce needs to fail at or below the session high 3 cents away to qualify as "Keene's Wave"- if it sets a new high, however, we can expect the trending move to drive toward next resistance in the 41.90 area. Link

Linda Piazza : 12/9/2005 3:30:46 PM

Advdec line's form still in keeping with a potential H&S.

Linda Piazza : 12/9/2005 3:30:27 PM

The OEX climbed to the top of the acceptable right-shoulder level for its potential H&S. It's pulled back from that a little now, with the OEX now at 575.73, but the formation is far from confirmed as yet.

Linda Piazza : 12/9/2005 3:28:51 PM

The TRAN broke to the upside through the descending regression channel off the 12/06 high. It's now dealing with the 15-minute 100/130-ema's, at 4106.20 and 4109.69, with the TRAN at 4108.20. Longer term, the TRAN is in a descending regression channel that began forming about November 18, with the TRAN now at about the midline of that channel. That channel could be a bull flag, so if the TRAN should continue rising today or next week, the current top of that channel is at about 4159. Bottom support is at about 4053 currently.

Jeff Bailey : 12/9/2005 3:26:13 PM

I feel like I'm "stringing traders along" with the SPX 1,250 Put profile (still no fill at $2.40), but I think patience will be rewarded.

Linda Piazza : 12/9/2005 3:24:03 PM

Advdec line's pattern still in keeping with a potential H&S on that chart, too, three- and five-minute views.

Linda Piazza : 12/9/2005 3:23:05 PM

Neckline for that potential H&S on the OEX's three-and five-minute charts is at about 574.90. With the five-minute 100/130-ema's at 574.72 and 574.86, I'd want to see a five-minute close below those averages before I considered it confirmed. OEX at 575.44 as I type. Current downside target at 573.50, if it's confirmed soon.

Jonathan Levinson : 12/9/2005 3:21:14 PM

Volume breadth weakens slightly to +1.55:1 on the NYSE, +2.95:1 on the Nasdaq, still strong as price holds just off the highs. Today is still an inside day for the Qs, a higher low and lower high, and the very light volume confirms it.

Linda Piazza : 12/9/2005 3:20:50 PM

OEX rising into the right-shoulder level for its potential H&S, the one I warned might be forming as the OEX began dropping out of its rising regression channel off the noon low. That right shoulder could also constitute a retest of the rising channel's support. However, if the OEX is forming a H&S, this bounce probably shouldn't get much above 575.85 and bears would like it to turn down sooner. OEX at 575.49 as I type.

Jeff Bailey : 12/9/2005 3:19:26 PM

Still no charts, but here's the Jan Nat Gas chart with retracements I posted on Tuesday at this Link ... After Friday's action, a bullish settlement in my opinion would have been above that $14.47 level. It isn't bearish to have it sitting above that $13.92, just not a bullish as it could have been.

Linda Piazza : 12/9/2005 3:15:49 PM

The advdec line also has a potential H&S at the top of its climb, also lacking a right shoulder.

Linda Piazza : 12/9/2005 3:12:14 PM

OEX approaching support near 574.72 and then from 574.39-575.63. In fact, it's bouncing from just above that as I type. Watch for potential resistance now at 575.45 if the OEX keeps bouncing. There's the possibility of a H&S on the three-minute chart, with a right shoulder still lacking.

Linda Piazza : 12/9/2005 3:07:11 PM

I didn't think the OEX looked as if it was going to rise all the way through that channel again, as it was looking a little weaker. Now it's broken through the channel's support. If it should continue dropping, watch for potential support at about 574.80,. The OEX currently tests 575.12 support on three-minute closes.

Linda Piazza : 12/9/2005 3:17:28 PM

For those who might not be watching the Market Monitor constantly, I wanted to repeat my announcement from earlier in the week. Challenges my family faces, including my granddaughter's illness, have forced me to rethink my time with the Market Monitor. I've loved this work, but recent developments have forced me to make a choice, at least until some of these challenges are resolved. Just this week, what began as a minor illness for my fragile granddaughter has resulted in one rush to the hospital and my inability to post trades all week because I haven't know when another trip might be necessary. So, it is with regret that I have come to the decision that I will continue writing for the newsletter, but will focus on meeting my family's needs during the day. I decided that I would try to stay on until the end of this option expiration cycle, and that's still my plan for now. After that, I'll drop in when I can, but probably will not post on a consistent basis. I will miss this work, as I've learned much from readers and my fellow commentators. I'll be lurking out there, reading the commentary whenever possible, and you'll still be reading my articles twice a week in the nightly newsletter.

Jeff Bailey : 12/9/2005 3:04:50 PM

03:00 Market Watch found at this Link

Jonathan Levinson : 12/9/2005 3:01:26 PM

QQQQ rests on the previous high at 41.70. Although the 72 SMA is just below at 41.60, a break of 41.70 should mark the end of the short cycle upphase, already extended and flattened in overbought territory. Link

Linda Piazza : 12/9/2005 2:57:25 PM

OEX coiling at the top of its range today. Support can be found at 575.77 on three-minute closes. A close beneath that Keltner line probably suggests a trip to the bottom of the rising regression channel, at least, now at about 575.40. Resistance at 576.12 on three-minute closes, and then at 576.43 on three-minute closes.

Jeff Bailey : 12/9/2005 2:55:17 PM

If anything, that 500 share trade I saw go off on my Level II at the bid would suggest a buyer of the underlying at 1,250 give/take $2.40.

Jeff Bailey : 12/9/2005 2:53:24 PM

I get used to seeing $0.10 spreads on most stocks and the $0.50 spread on SPX is a little difficult to deal with.

Linda Piazza : 12/9/2005 2:49:29 PM

Midline (rising regression channel off the noon low) and three-minute OEX Keltner support hold up, the three-minute RSI never even hit 50 on that pullback. The top of the channel is now at about 576.37, but I'm not positive that the OEX will get there this time and not positive that support will ultimately hold. The OEX looks a little weaker.

Jonathan Levinson : 12/9/2005 2:48:20 PM

Volume breadth is +1.63:1 on the NYSE, +3.2:1 on the Nasdaq, showing strength at the highs despite the overbought short cycle indicators. Link

Jonathan Levinson : 12/9/2005 2:40:31 PM

Crude oil closed -1.2 at 59.45, off a high of 61.525. Natural gas lost 4.93% to close at 14.255. Crude oil chart at this Link

Linda Piazza : 12/9/2005 2:40:07 PM

The pullback started right where the three-minute RSI said it should. Now midline support on the rising regression channel and three-minute support from 575.3-575.69 are being tested, with the OEX at 575.61. No, it jumped back to 575.69 as I typed. This is all the pullback that was "guaranteed," to the midline, but I'm watching to see if the bottom of the channel is tested or even broken.

Jeff Bailey : 12/9/2005 2:40:01 PM

I see a trade of 500 at $2.40, but I haven't gotten filled at this point.

Jonathan Levinson : 12/9/2005 2:38:55 PM

Session low for ten year notes, TNX now up 6.1 bps to 4.525%.

Linda Piazza : 12/9/2005 2:34:59 PM

OEX testing that 576.25-ish area that should be next resistance. The top of the OEX's rising regression channel off the noon low has moved up a few cents above that now. Three-minute RSI has marked the times when price was hitting the top of that channel and due to pull back through it, and RSI is now at 78.37 on that chart, showing a little bearish divergence with respect to the last swing high through that channel, at 575.56. There should be a pullback any time, either to the midline, now at about 575.60, or to the bottom of the channel, now to about 575.14. Bulls don't want to see the OEX fall out of that channel and would prefer that three-minute RSI not dip below 50, where it's been when it hit the bottom of the channel each time.

Jeff Bailey : 12/9/2005 2:34:09 PM

Swing trade put alert ... Let's bid 1/2 position at $2.40, or one (1) for my MM profiles for the SPX Dec. 1,250 Put (SZP-XJ) $2.30 x $3.00.

SPX 1,262.95 here

Jane Fox : 12/9/2005 2:31:40 PM

And the bulls live on. Link

Jeff Bailey : 12/9/2005 2:30:04 PM

02:00 Internals found at this Link

Jonathan Levinson : 12/9/2005 2:29:24 PM

QQQQ has broken its previous high, and the day's range is now looking like a launchpad pointing toward the 41.90-42.00 range unless the short cycle bears push back in a hurry: Link

Linda Piazza : 12/9/2005 2:26:12 PM

At about 576.25, the OEX again hits potential resistance, as it also hits the top of the rising regression channel off the noon low.

Linda Piazza : 12/9/2005 2:24:21 PM

Equal high test. One reason that I noted that this didn't appear to be a good climate even for scalpers any longer has been exemplified by the action over the last hour. There was a breakout above support that had been tested multiple times today and had held, so the breakout was significant. The OEX did run up a bit, but not a lot. Then it came down and that former resistance, tested so many times, should have held as support on the retest. It didn't. The OEX dropped, but not too much. Then it came back to retest that resistance. Since it had held so long and then had failed as support, logic suggests that it's going to hold as resistance again on the retest. It didn't. As I typed, the OEX moved a little above the equal-high level, with the advdec line still climbing as I type, toward 1540-ish next resistance. Advdec line at 1502 as I type.

Jonathan Levinson : 12/9/2005 2:24:20 PM

Volume breadth is up to +1.6:1 on the NYSE, +3.15:1 on the Nasdaq.

Jonathan Levinson : 12/9/2005 2:15:17 PM

A wavelet downphase is reaching oversold territory here, and if it bounces to match the previous high at 41.70, that should coincide with a short cycle top. Shorts at that level will need tigh stops, however, because the 30 min channel is still pointing up in a narrow range and could have more upside before reaching its own overbought levels, most likely in the 42 area if the current highs don't hold. Link

Jeff Bailey : 12/9/2005 2:10:34 PM

02:00 Market Watch found at this Link

Linda Piazza : 12/9/2005 2:09:06 PM

The SOX's 30-minute Keltner resistance that's been holding since the morning of 12/06 held again on the last 30-minute close.

Linda Piazza : 12/9/2005 2:08:28 PM

The OEX is about to test the rising trendline off the noon low, with that trendline at about 574.65 currently. That's going to constitute a test of the top of the OEX's resistance for most of the day. As I typed, the OEX dipped close and has bounced, currently at 574.87, up to test three-minute resistance from 574.98-575.31. I said earlier that this isn't even really a climate for scalpers any longer, and I still believe that.

Linda Piazza : 12/9/2005 2:01:40 PM

Former Keltner resistance for the day is not holding as support as it was tested. The OEX confirmed a little H&S on its one-minute chart, too, and has just about reached its downside target. It's bouncing again to retest that resistance at 575.12 on three-minute closes, with the OEX at 575.08 as I type, but bulls don't completely have the reins yet, or that support would have held in the first place and that H&S would not have confirmed.

Jonathan Levinson : 12/9/2005 1:59:43 PM

A short cycle downphase is due for QQQQ, and with 72 SMA support at 41.55, the current bounce is close to a potential reversal. Typical op-ex action- a shallow breakout after hours of basing. Link

Jeff Bailey : 12/9/2005 2:06:05 PM

SPX 1,260.60 +0.37% ... looks like we'll need a DAILY R1 to get filled on the SPX Dec 1,250 Puts Link

VIX.X 11.70 -4.17% ... I'm just plugging in the WEEKLY Pivot for the volatility measure.

Linda Piazza : 12/9/2005 1:57:31 PM

Earlier today, the Keltner line currently at 575.03 was holding as resistance on three-minute closes. Now the OEX tests it to see if it holds as support, with the OEX currently at 575.21.

Linda Piazza : 12/9/2005 1:56:15 PM

SOX still tsting that 30-minute resistance that has held over the last few days. With about five-minute to go in this 30-minute period, the SOX is at 495.44, with that resistance at 495.13-495.98. The support begins to firm under the SOX, so it's possible but not yet probable that it will break through that resistance.

Jonathan Levinson : 12/9/2005 1:50:57 PM

Ten year notes remain weak, TNX up 4.9 bps at 4.513%. Gold holds a 7.8 gain at 530.60, off a high of 534.10.

Linda Piazza : 12/9/2005 1:48:18 PM

The TRAN is testing 4100 but also the top of its descending regression channel off the 12/06 high. The TRAN is at 4100.21 as I type, with a 30-minute close still a few minutes away.

Linda Piazza : 12/9/2005 1:46:16 PM

Next resistance for the OEX at 575.65-576.06 on 10-minute closes. This is just below trendlie resistance up to about 577.39.

Linda Piazza : 12/9/2005 1:44:45 PM

The SOX attempts a breakout above Keltner resistance that has held since Tuesday morning, at 495.14-495.99 on 30-minute closes. The SOX is at 496.00, with about half the 30-minute period still to go.

Jonathan Levinson : 12/9/2005 1:42:10 PM

Volume breadth strengthens to +1.55:1 on the NYSE, +2.05:1 on the Nasdaq.

Jeff Bailey : 12/9/2005 2:04:19 PM

Question: ... Hello Jeff, I picked up on the APA trade the other day. Just wondering if you have a sell target in mind. The OIN sell point on the trade stopped out was $75-76. Are you still Turkey Trottin. I misplaced your email address, due to a computer virus.- George

Reply:

For the January $70 calls, I outlined a "sell strength" to sell 1/2 position between $72.45-$73.06, then look to sell the other 1/2 at $75.

I think we got the move in Nat. Gas prices I was looking for, and nat. gas-related stocks as well as oil service responded to a degree.

I think the energy stock bull trade is "back on" and APA should do well.

I did snug a profit stop under the profiled trade and we would have been stopped out today.

If you're still long and didn't stop at $2.90, I don't think you have to worry about APA falling much below $68 for the next couple of weeks.

"Everyone" is tuned into the weather, and the nat gas inventories. Yes, they should build again as offshore pipelines from the Gulf of Mexico slowly come back online, but for the next month or two, I think energy stocks find bids on pullbacks, then make a new relative high (for APA, something like up $3, down $3, then up $4, down $3, then up $4, down $3 type of action on a PnF chart.

When I get my computer cache memory problem resolved, I'll be pricing out another bull/call play for APA. Also trying to find a good "10 to 20-day weather forecast" website.

As for turkey trottin, its waterfowl and pheasant/quail that we're studying on the weekends.

Jonathan Levinson : 12/9/2005 1:37:30 PM

Session high for QQQQ at 41.67, testing this morning's high and 30 min channel resistance. There's room for it to run higher if the bulls can hold aove the 72 SMA at 41.52: Link

Linda Piazza : 12/9/2005 1:36:25 PM

We're entering a prime stop-running time of day and the OEX is being run up past resistance that held all day, on a three-minute Keltner basis. Watch to see if it's slapped back, in which case bears will have the information they need to pressure it lower again, or if it holds the breakout, as it's at least doing on the current three-minute candle, in which case bulls are going to try to run it higher.

Linda Piazza : 12/9/2005 1:29:53 PM

I've switched to a one-minute Keltner chart, if that tells you anything about the "action" on the OEX today. The OEX reached overbought status on that chart when it topped at 574.51 a few minutes ago, just below one-minute Keltner resistance. It's now inside the next smallest channel, finding resistance so far at the top of that channel on retests, with the top currently at 574.34. Support is nearby , at 574.09, holding since about 12:51, and support below that at 573.84-573.90. Altogether, it looks as if the first of those two support levels will be tested, and perhaps the second, but that's about all that can be said. Not much information here.

Linda Piazza : 12/9/2005 1:20:10 PM

I'm still here, but not seeing anything definitive just yet. The advdec line climbs, still, although its climb is slowing as it deals with resistance near its current 885 level and approaches next resistance at 1035. There's tentative bearish divergence on the 7-minute chart, when compared to the last swing up to test the resistance being tested now. The OEX appears to be readying another test of 574.54 resistance, though, with that looking significant on the 60-minute chart, up through 574.95 on 60-minute closes. That resistance is not as firm as it appeared to be earlier, however.

Jeff Bailey : 12/9/2005 1:16:42 PM

01:00 Internals found at this Link

Jonathan Levinson : 12/9/2005 1:16:10 PM

Headlines:

[GE] GE INCREASES SHARE BUYBACK BY $1B

[GE] GE: TOTAL 2005 SHARE BUYBACK NOW AUTHORIZED $5B

GE is up to a 20 cent gain at 35.55, pulling back 13 cents off today's high.

Jonathan Levinson : 12/9/2005 1:15:19 PM

Jeff, one simple trick that's helped me has been to de-prioritize applications that don't need the extra clock ticks. Using Ctrl-Alt-Del, in the "processes" tab, I'll set applications like MM.exe, Trillian.exe and other applications that don't need it down to "below normal" or "low" priority to free up processor time for the busier applications. You're probably digging way deeper than that by this point, but it might be worth a try.

Jonathan Levinson : 12/9/2005 1:13:08 PM

QQQQ broke the descending pennant resistance but did so on light volume and holds just off the low for the move, perhaps getting ready from one of those apex whipsaws we've come to know and love. Volume is very light at 32M QQQQs traded so far. Link

Linda Piazza : 12/9/2005 1:06:40 PM

The SOX has climbed into resistance that's held since Wednesday morning, with that resistance at 495.14-495.39 on 30-minute closes. The SOX is at 494.43 as I type.

Jonathan Levinson : 12/9/2005 1:04:19 PM

Volume breadth +1.35:1 on the NYSE, +1.9:1 on the Nasdaq.

Linda Piazza : 12/9/2005 1:03:25 PM

The OEX confirmed the inverse H&S on its three-minute chart. The advdec line still climbs.

Jeff Bailey : 12/9/2005 1:02:51 PM

01:00 Market Watch found at this Link

Jeff Bailey : 12/9/2005 12:59:54 PM

I'm trying to fix a computer cache memory problem. I think I'm getting close to "fixing" it. It has been driving me nuts for several months. I can get quote feeds, but trying to get a chart has been frustrating. I think I've simply got too much data hitting me at one time and need to free up memory.

Stocks look rather quiet. Nat. Gas futures bulls look to be locking in some gains, and has related stocks edging back. I don't think we would see another nat gas futures charge higher like we saw this week and may have some momentum traders looking for more of a pullback before getting long.

Jonathan Levinson : 12/9/2005 12:54:08 PM

QQQQ tests upper resistance trendline resistance here: Link

Linda Piazza : 12/9/2005 12:52:30 PM

The OEX has tightened its range even more. As I said in my 12:15:47 post, I'm not sure that even adept scalpers should be trading this lunchtime lull stuff.

Keene Little : 12/9/2005 12:37:48 PM

Marc, I'll be the dissenting opinion on INTC. As in charts that I've been showing for the past week, I think INTC may have topped last Friday. It will likely get a bounce now that it has hit its 200-dma, and of course you could be right that we'll get another new high out of this, but I don't like the fact that it hit its downtrend line from January 2004 right at some important Fib projections for the move up (last analysis done on 12/5/05 post). I've got a wave count that considers the move from its 2002 low as complete and as this weekly chart shows, it looks ripe for a rollover. This is the stock that gives me the heebie-jeebies about thinking long the market. I see the next bear market leg down straight ahead. This is a chart interpretation and has nothing to do with who will use what chips or any other funnymentals. JMHO on this. Link

Linda Piazza : 12/9/2005 12:35:05 PM

It didn't look as if the OEX was through testing resistance. On the three-minute chart, that resistance still looks stronger than support, but that view is countered by the presence of a potential inverse H&S with a neckline right along the three-minute resistance at 574.03 on closes. Further resistance at 574.44.

Jonathan Levinson : 12/9/2005 12:33:02 PM

Although the oscillators are still ambiguous, with price pinned at 41.50 QQQQQ, the price channels still suggest that a bottom is trying to form above yesterday's lows, which would be suggestive of an upside resolution to the current mess. Updated 3 min chart shows a pennant formed around the coiling price- first sign of a bullish resolution witll be a break above 41.55, with a corresponding surge in volume. After that, the next key level is the 41.67 high. Link

Linda Piazza : 12/9/2005 12:27:42 PM

I'm not sure whether the OEX is quite through testing resistance yet, but that resistance just tested at 574.05 does look stronger than support, suggesting another trip down to 573.33 or maybe 572.87, where bears would want to consider taking profits, if hit. OEX at 573.61, and this is no place to enter a new bearish play, I don't think. Actually, even I'm not trying any scalps right now even though the OEX has--unbelievably after the November we had--obeyed technical analysis quite nicely today. That TA suggested chop, but it's been rather well organized chop, if there's some such thing.

Jonathan Levinson : 12/9/2005 12:25:58 PM

Volume breadth is +1.15:1 on the NYSE, +1.3:1 on the Nasdaq.

Jeff Bailey : 12/9/2005 12:22:58 PM

12:00 Internals found at this Link

Marc Eckelberry : 12/9/2005 12:15:44 PM

INTC dec 25 pc ratio is 1.40. That will be supportive. Add 200 dma at 25.20 and I think this stock is being unfairly punished. They painted the tape, but I think this stock is a 30 plus stock in February. This is buy and hold, stop at 50%. Marginsg are fine at 63% and inventories will be worked out.

Linda Piazza : 12/9/2005 12:15:47 PM

The OEX bounce began from the point I suggested it might when I suggested that scalpers consider taking bearish profits. Now, the OEX's coil may be tightening even more and it may be even more difficult to scalp back and forth. Resistance now from 573.89-574.06 and then again at 574.44 on three-minute closes, with the lower part of that resistance having just been tested. I don't know if even adept scalpers should be trying it during the lunchtime lull while the OEX coils. If you have been and if you entered a bullish play, it's soon going to be time to consider whether you want to take profits. The advdec line is facing first resistance, but the resistance that's been turning it back during the middle of the day is up near 414. The advdec line is at 83 as I type. I'm just not sure whether the OEX or advdec line are going to continue extending from one side of their respective three-minute channels to the other, or if they're now going to tighten their ranges, preparatory to a breakout, but not necessarily one that will occur today.

Marc Eckelberry : 12/9/2005 12:12:56 PM

Alert: Picked up some INTC April 25 calls at 1.95.

Jeff Bailey : 12/9/2005 12:06:18 PM

12:00 Market Watch found at this Link

Jonathan Levinson : 12/9/2005 12:06:14 PM

Ten year note yields hold their 5.1 bp gain, back above 4.5% confluence at 4.515%, while IRX is down to a .2 bp gain at 3.847%. The Fed's next rate hike next week - I believe that this will make it #13- should take the overnight rate to 4.25%. So far, the day's repo drain and corresponding increase in dealer demand has been impacting treasuries much more than equities.

Linda Piazza : 12/9/2005 12:02:34 PM

Advdec line at potential support near -299, with the advdec just below that, at -314, but not really violating that line yet. No bounce yet, either, but the potential for one.

Linda Piazza : 12/9/2005 12:01:27 PM

And the OEX is hitting that downside target mentioned earlier, although the Keltner line itself rose from 572.80 to the current 572.89. Time to consider profits again if you were scalping a bearish play. There's no guarantee that a bounce will come from this level, but there is potential for this support to hold again. OEX at 572.94 as I type.

Jonathan Levinson : 12/9/2005 12:00:03 PM

The short cycle rolls over here as the wavelet cycle tries to find a bottom. Even on the shortest timeframes today, the various cycles are overlapping and opposed- a perfect recipe for futile stop runs and failed entries. Link

Jeff Bailey : 12/9/2005 11:55:16 AM

Swing trade bullish call stop alert for the Apache Corp APA Jan $70 Calls (APA-AN) at $2.90.

APA $69.59 -1.95%

Linda Piazza : 12/9/2005 11:49:23 AM

The advdec line is tsting support that may be strong. Scalpers who hope to see 572.50-573 to the downside want to see the advec line drop below about +50 and keep heading toward -270, with the advdec line at 71 as I type, testing support.

Linda Piazza : 12/9/2005 11:41:32 AM

Still coiling. I thought earlier that the three-minute Keltner resistance looked stronger than support, but not strong enough to prevent the OEX from rising to retest the resistance. That it did. That resistance is at 574.08-574.17 on three-minute closes and then at 574.53 on three-minute closes. Now, though, the OEX needs to drop below a support band just below, down to 573.53 on three-minute closes, before it can reset that potential downside target, now at 574.16. The OEX is instead showing some strength as it rises once again to retest that resistance. the advdec line tests resistance of its own, roughly at about 480 on three-minute closes, with the advdec line at 454 as I type. Just lots of chopping around, suitable only for adept scalpers and becoming less suitable for even them now.

Jonathan Levinson : 12/9/2005 11:38:35 AM

Looks like Jane and I are in sync.

Jonathan Levinson : 12/9/2005 11:38:13 AM

Pure chop for QQQQ this morning: Link

Jane Fox : 12/9/2005 11:37:37 AM

Here is your receipe for chop. I call it my chopometer. Link

Jane Fox : 12/9/2005 11:34:24 AM

I totally agree with Larry's comments. I think December will remain bullish but the new bear cyclical will start sometime in January.

Jane Fox : 12/9/2005 11:33:28 AM

Here is Larry McMillan's weekly update This market has stretched itself out on the upside, ignoring overbought conditions and other negative implications. However, it finally outran its supply lines, it appears, when it made new multi-year highs (at least $SPX and QQQQ did) last Tuesday -- at which point a negative reversal took place. $SPX quickly fell 18 points in about one day's worth of trading time. This has placed all of our indicators into sell signals or on the brink thereof. In addition, a false breakout to new highs is generally a powerful negative signal in its own right.

$SPX itself is technically still in an uptrend, despite the setback of the false breakout on Tuesday. There is support at or just below 1250. If that support holds, all will be well for the bulls, regardless of what else is going on. However, should $SPX close below 1248, say, a set of intermediate-term sell signals will likely be in place.

The equity-only put-call ratios have been our most positive indicators all during this rally. But now, they have bottomed and are on the verge of generating sell signals. The standard ratio has not confirmed a sell signal yet, and neither has the weighted signal. A further breakdown by $SPX will likely confirm these put-call ratio sell signals.

Market breadth had been quite strong during the rally. At first, it had a hard time getting in gear, but in the last few weeks, the breadth has moved strongly into overbought territory.

Volatility indices ($VIX and $VXO) have remained at relatively low levels. By itself, that would normally be somewhat bullish. However, $VIX has started to move higher in a fashion that implies an uptrend is beginning. Specifically, $VIX has made a higher high and a higher low -- a rising pattern on its chart. This is a sell signal for $VIX. Only a move back below 11 would negate it.

In summary, breadth and volatility have generated sell signals, with the equity-only put-call ratios not far behind. The last straw would be an $SPX close below 1248.

It is rare to see sell signals so near to the seasonally bullish end of the year, when so many traders and institutions have ulterior motives (i.e., performance bonuses to protect). Last year, the equity-only put-call ratio gave a sell signal in early December, but the market didn't break until January -- mostly because the bulls can levitate the market for a period of time. This year, there is more of a bearish agreement among the indicators. But the 'levitators' might do it again, which is why we need to see prices break before going short -- not just see sell signals from technical indicators.

Linda Piazza : 12/9/2005 11:26:58 AM

The OEX did drop from the resistance being tested, and now tests potential Keltner support at 573.69 on 10-minute closes. The OEX is at 573.67, but hasn't really fallen away from that support yet. If it does lost that support, next support is close by at about 573.47, and then at 572.84. OEX 572.84 does look like a possible short-term target, but perhaps not before another attempt to move higher and retest that resistance that it just fell away from. On the short-term chart I'm watching, the three-minute, resistance does look stronger than support, not strong enough to preclude a retest but strong enough to suggest that 572.84 might be possible. Just don't count on anything in this choppy market and trade it only if you're an adept scalper and know you won't let a trade get away from you.

Jonathan Levinson : 12/9/2005 11:18:59 AM

Session low for ten year notes here, TNX up 5.1 bps at 4.515%.

Jeff Bailey : 12/9/2005 11:17:06 AM

11:00 Internals found at this Link

Linda Piazza : 12/9/2005 11:15:54 AM

So, if you scalped a bullish OEX play, here's potentially strong resistance again. The advdec line evidence isn't clear, as it's facing light resistance, but not the strongest resistance, and it's really just coiling, still fitting my idea of a choppy day. This is a place to take at least partial profits if you were scalping a bullish play based on OEX evidence alone, but there's just no strong corroboration on the advdec line. OEX at 574.29 as I type, testing 60-minute resistance at 574.45 and 574.99 on 60-minute closes.

Jane Fox : 12/9/2005 11:11:35 AM

TICKS still strong at +800.

Jane Fox : 12/9/2005 11:11:22 AM

Remember how I said these could change in a New York minute well they did. Link

Jonathan Levinson : 12/9/2005 11:11:13 AM

QQQQ retests the pivot, the short cycles pointed north after breaking back above the 72 SMA. That's bullish for the 30 min cycle, but so far the channel is holding flat, support at 41.30, resistance 41.75. Link

Jane Fox : 12/9/2005 11:09:59 AM

TICKS reached at high of +977.

Jane Fox : 12/9/2005 11:08:33 AM

TICKS +800.

Linda Piazza : 12/9/2005 11:06:45 AM

Advdec line still bouncing, toward potentially strong resistance, from the current -121 level, up to about +260.

Jeff Bailey : 12/9/2005 11:02:25 AM

11:00 Market Watch found at this Link

Jonathan Levinson : 12/9/2005 10:59:14 AM

Volume breadth rises to +1.05:1 on the NYSE, +1.25:1 on the Nasdaq.

Linda Piazza : 12/9/2005 10:55:04 AM

The OEX deals with first Keltner resistance at 573.49 on 10-minute closes. The support beneath the OEX looks strong enough that, even if the OEX does need to retreat again toward 572.60-572.80, it looks as if it might bounce from there again, and perhaps eventually head up toward resistance now at 574.20-574.50. This is all just really iffy, though, and all it takes is one swoop to change this very short-term picture.

Jonathan Levinson : 12/9/2005 10:51:59 AM

It would be early for a short cycle upphase here for QQQQ, but the wavelet is turning up from its extended trending move as price tests downsloping 72 SMA resistance. This is just chop so far within yesterday's afternoon range- looks like op-ex week has arrived early. Link

Linda Piazza : 12/9/2005 10:51:35 AM

Tentative OEX bounce attempt beginning. Still a day for adept scalpers only, in my opinion, ones who don't need my advice. Still, I'm letting you know when I see rollover and bounce potential as they set up. So far, the charts are working fine to predict these little micro-moves, and since they are, I also trust the chart information that suggests that it could be a choppy day.

Linda Piazza : 12/9/2005 10:47:58 AM

The OEX isn't going far with any bounce attempt, but still tries to steady. The advdec line can be described the same was, as trying to steady above support at -830 on 10-minute closes, with the advec line now at -654. Nothing definitive here, and I'd consider it likely that any bounce would be short lived, part of a possible choppy day. OEX at 573.02.

Linda Piazza : 12/9/2005 10:44:21 AM

The OEX is tentatively trying a bounce from Keltner support, now at 572.51-572.70 on 15-minute closes, but more importantly, at 572.06-572.19 on 60-minute closes. Watch 574.27 for potential resistance, on 60-minute closes. OEX at 573.05 as I type.

Linda Piazza : 12/9/2005 10:40:47 AM

The advdec line tests potential support while the OEX does, too. The support doesn't look strong enough on the OEX's Keltner chart that I can say definitively that I think there's going to be a bounce here, but I wouldn't be surprised if there were a bounce from anywhere from the current 572.80 to 571.73. I also wouldn't be surprised if that bounce didn't get much further than 574.50.

Jonathan Levinson : 12/9/2005 10:39:14 AM

Volume breadth -1.1:1 on the NYSE, 1:1 on the Nasdaq.

Jeff Bailey : 12/9/2005 10:33:45 AM

Current OPEN MM Profiles found at this Link

Jonathan Levinson : 12/9/2005 10:32:47 AM

The intraday cycle picture is just a mess at this point, and I'll be ignoring the longer intraday oscillators until they get back in sync. A new short cycle downphase has kicked off, and yesterday's 41.25 low will be a key level. The old gap to 41.18-.20 was never filled, and that will be key support. Link

Linda Piazza : 12/9/2005 10:30:20 AM

If the currently being tested advdec line support doesn't hold, the advdec line hits next potential support at about -820, with the advdec line now at -579 and dropping quickly.

Linda Piazza : 12/9/2005 10:26:08 AM

The OEX now drifts lower, perhaps breaking out of its last bear flag climb on the 10-minute chart, but not yet dropping to 572.73-573.01 next support on that chart. Here it goes, as I type. Next support at 571.77. If you're in a bearish play from near 574.50 and didn't elect to exit earlier, consider taking at least partial profits somewhere in the 572-573 range, if touched. There's potential for the OEX to just slide lower all day again, but lots of potential support in that 572-573 zone, too.

Jeff Bailey : 12/9/2005 10:23:22 AM

Dave & Busters (DAB) $17.53 +15.25% Link ... Agrees to be acquired by Wellspring Capital for $18.05 per share.

Jonathan Levinson : 12/9/2005 10:22:04 AM

Ten year note yields are up 4.5 bps at 4.509%, steepening against the 13 week bill rate, up .5 bpsd at 3.85%. Looks like the Fed's repo drain is taking a bite this morning.

Jonathan Levinson : 12/9/2005 10:20:20 AM

Session low for QQQQ, losing 72 SMA support and driving the short cycle to a preliminary rollover. 30/60 min channel support lines up at 41.30: Link

Jonathan Levinson : 12/9/2005 10:19:17 AM

Session high for Feb. gold at 530.20, +7.40, silver up 8 cents at 9.069 and 2.6 cents off the high.

Linda Piazza : 12/9/2005 10:16:45 AM

The OEX isn't retreating far as the advdec line declines to mid-channel S/R. Bears hoping for a small pullback, a scalp, would have liked to have seen more downside with the downside move in the advdec line. As I said earlier, there wasn't much confirmation. If you entered a bearish play near that 574.50 zone, you might consider whether you want to hang on too long. There's no confirmation of a bounce, either, but the possibility.

Jeff Bailey : 12/9/2005 10:16:39 AM

10:00 Internals found at this Link

Yesterday's Internals found at this Link

Jonathan Levinson : 12/9/2005 10:07:57 AM

Session lows for QQQQ as the 30 min channel bottom and right shoulder reverse h&s support is tested at 41.50: Link

Linda Piazza : 12/9/2005 10:04:58 AM

Advdec line still pulling back, but now approaching the mid-line support area.

Linda Piazza : 12/9/2005 10:02:46 AM

On the first 30-minute close, the 30-minute resistance at 574.28 held.

Jonathan Levinson : 12/9/2005 10:02:19 AM

A 5.5B weekend repo drains net 6.5B against the 12B expiring, and drives the stopout rate up to 4.19%, 6 bps shy of the 4.25% anticipated target for next week's FOMC decision.

Jeff Bailey : 12/9/2005 10:02:02 AM

10:00 Market Watch found at this Link

Jonathan Levinson : 12/9/2005 10:01:38 AM

Headlines:

U.S. OCT. WHOLESALE INVENTORIES RISE 0.2%

U.S. OCT. WHOLESALE GOODS SALES CLIMB 1.2%

WHOLESALE INVENTORIES RISE LESS THAN EXPECTED

Linda Piazza : 12/9/2005 10:00:00 AM

Pullback beginning? If you're participating with a bearish play, consider it a scalp only and be ready to jump out quickly. There's really not a lot of confirmation of a rollover, and there is a whole lot of potential support beneath the OEX.

Linda Piazza : 12/9/2005 9:57:48 AM

Jane mentioned a "recipe for chop," and I've been seeing the same possibility, but from different indicators. I'm still watching for evidence of a strong directional move, but I don't see it yet. Currently, the tentative holding of resistance supports the idea that there could be a pullback, but that evidence is tentative only without advdec line confirmation, and it looks to me as if any pullback could be a shallow one.

Jeff Bailey : 12/9/2005 9:55:00 AM

Sirius Satellite Radio (SIRI) $7.64 +2.96% Link ... edging above neckline ($7.72) of reverse head/shoulder.

Jonathan Levinson : 12/9/2005 9:53:56 AM

Volume breadth is +1.45:1 on the NYSE, +1.95:1 on the Nasdaq.

Jonathan Levinson : 12/9/2005 9:52:18 AM

Awaiting the Wholesale Inventories data at 10AM, est. .5%.

Jonathan Levinson : 12/9/2005 9:51:44 AM

Headlines:

DEC. UMICH PRELIM CONSUMER SENTIMENT 88.7 VS. 81.6 NOV.

DEC. UMICH CONSUMER INDEX BETTER THAN 86.1 EXPECTED

Linda Piazza : 12/9/2005 9:50:52 AM

The resistance the OEX deals with right now is resistance at 574.83-574.88 on 10-minute closes. The OEX's rise looks corrective, still, and I'm watching to see if this might be one place from which the OEX might roll down. It's a potential, with the OEX currently at 574.57, still essentially retesting 60-minute resistance and the 11/30 and 12/01 lows. If the OEX should roll down, however, watch carefully for potential support in the 572-573 zone. This may be a recipe for a choppy day, as I said earlier.

Jeff Bailey : 12/9/2005 9:51:31 AM

Chesapeake Energy (CHK) $31.51 +0.15% Link ... #3 on the most active list after the company said it priced a secondary offering of $20 million common shares at $31.46.

The independent producer of natural gas said it intends to use estimated net proceeds of $605 million to repay amounts outstanding under its revolving credit facility or for general corporate purposes.

Jonathan Levinson : 12/9/2005 9:49:06 AM

QQQQ's short cycle continues to rise as price holds just below the highs. There's a possible reverse h&s pattern from yesterday on QQQQ, which would coincide with a 30 min cycle upturn and marking the low at 2:30 as the bottom of the "head"- neckline is at this monrinbg's 41.67 high. If valid, the 72 SMA support at 41.55 and the 30 min channel bottom at 41.50 must hold if tested. Link

Linda Piazza : 12/9/2005 9:47:31 AM

The SOX climbs this morning. It is currently just above the top of that possible exhaustion gap, just below the 10-sma at 492.08, after having risen to a high of 492.04, testing it. So far, the 10-sma holds as resistance, but it's still early. SOX at 491.25 as I type, also facing five-minute Keltner resistance from 492.01-493.60 on five-minute closes. The QCharts-calculated daily pivot is at 491.01. If that five-minute resistance holds, it looks possible that the SOX will retreat to 489.81 or possibly as low as 486.71.

Linda Piazza : 12/9/2005 9:43:11 AM

OEX and advdec line both pausing at resistance.

Jonathan Levinson : 12/9/2005 9:41:00 AM

Need to step away for a few minutes.

Linda Piazza : 12/9/2005 9:37:44 AM

Advdec line still climbing, picking up steam a bit. The OEX is retesting 60-minute Keltner mid-channel S/R at 574.76-575.02 on 60-minute closes. Resistance there looks fairly firm. So does support near 572.40. Recipe for choppiness? We'll see.

Linda Piazza : 12/9/2005 9:33:58 AM

Advdec line starting a tentative climb. OEX, too. It feels tentative as yet, however.

Linda Piazza : 12/9/2005 9:32:35 AM

Advdec line opens at support, and isn't yet moving much, somewhat reminiscent of yesterday's open. The OEX still tests the boundary of its descending regression channel off the 11/23 high, a potential bull flag. It's not moving much yet, either.

Jonathan Levinson : 12/9/2005 9:32:32 AM

Volume breadth is +1.4:1 on the NYSE, +1.3:1 on the Nasdaq at the open.

Jonathan Levinson : 12/9/2005 9:32:12 AM

QQQQ holds above 72 SMA support at 41.52 at the open. 30 min channel resistance is at 41.70, support 41.20: Link

Linda Piazza : 12/9/2005 9:05:00 AM

As is usual lately, yesterday's trading pattern left us with some unanswered questions. As I said late yesterday, if you're thinking of the SPX's formation at the top of its climb on its daily chart as a triangle, with a spike outside that triangle on Tuesday, you had an almost matching spike below it yesterday, with the day closing with the candle body back inside the triangle. If you're thinking of it as a rising regression channel, an equally valid interpretation, the boundaries were roughly maintained. So were the boundaries of the OEX's falling regression channel on the daily chart, a possible bull flag, and the OEX found support above a descending trendline off the March high. The last few days have felt terribly bearish as the OEX tumbled through that regression channel again, but when all is said and done, the tumble hasn't yet done terrible damage to the OEX. The jury is still out. As I've been saying, I think that both the TRAN and SOX show signs of topping out, and the SOX's move down into that last gap, that possible exhaustion gap, looked like partial confirmation, even though the SOX managed to almost bounce back above that gap. It didn't quite close back above the top of that gap, however, so gap support did not entirely hold, and the fact that the SOX moved into the gap at all gave further corroboration that it was an exhaustion gap. So, there's no strong confirmation of anything on the OEX, but some possible negative follow-through on the SOX and TRAN.

Obviously the SOX should be watched for guidance this morning. A drop below that gap, if the drop is sustained and doesn't see a bounce like yesterday's, will confirm that gap as an exhaustion gap, and will probably suggest either a deeper drop or a prolonged sideways move. With the former trendline off the summer's high at about 482.75 and a descending trendline off the March 2002 high just below that, at about 474, if I've drawn it correctly, I wouldn't be surprised to see the SOX take the choppy, sideways to sideways-down route while MA and other support rises beneath it. If the SOX doesn't drop below that gap again, it may be preparing for another rise through its last congestion pattern. Since it still shows evidence of topping out, I'd be careful about long positions.

There are some signs the OEX could drop into the 568.31-569.80 levels. If the OEX rolls over first thing this morning, traders might consider bearish positions, but only if they're aware that yesterday's low could be strong support. Care should be exercised. If the OEX bounces instead, we're just going to have to watch how things set up, because there's not a lot of agreement among the various time intervals as to what resistance will be strongest.

Jonathan Levinson : 12/9/2005 8:43:35 AM

Yesterday afternoon, QQQQ's 30 min cycle stalled and began to reverse its downphase midway through its run, then whipsawed back down on the INTC drop. It has yet to reverse back up, but the 60 min cycle is pointing north, and this morning's strength looks sufficient to pull the 30 min cycle back up again. I will update the SMA and channel levels when they refresh at the cash open.

Jonathan Levinson : 12/9/2005 8:25:31 AM

Ten year notes hold a light loss at the cash open, with ten year note yields (TNX) up 1.4 bps at 4.478%. 13-week bill rates (IRX) are up 1 bp at 3.855%.

Jonathan Levinson : 12/9/2005 8:20:14 AM

Headline:

8:17am GARTNER SAYS 2005 CHIP SALES SURPASSES RECORD 2000 SALES

Jonathan Levinson : 12/9/2005 7:40:45 AM

Equities are mixed, ES trading 1265.75, NQ 1703, and YM 10817 (basis March 06 contracts). QQQQ is down .06 at 41.99, gold is up 3.9 at 526.70, silver is up .046 at 9.035, ten year notes are down 3/32 to 108 13/16, crude oil is up .35 to 61 and natgas is up .12 to 15.115.

We await the 9:45 AM release of Michigan Sentiment, est. 85, and Wholesale Inventories, est. .5%.

Linda Piazza : 12/9/2005 7:08:35 AM

Good morning. Last night, the Nikkei recaptured 200 of Thursday's 300-point loss. Most other Asian markets climbed, but European markets decline this morning. As of 6:55 EST, gold was higher by $5.90 to $528.60, and crude, higher by $0.28 to $60.94. More details about Asian and European markets follow in succeeding paragraphs.

After Thursday's 300-point loss, the Nikkei gapped lower by more than 50 points at the open, but it wasn't to stay negative long. Japan's much anticipated third-quarter GDP revision disappointed, with that revision showing a 0.2% quarter-over-quarter and a 1.0% annualized rise. Expectations had been for 0.6% and 2.2%. The second quarter's GDP was revised higher, and that contributed in part to the unexpected decline since it was in comparison to a revised-higher number. Private inventories were revised lower, but private consumption, housing, capital expenditures and government final demand were revised higher. One interpretation of the inventories drawdown is that companies, recovering from an earlier glut, are selling inventories rather than raising production to meet demand, so there could be a positive spin on that number. When inventories are depleted, production should ramp--if demand continues. Internal demand fell in this number, however. The GDP deflator fell 1.4%, when it had been down by 1.1% in the original estimate. Much comment lately has concerned when quantitative easing will end, with Fukui saying this week that it's close to ending the policy. The government and Bank of Japan have been somewhat at odds over what economic number should be used to key the end of that easing policy. Ahead of a first-ever meeting with the Bank of Japan next week, the LDP party decided to set up a monetary policy panel to meet for the first time next week, with hints that the tension between the government and the BOJ is not likely to be eased. The government doesn't believe that deflation has ended, and wants to use the GDP deflator as a benchmark, and the BOJ so far intends to use CPI.

After the initial drop, banks and brokerages rebounded, bringing the index into positive territory again. It was to eventually close higher by 220.69 points or 1.45%, at 15,404.05. It did pause, however, at the recent support in the 15,450-ish zone, showing that the former support could now be at least temporary resistance. In addition to the rebound seen in banks and brokerages, other gainers included some resource-related issues.

Brokerages had taken a particular hit on Thursday after an erroneous order had helped to tank the Nikkei. Mizuho Financial Group, the parent company of the brokerage that caused the problem, attributed the problem to a typing error, to sell 610,000 shares of an IPO for 1 yen each, instead of selling 1 share for 610,000 yen. When the mistake was realized two minutes after the order was entered, four attempts to cancel the order failed.

Most other Asian markets were positive. The Taiwan Weighted gained 0.24%, but South Korea's Kospi retreated, down 0.51%. Singapore's Straits Times rose 0.67%, and Hong Kong's Hang Seng climbed 0.21%. China's Shanghai Composite gained 1.38%.

European markets decline, with chip-related issues at least partially responsible for pressuring the markets. In Germany, October's trade surplus narrowed, with exports falling 0.6% month over month and imports rising 3.14%. That decline in exports was a surprise after other recent economic releases, and some believe that the figure will rebound in November. Also in Germany, WPI declined 0.6% month over month, but rose 2.2% year over year. That number is known for its volatility because food and energy have such a heavy weighting in the number. In the U.K., Nationwide opines that house prices will rise next year, but that new buyers will struggle and the rise in prices will be small. The first few months of the year could even see a decline in year-over-year numbers. Also in the U.K., the trade deficit narrowed, with that narrowing of the deficit as unexpected as Germany's narrowing of the surplus had been. Some still believe that net trade will not contribute appreciably to GDP growth over the next year.

Schering headed lower in early European trading, but may have now rebounded. The FDA extended a review for a new drug application for the company's Yaz oral contraceptive. The FTSE 100, with only one tech, was pressured in earliest trading by a downward move in BP after an agency of the Kuwait government said it was selling 185 million shares of the company's stock as part of a portfolio reweighting. The London Stock Exchange's stock slipped lower after the exchange rejected a bid from Maquarie bank. Some telecoms headed higher in earliest trading, however.

As of 6:52 EST, the FTSE 100 was lower by 16.40 points or 0.30%, to 5,514.70. The CAC 40 was lower by 19.05 points or 0.41%, to 4,650.88. The DAX was lower by 17.51 points or 0.33%, to 5,269.24.

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