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Jeff Bailey : 8/23/2006 2:07:32 AM

YM 5-minute interval chart with tomorrow's DAILY Pivot Retracement (regular session high/low/close) at this Link

After today's trade and "reversal" from DAILY R1, I've got to be thinking "short" DAILY R1 and target the overlapping DAILY S1/WEEKLY Pivot.

On Monday and Tuesday the SMH has undercut its WEEKLY Pivot, and I think it may be trying to tell us something.

Jeff Bailey : 8/23/2006 1:55:04 AM

I'll be very surprise if the YM doesn't trade 11,313 tomorrow (see 01:13:08).

Jeff Bailey : 8/23/2006 1:51:17 AM

You be the judge ... YM 5-minute interval chart using extended session's high/low and then settlement at this Link

Two primary reasons that "make sense" as to why traders use REGULAR Session high/low and CLOSE is that futures are used in part to hedge CASH (DIA) and Options, which are NOT traded in an overnight session.

Jeff Bailey : 8/23/2006 1:37:15 AM

YM recap of Tuesday's trade, 5-minute intervals at this Link

Notes: YM traded 4-points ABOVE Daily R1 and then 4-points below Daily S2.

No problem seeing the YM trades "clean" using regular session high/low/close.

Today's problem was my NOT figuring out how to trade it.

Jeff Bailey : 8/23/2006 1:13:08 AM

YM Pivot Matrix for Wednesday at this Link

Note: Pivot levels I use are derived from the regular session High/Low and CLOSE (not settlement).

Keene posts his pivot levels based on all sessions and SETTLE.

Jeff Bailey : 8/23/2006 12:38:02 AM

Index Pivot Matrix found at this Link

Keene Little : 8/22/2006 10:18:57 PM

Wednesday's pivot tables: Link and Link

OI Technical Staff : 8/22/2006 10:00:00 PM

The Market Monitor has been archived.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

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Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Marc Eckelberry : 8/22/2006 9:52:33 PM

You decide: Link

Marc Eckelberry : 8/22/2006 7:53:44 PM

I'm short YG december 633.40, stop 636.20.

Marc Eckelberry : 8/22/2006 7:48:07 PM

A hawkish fed, an oil pullback and a stronger dollar should spell trouble for gold. 633.60 is must hold.

Jeff Bailey : 8/22/2006 7:37:35 PM

Current OPEN MM Profiles that I've made at this Link

Today's Activity

Closed out the 1/2 bullish position in Dynamic Materials (BOOM) at target of $32.90 ($+1.56/share, or +4.98%)

Seeing the Bloomberg news that MSFT might discount Vista, decide to raise stop on the 1/2 bullish stock position to $25.92 and we were stopped at that price (+$0.66/share, or +2.61%).

Still long the 1/2 call position in the MSFT Jan $22 Calls (MQF-AQ) with a Benchmark price of $25.41.

Raised the bullish stop on the Occidental Petroleum OXY Sep $52.50 Calls (OXY-IX) to $52.24 in the underlying.

YM Futures

Traded the YM long at 11,400 (Stop=11,379 : Target=11,435) and was stopped out at 11,379 (-21/pts, or $-105/contract)

Marc Eckelberry : 8/22/2006 7:11:22 PM

TXN hurt by NSM news.

Jeff Bailey : 8/22/2006 6:07:09 PM

Closing Internals found at this Link

Jeff Bailey : 8/22/2006 5:15:02 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 8/22/2006 5:04:26 PM

Bullish swing trade raise stop alert ... Let's raise a stop on the two (2) Occidental Petroleum OXY Sep $52.50 Calls (OXY-IX) to $52.24 in the underlying. (see 04:31:07 PM EDT Post)

Jeff Bailey : 8/22/2006 4:52:12 PM

NVDA Link ... maybe the "poster child" of an initial rise above its 200-day SMA on average volume. Eventually, it gets the "kick" as the MARKET gets enough information for conviction.

Jane Fox : 8/22/2006 4:49:18 PM

Economic Reports include:

10a.m. July Chicago Fed Natl Activity Index. Previous: +0.34.

10a.m. July Existing Home Sales. Consensus: -1.1%. Previous: -1.3%.

Jeff Bailey : 8/22/2006 4:48:43 PM

200-day SMA technicals ... It has been my observation over many years that the 200-day SMA is a VERY IMPORTANT indicator of "longer-term" action.

The POWERFUL, or more meaningful type of breaks come on VOLUME.

One of the more recent POWERFUL moves can be seen in CSCO Link

Those that can tend to take some time are ....

MSFT Link (note CSCO volume)

TXN Link

Jeff Bailey : 8/22/2006 4:42:03 PM

September Crude Oil (cl06u) official contract settlement at the NYMEX is $72.63.

October Crude Oil (cl06v) settled down $0.20, or -0.27% at $73.10.

Jeff Bailey : 8/22/2006 4:34:18 PM

Microsoft (MSFT) $25.62 -1.91% ... closed right on its 200-day SMA ($25.62).

Jeff Bailey : 8/22/2006 4:33:04 PM

TXN $32.49 -0.67% ... $31.80 extended.

200-day SMA curling up at $31.55.

Marc Eckelberry : 8/22/2006 4:30:28 PM

TXN getting pummeled AH.

Jeff Bailey : 8/22/2006 4:31:07 PM

Occidental Petroleum (OXY) ... updated 60-minute interval chart with WEEKLY/MONTHLY Pivot retracement at this Link

60-minute interval chart from 08/17/06 MM at this Link

Marc Eckelberry : 8/22/2006 4:24:45 PM

I took the NQ long up to 1583, I am just upset I did not immediately go short, would have been easier. I am looking at that QQQQ gap open below at 38.

Marc Eckelberry : 8/22/2006 4:22:25 PM

1289.25 to be precise. 10 dma and 23.6% rally off year lows.

Marc Eckelberry : 8/22/2006 4:20:58 PM

I don't know, Keene. That NQ failure at 1570.75 (Monday drop open) is pretty miserable. I am putting the stop at 1303.75, no more, target is 1290.

Keene Little : 8/22/2006 4:17:43 PM

After the sharp bounce off this afternoon's low, followed by the sideways consolidation into the close, it now looks like this will head higher again. If true then that tells me the sharp drop into this afternoon's low is the leg that finished the sideways correction from last Thursday and that we've now started the 5th wave up for the move up from Aug 11th. And if that's true then we should see a strong leg up almost immediately tomorrow morning. I don't like a short position from here since the risk is too great. I certainly would not want my stop much above 1304.

Marc Eckelberry : 8/22/2006 4:16:44 PM

Hadn't traded ES in a while. What a lumbering, plodding bore, it takes forever to cath up to NQ, but eventually it does. NQ is a much faster game, but I see more distance from 10 dma for ES, so I prefer that short. We close below 1302.25 and that makes me hold overnight. NQ closes below 1568 and basically, they both look tired now.

Jeff Bailey : 8/22/2006 4:13:13 PM

Nope ... DVN "head" at $67.49 and neckline ...mmm say $62.75 (shoulders at $65.00) has DVN falling to $59.84, with pattern objective $58.00

Jeff Bailey : 8/22/2006 4:10:39 PM

Check out DVN on 60-minute interval chart. VERY Similar as OXY late last week.

OXY still looks to be a "leader," but if OXY breaks its "little" h/s pattern, then DVN may well be a play. In fact ... DVN may have achieved that little h/s top pattern objective.

Jeff Bailey : 8/22/2006 4:07:01 PM

Buy Program Premium ... SPY $130.18

Marc Eckelberry : 8/22/2006 4:06:16 PM

Friday fibs are definitely in play. That 1302.25 50% is a line but stillno drop. Worries me.

Marc Eckelberry : 8/22/2006 4:04:20 PM

This reminds why I never short in an uptrend. What a pain. Broke the rule. I'll give it to 1303.75, no more.

Marc Eckelberry : 8/22/2006 4:02:16 PM

Correction, my fibs quoted for ES are Friday H/L. We are still inside so I use that day.

Marc Eckelberry : 8/22/2006 3:59:59 PM

Doji ending. Great.

Jeff Bailey : 8/22/2006 3:59:08 PM

If anything ... yesterday and today's trade in OXY "negates" that BIGGER H/S top pattern outlined last week.

Bulls might have some "fun" above $54.50.

Marc Eckelberry : 8/22/2006 3:57:39 PM

Always watch NQ when you trade the others. It is the canary in the mine. Right now, 1568 is the game.

Marc Eckelberry : 8/22/2006 3:55:39 PM

NQ gave you lots of time to prepare for an ES short. The failure at NQ 1570.75 was pretty critical and now if it loses 1568, I would be amazed if ES pulls out of this one. But I have been amazed bfore. There is nothing more dangerous than shorting in an uptrend.

Jeff Bailey : 8/22/2006 3:54:40 PM

Occidental Petroleum (OXY) $53.26 +0.73% ... probes morning highs.

Marc Eckelberry : 8/22/2006 3:53:10 PM

I hate typing and trading.

Marc Eckelberry : 8/22/2006 3:52:47 PM

ES 50% today is 1302.25. I'm short here, stop 1303.75. 61.8% today. I am little worried about this one, so stop is tight. But I think we are due for a trip to 10 dma at 1290, where I woud flip long again, since that is the trend as long as COMP holds 2115.

Jeff Bailey : 8/22/2006 3:48:51 PM

Devon Energy (DVN) $62.18 +2.11% ... James Cramer just mentioning some unusual call buying in the Nat. Gas producer.

Most active is the Sep $65 Calls (DVN-IM) $0.90 x $1.00 with my QCharts Dn/Uptick Vol 73/110 (1,912 traded with OI of 3,604)

Next is Sep $60 Call (DVN-IL) $3.30 x $3.50 with Dn/Uptick Vol 251/128 (1,432 traded with OI of 3,905).

Doesn't look like a "somebody knows something" trade.

Jane Fox : 8/22/2006 3:35:34 PM


Keene Little : 8/22/2006 3:30:52 PM

If the decline from this morning's high was the first leg of something larger to the downside, then this bounce should be topping around here (62% retracement of the drop is at 1302.50 which is where it's stalling). Then this should be followed by a strong decline. Not a bad place to try a short here. Stop needs to be at about 1305.

Marc Eckelberry : 8/22/2006 3:26:33 PM

Ths behavior looks toppy.

Jeff Bailey : 8/22/2006 3:12:17 PM

SPX NH/NL currently 11:4 and an exact match of yesterday's 11:4.

Swelled to 26 new highs on 8/15/06.

Jeff Bailey : 8/22/2006 3:10:39 PM

03:00 Internals found at this Link

Marc Eckelberry : 8/22/2006 3:03:05 PM

Techs woke up

Jeff Bailey : 8/22/2006 3:02:24 PM

03:00 Market Watch found at this Link

Marc Eckelberry : 8/22/2006 3:02:20 PM


Marc Eckelberry : 8/22/2006 3:02:03 PM

ES 1301.50. Out.

Jane Fox : 8/22/2006 2:57:11 PM

These markets are holding up amazing well considering how overbot they all are.

Marc Eckelberry : 8/22/2006 2:56:28 PM

NQ 1568 is a big deal. If you are long ES, move stops up to 1299. This is getting dangerous, but if NQ holds 1568, ES will hit 1301.50.

Jane Fox : 8/22/2006 2:55:55 PM

NEW YORK (MarketWatch) -- The dollar rose against major currencies Tuesday, touching a four-week high versus the yen, after comments from a Federal Reserve official reignited hopes that U.S. interest rates will continue to climb and as a German economic sentiment poll slumped to a five-year low.

Some "additional firming" of policy may yet be necessary to bring inflation back to the comfort zone, said Michael Moskow, president of the Chicago Federal Reserve Bank, in a speech to the McLean County, Ill., Chamber of Commerce Tuesday. Moskow said "the risk of inflation remaining too high is greater than the risk of growth being too low."

"His rhetoric suggests it's not a closed case for a steady [interest-rate] decision [in September] and this argues for some mild dollar upside tests," said Brian Dolan, director of research at Forex.com, a division of Gain Capital

Jane Fox : 8/22/2006 2:54:34 PM

SAN FRANCISCO (MarketWatch) -- Medtronic Inc., Borders Group Inc. and Intuit Inc. are on the schedule for companies expected to release financial results Tuesday evening.

Medtronic (MDT ) is expected to post earnings of 54 cents a share on sales of $2.9 billion for its fiscal first quarter, according to a poll of analysts conducted by Thomson First Call. Shares of Medtronic, at last check, edged down 0.6%.

Earlier this month, the medical devices maker said it expected its quarterly results to come in below Wall Street expectations. See archived story.

Borders (BGP)) is seen posting a per-share loss of 30 cents on sales of $857 million for the second quarter.

Intuit (INTU) is expected to report that its quarterly loss remained relatively unchanged from a year ago, and investors are likely to focus on the company's forecast for the current year.

Shares of Intuit, maker of the TurboTax and Quicken software programs, were off 0.5%.

Applied Signal Technology (APSG) is expected to report a fiscal third-quarter profit of 18 cents a share on revenue of $45 million.

Jeff Bailey : 8/22/2006 2:54:10 PM

What a "mess of mixture" from the U.S. Market Watch ... for most part, fractional red/green all around for equity indexes.

Jeff Bailey : 8/22/2006 2:52:22 PM

DIA $113.08 -0.37% ... kissed its DAILY S2 to the penny.

SPY $129.90 -0.17% ... session low of $129.68 didn't get the trade at DAILY S2.

QQQQ $38.41 -0.02% ... session low of $38.24 just a bit under DAILY S1.

Jeff Bailey : 8/22/2006 2:46:02 PM

I agree Keene ... majors as well as BIX.X yet to trade WEEKLY Pivots, and each time SMH does, buyers hold ground.

YM/DIA/INDU now look to be the "leaders" of weakness on an intra-day basis, and NQ/NDX/QQQQ tend to follow any weakness, not lead it as has been recent history.

ES/SPX/SPY in between.

Marc Eckelberry : 8/22/2006 2:43:52 PM

I wish these Feds would just shut up and let us trade in an orderly flow.

Keene Little : 8/22/2006 2:39:59 PM

The question here is whether or not ES 1299 is going to hold. The market is teasing both sides right now.

Jeff Bailey : 8/22/2006 2:39:19 PM

30-year YIELD ($TYX.X) down 1.0 bp at 4.954% ... WEEKLY Pivot Levels ... 48.97, 49.21, Piv= 50.21, 50.72, 51.72

Jeff Bailey : 8/22/2006 2:35:46 PM

Semiconductor HOLDRs (SMH) $32.49 -0.33% ... for second-straight session, undercut WEEKLY Pivot, but claw back just above.

Jane Fox : 8/22/2006 1:58:53 PM

ES and NQ PDLs held on as support.

Jane Fox : 8/22/2006 1:58:23 PM


Jane Fox : 8/22/2006 1:57:22 PM


Jane Fox : 8/22/2006 1:50:46 PM

Here is a 240 minute chart of ES showing the trendline from the July 19th lows. Isn't it interesting how that line once broken became resistance? Link

Jeff Bailey : 8/22/2006 1:49:30 PM

Occidental Petroleum (OXY) $52.89 +0.03% ...

Jeff Bailey : 8/22/2006 1:48:54 PM

Venezuela's Chavez: To Sell China 150,000 b/d Oil in 2006

China Visit To Include Series Of Energy Deals

Chinese Cos To Begin Oil Output In Orinoco Belt

Chinese Cos To Produce Oil In Zumano-Area Fields

Keene Little : 8/22/2006 1:46:20 PM

Just one caution for those who want to short this though--this leg down, which could be an under-throw of the recent consolidation, could lead to a fast reversal (where the shorts get spooked out of their positions) and the start of another rally leg. Be a little careful right here.

Marc Eckelberry : 8/22/2006 1:46:20 PM

NQ 1558 is next support below 1561.50.

Jane Fox : 8/22/2006 1:46:11 PM

Es is now slipping past its PDL - no it is holding on at least for now.

Jane Fox : 8/22/2006 1:45:19 PM

NQ and ES tag their PDL and find support. YM has broken is PDL.

Keene Little : 8/22/2006 1:45:05 PM

So much for another leg up after the pullback. At this point I don't expect 1299 to hold, and it's breaking as I type.

Jane Fox : 8/22/2006 1:42:49 PM

WEll it looks like the sellers have arrived.

Jane Fox : 8/22/2006 1:27:38 PM


Jeff Bailey : 8/22/2006 1:27:13 PM

DJ- Fed's Guynn (headlines)

Worried By Long Term Gov Budget Outlook

Monetary Policy Always A Judgement Call

International Factors Matter More Now For Policy

Jeff Bailey : 8/22/2006 1:25:06 PM

DJ- Fed's Moscow (headlines)

Additional Firming Of Policy May Be Needed

High Inflation Risk Greater Than Slow Growth Risk

Recent Job Data Consistent With Econ Potential

Don't See Worrisome Downshift In Econ Activity

Core Inflation To Come Down, But Risks Remain

Inflation Expectations Appear To Be Contained

Higher Energy Costs May Significantly Impact Econ

Housing Prices Unlikely To Decline Nationwide

Business,Consumer Spending Likely To Stay Healthy

Additional Firming Of Policy May Be Needed

Jeff Bailey : 8/22/2006 1:17:58 PM

01:00 Internals found at this Link

Jane Fox : 8/22/2006 1:13:33 PM

YM ticks to a new daily low but the only market to do so.

Jeff Bailey : 8/22/2006 1:02:42 PM

01:00 Market Watch found at this Link

Keene Little : 8/22/2006 1:02:30 PM

If we get another small leg down as part of the pullback from this morning's high (may be starting as I type), two equal legs down is at 1301.50. A 62% retracement of today's little rally is at 1301.75. That might be the level where we find support for another run higher (or not). I'd stick with a stop at 1299 if long.

Keene Little : 8/22/2006 12:56:51 PM

The pullback from this morning's high again looks corrective and that should mean we'll see a continuation higher. The pullback is currently finding support at the 38% retracement of today's little rally, at 1303.25. A 50% retracement is at 1302.50 so watch this area to hold (or not).

Jeff Bailey : 8/22/2006 12:54:02 PM

Current OPEN MM Profiles that I've made at this Link

Today's Activity

Swing trade long closed out at target the Dynamic Materials (BOOM) at $32.90.

With today's news that Microsoft (MSFT) may lower the price on Vista, I raised a stop on the stock position only to $25.92, and that portion of the MSFT trade is stopped out. Will look for pullback entry, and if Volatility stays low, may add to Jan $22 Call position on further pullback.

Day traded long the YM at 11,400, but was stopped at 11,379.

Jane Fox : 8/22/2006 12:49:20 PM

WASHINGTON (MarketWatch) - Jack Guynn, the president of the Atlanta Federal Reserve Bank, who is retiring on Oct. 1, gave a speech looking back at his four-decade career as a central banker in a speech Tuesday, and warned his colleagues not to forget the lessons of the 1970s that inflation is "poisonous" to an economy.

"I am sure future policymakers will remember the lessons we learned in the past 40 years about what happens when you start down the slippery slope of trading inflation for growth," Guynn said in remarks prepared for delivery to the Kiwanis Club of Atlanta.

"As we should now know, a bit of inflation can get out of hand quickly, especially when consumers and businesses expect more price increases, waste time and effort trying to beat inflation, and then rush to spend more money in a vicious inflationary cycle," he said.

"The consequences of high inflation were and remain economically poisonous: increased uncertainty and risk, the added incentive to consume instead of invest, cost of living adjustments, and other marketplace distortions," Guynn said.

Marc Eckelberry : 8/22/2006 12:45:51 PM

Jane, I would side with your article if housing had not experienced this tremendous bull market, which is coming to a temporary end. Using the 70's furthers my point: the stock market stayed idle but real estate exploded (at least in S. Cal.), even with the so-called stagflation. This time around, the hard asset game is played out so it is not the same scenario. I know everyone points out to the fall of the housing market as the fall of the consumer and thus a recession, but is only if inflationary pressures cut in to conumer buying power. I do not see this happening. Furthermore, the housing fall mmight be limited as baby boomers quit flipping houses and actually stay in the one they own through retirement, and they are the biggest segment of the population. In other words, that means money growth will have to seek equities. Again, the Feds seem to be on track. That could change, but for now, that is what I see.

Jane Fox : 8/22/2006 12:39:24 PM

ES and NQ have some bearish MACD divergences> YM had one earlier this morning but since then the MACD has been following price - down! Link

Marc Eckelberry : 8/22/2006 12:36:51 PM

It's either housing or equities. Very rarely do both go down for very long in tandem, at one point, one wins out and it usually works its way out in 6 to 12 months.

Jane Fox : 8/22/2006 12:35:41 PM

Marc I guess my point is that we can find well researched articles on both sides and we just really don't know so we need to fall back on history to guide us. Thus my theory that we will not see another bull market until later than 2010.

Marc Eckelberry : 8/22/2006 12:35:11 PM

The other argument is simple: money needs to go to growth and it won't be in housing or commodities (that one is played out), it will be in equities, especially the much maligned tech sector. I think the COMP will explode upward in the next 12 to 18 months.

Jeff Bailey : 8/22/2006 12:32:27 PM

Dow 30 Components (sorted by price) at this Link ... breadth pretty much even. Heavier weighted components a little stronger. IBM, MSFT, INTC somewhat negative theme for tech. HPQ +0.94%

Marc Eckelberry : 8/22/2006 12:33:40 PM

In other words, Bernanke is following the 2004 Greenspan pre-emptive strike to a tee, but is easing off at just the right time. I am sure Greenspan learned his lesson from 2001 and this is why he started the rate hike cycle early, but the minute we slow, the plan was always to stop. Bernanke could turn out to be the best Fed we ever had, or at least will be credited as such if we get a mild slowdown and inflation eases. Since I think oil is headed down the toilet in the next few months, the pass-through inflation from energy will ease off as well.

Marc Eckelberry : 8/22/2006 12:27:48 PM

I won't quote the entire Markman article, but here is a less doomsday conclusion:

The combination of a pause in growth with a moderation of inflation could lead to one of the most marvelous scenarios that investors have ever seen. So get ready for talk of recession to be replaced with discussion of the fabled, and little-seen, "midcycle slowdown." In past midcycle slowdowns, last witnessed in 1995 and 1985, the S&P 500 has risen as much as 40% as investors discounted a low in earnings and began to look toward the next peak. Here's how it worked the last time: Gross domestic product growth advanced 4.1%, 5.3%, 2.3% and 4.8% in the four quarters of 1994, then sank to 1.1%, 0.7%, 3.3% and 3% in 1995. Now you might think that the market would have been strong in 1994 and weak in 1995, but it's a lot more perverse than that. Market returns were negative in 1994, as investors anticipated that strength was peaking, and then were very strong in 1995, as investors anticipated that weakness was troughing. Sure enough, 1996 was indeed much stronger, with quarterly growth of 2.9%, 6.7%, 3.4% and 4.8%. The same pattern emerged in 1984-85. If this third midcycle slowdown occurs on schedule and the economy blusters through the Fed's tightening cycle without a recession, analysts at ISI Group suggest that three to five years of growth without inflation may lie ahead, e.g. from 2008 to 2010.
And even then, a recession might be remarkably mild compared with those of the past, as the last four -- in 1973-75, 1980-82, 1990-91 and 2001 -- were increasingly mild, with GDP falling, from peak to trough, 3.1%, 2.9%, 1.3% and 0.4%, respectively. This makes sense when you consider that the U.S. economy is a lot less cyclical than it was in the past, with so many more service companies than manufacturing companies.
The U.K., which is even more service-oriented, hasn't had a quarter of negative economic growth in 14 years. Considering all the negative press that the Fed has received recently, you should know that a key factor behind the economy's strength is the central bank's radical decision to launch a pre-emptive strike on inflation with rate hikes rather than wait for it to bust out. It took advantage of a period of strong corporate profitability. That stands in contrast to the Fed's decision to raise rates in 1990 and 2001 as profits were already weakening.

Jane Fox : 8/22/2006 12:19:35 PM

If you want to read a very well researched article on where the market is headed take a subscription out at www.richebacher.com.

Here is his conclusion It is by now a moot question whether the U.S. economy will slow down. It is happening, and at a pretty fast clip. Most important aggregates - employment, retail sales and housing starts - are generating solid recession warnings. Firing people is apparently the first response by businesses. Over the past three months, private sector job gains were 44% below the average monthly gains in 2005. Recall it was a labor-intensive bubble.

Most people, apparently, expect a brief, mild economic downturn, followed by a quick economic rebound. First of all, the high inflation rates are sure to put considerable restraint on the Fed's easing.

But what are the demand components that will probably respond to the new easing? After so many years of prior spending excess and, moreover, asset prices in a sharp fall, the consumer is sure to retrench. Nor is there, for sure, pent-up demand in residential building. There is talk of pent-up demand in business fixed investment. We see mostly companies, which appear to have a strong preference for mergers, acquisitions and stock buybacks, boosting shareholder value. In short, the U.S. economy's rebound after a brief "pause" is an illusion.

There will be a rude awakening.

Marc Eckelberry : 8/22/2006 12:18:23 PM

Correction: gaps are not closed. I was looking at 1583.75, but gap close is 1585 for NQ and 1307.50 for ES.

Jeff Bailey : 8/22/2006 12:17:21 PM

Swing trade long stop alert for the stock position in shares of Microsoft (MSFT) $25.92.

Marc Eckelberry : 8/22/2006 12:18:38 PM

ES and NQ gap opens on Monday are your support areas. NQ 1570.75 and ES 1302.50.

Marc Eckelberry : 8/22/2006 12:19:07 PM

You now have to look ahead at the housing numbers on Thursday and how markets will behave prior to the release.

Jeff Bailey : 8/22/2006 12:10:46 PM

Between that YM trade and a "chirping" smoke alarm, I'm about to go crazy.

Back in a minute after I rip the smoke alarm off the ceiling.

Jeff Bailey : 8/22/2006 12:05:50 PM

YM bullish stop alert 11,379

Jeff Bailey : 8/22/2006 12:05:34 PM

With YM looking like it is now in a 4-day range, may have to use Stochastics.

Jeff Bailey : 8/22/2006 12:04:38 PM

YM adjust bullish stop alert to 11,379 ... YM 11,382 here

Marc Eckelberry : 8/22/2006 12:01:01 PM

Keene, read that article, I promise it is worth it, all 4 pages, or whatever. His arguments are very compelling and very well researched, with back testing and stats. Everyone is looking at the 70's, but he uses SPX earnings stats and the shift out of cyclical to demonstrate a slightly different variation. Anyway, it's all conjecture, but we are still working our way out of the 2001 recession and we are working are way out, not in.

Jeff Bailey : 8/22/2006 11:58:06 AM

Swing trade raise bullish stop alert ... let's sell the 1/2 stock position in Microsoft (MSFT) $26.03 -0.34% ... should it trade $25.92

RAISING STOP to $25.92.

Jeff Bailey : 8/22/2006 11:56:01 AM

MSFT did kiss WEEKLY R1 $26.27 at the open. Tuesday's tend to be R1/S1 short-term exit points.

Jeff Bailey : 8/22/2006 11:54:51 AM

Microsoft (MSFT) $26.05 -0.26% ... slips red.

(see 10:48:56)

Thinking seriously about taking the 1/2 bullish stock position off the table for a decent gain, but holding the longer-term Jan calls.

Then look to buy the stock back should it trade .... back below $25.50 and post Dutch Auction announcement gap.

Keene Little : 8/22/2006 11:41:50 AM

Just to add an opinion on the longer term I think we'll see a repeat of the recession and stagflation like we saw in the 1970's. That would mean a high this year will be followed by a low that breaks the October 2002 low. Then another push back up into the current range and then a big dip again. It should play out into the 2010's. I think that's the best-case scenario. The uglier scenario, which could be greatly influenced by the housing market (if it crashes or not) is that we'll get a big bad ugly decline that goes much lower than the October 2002 low. In either case I don't think long stocks is where people should be for the next year.

Jeff Bailey : 8/22/2006 11:37:37 AM

YM 11,397 ... keeps sticking its head above DAILY R1, but that's been it so far this morning. Session high still 11,408.

Indexes still feel short to me.

Jeff Bailey : 8/22/2006 11:36:19 AM

ditto for SPY $130.44 +0.23%

Jeff Bailey : 8/22/2006 11:35:44 AM

QQQQ $38.76 +0.88% ... has moved above its DAILY R1.

Keene Little : 8/22/2006 11:34:20 AM

This is the kind of day that will drive bears crazy. It looks tired and ready to fall over and yet the sellers can't get anything going. The one negative thing I see is the way this is heading higher though. If we're completing a 5th wave up it's often a choppy move and it's a good sign that the rally is finishing. We might see a little ascending wedge develop for the move up from yesterday's low and that will enable us to get a good short entry (later). Hold your fire for now.

Marc Eckelberry : 8/22/2006 11:32:00 AM

Jane, you have not read that article to the end, I promise, it will open up some areas of thinking that have been missed by many.

Jeff Bailey : 8/22/2006 11:31:38 AM

BOOM $33.63 +6.87% ... has gone "boom!"

Marc Eckelberry : 8/22/2006 11:30:27 AM

Gap is just about closed and lunch (EST) is upon us. Told you it was a bread and butter trade. I'm now out and flat and ready for my breakfast. It doesn't get any easier than this.

Jeff Bailey : 8/22/2006 11:28:29 AM

YM long alert ... go long here at 11,400, stop 11,380, target 11,435

Jeff Bailey : 8/22/2006 11:27:19 AM

Ferocious buying in Treasuries ... 30-year down 1.5 basis points at 4.949% Link ... "O gets the square"

Jane Fox : 8/22/2006 11:27:14 AM

WE are in a bear secular market and they last 10 - 15 years and are notoriously flat periods.

Jane Fox : 8/22/2006 11:26:30 AM

Marc unfortunately though I don't see another bull happening until at least 2010.

Marc Eckelberry : 8/22/2006 11:23:17 AM

The premise is that the US is no longer a cyclical economy, but a service economy, pretty much like the UK which has see 14 years straight of growth.

Jeff Bailey : 8/22/2006 11:20:52 AM

11:00 Internals found at this Link

Yesterday's Internals found at this Link

Marc Eckelberry : 8/22/2006 11:19:28 AM

Jane, that's what Markman says and he compares this to 1994/1995 and sees a big bull ahead for equities once we pass this period.

Marc Eckelberry : 8/22/2006 11:18:04 AM

That's the third bread and butter type trade I use from open to lunch.

Jane Fox : 8/22/2006 11:17:51 AM

Marc my thoughts on what we will face going forward is what John Maudlin calls a muddle through economy and if we have a recession it will be a mild one.

Marc Eckelberry : 8/22/2006 11:17:11 AM

Could get a pre-lunch bid of oil stays low. Always stay with the trend right before 11:30, then bail with everyone else by 11:45 latest. Support is 1574/1574 now, followed by must hold 1571.25.

Jeff Bailey : 8/22/2006 11:04:36 AM

11:00 Market Watch found at this Link

Marc Eckelberry : 8/22/2006 11:03:05 AM

This, by the way, is an excellent article, one of the most intelligent I have read in the past few months. It is spot on, read it all the way through, especially if you are long gold (bad idea): Link

Marc Eckelberry : 8/22/2006 11:00:32 AM

That was to make all you conspiracy buffs happy. But there is a big grain of truth in it. All it takes is to make those CPI numbers and jobs numbers just a little more skewed your way...very easy to do.

Jeff Bailey : 8/22/2006 11:00:56 AM

Advanced Micro Devices (AMD) $24.69 +5.51% ... stock continues to outperform rival Intel (INTC) $18.17 -0.49%.

Stock higher today with Bear Stearns upgrading AMD to "outperform" from "peer perform", year-end price target of $29.00.

Bear Stearns expects AMD to extend its share gains for PC and server chips, be less affected by ongoing declines for PC chips, and benefit from healthier chip inventories. "We think the Street has become excessively bearish on pricing and consensus has not captured the real unit potential" for the second half of the year.

Marc Eckelberry : 8/22/2006 10:58:47 AM

And of course electons coming. I predicted lower rates, lower gas and higher equity markets starting in August and it is slowly happening. If you don't use politics in your trading, you miss out.

Marc Eckelberry : 8/22/2006 10:54:06 AM

By the way, for those clamoring for 80 oil, it has already happened with the October contract, the one trading now. I think the top is in if we can't get back above 74.50 soon. We could see lower 60's upper 50's by year end, as there is at least a $10 geo event premium, if not 15/20. China is slowing (higher rates coming there) we are slowing, plenty of oil stocked up and most of the bad news priced in. Another Katrina would change that, but that is not a good odds play.

Jeff Bailey : 8/22/2006 10:54:05 AM


DJ- Chicago Board of Trade will alter fees it collects on trading volume, lowering the threshold for certain members to receive volume discounts and increasing the rate per contract fees for Treasury futures.

BOT $116.62 +1.08% Link

Jeff Bailey : 8/22/2006 10:52:11 AM


DJ- CPI for July increases 0.1%, as 4.6% rise in gasoline prices offsets federal sales-tax cut. Analysts forecasted a 0.2% drop. Core rate declines 0.2%, cutting year-over-year increase to 1.5%.

Marc Eckelberry : 8/22/2006 10:51:23 AM

QM is dropping. I wrote up a piece last night on why I was bearish on oil.

Jane Fox : 8/22/2006 10:50:34 AM

I don't think we have a lot to room to the upside here because the daily charts are overbot but as long as price hangs around here and does not retrace the more bullish I get.

Marc Eckelberry : 8/22/2006 10:49:11 AM

The globex day is longer, 23.45.

Jane Fox : 8/22/2006 10:49:06 AM

I consider these neutral. Link

Jeff Bailey : 8/22/2006 10:48:56 AM


DJ- Software giant is considering concession, reports Bloomberg, because it has delayed release of the next-generation operating system until January. That has raised concerns shoppers may hold off buying PCs during holiday season.

MSFT $26.19 +0.26% Link

Jane Fox : 8/22/2006 10:47:51 AM

ES is pressing its daily highs but the VIX is not pressing its daily lows so I don't think those highs will break or, if they do, will not have follow through.

Jane Fox : 8/22/2006 10:46:47 AM

ES and VIX are trading in sync. Link

Jeff Bailey : 8/22/2006 10:46:33 AM


DJ- Chain-store sales increase 0.3% in the first three weeks of August compared with a month earlier, according to Redbook Research. ICSC says chain-store sales dip 0.2% last week from a week earlier.

Marc Eckelberry : 8/22/2006 10:46:25 AM

By the way, the daily candle on Qcharts gives you the H/L/C of the full 22 hour session.

Jeff Bailey : 8/22/2006 10:45:53 AM


DJ- Luxury-home builder posts net income of $174.6 million, or $1.07 a share, which includes 9c in writedowns. Analysts' mean estimate was for EPS of $1.04. Revenue declines 1% to $1.53 billion as deliveries fall 7.9%. Toll Brothers cuts fiscal-year earnings forecast, but it stands above analysts' already-lowered expectations, and sees fiscal 2007 deliveries dropping double-digits on a percentage basis.

TOL $25.35 +2.34% Link

Marc Eckelberry : 8/22/2006 10:45:28 AM

Jeff, I traded YM for 2 years on the monitor and can tell you that to the tee, traders use all hours pivots, not regular session. That has been my observation. In fact, as is the case with all futures contracts, since there is volume when Europe opens. We had this debate on the future's monitor a year ago.

Jeff Bailey : 8/22/2006 10:39:39 AM

YM 5-minute interval chart at this Link

Note: I use regular session h/l/c for deriving DAILY/WEEKLY/MONTHLY Pivot Levels.

Marc Eckelberry : 8/22/2006 10:36:40 AM

The envelope is getting stretched, no doubt. At least, raise your stop to 1573.75 or book profits on the next push.

Jeff Bailey : 8/22/2006 10:35:10 AM

YM 11,402 ... has traded DAILY S1 (11,355) to R1 (11,403) and finds its intra-day range.

Marc Eckelberry : 8/22/2006 10:33:18 AM

Oil is bidding and that, as always with NQ, is the wild card. Watch 73.20 and 73.50.

Marc Eckelberry : 8/22/2006 10:32:25 AM

Shorts are in the disbelief stage. We are overbought, but that makes no difference. 1580/1583 is very stuff resistance but ad lines are actually getting better. Amazing.

Jane Fox : 8/22/2006 10:29:23 AM

Federal judge approves deal allowing former star technology banker Frank Quattrone to avoid a third trial.

Marc Eckelberry : 8/22/2006 10:24:32 AM

OIl stayed weak and NQ managed a move above 1577, now stalled right belwo R1 and 61.8% gap.Gap close is 1583.

Jane Fox : 8/22/2006 10:23:39 AM

The only market not making new daily highs is YM.

Jane Fox : 8/22/2006 10:22:59 AM

VIX making new daily lows and AD volume making new daily highs is the formula the bulls want.

Jane Fox : 8/22/2006 10:22:18 AM

AD line is +427 and volume making new daily highs.

Jane Fox : 8/22/2006 10:21:57 AM

Bulls are in the lead now. VIX falling to new daily lows and TICK just hit +800.

Jeff Bailey : 8/22/2006 10:21:18 AM

It was Richmond Fed President Dr. Lacker that voted for a 25 basis point hike at the last FOMC meeting.

Jane Fox : 8/22/2006 10:17:04 AM

Jeff thanks for the RIchmond Fed results. I was not able to find those results. Odd!

Marc Eckelberry : 8/22/2006 10:15:21 AM

But as I said, looks tired, Watch 1574 support followed by 1571.25. Howver, oil is losing its shine and it could surprise us if it stays below R at 73.49 (38.2%)(October)

Jeff Bailey : 8/22/2006 10:15:15 AM

Richmond Fed: Aug Services Revenues Index 7 Vs Jul -3

Richmond Fed: Aug Retail Revenues -5 Vs Jul -32

Richmond Fed: Aug Mfg Shipments -8 Vs Jul 13

Richmond Fed: Aug Manufacturing Index 3 Vs Jul 12

Jeff Bailey : 8/22/2006 10:13:39 AM

BOOM $33.04 +5.08% ... WEEKLY R2 at $33.72

Keene Little : 8/22/2006 10:12:27 AM

The pullback from ES 1303.75 looks corrective and this should head higher. ES 1299 is still the magic number for bulls.

Marc Eckelberry : 8/22/2006 10:12:15 AM

If we get past 1577, odds are we close the agp.

Jeff Bailey : 8/22/2006 10:11:40 AM

Russell 2000 Index (RUT.X) 705.26 (unch) ... another good reason at this point to take some profits in BOOM (component of this very broad index)

Marc Eckelberry : 8/22/2006 10:10:35 AM

Target 50% gap at NQ 1577 was achieved. Looks tired now.

Jeff Bailey : 8/22/2006 10:09:31 AM

BOOM WEEKLY R1 $32.83, so good spot to look for some trading profits.

Jeff Bailey : 8/22/2006 10:08:24 AM

Bullish swing trade target alert ... for Dynamic Materials (BOOM) $32.90 +4.64%

Jeff Bailey : 8/22/2006 10:02:40 AM

10:00 Market Watch found at this Link

Jane Fox : 8/22/2006 10:01:42 AM

Dateline WSJ - Iran delivered Tuesday its formal response to a United Nations package of incentives aimed at persuading Tehran to suspend uranium enrichment. Officials say Iran has offered a new formula to resolve the nuclear dispute.

Iran's top nuclear negotiator, Ali Larijani, delivered Iran's response to ambassadors from the United Kingdom, China, Russia, France, Germany and Switzerland, state-run television reported. The envoys have begun a meeting with Mr. Larijani to discuss the response at the Supreme National Security Council building in central Tehran.

A top Iranian nuclear official said Tehran's response will provide "an exceptional opportunity" for a return to the negotiating table for a compromise. "Iran's response to the package is a comprehensive reply that can open the way for resumption of talks for a final agreement," Mohammed Saeedi, deputy head of the Atomic Energy Organization of Iran, said in comments published Tuesday.

Jane Fox : 8/22/2006 9:59:29 AM

Here is how the markets are trading in relation to their previous day ranges. Link

Jeff Bailey : 8/22/2006 9:58:28 AM

Bank of Montreal Reports 30% Net Income Growth And Record Net Income In 3Q 2006

3Q Net C$710M

3Q EPS C$1.38 vs. C$1.07

3Q Cash EPS C$1.40 vs. C$1.10

3Q ROE 20.3% Vs 16.8%

Bank of Montreal (BMO) reported a 30% increase in earnings in the third quarter, reflecting strong growth in all of its client operating groups.

The Toronto Canadian chartered bank said net income rose to C$710 million or C$1.38 a share from C$547 million or C$1.07 a year earlier. Cash earnings of C$1.40 a share were up from C$1.10 a year earlier.

The Thomson First Call mean estimate was for earnings of C$1.20 a share.

The provision for credit losses was C$20 million in the latest quarter, down from C$38 million a year earlier.

The return on common equity of 20.3% was up from 16.8%.

The bank said it is on track to achieve the targets set for fiscal 2006.

BMO $59.50 +1.48% Link

Jane Fox : 8/22/2006 9:56:35 AM

Just looking at the chart of the $ guess what Gold is doing. Link

Jane Fox : 8/22/2006 9:55:41 AM

Remember 10a.m. Aug Richmond Fed Manufacturing Index. Previous: 12.

Jeff Bailey : 8/22/2006 9:53:13 AM

DJ- Iran Offers New Formula To Nuclear Incentives -Officials

Jeff Bailey : 8/22/2006 9:45:49 AM

Current OPEN MM Profiles that I've made at this Link

Jane Fox : 8/22/2006 9:45:27 AM

The bulls are showing more strength than the bears because the TRIN opens below its PDR and the VIX, although opens within its PDR, is falling.

Jane Fox : 8/22/2006 9:43:45 AM

AD line is a neutral +169 and AD volume is above 0. No one has the reins this morning.

Jane Fox : 8/22/2006 9:39:01 AM

NQ is overbot as well. Link

Jane Fox : 8/22/2006 9:36:52 AM

Here is a chart of YM showing when the 7 day RSI was overbot this year and each one has lead to a retracement. That doesn't mean 100% that it will this time but the probably is that it will.

So if it does retrace where is support? I think it will be around 11200, right where the 100 and 50 EMAs meet the bottom of the channel. Link

Keene Little : 8/22/2006 9:36:22 AM

At this point I'm thinking keep it simple--long above ES 1299 and short below that level. If we get a rally up to 1309 tighten up your stop/take some profits in case that's it for this rally (but take advantage of any continuation higher to 1316).

Jane Fox : 8/22/2006 9:33:02 AM

One of the reasons I think ES will retrace before it moves higher is the 7 day RSI. Before this overbot RSI, the only time RSI has been overbot was in January and it did lead to a healthy retracment.

Jane Fox : 8/22/2006 9:25:48 AM

It is quite obvious that ES has butted up against some resistance here isn't it? But the big question is will it break this resistance before retracing and if it does retrace now far will it retrace. Well I think it will retrace before breaking and that retracement could be all the way back to where the major MAs meet the bottom of the channel around 1280. Then of course you have to make sure it does not break that support before getting long. On the other hand if it continues to move sideways here that is almost a guarantee it will break higher. Link

Jane Fox : 8/22/2006 9:08:46 AM

The needs to be taken into account when trading today - Iran on Tuesday was expected to formally reject the call by the United Nations for the world's fourth biggest oil exporter to stop its nuclear research program. Crude-oil futures rose 17 cents to $72.62 a barrel

Jane Fox : 8/22/2006 9:07:11 AM

Dateline MarketWatch - With no economic data on tap, two speeches from Fed officials are likely to garner some attention as investors look for confirmation that the central bank has stopped raising interest rates, at least for the time being.

Atlanta Federal Reserve Bank President Jack Guynn speaks to the Kiwanis Club of Atlanta at 12.40 p.m. Eastern, while Chicago Federal Reserve Bank President Michael Moskow address the McLean County, Ill. Chamber of Commerce at 1 p.m. Eastern.

Jane Fox : 8/22/2006 9:04:25 AM

Shares of XM Satellite Radio Holdings (XMSR)were up 11% in premarket action on Inet after the broadcast operator was upgraded to "outperform" from "underperform" by Bear Stearns. Analysts said the wave of bad news that has hurt the company has died down, saying that the market "has begun discounting the worst possible outcomes and is overly focused on the recent negative news." Rival Sirius Satellite Radio gained 2.6% on Inet and was the most actively traded issue after shares of the Nasdaq 100 Trust exchange-traded fund.

Advanced Micro Devices (AMD) gained 1.7%, after the chip maker said it intends to capture a 30% share of the global market for computer processors by 2009; current share is in the lower 20s, officials said. Separately, Bear Stearns upgraded its rating on the stock to "outperform" from "peer perform."

Falling sharply was Candela Laser (CLZR), which was down 26% after the company said fourth-quarter earnings fell 25% from the year-earlier period.

Jane Fox : 8/22/2006 8:58:33 AM

Dateline WSJ - Toll Brothers Inc. said Tuesday its fiscal third-quarter profit fell 19% as a downturn in the housing market resulted in a dip in revenue and caused the luxury home builder to reduce the number of lots it controls.

The results come amid growing signs of cooling in the housing market. Last week the National Association of Home Builders reported confidence among home builders hit a 15-year low. The University of Michigan's preliminary reading on August consumer sentiment showed households themselves view this as the worst time to go out and buy a home since 1990, a recessionary period that led to nasty housing declines in places like Boston and California.

Rising home inventories and shaky sales have put pressure on housing prices. Tomorrow's report on existing-home sales from the National Association of Realtors and Thursday's report on new-home sales from the Commerce Department may show that in July home prices had their first decline from year-ago-levels since 1995.

Jane Fox : 8/22/2006 8:56:47 AM

Both TBonds and Oil broke their respective PDHs overnight. October QM hit a high of 73.50.

Nat Gas is certainly settled down these last few days but seems to be hanging around the base of the triangle it is building on the daily chart.

Gold had a bullish day yesterday but retraced about 50% of the gain overnight. Gold could not break its PDH overnight. Link

Jane Fox : 8/22/2006 8:49:58 AM

The markets overnight session started off in rally mode but then around 1:30 they started to fall then fell to around 8:30. The overnight ranges have almost matched their respective PDRs. Notice YM tagged its PDH. Link

Keene Little : 8/22/2006 8:22:45 AM

But if 1299 continues to hold then the sideways consolidation (4th wave correction) stays alive and could lead to another shot higher in a 5th wave as per my post late yesterday (4:29 PM) which would mean an upside target of 1310 or 1316.50. This is why the 1299 level will be an important level this morning. Trying a long here could work for a nice play to the upside but keep your stop tight.

Keene Little : 8/22/2006 8:13:44 AM

With the futures down this morning, assuming they'll stay down after the open, it raises the possibility that we'll see another leg down to match the drop from Friday's high to yesterday's low. In other words get a pullback with two equal legs down. That would give us a target of ES 1294.25. This would negate the idea that we'll continue in a sideways consolidation this morning before heading higher and would point to the probability that Friday's high was the end of the rally leg from Aug 11th.

Keene Little : 8/22/2006 8:08:51 AM

Futures have taken quite a spill since the overnight high around 2:00 AM. The drop from that high is a nice 5-wave move so we should see at least a bounce back up into the cash open. If you're interested in playing a small move before the open I'd try a long from this ES 1299 area.

Marc Eckelberry : 8/22/2006 5:44:54 AM

QM catches a bid and the overnight equity rally stalls. Watch 73.50 38.2% (October). Should oil take off, 50 dma is 74.70 and stiff resistance.

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