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Keene Little : 9/5/2006 11:24:51 PM

Here's another bearish setup--this daily chart shows NYSE has now rallied up to the top of a parallel up-channel for price action since the June low. While it could certainly press higher that's not the way I'd bet my money. It's at the top of its channel while oscillators have reached overbought and MACD is showing negative divergences. Looks like the recipe for a short play. Link

Keene Little : 9/5/2006 10:24:41 PM

After the market closed on Tuesday I posted an updated chart of ES to show how it's rising in an ascending wedge and the negative divergences at the new highs supports the bearish interpretation of the pattern. It looks ready to fail at any time but could push up to 1320 without negating the bearish picture.

YM's 120-min chart shows the bounce since the July low. The 3-wave bounce from the June low is a very classic corrective pattern (correcting the May-June decline). Wave-C in the A-B-C bounce is the move up from the July low and it has formed an ascending wedge. This is very typical for a c-wave and the internal 3-wave price action along with the negative divergences is highly supportive of a bearish interpretation here. Link

When I look at the move up since Aug 23rd I see an EW count that is about to complete if it gets a little push higher on Wednesday. If we get the push higher it will complete the count, will give us a little throw-over above the top of the wedge and could tag an internal Fib projection for the final 5th wave of this c-wave (11528).

That's a lot of EW stuff that doesn't have much meaning if you don't follow EW. What it means to me is an outstanding setup for a short play--this pattern should see a break down and it should drop relatively quickly below the June/July lows. It allows a short entry with a relatively tight stop (a climb above 11550 would have me standing aside and waiting for further clarity). Legging into some put options and/or bear call spreads is a good way to position for the short side while protecting against a large loss with a tight stop.

For those who have followed me for the past couple of years you know that I don't pound the table very often on a trade setup. This is a pound-the-table short play setup for what could be a lucrative trade. Just be smart and manage your risk/position size smartly. YM 11550 and I'm out of short positions which will give me time to reevaluate before trying it again.

Keene Little : 9/5/2006 10:06:28 PM

Wednesday's pivot tables: Link and Link

OI Technical Staff : 9/5/2006 9:59:59 PM

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Keene Little : 9/5/2006 8:49:46 PM

ES is rising in an ascending wedge within an ascending wedge with negative divergences supporting the bearish interpretation of what's happening here. As I said today it's just a matter of how long they can hold this up while offloading inventory to the retail crowd who is getting sucked in at the top (again). Whether this makes it up to 1320 I do not know but I sure wouldn't want to play it that way. Either short the top of this pattern or a break below it Link

Jane Fox : 9/5/2006 4:41:49 PM

Economic Reports for tomorrow:

8:30a.m. 2Q Revised Productivity. Previous: +1.1%.

8:30a.m. 2Q Revised Costs. Previous: +4.2%.

10:00a.m. Aug Non-Manufacturing ISM Business Index. Previous: 54.8.

Marc Eckelberry : 9/5/2006 4:29:02 PM

INTC down 1% at 19.65. 10K was not enough.

Marc Eckelberry : 9/5/2006 4:23:11 PM

The street wants INTC to cut 20K jobs (whisper). If it announces only 10K, they will sell the stock.

Jane Fox : 9/5/2006 4:21:52 PM

Intel plans to cut 10,500 jobs, or about 10% of its workforce.

Marc Eckelberry : 9/5/2006 4:20:24 PM

INTC just dropped 20 cents, confirming my feeling that there are not enough shorts to drive the stock much higher from here. I guess anything can happen and it could push higher, but at some point, you have to exercize discipline and stick to what you know and not trade on air. And right now that stock looks too optimistic.

Marc Eckelberry : 9/5/2006 4:16:26 PM

QQQQ pc ratio at 40 strike is an optimistic .23. One gets the feeling there is just too much leaning on the long side and any hint of bad news could pulverize this rally. If I had seen more puts build at 40, I would be screaming buy. But it is a hard case to make, at least for now.

Marc Eckelberry : 9/5/2006 4:14:24 PM

NQ looks like it is going to close below weekly R1 (1606.50). Bulls held on and are trying to nab 1620, weekly R2 and 50%. It could happen, but given the low volume, I'm not sure markets are willing to commit so much with so little new information.

Marc Eckelberry : 9/5/2006 4:12:54 PM

INTC awaits job cuts news. I have closed my long position there for now. With a PC ratio of 0.13 (!) at 20 strike, there is little room for error. I will buy that stock on a pullback, once again.

Marc Eckelberry : 9/5/2006 3:15:30 PM

QM catches a small bid at 68.60. NQ needs to get 1606.50 back and quickly.

Jane Fox : 9/5/2006 3:10:34 PM

* DELTA: COURT OKS MOTION TO TERMINATE PILOT PENSION PLAN
* DELTA MUST OBTAIN PBGC APPROVAL TO TERMINATE PENSION PLAN
* DELTA TO ESTABLISH SEPT. 2 AS EFFECTIVE DATE OF TERMINATION

Keene Little : 9/5/2006 3:09:49 PM

The shorter term ascending wedge is tightening, like a noose. The bottom and top of it are at 1313.50 and 1317. It's looking like they might hold it up into the close. A short is looking better and better all the time. I've got to run but I'll check back in after the close for an update. See you later.

Marc Eckelberry : 9/5/2006 3:08:23 PM

NDX had to go hit 50% 2006 at 1604.15. NQ tagged weekly R1 at 1606.50 and then some, and has retreated a little since. SMH still not making new highs. All a little suspect, but again we will wait and see what price says.

Marc Eckelberry : 9/5/2006 2:58:16 PM

NQ weekly R1

Jane Fox : 9/5/2006 2:49:15 PM

* NYSE VOLUME 966M
* NYSE HAS 1,887 ADVANCERS
* NYSE HAS 1,322 DECLINERS
* NYSE HAS 164 ISSUES UNCHANGED
* NYSE HAS 131 ISSUES SETTING 52-WEEK HIGHS
* NYSE HAS 8 ISSUES SETTING 52-WEEK LOWS
* NASDAQ VOLUME 1.32B
* NASDAQ 1,768 ADVANCERS
* NASDAQ 1,190 DECLINERS
* NASDAQ HAS 172 ISSUES UNCHANGED
* NASDAQ 74 ISSUES SETTING 52-WEEK HIGHS
* NASDAQ 17 ISSUES SETTING 52-WEEK LOWS

Jane Fox : 9/5/2006 2:41:55 PM

I think ES has probably have made a short term top. RSI is getting too overbot for it go too much higher and price needs to retrace a tad for RSI to get back below 70. I don't see the retracement as bearish though because I see no divergence in RSI or MACD. With that said how far can ES fall before the bulls lose control? Well you have a lot of support at 1290 or the bottom of the upward channel. Notice how the 50 and 100 EMA are both rising to add their "support" to 1290 and/or the bottom of the channel. I think a close below the 200EMA would turn me into a bear. Link

Keene Little : 9/5/2006 2:24:35 PM

Confirmation of a break down doesn't occur until ES drops below Friday's 1310 low. Until then it will be possible for this to bounce around and find support at the bottom of the wedge created by the uptrend line from Aug 29th.

Keene Little : 9/5/2006 2:21:36 PM

I see that ES came close to testing the overnight high of 1316.75 (missed it by 2 ticks). It's also where ES has two equal legs up from Aug 29th. Price remains stuck inside its ascending wedge and as the negative divergences on this 15-min chart show, this wedge should be the ending move. It's just a matter of how much longer it's going to hold on and get pushed higher (or not).

That last low at 1312 was right at the uptrend line from last Thursday afternoon's low. It's the level to watch now since a break of it should be the indication that a top is in. I suspect the push higher as I type will create another negative divergence and I'd short it. If we get a little throw-over and then a collapse back inside the pattern that's sell signal #1. Link

Marc Eckelberry : 9/5/2006 2:11:25 PM

Bulls have spoken. Headed for 1611?

Jane Fox : 9/5/2006 2:06:51 PM

WASHINGTON (MarketWatch) -- Announcements of job reductions at major U.S. employers rose by 76% in August, only the second increase this year, according to a monthly survey conducted by Challenger Gray & Christmas released Tuesday.

Job-cut announcements rose to 65,278 in August from a six-year low of 37,178 in July, "in what may signal an early start to year-end downsizing," Challenger said. Announcements totaled 67,176 in June and have averaged 67,375 this year.

The figures are not seasonally adjusted. Layoff announcements typically fall in the summer months.

The report does "not point to a weakening in the labor market," said John Ryding, chief U.S. economist for Bear Stearns.

The report comes four days after the Labor Department reported that nonfarm payrolls grew by 128,000 in August, while the unemployment rate ticked lower to 4.7%. Government data show a softer pace of hiring in the past five months, while first-time claims for jobless benefits have ticked slightly higher in recent week.

Marc Eckelberry : 9/5/2006 1:07:30 PM

SMH is retreating, confirming the relative weakness for now.

Marc Eckelberry : 9/5/2006 1:05:22 PM

Sept. 5 (Bloomberg) -- U.S. home-price growth slowed during the second quarter from a year earlier in the sharpest three-month plunge on record, according to a government report issued today that indicates this year's housing slump is deepening. "The wheels are coming off the housing market," said Scott Anderson, an economist at Wells Fargo & Co. in Minneapolis. Prices for single-family homes rose an average of 1.17 percent during the quarter, compared with 3.65 percent growth in the second quarter of 2005, according to a report issued today by Office of Federal Housing Enterprise in Washington. The drop was the biggest since the agency began keeping records in 1975. The report doesn't give an average price, only the percent of change.

Marc Eckelberry : 9/5/2006 12:59:02 PM

Poole's remarks can also have a bearish slant to them if one thinks the economy is at a very fragile point. This is why any bid in oil is getting noticed. Now that we rallied, everyone is thinking we will get a repeat of last year and keep rallying for a week or two after labor day. So far this year, betting on the same pattern as last year has been a losing proposition.

Marc Eckelberry : 9/5/2006 12:55:56 PM

Noticing that equities are somehwat bothered every time QM bids at 68.60, S1.

Marc Eckelberry : 9/5/2006 12:56:13 PM

Consolidating at highs.

Marc Eckelberry : 9/5/2006 12:45:29 PM

Watch SMH 34.30, 200 ema. If bulls can get it back above, then I will grant them the benefit of the doubt. But for now, the semis holding back on making new highs is concerning me.

Jane Fox : 9/5/2006 12:44:44 PM

These are certainly bullish but not overly so. Link

Marc Eckelberry : 9/5/2006 12:40:34 PM

I am leaning bearish, just because of the relative weakness of the semis.

Marc Eckelberry : 9/5/2006 12:39:51 PM

The NQ July high is 1611 and the June high is 1612.50, so bulls can still decide to attack that, but if we fail at 1606, it will be a lower high at 50% fpr 2006 QQQQ and bearish.

Marc Eckelberry : 9/5/2006 12:38:36 PM

ER has not closed the July 3rd gap at 736.50, the only one no to do so now.

Marc Eckelberry : 9/5/2006 12:27:09 PM

The question now is if that news is priced in. We will see what happens at old NQ gap close of 1601.75 now must hold support .

Marc Eckelberry : 9/5/2006 12:25:08 PM

This is why we bounced so hard:
Sept. 5 (Bloomberg) -- The Federal Reserve can be "patient" in considering whether to raise interest rates again, even while inflation stands above the comfort level of policy makers, said St. Louis Fed President William Poole. "If we believe that we're headed off in the right direction, then we can be patient and sit there and not create a disturbance in the economy," Poole said in an interview with Bloomberg News at his sailboat's marina in Carlyle, Illinois. Even so, Poole said he "will be pushing hard for a policy that is as tight as it has to be" so inflation declines. With a sliding housing market and slowing economic growth that Fed officials expect to help ease inflation, investors see little chance the central bank will raise interest rates again this year. The Fed last month left its target for the overnight lending rate between banks at 5.25 percent, ending a series of 17 consecutive quarter-point increases over two years. Poole said the inflation situation is "well controlled."

Marc Eckelberry : 9/5/2006 12:22:16 PM

Shorts want to see VXN move above 17.80, and soon.

Marc Eckelberry : 9/5/2006 12:18:20 PM

SMH and SOX not confirming the new highs for NQ. 450 is a rcurring problem for the SOX, it seems. At least for now. Price will dictate.

Marc Eckelberry : 9/5/2006 12:16:14 PM

Watch VIX 12.40 support. If bulls mean business, they will push it below. If not, then equities will correct up to VIX 13.50.

Marc Eckelberry : 9/5/2006 12:11:14 PM

QQQ retreats a little at 50% 2006 39.41. NDX 50% is at 1604. NQ is at 1620, so you see the problem traders are facing. If NQ 1603.50 does not hold now, then I would go with QQQQ 39.41 as high. But that is not decided yet. 1601.75 is must hold for NQ.

Jane Fox : 9/5/2006 12:06:00 PM

VIX is confirming each and every move ES makes just like it should. Link

Jane Fox : 9/5/2006 12:04:11 PM

SAN FRANCISCO (MarketWatch) -- Inco Ltd., the world's second-biggest nickel producer, said Tuesday it terminated its $17.9 billion merger agreement with copper giant Phelps Dodge Corp.

Under the agreement, Inco (N) said it will pay Phelps Dodge (PD) a termination fee of $125 million immediately, and an additional $350 million if Inco completes an alternative takeover or similar transaction by Sept. 7, 2007.

"It was very clear from the proxies we received that Inco shareholders were not going to support the Phelps Dodge transaction, so the two companies agreed that it was in our respective best interests to move on," Inco Chairman and Chief Executive Scott Hand said in a statement.

Inco shares were off 90 cents, or 1.2%, at $76.79 in New York while Phelps Dodge shares rose $2.80, or 3.1%, to $93.55 on the news.

Marc Eckelberry : 9/5/2006 11:59:51 AM

QQQQ hits 50% 2006. (39.41).

Marc Eckelberry : 9/5/2006 11:50:51 AM

July gap is now closed. NQ needs to hold 1601.75, or that will be it. If it does hold, next stop would be 1620.

Keene Little : 9/5/2006 11:44:04 AM

One last comment--if you'd like to try a short off this spike up (I like the setup for it), a test of the overnight high of 1316.75 could be the spot.

Marc Eckelberry : 9/5/2006 11:39:35 AM

NQ found exact support at 38.2% (or 61.8%) 2006, 1582. That hit might indicate that QQQQ could test its own 38.2% at 38.50 if 39.15 fails. If 39.15 holds, NQ could go up and close that July 3rd gap at 1601.75. This is a trader's market.

Keene Little : 9/5/2006 11:38:52 AM

This move up off this morning's low has the potential to be the 5th wave up for the rally from Thursday afternoon. If so then it should be followed by a decline that takes out its uptrend line. I was thinking of lowering my stop from 1320 to break even (which may still be the prudent thing to do) but since I can't watch this all day I'll leave my stop at 1320 and see if I can catch the top of this move. Just keep an eye on that uptrend line near 1309.

I've got to get back on the road and won't be able to check on the market until near the close. Good luck and I'll see you later.

Jane Fox : 9/5/2006 11:36:44 AM

YM tags its PDH.

Marc Eckelberry : 9/5/2006 11:35:51 AM

Watch QQQQ 39.15, 200 ema.

Jane Fox : 9/5/2006 11:28:19 AM

Click Commerce Inc. (CKCM) shares rose after Illinois Tool Works Inc. (ITW) said it was buying the Chicago-based for $292 million. The deal values Click Commerce shares at $22.75 each, which represents a 27% premium to Friday's closing price of $17.95. Illinois Tool Works said it expects the deal to close in the fourth quarter of 2006

Jane Fox : 9/5/2006 11:22:50 AM

SAN FRANCISCO (MarketWatch) -- Crude futures fell Tuesday morning to their lowest level since March with news of a successful oil discovery in the Gulf of Mexico easing supply worries and concerns about the nuclear standoff between Iran and western nations and the Atlantic hurricane season taking a backseat for now.

"A lack of threatening weather and a lack of anything fresh on the geopolitical front adds to the burden on prices," said John Kilduff, an analyst at Fimat USA, said in a note to clients Tuesday.

Crude for October delivery was last down 69 cents at $68.50 a barrel on the New York Mercantile Exchange. It fell as low as $68.40, the weakest intraday price the contract has seen since March 28. On Friday, prices closed at a five-month low as rising U.S. petroleum inventories offset worry about Iran and other trouble spots in the Middle East.

Likely adding pressure to oil prices was Chevron Corp.'s (CVX) announcement that a production team it leads made the deepest successful well test in the Gulf of Mexico, potentially unearthing a reservoir of oil that could make it the top domestic source.

Meanwhile, forecasters at Colorado State University last week lowered their Atlantic hurricane activity forecast to 13 tropical storms, with only 5 of those projected to become hurricanes, according to Kilduff.

Less than a month ago, the National Oceanic & Atmospheric Administration warned that this year's relatively quiet start to the hurricane season, which ends on Nov. 30, is "not an indication of what the remainder of the season has in store."

Keene Little : 9/5/2006 11:18:34 AM

I just read Jane's posting at 10:59 and see on her chart the same support level that I'm looking at (ES 1308-1310). That's where I want to cover and go long. The corrective pullback (bull flag) and that support line make a good combination for a higher-odds play to go long there.

Keene Little : 9/5/2006 11:14:47 AM

Back for a look. I'm not liking the way this market is pulling back (considering I'm short). It's a very corrective looking pullback from Friday's high and it makes it look to me like it's going to press higher again once it's finished. The uptrend line from Aug 29th--the bottom of the wedge in the chart I posted below (10:44 PM)--is currently near 1309.

If this continues to chop sideways/down to that uptrend line I'm going to cover my short from 1316 (perhaps at 1310) and considerwill try a small position on the long side. Trading light and taking profits quickly is still the name of the game until this tops out and starts impulsively to the downside.

Jane Fox : 9/5/2006 11:00:26 AM

Now take a look at ES's MACD on the 240 minute chart and you begin to wonder if that support will hold. MACD is saying no.

Jane Fox : 9/5/2006 10:59:27 AM

Here is a 240 minute look at ES. Notice where it broke resistance and how it is now retesting it to see if it indeed has turned to support. Classic! Link

Jane Fox : 9/5/2006 10:57:36 AM

The VIX did not break to a new daily high so ES's daily should hold up.

Jane Fox : 9/5/2006 10:41:06 AM

And VIX testing daily highs.

Jane Fox : 9/5/2006 10:41:25 AM

TICKS are now making new daily lows.

Jane Fox : 9/5/2006 10:40:25 AM

That last +1000 TICK reading would have given us a nice profit had er faded it. Wish I knew these things ahead of time :)

Jane Fox : 9/5/2006 10:18:33 AM

ER breaks its PDH.

Jane Fox : 9/5/2006 10:17:56 AM

YM's 3 minute CCI only reached 153 so this is not a fade.

Jane Fox : 9/5/2006 10:16:57 AM

TICKS +1000 and the buyers are back in town.

Jane Fox : 9/5/2006 10:11:32 AM

Never a good environment in which to trade.

Jane Fox : 9/5/2006 10:11:14 AM

Although the VIX is well above its PDH it is making new daily lows. TRIN is above its PDH as well but is climbing so the internals are sort of bullish but not in sync.

Jane Fox : 9/5/2006 10:09:47 AM

AD line is +503 and AD volume is rising.

Jane Fox : 9/5/2006 10:09:27 AM

ER and YM are now making new daily highs.

Jane Fox : 9/5/2006 10:06:04 AM

TICKS hit +800 on that last push.

Jane Fox : 9/5/2006 9:51:46 AM

The VIX opens well above its PDH and this is never good for the bulls.

Jane Fox : 9/5/2006 9:37:49 AM

All markets except YM are now making new daily lows.

Jane Fox : 9/5/2006 9:37:18 AM

I am not getting a VIX reading yet but I see TRIN opening and remains above its PDH - this is not bullish.

Jane Fox : 9/5/2006 9:35:43 AM

AD line is a neutral +121 and AD volume is just a tad below 0. No one has the reins this morning.

Jane Fox : 9/5/2006 9:34:24 AM

I really wanted to take a long position in ZG at around 616 because I believed that support would hold if it got down there but I missed it. Woulda, shoulda coulda. Link

Jane Fox : 9/5/2006 9:32:19 AM

The equity markets need to continue this trek upwards or the upward channel they are currently building will morph into a bearish upward wedge (always something isn't there?). Also the MACD needs to make a higher high to confirm the price action.

Jane Fox : 9/5/2006 9:29:06 AM

I see all the markets except NQ closed above resistance on Friday which is exactly what the bulls wanted.

Jane Fox : 9/5/2006 9:23:14 AM

Dateline WSJ - Probing deeper beneath the sea than they ever have before, three energy companies today announced discovery of a new font of oil under the Gulf of Mexico that could become one of the biggest domestic petroleum sources for the U.S. The announcement -- with consequences more potential than proven -- coincides with a Labor Day move by President Bush to link jobs to energy supply.

Jane Fox : 9/5/2006 9:17:09 AM

Here again be careful where you put your PDR and overnight markers. QM (Crude Oil Emini) and QN (Natural Gas Emini) both traded on Sunday and Monday, which we consider over the weekend so I will use those lows and highs as my ON marker. QM made a low Sunday at 67.725 so that is what we now consider its ON low. QN made a low at 5.705 Monday and that is what I will now consider its ON low.

ZG (Gold Emini) and the electronic TBonds both trade on the ECBOT so they did not trade on Sunday. Gold's ON high was 634. Link

Jane Fox : 9/5/2006 9:18:00 AM

Good morning all. I hope you all had a wonderful Labor Day weekend. I always find it sad when summer ends. Well on to the markets and why we are all here.

Be careful how you read the overnight charts after a long weekend. The GLOBEX traded on Sunday and Monday but the ECBOT did not. In any event NQ was the only market that did not break its PDH overnight (over the weekend). Link

Keene Little : 9/5/2006 6:33:25 AM

I'll be doing a little traveling first thing this morning but will be able to check in occasionally to see how the market does on this first day after the holiday. My ES short from 1316 survived the night (futures are basically back to flat as I write this) so that could help for any early morning run up. My stop stays at 1320 for the day to hopefully give it some survivability. I would not want to chase anything long today.

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