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OI Technical Staff : 9/7/2006 10:00:04 PM

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Jane Fox : 9/7/2006 3:44:22 PM

Economic Reports for tomorrow include 3:00p.m. July Consumer Credit. Previous: +$10.3B.

Keene Little : 9/7/2006 3:40:12 PM

So much for the next leg up. This means we've still got a down-up-down sequence to new lows before the leg down from Tuesday is complete. That means we probably won't get a bounce until early next week. Shorts should stay there since we should see some consolidations and new lows tomorrow.

Keene Little : 9/7/2006 3:31:02 PM

I'm back. The pullback from the 2:00 high should lead to another leg up as part of a 3-wave bounce into tomorrow. But if it declines to new lows from here then we'll know we're playing out a longer 5-wave count to the downside and that it will need a new low followed by another consolidation and then another new low before setting up a bigger bounce. For now though I'm looking for another leg up.

Playing with some Fibs, if YM starts back up now, two equal legs up would be at 11411. A 50% retracement of this week's decline is at 11415. And as I had mentioned earlier, a previous 2nd wave bounce of the extended 5th wave down is at 11418 so there's some good correlation around that area for resistance to get short. But first we need the 2nd leg up.

Jane Fox : 9/7/2006 3:16:49 PM

AD volume is testing daily lows and with the aD line at -1038 I would take heed.

Tab Gilles : 9/7/2006 3:04:07 PM

Weekly EIA Report Link

Jane Fox : 9/7/2006 2:43:49 PM

Fed's Yellen - Calls Pause 'Good Idea' Needed Slowdown has begun.

Jane Fox : 9/7/2006 2:42:35 PM

YELLEN: RULES SUGGEST RATES ARE NOW IN 'APPROPRIATE' ZONE

FED'S YELLEN: CURRENT RATE LEVEL WILL BRING INFLATION DOWN

Jane Fox : 9/7/2006 2:35:00 PM

Dateline WSJ - Economists believe cooling in the housing market will extend into next year, according to the latest WSJ.com survey. Many forecasters predict no change -- or an outright decline -- in home prices next year. Also, the majority of economists surveyed said they believe the economy is now better able to withstand the shock of a major terrorist attack than it was in 2001.

Jane Fox : 9/7/2006 2:04:43 PM

I have ghosts in my images now that I have switched my charts to another computer.

Jane Fox : 9/7/2006 2:03:50 PM

Here is how the markets are trading in relation to their PDRs. Link

Marc Eckelberry : 9/7/2006 1:58:46 PM

I would not chase this rally unless SMH gets back above 33.45.

Marc Eckelberry : 9/7/2006 1:53:27 PM

Resistance after 1583 (if we get past that) is 1589, downward trendline from April highs. That will be tough for bulls. QM bid will not help. This is a bounce of the dead cat variety, but a good trade from 1565, weekly R1. Keep in mind that QQQQ max pain is at 39. SMH has key R at 33.45, so the deck is stacked against bulls short term.

Keene Little : 9/7/2006 1:37:00 PM

I've got to run some errands and will be out for a couple of hours. I should be back by the close.

Keene Little : 9/7/2006 1:36:18 PM

NDX has made it back into the green. If it gets a bounce off this morning's low that gives us two equal legs up we get an upside target of 1588.55 (cash). That would also take it back up to its broken uptrend line this afternoon. If we get that I'd look to short it. Link

Jane Fox : 9/7/2006 1:20:23 PM

CHICAGO (MarketWatch) -- Mortgage rates rose slightly this week, following six weeks of declines, according to Freddie Mac's weekly survey released on Thursday.

Mortgage rates will most likely continue to fluctuate as new economic data are released, said Frank Nothaft, Freddie Mac vice president and chief economist. He expects rates to remain in the 61/2 to 7% range for the remainder of the year.

"Slowly rising mortgage rates are offset in part by a slowdown in house price appreciation," Nothaft said. "Consequently, higher rates have resulted in houses sitting on the market for longer periods of time, changing the real estate sector into more of a buyer's market from the seller's market of the last few years."

The 30-year fixed-rate mortgage averaged 6.47% for the week ending Sept. 7, up from 6.44% the week before. The 30-year averaged 5.71% a year ago.

The 15-year fixed-rate averaged 6.16% for the week, up from 6.14% last week. The mortgage averaged 5.30% a year ago.

Keene Little : 9/7/2006 12:41:21 PM

I think we've put in a low today and we'll get a bounce into tomorrow. The downside looks to have started though and with opex next week we'll probably see an acceleration lower as the mega-banks' trading teams drive it down to ensure they rake in a few billion. I'll want to position short on the next bounce.

YM would retrace 62% of its decline at 11435 with a retest of its broken uptrend line by tomorrow. An EW guide here says I should look at the 50% retracement though as potential resistance to any further bounce. For you EW-ers that's also the level of the 2nd wave in the extended wave-(v) to this morning's low. That is often the bounce-to point. So watch for an eventual bounce up to 11415-11435 for what should be an outstanding shorting opportunity into next week. Link

One other possibility in the short term EW count is that this morning's low completed a 3rd of a 3rd wave down. That would mean we'll continue to stair-step lower as we unwind the count from Tuesday's high. That would mean we'll get the bounce next week.

Marc Eckelberry : 9/7/2006 12:29:29 PM

Longer term traders might want to look at all those gaps below us. In particular QQQQ 37.70.

Marc Eckelberry : 9/7/2006 12:20:09 PM

NQ stalls at weekly PP. Now at 50% 1577.75, must old for bulls. INTC pulled back below 19.45.

Jane Fox : 9/7/2006 12:14:30 PM

BOSTON (MarketWatch) -- New futures and options contracts from the Chicago Mercantile Exchange designed to hedge real-estate exposure are drawing more interest as investors grip with the unpleasant reality the U.S. housing market may be facing a deeper-than-expected downturn.

The CME (CME) earlier this week said it has partnered with commercial-real-estate index provider Global Real Analytics to launch 10 initial derivatives contracts based on property type and geography. The exchange has already introduced futures and options tied to regional home prices.

Jane Fox : 9/7/2006 12:12:22 PM

WSJ Alert - Shareholders of Alcatel and Lucent approve $10.8 billion combination. Full article coming shortly.

Jane Fox : 9/7/2006 12:10:34 PM

Looking at Marc's chart of ZG you can see there is a lot of support under this market and if it closes below all that support it is telling you with no uncertain terms that all your bullish Gold positions should make an exit stage left.

Marc Eckelberry : 9/7/2006 11:57:29 AM

A good proxy stock is INTC. Watch its 10 dma at 19.45 and see if it can close above. So far, it is R.

Marc Eckelberry : 9/7/2006 11:55:01 AM

The markets will be struggling for direction until the Feds on the 20th. I bought some gold at 622, but dumped at 625.50. I want to buy some for longer term as I think the dollar fall will carry weight with gold. If we hold 625.50 at the close, I might step in again. For now, patience everywhere, please. Don't be the first sucker in. Follow the money.

Marc Eckelberry : 9/7/2006 11:51:25 AM

Contrary to the headlines, gold is telling us there is little risk of inflation and it also might be telling us there is a little more downside to oil. Gasoline suppolies are up and that is what counts for now, not crude, at least until we get into the heating oil season. I am targeting an entry for oil around 66.50. If that fails, next stop would be 64.50. If 67.05 holds today, that could be it for now. This is a tough environment. My feeling is that equities have a little more work to do on the downside, but opex is coming next week and QQQQ 39 is max pain.

Marc Eckelberry : 9/7/2006 11:44:55 AM

Jane, June/July: Link

Marc Eckelberry : 9/7/2006 11:43:03 AM

NQ 1574 is ex trendline support off 8/24 low. Bulls wantthat back. Note that yesterday I commented how one shold wait for 20 dma hits everywhere. NQ did a perfect bounce off of that. Conditions are still overbought on teh daily with most stocks, although TXN is getting interesting.

Jane Fox : 9/7/2006 11:41:11 AM

Marc 50% of what range? (RE: 11:34 post)

Jane Fox : 9/7/2006 11:39:43 AM

San Francisco Federal Reserve President Janet Yellen is scheduled to speak on monetary policy later this afternoon.

Marc Eckelberry : 9/7/2006 11:39:56 AM

NQ almost closes the gap. Now we fiddle around through lunch as every trader feeds of QM ticks, which could be choppy. Line in the sand for bears is a move by NQ above 1577.50.

Marc Eckelberry : 9/7/2006 11:34:50 AM

Jane, also 625.50 is 50% for YG. Key number.

Jane Fox : 9/7/2006 11:31:43 AM

Ok that is my story on Gold and I'm sticking to it.

Jane Fox : 9/7/2006 11:30:57 AM

A close below the 200 EMA would be very bearish for Gold for it has not closed below this MA since July 2005.

Jane Fox : 9/7/2006 11:27:47 AM

The line in the sand for Gold is a close below 616. Link

Jane Fox : 9/7/2006 11:22:42 AM

Here is a link to the article. Link

Jane Fox : 9/7/2006 11:17:12 AM

HMMMM not looking good for Gold.

Jane Fox : 9/7/2006 11:16:13 AM

Do you remember an article I posted a couple of weeks ago siting a study done on the relationship Gold has with other markets? It stated the closest relationships were with Oil (direct), Swiss Franc (direct) and the US $ (Indirect). It even went in depth enough to say Oil needs to close below its weekly 12EMA, the Franc below its weekly 5EMA and the $ above its weekly 7EMA for the bears to be in control of the gold market.

Here is a chart of those markets and the EMAs from the study. Link

Jane Fox : 9/7/2006 11:09:20 AM

I think the retracement we have seen this week is very healthy for the bulls. Of course traders never know if the retracement will turn into something more bearish but so far it has not and the bulls still control the daily charts. And for me the daily chart is the most important for determining overall bullishness or bearishness.

Jane Fox : 9/7/2006 10:51:42 AM

VIX and ES are in sync today, as usual. Link

Keene Little : 9/7/2006 10:53:21 AM

ES 1291.50, the Aug 23rd low, is the next level for support. YM 11331 is its 20-dma and could provide a floor in this area.

Jane Fox : 9/7/2006 10:47:00 AM

Ok we got our little retracement bounce and it you didn't catch it then forget about the long side. For any kind of trades longer than a few point scalp, short is the name of the game today. Very Very clear today. Link

Jane Fox : 9/7/2006 10:43:13 AM

* NYSE VOLUME 348.8M
* NYSE HAS 629 ADVANCERS
* NYSE HAS 2,253 DECLINERS
* NYSE HAS 169 ISSUES UNCHANGED
* NYSE HAS 40 ISSUES SETTING 52-WEEK HIGHS
* NYSE HAS 17 ISSUES SETTING 52-WEEK LOWS
* NASDAQ VOLUME 479.9M
* NASDAQ HAS 674 GAINERS
* NASDAQ HAS 1,899 LOSERS
* NASDAQ HAS 129 ISSUES UNCHANGED
* NASDAQ HAS 17 ISSUES SETTING 52-WEEK HIGHS
* NASDAQ HAS 28 ISSUES SETTING 52-WEEK LOWS

Marc Eckelberry : 9/7/2006 10:37:36 AM

This is abig area of support fro oil, so be careful. A good hedge is a QM long.

Marc Eckelberry : 9/7/2006 10:36:36 AM

If long NQ, stops should now be at 1562.75, no lower.

Jane Fox : 9/7/2006 10:35:48 AM

* NATURAL GAS SUPPLY UP 71 BLN CUBIC FEET: ENERGY DEPT
* NATURAL GAS DOWN 21.4 CENTS, OR 3.6%, AT $5.79/MLN BTUS

Marc Eckelberry : 9/7/2006 10:35:41 AM

Your dead cat bounce type.

Marc Eckelberry : 9/7/2006 10:35:23 AM

I had pretty much targeted this area for downsed. If it dooesn't hold, next stop is 1556, but with oil dropping, this could be it. Be careful, but odds favor a reversal.

Marc Eckelberry : 9/7/2006 10:34:18 AM

Weekly S1 and 20 dma support for NQ (1561.75/1565).

Jane Fox : 9/7/2006 10:32:05 AM

* CRUDE SUPPLY DOWN 2.2 MLN BRLS LAST WEEK: ENERGY DEPT.
* DISTILLATE SUPPLY UP 3.1 MLN BRLS: ENERGY DEPT.
* GASOLINE SUPPLY UP 700,000 BRLS: ENERGY DEPT.

Keene Little : 9/7/2006 10:30:18 AM

YM has now dropped to the point where a retest of the broken uptrend line would be a 50% retracement of this week's decline (11422). That bounce would be an ideal short entry point since the next leg down following this week's should be a strong one. We may not be finished with today's decline but I'm thinking we're very close.

Jane Fox : 9/7/2006 10:21:06 AM

WASHINGTON (MarketWatch) -- Inventories of U.S. wholesalers rose 0.8% in July, beating economists' expectations, while sales at the wholesale level rose 0.4%, the lowest level since February.

Economists surveyed by MarketWatch were expecting wholesale inventories to increase by 0.6%.

Inventories rose by 0.8% in June, the same as originally estimated. Over the past year, wholesale inventories are up 8.8%, while sales have gained 12.6%.

The wholesale inventory report rarely affects financial markets because the data are old. The report is mostly of interest to economists tweaking their estimates for gross domestic product.

The overall number was led by a 0.9% gain in inventories of durable goods. Wholesale inventories of metals and electrical goods, in particular, each made strong gains of 2.7%.

Jane Fox : 9/7/2006 10:18:54 AM

NEW YORK (MarketWatch) -- In a bid to capture share in one of the fastest growing securities markets, the Nasdaq Stock Market Inc. on Thursday confirmed plans to start an options exchange.

Nasdaq (NDAQ) said it planned to launch and equity and index options market in the third quarter 2007. The market, to be called NASDAQ Options Market, will be fully automated. The move is subject to Securities and Exchange Commission approval.

The move comes after an SEC decision to begin a pilot program in which options will trade in pennies rather than nickels. Nasdaq said its trading platform is equipped to handle the change.

Jane Fox : 9/7/2006 10:17:35 AM

Dateline WSJ - LONDON -- British Prime Minister Tony Blair says he plans to resign within a year, forced by intense pressure within his governing Labour Party into making an announcement he has long resisted.

He didn't provide a specific date.

Eight junior officials quit Wednesday to insist on his resignation and news reports said Mr. Blair and Treasury Chief Gordon Brown, who is likely to be the next prime minister, had shouting arguments in Mr. Blair's office about a handover date.

Jane Fox : 9/7/2006 10:14:10 AM

I certainly would not be trying anything but very small scalps if going long. Link

Jane Fox : 9/7/2006 10:08:19 AM

I agree with Keene that consolidation near the lows is bearish however, the markets need to burn off some of the its oversold condition first and that could mean a small tradable retracement.

Jane Fox : 9/7/2006 10:00:58 AM

* JULY WHOLESALE INVENTORIES UP 8.8% YEAR-OVER-YEAR
* JULY WHOLESALE SALES RISE 0.4%
* JULY WHOLESALE INVENTORIES RISE 0.8% VS. 0.6% EXPECTED

Keene Little : 9/7/2006 9:56:51 AM

This consolidation near the lows is bearish. We could see a little stair-stepping lower this morning to finish the wave count to the downside. But I think we're too close to a temporary bottom to chase this lower. Instead be looking for signs of a bottom to then try to scalp a long.

Jane Fox : 9/7/2006 9:55:34 AM

Remember 10:00a.m. July Wholesale Inventories. Previous: +0.8%.

Jane Fox : 9/7/2006 9:51:41 AM

September volume still exceeds December but Dec is catching up and will surpass it this morning.

Jane Fox : 9/7/2006 9:47:51 AM

Online photo service Shutterfly Inc. on Thursday set an estimated price range of $13-$15 a share in its upcoming initial public offering.

The Redwood City, Calif. company partly owned by Silicon Valley scion Jim Clark plans to offer 5.8 million shares.

Based on the midpoint of the proposed price range, the company will raise $81 million.

The company will have 23.6 million shares outstanding after the IPO to give it a market cap of about $330 million, or about four times its 2005 revenue of $84 million.

The company plans to trade on the Nasdaq under the symbol "SFLY".

Jane Fox : 9/7/2006 9:43:37 AM

NEW YORK (MarketWatch) -- Gold futures dipped early Thursday, continuing the consolidation trend of the prior session as the dollar rose sharply against the euro and the British pound.

Gold for December delivery was last down $9.50 at $632.30 an ounce. On Wednesday, the contract lost more than $5 an ounce as dollar strength and weak oil prices gave traders an excuse to cash in some of the metal's recent gains. The metal remains "at risk to further pockets of oil-led liquidation dips," but should find support from physical buying heading into the Indian wedding season, said James Moore, analyst at TheBullionDesk.com.

After closing at a five-month low Wednesday, crude edged back up in early trade Thursday with traders looking to weekly supply data due at 10.30 a.m. Eastern, expected to show the first decline in gasoline stocks in three weeks.

The dollar was mixed, falling against the yen but gaining on the euro and British pound.

Jane Fox : 9/7/2006 9:36:31 AM

VIX opens well above its PDH, which it has every morning this week. TRIN opens within its PDR and is neutral.

Jane Fox : 9/7/2006 9:35:03 AM

AD line is -1255 and AD volume below 0. The bears have the ball.

Jane Fox : 9/7/2006 9:30:44 AM

BOSTON (MarketWatch) -- Beazer Homes USA Inc. again cut its earnings forecast for 2006, blaming higher cancellation rates and weakening sales as the deluge of negative news from the home-building group continues.

The Atlanta-based company (BZH) said net home sales for the two months ended Aug. 31 fell 49% from the year earlier as the cancellation rate rose to 50% from 26%.

"As compared to prior years, a higher percentage of home closings are being deferred or cancelled, immediately prior to closing in many cases, due to worsening buyer sentiment and the inability of buyers to sell their existing homes," the company said in a statement.

Beazer said in expects to close fewer homes in its fiscal fourth quarter than anticipated, and trimmed its 2006 per-share profit forecast to a range of $8 to $8.50 a share. In July the company lowered its annual estimate to $9.25 to $9.75 a share on a slumping housing market.

Jane Fox : 9/7/2006 9:29:12 AM

Dateline WSJ - WASHINGTON -- The number of new applicants for unemployment insurance fell in the latest week from the previous week's upwardly revised level, suggesting that while labor markets are moderating, they retain some resilience and should support consumer spending in coming months.

Initial jobless claims decreased 9,000 to 310,000 in the week ending Sept. 2, the Labor Department said Thursday. That's the lowest level since July 22. New claims for the Aug. 26 week were revised to 319,000 from a previously reported 316,000.

The median estimate of 13 economists surveyed by Dow Jones Newswires had signaled jobless claims would fall 1,000 to 315,000. The four-week moving average of new claims, which economists use to gauge underlying trends, fell 3,000 last week to 315,250.

The latest data are consistent with the softening in labor markets since the spring. Payrolls expanded just 128,000 in August, after rising a similarly tepid 121,000 in July. Softening in employment, as well as signs of a steep slowdown in housing, are expected to keep the Federal Reserve on the sidelines a second-straight time when it meets Sept. 20, and hold the Fed funds rate at 5.25%.

Still, with the unemployment rate at a historically low level of 4.7% and jobless claims still at moderate levels, labor markets should continue to support consumer spending despite headwinds from housing and higher interest rates.

Keene Little : 9/7/2006 9:29:07 AM

YM has closed its gap from Aug 30th at 11369. But so far that hasn't amounted to much of a bounce.

Jane Fox : 9/7/2006 9:26:37 AM

Although I will still give the bulls the benefit of the doubt this 240 minute chart of YM is making me wonder. I see a significant MACD divergence here and a break of the potential bearish wedge. Link

Jane Fox : 9/7/2006 9:16:18 AM

ES is testing its lower trendline of the upward channel and is making the bulls nervous. I think ES could retrace all the way back to to where the 50 and 100EMA join (1299-1301) before it resumes its upward trek. If it closes below that level all bullish bets are off. (I have adjusted the trendlines to accomodate the adjustment to the Dec contract). Link

Jane Fox : 9/7/2006 9:07:38 AM

Gold took a huge drop overnight (lows 631) but the Goldbugs should not worry yet because it is still in a sideways rectangle. I will show the daily chart later today.

Oil has tested its PDL and did not make a significant break. I am long QM and think it could revisit 70 before it takes another drop.

Natural GAs broke its PDL but its yearly lows are still holding on. On Sept first I went out on a limb and said I though this commodity would revisit 6.6 before it resumed its downward trek. Since then it has only reached a high of 6.1.

TBonds' overnight low matched its PDL. Link

Jane Fox : 9/7/2006 8:54:19 AM

Here is the same image but with YM's Dec contract. Link

Jane Fox : 9/7/2006 8:51:35 AM

All equity markets broke their PDLs overnight. TS is using the Sept contract for YM (ECBOT) but the Dec for ES, ER and NQ (GLOBEX). Link

Jane Fox : 9/7/2006 8:39:55 AM

Alert - Please be advised that today we roll over to the December contract for ES, ER, NQ and YM.(Always 1 week and 1 day ahead of options expiration)

Some traders wait until the volume increases to match Sept before using the Dec contract and some wait until tomorrow but I like to keep things simple and will start trading the December first thing this morning.

Keene Little : 9/7/2006 8:38:28 AM

Here's one reason why there's a strong possibility that we've seen the high for this market. I showed this YM chart yesterday and mentioned that the leg up from July looks like an ascending wedge for wave-C of an A-B-C correction to the May-June decline. I was looking for a very minor push higher to finish it off but it would appear that that minor new high had already been accomplished at the new high on Tuesday. It now appears we've had a 5-wave move down from that high and that would mean the trend has turned down.

In addition to the negative divergences supporting this bearish interpretation I like the fact that YM also achieved a Fib projection for the final move up within the wedge. The 5th wave of wave-C achieved 62% of the 3rd wave (at 11488) which I should have watched for on Tuesday. It was at the top of the wedge and hit the Fib projection there and I should have been all over that with a short. Missed it (but got short ES 1316 so caught one of them anyway). Link

It's hard to see the opening price for YM on this chart but it's right at the blue moving average which is the 50-pma. You can see how it has been support in the past (it's close to the 20-dma). With a 5-wave move down from Tuesday we should be ready for a bounce so watch for that. The broken uptrend line at yesterday's closing price of 11416 will now become important to watch for resistance (for a kiss goodbye).

Keene Little : 9/7/2006 8:20:58 AM

The drop in the futures doesn't look so good for the bulls. The daily chart of ES makes it look like it could find support at 1297.50 whereas the 60-min chart shows a break at 1300. That has to do with the closing prices. It means support could still hold here. Additionally the 20-dma is at 1297.25 so this level becomes a must hold for the bulls.

As Marc pointed out yesterday these 20-dma's are important intermediate buy/sell levels so it'll be important to see what happens at these averages. YM's is at 11331 and NQ's at 1561. I would think these moving averages would provide some support but then we'll watch to see what kind of bounce (assuming we'll get one) develops. I still don't trust the downside enough to just blindly hang onto short positions. I don't think the Boyz will let it drop that easily. But if they're positioning for the short side heading into options expiration then stand by for a flush.

Later today, maybe after the close, I'll be switching over to December contracts. The volume on December should pick up considerably today. Beware that some jerking around in the futures could be a result of this changeover to the new front month contracts.

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