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OI Technical Staff : 10/20/2006 9:59:59 PM

The Market Monitor has been archived.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

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Keene Little : 10/20/2006 4:56:49 PM

One more: if I could attach music to this chart it would be from "Jaws". VIX inched a little lower today. Getting close now. Link

This guy is representative of the bulls in the market (look carefully just under the bow). Link

Jim Brown : 10/20/2006 4:47:13 PM

Readers Challenge Update - It should be no surprise that this week's winners made such accurate predictions. These winners are long time subscribers.

Harriet has been a subscriber since Feb-1998

Scott has been a subscriber since Nov-1998

Robert, the comparative new kid on the block but with two wins under his belt subscribed in Jan-2005. I guess we can just chalk up his wins to beginners luck. (grin)

Keene Little : 10/20/2006 4:44:45 PM

Looking over the pattern of NYSE I don't get the same sense of upside potential as I get from the DOW. The way this has chopped its way higher from Tuesday's low makes it look like an ending pattern which could be very close to finishing. Once again notice all the 3-wave moves inside this triangle pattern--a corrective pattern to the upside is typically an ending pattern. Link

This pattern tells me that a small rise on Monday, maybe with a small throw-over to 8720, should complete the ascending wedge. This one is a big heads up warning for Monday. The weakness in the banks and brokers continues to be a warning as well.

I hope everyone has a great weekend.

Jeff Bailey : 10/20/2006 4:48:49 PM

SPY Most Active Options at the close ... Link

Screen capture as VIX.X hit 10.53 earlier today Link

Note to remember: SFB-WD (Nov $134 Put) rose to #4 from #8. $134 +/- $0.50 = $133.50 to $134.50.

Jeff Bailey : 10/20/2006 4:29:07 PM

Congratulations... Robert, Scott and Harriet!

Jim Brown : 10/20/2006 4:24:00 PM

Reader Challenge Winner Alert - This was an interesting week in the market and the guesses were all over the map for the three indexes. The Google and Caterpillar earnings skewed the indexes at Friday's open but other factors brought them right back to the flat line for option expiration. I congratulate the winners below for seeing through the smoke and haze and predicting the correct levels. Hopefully you bet on your own predictions!

Robert Demyanovich the Dow winner also won the challenge two weeks ago. Good predictions Robert!

Dow close: 12002.37
Nasdaq close: 2342.30
S&P close: 1368.60

Dow Winner - Robert Demyanovich @ 12010

Prize: The Options Course, By George Fontanills: Link

Nasdaq Winner - Scott Campisi @ 2340.99

Prize: The Art of the Trade, by R.E. McMaster: Link

S&P Winner - Harriet Dunne @ 1367.24

Prize: Demark on Day Trading Options, by Tom Demark: Link

Keene Little : 10/20/2006 4:11:57 PM

Jane, QCharts is not showing anything for the settlement (RLS.X).

Keene Little : 10/20/2006 4:10:27 PM

Assuming the DOW will be able to push higher towards its 12190 target, we should get just a quick dip on Monday morning that gets bought. It should be able to hold above 11980 (cash).

Jane Fox : 10/20/2006 4:02:41 PM

Does anyone have the $RUT settlement for today.

Jeff Bailey : 10/20/2006 4:06:50 PM

How perfect ... Earth Wind & Fire ... Dancing in September

SPX with my "bull fit 38.2%" (shown prior to SPX new highs, just in case bears were wrong) at this Link

Do you remember the 21st night of September?

Love was changing the minds of pretenders

While chasing the clouds away....

Jim Brown : 10/20/2006 4:02:04 PM

Russell futures really tanked at the close!

Keene Little : 10/20/2006 3:59:52 PM

Looks like a masterful job parking it at 12K.

Jeff Bailey : 10/20/2006 3:55:29 PM

Laughing ... Jane ... I was trying to remember who wrote the song with the lyrics ... "Do you remember..."

Kool And The Gang? Earth, Wind, & Fire?

Keene Little : 10/20/2006 3:53:06 PM

LOL, thanks Jane. I owe you one.

Jane Fox : 10/20/2006 3:53:32 PM

Keene sort of reminds you the song "Hit me with your best shot. Fire away." Just thought I would leave you with that one for the weekend. At least it wasn't Isty bitsy teeny weeney...

Keene Little : 10/20/2006 3:51:02 PM

Yea, and there's a pot of gold at the end of the rainbow.

Jeff Bailey : 10/20/2006 3:50:39 PM

Ohhhh... it is their money Keene. Any time there is manipulation it has to be their money.

Keene Little : 10/20/2006 3:49:44 PM

Come on Boyz, time to hit it with another buy program. Keep that DOW above 12K, you can do it.

Jim Brown : 10/20/2006 3:46:10 PM

Readers Challenge - If the Dow closes over 12001.35 and under 12011 Robert Demyanovich the readers challenge winner from two weeks ago will win again. Pretty good guessing Robert!

Keene Little : 10/20/2006 3:42:16 PM

It's kind of comical, in a sad way, now to watch these buying spikes hit. It's not their money they're spending to do this so they don't care. It's not being done for total return on portfolio but instead for show so they can suck the masses in and hand off their inventory.

Jeff Bailey : 10/20/2006 3:39:59 PM

Jane ... I know you were agreeing with me.

I was just remembering .... ;)

09/20/06 SPX Most Active Options ... C:\Documents and Settings\jeffb\My Documents\090106_093006\092006_SPXoptions_02.GIF

Jim Brown : 10/20/2006 3:27:48 PM

I also bought the dip on the QM at the close. The sell off was purely a sell the news event aggravated by the expiration of the November futures contract today. The December contract begins trading on Monday and I expect at least a short term bounce. The OPEC cuts will not be felt until 30-45 days after the Nov-1st start date. That is how long it takes oil to travel from the OPEC ports to the actual users around the world. That means production for the rest of the month will continue to be felt until around Dec-1st. However, demand will also begin to increase around Nov-1st with the coming of winter.

Jeff Bailey : 10/20/2006 3:27:35 PM

03:15 Internals found at this Link

Keene Little : 10/20/2006 3:25:17 PM

Playing around with the DOW chart shows me a couple of things. As seen on this 120-min chart, the DOW has stair-stepped higher with support and resistance levels about every 120 points. The current consolidation is starting to "violate" that pattern so that in itself could be warning us of something. But as I play with some EW counts, channels and Fib projections, I'm getting DOW 12200 (a little less than) as an upside target for the next push, assuming of course another push is coming. Link

If we get up to that level by Tuesday it would be at the top of its steeper up-channel and an over-throw of the up-channel from late September (also unsustainably steep on the daily chart). The Fib projections near 12200 cross the top of the steeper channel on Tuesday. If we start to see a steeper price correction after that you can see all the support levels the bears will need to break. Needless to say they'll have their work cut out for them.

The flip side of course is that if those support levels start breaking, the sell stops that get hit could cause a pancaking lower like collapsing floors in a building.

Jim Brown : 10/20/2006 3:24:07 PM

I bought the dip on CAT. I could not resist the obscene over reaction. Long term calls are cheap and I think CAT will recover quickly.

Jim Brown : 10/20/2006 3:22:43 PM

All indexes back in the green despite CAT being a -70 point drag on the Dow. Positively amazing.

Jane Fox : 10/20/2006 3:18:52 PM

Ym to new daily highs.

Jane Fox : 10/20/2006 3:18:13 PM

Actually Jeff I was agreeing with you.

Jane Fox : 10/20/2006 3:17:25 PM

TICKs +800

Jeff Bailey : 10/20/2006 3:16:36 PM

03:15 Market Watch found at this Link

Keene Little : 10/20/2006 3:14:48 PM

It looks like a pretty good effort to hold the DOW above 12K for the weekend newspapers. And they say the market can't be manipulated. Do you need more proof?

Jeff Bailey : 10/20/2006 3:13:26 PM

Remember the "bull fit 38.2%" line up on the SPX?

Jeff Bailey : 10/20/2006 3:12:34 PM

Remember what the most active call was?

Jeff Bailey : 10/20/2006 3:12:20 PM

Remember what we did with the SPX option chain?

Jeff Bailey : 10/20/2006 3:12:00 PM

Jane ... overconfidence and complacency were two of the words used in mid-September too!

Jeff Bailey : 10/20/2006 3:02:55 PM

Nope ...

Jane Fox : 10/20/2006 2:57:59 PM

Jeff did you read McMillan's commentary that I posted at 12:47? He says even though the market can continue to advance with the VIX at these levels it is a sign of overconfidence and complacency and that a sharp but probably short lived correction is probable.

Jeff Bailey : 10/20/2006 2:57:24 PM

Remember how bearish some commentators and bloggers got on September 13 when VIX.X traded similar level?

I simply mentioned that call buyers and put sellers outnumbers call seller and put buyers.

Jane Fox : 10/20/2006 2:54:05 PM

The internals are loud and clear today. Do not trade!

Jeff Bailey : 10/20/2006 2:52:05 PM

VIX.X alert 10.52 -3.48% ... Probes March 14, 2006 and September 13, 2006 relative lows.

Jane Fox : 10/20/2006 2:29:59 PM

VIX continues to make new daily lows and as long as it does I would not be short. Today, like yesterday, it is not telling us ES will make new daily highs but it is telling us ES will NOT make new daily lows.

Keene Little : 10/20/2006 2:26:42 PM

So can trading get any more boring than this for the indices? As we head into the final stretch, probably.

Keene Little : 10/20/2006 2:10:53 PM

When looking at the descending triangle that has been forming for QM (a continuation pattern in this case), it's a great example of how you'll see 3-wave moves inside the triangle. This identifies triangles and they're very common for 4th wave (and b-wave) corrections. These triangles are typically made up of 5 waves (labeled a-b-c-d-e) with each of those being a 3-wave move. Just FYI for those trying to learn EW.

Jeff Bailey : 10/20/2006 2:09:38 PM

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

Jim Brown : 10/20/2006 2:06:35 PM

There is widespread beliefe that the Iraq story will change significantly after the elections. It is suspected that the coalition troops will turn over daily enforcement to the Iraq police/troops and withdraw to fortified camps and function as only a deterent to Iran and avoid the daily attacks.

Jeff Bailey : 10/20/2006 2:04:35 PM

ALLSTATE ORDERED TO RETURN $17.5M

DJ- Property and casualty insurer is ordered to return $17.5 million to more than 20,000 Maryland policyholders for premium increases that didn't comply with the state law. Refunds average $850.

ALL $61.48 -0.25% Link

Keene Little : 10/20/2006 2:03:27 PM

If you like to trade oil I see the possibility for another bounce back up to a Fib projection at 61.10 (December QM) before turning back down and heading for new lows. It's possible yesterday afternoon's high was the end of the recent consolidation but the pattern as I show it here would look better from an EW perspective. Link

Assuming we get the leg down as depicted, whether from here or after another bounce first, it should complete the 5-wave move down from July. That would then set up a very good position trade to the long side as the pattern would call for a much bigger bounce into the new year (to correct the 5-wave move down from July).

Jeff Bailey : 10/20/2006 2:02:28 PM

BUSH TO LOOK INTO TACTICAL CHANGES IN IRAQ

DJ- President Bush acknowledges the situation in Iraq is "tough" and plans to consult with American generals to see if tactics should be changed. However, overall strategy is expected to remain the same.

Jeff Bailey : 10/20/2006 1:59:27 PM

French Minister: (update)

DJ- France and its allies are willing to suspend the drive to impose U.N. Security Council sanctions on Iran if it takes positive steps toward resolving questions over its disputed nuclear program, France's defense minister said Friday.

Defense Minister Michele Alliot-Marie said it was "very difficult to talk to Iran" becuase its officials may give the impression they're ready to change their stance, but then reverse themselves.

"When the factions are getting close there's a diplomatic step forward by Iran and then on the following day or three days later, when we think we're going to get into the talks once again, they step back and they stiffen on behalf of the Iranian government or president," she said.

Jeff Bailey : 10/20/2006 1:56:40 PM

Nymex Crude Falls to 2006 Low After OPEC Cut

DJ- New York crude oil futures fell to their lowest intraday price for 2006 as traders shrugged off greater-than-expected Organization of Petroleum Exporting Countries output cuts and focused instead on healthy U.S. petroleum stockpiles.

"People are looking at the fundamentals and saying there's too much supply," even with an OPEC cut of 1.2 million barrels a day, said Tom Bentz, a trader and analyst at BNP Paribas in New York. "There's also the question about whether OPEC will adhere to the cuts, but I have to believe they're serious."

November light, sweet crude contract on the New York Mercantile Exchange was down $1.16, or 2%, to $57.34 a barrel after earlier falling as low as $57.20, the least for the front month contract since Dec. 19. The contract expires Friday. Nymex December crude fell 85 cents to $59.65 a barrel. Brent crude on the ICE futures exchange fell 77 cents to $60.10 a barrel.

November heating oil fell 3.52 cents to $1.6849 a gallon. Front month unleaded gasoline fell 96 points to $1.4798 a gallon, and reformulated gasoline blendstock, or RBOB, fell 2.5 cents to $1.5078 a gallon.

OPEC agreed to cut 1.2 million barrels a day from its actual production rate, 20% more than the 1 million barrels members had been widely touting before a meeting late Thursday in Doha, Qatar.

"More than anything, this (fall in crude) is the market registering its skepticism of the OPEC cuts," said Mike Fitzpatrick, a trader at Fimat USA in New York.

The Department of Energy said Thursday that it assumes the actual OPEC cut will be 600,000 barrels a day and that U.S. crude stockpiles are healthy enough to take the OPEC cuts.

U.S. crude stockpiles rose by 5.2 million barrels last week, the department said in its weekly inventory report Wednesday. Analysts had expected just a 1 million-barrel gain.

Analysts said the bigger-than-expected OPEC cut is likely both designed to surprise oil markets and to ensure cuts of around 1 million barrels a day, with the cartel likely to be unable to get all members to comply.

"The 1.2 million barrels is a lot bigger than people were expecting but there will be doubt all these cuts will come to fruition," said Jason Schenker, an analyst at Wachovia Corp. in Charlotte, N.C. "It could be the case they are chasing 1.2 million barrels in the hope that even with cheating they can get a 1-million-barrel cut."

The effects of the cut will likely support prices for now and boost them over the Northern Hemisphere winter months when demand for heating oil rises, traders said.

Jeff Bailey : 10/20/2006 1:53:35 PM

EIA Comments on OPEC Cuts:

Skeptical OPEC Will Actually Cut Full 1.2M B/D

Assume Actual OPEC Output Cut Will Be 600,000 B/D

Reduced OPEC Vols To US Not Expected Until Early Dec

Crude Prices Should Firm In Week Or Two On OPEC Cut

Some OPEC Suppliers Have Already Reduced Output

If Price Firms In 1-2 Wks, Dec OPEC Cut Unnecessary

US Crude Stocks Healthy Enough To Take OPEC Cut

Keene Little : 10/20/2006 1:53:27 PM

DOW and SPX have broken today's uptrend but ES is holding above its line at 1372.25, where it just bounced. Another drop lower though will probably mean it's headed for the 1368 area. The DOW and SPX might be about to give today's uptrend lines a kiss goodbye.

Jeff Bailey : 10/20/2006 1:50:37 PM

French Minister: To Halt Sanction Push If Iran Acts To Ease Rift

Jane Fox : 10/20/2006 1:45:45 PM

Gee TRIN to new daily highs and AD volume to new daily lows. Are these two ducks enough to get me short. ARGHHH!!!

Jane Fox : 10/20/2006 1:42:47 PM

The holy grail for a short is TRIN and VIX moving up and AD volume moving down. As you can see these damn ducks are all off in their own directions again and VIX and TRIN are moving in opposite directions. At least you have the TRIN and AD volume moving the way they are supposed to but if the VIX is not confirming I ain't tradin'. Link

Jane Fox : 10/20/2006 1:39:02 PM

Nq and ER are not even back into their respective overnight ranges yet.

Keene Little : 10/20/2006 1:28:42 PM

We have a bit of a mixed picture when looking at the a-d volume and issues. Both are negative and that gives a bearish impression for the day. But the a-d issues number has been slowly climbing off this morning's low while a-d volume continues to new lows. VIX is hanging around new lows. All of these support the idea that we'll see another leg down this afternoon.

Jeff Bailey : 10/20/2006 1:19:21 PM

01:00 Internals found at this Link

Jeff Bailey : 10/20/2006 1:07:13 PM

Whole Foods Market (WFMI) $64.75 +0.07% ...

Keene Little : 10/20/2006 1:06:35 PM

YM's downtrend line from Wednesday's high is at 12055 so watch that level for resistance. It still looks like it should be a good short (with 12062 an upside possibility). And then if we get the drop, getting long around 12K should make a nice play (maybe on Monday).

Jeff Bailey : 10/20/2006 1:05:04 PM

Swing trade bullish filled alert ... on Wild Oats (OATS) $18.00

Jeff Bailey : 10/20/2006 1:03:25 PM

01:00 Market Watch found at this Link

Jeff Bailey : 10/20/2006 12:53:28 PM

Continental Airlines (CAL) $34.61 +6.00% ... notches a new 52-weeker.

Jeff Bailey : 10/20/2006 12:52:44 PM

JetBlue (JBLU) $11.08 +3.93% ... moves above its 200-day SMA ($10.88). Volume light at 1.99 million shares.

Jane Fox : 10/20/2006 12:47:08 PM

Here is McMillan's weekly commentary. - The broad market remains overbought, but bullish. This week, on more than one occasion, it looked like the market was going to experience a correction, but nothing was really forthcoming. To a certain extent, that might have more to do with option expiration than anything else (more about that later). In any case, there are no confirmed sell signals, so the major trend remains upward.

$SPX broke out on the upside, penetrating through the upper portion of its channel. That was "too much," and the market has struggled since doing that. However, it hasn't really corrected. Rather, it's gone sideways. A true correction would probably take it down towards the bottom of the trading range, which is near the 1340 support level. While a 25-point correction would likely be painful for some, it would essentially set the stage for a further intermediate-term advance. The equity-only put-call ratios have become more bullish, which is positive for the intermediate term. The weighted ratio finally made a new post-July low, and the standard ratio is not far behind. This is confirmation of the buy signal and of the bullish trend of these ratios. As long as they continue to decline, that is intermediate-term bullish for the broad market.

As has been the case for some time, the overbought nature of this advance is reflected in the short-term indicators -- market breadth and volatility indices. Breadth had expanded to extremely positive levels. In fact, both the "stocks only" oscillator and the NYSE-based oscillator reached highs last seen in November, 2004. On the one hand, this is positive, for it indicates that the rally is broad. But it also indicates that things have gotten very overbought, and so a correction is due.

Volatility indices ($VIX and $VXO) both closed below 11 today. That's about as low as they get. Even though the market can continue to advance while these volatility indices remain low, it is a sign of overconfidence and complacency. Specifically, put sellers have no fear in this market. That's a dangerous condition, which is usually met with a rather sharp, but often short-lived correction.

Finally, let us address expiration. The picture has pretty much remained unchanged all week: as long as $OEX is above 630, there should be a bullish bias to expiration. If it's above 635, that bias will be even stronger. Only if $OEX falls below 630 would the bullish bias disappear. This information is updated through exercises on Thursday night (only a few puts were exercised!), so it is as up-to-date as it can get.

Professional traders are aware of the expiration bias and, as a result, have not been eager to sell this week. However, the market has stalled anyway, making one suspicious that next week could finally bring the overbought correction. At this point, though, we'd suspect that it would -- at worst -- just be a correction to the lower end of $SPX trading range (near 1340 or so). Our intermediate-term bullish outlook remains in place until some confirmed sell signals arise in our technical indicators -- something that has not occurred thus far.

Keene Little : 10/20/2006 12:46:14 PM

This is the way I think YM will play out today and into next week. Maybe a final post-FOMC booster shot on Tuesday/Wendesday to the upside to be followed by a flame-out. Link

Jeff Bailey : 10/20/2006 12:46:15 PM

Note: It was September 13, 2006 that Dorsey/Wright's S&P 500 Bullish % achieved "bull confirmed" status.

Jane Fox : 10/20/2006 12:44:53 PM

VIX is saying ES will make new daily highs but once again you have to take into consideration this is OPEX Friday. What it is for sure telling you though it is not time to be short.

Keene Little : 10/20/2006 12:41:01 PM

Two equal legs up for YM is at 12062 and that matches its downtrend line from Wednesday's high (the top of its consolidation pattern for the past 2 days). That should be good for a scalp short to perhaps back down to 12K.

Keene Little : 10/20/2006 12:35:19 PM

Two equal legs up off this morning's low is at ES 1374.75 but it's hitting its downtrend line from Wednesday's high at 1373.75. The short term pattern would look best with another pullback to perhaps 1368 before it's set up for the next rally leg, so a scalp short should be the best play from here.

Jeff Bailey : 10/20/2006 12:33:15 PM

StockCharts' S&P 500 Bullish % ($BPSPX) Link

Jeff Bailey : 10/20/2006 12:32:07 PM

I thought you might Keene ;)

Keene Little : 10/20/2006 12:26:23 PM

Actually Jeff I consider it bearish that so much money is flowing into mutual funds now that we're hitting major resistance in the markets. It's always the case--retail investors and even large institutions buy the tops and sell the bottoms. I see the same thing happening right now.

Jeff Bailey : 10/20/2006 12:25:06 PM

Remember how "bearish" some traders/investors/commentators were regarding "no money flowing into mutual funds." Just about the time the Point and Figure bullish % charts all began signaling bull market resumption.

Jeff Bailey : 10/20/2006 12:20:59 PM

Fund Flows and Holdings at this Link

Jeff Bailey : 10/20/2006 12:14:55 PM

CATERPILLAR 3Q NET RISES 21% BUT MISSES MARK; OUTLOOK CUT

DJ- Shares tumble 13% after heavy machinery maker reports income of $769 million, or $1.14 a share, well short of Wall Street expectations of $1.35 a share. Revenue gains 17% to $10.52 billion, beating predictions of $9.87 billion. Company cuts 2006 earnings target to $5.05-$5.30 a share, down from $5.25-$5.50. Analysts expected $5.52 a share. Reduced outlook is blamed on slowing economy, a 'sharp drop' in on-highway truck engine sales and weaker construction.

CAT $60.00 -13.06% Link

Jeff Bailey : 10/20/2006 12:13:11 PM

MERCK PROFIT SLIPS 34% ON CHARGES

DJ- Merck's 3Q earnings slip to $940.6 million, or 43c a share, down from a year-ago profit of $1.42 billion. Drug maker concerned about Vioxx trials with multiple cases; plans to cut 7,000 jobs by end of 2008 as part of restructuring plan.

MRK $45.18 +1.55% Link

Jeff Bailey : 10/20/2006 12:11:28 PM

OPEC CUTS DEEP TO BOOST PRICES

DJ- OPEC agrees to cut oil production for the first time in almost two years, pledging to take a larger-than-expected 1.2 million barrels a day, or about 1%, off global oil markets. The cut represents a 4.3% decrease from its September output.

Jeff Bailey : 10/20/2006 12:10:37 PM

3M EARNINGS RISE 6%, TOP VIEWS

DJ- Industrial giant reports 3Q earnings of $894 million, or $1.18 a share, including a net gain of 1c a share from tax adjustments. Sales jump 8.8% to $5.86 billion. CFO sees optical films as a key profit center, despite price fall.

MMM $78.00 +2.09% Link

Jeff Bailey : 10/20/2006 12:05:23 PM

Treasury Asks Dealers About 30Yr Bond Interest, TIPS Issuance

DJ- The U.S. Treasury Department on Friday asked bond dealers about the market's interest in the 30-year bond, as well as Treasury's inflation protected securities issuance.

"What is your assessment of current and future expected demand for 30-year bonds and for liquidity in the 30-year sector?" Treasury asks in an agenda for meetings with dealers Oct. 26-27, ahead of Treasury's quarterly refunding announcement on Nov. 1.

At the previous refunding in August, Treasury said it was moving to a quarterly issuance for 30-year bonds in 2007, in an effort to assist trading of Treasury derivative products and boost liquidity.

Treasury has auctioned a total of $24 billion in 30-year bonds this year.

Treasury also asked dealers about the Treasury inflation-protected securities program, or TIPS, noting that January 2007 will mark the 10-year anniversary of the TIPS program.

"Treasury would welcome feedback on its TIPS issuance and any suggestions for improving the program," the agenda also said.

Jeff Bailey : 10/20/2006 12:01:59 PM

"Bad Tick" on SPY to $136.00

SPY $136.55 -0.19%

Keene Little : 10/20/2006 11:42:38 AM

With all the publicity around DOW 12K (listening to Maria on NBC news last night made me ill) and the money pouring into mutual funds over the past 2 weeks, it's clear that getting the masses excited and buying is working. Once again they're buying the top and the Boyz are now handing off their inventory. We should all be prepared for a down November/December. That would also be fitting for this year which has gone counter to just about all normal moves for the year.

Tab Gilles : 10/20/2006 11:42:38 AM

Peabody Energy (BTU)$42.25 SELL

Entered Oct 12 @ $40.50 in Open position Portfolio.

The company warned that near-term market conditions, including weakening coal prices and continuing railroad transportation delays, will hurt fourth-quarter earnings and production levels through 2007. Arch stock dropped 6.4 percent in morning trading. Sell

Keene Little : 10/20/2006 11:37:17 AM

Today's cartoon on Slate Magazine: Link

Kind of says it all don't you think?

Keene Little : 10/20/2006 11:28:15 AM

The way the market is consolidating sideways it sure is giving the impression it's going to resolve to the upside again. One of these days it's going to fool everyone and drop like a stone from a consolidation but until that happens it's looking like we should be looking for a place to get long. Link

For ES the uptrend line from Sept 22nd at 1366-1367, depending on when it reaches the uptrend line, would be a good place to try it. My best guess on the short term pattern is that we should get another small drop after the current bounce finishes and that would be the time to start looking for a long entry.

Jeff Bailey : 10/20/2006 11:26:04 AM

SPY $136.59 -0.16% ...

Jeff Bailey : 10/20/2006 11:25:20 AM

11:00 Internals found at this Link

Jane Fox : 10/20/2006 11:23:20 AM

NYMEX data may be subject to delays.

Jane Fox : 10/20/2006 11:11:30 AM

I certainly wouldn't be long this market. Link

Jane Fox : 10/20/2006 11:09:52 AM

SAN FRANCISCO (MarketWatch) -- Crude-oil futures edged lower Friday, trading slightly below last week's level, as traders awaited further signs that the Organization of the Petroleum Exporting Countries will make good on its pledge after members of the group agreed to cut production more than anticipated.

In a bid to stabilize a recent 25% decline in crude-oil prices since their record nominal level near $78 in July, OPEC said late Thursday its members will reduce production by 1.2 million barrels a day from current actual output of about 27.5 million barrels a day.

OPEC officials had previously indicated a production cut of 1 million barrels a day. The cuts take effect Nov. 1, OPEC said.

That's "200,000 barrels per day more than we anticipated and is solid evidence that OPEC is concerned that prices could collapse," said James Williams, an economist at WTRG Economics.

Attention has now turned to whether OPEC's member countries will cheat by not fully cutting their share of production.

"Only time will tell whether OPEC can actually implement these planned cuts," said Jonathan Wright, an analyst at Citigroup in London. "We see a risk that some of the old divisions within the group re-open and are skeptical about Iran, Nigeria, Venezuela and Indonesia's ability to cut back production in particular."

Jeff Bailey : 10/20/2006 11:03:54 AM

11:00 Market Watch found at this Link

Keene Little : 10/20/2006 10:57:26 AM

One index that's not looking too healthy at the moment is banks (BIX). After breaking and retesting its uptrend lines from Sept 11th the banks are dropping lower again today. A drop below Tuesday's low of 394 would not look good. It's also currently breaking its 20-dma at 395.47. Link

But the bulls still have a chance here to run it back up. Watching the banks and the brokers over the next day or so will hopefully provide us some clues as to what's next for the broader market.

Jeff Bailey : 10/20/2006 10:43:25 AM

Bullish swing trade long setup alert ... for shares of Wild Oats Markets (OATS) $18.37 +5.87% Link ... Place an order to go long 1/2 position at $18.00. Stop $15.00, target $24.00.

Keene Little : 10/20/2006 10:42:13 AM

The recent consolidation in bonds looks bearish for another leg down. If that were to happen it would give us a 5-wave move down from the high in September and would tell me that we have a trend reversal in bonds (a reversal down would be a reversal higher in yields, just the opposite of what many in the market are expecting). This chart is of ZB, the 30-year emini. Link

But after another the next small move lower, to complete the 5-wave move, we'll be due a larger upward correction of the drop from September. Perhaps that will be timed around the FOMC announcement on Tuesday. A bullish response from the bond market would say the Fed will stand pat on rates AND stay dovish on their comments. Bonds would rally to correct the latest decline and then after the election the Fed starts with their hawkish statements again. That's obviously all guesswork but it would fit the pattern as I see it developing.

Jeff Bailey : 10/20/2006 10:37:20 AM

Shoot! ... OATS $18.50 +6.57% ... busts a move. Was looking for stock to pull in to $17.00 and 21, 50 and 200-day SMAs.

Jane Fox : 10/20/2006 10:24:01 AM

TICKS +800.

Jeff Bailey : 10/20/2006 10:23:37 AM

Option Trader's Reminder: ... Please remember that the Options Clearing Corporation (OCC) has reduced the automatic threshold for in-the-money equity options at expiration. The new threshold is $0.05 (it was $0.25).

Keene Little : 10/20/2006 10:22:16 AM

In addition to support at Tuesday's low, ER is close to touching its uptrend line from Oct 3rd at 763. If the sideways consolidation in that index is a bullish one, then buying it here is the right play and then ride it up to a new high. A break below 763 that sticks would obviously negate the bullish setup.

Keene Little : 10/20/2006 10:19:29 AM

Sorry , I said cash for the RUT but was looking at ER chart. Tuesday's low for ER is 763.30 and this morning's low so far is 764.10.

Jane Fox : 10/20/2006 10:17:35 AM

All my ducks in a row are; AD volume making new daily lows, VIX making new daily highs and the TRIN making new daily highs. THere are a few days when these ducks all line up but this is not one of those days.

Keene Little : 10/20/2006 10:16:56 AM

Small caps are getting whupped this morning. The RUT is down -1.1% and its drop from yesterday's close has taken out Wednesday's low. Tuesday's low at 763 (current low is 764.10 for the cash index) could easily provide support. And even that one has a bullish possibility here. Its sideways consolidation since Monday could have an upside resolution. Bears need to stay cautious and be willing to take quick profits.

Jeff Bailey : 10/20/2006 10:14:21 AM

Swing trade bullish call cancel order alert ... please cancel the prior order to sell the two (2) Overstock.com OSTK Oct. $20 Calls (QKT-JD) for $1.60 and replace with this...

Sell for $0.10.

OSTK $18.00 -0.55

Jeff Bailey : 10/20/2006 10:04:23 AM

10:00 Market Watch found at this Link

Keene Little : 10/20/2006 10:03:51 AM

SPX came close to tagging its uptrend line from Sept 25th at 1360.60 (cash) so the uptrends are still holding and the dipsters are still active. Price action has become very choppy in the past week and another choppy move higher would further convince me that we're hammering out a top here. It's looking like a distribution pattern.

Jane Fox : 10/20/2006 9:58:25 AM

Gold has not been able to break its resistance from the 200 and 50EMAs let alone even test resistance at 615-616. Notice the MACD also has not been able to get above 0 nor the RSI above 70. Link

Keene Little : 10/20/2006 9:58:16 AM

DOW is hitting its uptrend line from Sept 22nd at about 11950 (cash). Obviously a break of its uptrend line would not be bullish. If it's going to bounce back up this is where it should happen.

Jane Fox : 10/20/2006 9:55:45 AM

I know I said I will not be relying too much on the VIX today but ES's new daily lows have NOT been confirmed by the VIX so I don't think we will see followthrough.

Jane Fox : 10/20/2006 9:54:27 AM

YM tags is PDL and seems to find support.

Jane Fox : 10/20/2006 9:53:50 AM

AD line is now -795 and AD volume below 0 and falling. The bears have found the ball and are running with it, however, they don't have field position. Let's see if the bulls can make an interception.

Jane Fox : 10/20/2006 9:51:08 AM

The TRIN was very bearish on Wednesday and bearish yesterday but today it is well below its PDL at a bullish 0.78. Go figure.

Keene Little : 10/20/2006 9:48:39 AM

We're very close to finding out what's going to happen to the brokers which should give us a very good clue what's around the corner for the broader market. From a bearish point of view the EW count is in the process of hammering out another 1-2 wave count to the downside. To say this wave count is bearish is a gross understatement as it calls for a relentless sell off to follow. Link

But the bullish possibility here is that it's not a bearish wave count but instead a corrective pullback that should be just about complete. A break of its downtrend line from the October 10th high, currently near 230.80, would suggest the pullback is finished and we'll start a new rally leg.

So keep an eye on the current bounce in this sector. A rollover to new lows could mean some very swift selling to follow. A continuation higher through 231 could mean get ready to rock and roll to the upside (and drive VIX down below 10).

Jane Fox : 10/20/2006 9:48:35 AM

... however, I do see that the VIX made a new daily high at the same time ES made a new daily low.

Jane Fox : 10/20/2006 9:47:56 AM

Yesterday the VIX was making new daily lows that did not translate into ES making new daily highs so I will not be putting a lot of faith into the VIX today.

Jane Fox : 10/20/2006 9:45:20 AM

AD line is -400 but AD volume is above 0 and climbing. The ball is just rolling around the field and it seeems that neither team has any idea where it is.

Keene Little : 10/20/2006 9:35:32 AM

The excitement in Googleland certainly hasn't translated to NQ, It's more negative than even YM.

Keene Little : 10/20/2006 9:27:22 AM

Gee, I wonder who's pushing futures back up just before the cash open.

Keene Little : 10/20/2006 9:25:57 AM

CAT has dropped $7 (-10%) to $62 premarket and has wiped out October's gain. That's going to be a big psychological blow to the market. The Boyz will have their work cut out for them if they want to keep this market propped up.

Jane Fox : 10/20/2006 9:12:24 AM

Keene CAT was the reason YM tagged both its PDH and PDL overnight.

Keene Little : 10/20/2006 9:12:28 AM

It looks like CAT made a stink bomb and the reaction, especially in the DOW futures, was predictable. When we have a market priced to perfection any disappointments are going to see a very negative reaction. It's why I've been saying surprises now will be to the downside. The reaction to GOOG's nice earnings announcement last night is going up in smoke. CAT's earnings are much more indicative of the broader economy. As political analysts like to say, it's the economy stupid.

Jane Fox : 10/20/2006 9:04:17 AM

Caterpillar Inc. (CAT) said third-quarter income rose to $769 million, or $1.14 a share, a 21% increase in earnings per share over the same period a year ago. Revenue gained 17% to $10.52 billion. Analysts polled by Thomson First Call, on average, forecast earnings of $1.35 a share on $9.87 billion in revenue. The Peoria, Ill., heavy-machinery maker cut its 2006 earnings target.

Jane Fox : 10/20/2006 9:03:55 AM

Google Inc. (GOOG) shares rallied 7.4% to $457.50 in pre-market trades Friday as Wall Street analysts cheered its latest earnings report. Goldman Sachs, Stifel Nicolaus, Merrill Lynch and RBC were among the brokers to increase their price targets for the Internet giant. Stifel Nicolas said Google's revenue of $2.69 billion beat its $2.61 billion estimate.

Jane Fox : 10/20/2006 9:02:08 AM

Dateline WSJ - OPEC's decision to reduce production by 1.2 million barrels of oil a day -- a modestly larger cut than expected -- marks its strongest signal in years that the cartel will act aggressively to stop falling crude prices.

The decrease -- decided at a hastily arranged meeting late last night in Doha, Qatar, by the Organization of Petroleum Exporting Countries -- represents about 4% of the group's current output and just more than 1% of global consumption. The cuts will take effect Nov. 1, OPEC said in a statement after the meeting. In comments before and after the meeting, ministers suggested the cartel could cut again this year if necessary.

OPEC ministers had indicated in recent weeks they had all but agreed to cut output by one million barrels a day -- worried that slowing demand growth, swelling inventories and new supply from non-OPEC producers threatened a downward price spiral below the $55-to-$60-a-barrel range for U.S. benchmark crude they suggested they were targeting.

But markets had largely shrugged off the threatened cut amid squabbling among ministers about how to distribute the decrease in production among members. That squabbling called into question the group's resolve.

By announcing a bigger-than-expected cut and leaving on the table the prospect of more cuts later in the year, OPEC ministers appear to be trying to send a strong message that they will stomach the temporary pain of reduced oil sales in exchange for the stability of higher prices.

Jane Fox : 10/20/2006 9:00:47 AM

I see bear wedges building on the major indexes but they are not confirmed by the MACD nor the RSI. This means the bear wedges have a much lower probability of breaking to the downside.

Jane Fox : 10/20/2006 8:50:14 AM

Good morning all. It was an interesting overnight session for YM tagged both its PDL and PDH. I'm not sure why YM was so volatile, no other market had such a wide range overnight.

Even though GOOG pleased its investors and climbed 7.8% in after hours trading, NQ was not able to break its PDH; tagged it but did not break it. Both ER and ES briefly broke their respective PDHs but have now retraced back into their PDRs. Link

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