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OI Technical Staff : 11/10/2006 9:59:59 PM

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Keene Little : 11/10/2006 4:38:46 PM

The setup on ER supports the idea that we could see a brief pop Monday morning and then another drop to the bottom of this week's consolidation. So perhaps a quick bounce to 774.90 (two equal legs up from yesterday's low) and then a drop back down towards 760 before a new rally leg gets started. Link

As pointed out on the chart, it's an interesting thought about whether we have an inverse H&S neckline--the right (inverted left) shoulder is getting lopsided but it's possible. It would portend a rally up to about 800 to cap this off.

Keene Little : 11/10/2006 4:18:38 PM

In fact NQ tagged the level where it had two equal legs up off yesterday's low (today's minor new low looks like a part of the upward correction), at 1759.50 and is at the top of what appears to be a bear flag. Link

Keene Little : 11/10/2006 4:14:08 PM

NQ's pattern continues to look bearish off yesterday's low and that adds to my impression that we're going to see a sell off early Monday.

Keene Little : 11/10/2006 4:09:31 PM

The impression I get from the bounce off today's low in YM is that we have a corrective bounce in progress. Whether that leads to a choppy move higher after just a pullback or a resumption of the decline is hard to say. But the first impression I have is that it's just a corrective bounce that will lead to another push lower. Two equal legs up in the bounce off today's low is at 12144 so a quick pop to that level on Monday could set up the sell off to suck in the bears. That's the way I'm currently leaning.

Jane Fox : 11/10/2006 4:05:59 PM

Everyone have a wonderful weekend and C U all on Monday.

Keene Little : 11/10/2006 4:03:38 PM

Looks like some last minute short covering as those who were looking for more downside throw in the towel and go home flat.

Jane Fox : 11/10/2006 4:02:56 PM

TICKS +1000 at 4:05 !!!!!!

Keene Little : 11/10/2006 3:47:27 PM

As we round the final turn today I haven't seen anything to negate the idea that we're going to see a rally next week (so the Boyz can make their opex gazillions). If that's to happen (new highs next week) it seems to me that they'll want to drive this lower on Monday to suck in some bear fuel and pick up those dirt cheap front-month call options. That's obviously pure speculation and the price pattern is not helping me here.

If they drive it lower though, support could be found at the July-Sept uptrend line which is where ES found support last Friday. On Monday morning that line will be near 1375. YM's uptrend line is a little closer, at about 12070. I have no idea if that's what we're setting up for as it's just a guess based on past behavior.

Just to add to the possible trickery, now that that behavior has been identified, they could pull the opposite on Monday and spike it up to load up on cheap put options and then drive it down hard, forcing all the longs to scurry like mad. I guess we'll have to wait until Monday to find out what the setup might be.

Marc Eckelberry : 11/10/2006 3:40:41 PM

For those who would rather trade futures (instead of Forex), December EUR/USD symbol is 6EZ6 or EC06Z.

Keene Little : 11/10/2006 3:09:50 PM

The Euro looks just the opposite--it looks like it will leave a strongly bearish shooting star candlestick after a gap up. The oscillators will leave a bearish divergence if it rolls back over here. A red candle on Monday would be good confirmation of a trend change. Could be a nice trade here (short the Euro) although I'd prefer to wait for the 30 and 60-min charts to get back into overbought.

Keene Little : 11/10/2006 2:56:02 PM

In fact today's daily candle for the dollar looks like a bullish hammer (with a bit of a shadow sticking out the top) on support at its uptrend line from December 2004.

Keene Little : 11/10/2006 2:52:45 PM

Marc, that's exactly the way I see the pattern in the US dollar. It should get a rally back up to the top of its consolidation pattern, near $87. And gold should pull back. Then get ready for a strong reversal in each in 2007 (down for the dollar, up for gold).

Marc Eckelberry : 11/10/2006 2:51:09 PM

Speaking of French, I am ambivalent about the Euro rise here. I'm not sure the dollar is going much lower at this point and the struggle gold is having at these levels is telling me we could get a year end rally in the greenback.

Keene Little : 11/10/2006 2:47:50 PM

That's the extent of my 8th grade French (and spelling may be incorrect). Don't expect me to understand anything else :-)

Keene Little : 11/10/2006 2:46:42 PM

Et voila? Parlez vous Francais?

Marc Eckelberry : 11/10/2006 2:45:21 PM

Or pin'd.

Keene Little : 11/10/2006 2:45:11 PM

This pattern for NQ looks bearish to me. It just got a pop over the top so if it drops back below 1755 that would be a sell signal. If it can hold above then my interpretation of this pattern could be wrong. Link

Marc Eckelberry : 11/10/2006 2:44:30 PM

QQQQ 43 is pinned. Et voila.

Keene Little : 11/10/2006 2:42:36 PM

NQ has been held down by its daily pivot at 1755 all day. It's bounce pattern continues to look bear flaggish and it's hard to trust an upside move this afternoon. I'm staying flat until Monday at this rate. I see the potential for a flush to the downside for the Boyz to load up on cheap call options. NQ breaking above 1755 as I type so we'll see if it holds.

Jane Fox : 11/10/2006 2:42:14 PM

TICKS +1000

Marc Eckelberry : 11/10/2006 2:42:06 PM

That said, it is not a good idea to short this. At least not until you get another tick fade set up.

Keene Little : 11/10/2006 2:36:59 PM

Although I see YM has broken its downtrend line and looks like it could be coming back for a retest at about 12113.

Marc Eckelberry : 11/10/2006 2:36:42 PM

That last bump was about pinning QQQQ 43. TRINNQ will not allow much more, but QM gives you all the heads up. A drop below 59.50 will set up higher highs for NQ. Otherwise, not much resolution in what could be a preliminary test of opex markers.

Keene Little : 11/10/2006 2:35:59 PM

So far that was just a head fake break. Easy to do in low volume environment.

Keene Little : 11/10/2006 2:20:33 PM

Looks like we're getting a break of the downtrend lines. Either that or this is just a quick head fake. A climb above ES 1384 would confirm an upside break.

Keene Little : 11/10/2006 2:05:23 PM

I'm lowering my buy order to ES 1378.50, stop 1376.50. At this point I'm going to try to either get a better price on a dip lower or wait for a break of its downtrend.

Keene Little : 11/10/2006 2:01:51 PM

Watch for support today on the DOW at 12058. This is where both its 20-dma and uptrend line from July are located. If it were to drop that low that would mean ES could drop a little below 1378 and would give YM a downside target near 12080.

Keene Little : 11/10/2006 1:55:36 PM

With daily S1 at 1379 that could be our downside target for the day. Missed only by a tick on that last spike down. If it were to drop much below that then daily S2 and weekly pivot at 1373.25 could be the next target. I've got a buy order in at 1379 with a stop at 1377. A move above 1383 at this point would have me looking for a pullback to get long.

Keene Little : 11/10/2006 1:45:45 PM

This decline could end at any time now so a break of its downtrend line from yesterday, followed by a successful retest of the line (may or may not get that part), and continuation higher should be a good long play. I'm still wondering if this is setting up an opex run higher next week. Suck in the shorts here, maybe get a little bounce into the close, push it down on Monday to pick up some cheap front money call options and then slam the shorts with buy programs.

It's been the modus operandi of the banks' trading teams. Will that change this month to the other direction? Certainly possible but so far the long side would be my first choice. Drive VIX below 10 in the process. That way I can pick up a boat load of cheap put options.

Keene Little : 11/10/2006 1:39:28 PM

It's possible we're forming a small descending wedge (if ES bounces from 1379.50 which it's hitting as I type) which would be a typical 5th wave finish for the decline from yesterday's high. That interpretatin requires another choppy bounce followed by a final low. If it follows a path similar to what I've depicted here we should see lots of bullish divergences and I'd buy it. Link

Jane Fox : 11/10/2006 1:38:57 PM

This is why I rely so heavily on the VIX. Link

Jane Fox : 11/10/2006 1:37:55 PM

This selling is been confirmed by the AD volume and the VIX so I think it will hold.

Keene Little : 11/10/2006 1:30:14 PM

And just like that, out of nowhere, comes a sell program. Now we'll see if it sticks or if instead it's just a quick move by someone saying he wants out before starting his weekend.

Jane Fox : 11/10/2006 1:23:15 PM

Good question Keene. My husband has the day off sooooo.... Ah I will stay because I have most of next week off for the futures seminar in Lost Wages.

Jane Fox : 11/10/2006 1:22:08 PM

I figured we would have a day like this. Link

Keene Little : 11/10/2006 1:20:26 PM

Things seem to be getting quieter out there. Looks like many traders have simply taken Veteran's Day off in order to give themselves a nice long weekend. Jane, what are we doing here?

Keene Little : 11/10/2006 12:47:28 PM

I always get a smirk when I read about real estate forecasts from the NAR. They've been consistently wrong the past two years and they've basically been chasing this market lower. As for getting their information from the 54 economists, I wonder if those are the same economists that were predicting no recession in 2001 six months After the recession had already started.

Jane Fox : 11/10/2006 12:42:40 PM

TRIN 1.54 and to new daily highs. This is not what the bulls like to see.

Jane Fox : 11/10/2006 12:41:36 PM

WASHINGTON (MarketWatch) -- The housing market correction has further to run, with new-home construction expected to fall another 12% next year, a real estate industry group said Friday in an updated forecast for 2007.

While the market for existing homes will probably flatten out, the new-home market will probably continue to slow through next year, said David Lereah, chief economist for the National Association of Realtors.

Sales prices are expected to rise slightly. "Given the huge gains in home values during the housing boom, and this year's rise in housing inventory, overall price gains this year and next will be modest," Lereah said. Median existing-home prices are expected to rise 1.7% next year, while new-home prices are expected to rise 1.3%.

Housing starts will probably fall about 12% next year to 1.63 million after falling 11% this year, he said. Starts totaled 2.07 million in 2005.

The NAR forecast for housing starts for 2007 is close to the Blue Chip consensus forecast of 1.62 million. The Blue Chip forecast is derived from the forecasts of 54 economists surveyed by the publication Blue Chip Economic Indicators.

Jane Fox : 11/10/2006 12:40:57 PM

NEW YORK (MarketWatch) -- The dollar continued to lose ground Friday, hitting an almost three-month low versus the euro and a one-week nadir against the yen, on concerns that China, the world's largest holder of foreign-exchange reserves, will begin to diversify away from the U.S. currency.

Zhou Xiaochuan, governor of the People's Bank of China, said Thursday at a conference in Frankfurt, Germany, that China has very clear plans to diversify its reserves and is considering lots of instruments. He expanded on his remarks overnight, saying that there has been no change in Beijing's diversification plans and that the central bank was not selling U.S. dollars.

The foreign-exchange markets "prolong the assault on the U.S. dollar as global central bank rhetoric raises the volume on the need to diversify from U.S. dollar assets and to further tighten monetary policy at a time when the Fed shifts to a less hawkish stance," said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York.

In New York trading, the dollar was quoted at 117.42 yen, compared with 117.93 yen late Thursday, after falling to 117.16 yen, the lowest level since Nov. 3.

Keene Little : 11/10/2006 12:07:12 PM

NQ is giving me the opposite impression right now--it has been chopping higher since yesterday's low (brief poke lower this morning) and it looks like a bear flag. I'd be tempted to short 1757 if tagged.

Keene Little : 11/10/2006 12:04:06 PM

This ES 15-min chart shows the down-channel from yesterday's high and the Fib target at 1379.25. If this continues to chop its way lower to that level then I continue to think it could set up a bigger bounce. I might be tempted to buy a break above the downtrend line if it comes back down for a successful retest (since the last low might have been the end of the leg down from yesterday's high). Other than that I just can't get excited about the trading opportunities here. Link

Keene Little : 11/10/2006 11:34:29 AM

ES 1381 might have been the better entry for a long but considering how choppy price has been I'm just as happy being flat. Resistance for the current bounce could be 1385 at its downtrend line from yesterday's high.

Jane Fox : 11/10/2006 11:31:03 AM

TICKS +1000 Gotcha!!

Jane Fox : 11/10/2006 11:26:21 AM

Trading today could be dangerous to your account.

Jane Fox : 11/10/2006 11:19:09 AM

AD volume is making new daily lows which will keep me from going long. VIX is not making new daily highs which will keep me from going short. Sigh!!!

Keene Little : 11/10/2006 11:05:13 AM

I'm going to buy ES at 1379.25 if it's tagged, with a stop at 1377.25. It'll be a test of Fib support and close to the bottom of it down-channel from yesterday. The first potential support at 1381 is getting tagged now.

Jane Fox : 11/10/2006 10:57:38 AM

These are what you would call in alignment so trading is much much more difficult. Link

Keene Little : 11/10/2006 10:57:29 AM

With prices just flopping around here I feel like shorting a new high or buying a new low is the right play (for a scalp). In the meantime it's a coin toss and I don't like playing coin tosses.

Jane Fox : 11/10/2006 10:54:37 AM

BOCA RATON, Fla. (MarketWatch) -- Securities and Exchange Commission Chairman Christopher Cox said Friday that Congress would have to approve a merger of the government's securities regulators.

The idea of combining the regulators has received interest as futures, options and other derivatives become a bigger part of the securities landscape. The growth of such securities has prompted some to suggest that the government combine the SEC with the federal government's main derivatives regulator, the Commodities Futures Trading Commission. Asked about the possibility of the merger, Cox yielded to Congress.

"It's a legislative matter outside my purview," Cox told reporters, but, he added, "That discussion also has been broached."

Cox, speaking to reporters after addressing the annual meeting of the Securities Industry and Financial Markets Association, also said that the issue was a pressing one, but that it would require a dramatic legislative change. He said he was working with CFTC officials to coordinate efforts

Jane Fox : 11/10/2006 10:49:47 AM

Bears beware the VIX is testing daily lows telling me the bulls are getting stronger.

Jane Fox : 11/10/2006 10:45:26 AM

ES's new daily lows are not been confirmed by the VIX ie the VIX is not making new daily highs. This means the new lows will not have a lot more downside until the VIX starts to confirm.

Jane Fox : 11/10/2006 10:36:31 AM

Late Thursday, Genentech (DNA) said it will pay $20 a share for Tanox (TNOX) , which helped develop Genentech's asthma therapy Xolair. Tanox specializes in the development of therapeutic monoclonal antibodies, and is working on possible treatments for asthma, HIV and age-related macular degeneration.

Keene Little : 11/10/2006 10:33:44 AM

If this move down for ES is its 5th wave in the decline from yesterday's high, a Fib target for it is now 1379.25 based on equality with the 1st wave down and projecting from this morning's high. It's a little wide but that gives me a 1379-1381 window to watch for potential support.

Keene Little : 11/10/2006 10:15:50 AM

I had mentioned yesterday to watch ES 1381 for potential support since that's where we'd have two equal legs down from Tuesday's high. If this is going to be just a correction to the Monday/Tuesday rally then that level still holds the potential to be support and launch another rally leg (for another opex push?).

Jane Fox : 11/10/2006 10:15:23 AM

Yesterday the TRIN was really bullish and we had a selloff. Well today the TRIN is quite bearish sooooooo .....

Jane Fox : 11/10/2006 10:12:25 AM

TRIN to new daily lows and AD volume below 0 now.

Jane Fox : 11/10/2006 10:11:33 AM

Looks like the rescue team is running short of orygen. That little buying spur was sold into.

Jane Fox : 11/10/2006 10:02:28 AM

Rescue team is back in town TICKS +1000

Keene Little : 11/10/2006 10:02:04 AM

A retest of the overnight high for ES (1386.25) would also be a test of its downtrend line from yesterday's high. Good spot to try a short if it's tagged.

Keene Little : 11/10/2006 10:00:19 AM

By the same token, if we see this chop its way lower then that will be bullish and look for an entry to get long. If this pushes higher again it's going to look like a little bear flag from yesterday's low.

Keene Little : 11/10/2006 9:49:51 AM

If we see this chop its way higher still then it will still look bearish. The downtrend line from yesterday's high is near 1286.50 which is where I'd look for a short play. Right now it's just flopping around.

Keene Little : 11/10/2006 9:47:55 AM

ES 1385 was two equal legs up from yesterday's low and as long as that holds now we should see a move lower. Then the Fib target at 1378.75 could provide a nice spot to scalp a long (if the setup looks good if/when it gets there).

Jane Fox : 11/10/2006 9:41:25 AM

VIX confirms the slight bullishness but the TRIN is above its PDH although since the TRIN was so dang bullish yesterday that is not bearish.

Jane Fox : 11/10/2006 9:39:36 AM

AD line is a bullish +585 and AD volume above 0 and climbing. The bulls have the ball but not field advantage.

Keene Little : 11/10/2006 9:38:28 AM

Thanks Jane. Looks like the MarketWatch author had the same thought as I have--the Fed and Treasury (through their repos) are in fact hyperinflating the money supply. To think otherwise sounds crazy to me, no matter what Bernanke tries to say publicly.

Jane Fox : 11/10/2006 9:33:35 AM

The speech was "information" not "inflation."

Jane Fox : 11/10/2006 9:30:08 AM

... I will check the text of the speech.

Jane Fox : 11/10/2006 9:29:30 AM

Keene I didn't notice that but that is pretty funny.

Keene Little : 11/10/2006 9:28:34 AM

Jane, I noticed in your 9:04 posting the quote from Bernanke may have had a Freudian slip--"... money growth may still contain important inflation about future economic developments..." I'm not sure if it was a typo by the MarketWatch author or if it was Bernanke making that slip (the bolded word should have been "information") but it's interesting because the out-of-control money growth is in fact inflationary.

Keene Little : 11/10/2006 9:25:00 AM

It looks like we're going to start off the day flat and futures are in the middle of the overnight range so not much going on there. Yesterday's late day bounce off the low looked like it needed a slight bit more to the bounce before rolling back over for what I think will be a minor new low before starting a larger bounce.

I'm not sure yet if the decline is the start of something bigger or just part of a corrective pullback so hopefully I'll get some clues from the next bounce. A downside Fib projection, if we get a little further drop, is to ES 1378.75.

Jane Fox : 11/10/2006 9:23:24 AM

NEW YORK (MarketWatch) -- Metabolix fattened its deal and Capella Education priced above its range, but ACA Capital and Thermage came up shy as a foursome of initial public offerings readied for their debut Friday.

Capella Education Co. (CPLA) priced at $20 a share, above the previously projected range of $17.50 to $19.50 a share. The post-secondary online-education firm raised $80 million by selling 4 million shares.

Meanwhile, Metabolix (MBLX) , a firm that specializes in biodegradable plastics, priced 6.8 million shares at $14 each in a bid to raise $95 million. The company, which has an alliance with Archer Daniels Midland (ADM) , increased the size of the IPO from 5.8 million shares and priced at the top of its $12-to-$14 range.

On the flipside, cosmetic medical-device provider Thermage Inc. (THRM) priced 6 million shares at $7 each in a bid to raise $42 million. This put the offering below its reduced range of $8 to $9 a share; the company's IPO price range earlier had been $11 to $13 a share.

And ACA Capital Holdings Inc. (ACA) priced 6.9 million shares at $13 each in what would be a $90 million IPO. The New York-based seller of guaranty insurance for global credit derivatives markets, structured finance and municipal finance firms cut the size of the IPO from 10.78 million shares while paring the price level from $15 to $17 a share.

Jane Fox : 11/10/2006 9:09:33 AM

Here is another bullish chart although not as bullish as gold. Notice the green trendline was resistance back in September and then became support earlier this month. I believe TBonds will break to new yearly highs. Link

Jane Fox : 11/10/2006 9:04:54 AM

WASHINGTON (MarketWatch) - Money growth measures no longer play a key role in Federal Reserve monetary policy decisions, although the central bank still keeps one eye on the data for clues about the economy, Fed Chairman Ben Bernanke said Friday.

"Although heavy reliance on monetary aggregates as a guide to policy would seem to be unwise in the U.S. context, money growth may still contain important inflation about future economic developments," Bernanke said in prepared remarks to European Central Bank conference in Frankfurt, Germany.

Bernanke made no comments about the current state of the U.S. economy.

Monetarism, the focus on the supply and demand of money to regulate economic activity, had its heyday in the late 1970s and early 1980s, under the leadership of Chairman Paul Volcker.

But the unstable relationship between money growth and economic growth fueled by financial innovations soon led the Fed to abandon money-supply targets.

Jane Fox : 11/10/2006 9:02:45 AM

Crude Oil bulls should be encouraged that this market has peeked above its downward channel. Unfortunately that is all I can say that the bulls could be encouraged about. Everything else is quite bearish to me. Link

Jane Fox : 11/10/2006 8:59:14 AM

I haven't looked at the daily gold chart for a while and I thought I would revisit it today. I love this chart. Look at the support turned resistance turned back support right at the reverse H&S neckline. Wow talk about trading technically. We should all print this chart and put it up on our walls. You don't run across a market that trades this nicely often. Link

Jane Fox : 11/10/2006 8:55:09 AM

Mostly neutral overnight session but the new overnight lows right after making new overnight lows should encourage the bulls. However, I think today will be a throwaway day and the markets will trade sideways. Link

Jane Fox : 11/10/2006 8:47:01 AM

Holiday Hours for Veteran's Day 2006

All exchanges will trade their regular hours Friday, November 10 and Saturday, November 11, 2006.

The Chicago Board Options Exchange (CBOE) will observe two minutes of silence from 10:00 to 10:02 a.m. CT on Friday, November 10th in recognition of Veteran's Day. Trading will not be halted during the two minutes of silence. Regular trading hours will otherwise be in effect.

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