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Jeff Bailey : 12/16/2006 3:29:51 AM

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

This could be an "I don't care" item. But if it is, then the educational portion of ACCOUNT MANAGEMENT, and RISK MANAGEMENT may be lost. If you "don't care" about either of these being a FIRST priority, then some further education is needed. Do institutional market makers, that hold long inventory so others can buy, practice RISK and ACCOUNT management? I think Goldman Sachs does. I know Merrill Lynch does.

Now, you might "not care" that I've said (here in the MM) that Red Hat (RHT) is a stock I think could go bankrupt. I've only said that once before, about any other company when I had profiled a bearish trade in Adelphia Communications. By gosh, the Point and Figure bearish vertical count to $0.00 was right on that one! It's almost as if the MARKET knew it, but the cat wasn't out of the bag yet. I'll never forget it, as will subscribers when it was publicly learned during the company's earnings call that the company had lent huge sums of money to its founder.

But you might "not also care" my mentioning that one Wall Street analyst thought the company could be a takeover candidate. But I thought we "should care" and just the other day (12/12/06 08:49:18 PM) I noted the company's move to the NYSE. And I have seen this before. In fact, just recently with Bema Gold (BGO). So you might "not care" that I discussed RISK management for those that may be short the underlying shares, should the BULLISH (yes, even though I'm bearish RHT, I'm always looking for reasons, or open to the possibility, as to why the stock trades bullish). So, one way to still play the BEARISH scenario if short the underlying (PnF chart bearish vertical count to $1.00), was for a short to cover their position, then turn to the options market, where bearish RISK could be limited, if RHT were to be bought in the near-future.

You might not care, but I probably know a little bit, and I do mean a little bit more about the software business, than I know about the cable communications business. But if a chart doesn't look bullish and I think something's "wrong" I tend to voice an opinion, and stick my neck out with a trade PROFILE, and more times than not, my OWN capital. Then I follow it to some type of completion.

Now you might "not care" that I've profiled a 1/2 bullish position in KGC, and that prior to today's close, still had a 1/2 bullish position on in the GLD (represents the gold commodity itself) and walked subscribers through a thought process of RISK and ACCOUNT management. I made the decision to CLOSE OUT the 1/2 position in the GLD. It was close enough to the profiled stop, and the RISK of a possible gap lower, relative to the ACCOUNT and the KGC long position, didn't justify a full position in my opinion. Again, you might "not care" about these types of thought process, but if you're long/short oil the commodity and long/short an oil stock, it may be helpful in the future.

The KGC Dec. $12.5 Calls (KGC-LV) that were sold as covered call expire today. Now, 12/07/06 was five trading days AFTER the bullish trade in KGC. We had just exited with a gain in some ABX calls (see those reasons) and on 12/07/06 we saw that "jump" in volatility (see the VIX.X) and I decided we might want to sell that premium. The only RISK was that the stock run well above $12.56 + $0.30 = $12.86 and we suffer an opportunity loss. If I were as smart as the MARKET has been since that "doji" on 12/05/06, I'd have sold another 4. I'm not smarter than the MARKET.

The DIA Feb $120 Puts (DAW-NP). What bearish scenario are we on now? Now THAT I DON'T CARE ABOUT! ;) If the trade ever gets profitable, or if the DIA itself ever trades back to, or below 12/01/06 entry of $121.93, I'll probably go back and review the upcoming Market Wrap on Monday night and list of bull/bear scenarios.

The VIX.X and VIX-BV Calls. Now this is an interesting one. How do you explain that in the context of an economy, earnings, inflation...? You can't. But you might "not care" about ranges, and institutional computers, and the institutional thought of SELLING premiums. I can't look at the DIA Feb. $120 Puts and tell you a LOW VIX.x means bulls are going to be sorry, and that call buyers are out of their minds. I can't, because I care about HOW you think about the VIX.X, and only that it measure not just call buying, but put selling as well as call selling/put buying. You see, I do believe the MARKET knows all, and it has several avenues where that knowledge can pass. And you might "not care" that my target is VIX.X 12.50 for this trade and back at the 12/07/06 relative high. But if it does trade there and the SPY/SPX aren't close to their 12/07/06 lows, then you "might care" what you read in the MM that day and what is happening in YOUR account.

Now the SLB Feb $70 Calls is tied directly to BHI and even the VIX.X and historical sector seasonal bullish tendencies, but I've been around the block a few years and don't just day trade 2000 stock futures trades a year.

And you might "not care" about what a Tax Loss Bounce strategy. The LAB Jan $10 Call trade is a stock that I think may be a viable candidate. Maybe you are long a very profitable short, or put position and its is at/near a low for this year, but come January 2, 2006 and suddenly the stock starts rising, for seeming no reason at all, as if all sellers are gone, you "might care" to know what might be going on. I'll never forget that tax loss sell bull trade we had on here in the MM for Worlcom (WCOM) in late December 2000 and January 2001 will you?

And you might "not care" to have a Watch List of stocks, grouped by "likeness" with 5-day, 20-day, YrNet%, which might become the reason to either cut out of a trade, or analyze what may be at play in an economy, a market, a sector, or a stock, or other items all trackable with QCharts' portfolio tracker. But I think that can become "tunnel vision" and can have a trader/investor so believing in a conviction, based on a scenario, that they never see a rational for why they might want, or need to take some type of action.

Jeff Bailey : 12/16/2006 1:11:02 AM

Closing Internals found at this Link

This could be an "I don't care" item. But if it is, then I think further education is needed.

While a mixed-to-higher trade was found, both the NYSE and NASDAQ's a/d lines were negative in the afternoon.

This may confirm some of what I discussed in Thursday evening's MM regarding how institutions can "push" the BIGGEST stocks that comprise an index around, in order to get an index to close where they want it to close, or NEED it to close.

You might "not care" that I noted late Friday, the the Dow Industrials was UP today, the oil commodity was up today, but that Exxon/Mobil (XOM) $77.30 -1.81% traded off its all-time high and now has tweezer top on its bar chart.

You might also "not care" about New Highs and New Lows of a market's components and what that says about bullish leadership, or lack of it, turning to bearish leadership. But if you've looked at a chart of the NYSE Composite, or the NASDAQ Composite in recent months, then you might want to care.

You might "not care" about volatility measures and how they can be useful in intraday trading, but also understanding in a general sense, about call option premiums. But if you bought an out the money call for December expiration as recently as 12/07, or 12/08 on an index, and the index actually rose from the time you placed the trade, then the decline in volatility from 12.00-ish, as well as each day's time decay to today's expiration, then you might actually care what happened, to your capital and the impact of a decline in volatilty despite a rise in price of the underlying security.

Jeff Bailey : 12/16/2006 12:32:02 AM

Closing U.S. Market Watch found at this Link

This could be an "I don't care" item. I look at it all day, and only post it here for subscribers that may be away from their trading platform intraday, or on the road and checking in to see how things ended up at the end of a session.

Jeff Bailey : 12/16/2006 12:29:40 AM

If you are a subscriber that DOES NOT care about what you read, or information given here in the Market Monitor, then do this.

Send an email to me jeffoption@comcast.net and CC it to support@optioninvestor.com

with the subject... "I don't care"

Hopefully the "I don't care" voice will be small, and not overload the OI support staff.

I'm probably as busy, if not busier that most, and if the content I give during trading hours, or analyzing and testing/following in future sessions is of no use, then I would be glad/willing to eliminate that from my list of "to do."

Jeff Bailey : 12/15/2006 11:50:11 PM

Here's what I'm going to do.

I'm going to go through the Market Monitor postings this weekend, and I'm going to pick out ALL the bullish and bearish scenarios that have been mentioned since September 1, 2006.

These should be MACRO in nature. Right? A scenario can't play itself out in 1 day, but after at least 30-days, there should be some sign that the scenario (bullish/bearish) is actually in play.

My education and understanding of economics is not PH.d level, but I've traded in, and invested in, economic expansions, and recessions. I've traded/invested MY money, the capital of firms I've worked for, and the capital of individuals just like you.

I've been able to do this as a "broker," as a "trader," a "consultant" and as an "analyst."

What I'm going to do with all the scenarios is state them at the beginning of Monday's Market Wrap.

Then what I'm going to do, is I'm going to show charts (charts are the MARKET'S view) of things.

Indexes are probably the "best" way to get a general view of what the MARKET thinks of a sector.

Each chart I show, will address a particular scenario, perhaps two, or three different scenarios.

I will give you MY honest, and UNBIASED opion of "is this scenario in play." Marc, Keene, Jim, Jane and YOU can either agree or disagree.

But what I'm also going to do, which you will find "eye opening" is give YOU a VALUE, or PRICE level, where one of the scenarios may actually be IN PLAY. Or showing some sign from the MARKET, that the MARKET agrees with that scenario.

At the end of the Market Wrap, I'm going to be pleasant, calm, and write a conclusion.

Those scenarios given, that can NOT be VALIDATED with a chart, or a PICTURE of the MARKETS view, will be deemed an INVALID SCENARIO. An INVALID SCENARIO is one that can NOT be PROVED, or DISSPROVED (tested) by/against the MARKET.

In my Market Wrap, nobody's name, but my own will be mentioned.

As I've said before, it is good to be AWARE of bull/bear scenarios, but they MUST be TESTED.

That is what I'm going to do in Monday's Market Wrap.

If tonight, YOU think I've "picked on" anyone, then I ask YOU to also review the MM archives, and starting on September 1, read some of the "thoughts" of why this, or that was going to happen. Those "thoughts" are most certainly scenarios.

Now, Linda Piazza has asked me to cover for her Market Wrap on 12/27/06 and I'm flattered to do so. At that TIME (before the 12/27/06 Wrap), I want YOU (Marc, Keene, Jane and Jim too) to give me any ADDITIONAL indexes YOU think need to be analyzed (after you've READ Monday's wrap), as to what THEY are saying about ANY of the scenarios.

Jeff Bailey : 12/15/2006 10:45:08 PM

For any trader that is trying to LEARN to trade, or interpret a market, my advice would be this.

Take ANY bullish/bearish scenario, regardless of how many are thrown your way during a week (from nuclear distruction from Iran, to this stock is cheap on some type of valuation even though it is in a downward spiral, i.e. Enron) with a VERY big question mark.

When the particular scenario YOU grasp hold of (don't jump from one scenario to another to keep your convictions, even as your gut, and your loss builds) LOOKS as if the MARKET AGREES with that ONE scenario, THEN place the initial trade.

If the trade begins to move against you (you're not day trading a MACRO scenario) DON'T add to the loss, by averaging DOWN. WAIT for the MARKET to be RIGHT WITH YOU again, or confirm the scenario you have conviction in.

You must be clear on this.

The MARKET is NEVER WRONG. Only YOU and I can be wrong.

Trade blotters can be wonderful to look at, and sometimes they are tough to look at. But they MUST be looked at, and reviewed, if YOU/I are EVER to find out where YOU/I were WRONG, and what the MARKET is telling you/I.

WHAT SCENARIO IS IN PLAY? What does the MARKET believe in?

Yes. YOU may have been told that the ONLY WAY to make money trading/investing is to NOT follow the herd.

YOU will be poked fun at if you follow what the herd is doing.

That is the WORST bit of advice you could ever follow.

YOU MUST do what the HERD is doing to make money trading and investing.

If you trade/invest AGAINST the herd, the herd will run your account into the ground.

Jeff Bailey : 12/16/2006 9:12:59 AM

I agree with you there Marc (09:55:48) and when you, Jim, or Marc Davis posted trades all day long, and they disagreed, I never said a thing.

What gets me is that a day trader like yourself will buy, buy, buy during a decline, and manage to scalp out a profit for the week, but still be telling me about some MACRO bullish scenario that will eventually play out in the future. Throw in an interview with some hedge fund manager as additional proof that we should be buying each dip because he was bullish on technology. All very convincing, and adding to that conviction.

Then tonight, tell me the MARKET is only right in trend, but wrong at extremes and for the past three months, there's all these MACRO things taking place that were, or are now going to be BEARISH.

Isn't MACRO a "bigger picture" and somewhat of a longer-term view of things?

You don't get it. You and I and Tab WERE RIGHT this past summer about what was going to take place this fall and winter.

OI Technical Staff : 12/15/2006 9:59:59 PM

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

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

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

Marc Eckelberry : 12/15/2006 9:59:29 PM

Jeff, take a pill and chill. Do your trades and let others do theirs. Quit bashing traders and just do your thing. No one cares anyway.

Marc Eckelberry : 12/15/2006 9:55:48 PM

I'll add that Jim, Mark Davis and myself posted trades all day long and they often disagreed. Readers pick and choose, not you.

Jeff Bailey : 12/15/2006 9:57:22 PM

So if I posted 20 short YM futures trades a day and 2 long YM futures trades a day, during this rise then.... what? No complaints? And I can attack you?

In my opinion, there's probably two trades a day in the futures, otherwise it is what industry call "churn." Trading just to trade.

Keene Little : 12/15/2006 9:53:08 PM

You just identified your problem Jeff: "It is frustrating to me to PROFILE a BULLISH trade, only to see a post one minute later regarding some bearish scenario." You take it personally when I offer an opinion that differs from yours. That's why I said chill out. We each have different opinions and you need to stop thinking I'm calling you wrong when my opinion is different than yours.

Our readers are smart enough to take both opinions AND FORM THEIR OWN OPINION. That's what we're trying to teach them to do and not to do as I say or you say. While I tell people when I think the market will turn I will consistently identify levels where the market proves me wrong and to trade with the trend. Why you keep forgetting this fact is baffling. But I think you just answered my question in your quote above. And with that I'll say good night.

Marc Eckelberry : 12/15/2006 9:49:23 PM

Jeff, when I posted trades on the monitor, and I did far more future's trades than you on the monitor(probably over 2000 in two and a half years), I gave a weekly summary at the end of every week. Old time subscribers know I did this for over two years while you were on the other monitor. I don't post trades anymore because I don't have the time. If anyone has a complaint (or good memories) about the trades I used to give, write to me and let me know : marceckelberry@gmail.com.

Jeff Bailey : 12/15/2006 9:47:35 PM

And since Marc and Keene have brought up the subject that I want to prove everyone is wrong, and I'm the only one that's right.

Start profiling some trade Marc and Keene. I'm sure subscribers would LOVE to have more trade ideas PROFILED, and have both of YOU follow them, updated them to their completion (win, lose, or draw).

Then take 1 minute each night (you've got time to team up on me this evening) and put together a trade blotter, so I can see the power of wave theory analysis.

It is frustrating to me to PROFILE a BULLISH trade, only to see a post one minute later regarding some bearish scenario.

I know, as do subscriber that I'm not right every time. Heck, I post my trade blotters and my current OPEN profiles.

My analysis of point and figure charts and pivot analysis isn't right all the time.

And my eventual "this is what I believe the market is telling us" scenario isn't right all the time.

But trading/investing is a LONG process, as long as you don't blow up your account.

The ONLY way to survive is to admit mistakes, don't keep repeating them.

If Keene and Marc ever posted a trade blotter of trades they PROFILE here, based on their "scenarios" since mid-September, I don't think the 7 scenarios (I've lost count to tell the truth) would still be posted.

But the bear scenarios continue to come in a rising market, just as the bull scenarios came in the May-July decline.

I love Marc and Keene's doom/gloom scenarios during the rising market, just as I loved Marc's bull theme during the decline.

What Marc doesn't get, what that HE WAS RIGHT about his bull theme during the decline, but his convictions were to strong to short 90% of the time, instead of buying the NQ 90% of the time.

When Marc's bull theme finally came to fruition, and the move really getting under way, I don't think he could believe it, and had to turn bearish. Probably because I was becoming MORE bullish and alerting to the Point and Figure bullish % charts also confirming the internals were strengthening rapidly.

The term "Pointy Finger" is an attempt to get under my skin. I know that. And only after wave, after wave, after wave of bullishness do I chuckle, sit back, and though I'm "hot under the collar" right now, I'm hearing the gentle waves of water lapping against some distant shore.

Post some trades "Boyz" and that will keep you busy enough, and away from those CONTRARIAN publications you seem to like to read.

Keene Little : 12/15/2006 9:21:03 PM

What you've done Jeff is look at my bearish calls without acknowledging the other side that I've called each time--if this then that otherwise this. You continue to get hung up on people disagreeing with you and quite frankly it gets tiring. I make my case every day and give levels to watch for confirmation and potential resistance for turns.

How you can get this wrong time after time is very confusing to me. As I said, arrogance colors peoples' opinions and we all have to be careful of not letting it happen to us. I suggest you look in the mirror.

Jeff Bailey : 12/15/2006 9:18:30 PM

I profess to know nothing about wave theory, and to date, I've never seen it work in application. Blue arrow down after blue arrow down, after blue arrow down. I'm sea sick to tell you the truth Keene. But I'm sure it was right, and the market was wrong.

My point folks is this.

When analysis is wrong 10 waves in a row, and each time the MARKET moves higher, then in my opinion the MARKET isn't wrong, the analysis is wrong, and the MARKET kows something that disagrees with the analysis.

Why does the analysis continue to be wrong?

Because the "analyzer" doesn't want to admit that he/she can ever be wrong.

How does one cover it up?

I've said it before and I'll say it again.

A trader/investor that is on the wrong side of a market and continues to try and prove the MARKET wrong is doomed!

You can swith from this scenario, to that scenario, to another scenario, trying to talk yourself, or others into believing you know what you're doing.

Or ... talking YOURSELF into knowing what you're doing and before you blow up your account, one of your scenarios will come to fuition as you meet margin call after margin call, or leverage the house so you don't have to eventually cut the loss, which is what GOOD/SMART traders/investors do, even though it is admitting that they were WRONG.

The best way to blow up your account in a rising market is to jump from bearish scenario to bearish scenario and see a completion of a 5th, 6th, 7th wave at each new high and continually sell that high short as a loss builds from wave 1 thru 7.

Another way to blow up your account in a falling market is to jump from bullish scenario to bullish scenario and see a completion of a 5th, 6th, 7th wave at each new low and continually try and buy that low as a loss builds from wave 1 thru 7.

Another good way to blow up the account is to call a friend at night, tell them your problems, and that friend tell you everying is OK, just hang in there, keep doing what you're doing, and eventually you'll be right.

Keene Little : 12/15/2006 8:48:27 PM

I saw those same dojis Marc. It's got me salivating, even if we get a small push higher first on Monday. But mind you, I'm not bearish (wink). I'm just following technical indicators.

Marc Eckelberry : 12/15/2006 8:47:06 PM

By the way, gravestone doji for ES and bearish shooting star for NQ. It needs confirmation, but there they are.

Marc Eckelberry : 12/15/2006 8:44:36 PM

Keene and I have disagree many times, but we discuss/argue about technicals and macro issues, but never about the other person's ability to be correct or wrong at any other given time. We all take risks, that is trading, but writers add on even more risk and should not be assaulted for it.

Keene Little : 12/15/2006 8:27:12 PM

Good arguments Marc. I stated in my post what was my opinion (based on EW Theory which Jeff has professed to know nothing about). Jeff states his opinion as fact. That my friends is arrogance and I dismiss him out of hand. His spreadsheet that he has posted of his trading results has not convinced me he knows any better than I. Hell, we make a market and why Jeff feels it's necessary to prove others wrong to make himself right has always baffled me. I try to ignore his comments when he gets on his high horse which he has done again this afternoon. Have a good weekend Jeff and chill out.

Marc Eckelberry : 12/15/2006 8:22:41 PM

The next big move is down and that is all Keene was saying. Jeff, I can't even begin counting the amount of times you were wrong (like shorting a gap close earlier today for YM??? short bounces, you will get easier stops).
Anyone who bought Dec QQQQ 45 calls mid November, listening to the cheerleading squad, lost it all. So for every bullish story, I have a bearish one the past month. I will add that Keene did profile some 1420 calls, and he was right and not the perma bear you make him. Enough.
Why do you hassle everyone on this monitor, folks who put in time and thought? You just make it a sad space to work in, and why I am showing up less and less.

Marc Eckelberry : 12/15/2006 8:52:20 PM

I have not been bearish since September. I have been bullish in other sectors (especially gold in late October and oil and the Euro recently at But Being bearish and trading are two different things. Being a cheerleader or being a trader are two different things. I have made fast money almost every day shorting the opening bounce and getting out on the reversal or taking the reversal long and exiting, no matter what the trend. I book the money and walk away. The only trades I like holding overnight are defensive, such as gold, bonds or short equities, if I have a cushion. I rarely trade past the first hour and I don't care what the trend is because it rarely matters when you play the opening game. Short covering rallies in a downtrend can make you more money in a few minutes than it takes you to make in an hour in the trend. Same with shorting pullback in an uptrend, it's fast and easy money. There are no rules. Those big breakout or breakdown days are not the norm and if you build your trading on that, you will get burned on the chop days, no matter what the trend. Yes, trade the trend when AD line is +1000. Below that, it means little other than a bias you can find at the close.

Jeff Bailey : 12/15/2006 7:34:59 PM

So I WAS right with the SPY put in October (an extreme), and I was right again with the recent DIA put (an extreme). (if anyone thinks the market was wrong, and I was right).

Now we understand why Marc and Keene have been bearish since mid-September (an extreme) and the market has been so wrong.

Marc Eckelberry : 12/15/2006 7:31:27 PM

The market is right in the trend but wrong at extremes. Keene considers this an extreme and I agree. If the market was always right before a reversal, there would never be reversals. Cramer calls the market stupid and that is how you can profit from its macro mistakes. Right now, for the past month, there ha sbeen just as much money made on the short side than on the long side if you traded techs and know how to trade short. So who is right? Keene is now considering the next trend and how a good trader can be ahead of the flip 2 % before the rest of the crowd. Just like in day trading, you should not short a drop, only a bounce, thus giving you a better entry and safer stop. And there was nothing telling you today to short ES 1445, other than a fib projection, overbought conditions, bond reversals AND your gut feeling as a trader. But it was THE right trade, even though the market was heading up.

Jeff Bailey : 12/15/2006 5:55:19 PM

Ooooo Keene (01:53:41) ... so wrong, so wrong.

The MARKET is NEVER wrong and what is taking place this month, is representative of news (the economic data) to be revealed in the January and February and March.

C'mon ... its the trader that DOES NOT BELIEVE THE MARKET IS ALL KNOWING that buys and buys and buys during a market decline (see May-August and all the good news and reasons mentioned to keep trying to buy each low based on the good news) and eventually gives up at the bottom, that then sells, sells, sells all they way up during an advance, or gives a new/multitude of reasons why they shouldn't believe the advance (just as they shouldn't believe the decline during good news).

Believe me Keene, I have been told "news" direct from CEO's mouths from investment banking relations MONTHS in advance before it was made public. And having NOT acted on that information myself, or told anyone outside the firm, the STOCK of that company rose, or fell MONTHS before the news was made public.

And that leads to other disagreements that you and I have.

Like ... the need for technical analysis. You see, since the market IS all knowing, the technician is SUPPOSED to analyze the technicals, then process the bullishness, bearishness of various sectors, commodities, to then relate WHAT THE MARKET IS TELLING THEM.

This "random walk" stuff is for the birds.

You may believe investors just throw money around, like darts at a board, hoping something sticks, but that's NOT what smart money does.

Smart money goes, where smart money goes.

Jeff Bailey : 12/15/2006 4:48:33 PM

If you haven't looked already ...

DIA $124.15 +0.20% and INDU 12,445.52 +0.23%.

Oil settles up 47 cents, or +0.74%.

How did the only Dow oil component (XOM) close?

Makes a lot of sense doesn't it?

Keene Little : 12/15/2006 4:37:14 PM

Using the ES 15-min chart I'll point out a couple of reasons why I'm not entirely sure what to expect for Monday and why I'm leaning to the short side but hedged. Today's pullback looks a little choppy and may be the 4th wave correction I mentioned below--I've got the bull flag drawn on this chart and the bottom of the flag intersects the uptrend line from Tuesday's low at 1435 and that's the pullback potential early Monday. Link

You can see by my EW labeling the need for another rally leg for the 5th wave. As I look at the price pattern I like this count. But I don't like the count when I look at MACD for confirmation. I like to see wave-3, which is typically the strongest move of the 5, have the highest MACD peak. The 5th wave is typically negatively divergent against the 3rd wave high.

That's not what we have here and you can see where I have wave-3 labeled that MACD is below the MACD level where price peaked out yesterday morning. Coming into today I had been thinking that yesterday's high was wave-3 and MACD is still telling me it is. So if that's wave-3 then today's high was wave-5. And if today's high is wave-5 then we've already topped out and started the decline, even if it has started down in a choppy fashion.

Hence my leaning short, but hedged. A break below ES 1435 that stays there would have me covering my hedge position. I hope everyone has a great weekend and I look forward to an answer to this question early Monday.

Jeff Bailey : 12/15/2006 4:03:48 PM

DIA $124.18 +0.22% ... 12-minutes to close

Jeff Bailey : 12/15/2006 4:00:17 PM

"Forget what you believe, trade what you observe, and above all else, utilize RISK/ACCOUNT management." - Jeff Bailey

Keene Little : 12/15/2006 3:57:49 PM

Here's my guess for Monday--today's pullback looks like a 4th wave correction in this week's rally. If you look at a 30-min chart you can count a 3-wave move up from the 12th to this morning's high. The pullback would be wave-4 and then Monday we'll get a 5th wave up to a new high. The new high may not be much but ES 1445-1450 is the potential. I like a short play here but am personally hedging my futures short position with some long calls.

The reason I'd like to stay short the futures is because waiting for the 5th wave has burned me more often than I care to remember. Therefore I don't want to be long in expectation of another move higher but I do want to protect my short position in case it happens.

Jeff Bailey : 12/15/2006 3:57:14 PM

Risk/Acct. Management alert ... Swing trade long close out alert for the 1/2 position long in the StreetTracks Gold (GLD) $61.06 here.

Hold the KGC $11.72 -3.30

Jeff Bailey : 12/15/2006 3:52:16 PM

VIX 10.05

Jeff Bailey : 12/15/2006 3:54:30 PM

You know what ... I say "cork screw it" and I think this action in GLD and SLV and dollar is Q4 Op-Ex related.

My reasoning for being long gold is/was dollar weakness only because Fed wasn't going to budge, or budge anytime soon and stand pat at 5.25%. That hasn't changed. AND THE TECHNICALS makes sense to that scenario in my opinion ... OK silver probably overbought.

Let's stick with the plan, honor stops, and see what unfolds on Monday.

ACCOUNT/RISK Management does say cut back on full position gold exposure ($5000 GLD and $5000 KGC), so I opt OUT of GLD.

Keene Little : 12/15/2006 3:42:21 PM

No sooner said than done. Getting some selling now, even in MER, which just broke its string of higher lows for the day.

Jeff Bailey : 12/15/2006 3:38:29 PM

Berkshire Hathaway A (BRK.a) 112,200 +1.90% ... it keeps going, and going, and ....

Keene Little : 12/15/2006 3:37:11 PM

VIX has had quite a bounce off today's low and it's not even UP to 10 yet. Amazing. Just hit 10 as I type.

Keene Little : 12/15/2006 3:35:00 PM

This continues to be a "hold 'em til you fold 'em" market and there's no one folding. Not even MER--no sellers to be found.

Jeff Bailey : 12/15/2006 3:34:40 PM

GLD 60-minute interval chart Link ... its the recent action in the MONTHLY Pivot that begins to suggest distribution started on that last test of $63.16, buyers tried to hold it at MONTHLY S1, but now that's given way.

If comparing against the 11/08/06 close, which may provide a gap higher open on Monday, its TODAY's MACD and recent MACD below zero that is cautioning that a gap up is much of a high probability for the commodity.

Jeff Bailey : 12/15/2006 3:16:29 PM

A good test if you ONLY have a partial gold position (equity/commodity) ... is to see if BUYERS are strong enough to get a commodity close above WEEKLY S1. I'll follow with the 60-minute GLD chart in a second.

Jeff Bailey : 12/15/2006 3:14:02 PM

My eyes say "hold", but the risk management side of me says pair back the gold exposure for now.

Jeff Bailey : 12/15/2006 3:11:49 PM

Sheeeooot ... look at the GLD chart on a 60-minute interval ... check out the 11/08/06 action at the close. Then look at today's.

Jeff Bailey : 12/15/2006 3:06:36 PM

If I've got the energy on Sunday, one thing I'm going to do is go back from about mid-September a read all the MM comments. Make a list of all these various "bear equity/economy" dynamics and see which one might NOW be in play. See if there isn't one that does have a sharp decline in gold/silver and rise in the dollar as being technical confirmation of a scenario.

Jeff Bailey : 12/15/2006 3:02:57 PM

03:00 Market Watch found at this Link

Keene Little : 12/15/2006 3:02:46 PM

MER is still being held up at today's high. Max pain for that one is $90 but it sure doesn't look like they're going to drop this from its current 91.79 price. It's previous high on December 12th was 91.83 so watch for a double-top here.

Jeff Bailey : 12/15/2006 2:58:27 PM

SPY $142.53 ... I think today was dividend distribution day.

Jeff Bailey : 12/15/2006 2:57:15 PM

DIA $124.26

Jeff Bailey : 12/15/2006 2:56:32 PM

Meanwhile ... YM 12,545

Jeff Bailey : 12/15/2006 2:50:29 PM

I'm really kicking myself for not shorting Silver this morning. I thought "it has a lot further to fall to support if some major selling takes place" ... but I sure didn't think a 6.5% decline was feasible today.

Jeff Bailey : 12/15/2006 2:49:05 PM

ZG/YG live book Link

Jeff Bailey : 12/15/2006 2:44:32 PM

Some viewers may be thinking ... Jeff seems concerned about his GLD trade, but he's only down $1.50/share on 80 shares.

Yep, that doesn't seem to be too bad on THAT thought. Now go down $11.50 on on 100oz or YG futures and hold that until things open up, or down Sunday evening.

Jeff Bailey : 12/15/2006 2:39:53 PM

Feb Gold (YG07G) $618.80 looks just like the GLD ... WEEKLY S1 $619.80.

Jeff Bailey : 12/15/2006 2:33:20 PM

Just the INVERSE of yesterday's BHI trade. See what it does into the close, but determined to exit it before the close. If the MARKET is thinking the same thing (the MARKET is great at managing risk) then ....

Jeff Bailey : 12/15/2006 2:32:09 PM

OK ... if we get a "bounce" for GLD, the places to look for the exit point are $61.51, or $61.70. Here's my GLD chart on 5-minute intervals with QCharts' WEEKLY Pivot Levels and my MONTHLY Pivot retracement Link ... added a "dynamic" , but gut feel is GLD closes at/near lows of session.

Jeff Bailey : 12/15/2006 2:20:17 PM

OK ... GLD $61.09 and off the low of $60.93. Check out that BIG volume spike 674,200 from $61.27 down to $69.98, and liiight volume edge up from the bottom. Intra-day "oversold" and maybe get a pop if we can get back above WEEKLY S1 of $61.11. My initial profiled stop is close as it is at $60.80 so I'll stick with that for the next hour, but want to get out of this position an this point, but hold the KGC for "gold exposure" at this point.

Jeff Bailey : 12/15/2006 2:15:51 PM

The guy at Amaranth's hedge fund never did consider that in my opinion when Nat. Gas just kept falling and falling. I'm sure even though he was perplexed as to why Nat. Gas was falling, he just couldn't manage the risk and kept holding on all the way down.

Keene Little : 12/15/2006 2:15:10 PM

Nope, false alarm. Looks like a stop run on MER as it's jumping back up. Could be nothing more than opex and I'm making something out of nothing here. I'm bored, what can I tell you (wink).

Keene Little : 12/15/2006 2:13:33 PM

MER just got hit with some selling and is breaking the trend line along this morning's lows. Heads up for some selling in the averages.

Jeff Bailey : 12/15/2006 2:13:32 PM

Right now I/you say ... stick with the technicals as it hasn't said "sell." Yet on Monday, it says "sell" with an opening tick of $60.00, AND we're still long KGC.

That's the RISK management that says I've got to do something, JUST in case gold's decline accelerates.

Jeff Bailey : 12/15/2006 2:11:16 PM

GLD ... gosh ... the $0.50 box chart from Dorsey/Wright ... that's a possible "shake out" pattern. It's the first sell signal in the upward trend on that box size (their default). The $0.40 box that would be equivalent to futures doesn't give a sell signal until $61.60.

See my risk management predicament vs. technical?

What if this is end of year tax gain selling, or beginning of major dollar comeback and we get gapped down on gold?

Jeff Bailey : 12/15/2006 2:02:31 PM

OK ... here's what we're going to do for the MM profiles ....

I'm still a bit unertain of the gold/silver action and it may be Op-Ex related (forced selling due to action in the stocks, etc, etc), but from an account management view ...

We don't need the commodity exposure of $5,000.00 risk (what we paid for GLD) considering long position in KGC, which is currently down $336.00, while the GLD position is down $112.80.

We sell the GLD, consider it a "wash" against the KGC covered calls.

Then, hold onto KGC and "hope" (you know what they say about hope) that this is all Op-Ex related, and get bounce back next week, and bull trend continues.

Keene Little : 12/15/2006 2:02:03 PM

They're still buying MER.

Keene Little : 12/15/2006 1:56:32 PM

For ES, two equal legs down is at 1436.25, just below the top of its ascending wedge that I mentioned for SPX which is near 1437.

Keene Little : 12/15/2006 1:55:18 PM

If the current pullback from this morning's high is just a correction to the rally, two equal legs down for YM at 12523 should be support for another run higher.

Jeff Bailey : 12/15/2006 1:54:53 PM

Shoot ... I'll bet that's "the news" regarding gold/silver weakness. Should have put that together as that was one of many U.S. equity bear's reasons not to buy stocks since mid September.

Remember ... foreign capital exiting U.S. Treasuries in mass and crumble of U.S. economy, etc., etc.

Keene Little : 12/15/2006 1:53:41 PM

Jeff, re: your 1:42 post about trying to find out news about why the metals are moving so much, this is where you and I fundamentally disagree on the market. I believe the market drives the news, not the other way around. The emotions of the traders drives the markets and the rest follows. The stock market doesn't know what's coming and is therefore not smart.

The market makes a big move due to the changes in human emotions (fear and greed) and the rest of the economy, and news, follows like a little puppy dog. When people get into a selling mood they also don't buy products and business slows. The slowdown in the business cycle follows the stock market and that's why it looks like the stock market is smart.

The market is just a mirror of the collective emotions of all the traders/investors out there, nothing more. Now if I could only figure out when a little fear is going to creep back into the stock market...

Jeff Bailey : 12/15/2006 1:52:12 PM

See 11:24:48 post ... that could be it too. The robust inflow of foreign buying of US debt.

Jeff Bailey : 12/15/2006 1:45:13 PM

BGO $5.07 -2.50% ... which is being bought by KGC $11.78 -2.72% ...

Again... a thought is BGO being pulled into its $5.00 strike.

Jeff Bailey : 12/15/2006 1:43:41 PM

Could be some dollar hedges unraveling.

Keene Little : 12/15/2006 1:42:55 PM

A trend line along the highs for SPX since October 26th is near 1424.40. This is the top of its ascending wedge for the move up from October and the rally above it this week is either a breakout or a throw-over. Bulls will want to see SPX hold above 1424 since a drop back below that would suggest the move up was a throw-over to finish the rally (which is the way I have the EW labeling). Link

This morning's rally satisfied a couple of Fib projections that I had lining up near 1430. I'm sure we'll get a bounce off this trend line but what happens from there will be important.

Jeff Bailey : 12/15/2006 1:42:47 PM

I'm "grasping" for any type of news that may have brought the 12:00-on weakness in metals.

Jeff Bailey : 12/15/2006 1:41:41 PM

Brazil Stocks Reverse Course, Slide 0.1% In Late Trade

DJ- Brazil's benchmark Ibovespa stock index reversed early gains Friday as investors started to lock in profits from the week's record-setting run.

At of 1753 GMT, the Ibovespa stocks index traded 0.1% lower at 43,720 points. The market opened trading Friday 0.5% higher at 43,970 points, up from Thursday's close at 43,754 points.

According to traders, investors were locking in profits after the benchmark Ibovespa index continued its recent end-of-year surge. This week, the index has twice set fresh record-high closing marks.

In addition, investors are starting to build solid positions ahead of the holiday season, when trading will be limited and liquidity will be light.

Jeff Bailey : 12/15/2006 1:38:27 PM

YM 12,531 alert ...

Keene Little : 12/15/2006 1:35:23 PM

I've been looking for gold to pull back to the 610-620 area but could get a bounce before another leg down into this area for better support. It's possible it will find support near the current levels but I'm not so sure about that.

Keene Little : 12/15/2006 1:33:42 PM

Gold is pulling back a little further as I have been expecting. Here's the updated chart from last night's Market Wrap. Link

Jeff Bailey : 12/15/2006 1:32:42 PM

BHI North America Rotary Rig +26

Jeff Bailey : 12/15/2006 1:31:24 PM

BHI reporting their rig count data.

Keene Little : 12/15/2006 1:30:45 PM

NYSE now in the red.

Jeff Bailey : 12/15/2006 1:29:46 PM

Folks ... I have no idea what is going on with gold/silver ... end of quarter roll, rebalance?

Keene Little : 12/15/2006 1:28:58 PM

Countering some of the bearish things I'm seeing with the small caps and Trannies down, the brokers are being bought today as they continue to make new highs for the day. This include Mother Merrill (MER) so following the move in MER says we should be thinking the long side, or at least staying away from the short side. The overall mixed picture today tells me to stay away. I never like trading opex Fridays anyway.

Jeff Bailey : 12/15/2006 1:28:04 PM

BHI $78.00 +1.43% ... challenges yesterday's high. Traded $76.50 this morning.

Jane Fox : 12/15/2006 1:25:00 PM

* Feb. gold taps $620.50, lowest since Nov. 1 as dollar rises
* Feb. gold last down $10.50, or 1.7%, at $620.40/oz

It is looking like the strong Oil market is not enough to overcome the strong $.

Jeff Bailey : 12/15/2006 1:24:56 PM

10-year now flat at 4.593% ...

Jeff Bailey : 12/15/2006 1:24:30 PM

Yeah ... the dollar is up, but the intra-day moves lower in gold and silver seem overdone if it is just that.

Jeff Bailey : 12/15/2006 1:23:20 PM

I haven't been monitoring the news wires that closely this morning ...

Keene Little : 12/15/2006 1:23:09 PM

The bond market, by dropping back to near yesterday's close after the big bounce this morning, is saying the CPI data is not necessarily good enough to get the Fed to relax about inflation. The overall inflation rate is still higher than their target number of 1%-2% and the bond market clearly has rethought its initial reaction to the CPI data.

Meanwhile the stock market stays in lala land thinking all news is good, no matter what it is. To say this market has its head in the clouds (or perhaps where the sun doesn't shine) is an understatement. Either that or there's just too much money coming in (from the Fed and other sources) and it's mostly going into the stock market.

Jeff Bailey : 12/15/2006 1:21:40 PM

Big talk yesterday about inflation?

Jeff Bailey : 12/15/2006 1:20:51 PM

Silver getting hammered ... SLV plunging 6%

Jeff Bailey : 12/15/2006 1:19:49 PM

SPX Nh/Nl 56:0 ... same as 11:00 AM EST

Looks like things are going to chop sideways at this point, with a DIA pin somewhere around $124.25, with a disclaimer of "anything can happen into Op-Ex close"

Hopefully YM traders understand the logic for a short where I put it on.

Just didn't get the "dip lower" for the real good bull trade, to give the upside target where YM is trading currently.

YM short was a bit of a "picking up dimes in front of bulldozer" if another squeeze took place like yesterday.

Check out TRIN and TRINQ and I think same type of chop trade as Thursday.

I had a long/short YM double loser on Thursday, and I'll stop at one loser today.

Keene Little : 12/15/2006 1:16:52 PM

Trannies are also negative on the day and making new lows here.

Jeff Bailey : 12/15/2006 1:15:02 PM

01:00 Internals found at this Link

Keene Little : 12/15/2006 1:12:53 PM

RUT just went negative.

Keene Little : 12/15/2006 1:06:14 PM

YM broke down through its short term uptrend line from yesterday morning and then just jumped up for a retest of that trend line. It can continue to rally back up for another test but so far it's looking at least short term bearish here. Link

If it does manage to push back up for another test of the broken uptrend line it will probably be a test of this morning's high as well. If it's accompanied by bearish divergences then I'd short it. In the meantime a break below the last dip to 12538 could see a quick trip down to at least 12510.

Jeff Bailey : 12/15/2006 1:02:36 PM

01:00 Market Watch found at this Link

Jeff Bailey : 12/15/2006 12:59:52 PM

PHF $9.75 ... monthly dividend of $0.075 has SEC yield at 9.2% here.

10-year down 1.6 bp at 4.579%.

Maybe not that notable, but with major indices pushing as high as they have, still a bit weak on PHF in my opinion.

Jeff Bailey : 12/15/2006 12:57:08 PM

PHF $9.75 -1.91% ... notable weakness in this closed-end "junk bond" fund considering treasury yields.

Jeff Bailey : 12/15/2006 12:50:20 PM

YM 12,559 and bumped against 19.1% dynamic ... understand here that if computers start to buy, buy, buy on this move above WEEKLY R1/MONTHLY 80.9% they might not "turn off" until 12,602.

Jeff Bailey : 12/15/2006 12:44:50 PM

NEM $47.26 -0.65% ... just under its $47.50 strike

Jeff Bailey : 12/15/2006 12:43:29 PM

ABX $30.60 -0.77% ... "well off" its $30.00

Jeff Bailey : 12/15/2006 12:43:08 PM

KGC $11.85 -2.14%

BGO $5.10 -1.92% ... KGC's action may be more related to BGO's $5.00 strike.

Jeff Bailey : 12/15/2006 12:41:16 PM

Might be too tight, but I'm not up for getting caught in a squeeze.

Jeff Bailey : 12/15/2006 12:40:47 PM

YM short stop alert 12,558

Keene Little : 12/15/2006 12:39:02 PM

That sell program, with volume, is being followed by a much lower volume bounce so that's a warning that the bounce could fail. But I expect most of the trading to be lower volume and we could just as easily see a bounce take it right back up if the sellers stay away.

Marc Eckelberry : 12/15/2006 12:40:19 PM

ES and SPX did an exact high at 50% projection November and that is good enough for many it seems. No "bla, bla, bla" (quoting a child) about Monthly R2's and 61.8% until that breaks out.
Now I know why I make myself scarce.

Jeff Bailey : 12/15/2006 12:37:58 PM

GLD $61.43 -1.11% ...

Jeff Bailey : 12/15/2006 12:37:11 PM

Gold is getting "melted" ...

Keene Little : 12/15/2006 12:32:10 PM

NQ dropped into the middle of its gap and is now like the squirrel who runs into the middle of the road with traffic coming from both directions. Which way is it going to go here?

Keene Little : 12/15/2006 12:30:53 PM

ES did a quick gap close and got a good bounce right away. Obviously if it can't hold above 1438.50 now this could see some selling take hold. For now we could be seeing a test of the day's range and not much more. YM is holding above its gap.

Jeff Bailey : 12/15/2006 12:30:11 PM

YM 12,547 ... DIA $124.29

Jeff Bailey : 12/15/2006 12:28:25 PM

YM 12,549 ... undercut 50% dynamic 12,540 and snapped up there so far ...

Keene Little : 12/15/2006 12:27:25 PM

Here's a thought bears can hang onto--after today's gap up if we close in the red today it will be a key reversal day. Key reversal days on an opex Friday are sometimes followed by a wicked sell off the following Monday.

Jeff Bailey : 12/15/2006 12:27:17 PM

We're going after MONTHLY R1 and 61.8% dynamic. That's it. No money supply discussion, p/e valuations, bla, bla, bla.

Jeff Bailey : 12/15/2006 12:25:34 PM

Have your finger on the button YM traders ...

Keene Little : 12/15/2006 12:25:18 PM

We've seen quite a reversal in the US dollar (now up), gold (now down) and bonds (pulling back) since this morning's CPI news. The only one not to equally correct are the equities. Perhaps that will change soon.

Jeff Bailey : 12/15/2006 12:24:52 PM

YM short lower stop alert ... to 12,558

YM 12,541

Keene Little : 12/15/2006 12:22:42 PM

As this slowly works its way back down, watch the tops of the gaps at YM 12535 and ES 1440. ES looks like it should retest this morning's early pullback at the top of its gap first.

Jeff Bailey : 12/15/2006 12:20:34 PM

YM short alert here at 12,552 ,disciplined stop at 12,563, target 12,531

Jeff Bailey : 12/15/2006 12:18:40 PM

Squint ...

Marc Eckelberry : 12/15/2006 12:17:47 PM

The short side is looking absolutely fantastic for January or February and it won't be just a 2% affair. We got 10% in Feb 1994 and with a replicate VIX reading, I expect the same on top of the NYSE all time overbought conditions. I don't think I have ever seen such a great set up since 2000. Hogs get slaughtered and that is exactly what will happen and soon. Then I will go in and buy tech stock for the spring. Buying anything now other than a daytrade or very short term is suicide. Remember: they can't start the year too high or the bar is impossible at year end, so we could even drop before. I think cost averaging into longer term puts is the way to go, or just cost average short ES if you have the capital. Remember that you can't get to highs like this without some good news and everyone saying buy, so you really have to shut off the TV and avoid the cheerleaders if you want the next big trade (not the scrap longs at this level). Just like in June when everyone said it was the end of the world, this is not the beginning of the world either.

Jeff Bailey : 12/15/2006 12:17:25 PM

Bounce target on LAB is $11.50 Link

I discuss the supply/demand scenario for the "Tax Loss Selling" bounce.

Keene Little : 12/15/2006 12:02:33 PM

Just not much trading going on out there and now we enter the lunch hour. This will either remain very boring or else we'll get an occasional buy or sell program to keep things a little more exciting. Not seeing much to entice me either way here.

Jeff Bailey : 12/15/2006 11:53:29 AM

I've mentioned LAB from time-to-time here in the MM. Today there was some type of news regarding NYSE extending trading hours next year in attempt to increase trading revenue.

Jane Fox : 12/15/2006 11:52:11 AM

Here is McMillan's weekly update. While there have been some indications that this bull run is "tired," thereare few if any technical sell signals to indicate that a change of direction might take place. $SPX and $DJX (the Dow) made new highs today (6-year highs for the former, and all-time highs for the latter), although $RUT, $SML, $VLE, and $NDX did not. The main index chart that we follow -- $SPX -- thus remains very bullish, as the index continues to climb within its ascending channel. The bottom of the channel is at about 1400 right now, so any violation of that area on the downside would be cause for concern. Lacking that, the intermediate-term bullish trend remains in place.

The equity-only put-call ratios continue to confirm that intermediate term bullish outlook, too. As long as they are declining, they are on buy signals (which originated months ago). They are beginning to decline into rather low areas of their charts -- especially the weighted ratio. As such, our computer projections are warning of a possible sell signal on the weighted chart. However, we would not jump the gun; wait for confirmed, visual sell signals before acting bearishly.

Market breadth faltered a little over the past week or so, and the "stocks only" breadth oscillator gave a sell signal, but that was not confirmed by the NYSE-based oscillator. As we've stated before, these are confirming indicators, not leading ones, so we'd wait for at least one other indicator to turn bearish before acting on any breadth sell signals.

Volatility indices ($VIX and $VXO) have declined to historic lows, as both fell below 10 this morning. They are thus extremely overbought, but the market can continue to advance as long as these volatility measures remain depressed. Only if $VIX closed above 12.70 would we consider it to have turned bearish.

In summary, things remain much the same as they have for a long time now: intermediate-term bullish, with the possibility of a sharp, but short-lived correction (because of the overbought conditions). This view is supported by the fact that expiration has a bullish bias to it (see below) and the end of the year is traditionally a bullish, low-volatility period. That doesn't give the bears much time to operate, even if they wanted to (next week, perhaps), so even if sell signals arise, they probably wouldn't be able to generate substantially lower prices until next year.

Jeff Bailey : 12/15/2006 11:51:41 AM

Tax loss bounce call alert ... Here's a darned good looking candidate

Go long three (3) of the Labranche LAB Jan $10 Calls (LAB-AB) at the offer of $0.75.

LAB $10.14 +3.78% ... they are a specialst firm.

Disclosure: I currently hold bullish position in LAB.

Marc Eckelberry : 12/15/2006 11:39:20 AM

I had a chat with Keene last night and I pointed out the NYSE RSI monthly read at 80, an overbought monthly reading never seen in that index. Never. This market is not ready for bad news once we are done with opex. Pundits comparing this to the 90's bull market are outof their minds. We had massive growth with 1.6 core readings. We barely get 2% GDP with 2.6 core now. And SPX is up 14% for the year. Right.

Jeff Bailey : 12/15/2006 11:35:52 AM

GSO.X is 188.12 +0.65% and has been trading between DR1 and DR2 with Weekly R1 and R2 at 187.20/191.21

Jeff Bailey : 12/15/2006 11:33:51 AM

Compelling ... about 9,000 OI each on the ADBE Dec. $40 and $42.50 calls.

Marc Eckelberry : 12/15/2006 11:30:43 AM

Year over year core still at 2.6%, much higher than normal. The labor market is still showing inflationary signs, just ask anyone who owns a business. It's impossible to get help and you have to pay more for it. Expect revisions next month.

Jeff Bailey : 12/15/2006 11:30:38 AM

ADOBE GAINS AS 4Q NET RISES 16%

DJ- Shares climb 5% a day after software company's 4Q earnings rise to $181.9 million, or 30c a share, while revenue grows to $682.2 million. For fiscal 2007, Adobe expects revenue growth of about 15%.

ADBE $42.74 +4.72% ... might get further Op-Ex naked call squeeze on this one before the session is out. Let's check where the OI is at.

Jeff Bailey : 12/15/2006 11:28:57 AM

APPLE DELAYS 10K AMID OPTIONS PROBE

DJ- Company says it is unable to file its 10-K Form by Dec. 14 deadline because it needs to restate historical financial statements to record charges for compensation related to past grants.

AAPL $88.52 -0.03% ...

Jeff Bailey : 12/15/2006 11:27:55 AM

Look's like StockCharts.com's server is down this morning. Can't access it to post some "pointy finger" charts for you.

Jeff Bailey : 12/15/2006 11:27:12 AM

BIOVAIL FALLS; FDA OKS GENERIC WELLBUTRIN

DJ- Biovail shares fall 2.5% as the FDA approves the first generic of Wellbutrin XL, a once-daily antidepressant that also happens to be Biovail's biggest source of revenue. The generic belongs to privately-held Anchen Pharmaceuticals.

BVF $20.42 -2.43%

Jeff Bailey : 12/15/2006 11:25:35 AM

BERNANKE SAYS US MUST SAVE MORE

DJ- Fed chairman says U.S. should reduce its deficit to counter global trade imbalances, while countries with excess savings, such as China, should boost domestic consumption. U.S. and China agree yuan needs to be more flexible.

Jeff Bailey : 12/15/2006 11:24:48 AM

FOREIGN BUYS OF US DEBT SURGE

DJ- Net foreign acquisition of U.S. securities with maturities of more than a year rises 26% on the month to $73.5 billion in October. Monthly net TIC flows of foreign capital increase 8% to $62.2 billion.

Jane Fox : 12/15/2006 11:23:11 AM

WASHINGTON (MarketWatch) -- The U.S. median consumer price index rose 0.2% in November, the smallest gain since January, the Cleveland Federal Reserve Bank reported Friday, based on Labor Department data. The median CPI is an alternative method of computing core inflation that does not automatically exclude food and energy prices, as the Labor Department's core CPI does. Earlier, the Labor Department said the CPI and the core CPI were unchanged in November. The median CPI had risen 0.3% or 0.4% in every month since January. The median CPI is up 3.7% in the past year, the biggest year-over-year gain since early 2002. The CPI is up 2% over the past year, while the core CPI is up 2.6%.

Jeff Bailey : 12/15/2006 11:23:00 AM

General Electric (GE) $37.13 +2.51% ...

Jeff Bailey : 12/15/2006 11:21:34 AM

11:00 Internals found at this Link

Marc Eckelberry : 12/15/2006 11:20:57 AM

SPX internal sectors not confirming. XLF (financials), XLK (techs), XLE (energy) all down.

Jane Fox : 12/15/2006 11:10:33 AM

These are telling me your highest probability of profit is from the long side. Link

Jeff Bailey : 12/15/2006 11:07:23 AM

11:00 Market Watch found at this Link

Jeff Bailey : 12/15/2006 11:02:46 AM

I had two long trade setups ready for this morning, but wanted a pullback. A DIA call and a YM long. Economic data put a hole in that didn't it?

Jane Fox : 12/15/2006 11:01:49 AM

Here is some good reading if you have nothing else to go. Link

Jeff Bailey : 12/15/2006 11:00:32 AM

YM 12,568 ... bugger looks like it wants to leverage itself off of WEEKLY R2 and there's quite a bit of room to 12,602 and DAILY R2.

Keene Little : 12/15/2006 11:00:22 AM

The DOW is relatively stronger this morning and keeps getting lifted slightly higher while ES and NQ drift more or less sideways. I have a potential upside Fib target for YM near 12580 to match the one for ES at 1445.50 so watch these levels for a potential high this morning. ES 1445.50 would of course be a test of the pre-market 1445 high.

Jeff Bailey : 12/15/2006 10:53:43 AM

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

Jeff Bailey : 12/15/2006 10:48:33 AM

My VIX.X 9.60 -3.71% call option trade is the first I've ever made. Don't ask me how/why, but the VIX-BV are $1.90 x $1.95.

Increase in IMPLIED volatility at an expiration is my best guess.

Jeff Bailey : 12/15/2006 10:43:25 AM

"Bad Tick" in the DIA $124.46 +0.18% ... to $126.45 (just a note when I post the 11:00 Market Watch so you don't think it traded there)

Jeff Bailey : 12/15/2006 10:38:51 AM

Also monitoring March Copper (hg07h) $3.02 -1.62% ... probes 6-month lows at $3.00.

Keene Little : 12/15/2006 10:24:14 AM

We had a pre-market move and it's been flat ever since. I sure hope this is not going to be true for the rest of the day. If I knew that in advance I'd close my broker window right now and find something else to do.

Jeff Bailey : 12/15/2006 10:18:30 AM

The U.S. Dollar Index (dxy) 83.68 did trade its MONTHLY Pivot (83.89)

StreetTracks Gold (GLD) $61.86 -0.40% ... undercutting its MONTHLY S1 ($61.91), which pretty much needs to hold support for gold bulls near-term. Otherwise, I see technical downside risk to $61.00-$61.85

Jane Fox : 12/15/2006 10:15:03 AM

Both ES and NQ have found suppport at their PDHs. Link

Marc Eckelberry : 12/15/2006 10:16:02 AM

The problem I have found with those VIX options is the exorbitant premiums. Break-even at expiration is a VIX at 14.50 in Feb for those 12.50 calls. Quite a jump from here, even if we correct hard. They are usually good for quick swing trades, definitely not buy and hold, unless you expect the VIX to be above 15 in a month. But they are a good gauge of forward fear.

Keene Little : 12/15/2006 10:07:23 AM

Interesting that the VIX is lower today than yesterday and yet the price of the same Feb 12.50 calls that Jeff recommended are now 1.95 x 2.00 vs. 1.75 x 1.80 yesterday. The VIX has dropped but the call premium is up. Somebody know something over there?

Jeff Bailey : 12/15/2006 10:03:14 AM

10:00 Market Watch found at this Link

Jane Fox : 12/15/2006 9:57:40 AM

And the beat goes on and on and on ....

Jane Fox : 12/15/2006 9:56:56 AM

...It is bonus week on Wall Street, which is coming off a record year thanks to outsize trading and investment-banking returns across the board. "This has been another excellent year on Wall Street with earnings and stock up significantly, and CEOs will be paid accordingly," says Glenn Schorr, a stock analyst at UBS AG.

Goldman kicked things off with a bang Tuesday when it weighed in with record profits and plans to pay its employees $16.5 billion in compensation, the most ever for a Wall Street firm. Yesterday, Lehman and Bear disclosed their annual compensation payouts will be $8.67 billion and $4.34 billion, respectively. This translates into $334,000 per employee at Lehman and $320,000 at Bear. At Goldman, if the money were distributed equally, each employee would make $622,000.

Jane Fox : 12/15/2006 9:56:04 AM

Dateline WSJ - Record profits at Wall Street's big brokerage firms are already translating into big paychecks for the Street's chief executives, with the first out of the gate, John Mack of Morgan Stanley, hauling in an estimated $41 million.

But Mr. Mack's mark, disclosed yesterday evening, is likely to be eclipsed soon by one or more of his rivals. Compensation for Lloyd Blankfein, chief executive of Goldman Sachs Group Inc., will exceed $50 million, believed to be a record for big-firm CEOs, according to a person familiar with the matter. Last year, as president of Goldman, Mr. Blankfein made $38 million.

Analysts say they expect a handful of other CEOs could hit $40 million to $50 million or higher, including James Cayne of Bear Stearns Cos., Stan O'Neal of Merrill Lynch & Co. and Richard Fuld of Lehman Brothers Holdings Inc. The three made $30.3 million, $35.5 million and $34.5 million, respectively, last year...

Jeff Bailey : 12/15/2006 9:52:36 AM

OPEC-10 Dec. Oil Supply Mostly Unchanged On Nov. - Petrologistics

DJ- Oil supplies in December from the Organization of Petroleum Exporting Countries are expected to be mostly unchanged on November, preliminary estimates from leading tanker tracker Petrologistics showed Friday.

According to early data from Petrologistics, the 10 members of OPEC subject to a quota supplied 27.3 million barrels a day in December, down 100,000 b/d on the previous month, but still 1 million b/d over the target the group set itself for November.

Jane Fox : 12/15/2006 9:51:23 AM

On a 1 minute chart I see both VIX and TRIN making new highs and the AD volume new lows this is bearish for the short term but the overall tone of the market is bullish. Will the bearishness overcome the bullishness? Right now I would say no.

Jane Fox : 12/15/2006 9:49:38 AM

VIX opened below its PDL but has climbed back into its PDR now. TRIN opened at 0.62 and has climbing back to 0.76.

Jane Fox : 12/15/2006 9:37:14 AM

WASHINGTON (MarketWatch) -- Capital flows to the U.S. climbed back in October as official institutions like central banks snapped up U.S. Treasury bonds and notes, the Treasury Department reported Friday.

Foreigner investors bought a net $62.2 billion in securities, the Treasury said, including short-term securities like Treasury bills. That's up from $57.8 billion in September. ,p> Net long-term capital inflows, meanwhile, grew to $82.3 billion in October.

Private investors bought slightly more long-term securities than in September. Overall, they bought $76.7 billion in October compared to $75.8 billion in September.

They snapped up $7.8 billion in Treasury bonds and notes in October, according to the data. In September, private foreign investors sold $7.9 billion worth of those securities.

Private investors also had a strong appetite for U.S. equities in October, buying $21.4 billion in equities. It's more than double the $9.2 billion they bought in September.

Central banks bought far more Treasury bonds and notes in October than in September, snapping up $18.5 billion in securities.

Jane Fox : 12/15/2006 9:36:13 AM

WASHINGTON (MarketWatch) -- U.S. industrial production rose by an overall 0.2% in November, as the auto sector showed signs of life after sharp declines in the past two months, the Federal Reserve said Friday.

The increase was greater than expected. Economists surveyed by MarketWatch had expected production would remain flat in November.

But some of the sense of strength in the report was mitigated by a downward revision to output in October. Output in October was revised to be flat, down from the initial estimate of a 0.2% gain.

Over the past year, industrial production has risen 3.8%.

Production of motor vehicles and parts rose a sharp 3.7% in November after sharp declines in the past two months. The production of motor vehicles had reached its lowest level in more than four and a half years in October, the Fed said.

Despite the jump in November, output of cars and parts is still 2.5% below its year-earlier levels, the Fed said.

Manufacturing output rose by 0.3% in November after a 0.5% drop in October

Marc Eckelberry : 12/15/2006 9:35:42 AM

With equity pc ratio at .44 yesterday, I expect a sell the news event at some point.

Keene Little : 12/15/2006 9:34:54 AM

From the November 28th low I've got several Fib projections off the wave pattern and it's interesting that I've got several degrees of the pattern all Fib'ing out to ES 1445 on the nose. That's where the spike up stopped on the post-CPI bounce. Coincidence? Could be but it has me wondering about the gap n crap possibility.

Jane Fox : 12/15/2006 9:32:49 AM

AD line is a healthy +708 and climbing. AD volume is climbing as well.

Marc Eckelberry : 12/15/2006 9:26:17 AM

As usual, economissts got it wrong.

Marc Eckelberry : 12/15/2006 9:23:43 AM

On the premise that someone knew this news ahead of time yesterday (which is why we had that big rally with no news to speak of)we could have seen the day highs, or close, on the overnight bounce.

Jane Fox : 12/15/2006 9:01:38 AM

I have not shown these charts for a while but I use them to help me trade Gold. I bailed on my long gold but these charts told me it was premature and sure enough it was. I am long Gold again. Link

Keene Little : 12/15/2006 9:00:44 AM

That was quite the spike up in equity futures on the CPI data and it's holding. Bonds liked it too--big jump in bond prices, drop in yields. The key will be what happens after the open. I have no reason to believe it will sell off since the market got what it wanted. Of course many times it gets what it wanted and then proceeds to sell off anyway (sell the news). A gap n crap this morning, while not expected, would be bearish for the day. In the meantime, up up and away.

Jane Fox : 12/15/2006 8:55:49 AM

Even though the $ has broken resistance Gold has not broken its support due to a strong Oil market. Don't you just love how Gold "knows" where its support is and is so willing to show it on the charts? Link

Jane Fox : 12/15/2006 8:52:30 AM

As you can see Gold broke its PDL and its PDH overnight. Gold is getting pushed and pulled from the relatively stronger $ and stronger Oil prices. One is pushing Gold down ($) and the other pushing Gold up (OIL). The result is Gold all over the map. Link

Jane Fox : 12/15/2006 8:48:31 AM

$ is ralling on the tame inflation data. If long gold watch it closely. Link

Jane Fox : 12/15/2006 8:44:44 AM

Hopefully no one tried shorting this market overnight. If so, you had your head handed to you. The report out at 8:30 was mostly neutral from my standpoint but obviously the market saw it altogether differently. Link

Jane Fox : 12/15/2006 8:40:16 AM

WASHINGTON (MarketWatch) -- U.S. consumer prices were unchanged in November, as lower energy and car prices offset increases in costs for homeownership and medical care, the Labor Department reported Friday.

Core prices - which exclude volatile food and energy prices - were also unchanged in November, the lowest core inflation since June 2005.

The consumer price index was much tamer than expected. Economists polled by MarketWatch expected 0.2% gains for both headline and core inflation.

The flat readings could encourage the Federal Reserve to begin to relax about inflation. Earlier in the week, the Federal Open Market Committee said it judged inflation risks to be its greatest concern even as it held interest rates steady at 5.25%.

Markets and most analysts expect the Fed to cut rates next year, figuring that worries about stalling growth will begin to outweigh the Fed's concerns about inflation.

Jeff Bailey : 12/15/2006 3:31:08 AM

Have you given any thought to the VIX.X and its wild action from 12/07/06 (big up to 12.68) and then the recent plunge?

Somebody was setting somebody up for the fall weren't they?

It is that kind of action that ALWAYS has a trader expecting ANYTHING and EVERYTHING into an expiration.

If you think this decline in the VIX is "bull complacency" you are DEAD WRONG. It was BEAR complacency and the NAKED Call seller got his/her head handed to them the last 5 sessions, especially if they were OVERLEVERAGED. Not only in PRICE action, but loss of time value and PREMIUM went "poof" real quick-like.

Jeff Bailey : 12/15/2006 3:23:25 AM

Hmmm... looking at the top 10 Dow components' price closes (IBM, BA, MO, MMM, XOM, AIG, JNJ, UTX, PG, CAT). Remember, the INDU/DIA is a PRICE WEIGHTED INDEX, so the larger the price of the stock, the MORE weight it carries and these would be the candidate stocks for institutional computers to push around to get the DIA to close where they want it to close.

IBM $95.36 is $0.36 above its $95 strike (thinking "pin" $95.00)

BA $89.93 might have $+1.07 in it (thinking "pin" $90.00)

MO $84.97 almost pinned at $85.00.

XOM $78.73 is upper-half ($77.50 being middle) of $75-$80 strikes.

Well, you get the picture.

The SCENARIO would be a DIA/SPY pin to expiration of $125.00 and $144.00

How does an institution get them there?

How can a trader stand to benefit?

We'll see if we can't find out tomorrow, but I've got a plan.

My QCharts' option montage is "blank" at this hour, but an options trader might want to look for a spec call play.

Now, I was questioning Keene on a previously mentioned SPY $143 Call play where the calls were trading $0.70, which he closed out on Friday for $0.70. $143.00 + 0.70 = $143.70.

Looks like that was still the RIGHT decision considering 5-days to expiration... IF the SPY only has $144 in it. But what IF those calls trade, say $0.20 tomorrow morning, say before 11:00 and leaves 4-hours and $143.63 to $144.13 upside? $143 + $0.20 = $143.20.

$143.63 - $143.20 = $0.43 and $144.00 - $143.20 = $0.80.

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