Option Investor
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Keene Little : 12/19/2006 1:16:15 AM

Just a quick note to tell you that I like your EW observations and more notably your call for a market top. Quick questions: (1) If we do roll over in earnest across the major averages, how long do you see the next leg down taking? (2) You spoke of taking long term put options. How far out do you typically like to buy the options (3 mths, 6 mths or 1 year?) if you see a six month 1st wave down unfolding? (3) Same question as above but assuming you see a 1 year 1st wave unfolding to the down side as part of a multiyear (2007-2011) selloff as Pretcher envisisons. In other words, talk about how you would play the various legs of the next move down using options. Thanks and keep up the good work.

These are great questions and before I answer let me state that there are as many ways to play this market as there are traders. I'll give an example and reasoning and you can use that fwiw in your own assessment of the market and how you'd like to play it. I'll stick with the SPX for analysis and numbers so as not to add too many elements.

As we approach the end of the month/year I obviously don't anticipate we'll see much of a decline before the new year. We could be in for a surprise move to the downside this month but if that were to happen then just change the approximate dates I'll use. The start of the decline should go relatively slowly since the first wave down will not be as strong or deep as the 3rd wave down. The first 5-wave move down, that could take about four months, would create a larger degree wave-(1) so I'll break it apart a little here.

For the first of the 5 waves down I'm anticipating that we might see a drop to SPX 1375 take about 3 weeks (15 trading days) and I'm using March puts for this play and I'll exit them on that kind of dip. We'll then get a bounce (wave-2) that might take a week or two and could retrace back up to 1410 before rolling back over.

The next leg down (wave-3) could go to about 1325 and take us into the end of February. That's too close to March and I like to leave at least a couple more months on an option play. I'd move out to April/May/June for that play and again look to cover when SPX looks to be finishing the 3rd wave down. After that we could anticipate a longer sideways correction before another small leg down into the April time frame as SPX perhaps finds a bottom around 1300 as it finishes the 5th wave (and finishing the larger degree first wave).

This is clearly speculation on my part but gives an idea of what I'm expecting to see. So if you didn't want to play those individual moves you might look at December 2007 puts and wait for that 5-wave move down to around 1300 in April before you cover and then play the big bounce into the summer. If you stay closer to the money when buying puts now you can consider perhaps the June-Sept 07 puts since you won't have to worry as much about time decay once your puts get deeper ITM.

Assuming we then get a rally into the summer, as the larger degree wave-(2), and it goes back up to around 1375 by the end of June that's when you'll want to get short for wave-(3) down. I anticipate that kind of move could take SPX down to about 1160 by October so Jan 08 LEAPs would be a good way to play that move. I might want to move even further out unless again you look closer at ITM on the puts so that you don't lose too much time premium while waiting for the move to play out.

That deep plunge would be followed by another larger sideways consolidation/rally into the end of the year and then wave-(5) down to about 1060 into the spring of 2008 which would then be followed by another big corrective rally into the summer of 2008. This whole scenario could take half the time I've laid out above but I would want to give myself more time rather than be disappointed I was right on the direction and wrong on the time, only to find out my put options expired before the move happened (not that that's ever happened to any of us).

If the moves happen much faster than described above then the worst that will happen is that you bought a lot more time than was necessary but so what. Options are already highly leveraged and paying more for an option 6 months out only to cash it in next month is not a big deal in my book. Buying an option one month out and having it expire on me, only to have the anticipated move happen the following month--that's a big deal to me.

Like I said, those are just a couple of ideas of how I'd look to play an anticipated decline in 2007 which I believe we'll have. Any rallies in 2007, as described above, will be playable but ones you'll want to short. We should be getting ready to enter bear market leg #2, which is very late in coming, and it should last well into 2008 and potentially well beyond that before we finally find a bottom (which I believe will be below the October 2002 low).

Jeff Bailey : 12/18/2006 11:08:58 PM

Late Friday evening, I had mentioned that I would review Market Monitor postings since September 1, 2006 and make a list of "bullish" and "bearish" scenarios that had been presented.

Well, it didn't take long before I realized what a "wall of worry" these markets have been climbing since September 1!

So, I thought to myself that it would be a waste of time, if not overly time consuming, to even try and review the bearish scenarios where the technicals confirmed any of the bearish scenarios, regardless of what major market index, or sector index I put to the challenge.

So, in tonight's Market Wrap, I took a different approach and instead of showing you just how the MARKET had been "ignoring" the bear case, I decided to try and find any signs that the MARKET(s) were listening, or starting to listen.

Thus the section ... Have bears cried "wolf" one-too-many times?

Keene Little : 12/18/2006 10:05:10 PM

Tuesday's pivot tables: Link and Link

OI Technical Staff : 12/18/2006 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.

Jeff Bailey : 12/18/2006 5:55:43 PM

Oracle (ORCL) $17.91 +1.30% ... marked lower at $17.39 on headline numbers.

DJ- Software company's 2Q profit increases to $967 million, or 18c a share, from $798 million, or 15c, a year earlier, as sales surge 26%, boosted by stronger demand for its business application software. Excluding certain one-time items, Oracle says it earned 22c a share, in line with Wall Street's expectations. Revenue climbs to $4.16 billion.

Jeff Bailey : 12/18/2006 5:51:16 PM

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

Jeff Bailey : 12/18/2006 5:35:26 PM

Closing Internals found at this Link

Jeff Bailey : 12/18/2006 5:08:31 PM

Closing U.S. Market Watch found at this Link

Keene Little : 12/18/2006 4:29:52 PM

We got a deeper pullback today than I expected in ES. Not so for YM which stayed near the flat line in its pullback, but ES leaves me with the impression it might pull back just a tad further before the potential rally leg takes hold. This 120-min chart shows the uptrend line from November 28th, currently near 1430, where ES could be heading for. Link

I think that uptrend line is important--we either had an over-throw above the wedge (see the light red line across the highs since October 26th) and a drop back inside the pattern today (a sell signal) or else the ascending wedge is still in play (using the heavier red line across the highs since December 16th). If ES bounces right away tomorrow and gets back above 1440 I think there's a good chance we'll see the next rally leg as depicted on the chart; upside projection is at 1449.

But if ES drops below 1430 and stays there then the rally potential is in trouble. It takes a break below the low on the 12th, so ES 1417, to put a nail in the rally coffin. These wedges are full of choppy price action and whipsaws, fitting for a top, so unfortunately I can't narrow down closer support or resistance yet. I would expect this week to be a battle between the bulls and bears so it warrants caution anyway.

Jane Fox : 12/18/2006 4:15:45 PM

Economic Reports for tomorrow include

8:30a.m. Nov Producer Price Index. Previous: -1.6%.

8:30a.m. Nov Producer Price Index, Ex-Food & Energy. Previous: +0.6%.

8:30a.m. Nov Housing Starts. Previous: -14.6%.

Jeff Bailey : 12/18/2006 4:03:56 PM

Key Interest Rates @ 04:00 PM EST Link

Jeff Bailey : 12/18/2006 3:58:53 PM

Red Hat (RHT) $18.00 +2.10% Link ... Trade at $18.00 gets stock's PnF chart back on a "buy signal" and negates the prior bearish vertical count to $1.00.

Bullish vertical count begins to $22.50.

Jeff Bailey : 12/18/2006 3:51:37 PM

U.S. Dollar Index (CEC:DXY) 03:00 PM EST closing tick was 83.98.

Daily Pivots for tomorrow are ... 83.77, 83.87, Piv= 84.05, 84.15, 84.33.

Keene Little : 12/18/2006 3:37:44 PM

Volume looks like it will come in on the light side today which is no surprise. I suspect we'll see light volume for the rest of the month. If the funds can hold this relatively close to the highs into January I'm sure there will be lots of high fives, not to mention bonus money, going around. After January there will be no incentive to hold the market up. In fact just the opposite--let it drop so stock can be bought back cheaper and set up another good year (or so they'll think whereas I believe we'll have a bad year for stocks and homes in 2007).

Keene Little : 12/18/2006 3:28:21 PM

There's even a difference between the VIX and VXO today. SPX is down 0.4% vs. OEX down a smaller 0.15% and the VXO is based on the OEX which is not as bearish today (even bigger caps than SPX). VIX is up 6.5% today while VXO is down 1%.

Keene Little : 12/18/2006 3:19:00 PM

Pretty amazing disparity between indices today. The DOW is just barely under water right now while SPX is down 5.7 points which would be equivalent to the DOW being down 57 instead of 7 points. SPX is down .4% while NDX (the tech big caps) is down 1.25% and RUT (small caps) is down 1.4%. Any question where people are running to hide today?

Jeff Bailey : 12/18/2006 3:17:44 PM

03:00 Internals found at this Link

Jeff Bailey : 12/18/2006 3:04:41 PM

03:00 Market Watch found at this Link

Jane Fox : 12/18/2006 3:01:22 PM

Not one TICK alert today.

Jane Fox : 12/18/2006 3:00:57 PM

AD line is now +1039!

Keene Little : 12/18/2006 2:59:30 PM

Certainly looks like a real selling program, across the indices, hit. Now it's not looking as bullish at the moment for another bounce. But it's still entirely possible that the pullback is part of the correction to the rally from December 12th. The drop is not impulsive yet and therefore I would be cautious about jumping on the short side, at least for anything other than a scalp play. I have potential support for ES at 1433 at a Fib projection for this leg down and then 1430 below that which is the uptrend line from December 1st.

Jeff Bailey : 12/18/2006 2:59:16 PM

CRB Index (CEC:CRY) 310.41 -0.94% ... (30-min. delayed) ... sits at its WEEKLY S1 (310.41) for second time today.

Jane Fox : 12/18/2006 2:57:19 PM

All markets are making new daily lows except YM. Never fool around when the AD volume and VIX are in sync. I did see once last week when they did not predict the correct direction but the odds are in your favor when you trade with these two in your corner.

Jeff Bailey : 12/18/2006 2:57:28 PM

QQQQ $43.96 -1.03% ... really got "whacked" from WEEKLY Pivot last 15-minutes.

Jeff Bailey : 12/18/2006 2:55:55 PM

Kinross Gold (KGC) $11.56 -2.19% ... 200-day SMA at $11.60. WEEKLY S1 ($11.45) has been holding to this point.

Jeff Bailey : 12/18/2006 2:54:19 PM

StreetTracks Gold (GLD) $61.04 +0.06% ... inches green. Trying to reclaim correlative 200-day and 50-day SMA's. Did "hold trend" from early October low to 10/24/06 pullback low.

Keene Little : 12/18/2006 2:46:44 PM

Is NQ coming back for a test of its broken downtrend line from November 24th? If so then support should be at about 1814, hitting it as I type. Link

Jeff Bailey : 12/18/2006 2:47:25 PM

Excellent comment from James Cramer regarding ... "don't trade a stock based on its multiple,"... as sometimes the multiple tells you where the stock is going.

One of the "bear cases" mentioned in September was the "market multiple" and gravitation to the mean. SPX has skyrocketed about 100 points since.

Jane Fox : 12/18/2006 2:40:42 PM

Jeff sorry but I have to comment on your 2:32 post. The $ has not risen at all this year but maybe I am reading your comment wrong. Link

Jeff Bailey : 12/18/2006 2:35:04 PM

Another area of "defensive action" ... tends to be LOWER Treasury YIELDs ...

Jeff Bailey : 12/18/2006 2:33:18 PM

What would the CRB Index (CEC:CRY) suggest about inflation, or NEED for rate hikes?

Answer (in my opinion) ... NO NEED.

Jeff Bailey : 12/18/2006 2:32:24 PM

In the scope of economic dynamics we've seen, why has the dollar tended to RISE this past year?

Anticipation of Fed rate hikes!

Jeff Bailey : 12/18/2006 2:31:25 PM

Yes .... I'm starting to think the same thing. The dollar.

Jeff Bailey : 12/18/2006 2:30:32 PM

What security often rises as a sign of "defensive action?"

Keene Little : 12/18/2006 2:30:30 PM

The bounce failed to make it up to the levels where we'd have two equal legs up in either ES or YM. ES looks very weak here and has me wondering if we're going to get a deeper pullback before seeing the potential for another rally leg. There enough of a discrepancy between the indices to have me questioning both directions at the moment. Good time to sit back and wait for some clarity.

Jeff Bailey : 12/18/2006 2:27:00 PM

04/28/06 to 05/12/06 Sector Bell Curve at this Link ... time just prior and beginning of this spring's/summer's decline.

Any "commodity" theme from the equity sectors?

Keene Little : 12/18/2006 2:18:10 PM

MER still pushing higher in its bounce.

Keene Little : 12/18/2006 2:07:43 PM

I keep talking about one more high for the short term pattern in order to finish the longer term rally and I had posted a chart of ES on Friday (4:37 PM) with my idea for that. This YM 60-min chart shows the same kind of thing with the idea that the current bounce this afternoon will lead to another pullback before heading higher. Here's how it might look (using the EW count and Fib projections off the wave pattern): Link

If we get another small pullback, perhaps to the uptrend line from December 12th near 12540 I'd watch for the setup to get long. Using some Fib projections and trend lines I see upside potential to 12659. I'd like to see this play out because it would be a great place to finish the rally and look for another attempt at a longer term short.

Keene Little : 12/18/2006 2:01:23 PM

If the current bounce will lead to another pullback before setting up the next rally leg watch for two equal legs up off this morning's low. That would be at YM 12571 and ES 1440.25. For YM that's back near today's high but not nearly so for ES.

Jeff Bailey : 12/18/2006 2:00:27 PM

Good gravy! ... the CRB Index plunged to a 6/13/06 relative low of 329.61.

SPX hit its June closing low of 1,223.69 on , on, on 6/13/06.

Jeff Bailey : 12/18/2006 1:58:03 PM

Hey! The CRB Index (CRY) 310.94 ... it reversed sharply from a, a, a, a ... high of 365.45 ... on 5/11/06.

See chart in today's MM at 12:30:09 PM EST.

Jeff Bailey : 12/18/2006 1:54:23 PM

May 01 to May 19, 2006; 3 Weekly Pivot Matrix found at this Link

Jeff Bailey : 12/18/2006 1:43:03 PM

I might be on to something here ...

Jeff Bailey : 12/18/2006 1:40:06 PM

Hey! It was on 05/10 and then 05/11/06 that the SPX began to suffer the steep decline to its June lows.

Jeff Bailey : 12/18/2006 1:37:19 PM

Just noticing that the U.S. Dollar Index (CEC:DXY) 84.11 +0.15% has been able to reclaim its 5/11-6/05 relative lows of ~83.90.

Jane Fox : 12/18/2006 1:34:01 PM

Even if the TRIN is bullish to neutral would you be long here? I wouldn't. Link

Jane Fox : 12/18/2006 1:32:34 PM

AD volume is making new daily lows and that is never a time to be long.

Jeff Bailey : 12/18/2006 1:29:41 PM

Last 3 WEEKLY Pivot Matrix found at this Link

Jane Fox : 12/18/2006 1:27:08 PM

AD line and VIX are telling you this is a get short and stay short kind of day but the TRIN is supporting that position. Although when the TRIN is neutral you can;t really use it much as a trading tool. Link

Jeff Bailey : 12/18/2006 1:21:32 PM

Last week, 10-year YIELD ($TNX.X) rose 3.3 bp as investors got a little less defensive and seemed to roll some cash into equities (SPX +1.2% on week). With dollar also rising last week, foreign capital may also have found its way into U.S. assets.

Jeff Bailey : 12/18/2006 1:18:41 PM

Treasuries little changed ... 10-year YIELD ($TNX.X) now up 0.4 bp at 4.601%.

Jeff Bailey : 12/18/2006 1:17:34 PM

01:05 Internals found at this Link

Keene Little : 12/18/2006 1:16:15 PM

For all the early strength in NQ as we started the morning it's notably weak now. The small caps (ER) are down the hardest and the DOW is holding up the best. If this doesn't look like defesive action I don't know what does. But it doesn't mean we've seen the highs for the market, or at least I haven't seen anything yet to tell me the top is in. I'm still thinking consolidation into tomorrow and then a push higher, probably more as a rotation into the big caps.

Jeff Bailey : 12/18/2006 1:07:47 PM

01:05 Market Watch found at this Link

Jane Fox : 12/18/2006 1:05:41 PM

WASHINGTON (MarketWatch) - U.S. home builders were a bit more pessimistic about the housing market in December, but were growing more hopeful that home sales could perk up in six months, the National Association of Home Builders reported Monday.

The NAHB/Wells Fargo seasonally adjusted housing market index fell to 32 in December from 33 in November. About a third of builders view the market as favorable. The index has been roughly flat for the past five months in a range between 30 and 33.

Economists expected the index to improve to 34 in December, according to a poll conducted by MarketWatch.

The index measures builder sentiment. A reading of 50 shows that half the builders surveyed think the market is good and half think it's poor.

The index had fallen to a decade-low of 30 in September, the sharpest decline in the index's 20-year history. The index was at 57 a year ago and peaked at 72 in June 2005.

Historically, the index has tracked well with single-family building permits. This year, the home builders' index is off more than the 31% drop in building permits.

Jeff Bailey : 12/18/2006 12:53:56 PM

NYSE: 4 iShare ETFs to Transfer to Arca from Amex.

Jeff Bailey : 12/18/2006 12:49:37 PM

I'd be a tempted long, but without TRIN, I'll stay on the sidelines.

Jeff Bailey : 12/18/2006 12:48:43 PM

YM 12,553 ... tries to reclaim MONTHLY 80.9% here after test of MONTHLY R1.

Jeff Bailey : 12/18/2006 12:46:56 PM

Brazil's Central Bank Buys Dollars At Spot Market Auction

DJ- Brazil's central bank bought U.S. dollars at auction Monday for BRL2.148 per dollar, the bank said.

The central bank didn't reveal the volume of dollars purchased.

Before the auction, at 1710 GMT, the real was trading at BRL2.148 per dollar. Following the auction, as of 1730 GMT, the real was trading at BRL2.149 per dollar.

Brazil's central bank has purchased dollars in daily auctions since October 2005 in an effort to rebuild the country's foreign reserves. The auctions were suspended temporarily in mid-May, but resumed in July.

As of Friday, Brazil's foreign reserves stood at $84.56 billion.

Jeff Bailey : 12/18/2006 12:43:25 PM

NYSE Group (NYX) $102.10 +4.16% ... jumps from $100 strike.

Jeff Bailey : 12/18/2006 12:42:54 PM

Kinross Gold (KGC) $11.47 -2.96% ... daily interval bar chart at this Link

Keene Little : 12/18/2006 12:42:15 PM

Not much to do but wait to see if the current bounce gets a little bigger. If you bought the dip use a new daily low for your stop. If we get a bounce back up near ES 1444 I'd look to take profits and look to get short for a quick ride back down. If that up-down pattern plays out from here then we should be set up, probably not until tomorrow, for another rally leg to finish the whole thing off.

Jeff Bailey : 12/18/2006 12:30:09 PM

CRB Index (CEC:CRY) 311.09 -0.71% ... Daily interval bar chart (same as Monday's Market Wrap) at this Link

With renewed dollar strength, commodities as a whole will be monitored closely. Many "gold miners" are sitting on similar trend as found in CRB, but as I've said over the years, the equities tend to lead the commodity direction.

Keene Little : 12/18/2006 12:13:27 PM

MER is starting to bounce back up and is not confirming the new daily lows in the DOW or SPX.

Keene Little : 12/18/2006 12:12:36 PM

The risk for a long trade here is that there's no real damage done to the bullish pattern, from an EW perspective, until ES drops below the 1430.50 high on December 13th so don't let a drop here go too much against you if you're trying the long side. Next Fib support below us is at 1433.

Keene Little : 12/18/2006 12:10:12 PM

ES is now tagging its uptrend line from December 12th, at 1436.75, so this should hold if we're not done making new highs.

Jeff Bailey : 12/18/2006 12:07:05 PM

Shaw Group (SGR) +11%; To Install Nuclear Reactors In China

Keene Little : 12/18/2006 12:03:27 PM

MER is not making new lows with the DOW or SPX so this is a good test to see if the new lows should be faded (bought). ES tagged support at 1437.50 and this is a good place to try a long for a bounce back up near today's high.

Keene Little : 12/18/2006 11:52:40 AM

Also the trend line along the highs since October 26th, which ES broke above on Thursday, is currently at 1437.50. If that can't hold as support now then we'd have a potential throw-over finish to the rally but I'm not quite ready to believe that yet.

Keene Little : 12/18/2006 11:50:18 AM

ES's uptrend line from December 12th is currently just below 1437 so if this drops a little lower than 1438 support I'd watch for the uptrend line to hold, or not.

Jeff Bailey : 12/18/2006 11:48:55 AM

Dollar Index (dxy) 84.15 +0.20% ... closed just above its MONTHLY Pivot on Friday and extends gains today.

Not looking bullish for the gold commodity, or KGC.

Dollar/gold traders that are BULLISH gold, would need DXY back below WEEKLY Pivot ... AND SOON!

Jeff Bailey : 12/18/2006 11:46:51 AM

Current OPEN MM Profiles found at this Link

Jeff Bailey : 12/18/2006 11:37:45 AM

Research In Motion Up: Strong 3Q Results Seen

DJ- Research In Motion Ltd. (RIMM), which is scheduled to report its third-quarter results on Thursday, is up 2.5% in Toronto, possibly spurred by analyst reports projecting results "well above expectations."

In a report Monday, Merrill Lynch analyst Vivek Arya reiterated a Buy rating and $165 target for RIM shares, citing the successful launch of Pearl at T-Mobile and the upgrade cycle of the 8700 handset at Verizon and Cingular.

Arya expects RIM third-quarter sales of $811 million, earnings of 93 cents a share, new subscriber additions of 800,000, and unit shipments of 1,760,000, in line with mean estimates for sales of $814 million, earnings of 94 cents a share, new subscriber additions of 800,000-820,000 and unit shipments of 1,780,000.

Arya expects Pearl's strength at Cingular to boost fourth-quarter results, with upside from the potential launch of new Blackberry Indigo and Crimson handsets that could extend RIM's momentum into 2007. The report anticipates fourth-quarter sales of $871 million, earnings of $1.00 a share and unit shipments of 1.9 million, ahead of mean expectations of sales of $853 million, earnings of 98 cents a share and shipments of 1,870,000.

The analyst's forecast of fourth-quarter subscriber additions is 816,000 versus a mean forecast of 916,000. Arya attributed the conservative forecast to strong competition to RIM's Pearl from Samsung's Blackjack and Palm's 680 handset at Cingular. Assuming RIM's achievement of 900,000 or more subscriber additions in the fourth quarter, Merrill projects added earnings of 4 to 6 cents a share for the quarter.

Merrill Lynch or one of its affiliates acts as a market maker for Research In Motion securities, and it or an affiliate has received compensation from the company for non-investment banking services or products within the past 12 months.

Research in Motion, Waterloo, Ont., makes the Blackberry e-mail device.

RIMM $137.88 +2.13% Link

Jeff Bailey : 12/18/2006 11:27:54 AM

GE $37.77 +1.09% and C $55.19 +2.08% ... hold #1 and #3 spots on today's most active list.

I can't remember the last last time two Dow components were in the top 5 on the same day.

Incredible appetite for equity exposure.

Jeff Bailey : 12/18/2006 11:19:15 AM

It has been a MEGA merger Monday today.

Jane Fox : 12/18/2006 11:18:39 AM

Here is my 1 minute TRIN and it is as neutral as it can get. Link

Jane Fox : 12/18/2006 11:17:02 AM

The VIX is consolidating at daily lows as well so the probability of lower lows is less than if the VIX were even mid range.

Jeff Bailey : 12/18/2006 11:16:16 AM

QCharts may have switched up TRIN's symbol too. They've been doing that on quite a few things lately.

Keene Little : 12/18/2006 11:15:47 AM

I'm not getting TRIN either. I am getting TRIN.NY (for the NYSE) and TRIN.NQ (techs) both of which have been on the rise since 10:00 AM which supports the price pullback. Watch ES 1438 area for support if this is going to lead to another bounce to stay within Friday's range.

Jane Fox : 12/18/2006 11:15:08 AM

This little consolidation at daily lows is suggesting we will see lower lows. So much for my bullish internals today.

Jeff Bailey : 12/18/2006 11:14:41 AM

Jane ... OK, I'm just not getting any feed for 12/18/06 and those that may review the U.S. Market Watch intraday, might have thought TRIN stuck at 0.95.

Jeff Bailey : 12/18/2006 11:13:08 AM

11:00 Internals found at this Link

Jane Fox : 12/18/2006 11:12:10 AM

Jeff the TRIN is neutral at 1.00 and has been moving in almost a straight line sideways all day.

Jeff Bailey : 12/18/2006 11:03:43 AM

11:00 Market Watch found at this Link

Note: I'm not getting a TRIN data feed so far this morning.

Jane Fox : 12/18/2006 10:56:50 AM

NEW YORK (MarketWatch) -- Isilon Systems rallied 78% in one of the year's strongest opens, tapping into Wall Street's new-found enthusiasm for technology IPOs as the hottest of six initial public offerings launching Friday. Isilon Systems (ISLN) IPO ranks as the third biggest opening day gainer of the year behind the 125% rise by the Nymex and the 100% jump by Chipotle Mexican Grill (CMG).

With 18 IPOs from major underwriters this week, the U.S. IPO market has turned in its busiest seven days in two years, said Richard Peterson of Thomson Financial.

The Santa Claus rally has extended into the new issues market as IPO bankers offer stocking stuffers to fund managers in buying mode for the end of the year.

Keene Little : 12/18/2006 10:53:57 AM

After a stronger showing pre-market and out of the gate NQ is now showing relative weakness in the pullback from this morning's highs. This tells me that they're using rallies in the techs to unload and roll over into the large caps. The relative weakness in ER (small caps) says the same thing.

This is all defensive as funds are preparing to get into the safety of more liquid stocks. That means people are looking less for additional gains and more for the safety of large numbers. When and if they have to bail they don't want to be in small caps and find a skinny little exit door to try to squeeze through if someone yells fire.

Jeff Bailey : 12/18/2006 10:41:32 AM

Caremark RX (CMX) $55.12 +9.56% Link ... CMX higher after rival Express Scripts (ESRX) $67.39 -1.85% Link launches takeover attempt for approximately $26 billion, roughly $5 billion more than CVS Corp's (CVX) $30.11 -1.34% Link proposal announced November 1.

bizjournals.com Story Link

Jane Fox : 12/18/2006 10:39:17 AM

These are bullish so I would be careful if short. Link

Keene Little : 12/18/2006 10:36:32 AM

The other possibility that I still see for today is an inside day--a trading range between Friday's high and low (forget about the DOW's quick spike to a new all-time high--that was done for the quick press release). A consolidation for a day or two before a final assuault on a new high would fit the rally pattern from December 12th nicely.

Jane Fox : 12/18/2006 10:35:55 AM

NEW YORK (MarketWatch) -- Strong Wall Street interest surrounds Melco PBL's $900 million initial public offering, expected to begin trading on Tuesday, according to IPO watchers. Melco PBL would cap a flurry of activity in the IPO market to close out 2006. It would be the sixth deal of the year to come in near or above $1 billion, after MasterCard Interational (MA) , SAIC Inc. (SAI) , Warner Chilcott (WCRX) , Hertz Global (HTZ) and Douglas Emmett (DEI).

Melco PBL plans to offer 53 million American depositary shares, priced in a proposed range of $16 to $18 each, for trading on the Nasdaq under the symbol MPEL.

Melco PBL is a joint venture between Lawrence Ho, son of Macau casino mogul Stanley Ho, and Australia's Publishing & Broadcasting Ltd. Melco PBL bought its license to build a Macau gambling house for $900 million from Steve Wynn (WYNN) .

Fund manager Renaissance Capital tapped the deal as its IPO of the week. IPO Boutique's Scott Sweet said he's "highly confident" that the IPO will price at the high end of its range or above and that the number of shares may be increased.

Keene Little : 12/18/2006 10:26:07 AM

If this morning's rally is the last leg up that I've been waiting for then it shouldn't be done quite yet. We should get a choppy correction to this morning's rally and then another push higher. After another push higher is when I'll be watching it closely for weakness to attempt a short play. In the meantime, assuming we'll get some kind of choppy pullback I'll watch it for an opportunity for a scalp long. I don't like it yet for a play either way.

Jeff Bailey : 12/18/2006 10:23:24 AM

Exxon/Mobil (XOM) $76.45 -1.09% ... downgraded at Friedman Billings to "Mkt. Perform" from "Outperform"

Note: Goldman Sachs downgraded XOM on 10/10/06 at $66.55 to "Neutral" from "Buy"

Jeff Bailey : 12/18/2006 10:20:33 AM

Schlumberger (SLB) $66.41 -1.68% ... downgraded at Goldman Sachs to "neutral" from "buy."

Jeff Bailey : 12/18/2006 10:16:51 AM

Dow Diamonds (DIA) $124.62 +0.37% Link ... new all-time high!

Jane Fox : 12/18/2006 10:04:51 AM

WASHINGTON (MarketWatch) -- The U.S. current account deficit widened to a record $225.6 billion in the third quarter, or 6.8% of gross domestic product, the Commerce Department reported Monday.

The growth in the deficit in the third quarter was accounted for by increases in the deficits on goods and income. The surplus on trade in services increased.

The increase almost exactly matched the $225.5 billion expected by economists polled by MarketWatch.

The current account, also know as the balance of payments, is the broadest measure of international flows of goods, services and capital in and out of the U.S. In essence, the current account measures how much Americans need to get in investment and lending from abroad to fund their consumption and investment.

Few economists believe a current account deficit of 6.8% of GDP is sustainable. Global economic policymakers have said the U.S. current account deficit (and corresponding surpluses in China and elsewhere) represent a major threat to global growth.

"There is a lot more improvement that is necessary before the vulnerability of the U.S. financial markets to foreign interests is materially improved," wrote Ray Stone, chief economist for Stone & McCarthy Research, in his note to clients.

Jane Fox : 12/18/2006 10:03:51 AM

All markets but ER are now testing their PDHs.

Jeff Bailey : 12/18/2006 10:02:38 AM

10:00 Market Watch found at this Link

Jane Fox : 12/18/2006 10:00:29 AM

The only market to not pop through its overnight high so far is ER.

Jeff Bailey : 12/18/2006 9:58:26 AM

VIX.X 10.43 +3.78% ... session lows.

Keene Little : 12/18/2006 9:57:16 AM

If this manages to push higher from here, I've got a few Fib projections pointing to 1445.50 that I had mentioned on Friday. That's the first level I'd watch for this to top out. If that level is broken then the weekly R1 and and monthly R2 at 1450 is the next upside target.

Jeff Bailey : 12/18/2006 9:53:23 AM

VIX.X 10.55 +4.97% ... 60-minute interval chart with updated WEEKLY Pivot Levels at this Link

Jane Fox : 12/18/2006 9:52:41 AM

I agree with Keene that you should be watching the overnight highs for resistance. Opps there goes ES's overnight high.

Jane Fox : 12/18/2006 9:51:42 AM

WE have the VIX making new daily lows with the AD volume making new daily highs. THis is bullish but then the TRIN is making new daily highs and that is bearish.

Keene Little : 12/18/2006 9:47:06 AM

We got the early push down, but not enough to close the gaps, and now bouncing back up. Watch the overnight highs if they're tested early. It's possible we're just going to chop a little longer inside Friday's range.

Jane Fox : 12/18/2006 9:41:30 AM

I was going to post this article but it is rather long although worth reading. Link

Jeff Bailey : 12/18/2006 9:41:01 AM

Dow Diamonds (DIA) $124.28 +0.10% ... 60-minute interval chart with updated WEEKLY Pivot levels at this Link

Jane Fox : 12/18/2006 9:37:41 AM

VIX opens bearish and well above it PDR but the TRIN opens neutral and within its PDR

Jane Fox : 12/18/2006 9:36:46 AM

Ad line is +314 but falling. AD volume is above 0 but falling as well. No one has the ball this morning.

Jane Fox : 12/18/2006 9:35:52 AM

Gold plunges below its PDL and overnight low.

Jeff Bailey : 12/18/2006 9:31:50 AM

Weekly/Monthly Index Pivot Matrix found at this Link

Keene Little : 12/18/2006 9:16:23 AM

Equity futures had a bullish overnight session, ramping up as Europe opened for trading but then flattened out. NQ is up much stronger relative to the others this morning but I haven't seen any news yet to explain that one. Assuming we see a pullback to close this morning's gaps that should hold the market up as it pushes to new highs, if there's another leg up needed to finish the rally leg from December 12th. The short term pattern would look best with another push higher, perhaps another DOW 100 points from Friday's close, but the longer term pattern says be very careful now about the long side.

Jane Fox : 12/18/2006 9:05:21 AM

Gold tested its PDL overnight and is suggesting that lower lows may be waiting right around the corner. This market closed below its support on Friday and I have stepped aside for now.

Oil on the other hand tagged its PDH overnight but then made a new overnight low so I am not sure it will make a higher high during the intraday session.

Natural Gas opened at its PDL and was not able to get back to retest those lows.

On Friday Tbonds had a very bullish start but as you can see they retraced the entire rally and the overnight session did not gain any of it back. Link

Jane Fox : 12/18/2006 9:03:13 AM

ER and NQ were the strongest markets overnight and are maybe starting a game of catch-up for they have been the weaker markets; both ES and YM made new yearly highs last week whereas ER and NQ did not. Link

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