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Keene Little : 12/19/2006 11:29:35 PM

Wednesday's pivot tables: Link and Link

OI Technical Staff : 12/19/2006 9:59:59 PM

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Jeff Bailey : 12/19/2006 7:46:58 PM

YM Pivots for tomorrow at this Link ... We lose the recent DAILY R2 correlations and YM sure looks like it at least has a WEEKLY R1 in it after today.

Jeff Bailey : 12/19/2006 7:36:18 PM

Daily/Weekly/Monthly Index Pivot Matrix found at this Link

Jeff Bailey : 12/19/2006 7:08:36 PM

It looks like it is "all cash" deal.

Jeff Bailey : 12/19/2006 7:07:55 PM

Redback ... Press Release Link

Jeff Bailey : 12/19/2006 7:06:02 PM

Can't see if it is "all cash" or stock/cash...

Jeff Bailey : 12/19/2006 7:04:51 PM

Alert! Redback Networks (RBAK) $21.17 +2.17% ... to be acquired by Ericsson for $25.00/share.

Jeff Bailey : 12/19/2006 6:44:16 PM

US:China Talks Ease Oil Reserve Concerns, But Others Remain

DJ- A recent energy dialogue in Beijing has left U.S. officials more confident that China and other Asian nations won't use their oil stockpiles to manipulate prices, a Department of Energy official said Tuesday.

Karen Harbert, assistant secretary of energy for policy and international affairs, said energy ministers from the U.S., China, Japan, South Korea and India last week signed a communique that signals China's willingness to only tap into their strategic oil reserves for supply disruptions. The officials of the five large energy-consuming nations met as part of a five-party ministerial dialogue.

U.S. officials had been particularly concerned that China, which is in the early stages of developing a strategic oil reserve, would use the supply in times of soaring oil prices.

But China rejected that idea at the meeting, Harbert said.

"They are embracing the more market-based use of a strategic oil reserve which I think is very good news - very good news for the market," she said. "It shows they are willing to integrate themselves more fully into the global energy market."

She added that she anticipates that Chinese officials will visit the U.S. strategic petroleum reserve system as they look to increase capacity through an underground system.

Still, Harbert noted that U.S. and Chinese officials left the dialogue with very different views about energy security.

While the U.S. has relied on the market for energy supplies and imports, China and other developing countries are seeking to purchase assets in energy-rich countries.

"India and China have been on a very aggressive pursuit of resources," she said. "They're not going to be able to own all of the resources they need."

Meanwhile, Harbert defended the DOE's endorsement of a memorandum of understanding that will pave way for Westinghouse Electric Co. to construct four civilian nuclear power plants in China.

According to a recent New York Times article, a commissioner of the U.S.-China Economic and Security Review Commission that reviews bilateral relations has voiced concern that the Pittsburgh-based company, which was recently bought by Japan's Toshiba Corp. (6502.TO) is transferring technology to China in a way that would limit long-term benefits to the U.S.

But Harbert disagreed.

"This is not just a transfer of technology; it's a commercial transaction," she said. "This is not a giveaway."

She noted that China plans to build 40 new nuclear plants over the next 15 to 20 years and said it's a positive step that China would decide to start off that effort with a the AP1000 reactor technology, which is proliferation resistant.

"It's a tremendous step forward for them to elect this technology," she said.

Jeff Bailey : 12/19/2006 6:40:35 PM

President Bush Signs Bill to Expand AIDS Treatment DJ (portion)- AIDS Healthcare Foundation (AHF), the largest AIDS healthcare, prevention and education provider in the United States which operates free AIDS treatment clinics in the US, Africa, Latin America/Caribbean and Asia, including 14 healthcare centers in California and Florida, applauded and thanked President Bush today for signing the Ryan White CARE Act (RWCA, or the CARE Act), the federal law that provides the primary source of funding for AIDS care and services nationwide. The bill is a compromise version approved by both houses of Congress as the 109th Congress drew to a close on December 9th. At that time, President Bush said, "This legislation focuses on life-saving and life-extending services and increased accountability, and will provide more flexibility to the Secretary of Health and Human Services to direct funding to areas of greatest need. The Ryan White Care Act demonstrates the compassionate and generous spirit of America, and I look forward to signing this important legislation into law." The updated CARE Act, which Bush signed in a White House ceremony earlier today, now addresses several key lawmakers' concerns about the equitable distribution of federal AIDS funds across the country and also heads off the potential loss of millions in AIDS funding to certain hard-hit urban areas.

"We thank President Bush for swiftly signing this lifesaving AIDS care bill into law," said Michael Weinstein, President of the AIDS Healthcare Foundation. "This updated and reauthorized version of the Ryan White CARE Act will dramatically increase the opportunities for people living with HIV/AIDS throughout the U.S. to obtain medical care and get on lifesaving antiretroviral drug treatments. We applaud the passage of a bill that now prioritizes medical care over bureaucracy, and urge the Health Resources and Services Administration to quickly begin to act in accordance with the parameters of the new law."

The bill -- which was first enacted in 1990 and most recently was set for reauthorization in September 2005 -- had languished since September 2006 when Congress adjourned in the fall without the Senate passing a measure to reauthorize the CARE Act. At that time, several Senators blocked consideration of the House-approved bill over disagreements over the distribution and reapportionment of funds among urban and rural areas affected by the disease, and in particular, the potential loss of millions of dollars in HIV/AIDS funding by urban centers in New York, California, New Jersey and Illinois that have been particularly hard-hit by the epidemic.

Jeff Bailey : 12/19/2006 6:32:30 PM

Australian Leading Economic Index Up 5.8% in October

DJ- A leading index of the Australian economy grew at an annualized rate of 5.8% in October, unchanged from September, the compilers of the gauge said Wednesday.

The index of where the economy is headed in the next three to nine months is compiled monthly by Westpac Banking Corp. and Melbourne University's Institute of Applied Economic & Social Research.

Westpac Chief Economist Bill Evans said the growth rate of the leading index has been holding around a steady 2 percentage points above the trend growth rate for the past four months.

"That consistent outperformance is pointing to strong growth prospects for the economy over the next three to nine months," Evans said in a statement.

Such growth prospects will be marked by steady growth in consumer spending, some slowing in housing following another rate increase early in 2007, stable business investment and strong government spending, he said.

Most importantly, the strong growth prospects will be marked by a sharp pick-up in export growth "as the benefits from the investment boom in mining really start to pay off," Evans said.

The coincident index, which is a broad measure of current economic activity, rose 0.2% in October from September for an annualized growth rate of 3.6%, the compilers said.

A decline in Australia's unemployment rate and stronger growth in industrial production have brought about a recovery in the annualized growth rate of the coincident index in recent months, which is now just about the trend rate of 3.3%.

Jeff Bailey : 12/19/2006 6:27:26 PM

Iran Asks UN Council To Condemn Israel Nuclear Arms Development

Jeff Bailey : 12/19/2006 6:20:20 PM

Hydril (HYDL) $73.26 +2.79% Link ... surging to $79.80 extended after raising guidance.

DJ- Hydril (Nasdaq:HYDL) expects its fourth quarter 2006 earnings to be approximately or exceed $1.05 per diluted share, which is above previous expectations, primarily due to improved premium connection segment results.

Operating income for the premium connection segment is now expected to strengthen above the third quarter due to higher revenue for international markets, and manufacturing efficiency improvements in both domestic and international plants are expected to increase the segment's operating margin.

Operating income for the pressure control segment is anticipated to remain on the increasing trend of the past several quarters, as previously expected. Capital equipment revenue is expected to be higher than the third quarter as a result of progress made on deepwater blowout prevention equipment projects in backlog. Aftermarket revenue is expected to remain on the longer-term gradually increasing trend of the past several quarters.

Management will discuss the company's financial results for the fourth quarter and year-ending 2006 in a conference call tentatively scheduled for February 1, 2007.

Hydril, headquartered in Houston, Texas, is engaged worldwide in engineering, manufacturing and marketing premium connection and pressure control products used for oil and gas drilling and production.

Jeff Bailey : 12/19/2006 6:07:54 PM

Moodys Sees Thai Credit Fundamentals Unaffected

DJ- Moody's Investors Service said that the Bank of Thailand's (BOT) abortive attempt to introduce controls on non-trade-related short-term capital inflows and the resulting turbulence in the country's equity market do not signify deterioration in Thailand's credit fundamentals.

"However, the authorities' quick reversal and scaling back of the controversial measures does raise concerns about the consistency and soundness of current policies over the long run," said Moody's Vice President Thomas Byrne, "although currently it does not seem that the authorities are about to adopt systematic protectionist and inward-looking policies which would adversely affect Thailand's economic competitiveness and credit fundamentals."

He said that the government of Thailand's Baa1 foreign and local currency bond ratings and its A3 foreign currency country ceiling have been supported by liberalization measures and sound fiscal, monetary and exchange rate polices since the 1997 financial crisis that have helped produce overall macroeconomic stability with annual real GDP growth trending between 5 and 6%.

"The sharp reduction in external debt and substantial accumulation of official foreign exchange reserves also reflects the success of Thai policies," said Byrne. "Sizable current account surpluses, until last year, coupled with increasingly large foreign direct investment inflows have been the main reason for the build-up in official reserves since the '97 crisis to almost $65 billion in early December, a level that exceeds the country's total stock of external debt."

He said the Bank of Thailand's abortive attempt on December 18 to regulate speculative inflows was in reaction to the rise in portfolio and other short-term inflows since 2005 and especially in recent months. However, the measures had the unintended consequence of precipitating, rather than stabilizing, volatility in short-term capital flows

In contrast, concerns that the year-to-date 15% appreciation of the baht against the dollar would erode export competitiveness are not readily evident. Thai exports grew 17% in the first 10 months of 2006 compared with the same period in 2005, noted the analyst. This may, nevertheless, have been a distant concern.

"The BOT may have rejected orthodox options as unappealing, as the recent focus of policy has been focused on restraining inflationary pressures, and, therefore, the Bank probably did not opt to lower interest rates in an attempt to discourage capital inflows," said Byrne. "Concerns about the costs of sterilizing large capital inflows and complications for monetary policy may have been a contributing factor to take the alternative, more drastic action."

Although the massive sell-off in the Thai stock exchange index on Oct. 19 was the steepest since the financial crisis of almost a decade ago, he said, economic conditions have nothing in common with that period.

"While Thailand's economic fundamentals and overall policy capabilities are much improved, we believe the introduction of burdensome regulations affecting investment or prolonged enforcement of capital controls would, over time, introduce distortions and cloud the overall investment climate of a country at Thailand's level of development," said Byrne.

Jeff Bailey : 12/19/2006 5:26:48 PM

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

RHT hasn't had a "down day" since moving over to the NYSE. Earnings on Thursday.

Jeff Bailey : 12/19/2006 5:11:13 PM

Closing Internals found at this Link

Jeff Bailey : 12/19/2006 4:47:42 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 12/19/2006 4:38:15 PM

That guy on CNBC that was talking about Home Depot's (HD) $39.64 -0.80% Link earnings does make some good points. However, my "consumer experience" there has not been all that great in recent months. Some very good employees, some that aren't so good.

P/E ratio is 13.6 while EPS growth rate faster at 19.89, with current EPS of $2.92, so based on that model of valuation, stock "should be" trading at least ($2.92 x 19.89 = $58.07)

Keene Little : 12/19/2006 4:29:09 PM

Interesting too that the Fib projection for a new high tomorrow, if that's what we're going to get, is at 1444.25 which is last week's high (followed by a test of it at 1444). Triple-top failure? Wouldn't surprise me in the least. But first the bulls will need to show their stuff early tomorrow.

Keene Little : 12/19/2006 4:22:37 PM

Here's the other reason I said tomorrow is an important test. As per the ES 120-min chart that I just showed (3:36) I had pointed to price stalling this afternoon at the trend line along the highs from October 26th (I had said from November 28th but it's actually from October so even more important, potentially). A closer view of today's price action on this ES 5-min chart shows the bearish wave count for today. Link

If today's bounce was just an a-b-c bounce to correct the decline from last week's high, then we completed it this afternoon. Today actually had a clean EW pattern and it might have to do with the Boyz and their program trading taking a rest today. I show an A-B-C bounce and wave-C clearly shows a 5-wave count. This EW count suggests a continuation of the decline tomorrow.

But the bullish count here is a 1-2-3 instead of A-B-C. The bullish count says the late-day pullback is wave-4 and tomorrow we'll get wave-5 to a new high. The typical retracement for a 4th wave is 38% of wave-3 and that's exactly where ES just closed--1436.25. If we get wave-5 up tomorrow and it equals wave-1 then we get an upside projection at 1444.25 which is where I'd look to get short.

BIG test tomorrow and we should get some answers early in the morning. A bounce followed by a new move to below 1436 and it'll look bearish. A bounce to a new high and it will look like the "one more new high" is in play.

Jeff Bailey : 12/19/2006 4:16:34 PM

Hey! Where's my "friend" on the PACX and his/her offer at $12.11 on KGC?

Jeff Bailey : 12/19/2006 4:13:16 PM

VIX.X 10.27 -3.11% ... remember this and this morning's "spike" to 11.31. It trades 12.50 and they're gone (those VIX-BV)

Jeff Bailey : 12/19/2006 4:06:56 PM

US Treasury / China

DJ- The U.S. Treasury Department on Tuesday again declined to designate China as guilty of currency manipulation in a report, noting the government in Beijing is moving steadily, though slowly, toward a flexible foreign exchange regime.

"The Department of Treasury concluded that no major trading partner of the U.S. met the technical requirements for designation," according to the closely watched and overdue report to Congress on international exchange rate policies during the first half of 2006.

Treasury outlined steps China is taking to loosen restrictions on capital moving in and out of the country and develop new financial instruments, such as currency futures, to prepare for a freely floating currency. In recent months, the government has allowed the value of the Chinese yuan to fluctuate more and the pace of appreciation has picked up. This progress made it difficult to say that China is managing its currency regime with the intent of gaining a trade advantage, a senior Treasury official told reporters on condition of anonymity.

Nonetheless, China is moving too cautiously and the pace of reforms are too slow, Treasury said.

"China's cautious approach to exchange rate reform continues to exacerbate distortions in the domestic economy and impede adjustment of international imbalances," Treasury said. "Clamping down on exchange rate fluctuations has increased pressures in other parts of the economy."

Treasury's decision, originally due Oct. 15, was widely expected. The department has refused to call China a currency manipulator in recent reports. And since the last report, released in May, China has allowed the yuan to appreciate more rapidly. The yuan strengthened 0.5% against the U.S. dollar in the second half of 2005 and another 1.0% in the first half 2006. Since China abandoned the dollar peg in July 2005, the yuan has risen just under 6.0%.

This is far too little, say U.S. manufacturers and their representatives in Congress, who argue the yuan is undervalued by as much as 40%. Indeed, China's central bank continues to accumulate massive foreign exchange reserves as a result of currency market intervention to prevent faster yuan appreciation.

Treasury will be under fire from those critics, who say the Bush administration hasn't been tough enough on China, when Congress returns for a new session in January. They got a boost last week when Federal Reserve Board Chairman Ben Bernanke, in the prepared text of a speech, called the undervalued yuan an export "subsidy."

Members from both the House and the Senate are working on legislation to overhaul the foreign exchange reporting requirement and develop new laws, mostly directed at China, to pressure countries that limit currency appreciation. A measure backed by Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa, would target currency "misalignment" rather than "manipulation," taking the question of intent out of consideration of whether Treasury should call out a country for problematic currency policy.

Treasury officials have said repeatedly that they believe diplomacy will be far more effective in getting China to reform than trade sanctions. Last week, U.S. Treasury Secretary Henry Paulson led a delegation including almost half of President George W. Bush's cabinet for talks with senior Chinese officials on economic relations between the two countries.

The meeting yielded some modest agreements, such as for sharing environmental and energy technology and pledges to work on an agreement protecting investment flows. At the close of the meeting, Paulson said the currency issue will remain "at the core" of U.S.-China engagement.

In the report released Tuesday, Treasury noted China's average monthly accumulation of foreign exchange reserves was $20.4 billion in the first half this year. That measure fell to $15.6 billion in the third quarter, coinciding with a pick-up in the pace of yuan appreciation.

The burden of intervention on the central bank has hindered its ability to control interest rates and inflation, Treasury said. It has also impeded rebalancing of Chinese growth away from investment and exports in favor of more consumption, a stated goal of the Chinese government.

For its part, the U.S. should help reduce global trade imbalances, which economists warn could spark financial market instability, by encouraging its citizens to save more and by cutting budget deficits.

Turning to other trading partners, Treasury said tepid economic growth in Europe and Japan has contributed to global trade imbalances.

"Europe and Japan each need to achieve higher rates of growth of domestic demand on a sustained basis," Treasury said, noting that it is uncertain whether Europe's brighter economic outlook will last. Growth in Japan is already decelerating from last year's recovery, Treasury said.

Most important U.S. trading partners have floating currency regimes in place. Japan, whose trade-weighted yen is at its weakest level in two decades, hasn't intervened in currency markets since March 2004.

Malaysia - noted in previous Treasury reports for its large and growing current account surplus - like other oil-exporting countries would benefit from more currency flexibility, Treasury said.

Trade surpluses among major oil exporters are now outpacing those of Southeast Asia's developing economies, inflated by higher oil prices. Russia's current account surplus totaled $56.5 billion in the first half 2006, or equal to just over 11% of gross domestic product. Russia's central bank intervenes to manage the pace of ruble appreciation against the dollar, 6% in the first half 2006.

Saudi Arabia, like other Gulf countries, pegs its currency to the U.S. dollar. Between 2004 and 2006, Saudi's oil revenue almost doubled to just under $200 billion. A portion of this money returns to the U.S. for investment, raising the U.S. capital account surplus, a mirror image of the current account deficit.

Treasury said the oil producers could help sustain global economic growth and reduce global trade imbalances by investing more in oil production capacity, investing more in their economies, and moving to a more flexible currency.

Jeff Bailey : 12/19/2006 4:03:23 PM

Treasury

China Moving To Flexible Yuan But Too Slowly

No Major Trade Partner Guilty Of FX Manipulation

China Should Rely More On Consumption For Growth

China Is Gradually Liberalizing Financial System

Europe, Japan Need Higher, Sustained Econ Growth

Oil-Exporting Countries Need More Flexible Forex

US Should Increase Savings; Cut Budget Deficits

Keene Little : 12/19/2006 4:00:20 PM

The wave pattern for the DOW is just as ugly as SPX's but I can actually squeeze an impulsive count out of the rally from November 28th. And within its last wave-5, which is the move up from December 12th, and is itself a 5-wave move, the very last 5th wave would equal the first wave at 12512.7 which is up against an intersection of trend lines tomorrow. Link

As I label on the chart, one of those trend lines is the one from July and is the one that I keep showing on the daily chart where price can't make it back above the line (except for brief spurts). This one has some very interesting possibilities for tomorrow and I'll be watching for price failure at that 12513 area, assuming we get there.

Jeff Bailey : 12/19/2006 3:55:42 PM

C'mon ... you HAVE to smile at least once a day.

Jeff Bailey : 12/19/2006 3:54:54 PM

I don't dare say anything about that chart ...

Jeff Bailey : 12/19/2006 3:54:05 PM

Rick's Cabaret Calls Opening of Its Newest Club Onyx in Charlotte a "Grand Sucess"

RICK $5.41 -4.24% Link ...

Jane Fox : 12/19/2006 3:50:11 PM

No significant economic reports out tomorrow.

Jeff Bailey : 12/19/2006 3:49:47 PM

Dollar Index weakness today a bit surprising to me, that is.... in the context that today's economic data was "inflationary." I'd have thought dollar strength with buyers bidding the dollar up .... IF the MARKET was thinking a Fed hike in reaction to the data.

Jeff Bailey : 12/19/2006 3:46:43 PM

And with the RUT.X, I like to throw in the 'junk bond' PHF $9.85 +0.40% ... nothing major weak with the PHF, but I'd say about $0.075 weaker than a small cap bull would like.

Jeff Bailey : 12/19/2006 3:44:39 PM

Russell 2000 (RUT.X) 781.87 -0.01% .... right AT its prior all-time high close from 05/05/06.

You know what I'm benchmarking here right?

Yep ... RUT.X is about 50/50 NYSE and NASDAQ stocks.

Keene Little : 12/19/2006 3:36:26 PM

I agree with Jeff--big test tomorrow. This ES 120-min chart is an update to the one I showed on Friday with the projection for a new high (this chart matches the one I just showed for SPX at 2:13) and it points to ES 1450 area for a potential high for this leg up. But if the bears are to regain control, this is the place they'll need to step back in.

The trend line along the highs from November 28th (light red line on the chart), which ES jumped above on December 14th and then fell back below (throw-over?) yesterday, is currently at 1438.50. The question here, as I look at this chart, is whether today's bounce is to resistance for a kiss goodbye. Link

Jeff Bailey : 12/19/2006 3:34:21 PM

Ford Shares Up on Upgrade ... AP Story Link

This may be juuuust enough to provide some very bullish dynamics for a January tax-loss bounce candidate. Just enough uncertainty to keep sellers off early next next. The "best time" to put on a tax-loss bounce trade is 3 or 4 days until the end of the trade calendar, which would be Tuesday 12/26/06. (trade date + 3 for settlement)

Jeff Bailey : 12/19/2006 3:23:44 PM

Tomorrow is going to be a big test for BEARS in my opinion.

Pattern has been for NASDAQ Nh/Nl to revert and snap back after inverting. Last day we saw inversion was 11/2/06 at 52:65.

COMPX closed 2,334 that day. QQQQ closed $42.04

Keene Little : 12/19/2006 3:15:54 PM

The short term pattern looks ready for a small consolidation before pressing higher again so it would look like a consolidation at the highs before making a new high. But the pattern would be set up for a brief new high tomorrow and then failure, in other words a bull trap. We'll see. First thing we need to see is a consolidation into the close.

Keene Little : 12/19/2006 3:13:48 PM

YM is about to test last week's highs at 12577 and 12579.

Jeff Bailey : 12/19/2006 3:13:26 PM

This morning, prior to putting on the YM short, SPX NH/NL was 8:1 and I thought to myself "we're going to stay right there, maybe 15:1 to the close and when YM breaks below its WEEKLY Pivot, we'll have a nice YM short on our hands.

SPX NH/NL now 21:2 and bulls have a nice squeeeze going to the close.

Jeff Bailey : 12/19/2006 3:11:01 PM

03:00 Internals found at this Link

Jeff Bailey : 12/19/2006 3:02:53 PM

03:00 Market Watch found at this Link

Jeff Bailey : 12/19/2006 2:59:32 PM

NYSE a/d 1,668:1587

Jeff Bailey : 12/19/2006 2:57:48 PM

Oooowow! ... YM 12,551

Keene Little : 12/19/2006 2:20:42 PM

Having been through that whole explanation for why we can expect a new high, if we're Not going to press to a new high then the current bounce will be a good time to get short. Two equal legs up off this morning's low is at ES 1437.50 which was just tagged. That's also a 62% retracement of the drop from last week's high. If you like the downside potential then here's where you want to get short.

Keene Little : 12/19/2006 2:13:38 PM

The rally from the beginning of November has been uglier than sin. It's been choppy and full of corrective 3-wave moves. This has made counting it extremely difficult and this market remains one of the most challenging I've seen in a long time for using EW analysis. That's not an excuse for why I'm constantly changing wave counts, just a reason. At any rate, considering the possibility for NYSE to give us a minor new high before completing its rally I've also got a wave count for SPX supporting the same idea. Link

In the move up from November each move up is only 3 waves before we got a larger correction. This tells me we're likely forming an ascending wedge (all triangles are made up of 5 waves each being a 3-wave move (or more complex) and not a 5-wave move. So when you look at the SPX 120-min chart you'll see a bunch of a-b-c moves. The move up from December 12th still needs wave-c of 5 and that's the move that should give us a minor new high and the one that completes THE rally.

I show an upside Fib projection at 1441.76 but that's a limit not a target. Based on the internal wave pattern and Fib relationships (wave-3 can't be the shortest), the 5th wave can not exceed that Fib projection (otherwise something else is happening). So, assuming we get a push back towards the highs, I'll be watching for a retest of the high (1431.81) up to that 1441 level for an opportunity to get short for a longer term play. Wave-c up from this morning's low (if that's what we're going to get) will be a 5-wave move so that should help me zero in on an upside target as the move progresses.

Jane Fox : 12/19/2006 2:07:52 PM

WE just had our first +800 TICK reading in 3 days. Link

Jeff Bailey : 12/19/2006 1:49:25 PM

Ugh! ... NYSE a/d 1,450:1,789

YM 12,520

Keene Little : 12/19/2006 1:49:09 PM

Jeff made an interesting suggestion on analyzing other kinds of charts using EW analysis so I've been looking over a couple of different ones. It looks like P&F charts are not good because of the removal of the time component. I've noticed in the past a similar EW pattern in other indicators though. I've even shown it on things like the VIX. Looking at the NYSE Summation Index I notice a close correlation to the wave count I've shown recently for the NYSE (Sunday, 12/17/06, 10:43 PM). This is the NYSE McClellan Oscillator chart from stockcharts.com: Link

The price chart at the top has my latest wave count and calls the top of the rally potentially here or possibly with a minor new high yet to come. The Summation Index chart shows the wave count which interestingly is a little clearer on this pattern than on the price pattern. The move up from June counts cleanly to the completion of a 5-wave move.

My guess that we could use a minor new high for this rally is also backed up by the summation index chart--the move up from November could use another minor high to create a 5-wave move for that leg up. These final little 5th waves have been frustratingly absent many times so I'm not holding my breath for that move but the wave pattern calls for it and therefore I continue to caution those who want to get short--the market may have one last surprise for the bears.

Jeff Bailey : 12/19/2006 1:46:24 PM

I don't think the YM goes much above intraday high, but not looking like much below intraday low.

I've got a conference call here in 10-minutes and will be back by 02:30

Jeff Bailey : 12/19/2006 1:45:06 PM

YM short stop alert 12,516

Jane Fox : 12/19/2006 1:42:35 PM

WASHINGTON (MarketWatch) -- Inflation remains the biggest risk to a stable economy, said Richard Fisher, president of the Dallas Federal Reserve Bank. In a speech in Longview, Texas, Fisher hewed to his previous view that the Fed remains hopeful, but not certain, that inflation will come down without further rate hikes. A copy of his speech was made available in Washington. Fisher said he's optimistic that the economy will grow faster than "the gloomy forecasts making all the headlines lately." Inflation has reached a "stasis," he said, but unfortunately "at too high a level for party poopers like me who will have no choice but to advocate tightening monetary policy further if inflation does not ratchet downward."

Jeff Bailey : 12/19/2006 1:41:41 PM

YM short lower stop alert ... to 12,516

YM 12,508

Starting to look "tough" to get another test of WEEKLY Pivot at this point.

Jane Fox : 12/19/2006 1:41:06 PM

* Wall St. bonus payout totals $23.9 bln-New York State
* Wall St. bonus level new record, up from $20.5 bl in 2005
* Wall St. bonus will average $137,580, 15% more than year-ago
* Wall St. bonuses to generate $1.6 bln tax revs for NY State ( at least there is some good out of this)

Jane Fox : 12/19/2006 1:35:49 PM

* Fed's Fisher: Inflation risks outweigh dangers of slowdown
* Fisher: Can't say corner has been turned on inflation

Jeff Bailey : 12/19/2006 1:28:56 PM

YM and a 10-minute interval chart at this Link

Jeff Bailey : 12/19/2006 1:25:48 PM

YM short lower stop alert ... to 12,525

YM 12,502.

Currently under its 10-minute interval 21-pd and 200-pd SMA. Need the distribution here as both are still trending higher.

Jeff Bailey : 12/19/2006 1:20:52 PM

QCharts users: The "symbol" for the NYSE a/d/unch is INDEX:ISSU

Jeff Bailey : 12/19/2006 1:19:55 PM

Tested again here at 12,503

Jeff Bailey : 12/19/2006 1:19:36 PM

Sure looks like some market participants are trading that upward trend on my YM chart. Was tested again at 12:18 and 01:10

Jeff Bailey : 12/19/2006 1:15:34 PM

Kinross Gold (KGC) $11.98 +3.81% ... session high and takes a look above WEEKLY Pivot ($11.97). This after yesterday's noted trade at WEEKLY S1 ($11.45).

Jeff Bailey : 12/19/2006 1:13:13 PM

01:00 Internals found at this Link

Keene Little : 12/19/2006 1:11:30 PM

I've been reviewing several different summation, new highs-new lows and bullish percent P&F charts. Even after playing with various box sizes it doesn't look like a good vehicle to use EW analysis on. It's an interesting idea but possibly because EW analysis uses time as well as amplitude in measuring wave patterns the fact that P&F charts remove the time function it may not be conducive to EW.

Jane Fox : 12/19/2006 1:11:20 PM

The H&S i showed earlier have pretty well gone by the wayside but notice how the PDLs are hanging in there as resistance. Link

Jeff Bailey : 12/19/2006 1:02:53 PM

01:00 Market Watch found at this Link

Jeff Bailey : 12/19/2006 12:57:07 PM

YM 12,508

Jeff Bailey : 12/19/2006 12:55:24 PM

YM 12,504

Jeff Bailey : 12/19/2006 12:54:41 PM

Blugh.... check out a 10-minute interval chart of the YM with 21 and 200-pd SMA right at today's mid-point of the session 12,505. 50-pd trending lower at 12,523.

Jeff Bailey : 12/19/2006 12:49:57 PM

NYMEX SEAT/SHARE BUNDLE SELLS FOR RECORD $10.5M

DJ- Nymex seat bundled with 90,000 shares sold for a record $10.5 million yesterday, beating the previous record of $10.4 million set Friday.

Keene Little : 12/19/2006 12:46:24 PM

I read a good analogy for us individual traders in a light trading environment (found in one of my many daily newsletters that I read). "An individual investor trying to trade alongside the institutions in this type of environment is like a four-year-old child battling with a bunch of eight-year-olds for candy when the piqata breaks. It's better just to stand aside and wait for the goodie bag at the end of the party."

Jeff Bailey : 12/19/2006 12:46:35 PM

NASDAQ NH/NL ratio chart with "f"ive day NH/NL ratio (a wave count?) and 10-day (X,O).

In last night's Market Wrap, I showed the NASDAQ Summation ($NASI) Link

See the "correlation" back in May (red 5) between the NH/NL 10-day and the summation?

Note: The NASDAQ "f"ive day NH/NL ratio hit 84% on 10/18/06 and its 10-day (X) at 80% was achieved on 10/23/06.

Keene Little : 12/19/2006 12:35:53 PM

Resistance for ES is its downtrend line from yesterday morning's high, currently just under 1434.

Keene Little : 12/19/2006 12:35:11 PM

The pullback didn't make it down to the projections for two equal legs and that tells me there's probably more underlying buying strength than is visible by other measures. ES continues to hold above its uptrend line so I'd say that becomes the measuring line--cross down below it and get short (watch the head fake like this morning's) otherwise the bulls maintain control here.

Jeff Bailey : 12/19/2006 12:30:49 PM

YM 12,508

Jeff Bailey : 12/19/2006 12:30:23 PM

It is still anybody's game in the YM between WEEKLY Pivot and MONTHLY R1 as far as I'm concerned.

Jeff Bailey : 12/19/2006 12:29:19 PM

Seller tried "chunking" it lower there. (QQQQ/GOOG)

Jeff Bailey : 12/19/2006 12:24:49 PM

Dow 30 Components sorted by PRICE (price-weighted index) at this Link

Keene Little : 12/19/2006 12:23:33 PM

Two equal legs down for NQ is at 1789.50. YM has been holding up better than the others so I suspect, if we're to see another push higher, that it will not pull back to its projection at 12486. But if it does then it would also be essentially a retest of this morning's low. Needless to say, if it breaks to a new daily low then that would likely negate the idea of another bounce leg.

Keene Little : 12/19/2006 12:20:30 PM

Jeff, I haven't tried EW counts on P&F charts but that's an interesting idea. Think I'll take a look at it.

Keene Little : 12/19/2006 12:19:23 PM

If we're going to get a larger bounce off this morning's low, watch the current pullback to turn back up. Two equal legs down from this morning's high is at ES 1428. We could be getting a little a-b-c move down that will lead to another rally leg. That's just speculation at the moment which is why I want to see if 1428 holds.

Jeff Bailey : 12/19/2006 12:18:22 PM

YM 12,497

Jeff Bailey : 12/19/2006 12:18:00 PM

3M (MMM) $77.75 -0.76% ... slips to new session low.

Jeff Bailey : 12/19/2006 12:16:00 PM

Or the Summation measures?

Jeff Bailey : 12/19/2006 12:13:45 PM

Keene ... thanks for the 11:56:19.

Have you ever tried to count waves in the NH/NL ratio PnF chart?

Jeff Bailey : 12/19/2006 12:12:07 PM

I don't think a "quick recovery" in the housing market is in the cards either.

However, a slow measured pace looks to be coming to fruition.

Remember ... the Fed has said that ENERGY and HOUSING PRICES are the focal points of inflation that they are monitoring the closest.

Jeff Bailey : 12/19/2006 12:07:56 PM

Google (GOOG) $464.54 +0.36% ... session high pegged its DAILY Pivot ($468.71)

Keene Little : 12/19/2006 12:07:39 PM

I hate to keep sounding so pessimistic on housing but I just don't see a quick recovery in that market. It will either correct in time (many many years) or price, or both. There's a lot of excess to be wrung out in that sector and bubbles never end softly.

Jeff Bailey : 12/19/2006 12:06:56 PM

YM 12,514 .... has been a little sloppy around its DAILY S1, but I think a YM short wants QQQQ back lower.

Jeff Bailey : 12/19/2006 12:05:53 PM

QQQQ $43.72 ... trying to stabilize above its DAILY S1 ($43.60).

Keene Little : 12/19/2006 12:05:05 PM

I think I might lean over to Hovnanian's CEO and mention that the sparkle at the end of the tunnel that he sees is actually a new bright xenon light on a train.

Jane Fox : 12/19/2006 11:59:43 AM

(MarketWatch) -- Home builder Hovnanian Enterprises Inc. said it sees a sparkle at the end of the tunnel for housing that could lead to a firming up in 2007, but many Wall Street analysts say it's too early yet to toast a market bottom.

Hovnanian (HOV) said it swung to a quarterly loss late Monday on land charges as expected, but investors focused on Chief Executive Ara Hovnanian's prepared remarks in which he said the company has "started to see a glimmer of hopeful indicators that the markets may be stabilizing." He cited modest waning of resale inventories, recovering buyer confidence and community traffic.

The company expects its cancellation rates to level off in the second quarter of 2007 and is "tweaking" prices higher in some markets, the CEO said in an interview with business-news channel CNBC Tuesday morning.

"We believe that the overall U.S. housing market may hit the bottom in the first half of 2007," added Chief Financial Officer J. Larry Sorsby in the earnings release. "However, the housing market is likely to bounce along the bottom for several quarters before pricing and sales pace improves."

Keene Little : 12/19/2006 11:56:19 AM

Jeff, yes, an impulsive wave count (impulsive meaning that's the primary trend) is made up of 5 waves. Corrective moves (those moving against the primary trend) are made up of 3 waves (or some more complex variety of that). Because each impulsive wave itself consists of 5 waves I often talk about counting the number of waves within a move (without getting into the nitty gritty wave counts of each) to see if it's impulsive or corrective.

Not to try to confuse things but multiples of 4 after 5 and multiples of 4 after 3 tell you whether the move is impulsive or corrective. So a 5, 9, 13, etc. wave count is impulsive whereas a 3, 7, 11, etc. wave count is corrective.

A quick example would be in an impulsive move up after waves 1 through 4 finish, wave-5 may extend and have its own clear 5-wave count and the whole move up might look like stair-stepping higher (sound familiar?). That creates an "extra" 4 waves inside the extended 5th wave and that would make the whole move look like a 9-wave count. The easiest way to understand, or to visualize, that is to draw out on paper that kind of move and you'll see the number of waves I'm talking about.

In a pullback, it's typically an a-b-c move (3-waves) but could get a little more complex and get a wave in between (wave-x) and then another a-b-c move down. Add those up and you get a 7-wave move, which is corrective.

Jane Fox : 12/19/2006 11:54:29 AM

* Melco PBL (MPEL)IPO rises to $23 a share
* opens at $22, above its $19 price

Jane Fox : 12/19/2006 11:52:06 AM

Certainly looks like some H&S are forming on all markets. Link

Jeff Bailey : 12/19/2006 11:44:11 AM

Keene ... I ask this question in all seriousness. How many waves does a complete bull wave have? Is it 5?

Jeff Bailey : 12/19/2006 11:40:38 AM

YM 12,502 ... 5-minute interval chart at this Link with QCharts' DAILY Pivot levels turned on.

Jeff Bailey : 12/19/2006 11:34:29 AM

YM 12,506 ... 30-minute interval chart at this Link

Keene Little : 12/19/2006 11:29:43 AM

ES had dropped below its uptrend line from December 1st and obviously bounced back above it this morning. Now watch to see if 1430 acts as support this time.

Jeff Bailey : 12/19/2006 11:28:03 AM

YM short lower stop alert ... to 12,535.

YM 12,504.

Jane Fox : 12/19/2006 11:24:09 AM

NEW YORK (MarketWatch) -- Melco PBL (MPEL) CEO Lawrence Ho and CFO Simon Dewhurst said in an interview with MarketWatch the response by prospective investors to the company's $1.1 billion initial public offering to raise money to build casinos in Macau, China has been excellent. "It's the most exciting gaming story in the world," said Dewhurst. Ho said he decided to team up with PBL after "we went around the world looking for a partner." PBL had distinguished itself as a gaming firm that had been able to focus on Asian clientele, he said. Dewhurst said Melco already has a track record in Macau with a roughly 30% share of the slot machine business there. The IPO priced above its range and added shares.

Jeff Bailey : 12/19/2006 11:22:08 AM

11:00 Internals found at this Link

Note: It would currently take a 64.00% closing reading for the NASDAQ's 5-day NH/NL ratio to generate a "sell signal," and a 70% measure for its 10-day NH/NL ratio to reverse into a column of "O"

Keene Little : 12/19/2006 11:07:31 AM

Watching the NYSE, it broke below its uptrend from December 1st yesterday and is now bouncing back up to it, currently at 9120. If this turns into resistance then it could head back for new lows from the current bounce. About to hit it as I type. This is only a short term trend line but still worth keeping an eye on.

Jane Fox : 12/19/2006 11:05:16 AM

Look at how the AD volume spiked. Link

Jane Fox : 12/19/2006 11:04:13 AM

Tenor of the market has totally changed now and although the bulls are not in total control (AD line is still below 0) I certainly would not be short.

Jeff Bailey : 12/19/2006 11:02:33 AM

11:00 Market Watch found at this Link

Jane Fox : 12/19/2006 11:00:32 AM

Here is how the VIX and ES are trading today. In sync just the way I like them. Link

Keene Little : 12/19/2006 11:00:21 AM

First resistance is at gap close at ES 1435 and YM 12537 and then we'll see if there are more bearish things afoot here, or if this morning's dip was just another bear trap.

Jane Fox : 12/19/2006 10:58:12 AM

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

Jeff Bailey : 12/19/2006 10:56:43 AM

YM 12,527 ... probes MONTHLY R1.

Jane Fox : 12/19/2006 10:56:45 AM

Well I have not had a +800 TICK alert but I do see the AD volume to new daily highs and the VIX to new daily lows so you know the drill. Bail on your shorts, the rescue team is back in town.

Jeff Bailey : 12/19/2006 10:55:05 AM

iShare Malaysia (EWM) $9.02 -2.69% Link ... off its morning lows of $8.60.

Jane Fox : 12/19/2006 10:53:15 AM

YM is more bearish than ES because the MACD and RSI divergences are much clearer. A revisit to the bottom of YM's new channel would also be a revisit to the 50 EMA. Link

Jeff Bailey : 12/19/2006 10:51:59 AM

Quick look at YG sure doesn't show much overnight response to the Thai news.

Jeff Bailey : 12/19/2006 10:50:27 AM

THAILAND TO LIFT INVESTMENT CONTROLS

DJ- Thai government says it will lift controls on foreign investment in stocks after the market plunges nearly 15%, rattling regional bourses amid worries about a repeat of the 1997 Asian financial crisis.

Jane Fox : 12/19/2006 10:48:51 AM

I think ES has a very good chance of revisiting its 50EMA before it makes new yearly highs. That is about as bearish as I am willing to get until I see further breakdown. Link

Jane Fox : 12/19/2006 10:40:57 AM

I expect to hear my +800 TICK alert at anytime now.

Jeff Bailey : 12/19/2006 10:40:50 AM

YM Daily/Weekly/Monthly Pivot Matrix found at this Link

Jeff Bailey : 12/19/2006 10:36:52 AM

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

Jeff Bailey : 12/19/2006 10:23:40 AM

YM 12,510 ... stubborn at WEEKLY Pivot/Daily S2 overlap this morning.

Keene Little : 12/19/2006 10:23:12 AM

The other thing to remember, as we finish up the month in a holiday trading environment is that the light volume will make it much easier for bigger money to push the market around at will. This could cause some whipsaws and surprise moves. Trading should be quick scalps and then get out of the way. If and when we get a downtrend started then we can look for some swing trades. The upside remains risky even though I still see potential to rally to a new high before calling a top.

Jeff Bailey : 12/19/2006 10:23:06 AM

3M (MMM) $77.84 -0.65% ... slips below my 12/08/06 day trade short target.

Keene Little : 12/19/2006 10:10:19 AM

The drop in the dollar and bounce in gold are both saying inflation is a concern. Certainly mixed signals this morning.

Keene Little : 12/19/2006 10:09:09 AM

With the recovery in the bonds we might see the same thing happen in the equities this morning. If the bond market believes this morning's PPI data will not cause the Fed to abandon its rate hold, or even rate decrease path, then the stock market could feel emboldened to continue its rally.

Jeff Bailey : 12/19/2006 10:07:12 AM

10:05 Market Watch found at this Link

Keene Little : 12/19/2006 10:06:17 AM

After leading to the downside NQ is now slightly ahead in the bounce off the lows. The bounce even has impulsive qualities which suggests a pullback from its bounce will lead to another push higher.

Jane Fox : 12/19/2006 10:00:25 AM

TBonds are recovering from the hit they took this morning as well.

Jane Fox : 12/19/2006 9:58:00 AM

Gold is breaking back above its overnight and PDH which is not surprising because the $ is so weak.

Jeff Bailey : 12/19/2006 9:57:31 AM

YM did rise to 12,508 ... pretty close to the initial 12,510 entry point.

Jeff Bailey : 12/19/2006 9:56:51 AM

YM short entry alert here at 12,503

Jane Fox : 12/19/2006 9:54:27 AM

Don't get too excited by this little bull rally we are seeing off the lows. Link

Jane Fox : 12/19/2006 9:50:09 AM

VIX opens well above its PDH supporting ES's open below its PDL. Internals so far are supporting the bears.

Jeff Bailey : 12/19/2006 9:48:42 AM

VIX.X 11.28 +6.41% ... sticks its head above MONTHLY Pivot.

VIX-BV $2.00 x $2.20

Keene Little : 12/19/2006 9:47:18 AM

I don't discount the possibility we're going to see some buy programs rescue the day. Holding the market at least flat for another week and a half should not be a difficult thing when you consider the amount of money (profits) at stake. Come January we have a whole new ball game but I'd be a little more careful right now chasing any move to the downside.

The flip side of that is more bearish as many traders expect to see the market held up, if not rally, into the end of the year and a drop could catch many by surprise if the selling becomes more intense. Then we could see a scramble for the skinny exit door.

Jeff Bailey : 12/19/2006 9:42:06 AM

YM short entry setup alert look to go short at 12,510 , stop 12,548, target 12,430.

YM 12,488.

Jane Fox : 12/19/2006 9:41:04 AM

AD line now is a very bearish -1426

Jane Fox : 12/19/2006 9:39:38 AM

* NYSE decliners outnumber advancers 10 to 3
* Nasdaq decliners outnumber advancers 19 to 5

Keene Little : 12/19/2006 9:38:00 AM

Techs are getting slammed to the downside relative to the others this morning. This could cause selling to spill over into the other sectors as fund managers worry about losing profits gained for the year.

Jane Fox : 12/19/2006 9:34:01 AM

AD line is -986 and AD volume below 0 and falling. The bears have the ball this morning and field position.

Jane Fox : 12/19/2006 9:23:45 AM

NEW YORK (MarketWatch) -- Claymont Steel Holdings Inc. (PLTE) priced 8.7 million shares at $17 in a bid to raise $148 million in its initial public offering on Tuesday. The company boosted the size of the IPO from 6.25 million shares and priced at the top of its $15-$17 range.

Keene Little : 12/19/2006 9:17:19 AM

With the drop in equities pre-market we now have ES hitting the 1430 potential support area by its uptrend line from December 1st. ES is trying to push below it a little but this might be a drop n pop kind of day if that support holds. Otherwise we might actually have follow through to the downside, a rare occurrence in this market.

Jane Fox : 12/19/2006 9:10:55 AM

Stocks may have taken it on the chin when the PPI number came in so high but TBonds were decimated and fell almost a whole point (32 ticks). They are now starting to get their feet under them and have almost recovered their PDL.

I have replaced the Natural Gas chart with the US $ and then put it on top of the Gold chart so we can see how these two trade together. As you can see the $ took a hit but Gold did not get a boost. Of course you have to also take into consideration Oil which was sold overnight as well. Link

Jane Fox : 12/19/2006 9:00:32 AM

Opps looks like our Goldilocks economy has encountered a bear and stocks are heading for the hills. Markets certainly did not like the 8:30 PPI data, all broke their respective PDLs. Link

Jane Fox : 12/19/2006 8:59:51 AM

Morgan Stanly (MS) said its institutional-securities business, which includes its investment-banking and trading businesses, posted record pretax income of $2.3 billion, up 46% from a year ago. Revenue also rose, coming in at $5.6 billion in the fourth quarter, up 34% from a year ago. Pretax margin at the unit widened to 41% from 38%.

And the beat goes on.

Jane Fox : 12/19/2006 8:53:53 AM

WASHINGTON (MarketWatch) - Construction on new homes rebounded in November, rising 6.7% after a whopping 14% drop in October, the Commerce Department reported Tuesday.

Building permits, meanwhile, fell 3% to a fresh nine-year low, signaling that the housing market remains very weak.

Starts rose 6.7% in November to a seasonally adjusted annual rate of 1.588 million from October's revised 1.488 million pace. Starts are down 25.5% in the past year and are down 12.5% in the first 11 months of 2006 compared with the same period in 2005.

Building permits, considered a leading indicator of the economy and of the housing market, fell 3% to a seasonally adjusted annual rate of 1.506 million, the 10th straight decline in permits, from October's 1.553 million pace.

Building permits are down 31.3% in the past year and are down 14.1% in the first 11 months of 2006 compared with the same period in 2005.

The pace of starts in November was above the expected 1.54 million, while permits fell short of the 1.55 million expected by economists polled by MarketWatch.

Jane Fox : 12/19/2006 8:51:55 AM

WASHINGTON (MarketWatch) -- Producer prices rose much more than expected in November, as the core producer price index rose by the most since July 1980, the Labor Department said.

The November producer price index climbed by 2%, the biggest rise since November 1974, statistics show.

The core PPI, which excludes food and energy prices, rose 1.3%.

Much of the gain in the headline producer price number was in energy prices, which rose by 6.1%. Of that, 17.9% was gasoline prices, while 14.6% was diesel fuel.

Wholesale prices for home heating oil climbed by 7.7%. Natural gas prices, meanwhile, rose by 5.9% at the wholesale level in November.

A 13.7% gain in wholesale prices for light motor trucks powered the core PPI, which excludes food and energy prices.

Economists surveyed by MarketWatch were expecting the PPI to rise by 0.7%. They also forecast a 0.3% rise in the core PPI.

Year over year, the PPI is up 0.9%.

Year over year, the core PPI is up 1.8%.

The report follows on the heels of a benign inflation reading last week, with the Labor Department reporting U.S. consumer prices were unchanged in November. Core prices were also unchanged. Taken together, the numbers took pressure off the Federal Reserve to raise rates to control inflation

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