Option Investor
Printer friendly version
OI Technical Staff : 12/29/2006 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The Market Monitor has been archived.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 : 12/29/2006 8:34:30 PM

Happy New Year! See you on Wednesday.

Jeff Bailey : 12/29/2006 8:34:00 PM

If you received a $10.00 gift card to your favorite grocery store, I highly recommend the Haagen Daz chocolate ice cream. King Soopers (a Kroger Foods store here in Colorado) puts the pints on sale every so often for 2 for $6.00 in the winter!

Jeff Bailey : 12/29/2006 8:28:49 PM

2007 Dow Dog Strategy Thoughts ... Per several of my recent Market Wraps and observations of "higher risk" for bulls, I would think a Dow Dog theory strategy would be as follows.

Assuming a round number account of $100,000.00, where that money would be placed EQUALLY ($10,000.00/stock), my thoughts of 50% equity exposure and more "neutral" stance currently could have an investor placing just 1/2 position, or $5,000.00/stock (depending on you account size).

This way, an investor still gets exposure to equity with some dividend.

But note your dividend YIELD and keep a watchful eye on the S&P 500 Bullish % ($BPSPX) during the year.

Some investors will only place 1/2 position in the Dow Dogs at the beginning of the year, then ONLY invest further on a decline, when the underlying "dog" retreats that initial SEC Yield amount from initial entry.

If you received a $100,000.00 bonus in late December, maybe these thoughts will be of value.

Jeff Bailey : 12/29/2006 8:25:03 PM

"Dow Dogs" for 2007 at this Link

The "Little Dogs" are the 5 LOWEST PRICED of the ten. A bit of market psychology here, as it is thought some investors perceive "value" based on a stock's price, or ability to buy MORE SHARES of a lower priced stock.

2006 "Dogs" were GM close at $19.42 with 12/30/05 SEC YIELD of 10.3% Link , T $24.49/5.43% Link , VZ $30.12/5.38% Link , MRK $31.81/4.78% Link , MO $74.72/4.28% Link , PFE $23.32/4.12%, C $48.53/3.63%, DD $42.50/3.48%, JPM $39.69/$3.43, GE $35.05/2.85%

Jeff Bailey : 12/29/2006 7:43:46 PM

Santa Claus Rally ... Dates are last 5-days of the year, and first two in January. According to the StockTrader's Almanac, has been good for an average 1.6% gain since 1969 (1.5% since 1950). Santa's failure to show tends to precede bear markets, or times stocks could be purchased later in the year at much lower prices.

Jeff Bailey : 12/29/2006 7:31:27 PM

QCharts' Symbol for S&P 500 Equal Weight is $SPXEW.X

Jeff Bailey : 12/29/2006 7:35:55 PM

S&P 500 Facts ... SPX industry/sector weightings. 22.3% Financials, 15.3% Info Tech, 12.7% Health Care, 10.9% Industrials, 10.1% Consumer Disc., 9.6% Consumer Staples, 9.3% Energy, Telecom Services 3.5%, Utilities 3.4%, Materials 2.9%

Jeff Bailey : 12/29/2006 7:18:52 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 12/29/2006 7:14:14 PM

Russell 2000 (2006) Daily interval bar chart with "5-DRT" retracement at this Link

StockCharts.com's Russell 2000 Index ($RUT) PnF chart at this Link

Marc Eckelberry : 12/29/2006 7:11:02 PM

NDX ends down 2% for the month and only up 6% for the year. If you exclude the price weighted DOW, the Santa rally was a no show. The fact remains that many investors would have been better off getting out a few weeks ago, and certainly out of high flyers such as GOOG last month. Since only a minority of bigger cap stocks move 70% of SPX, I doubt many investors actually posted gains since early December. Key sectors such as retail did not budge the entire month. Small caps were also a no show this month, down 1.5% since December 5 high. Bulls will need more support next month from these key areas now that bonuses have been cashed.

Jeff Bailey : 12/29/2006 6:17:09 PM

NASDAQ-100 (2006) Daily interval bar chart with Upper "5-DRT" and Lower "5-DRT" retracement at this Link

StockCharts.com's Nasdaq 100 Bullish % ($BPNDX) at this Link

Nasdaq 100 ($NDX) PnF Chart at this Link

Jeff Bailey : 12/29/2006 5:53:33 PM

S&P 500 (2006) Daily interval bar chart with "5-DRT" retracement at this Link

StockCharts.com's SPX Bullish % (BPSPX) at this Link

SPX PnF chart at this Link

Jeff Bailey : 12/29/2006 5:29:46 PM

Dow Industrials (2006) Daily interval bar chart with "5-DRT" retracement at this Link

StockCharts.com's DJIA Bullish % (BPINDU) at this Link

DJIA PnF Chart at this Link

Jeff Bailey : 12/29/2006 5:14:37 PM

First 5 trading sessions of January Set Tone for the Year

StockTrader's Almanac: The last 35 up First Five Days were followed by full-year gains 30 times for an 85.7% accuracy ratio and a 13.7% average gain in all 35 years. The five exceptions include flat 1994 and four related to war. The 21 down First Five Days were followed by 11 up years and 10 down making (less than 50% accurate).

Bullish 4-year Election Cycle forces have given this indicator a 12-2 record in Pre-Election Years. Only the two down years have been wrong. A margin increase at the outset of 1955 caused a brief blip in Eisenhower's post-Korea 2.5-year bull. Stocks sagged in early 1991 in anticipation of military action against Iraq.

First 5-days of 2006 MM postings.

1) Link

2) Link

3) Link

4) Link

5) Link

Keene Little : 12/29/2006 4:13:24 PM

Here are updates to the SPX and DOW charts I showed yesterday with my thoughts about how price could play out into next week. First the DOW chart which hasn't pulled back quite as far as I thought it would, which is likely due to false propping this week. Whether the pullback is finished or not I don't know but I'm thinking it is. In other words we could be ready to rally out of the gates on Wednesday. Link

If DOW 12626 is a good upside target then that would equate to about SPX 1434. If we get two equal legs up from Tuesday's low for SPX that's also at 1434 and that's what I show for its chart. It also shows the market peaking out by next Friday. Link

We'll see what happens on Wednesday. I hope everyone has a great long weekend. Happy New Year!

Jane Fox : 12/29/2006 4:03:17 PM

Happy New Year to everyone out there. We will all be back bright eyed and bushy tailed on Wednesday January 3.

Jane Fox : 12/29/2006 4:02:17 PM

Pretty impressive bears. Looks like they will have a Happy New Year. Link

Keene Little : 12/29/2006 4:00:25 PM

DOW 12500 is looking very iffy at this point. Pack up your office Boyz. The boss is not going to be happy.

Keene Little : 12/29/2006 3:45:58 PM

Amazing what fear for one's job will do. Besides, the mini-Boyz are only spending the company's money to jack this back up in order to get DOW 12500. Now if they can just keep the sellers away they should be able to do it.

Keene Little : 12/29/2006 3:41:43 PM

The relative strength between the DOW and SPX is very obvious at this point--the DOW is clearly being supported as it has only retraced 38% of this week's rally whereas SPX has retraced 62%.

Keene Little : 12/29/2006 3:32:21 PM

Uh-oh, the junior traders who were left in charge with strict instructions to hold the market up are not doing too well here. Jobs are on the line now. ES gap is closed and it tagged its 62% retracement of this week's rally (at 1427). Do or die here to save DOW 12500. Some buying as I type so we'll see if the mini-Boyz save the day.

Jane Fox : 12/29/2006 3:24:07 PM

All markets to new daily lows except NQ. Love it when everything is in sync.

Keene Little : 12/29/2006 3:23:40 PM

The broken downtrend line from December 18th is at 1429.75. But only a point below that is the gap fill.

Keene Little : 12/29/2006 3:22:49 PM

This could be the throw-under move that finishes the pullback. If so we should get some buying kicking in now.

Keene Little : 12/29/2006 2:50:22 PM

It's possible, from an EW perspective, that the current pullback is finishing a correction to this week's rally. That interpretation says we'll rally out of the gates on Wednesday when the market reopens.

Jane Fox : 12/29/2006 2:38:29 PM

YORK (MarketWatch) - Gold futures closed the final trading session of the year on a positive note Friday, chalking up a fifth straight day of gains and adding 23% in 2006.

Gold for February delivery ended up $1.10 at $638 an ounce on the New York Mercantile Exchange, finding support in the dollar's mixed performance against major rivals.

"Trading activity slowed considerably in the final hours of 2006, as traders took stock of another exciting year in precious metals," said Jon Nadler, investment analyst at bullion dealers Kitco.com.

Marc Eckelberry : 12/29/2006 2:37:26 PM

As for crude, tankers have been held up by the fog last week. Next week could see a big boost in inventories, which is why I am not jumping in long quite yet.

Marc Eckelberry : 12/29/2006 2:37:52 PM

An NDX close below 1766 would be unconditionally bearish for next week.

Marc Eckelberry : 12/29/2006 2:35:05 PM

Re the QCharts notes. You must specify TRIN.NY to get NYSE read. Same with Tick. Qcharts has been working fine for me.

Jane Fox : 12/29/2006 2:34:44 PM

This just in from Denise - cnbc just said the crude inventory drop reported was an error..not saying which way.

Keene Little : 12/29/2006 2:33:14 PM

The bottom of a potential parallel down-channel for yesterday's and today's price action (bull flag?) is currently at 1430.75.

Jane Fox : 12/29/2006 2:31:04 PM

Me thinks we will see new daily lows across the board today.

Keene Little : 12/29/2006 2:29:21 PM

Here come those pesky sellers again. The lifting brigade will have to step back in shortly.

Keene Little : 12/29/2006 1:50:11 PM

I do see the potential for ES to pull back to about 1431 today as part of a bull flag pattern and think Jane's reading of the weakness in this market could see that happen (although the current jam higher might be telling us otherwise). A pullback, maybe down to 1428.75 to close this past Wednesday's gap up, may happen next Wednesday after the market reopens. But regardless what happens this afternoon I still believe it will be too easy to jam the market back up to ensure a close over DOW 12500.

Keene Little : 12/29/2006 1:41:29 PM

Did you really think they're going to let this drop today?

Keene Little : 12/29/2006 1:36:17 PM

It should take about 2 contracts to jam the market back up (wink).

Keene Little : 12/29/2006 1:35:46 PM

Ready for the next buy program?

Jane Fox : 12/29/2006 1:33:44 PM

Opps ER just made a new daily low.

Jane Fox : 12/29/2006 1:33:32 PM

Internals are telling me that daily lows will not hold but with the way the market has been trading of late I'm not sure there are enough traders trading today to get price moving too much in any direction.

Keene Little : 12/29/2006 1:22:45 PM

Watching the TICK readings on QCharts led me to believe the number is a bit wacko even if it did show the bounce coming. This from Al:

I think that Qcharts has gone bonkers again. I display the tick and trin on IB as a backup to qcharts. The tick on IB is running about half of the number on qcharts since it ramped around 12:30 and of course the trin has been nuts all day--currently 3.66 on qcharts and 1.22 on IB.
Have a great new year.

Thanks Al.

Jane Fox : 12/29/2006 1:06:16 PM

I think this little buying spurt is a good place to get short again if stopped out from your last one.

Jane Fox : 12/29/2006 1:23:34 PM

I hadn't looked at the TICKS so far today until Keene mentioned them. My charting platform show the TICKS as quite neutral, which just goes to show how different platforms calculate these numbers differently. Link

Keene Little : 12/29/2006 12:59:51 PM

High TICK readings continue so perhaps this will lift the market back up into the green which is where I suspect they'll want to hold it today.

Keene Little : 12/29/2006 12:58:33 PM

My TICK reading just hit the day's high and yet price is sitting at the bottom of this pullback. Not sure what to make of that. I suspect most readings will not be that accurate today as far as showing where the market might head next.

Jane Fox : 12/29/2006 12:36:57 PM

* CME Foreign Exchange market partially open on Tuesday
* CME Interest Rate market partially open on Tuesday
* CME to close Commodity and Equity Index markets on Tuesday
* CME: Markets closure in honor of President Ford

Keene Little : 12/29/2006 12:33:31 PM

Gee what a surprise, ES and YM are stuck at the flat line. I'd be very surprised if the DOW closed below 12500 today. It'll be too easy to jam it back up whenever it's needed, like the end of the day.

Jane Fox : 12/29/2006 12:32:25 PM

The highest probabilty trade is short and I would be short here.

Jane Fox : 12/29/2006 12:14:13 PM

Internals very bearish. Link

Marc Eckelberry : 12/29/2006 12:06:38 PM

A prayer for our troops over the weekend. Things could get rough over there.

Tab Gilles : 12/29/2006 11:46:44 AM

Best Wishes to all and a Happy New Year!!!


Tab Gilles : 12/29/2006 11:49:12 AM

Apple (AAPL)$85.25 +$4.40 , up 5.4%

This stock had topped in October on the options back dating news and capitulated on the Financial Times report. According to the board the restated that Stephen Jobs is clear of any wrong doing.

My question is...Jobs knew of the options and recommeded dates and has now hired an attorney. Why?

Yes the board cleared him...but I didn't hear anything about the SEC clearing him?

Be very cautious of this stock. With the NDX looking to correct, we could see AAPL retest that 30-ema on the weekly chart, or perhaps go lower as this SEC investigation plays out.

On the daily chart it bounced off the 100-ma and is now hovering arounds it's 50ma. MACD & RSI rising. Link

However, a look at the weekly chart paints a slightly different scenario. Using the 10 and 30 weekly EMA. MACD, RSI & Stochastics appear to give a top or sell. Link

Looking at the NASDAQ100 and several charts, I've recommended going short via Profunds Ultra Short OTC (USPIX) and UltraShort Small Cap (UCPIX). Entering 1/2 trades on Nov. 2nd and November 27th. (*see posts 11/3 10:36 AM & 11/27 10:49 AM)

USPIX $14.06 & $13.10 Link

UCPIX $14.66 & $13.85 Link Link

NDX Charts: Link Link Link Link

Marc Eckelberry : 12/29/2006 11:48:41 AM

I think we could have a sell-off right at the open after a brief spike if yields remain above 4.7%. Just like Jan 2005. If you went short yesterday at YM 12602, you should be ok and have enough room. You can always alter Tuesday evening. I prefer using globex and ES since it will trade earlier. I will be holding a short position over the holiday.

Keene Little : 12/29/2006 11:38:05 AM

I completely agree Marc. Maybe a couple of puts just in case something happens over the long weekend. But I think we'll see some new highs next week (may pull back a little more first) so I'm holding off until next week to add to my longer term short position.

Marc Eckelberry : 12/29/2006 11:34:21 AM

VIX 11 has supported equities recently, so they will probably pin the DOW above 12500. Nevertheless, I would not recommend holding a long over such a long weekend. They will hang Saddam and traders should remain alert to the possibility of a terrorist attack. Saddam is not popular with Al Quaeda, but these guys don't care. Flat is best now, or short if you have the cushion.

Keene Little : 12/29/2006 11:24:51 AM

ES could just ping pong between trend lines today since there's really no momentum here. The uptrend line off Tuesday's and this morning's lows is currently near 1432.50 which has been recent support (it's monthly R1). The downtrend line from December 18th through yesterday's high is currently near 1437.75. So far today's range has been between daily S1 (1431.75) and R1 (1437.75) so it's just technical trading we're seeing today. Price is gyrating around today's 1434.75 pivot. Link

Jane Fox : 12/29/2006 11:17:40 AM

Any doubt as to who has the ball this morning. Link

Keene Little : 12/29/2006 11:16:53 AM

Back to the flat line for ES and YM (NQ continues to show relative strength).

Marc Eckelberry : 12/29/2006 10:39:15 AM

YM 12586 is critical.

Keene Little : 12/29/2006 10:38:14 AM

Sometimes we get a pop n drop after the open but today it's looking like a pop n stop. We're getting a small pullback from the spurt higher but so far nothing much. Price action has pretty much stalled.

Marc Eckelberry : 12/29/2006 10:38:58 AM

Bonds are bearish and holding ES and YM back. The ten year yield is back above 4.7% and is the true story going into 2007. Higher rates. Unless that flips, small caps will struggle as well.

Jane Fox : 12/29/2006 10:19:14 AM

Here is how the markets are trading in relation to their PDLs. Obviously NQ is the stronger market today. Link

Keene Little : 12/29/2006 10:15:33 AM

NQ is getting a big lift today. AAPL's bounce is likely helping but I suspect the are some "public" reasons for getting this index higher before the end of the year as well. Keeping maximum profits is always important but the Boyz also want the public to be excited about buying the sexy techs next week so that smart money can hand off their inventory.

In the meantime I'm getting the feeling that the DOW is either going to consolidate sideways before pressing higher next week or it will chop its way higher from here in what might become a small ascending wedge (typically found at tops during distribution). Either scenario will mean very choppy and whippy price action.

Jane Fox : 12/29/2006 10:11:16 AM

AD volume making new daily highs and above 0 so I would not be short yet.

Jane Fox : 12/29/2006 10:03:32 AM

WASHINGTON (MarketWatch) -- The volume of help-wanted advertising in major U.S. newspapers was unchanged in November, the Conference Board said Friday. The research group's help-wanted index remained at 30 in November. A year ago, it was 38. Conference Board economist Ken Goldstein said it's evidence the labor market has "little momentum" going into 2007. In the last three months, help-wanted ads fell in five of the nine U.S. regions, with the biggest drops in the South Atlantic, New England and Mountain regions. The board surveys help-wanted ads in 51 major U.S. newspapers.

Jane Fox : 12/29/2006 9:46:31 AM

Careful bulls AD line is -379 and AD volume is below 0.

Jane Fox : 12/29/2006 9:43:24 AM

Here is McMillan's weekly commentary. - Despite some negative signs that appeared just before Christmas, the stock market has continued to plow ahead. $SPX pulled back and touched the bottom of its bullish uptrending channel. That was as far as the pullback went, however, and a strong rally developed from there. So, once again -- as it has done for the last six months -- $SPX remains well entrenched in that channel. Until it falls below that support convincingly, we will retain a bullish attitude.

The equity-only put-call ratios are our most bearish indicators at present. They both rolled over to sell signals about two weeks ago. At the current time, these reliable intermediate-term indicators are out of step with the market. That's unusual, but not unprecedented. Typically, the ratio rolls over and gets back in synch with the market.

Market breadth was weak when the market was weak, and has been extraordinarily strong this week when the market has rallied. As such, it is acting as a confirming indicator and not a leading one.

Volatility indices ($VIX) never got too excited about the pre- Christmas decline, as $VIX never closed above 11.50. With the strong upward move this week, both $VIX and $VXO fell back near 10.

The Santa Claus rally has begun with a strong bullish move. This year it encompasses the four trading days of this week and the first two trading days of next week. If the period is bullish -- and it certainly looks like it's going to be this year -- it merely confirms the seasonality of that time period, However, if the period is bearish, it can have implications for next year.

In summary, the simplest approach is the best one for this market: as long as prices continue to climb, there is no reason to abandon the bullish bandwagon. Admittedly, the bandwagon has become very crowded (when was the last time you saw a bearish analyst on CNBC?), and that makes us nervous. So be sure to keep tightening your stops, because once the selling begins it will be furious as all the newbie bulls try to squeeze out the exit at the same time.

Keene Little : 12/29/2006 9:42:40 AM

The quick spike down at the open was to go nail stops that were place just below the overnight lows. Now they need to go up and nail the stops just above overnight highs (ES 1435.25 and YM 12582) and they can call it a day.

Jane Fox : 12/29/2006 9:32:09 AM

Looks like we are going to have a very long weekend.

Jane Fox : 12/29/2006 9:31:41 AM

NYSE closed Tuesday for Gerald Ford day of mourning

Jane Fox : 12/29/2006 9:21:11 AM

WASHINGTON (MarketWatch) -- The Federal Reserve Board will be closed on Tuesday to mark a day of mourning for former President Gerald Ford, the Fed said late Thursday. Minutes of the Federal Open Market Committee's Dec. 12 meeting will be released Jan. 3 at 2 p.m. Eastern time instead of of Jan. 2. The Fed's 12 regional reserve banks, however, will be open normal business hours on Tuesday. Most other U.S. government offices and agencies will also be closed on Tuesday, as will the Nasdaq Stock Market. The New York Stock Exchange will make an announcement later Friday about its operating plans, a spokesman said Friday morning.

Jane Fox : 12/29/2006 9:20:13 AM

Here is how the VIX and the TRIN looked for last four days. Friday, the 22nd was bearish and see the trajectory of the VIX - up. Now take note of the VIX's trajectory on Tuesday and Wednesday - down. Yesterday it was neutral and did not support the AD line/volume's bearishness.

The TRIN was not too helpful on Friday other than it was above 1 most of the day but on Tuesday and Wednesday it did support the other bullish internals. Then again yesterday it traded the whole day above 1. Link

Keene Little : 12/29/2006 9:19:13 AM

After a very quiet overnight seesion in equity futures they got a little whippy just before 5:00 AM until now, but basically around the flat line and it looks like that's where we'll open. Bonds are giving up some of yesterday's late-day bounce and that pattern looks like another low is coming (pop in yields). Other than a very crisp setup, which I'll watch for, trading in today's very low volume environment will be risky. Scalp 'em quick if you trade.

For those who haven't heard, Nasdaq will be closed on Tuesday in observance of President Ford's funeral. The other markets haven't announced anything yet but are expected to also close. With a 4-day weekend ahead of us many traders will exit early today if they haven't already done so.

Jane Fox : 12/29/2006 9:11:52 AM

Here is what I was talking about when I said the internals were bearish on Friday and yesterday. Notice how the AD volume and AD line never get above 0. When these two are below 0 never expect to get long and hold on all day, I guarantee you your trade won't go far. Link

Jane Fox : 12/29/2006 9:02:56 AM

US $ held steady overnight and did not break any previous day levels but did make lower lows and highs, which is bearish.

Gold had an upward trajectory and almost tagged its PDH.

Crude sellers were alive and well overnight night and brought this market lower than its PDL. Link

Jane Fox : 12/29/2006 8:54:36 AM

The overnight session was about a neutral as you can get. The markets have been a little odd lately. Last Friday the internals were quite bearish but the markets did not do much until after the cash markets closed when they finally succumbed to selling pressure and sold off. Then yesterday we had the same scenario, the internals were bearish all day (AD line's high was +31) but the sellers remained in the shadows until after the cash markets closed. Link

Jane Fox : 12/29/2006 8:43:39 AM

NEW YORK (MarketWatch) - Shares of Apple Computer gained early Friday after the maker of iconic iPod digital music player provided some answers to questions that have surfaced about the nature and extent of improprieties with its stock option granting practices, saying it has concluded that CEO Steve Jobs was aware of favorable grant dates but didn't personally benefit from it.,p> The stock (AAPL) was up about 4.2% to $84.26 in pre-market action.

In a delayed annual filing with the Securities and Exchange Commission, Apple said a special committee of its board found that while Jobs was "aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications."

There was no evidence of misconduct by current management, the committee said, but it added that the probe raised serious concerns about the actions of two former officers in connection with the accounting, recording and reporting of stock-option grants.

Market Monitor Archives