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Keene Little : 4/17/2007 10:34:32 PM

Here are the 60-min charts for the 4 indices plus gold that I did for tonight's Wrap:
DOW: Link
SPX: Link
NDX: Link
RUT: Link
Gold ETF (GLD) daily: Link

Keene Little : 4/17/2007 10:31:24 PM

Wednesday's pivot tables: Link and Link

OI Technical Staff : 4/17/2007 9:59:59 PM

The Market Monitor has been archived.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

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Marc Eckelberry : 4/17/2007 5:47:15 PM

From Dan:

Here's how I played the IBM earnings:
The April options were pricing in about 45% vol and the May's were at 20%, so I sold the April 100 call and the April 95 put and bought the May 100 call and May 95 put to create two calendar spreads. Since the April options aren't going to be worth much tomorrow whatever the case, if IBM can stay in a relatively narrow range (between 93-103) this calendar will get even wider. I bought the spread for 1.13. As I type this, IBM is trading right around where it closed, so this should be a really good trade imo. The April options will be worthless and I'll have a "free" strangle on IBM for the next month. A set and forget play as long as nothing crazy happens overnight. Just sharing how I did this trade to profit from their earning with little or no risk. -D

Marc Eckelberry : 4/17/2007 5:24:04 PM

NQ might even head down to 1835/1837 if we lose 1842.50. But overall, I don't think we have seen the highs yet. Option noise now, with QQQQ 45 pin.

Marc Eckelberry : 4/17/2007 5:09:42 PM

Consolidation day tomorrow, but nothing for bears to change the trend.

Keene Little : 4/17/2007 4:42:36 PM

I haven't been able to check any numbers yet but YHOO is tanking after hours. But both INTC and IBM are up so it's got traders confused. NQ has dropped 4.50 here but still well within the closing range.

Jane Fox : 4/17/2007 4:12:23 PM

IBM's net rises 8% to $1.84 billion as revenue rises 6.6% to $22.03 billion

Keene Little : 4/17/2007 3:53:09 PM

The DOW did a perfect tap of 12780 and is now dropping from the retest of its broken uptrend line. But it's all very small price action here and hard to take much away as we head into the close. I continue to like the short setup but recognize the risk around important earnings tonight.

Other than the techs and small caps, they're going to hold the DOW and SPX in the green for one of the longest winning streaks on record. But at what cost? Lagging techs and small caps is a sign of nervousness amongst the more aggressive traders. That could easily result in a huge relief rally tomorrow if INTC, IBM and YHOO give some good guidance but at this moment it's a warning flag, especially with the potential completions in the EW counts.

Keene Little : 4/17/2007 3:21:46 PM

Small move here but the DOW has now broken its uptrend line from April 12th. A retest that fails at 12780 would be the kiss goodbye.

Keene Little : 4/17/2007 3:15:28 PM

Right now there's a big negative divergence on INTC's 60-min chart at today's high vs. last week's high and that supports the wave count calling today's high as the 5th wave.

Keene Little : 4/17/2007 3:13:32 PM

INTC is approaching its downtrend line from December 2005 through the high in January 2007, currently near 21.10 (high so far is 20.96). The wave pattern looks like it's completing the move up from its March low. Whether that leg up is the start of something more bullish or the completion of a larger corrective pattern from last November's high is difficult to determine. But it looks like it's ready for at least a correction.

So we could get either a pullback or the start of the next leg down. The pattern suggests a disappointing reaction to tonight's earning's report (and it will have been yet again a good ol' fashioned earnings run). But bear beware--how often have we seen a stock/index park itself under resistance such as its downtrend line only to gap above and make a run higher? I don't discount that possibility here.

Keene Little : 4/17/2007 2:48:45 PM

With INTC, IBM and YHOO reporting tonight, a rally into the close would not necessarily be bullish. No fear in front of earnings (I almost typed warnings--Freudian slip?) could be dangerous for bulls. That's of course pure speculation. I like a short play setup here based on the EW pattern and the bearish divergences on the charts.

Keene Little : 4/17/2007 2:43:52 PM

If at any time the DOW now drops below 12760, that's it, the rally's over, confirmed with a break below 12750.

Keene Little : 4/17/2007 2:41:08 PM

A picture is worth a 1000 words so here's the wave count for the move up from April 12th on the DOW. I'm showing Fib projections for the 5th waves based on the size of the 1st waves. DOW 12796 lines up nicely and then if that's exceeded I have 12814 (two equal legs up from March 14th) and then 12826 and 12859 based on projections shown on this chart. So far I'm liking that 12796. A little pullback as I type should be followed by one last push higher and then I'd short it (but sometimes the last little push is a no-show). Link

Marc Eckelberry : 4/17/2007 2:34:23 PM

YM stays closing hour bullish above 12813.

Keene Little : 4/17/2007 2:31:02 PM

Just keep in mind that, bullishly, the best thing that could happen here is a consolidation under the DOW's previous 12796 high. That would suggest the bulls are building up their ammo supply for the final assault.

Keene Little : 4/17/2007 2:25:11 PM

A quick look at the DOW, since it's been acting stronger today, shows the possibility that the decline actually finished up the 4th wave correction within the move up from yesterday afternoon. That says we should get one more minor new high (as the 5th of the 5th wave in the move up from April 12th). That last little 5th wave = the 1st wave at 12796, once again showing the importance of that level. If tagged I'd short it again if you get stopped out of your previous attempt.

Keene Little : 4/17/2007 1:50:17 PM

If ES can get another little leg up here in its bounce, two equal legs up is at 1479.50, only a tick away from the 1479.75 level I pointed out earlier for where to look to short it.

Jane Fox : 4/17/2007 1:45:32 PM

These are telling you you should stay on the short side, however, the number system I reference (all markets are a +6) and the AD line are telling you to not trade at all. Link

Jane Fox : 4/17/2007 1:42:20 PM

CHICAGO (MarketWatch) -- The Chicago Mercantile Exchange plans to launch electronically traded wood pulp futures and options contracts in the third quarter of this year, the exchange said Tuesday.

No specific start date was set, and both the pulp futures and options contracts would trade exclusively on the Globex electronic platform, CME said in a press release.

The cash-settled contracts for northern bleached softwood kraft pulp will be based on the PIX NBSKP Europe Index by FOEX Indexes Ltd., the exchange said. FOEX is a private company based in Finland that specializes in pulp and paper price indexes.

The new CME contract will be for 20 metric tons of NBSK pulp, with a tick size of $10 per contract, the exchange said.

Keene Little : 4/17/2007 1:39:12 PM

I've got somewhat limited time today to watch this closely since I'm working on tonight's Wrap (filling in for Jim), but I've got ES in front of me while working on other charts. If the 1st wave down from today's high is now complete, a 50% retracement is at 1479.75 which is at the 4th wave of the decline (a typical retracement level). If we get a nice 3-wave kind of bounce up to that level and it looks like it could roll over, that's where I'd hit it short. The stop needs to be a new daily high.

Keene Little : 4/17/2007 1:14:03 PM

We've now got a small impulsive decline off today's high so unless it extends lower we should get a bounce now to correct it. That bounce, hopefully a nice simple 3-wave bounce, will be the one to short.

Keene Little : 4/17/2007 1:12:14 PM

Mother MER continues to be a good stock to keep an eye on. It trades well technically so I watch it for a lot of clues to help me confirm or negate some EW patterns I'm watching in the broader market. Back at the end of February I had posted this chart to show how I thought the price pattern would play out--to finish the decline and then get a bounce to correct it: Link

Here's the same chart with today's prices: Link Obviously the bounce has gone a little higher than I had projected but not nearly as high as the broader markets. Now, cleaning it up a little and showing the form of the bounce and its Fibs, you can see how well it's trading: Link

On the last chart I labeled the bounce as an a-b-c correction to the impulsive decline from the February high. If this wave count is correct, an impulsive 5-wave move, followed by a corrective 3-wave move, will be followed by another 5-wave move (down in this case). The a-b-c bounce achieved equality at $90 and a 62% retracement of its decline is at $90.34. Today's high is $90.69. It might have a minor push higher to finish but that last little push is what often doesn't show up in the very short term wave patterns.

Based on this chart alone I'd mortgage my house and get short the market. I'm only kidding of course--my wife would never let me mortgage the house. However we have agreed to sell our first born. Now if I could only find her.

Jane Fox : 4/17/2007 12:56:42 PM

If you want to go long I would pick YM. Link

Marc Eckelberry : 4/17/2007 12:55:16 PM

They will try and pin QQQQ 45 as much as they can, so be aware of that when we get run ups.

Keene Little : 4/17/2007 12:52:32 PM

I like the fact that each index tagged its Fib target so short is the place to be now. Whether it leads only to a relatively minor pullback or is the start of something more serious can't be known yet. We'll take it one leg at a time and let price lead the way.

Keene Little : 4/17/2007 12:50:57 PM

We got the sell signal with the break below the last low. A little consolidation followed by a new low should lead to a bigger bounce to correct this drop. That will then be the next good shorting opportunity.

Marc Eckelberry : 4/17/2007 12:49:00 PM

Retraces to 5 DMA are likely, but end of week could see QQQQ 46.

Keene Little : 4/17/2007 12:35:50 PM

SPX has already tagged its 1474 Fib target so a break below 1471 would be a sell signal. Confirmation would be a break below yesterday afternoon's low at 1465.

Keene Little : 4/17/2007 12:34:35 PM

The DOW, the most bullish index today (does that make you suspicious?) is inching its way higher towards the Fib target and February high at 12796. The final 5th wave in the move up from April 12th looks very close to completion. While it can always extend, meaning a spike higher, we're definitely in the "close enough" territory and I think the risk is to the bulls from here. Today could set up for an afternoon reversal but we won't know that until we start getting some lower lows to negate the string of higher lows. This is an update to the DOW 30-min chart I posted yesterday with the setup. Link

Marc Eckelberry : 4/17/2007 12:33:35 PM

No one in the world pays more for a prescription drug than us, and we are the biggest users, What's wrong with that picture? It's called the drug lobby and our polluted congress.
Short pharmaceuticals if Clinton gets the nomination.

Marc Eckelberry : 4/17/2007 12:31:57 PM

I fork out 1700 every 3 months and I am sick of it. When I see that we spend more than Canada out of our budget on a percentage basis (and theirs is free) and still have to pay these premiums because drugs get to sell full retail to us American suckers, you know there is a revolt in the wings.

Marc Eckelberry : 4/17/2007 12:29:11 PM

Clinton will get the presidency. I think everyone is ignoring how fed up people are with health care costs and that's her shtick. No preference here, just my gambler's wager.

Keene Little : 4/17/2007 12:17:55 PM

Interesting chart Marc. I can tell you who I'm NOT voting for--Giuliani. Anyone supported by my favorites--the big banks--will not be supported by me. It doesn't matter what party they're in. I can only imagine the collusion between the government and the stock market with someone like him in office. And that's my political commentary for the day.

Marc Eckelberry : 4/17/2007 12:00:26 PM

Wall Street 2008 backings: Link

Keene Little : 4/17/2007 11:51:22 AM

I'll use the COMP to show the possbility for a bullish follow through to the rally that could take us into the end of the month. This price projection says you need to be very careful about trying to short the market, or if you're short and hanging on for a turn back down. Using a parallel up-channel and some Fib projections for the move up from the March low we could see the COMP head as high as 2600. Link

Needless to say that would inflict some pain on bears so don't let a move go much against you if you're short. This is not my preferred EW count, especially with some of the weak internals and non-confirmations I'm seeing, but we all know how the market can rally far longer and higher than it would appear capable of doing. For a reminder, look at the November-February rally. That sucker should have died a lot sooner than it did, and even the correction to that was quickly reversed higher again.

Jane Fox : 4/17/2007 11:41:40 AM

Today the best trade is on the sidelines.

Jane Fox : 4/17/2007 11:40:35 AM

Here is how the markets are trading in relation to their PDRs. This is very bullish folks even though the internals are not all that bullish. Link

Marc Eckelberry : 4/17/2007 11:35:08 AM

I mentioned at the beginning of the month that the markets will not behave the same way in April/May as last year. I still believe that, so don't bet the farm short. Day trades only.

Keene Little : 4/17/2007 11:28:07 AM

The NYSE, which has been very bullish, came within 3 points of a Fib target at 9655 where it has two equal legs up from its March 28th low. As shown on the chart it's also at the top of a parallel up-channel for part of the move up from the March low. If the rally continues then the next upside target is 9711. Link

Some other Fibs that often come into play are based on projections off the previous move, in this case the decline from the February high. A 127% projection of that move is at 9532 (already exceeded) and then the 138% projection at 9701.

Marc Eckelberry : 4/17/2007 11:26:04 AM

On another subject, I saw a great film last night, a screening of "La Vie en Rose", a bio of Edith Piaf, set to be released in June. It is a masterpiece. Some of you might be familiar with her talent and very tragic life. Don't miss it when it comes out. The actress playing Piaf is simply riveting and the music, of course, still survives the test of time.

Keene Little : 4/17/2007 11:16:57 AM

Whenever you see the DOW up 56 points and the RUT is in the red, if you're long you should be worried.

Keene Little : 4/17/2007 10:59:40 AM

The setup is looking good so far. The 15-min charts are showing some negative divergences. If at any time price now drops back below the last pullback around around 10:40 that should be the signal that the rally is over.

Marc Eckelberry : 4/17/2007 10:59:11 AM

The only problem right now is gravity and opex Wednesday coming up. We are a little far from 10 DMA's.

Marc Eckelberry : 4/17/2007 10:46:14 AM

Buy the dips when we are going up. How much more complicated does one have to make trading? Do you think successful traders are brain surgeons? By now, you should have made enough money so that you have all the ammo in the world to flip short when the trend changes.

Keene Little : 4/17/2007 10:40:50 AM

SPX only needs another 2 points to get up to its first Fib target in the 1474 area so again, a small consolidation followed by a push up into the area could set up the short play. Check for negative divergences against this morning's highs.

Marc Eckelberry : 4/17/2007 10:39:32 AM

Watch 1847 on this pullback. Key mid level.

Marc Eckelberry : 4/17/2007 10:39:13 AM

The only thing bearish I see is mild profit taking after a huge run-up. We are due for some more, but if NQ 1847 holds, it might be it for now. Lots of chop with big guns due out tonight. It was another day to buy the dip. That is your line in the sand today, 1842.75, overnight low. Still higher lows and higher highs for now.

Jane Fox : 4/17/2007 10:32:39 AM

This is going to be a tough day to trade.

Keene Little : 4/17/2007 10:28:59 AM

While the COMP approaches its Fib target at 2525 the DOW is also approaching its first Fib target that I showed on its chart at 12779. If the market consolidates now for a little while and then pushes higher into those price areas then it'll be time to start watching for a potential short entry.

Keene Little : 4/17/2007 10:26:00 AM

We've often talked about the bearish connotation when the generals are not leading the charge. We saw it building during the November-February rally where the bigger caps such as the NDX were lagging the troops such as the COMP. It's never a healthy sign when the troops are sent out ahead to get shot. And now I'm seeing the same thing as they both head for their February highs. It's relatively minor but right now the COMP is closer to its February high than is the NDX.

With the COMP slightly ahead it will be the first to hit a potential Fib target at 2525, only 5 points away, which is where it will have two equal legs up from the March 14th low. For the NDX it's about 13 points away just under 1850. Needless to say it would be a disappointment to the bulls if this bounce results in a double top against the February high.

Jane Fox : 4/17/2007 10:11:37 AM

YM to new daily highs as ES probes its daily highs.

Jane Fox : 4/17/2007 10:05:21 AM

It looks like the bears are losing control of the reins. AD volume to new daily highs and the VIX is falling. However, the AD line at +204 makes it still very unclear.

Jane Fox : 4/17/2007 9:58:58 AM

As far as the open number system is concerned, you would not be long until price traded above the daily open and would not be short until price got below the weekly open. Link

Keene Little : 4/17/2007 9:56:17 AM

We're getting a fairly sharp pullback but without a larger leg up from yesterday afternoon's low I don't think the rally is over. If anything I'd be tempted to buy this pullback. A drop below yesterday afternoon's lows would have me thinking otherwise so that can be used as a stop level if you're long.

Jane Fox : 4/17/2007 9:46:02 AM

AD line is now -209, AD volume falling and the VIX is climbing. It is looking like the bears are taking control.

Keene Little : 4/17/2007 9:44:08 AM

Home builders are rallying smartly this morning--up +2.1% this morning. Ah, another call for a bottom. Get used to it.

Jane Fox : 4/17/2007 9:43:36 AM

Very unclear as to which side to trade so far so just hold on to your trading mouse for now.

Jane Fox : 4/17/2007 9:39:19 AM

VIX is probing its PDL so that is a very clear sign "Bear beware."

Jane Fox : 4/17/2007 9:38:17 AM

Ad line in an innocuous +296 but AD volume is climbing. No one has the ball this morning.

Jane Fox : 4/17/2007 9:29:23 AM

WASHINGTON (MarketWatch) - The output of the nation's factories, mines and utilities fell 0.2% in March, held back by a 7% decline in utility output due to warmer weather, the Federal Reserve said Tuesday.

Factory output rose 0.7%, the most since December's 1.1% gain. Output of business equipment jumped 0.8%.

Capacity utilization - a key gauge of inflationary pressures - fell to 81.4% from a revised 81.6%.

The figures were weaker than forecast by economists surveyed by MarketWatch, who were looking for a 0.1% drop in output and utilization rate of 81.8%.

Industrial output is up 2.3% in the past year. Output in December, January and February was revised lower by a total of 0.4 percentage points.

Jane Fox : 4/17/2007 9:18:27 AM

The jtHMA spreadsheet hasn't changed much from yesterday but most noticeable is the red Gold 60/120 charts, which could be a good place for a long however the daily charts would not let me take a long here. At this point I would need the daily charts to turn red before I took a long, if not already in. Link

Keene Little : 4/17/2007 9:12:45 AM

With the big jump in the futures after the 8:30 reports it's looking good for the next leg up that I showed on the charts below. Ideally we'll get the spike up, consolidate for a couple of hours and then a final minor push higher. That's the high I would then watch for an opportunity to test the short side (it should be met with lots of negative divergences). I think playing the long side could be tricky considering the bulk of the move is probably already over pre-market here.

Jane Fox : 4/17/2007 9:08:46 AM

SAN FRANCISCO (MarketWatch) -- Despite continuing fallout from subprime loans and clouds over the U.S. economy, three banking giants are expected to report relatively strong first-quarter earnings this week.

That would be a welcome sign. Financials as a group could be facing a range of headwinds as the year progresses. Those include rising inflation, slower economic growth and possible interest-rate hikes.

"Their valuations certainly aren't cheap and their business fundamentals likely face more challenges in coming quarters," said Anthony Welch, a portfolio manager at Sarasota Capital Strategies Inc. "They definitely could use some momentum heading into the rest of the year."

Jane Fox : 4/17/2007 9:05:50 AM

WE now await:

9:15a.m. March Industrial Production. Previous: +1.0%.

9:15a.m. March Capacity Utilization. Previous: 82.0%.

Jane Fox : 4/17/2007 9:04:41 AM

I did not close out my GLD position yesterday because once I revisited my trading plan for this ETF I realized that closing out the position at that time would not be following my plan.

US$ falling to new yearly lows and Oil in rally mode bodes well for Gold.

Bonds are in rally mode as well. Link

Jane Fox : 4/17/2007 8:59:57 AM

Oh my goodness the markets really liked the CPI data out at 8:30 and are all comfortably above their respective PDRs. ES and ER2 are at yearly highs. Link

Jane Fox : 4/17/2007 8:54:41 AM

WASHINGTON (MarketWatch) -- Boosted by warmer weather, construction of new homes increased 0.8% in March to a seasonally adjusted annual rate of 1.518 million, the highest level this year, the Commerce Department estimated Tuesday.

Building permits also increased 0.8% in March to a seasonally adjusted annual rate of 1.544 million.

The figures were slightly higher than expected by economists surveyed by MarketWatch. The median estimate for housing starts was 1.50 million, while permits were expected to be at 1.52 million.

Housing starts are down 23% from March 2006, while permits are off 26%.

Jane Fox : 4/17/2007 8:51:34 AM

Dateline WSJ - WASHINGTON -- A sharp drop in apparel prices and soft gains in housing and medical costs kept underlying inflation in check last month, a government report showed, though overall inflation accelerated on the back of higher energy prices.

Meanwhile, home construction unexpectedly climbed in March and permits for future building posted the first increase in three months, a sign of hope for the struggling housing sector.

The data suggest the status quo on official interest rates, with inflation still uncomfortably high but not so much of a worry to trigger rate increases amid signs of weaker economic growth.

The consumer price index rose 0.6% in March, the Labor Department said Tuesday, up from February's 0.4% rise. But the core CPI, which excludes volatile food and energy prices, advanced just 0.1%, half the previous month's increase. Unrounded, the CPI rose 0.608% last month. The core CPI advanced 0.061% unrounded.

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