Option Investor
Printer friendly version
Jeff Bailey : 7/26/2007 10:55:06 PM

Print, tear off, and go to dinner with some reading! See you in the morning.

Jeff Bailey : 7/26/2007 10:54:10 PM

LIFO ... Last In First Out

Jeff Bailey : 7/26/2007 10:52:00 PM

Olin (OLN) ... Earnings Press Release Link

Keene Little : 7/26/2007 11:45:06 PM

Friday's pivot tables: Link and Link

We expected to see some volatility pick up but maybe not quite this much or this fast. It could be the way things will be for a little while. The steep decline this week, considering where we were in the EW pattern for the rally up from March, tells me the rally is finished. Now I'm trying to figure out how this has started down which will determine when we get the next big bounce.

Interestingly, the techs (as I'll show on the NDX daily chart) show the possibility for another new high--it hasn't been damaged like the DOW and SPX, or the RUT for that matter. But expecting new highs out of the techs without the others is probably a bit of a stretch.

Starting with the DOW and SPX 60-min charts they're hopefully not too confusing but I'm showing two ideas for where we are in the pattern. The first, in dark red, says we finished a 5-wave move down from last week's high and now will get a 3-wave bounce into early next week before tipping back over again:
DOW: Link
SPX: Link

I'm showing a 50% retracement for the DOW and a 62% retracement for SPX, which are just guesses at this time. Both bounces would be in 62% of the time for the 1st wave down giving us a high by the end of the day Tuesday. SPX sold off harder so it could bounce harder. I'm also using broken trend lines or previous 4th waves for retracement levels as a guide.

The alternative is shown in light red and calls today's decline the 3rd of a 3rd wave down (and the strength of the decline supports this wave count). That calls for a small consolidation (relatively speaking) in wave-(iv), another drop to finish the larger 3rd wave, another consolidation in wave-4 and then another low to finish the 5-wave move down. In this wave count the DOW might finish near 13100 and SPX near 1440 by mid week next week before setting up the larger bounce. It takes a rally above Wednesday's low to tell us we're into the dark red wave count, looking for the bigger bounce into early next week.

Using the NDX daily chart, you can see how price did a fast drop back down to the bottom of its parallel up-channel from March. It has not overlapped the green wave-i high near 1948 on June 20th. This keeps alive the bullish wave count and the failure to break its uptrend line keeps the uptrend intact. Therefore the bullish wave count potential has to remain on the chart, and be respected. Link

The bearish wave count says we'll get a bounce just like in the DOW and SPX and then roll over to new lows. A break of 1948 is the key level for the bears as it would negate the bullish wave count and be a break of its uptrend.

The RUT's daily chart shows my best guess on this one, based on the internal pattern of the decline. It would look best with a 4th wave consolidation followed by a new low into next week to finish a 5-wave move down and set up a bigger bounce. But the pattern is not clear enough on this to make a confident prediction. It might have more exaggerated moves but should follow the broader averages. Link

Jeff Bailey : 7/26/2007 10:36:45 PM

YM daily pivot levels for Friday ... 13173, 13363, Piv= 13574, 13764, 13975.

Jeff Bailey : 7/26/2007 10:34:20 PM

Whew! If I weren't so tired, I'd try scalping a YM long here at 13,560. Stop 13,544. Target 13,625.

Jeff Bailey : 7/26/2007 10:09:36 PM

Don! I'm done now. BUT EVERYONE probably has at least ONE STOCK, or ONE POSITION that isn't quite "going their way" right now (LONG and SHORT, or PUT and CALL).

Good gravy!

USEG, CROX ... should I go on?

For STOCKS that aren't quite going your way, this is where you, I, would have the BULK of our capital tied up.

Options that are NOT overleveraged, well, thats SMALLER amount of capital, and it has some DURATION (depending on maturity/expiration).

OI Technical Staff : 7/26/2007 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 : 7/26/2007 9:59:28 PM

Sector Bell Curve comparison (6/7/07-7/26/07) at this Link

OK Don! 6/07/07 was "the day" that WB traded $53.00.

The STOCK gave a "sell signal."

The SECTOR was out of favor and outside of SAVIngs&loan was one of the weakest SECTORS.

The BPOEX was at 86% bullish, the BPSPX was at 75.95% bullish.

REGARDLESS of what I think, or what Mr. Thompson thinks, its what the MARKET thinks that we want to monitor/OBSERVE.

Jeff Bailey : 7/26/2007 9:47:42 PM

Bear Alert! ... Today's action has Dorsey/Wright's narrower S&P 100 Bullish % (BPOEX) falling 9% to 67% (68% on 2-box chart).

It would take a measure of 66% to achieve "bear confirmed" and a reversing higher measure of 74% to get back to "bull confirmed."

Still working on things Don!

Jeff Bailey : 7/26/2007 9:32:37 PM

OK ... here we go ... Story time (fiction, or true?)! ...

Back in May I attended a "road show" hosted by Wachovia. Speaker was a Mr. G. Kennedy Thompson.

Very good discussion about Wachovia's future and how dynamic the banking industry has become, and how Wachovia has set itself up for the future.

Now, I manage a $20 billion blended fund of large cap stocks. You know ... S&P 100 or S&P 500 stocks only. It is in the prospectus. If it isn't "in there," then it isn't "in here."

So, I get back to the office, crunch some numbers and things look good. Yeah, this credit crunch has banks out of favor, but let's see what the market thinks (MID-May).

So, I pulls-me-up a pointy-finger chart of WB Link with the stock trading (see Don's question) $55.

Hey! That's not bad (I say to myself in May). Stock is ABOVE its longer-term bullish support trend ($52.00).

So ... let's SELL NAKED the July $52.50 puts, "just 100 of them" as I'm only willing to nip away with 10,000 shares at $52.50 - $?.?? = $52.00? (10,000 * $52) = $520,000.00. Probably won't see $51 anyway.

I think the "credit squeeze" will end soon enough!

Fast forward ... June (6) and July (7)

June ... Hmmm ... At $53, stock has given its first "sell signal" in, in, in .... 19-months. I'mmmmm not going to get too worried at this point. MAYBE the MARKET knows something I, or Mr. Thompson doesn't know. "Too late now" as I've been exercised at $52.50. That's OK! Still ABOVE longer-term trend.

July (7) ... Houston, we may have a problem.

Not that much of a problem though. SMALL POSITION, and this clown at OI has me somewhat hedged with some XLF puts. Just 25 though (25 * 100) = 2,500 shares. 2,500 * $37strike= $92,500 sector insurance.

It can't be the STOCK, so it has to be the SECTOR.

Fast forward ... to July 26, 2007


Speaking from the heart, and my trade blotter, TRADERS aren't going to be interested in BANKs. Brokers maybe as they've got more volatility. LOOK at WB's point and figure chart. Thirty-two columns of alternating X/O since the beginning of 2002? Sloooooow mover.

In fact! I forgot! I'm running a $20 bilion blended fund. I'm an INVESTOR.

I BUY stocks in bits, ACCUMULATE over time, but I DUMP them when they disappoint me, or the fundamentals change, usually within a SHORT PERIOD OF TIME.

Heck, my fund did buy some WB at $38 back in January (1) of 2003. Then I started building a position at $39, then some more at $44, then some more at $48 in October (A) of 2004. I dumped 1/2 of it at $50 in March (3) of 2005 and the rest at $52 in May (5) of 2005.

Now I'm probably going to dump the 10,000 shares from $52 IF the stock trades $46 as I'm assessing RISK to $38.

In "hindsight" the TECHNICAL break of LONG-TERM bullish support trend is BEARISH.

I can see from the WB chart that once it has given a "sell signal" like July (7) of 2002, it took 6-months before it gave a "buy signal."

In March (3) of 2005, it took 9-months before the stock gave a "buy signal."

If I can get a "bounce" to $51, or $52, what might I do?


So Don! THAT's the way I've learned to TRADE, or INVEST as a RETAIL/INSTITUTIONAL trader.

And I'm NOT managing a $20 billion blended fund.

I've dealt with several that do!

Jeff Bailey : 7/26/2007 8:25:47 PM

Still working on WB Don! (7:57:50)

Jeff Bailey : 7/26/2007 8:24:33 PM

Listening to CNBC? ... Talking about the VIX!

Jeff Bailey : 7/26/2007 8:10:48 PM

Listening to CNBC? ... "Investors are selling GOOD stock in order to pay for the downside pain."

Pretty close to ... fund manager SELLING some WB in order to lessen the pain.

Jeff Bailey : 7/26/2007 7:57:50 PM

Email Question: Jeff,

I'd be curious to know how a market professional looks at Wachovia (WB). From a business and fundamentals side they seem to do well: low p/e, high dividend, consistent earnings, successful and continuing mergers, no identified pitfalls. But The Street gives them no respect, the stock price is dormant. I know a couple people there, but they have no clue. The investor relations people say some analysts don't like Thompson (CEO), and that they are working hard to lobby The Street.

With this stock at 55 I sold some July NP's at 52.5 so I own that now. In 1998, when FTU was around, the stock was 45. Here we sit at 48. Is this a stock a trader would just walk away from because it has no momentum, and in this psychological climate for the financials, no chance of getting any? Would an investor-type hold it? What keeps a fund manager from wanting to own this stock? I'm just trying to figure out why I can't think like they do.

Thanks. Don


Don! Much of what you point out is probably true.

For instance ... I've said before here in the Market Monitor that I don't "trust," or have much confidence in Advance Micro Devices (AMD) CEO. Guidance is HORRIBLE (they'll be WAY LOW, or WAY HIGH) and can't be trusted. Many on "The Street" feel the same way (check # of analysts that follow them, then # that follow Intel).

So, yes, sometimes what Wall Street thinks of a CEO can influence a stock's performance.

Believe me! I started my career out with a FUNDAMENTAL shop. Sat right there as the ANALYST and the CEO went over next quarter's numbers. Sounded GREAT! Then next quarter came and things didn't sound anything like they were supposed to. ANALYST told us to dump the positions, DROPPED coverage of the stock. AFTER stock was already down 15%!

I don't know Thompson (CEO of Wachovia), or history with analysts.

Lobbying the street? Sometimes that's good. Gets the attention, but ANALYSTS will usually wait and see, especially when the SECTOR in under a watchful eye.

Now what I "do know something about."


Hey, remove 2 of the last three days and the "market" or SPX has been on a roll!

Good gravy! If you'd have told me three months ago that the SPX was going to trade 1,550 with the S&P Banks Index, or KBW Bank Index, "financials" as a whole were going to fall 5%, I'd have thought you were crazy!

But that's the SECTOR (as your question points out) has simply fallen OUT OF FAVOR (or lost bullish momentum).

Heck! XLF $33.88 ??? That's even BELOW my "guidance" of $34.50.

Is this a stock a trader would simply walk away from? ... YES! A bullish one at least.

An investor? No! 1998? That's about ten months (not 10 years) for Warren Buffett. He's probably nipping away at a few thousand shares each day.

What keeps a fund manager from wanting to own this stock? ... Probably NOTHING for a fund manager that ONLY manages a mutual fund that ONLY invests in banks/brokers/insurance. But a DIVERSIFIED fund manager that can move around to so many other areas? Remember! Each quarter a "Letter to shareholders" goes out and a PROSPECTUS showing just what stocks the fund manager holds. Anyone want to show BANKS as their top holdings right now? Take that a step further. Who owns mutual funds? You, me and a lot of investors. Are we pouring our money into a SECTOR bank/broker/insurance mutual fund right now? No (see SECTOR bullish %). Money is flowing OUT, so even a SECTOR fund manager is seeing REDEMPTIONS. He/she can't buy, even if they WANT to. In fact, they're SELLING their WEAKEST holdings, trying to hold onto their STRONGEST, but as each WEAKEST has been gotten rid of, what's a BANK fund manager going to do? At some point, he/she still needs to stay DIVERSIFIED, and ends up selling SOME of the STRONGEST "fundamental" holdings.

Do you see? Probably the BIGGEST problem with WB at this point is that MARKET PARTICIPANTS don't like the sector, and their simply isn't a lot of DEMAND.

Jeff Bailey : 7/26/2007 7:08:46 PM

Oh Ron! ... your question ...

Jeff Bailey : 7/26/2007 7:07:28 PM

Still not seeing OLN's earnings ... Link

Jeff Bailey : 7/26/2007 7:05:45 PM

CROX ... I said earlier that I "lost my INET Level II." Link

Sometimes I'll see SIZE at a "level" on my chart. Not so tonight without Level II.

SIZE at bid and offer can influence day traders. But be careful. PRICE often-times gravitates/elevates to the size.

I've gotten my fanny handed to me a couple of times when I first started "Level II trading" thinking I'd get in front of the size, certain it was the support/resistance level. When PRICE gravitated/elevated to the SIZE, and the SIZE suddenly gotten eaten up ... eyeballs pop open.

Usually takes about two or three times to learn that some of these things, and NOT make the assumption.

Jeff Bailey : 7/26/2007 6:52:04 PM

Couldn't explain the $59.00 "resistance" so find an interval like the 3-minute to try and provide the trailing support.

Jeff Bailey : 7/26/2007 6:50:25 PM

CROX a 3-minute interval chart with extended session "dynamic" Link

When there aren't any levels to trade at all-time highs (or 52-week lows), the "dynamic" that defines a range, then slices it up, is a trader's only way to assess risk/reward.

Jeff Bailey : 7/26/2007 6:36:36 PM

CROX $58.93 ...

Jeff Bailey : 7/26/2007 6:35:57 PM

Not willing to risk much in order to do so though.

It worked on the ACH via ACH-WF.

Sometimes admitting the "mistake" and going with the market gets you back to even.

While my goal is to always make money, sometimes a loss into break-even is better than a loss.

Jeff Bailey : 7/26/2007 6:33:38 PM

Thought we might be able to make back the $1.10 on the CQJ-UV.

Jeff Bailey : 7/26/2007 6:30:27 PM

3-minute interval chart, about as small as I'll go. Has 21-pd SMA at $58.55 now.

Jeff Bailey : 7/26/2007 6:28:59 PM


Jeff Bailey : 7/26/2007 6:28:52 PM


Jeff Bailey : 7/26/2007 6:28:38 PM


Jeff Bailey : 7/26/2007 6:28:01 PM

Day trade long stop alert ... for CROX $58.60

Jeff Bailey : 7/26/2007 6:27:29 PM

CROX $58.62 ... either kicks higher here or we're out.

Jeff Bailey : 7/26/2007 6:26:45 PM

Day trade long raise stop alert for CROX to $58.60

Jeff Bailey : 7/26/2007 6:21:32 PM

Day trade long extended raise stop alert ... for CROX to $58.50.

Jeff Bailey : 7/26/2007 6:20:24 PM

CROX $59.00

Jeff Bailey : 7/26/2007 6:20:10 PM

I've "lost" my INET Level II ... so can't see depth of orders.

Jeff Bailey : 7/26/2007 6:18:02 PM

Day trade long extended raise stop alert ... for CROX to $57.90.

CROX $58.80

Jeff Bailey : 7/26/2007 5:49:21 PM

Slap a "dynamic" extended from $50.09 to $63.00.

38.2% $58.06. 19.1% $60.53.

Jeff Bailey : 7/26/2007 5:48:03 PM

Day trade long extended session alert ... for 1/2 position in CROX $58.50 here. Stop $57.50. Target $60.

Jeff Bailey : 7/26/2007 5:37:52 PM

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

Today's trades
09:37:06... Long an additional SPY Sep $148 Put (SFB-UR) at the offer of $3.40.

11:06:35 ... IF it goes MNTHLY R2, then what about selling an out the money put?

11:41:08 ... Sold a COVERED SPY Aug $146 Put (SFB-TP) at the bid of $1.80.

11:55:33 ... explain what the heck we've just done. But what many institutions do too! Especially AGGRESSIVE SHORTS! Even when they're on the RIGHT side of a trade.

1:36:27 ... What the heck! CLOSED out the Crox CROX Sep $42.50 Put (CQJ-UV) at the bid of $2.20. $50.28 +2.09% today?

02:20:28 ... Sold a COVERED VLO Sep $62.50 Put (VLO-UZ) at the bid of $2.35.

2:22:18 ... A place to look for INSTITUTIONAL selling of premium. (portion of reasoning for 02:20:28 as well as my target was $63.50. Earnings Tuesday will be "strong," but what about future crack spread Gasoline/Oil by December?

02:31:52 ... Closed out one (1) SPY Sep $148 Puts (SFB-UR) at the bid of $4.80. (see 2:22:18) and target of $146. So soon? Lock'em in!

Jeff Bailey : 7/26/2007 5:03:03 PM

Holy CROX! Link ... $61.50 extended.

They make rubber shoes!

Jeff Bailey : 7/26/2007 4:58:28 PM

Closing Internals found at this Link

Jeff Bailey : 7/26/2007 4:53:11 PM

WSJ - Bear Stearns Seizes Assets In Troubled Hedge Fund

Jeff Bailey : 7/26/2007 4:52:24 PM

CME - Nikkei 225 Stock Index Futures Settle Down 525 Points

Jeff Bailey : 7/26/2007 4:42:54 PM

Olin Corp. (OLN) $19.84 -3.31% ... taking their sweet time.

Jeff Bailey : 7/26/2007 4:40:40 PM

To be truthful, I had NO idea CROX was reporting earnings today. I looked at calendar last week and didn't see them this week.

Jeff Bailey : 7/26/2007 4:39:30 PM

May have just saved ourselves $220.00 ... thanks to the VIX/VXN

Jeff Bailey : 7/26/2007 4:38:49 PM

Crocs, Inc. (CROX) $50.59 +2.72% ... released for trade. $58.10 extended.

Jeff Bailey : 7/26/2007 4:38:09 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 7/26/2007 4:32:03 PM

CROX ... Earnings Press Release Link

Jeff Bailey : 7/26/2007 4:30:50 PM

Crocs, Inc. (CROX) $50.59 +2.2% ... halted for trade.

Jeff Bailey : 7/26/2007 4:02:13 PM

Strong volume at the big board today. Might be a record.

Jeff Bailey : 7/26/2007 4:00:27 PM

OLN-AD's are $1.50 x $1.85 at the close

Jeff Bailey : 7/26/2007 3:59:18 PM

Olin Corp. (OLN) $19.91 -2.97% ... earnings after the close. 6 analyst's EPS consensus is $0.36. 2 analyst's Revenue consensus is $852.75 million.

Jeff Bailey : 7/26/2007 3:55:44 PM

YM 13,565 juuuuuust above MONTHLY Pivot.

Jeff Bailey : 7/26/2007 3:55:11 PM

For you DIA call option bulls, hold off until tomorrow. I'll be looking to see with VIX/VXO do at the open and what DIA PRICE does.

BULL ramp setup would be a VIX/VXO that tags MONTHLY R2, with DIA near MONTHLY S1. Then play the Aug $134 with a target of $137.

Jane Fox : 7/26/2007 3:55:02 PM

The NDX tags its 50EMA. Link

Jane Fox : 7/26/2007 3:52:56 PM

It looks like the bears will be able to close SPX below 1490 but not by much. That is quite the tail the bears are leaving behind. Link

Jeff Bailey : 7/26/2007 3:49:19 PM

Don! I'll try and cover your question from this morning regarding WB later. Stock is at "bottom" of 10-week trading band. Sector is "bear confirmed" at 32%. WB's bearish vertical count is $38.00.

SECTOR is WB's problem if your fundamental analysis is correct. Which, I also believe to be true!

Tab Gilles : 7/26/2007 3:44:18 PM

A look at some of the financials:

GS Link XLF Link MER Link MS Link C Link JPM Link AXP Link

Jeff Bailey : 7/26/2007 3:29:26 PM

Earlier today ... Tyco withdraws debt sale, Gazprom postpones offering ... MarketWatch Story Link

Jeff Bailey : 7/26/2007 3:27:00 PM

VIX 21.42 ... 50% "dynamic" ... in no-man's land.

Jeff Bailey : 7/26/2007 3:24:28 PM

VIX 21.55 +19.06% ... has "darted" back under MONTHLY R2 last 10-minutes.

Jeff Bailey : 7/26/2007 3:19:26 PM

We shall see ... 42-minutes until 04:00 close.

Jeff Bailey : 7/26/2007 3:18:40 PM

RUT.X 789.29 -2.83% ... threatens to hold a close above 785.55.

Jane Fox : 7/26/2007 3:14:53 PM

Dateline WSJ - It's like Johnny Cash's "Ring of Fire" - stocks just keep going "down, down, down."

Widening credit-market worries forced the major indexes down more than 2% each on Thursday, with the losses getting steadily bigger as the session went on.

The Dow Jones Industrial Average fell 375.55 points to 13409.52, on track for its second-biggest point loss of the year after the 416-point meltdown on Feb. 27. The S&P 500 declined 46.08 to 1472.01, and the Nasdaq Composite Index was off 75.01 to 2573.16.

Trading curbs, which are meant to reduce volatility, were put into effect on the NYSE by midmorning. Volatility was high, with the VIX index over 22, continuing a trend that has gone on for more than a week. And breadth was poor, with decliners outnumbering advancers on the NYSE by more than 13 to one.

Jeff Bailey : 7/26/2007 3:14:10 PM

03:00 Internals found at this Link

Jeff Bailey : 7/26/2007 3:09:06 PM


Jeff Bailey : 7/26/2007 3:08:52 PM

So much trading ...

Jeff Bailey : 7/26/2007 3:08:44 PM

Excellent, excellent comments/observations from CNBC's Rick Santelli ... so much news today.

Jeff Bailey : 7/26/2007 3:02:43 PM

03:00 Market Watch found at this Link

Keene Little : 7/26/2007 3:01:34 PM

I've got to leave and will miss the last hour. Yikes, stay short or stay away. I keep wondering if there will be short covering into the close but if nothing shows up in the last hour it could get even uglier. I mentioned in last night's Wrap that the abolishment of the uptick rule on July 5th could exacerbate any selling we get now. I wonder how much of today's selling would have been thwarted if the uptick rule was still in place. Probably not much different but the timing is interesting--just as the wave count was showing us nearing a top for the market. Be safe. I'll update charts later this evening.

Jeff Bailey : 7/26/2007 2:50:18 PM

RIMM $221.53 -1.69% ...

Jeff Bailey : 7/26/2007 2:50:00 PM

AAPL $143.00 +4.18% ...

Jeff Bailey : 7/26/2007 2:49:35 PM

CROX $49.15 -0.20% ... slips red. CQJ-UV $2.35 x $2.55.

Jeff Bailey : 7/26/2007 2:38:50 PM

I refuse to mention it ... but one of the MM bullish profiles is hang'n tough despite INDU -2.69% ... it's a "defensive" type of stock.

Keene Little : 7/26/2007 2:36:16 PM

Boy, this is just one ugly day. There's little question at this point that we're in the 3rd of a 3rd wave down and in case you had any doubt as to whether or not we've seen THE market high, today should answer that question with a resounding YES! The 3rd of a 3rd wave down wave count means we will continue to stair-step lower over the next few days. No big bounce until we finish unwinding this count to the downside.

Jeff Bailey : 7/26/2007 2:31:52 PM

Swing trade put close out alert! ... one (1) of the S&P Depository Receipts SPY Sep $148 Puts (SFB-UR) at the bid of $4.80.

SPY $147.19.

Remember March 7 and the SFB-PN

Jeff Bailey : 7/26/2007 2:28:16 PM

SPY probes its 150-day SMA.

Jeff Bailey : 7/26/2007 2:27:12 PM

CROX $49.72 +0.95% ... softening up a bit.

Jeff Bailey : 7/26/2007 2:26:16 PM

VLO alert! retraces 38.2% of its 9/25/06 low close to recent 7/10/07 high close. Remember recent option montage observation!

Jeff Bailey : 7/26/2007 2:22:39 PM

SPY $147

Jeff Bailey : 7/26/2007 2:22:18 PM

VIX alert! 22.48 ... MONTHLY R2

Jeff Bailey : 7/26/2007 2:21:11 PM

VIX.X 22.18

Jeff Bailey : 7/26/2007 2:20:57 PM

ZPY-XN are $7.80 x $8.00.

Jeff Bailey : 7/26/2007 2:20:28 PM

Swing trade sell covered put alert! ... Let's sell one (1) of the Valero Energy VLO Sep $62.50 Puts (VLO-UZ) at the bid of $2.35.

VLO $66.58 -5.04% ...

Jane Fox : 7/26/2007 2:17:26 PM

... as we make new daily lows.

Jane Fox : 7/26/2007 2:17:12 PM

I do not think today will be a day to try any long positions. I will take counter trend trades but today the internals are so bearish it is just not worth your while.

Jane Fox : 7/26/2007 2:15:56 PM

This is a sight for bear eyes. Link

Keene Little : 7/26/2007 1:59:20 PM

I can't say that I see enough bullish divergences at these lows to get me excited yet about the buying opportunity. At this point I think it would be safer to wait for better evidence of a break of the downtrend. And if it doesn't turn back up soon, DOW 13300 here we come.

Keene Little : 7/26/2007 1:41:35 PM

If we've found our bottom then the current pullback should be a good buying opportunity, stop below today's low. SPX is riding down the broken downtrend line along today's highs (following the opening drop).

Jeff Bailey : 7/26/2007 1:37:32 PM

CROX way too strong for this type of market environment. Cut the put loss while we have some premium/volatility.

Jeff Bailey : 7/26/2007 1:36:59 PM

VXN.X 21.15 +11.78% ...

Jeff Bailey : 7/26/2007 1:36:42 PM

VIX 21.36 +18.01% ...

Jeff Bailey : 7/26/2007 1:36:27 PM

Swing trade put close out alert ... the Crox, Inc. CROX Sep. $42.50 Put (CQJ-UV) at the bid of $2.20.

CROX $50.28 +2.09% ...

Keene Little : 7/26/2007 1:18:26 PM

Nice bounce. YM is up almost 90 points off its low. Funny how it looks like a tiny little bounce on my 30 and 60-min charts.

Jeff Bailey : 7/26/2007 1:15:58 PM

01:00 Internals found at this Link

Jeff Bailey : 7/26/2007 1:02:20 PM

01:00 Market Watch found at this Link

Keene Little : 7/26/2007 12:58:25 PM

I've got to step away for about 30 minutes. Getting a bounce now and a break above SPX 1490 would say the bottom just might be in. Any pullback is a good time to try a long against today's low.

Keene Little : 7/26/2007 12:44:55 PM

It's time. The bulls need to step in now or else...

Keene Little : 7/26/2007 12:43:42 PM

I'm getting way ahead of myself but it would be interesting if the DOW were to drop down quickly to the 13300 area since that would make a good neckline for a H&S topping pattern. You can see how the EW pattern fits H&S tops and why the 3rd wave is so strong--it's the one that breaks the neckline. Link

Jane Fox : 7/26/2007 12:42:53 PM

Internals are talking to you today. Link

Jeff Bailey : 7/26/2007 12:41:48 PM

TRIN alert! 1.05

Jeff Bailey : 7/26/2007 12:41:03 PM

Test for DWC analysis ... is RUT.X at 785.

Right? Right!

Jeff Bailey : 7/26/2007 12:40:13 PM

VERY nice overlap at 50% 14,799 and its 02/20/07 relative high CLOSE. 150-day SMA also rising at 14,821.

That's where I think IT is going near-term.

Keene Little : 7/26/2007 12:39:17 PM

Just for comparison, the DOW dropped about 750 points from its February high before getting a decent bounce. From its July high near 14022 that would takes us down near 13300. If SPX breaks 1480 we could get there sooner rather than later, as in the next day or two. But first I want to see if the bulls can step in soon and start driving this back up. Afterall, what a great buying opportunity (cough, sputter). Actually for a trade it could be.

Jeff Bailey : 7/26/2007 12:38:49 PM

Wilshire 5000 (DWC) 14,919 -2.43% ... has edged below its 38.2% (15,012) 03/05/07 low close to recent 7/16/07 high close.

Jane Fox : 7/26/2007 12:37:26 PM

SPX's 1490 support is breaking as well. Link

Jane Fox : 7/26/2007 12:36:17 PM

My goodness gracious!! Link

Jeff Bailey : 7/26/2007 12:35:58 PM

You see, right now, with RUT.X BELOW MONTHLY S2 and WEEKLY S2, now we want to focus on the CONVENTIONAL 38.2% as a support level.

Unfortunately, on Monday, I was still dealing with some back office issues and couldn't profile a put for the IWM.

We play the broadening of weakness yesterday and again today.

Jane Fox : 7/26/2007 12:35:12 PM

The obvious support I thought would hold on the DOW daily chart has not so now I will be looking for the 50EMA to hold up as support. Link

Jeff Bailey : 7/26/2007 12:32:38 PM

SPY daily interval chart with conventional CLOSE to CLOSE retracement, and MONTHLY Pivot retracement Link

RUT.X from last night Link . RUT.X's MONTHLY S2 at 799.97.

Keeps things RELATIVE!

Keene Little : 7/26/2007 12:31:48 PM

Let's see if SPX finishes its move to the downside today at or near 1481. Internal Fib projections for the move down today are lining up at the same level as the projection from last week's high (e.g., today's 3rd through 5th waves would equal the extended 1st wave at 1481.77 and the 5th wave would equal 62% of the 3rd wave (has to be shorter than the 3rd wave here) at 1480.00). It should also be accompanied by bullish divergences there and if so I'd be a buyer. Link

Jane Fox : 7/26/2007 12:31:43 PM

The AD line and volume are very bearish today and the bulls have not had a chance. I don't suspect that will change. Link

Tab Gilles : 7/26/2007 12:06:09 PM


VIX & VXN up.... Link Link

However...look at the NYLOW and NALOW? Link Link

Keene Little : 7/26/2007 11:55:43 AM

Did you catch the last line of Tab's post? "That there is the need to raise money at any cost now." This is why it will be a selling in all assett classes this time, with very few exceptions.

Jeff Bailey : 7/26/2007 11:55:33 AM

By selling one (1) of the COVERED Aug $146 puts, we're OBLIGATING ourselves to BUY 100 SPY for ... $146, or $146 - $1.80 = $144.20.

Jeff Bailey : 7/26/2007 11:53:05 AM

What the selling of the one (1) put is take us from "overweight" bearish, to a more "equal weight".

Tab Gilles : 7/26/2007 11:51:33 AM

$RUT weekly /Profund UltraShort Small Cap Fund UCPIX Refer back to 12/29/06 11:49 AM post; average cost basis $14.25, down about -8.7%. Link Link

$NDX / UltraShort OTC fund USPIX Average cost basis $13.58 currently around $11 down -19%. Link Link

The large cap techs have been holding up better than the small caps. Although the short funds have been down prior to entering the USPIX/UCPIX I recommended being long the UOPIX/UAPIX which were up 24.03% and 18.85% repectively (see 11/3/06 10:36AM post).

So, a $5,000 position in each fund back on June 27, 2006 going long...then rolling into the short funds on Nov/Dec. would now be worth approx. $5400 small cap and $5034 NDX.

Is this just another 5% pullback similar to March's or a larger well needed 10% correction?

Just heard Michael Metz, on CNBC, he commented that this is the unwinding of the Carry-Trade and that earnings or the economy is ireelevant. That there is the need to raise money at any cost now.

Keene Little : 7/26/2007 11:47:51 AM

One of the things I like about this setup is that a retest of the broken uptrend line from March would coincide with a retracement to the previous 4th wave (dark red wave-4 for yesterday's high) which is a very common retracement level.

Keene Little : 7/26/2007 11:45:57 AM

Next chance for the bulls to turn this around would be at or above 1481 (such as the June 1484 low). An extended 5th wave (if this is not the middle of the 3rd of a 3rd wave down) would go to 162% of the 1st wave so that projects to 1481. If this wave count is correct then we're setting up for a very big bounce, maybe back up to 1525 by Monday/Tuesday. This would be the GMOAP setup, for GrandMother of All Puts (thanks to Scott for that one). Link

Jeff Bailey : 7/26/2007 11:41:23 AM

VIX.X 20.80

Jeff Bailey : 7/26/2007 11:41:08 AM

Swing trade sell covered put ... let's sell one (1) of the S&P Depository Receipt SPY Aug $146 Puts (SFB-TP) at the bid of $1.80.

SPY $148.90

Keene Little : 7/26/2007 11:25:07 AM

Actually the more important level for SPX is 1484, the June low.

Jeff Bailey : 7/26/2007 11:23:28 AM

Program Trading Collars In ... Link

NYA.X 9,705.50 -2.26% (-224.86)

Jane Fox : 7/26/2007 11:23:26 AM

The only significant change on the jtHMA spreadsheet is that the DOW daily has turned red. Link

Keene Little : 7/26/2007 11:23:15 AM

The drop below this morning's first low is too much to be considered an ending move. Until proven otherwise, this is a day to short the bounces. We should be heading lower. But first SPX 1490 needs to crack.

Keene Little : 7/26/2007 11:20:31 AM

I don't pretend to understand the McClellan oscillator, but I do review it often. The divergence on aapl vs. price is startling. Not sure that it means anything, as the indicators haven't been helpful for a long time now, but was interested in your opinion on this. Thanks as always.

Good observation Lynne. The McClellan oscillator is very similar to the others--they show momentum and are most useful for identifying divergences at new highs and lows. On my daily chart of AAPL I show the negative divergence against RSI at the new highs. This one looks like another excellent longer term shorting opportunity: Link

Today's gap up would fit as an exhaustion gap for the 5th wave which has reached the top of its parallel up-channel. The wave count is now complete, price is at the top of the channel and the bearish divergence for the 5th wave against wave-3 is confirming the count. What's not to like about this chart from a bearish perspective?

Jeff Bailey : 7/26/2007 11:16:59 AM

11:00 Internals found at this Link

Jane Fox : 7/26/2007 11:08:52 AM

VIX to new daily highs supporting the markets new daily lows.

Jeff Bailey : 7/26/2007 11:07:00 AM

SPX 1,496.55

Jeff Bailey : 7/26/2007 11:06:46 AM

SPY 149.61

Jeff Bailey : 7/26/2007 11:06:35 AM

VIX.X alert! 19.91 ... 19.1% MONTHLY Pivot retracement.

Keene Little : 7/26/2007 11:04:50 AM

The thing to watch for here is for price to now chop its way lower as it's currently doing, with a minor new low and bullish divergences. If it all of sudden lets go to the downside do not try to buy the dip.

Jeff Bailey : 7/26/2007 11:03:13 AM

Narrow and big ...

Jeff Bailey : 7/26/2007 11:02:30 AM

11:00 Market Watch found at this Link

Jane Fox : 7/26/2007 11:00:21 AM

Although the Nasdaq composite broke support, Link I see that the NDX has not. Link

Jane Fox : 7/26/2007 10:58:25 AM

WASHINGTON (MarketWatch) -- Sales of new homes in the U.S. declined more than expected in June, falling 6.6% to a seasonally adjusted annual rate of 834,000, the Commerce Department estimated Thursday.

Sales are down 22.3% compared with June 2006. Most analysts don't expect any improvement in sales until next year at the earliest.

The sales pace in June was the lowest since March's 830,000, which was the lowest since 1999

Jane Fox : 7/26/2007 10:55:39 AM

Crude's fib retracement has a 61.80% retracement sitting right at the $67.00/bl support. Link

Jane Fox : 7/26/2007 10:48:31 AM

SPX has not broken support yet either. Link

Jane Fox : 7/26/2007 10:48:00 AM

DAX has not broken support yet. Link

Jane Fox : 7/26/2007 10:47:21 AM

Mid Caps have broken their support. Link

Jane Fox : 7/26/2007 10:43:28 AM

The last time the Russell tested its 200EMA (green dotted line) was way back on March 14th. Link

Keene Little : 7/26/2007 10:43:27 AM

A test of this morning's low for the DOW would also be a test of potential support at its uptrend line from March. Watch for a headfake break below it and then a rally (or not). Link

Jeff Bailey : 7/26/2007 10:42:30 AM

EIA Weekly Nat Gas Storage Table Link ... build of 71 Bcf

Jeff Bailey : 7/26/2007 10:41:03 AM

KBW Bank Index (BKX.X) 106.77 -1.85% ...

Jeff Bailey : 7/26/2007 10:40:33 AM

S&P Bank Index (BIX.X) 362.92 -1.85% ...

Jeff Bailey : 7/26/2007 10:39:28 AM

10-year Yield ($TNX.X) down 6.7 bp at 4.837% ...

Jeff Bailey : 7/26/2007 10:39:03 AM

SPX 1,499.09

Jeff Bailey : 7/26/2007 10:38:48 AM

December Fed Fund futures (ff07z) alert! 94.88 ... roughly 30% chance of 25 bp rate cut between now and December. Ticked here on 6/27/07.

Keene Little : 7/26/2007 10:19:50 AM

If the current bounce gets any bigger and then heads south again it could be a big drop (as opposed to the minor new low I just mentioned). The bulls want to see a test of the low (with a minor new low) to set up the long play. The bears want to see a bigger bounce (another 2nd wave correction to this morning's drop) and then let go to the downside.

Jeff Bailey : 7/26/2007 10:13:45 AM

NASDAQ-100 Heatmap Link

Jeff Bailey : 7/26/2007 10:11:44 AM

QQQQ $49.45 +0.10% ... gets green.

Keene Little : 7/26/2007 10:08:07 AM

For the less bearish scenario, looking for today's decline to finish the 1st larger degree wave down from last week's high, watch for one more minor new low with bullish divergences to set up the rally. In fact it could make for a very nice long play (back up to SPX 1525 area). Link

Jane Fox : 7/26/2007 10:07:33 AM

Finally the DOW daily jtHMA has turned red so we can start looking for a buy signal from this market as well. Link

Jeff Bailey : 7/26/2007 10:05:31 AM

NASDAQ a/d 500/2,180

Jeff Bailey : 7/26/2007 10:05:20 AM

NYSE a/d 334/2,707

Jeff Bailey : 7/26/2007 10:04:57 AM

10:00 Market Watch found at this Link

Jane Fox : 7/26/2007 10:01:54 AM

Even though we are very bearish the bulls were still able to stage a rally but not a lot of follow through. Link

Jane Fox : 7/26/2007 9:55:35 AM

NAZ support did not hold however. Link

Jane Fox : 7/26/2007 9:54:47 AM

Very interesting on how the bulls were able to come back with a vengeance and the DOW's support has mostly held. Link

Jane Fox : 7/26/2007 9:47:48 AM

This is very bearish. Link

Jane Fox : 7/26/2007 9:44:28 AM

VIX to new daily highs and AD volume to new daily lows. The bears have control this morning and I'm not sure if they will give it up.

Jeff Bailey : 7/26/2007 9:44:13 AM

VIX 19.55 +8.01% ...

Keene Little : 7/26/2007 9:45:21 AM

Small caps are getting annihilated--down 2%. SPX is new hitting the 1496 level that should tell us whether or not we're going to see sustained selling today.

Jeff Bailey : 7/26/2007 9:38:54 AM

Citigroup (C) $48.00 ... reversing lower double bottom sell signal.

Jeff Bailey : 7/26/2007 9:37:06 AM

Swing trade put alert for an additional one (1) S&P Depository Receipt SPY Sep $148 Put (SFB-UR) at the offer of $3.40.

SPY $149.70.

Jane Fox : 7/26/2007 9:33:49 AM

AD line is a very bearish -1202

Jane Fox : 7/26/2007 9:17:20 AM

Economic Reports yet to come today are:

10:00a.m. Conference Board June Help-Wanted Index. Previous: 27. 10:00a.m. June New Home Sales. Expected: -1.6%. Previous: -1.6%.

11:00a.m. Kansas City Fed Mfg Index. Previous: -2.

12:00p.m. Chicago Fed Midwest Mfg Index. Previous: -0.2%.

Jane Fox : 7/26/2007 9:16:27 AM

NEW YORK (MarketWatch) -- Apple Inc. on Wednesday reported a 73% increase in fiscal third-quarter profit, spurred by strong sales of its flagship Macintosh computers and iPods, as well as shipments of 270,000 of its new iPhones. Apple said it earned $818 million, or 92 cents a share, compared to $472 million, or 54 cents, a year earlier. Revenue rose almost 24% to $5.41 billion from last year's $4.37 billion.

Gross margins climbed to 36.9% from 30.3% a year ago.

Jane Fox : 7/26/2007 9:14:29 AM

WASHINGTON (MarketWatch) -- First-time jobless claims fell for a third straight week, another sign that the U.S. labor market remains healthy, according to government data reported Thursday.

The number of workers filing for state unemployment benefits fell by 2,000 to a seasonally adjusted 301,000 for the week ended July 21, the Labor Department said.

This marked the lowest level of claims in two months

Jane Fox : 7/26/2007 9:13:47 AM

WASHINGTON (MarketWatch) -- Capital spending by U.S. businesses weakened for a second straight month in June, while strong demand for airplanes pushed total orders for U.S.-made durable goods 1.4% higher, the Commerce Department reported Thursday.

Except for the red-hot aerospace sector, demand was tepid in June. Excluding transportation goods, orders fell 0.5%.

Orders for core capital equipment goods -- the kinds of things businesses invest in to increase their productive capacity -- fell 0.7% last month, on the heels of dropping by 1.5% in May. Read the full government report.

The government's report on durable-goods manufacturing was weaker than expected. Economists had been looking for a 2.5% increase in total orders, according to a survey conducted by MarketWatch

Jane Fox : 7/26/2007 9:10:00 AM

Crude broke the $77.00/bl overnight, which should help Gold but it sure doesn't seem to be. Even the fact that the US$ barely broke its PDH was not able to help Gold.

Notice how the DAX has broken its PDL along with the American Markets. Link

Jane Fox : 7/26/2007 9:03:27 AM

All the American Equity Indexes we watch here in the monitor broke their PDLs overnight. The support I was talking about yesterday looks like it will fail today. It is too early to say that the bulls are losing control of the reins but this interesting. Link

Keene Little : 7/26/2007 8:57:14 AM

Updating the SPX 30-min chart that I posted last night (below), here are the two bearish scenarios that I'm currently looking at (I don't see any bullish scenarios at this point): Link

Yesterday's bounce either finished a 4th wave correction in the decline from last week's high or it finished a 2nd wave correction within the 3rd wave down. If it's the former (labeled in light red) then watch for support at the bottom of its down-channel and a Fib projection (for equality between the 1st and 5th waves) at 1496.54. With futures down 18 points as I type, that would have SPX down to about 1500 so far.

If it's the more bearish 1-2, (i)-(ii) wave count that I show in dark red then like the banks did we should see SPX smoke down through the bottom of its down-channel. So at this point I'd say SPX 1496 will be your guide as to which scenario is playing out. Good luck.

Keene Little : 7/26/2007 8:33:41 AM

Somebody hit the down-elevator button last night. I had mentioned in the DOW 30-min chart last night (below) that it's possible to count the move down from last week's high as a 1-2, 1-2 wave count which calls for a strong 3rd of a 3rd wave down (which typically start with a big gap down).

If today we get a gap down followed by strong selling for the rest of the day then there will be little question as to what's playing out and it will mean you'll want to be short and hang on. On the other hand if this gaps down and runs a little lower but then finds buyers who drive it right back up to close the gap then we might have put in a temporary bottom. It could get interesting today.

Market Monitor Archives