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Jeff Bailey : 7/28/2007 1:28:28 AM

S&P 500 (SPX) 10-point box size chart Link

I think our period of recent history to study should be late May of 2006 (see 12:07:13 AM If I were to try and find a period tonight, that might be EQUIVALENT levels of RISK and WEAKNESS, it would have to be the 54% measure found in late May (5) of 2006.

So the BPSPX "tells me," or at least I analyze that it tells me, I might want to study the PRICE action and technical of the SPX during that time.

Right now, we see some SIMILARITY.

What might we look for?

One quick item, then I've got to get some rest.

The "reversal" in late May of 2006 was from 1,250 to 1,290.

That was a 40-point move, roughly $4 SPY. It was also a +3.2% move.

A SIMILAR SPX bounce from 1,460 would be equivalent to 1,460 * 1.032 = 1,506.

That's the SIMILARITY.

The DIVERGENCE would likely be a something more than a continual column of O to 1,440.

SHORTS, or PUT holders/buyers.

While I've done "OK" so far with SPY put profiles, do you see what I've profiled so far? The position I'm in. Does it make sense?

Bought 1 SPY put at $150.91 (~1,510 SPX). Then got a little more AGGRESSIVE with another at SPY $149.70 (~1,500 SPX). Then closed one out at SPY $147.10 (~1,470 SPX) and SOLD a COVERED SPY $146 puts for $1.80 (~1,440).

IF history repeats, do you know what I'm going to do? What might the MARKET do?

Jeff Bailey : 7/28/2007 12:50:13 AM

So what?! ... I'm trading PRICE!

Jeff Bailey : 7/28/2007 12:36:39 AM

So ... if the BPSPX is AS WEAK and AS RISKY as it was in late May (5) of 2006, what are we looking for?

We're looking for two things!

HISTORY to REPEAT, or DIVERGENCE from recent history.

Blah! Recent history more than 1-year ago!

C'mon now ... you have to get in the mindset of an institutional trader/investor.

Jeff Bailey : 7/28/2007 12:30:48 AM

Now, I promise you. With the S&P 500 Bullish % (BPSPX) I analyzed it QUANTIFIABLY. Quantifiably: 3 + 3 + 3 = 9. Quantifiably 4 + 4 + 1 = 9.

Anecdotally 5 + 5 + 5 = 9.

Jeff Bailey : 7/28/2007 12:26:35 AM

OK ... now we can perhaps begin to comprehend the difference between RISK and weakness/strength.

Two of the most difficult beliefs any trader, or investor can fathom is that the MARKET is NEVER WRONG. Sure, it (or market participants that make up the market) may overdo things on the upside and the downside, but trying to "fight" the herd can be difficult. Sometimes VERY COSTLY.

The second most difficult belief to grasp is the belief that there is NO BETTER analyzer of RISK than a MARKET!

If a MARKET perceives RISK, it sells it, and capital always flows to those areas of a market (gold, silver, bonds, real estate, stocks, oil, cash) where the LOWEST amount of RISK is found. Not just this minute, or day, or month, but often-times 6-to-9 months out.

For many, that's INVESTING! For an institutional investor/trader, it usually takes at least 6 months at a minimum to build a position.

Aha! But even though you and I KNOW how institutional investors/traders view things, you and I probably don't have institutional-type money.

We're probably looking more for shorter-term moves and not trying to tie up our capital for 6-to-9 months. Especially here in the Market Monitor.

Jeff Bailey : 7/28/2007 12:07:13 AM

Bullish % Table that I keep Link

The NYSE Bullish % (BPNYSE) is the most heavily followed bullish % by institutions Link ... As you look at the above table, this very broad market bullish % did reach a recent inflection high of 74.76% (envision more than 3,000 point and figure charts. The "buy signal" pile had about 2,243 charts in that pile). On 6/27/07 it reversed lower to "bear alert" (bear alert is when a bullish % falls from above 70% to below 70%). On Thursday, 7/26/07 it achieved "bear confirmed" status (column of O exceeds prior column of O). It would currently take a 3-box reversal higher to 58% to see "bear correction" status. It would take a measure of 76% to achieve "bull confirmed" status.

The S&P 500 Bullish % (BPSPX) is the second-most followed bullish % Link ... As you look at the above table, this broad market bullish % did reach a recent inflection high of 78.96% in late May, early June. I have shown what some point and figure analysts would see as "bull correction" status with BLUE circles, where even well above 70%, a 3-box reversal down from a "bull confirmed" status could be viewed as a bull market correcting, or "bull correction."

At Friday's close, the same level of RISK as that found in September (9), but internals still weakening.

RISK: How is RISK addressed with the bullish %? RISK is measured between 0% and 100%, and since this is a BULLISH % (we could call it BEARISH % too, but flip the numbers around) an analyst that follows the bullish % simply views 54% today, is the same as 54% a month ago, a year ago, 10-years ago.

If 54% of the stocks in the basked are on a "buy signal," then how is that any different that 54% of the stocks on a buy signal at any other point in time?

It is no different, but we'll take in other observations to see if the markets are removing risk (falling bullish %) at other levels rlative to history.

For instance, see the golden-brown circles at the 54% levels? Those are periods where we can QUANTIFIABLY say the S&P 500's internals were not only showing the SAME levels of RISK, but the were also JUST AS STRONG.

A "bull correction" at 54% in November (B) of 2005, was the same as a "bull correction" in July (7) of 2005, and that was the same as a "bull correction" in September (9) of 2006.

If I were to try and find a period tonight, that might be EQUIVALENT levels of RISK and WEAKNESS, it would have to be the 54% measure found in late May (5) of 2006.

See the "bear confirmed" status in February (2) of 2006, then an entry for May (5) at 62%, which fell all the way down to 50% by June (6) and then 48% before the 3-box reversal back up to "bear correction" by July (7)?

Keene Little : 7/27/2007 10:44:58 PM

Monday's pivot tables: Link and Link

I'm working on some charts and will get the rest posted by Sunday night. For now here's a DOW 30-min chart updated after the drop to a new low Friday afternoon: Link

First thing to notice, regardless of the wave count, is the descending wedge pattern over the past day with the bullish divergence to go with it. This is getting ready to pop back up.

The dark red wave count calls the end-of-day drop to a new low as the end of the move down from the July 19 high. It would be counted as a quick succession of 4th and 5th waves after the steep 3rd of a 3rd wave down to Thursday's low. This wave count calls for a big rally next week to correct the decline. It would set up an outstanding shorting opportunity later in the week, but a great long play until then.

The light red wave count calls the descending wedge as the 5th of the 3rd wave which needs another up-down sequence to finish it. Then another consolidation in wave-4 to be followed by a final low perhaps to around 13100 by mid week. This would then be followed by the big bounce correction of the decline.

The bullish divergence says shorts are the ones at risk now. A break of the top of the wedge, as per the dark red wave count, would be the signal that the decline is finished. Otherwise look for the market to continue to struggle for a few more days before a rally can get some footing.

OI Technical Staff : 7/27/2007 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 : 7/27/2007 9:33:19 PM

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

BSC $123.18 -0.86% ... falling further and further below its bearish vertical count of $136. May suggest that the "credit crunch" is more significant than first thought? Chrysler bond deal taken by the banks. Tyco withdraws $1.5 billion debt offering on Thursday due to "unfavorable conditions in the debt markets."July Trade Blotter of CLOSED Trades found at this Link

Both SFB-UR long trades were HIGHLY tied to the bond market news/developements and confirming technicals. One close out and other covered put still looks like they were closed out early.

Gut feel, and VERY SLIGHT observation of new low "firming" has me looking for a short-term oversold bounce early next week. But that bounce is going to find selling, and with things just starting, yes just starting to weaken internally, I don't think the summer lows are here.

Jeff Bailey : 7/27/2007 8:58:32 PM

Closing Internals found at this Link ... A real "bid puller" in the last 45-minutes of trade. SPX -18 points.

New Lows try to "firm," but that only suggests some short covering at this point. New Highs continue to fall off, and that suggests the broader market selling now starts to have bulls selling their "favorites." This action tends to happen when losses begin to build more than previously anticipated.

Jeff Bailey : 7/27/2007 8:11:19 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 7/27/2007 4:11:16 PM

YM 13,286 ... tags MONTHLY S1

Jeff Bailey : 7/27/2007 4:09:04 PM

TRIN went 1.99

Jeff Bailey : 7/27/2007 4:07:51 PM

That was NOT a bullish-looking close at all.

Jane Fox : 7/27/2007 4:02:06 PM

Everyone have a great weekend.

Jeff Bailey : 7/27/2007 4:00:10 PM

Wilshire 5000 (DWC) 14,726.97 -1.41% ... darts below 50% retracement of 3/05/07 low close and recent high close.

Jeff Bailey : 7/27/2007 3:55:38 PM

All red to the close ...

Jeff Bailey : 7/27/2007 3:37:24 PM

Will see how things end up, but the WEAKEST sectors of late show some green today.

NYSE's number of new lows juuuuuuust better than yesterday's and Wednesday's.

NASDAQ's 276 better than yesterday's, but not better than Wednesday's.

Jeff Bailey : 7/27/2007 3:33:24 PM

03:15 Internals found at this Link

Keene Little : 7/27/2007 3:26:41 PM

Today's excitement is too much for me to handle. I have to leave early and get some rest so that I have the energy to play after work. Actually I need to get to a couple of stores before they close. I'll get some charts updated tonight and then look at it again on Sunday night (not much of a change from last night's). Have a great weekend.

Jeff Bailey : 7/27/2007 3:18:27 PM

03:15 Market Watch found at this Link

Jane Fox : 7/27/2007 3:17:08 PM

Here is the updated jtHMA spreadsheet. As soon as the weekly turns red I will no longer take long swing trades until the charts get back in sync however, I will exit my longer term positions in 401(k)s. Link

Jeff Bailey : 7/27/2007 3:12:58 PM

If I can get my QCharts session restarted, I'll place DDM in Market Watch (remove DIA near-term).

Jeff Bailey : 7/27/2007 3:04:50 PM

Disclosure ... I held bullish position in DDM prior to profile.

Jeff Bailey : 7/27/2007 3:04:14 PM

Swing trade long filled alert! ... on the DDM.

Jeff Bailey : 7/27/2007 3:02:43 PM

Swing trade long setup alert ... for 1/2 position in the Ultra Dow30 ProShares (AMEX:DDM) $93.35 -1.56% ... should they trade $93.02, or $93.55. One fill cancels the other.

Stop goes $90.50. Target a 2-day bounce to $97.00.

Keene Little : 7/27/2007 3:02:31 PM

It's looking like we could get a little larger 3-wave bounce which for PSX would have two equal legs up at 1485 now. Then perhaps another down-up sequence on Monday to set up the next leg down: Link

Jeff Bailey : 7/27/2007 2:57:02 PM

December Fed funds futures alert! (ff07z) 94.95 ... 80% probability of 25 basis point rate cut by end of year.

Jeff Bailey : 7/27/2007 2:52:30 PM

Dow Diamonds (DIA) $133.90 -0.60% ...

Jeff Bailey : 7/27/2007 2:51:39 PM

Ultra Dow30 ProShares (AMEX:DDM) $93.02 -1.77% Link ...

Jeff Bailey : 7/27/2007 2:41:14 PM

US House Passes Multibillion-Dollar, 5-Yr Farm Bill

Jeff Bailey : 7/27/2007 2:30:06 PM

PHF should be releasing its updated NAV from yesterday's close. After the Chrysler deal, probably takes a hit, and somebody's already seen it today. Link

Jeff Bailey : 7/27/2007 2:22:52 PM

CROX $55.79 +10.27% ... CQJ-UV $0.65 x $0.75.

Jeff Bailey : 7/27/2007 2:21:22 PM

Still, might give short-term option traders an idea of how volatility plays into things, benchmarked from a price in the underlying security.

Jeff Bailey : 7/27/2007 2:20:17 PM

Current OPEN MM Profiles that I've made and Watch List found at this Link ... slapped on a MAN-HR Level II. Haven't been watching it to know if the offer came down to $0.25 or not. SEC rules have me booking closure at stated offer of $0.35 @ 01:01:07.

Keene Little : 7/27/2007 2:14:02 PM

If SPX makes it much above 1484 on this bounce then it'll be possible we'll get the larger upward correction as per the dark red count shown in this updated 30-min chart: Link Until then I think we'll see a continuation of the sideways consolidation before heading lower again next week.

Jeff Bailey : 7/27/2007 2:06:35 PM

MAN $81.08 -5.66% now ...

Jeff Bailey : 7/27/2007 2:06:16 PM

Somebody got filled on 5 of the MAN-HR at $0.25.

Keene Little : 7/27/2007 2:05:00 PM

The afternoon bounce in SPX will have two equal legs up at 1482.25 so about another 6 points. That would be the level I'd look to cover a long if you took at the last low and reverse short again. Any drop back below 1470 from here would be bearish and could be an indication that new lows are coming. But for now we're just doing the slow cycling up and down as part of the sideways consolidation.

Jeff Bailey : 7/27/2007 2:03:04 PM

JNJ at #10 is $60.12 -1.37% ... not showing the relative strength today that it did yesterday.

Jeff Bailey : 7/27/2007 2:02:03 PM

Big 10 have top 3 up, 4-8 down.

Jeff Bailey : 7/27/2007 2:01:15 PM

INDU breadth is 7 up, 23 down.

Jeff Bailey : 7/27/2007 2:00:31 PM

Having seen YM peg DAILY Pivot, then DAILY S1, here at 13,454 is the "toughest" trade.

Jeff Bailey : 7/27/2007 1:57:30 PM

My mindset near-term is that the LOWER treasury yield action (mentioned earlier this week) has been DEFENSIVE. 10-year's DAILY Pivot is 48.01.

Jeff Bailey : 7/27/2007 1:56:00 PM

10-year ($TNX.X) up 0.7 bp, call it unchanged at 4.784%.

Jeff Bailey : 7/27/2007 1:51:36 PM

RUT.X 785.26 -0.78% ...

Jeff Bailey : 7/27/2007 1:49:36 PM

Pacholder High Yield (PHF) alert! $9.49 -6.50% ...

Jeff Bailey : 7/27/2007 1:43:49 PM

Somebody got some OLN-AD from $2.00 to $2.15 today.

$2.00 x $2.40 with OLN $20.74 +4.53% ... it sure wasn't me. :(

Jane Fox : 7/27/2007 1:34:17 PM

The internals are certainly telling us the bears have the ball. Link

Jane Fox : 7/27/2007 1:31:30 PM

It is turning into a slow summer Friday afternoon and I think all the best daytrading opportunities are mostly over.

Jeff Bailey : 7/27/2007 1:24:44 PM

01:00 Internals found at this Link

Jeff Bailey : 7/27/2007 1:05:06 PM

01:00 Market Watch found at this Link

Jeff Bailey : 7/27/2007 1:01:46 PM

VIX 22.71 +9.49% ...

Jeff Bailey : 7/27/2007 1:01:28 PM

Manpower (MAN) $80.50 -6.32% ...

Jeff Bailey : 7/27/2007 1:01:07 PM

Swing trade NAKED CALL buy it back alert ... I'm going to have us buy back the Manpower Inc. MAN Aug $90 Call (MAN-HR) at the offer of $0.35 ($0.15 x $0.35).

Free up any MARGIN requirement.

Those with "larger accounts" that may have plenty of equity, can sit it out though.

"Smaller account" can maybe work the spread for say, go with a bid of $0.20, or $0.25 and see if you get a taker that is not displaying an offer (every buy or sell an option at displayed bid/offer and get a better fill that you were expecting?) Not all bids/offer are displayed Level II.

Jeff Bailey : 7/27/2007 12:52:54 PM

Yesterday's Bullish % action. I've noted "Status Changes" of MARKETs and SECTORS.

Jeff Bailey : 7/27/2007 12:49:17 PM

Not only has the a/d line been weak, but BPALL (think NYSE and NASDAQ) now seeing some meaningul signs that supply (O) is outstripping demand (X).

Jeff Bailey : 7/27/2007 12:47:51 PM

NYSE Summation ($NYSI) Link ... measures RATIO of advance/decline on the big board.

Jeff Bailey : 7/27/2007 12:47:00 PM

NASDAQ Summation ($NASI) Link ... measures RATIO of advance/decline.

Jeff Bailey : 7/27/2007 12:45:02 PM

Bear Confirmed alert! ... Yesterday's action had Dorsey/Wright's broadest-of-broad All Bullish % (BPALL) falling from "bull correction" status "bear confirmed." 50.03%.

Jeff Bailey : 7/27/2007 12:41:38 PM

Bear Confirmed alert! ... Yesterday's action had Dorsey/Wright's rather broad Optionable Bullish % (BPOPTI) falling from "bull correction" to "bear confirmed" status.

Many institutions will ONLY buy/hold stocks that trade with options. When those stocks weaken, PUT options are used to hedge positions.

Jane Fox : 7/27/2007 12:41:01 PM

SAN FRANCISCO (MarketWatch) -- Gold futures fell Friday to touch a three-week low, ready to end the week with a loss of more than $26 an ounce, with pressure coming from renewed strength in the U.S. dollar and sharp declines in the broader stock market.

"Precious metals remain under pressure here with economic data, along with government-related entities, most likely supporting the U.S. dollar," said Peter Spina, chief investment analyst at GoldSeek.com.

In late morning trading, gold for August delivery was down $4.30 at $658.50 an ounce on the New York Mercantile Exchange. It touched $657.30, the contract's weakest intraday level since July 6.

Prices were trading $26.20, or 3.8%, below the week-ago closing level of $684.70.

Jane Fox : 7/27/2007 12:40:15 PM

NEW YORK (MarketWatch) - Treasury prices turned higher at midday Friday, pressing yields lower, as new rumors about possible hedge fund worries linked to the subprime lending sector put the safe-haven bid back in the market.

Jeff Bailey : 7/27/2007 12:35:24 PM

Now tie in those NYSE NH/NL indications 11:41:05 post and Columns S, T, AD, AE, AF.

Jane Fox : 7/27/2007 12:35:17 PM

The DOW's low yesterday was 13335 and so far today it has been 13310 - and as I type the DOW is making new daily lows.

Jane Fox : 7/27/2007 12:34:24 PM

SPX's PDL was 1465 and so far today's lows have been 1463 close enough to say yesterday's lows have held - so far.

Jeff Bailey : 7/27/2007 12:32:44 PM

Bear Confirmed alert! ... Yesterday's action had Dorsey/Wright's very broad NYSE Bullish % (BPNYA) falling further from "bear alert" to "bear confirmed."

DEFENSIVE TEAM on the field.

Jeff Bailey : 7/27/2007 12:25:13 PM

Wow!

Jeff Bailey : 7/27/2007 12:23:58 PM

Permian Basin Trust (PBT) $14.17 +0.85% ... would be nice to see Nat Gas prices firm to higher.

Jeff Bailey : 7/27/2007 12:22:56 PM

Hmmm ... Nat Gas traded sideways April and May, but fell off the table in June. Must have been net long.

Jeff Bailey : 7/27/2007 12:19:57 PM

Looks like Natural Gas ... down under "Merchant"

Jane Fox : 7/27/2007 12:18:53 PM

The Russell 2000 breaks its PDL but so far the DOW, SPX and NDX have been able to find the required buyers at their respective PDLS.

Jeff Bailey : 7/27/2007 12:16:48 PM

CEG's Earnings Press Release Link

Jeff Bailey : 7/27/2007 12:15:50 PM

CONSTELLATION ENERGY 2Q NET JUMPS 25%

DJ- Electricity utility posts profit of $116.3 million, or 64c a share, as revenue grows 10% to $4.12 billion, on continued strong results from its nonregulated power generation unit. Earnings include a loss of 14c a share related to hedges.

CEG $86.31 -1.38% ... what kind of hedges?

Keene Little : 7/27/2007 12:15:34 PM

Two equal legs down in SPX's pullback from this morning's high is at 1463.45. Watch to see if support is found there for a scalp long play. It could head back up to around 1480-1485 if we end up doing a sideways triangle consolidation today and Monday.

Jeff Bailey : 7/27/2007 12:14:25 PM

CLEAR CHANNEL 2Q NET CLIMBS 20%

DJ- Clear Channel's net income rises to $236 million, or 48c a share, as revenue rises 5% to $1.78 billion. Billboard unit revenue increases 12% to $836.7 million. On adjusted basis, it earns 42c a share, 2c shy of Wall Street expectations.

CCU $36.92 +0.46% ...

Jeff Bailey : 7/27/2007 12:13:13 PM

INGERSOLL RAND 2Q NET MORE THAN TRIPLES

DJ- Manufacturing company's net income climbs to $964.1 million, or $3.17 a share, from $313.5 million a year earlier, as revenue from its international markets offset a soft domestic market. Results meet expectations.

IR $47.86 -5.60% ...

Jeff Bailey : 7/27/2007 12:11:40 PM

BEAR STEARNS SEIZES ASSETS IN HEDGE FUND (update)

DJ- More than a week after a troubled hedge fund operated by Bear Stearns was unable to meet a margin call, or request for additional cash or collateral, lenders at the brokerage have seized most of the remaining assets in the troubled hedge fund.

Jeff Bailey : 7/27/2007 12:10:48 PM

CITI SEES FREDDIE, FANNIE SUBPRIME LOSS AT $4.7B

DJ- Citigroup says falling prices on subprime mortgage bonds have cut the value of such securities held by Fannie Mae and Freddie Mac by $4.7 billion. But those losses might not be realized because prices could recover.

Jeff Bailey : 7/27/2007 12:10:21 PM

SOWOOD CAPITAL HIT WITH BIG BOND LOSSES

DJ- Jeffrey Larson's hedge fund is down about 10% so far this year and is selling positions to raise cash to deal with ongoing difficulties in the credit markets and cover potential margin calls. Source says Sowood has so far met the margin calls.

Jane Fox : 7/27/2007 12:05:57 PM

PDLs are now been tested. Will they hold? Link

Keene Little : 7/27/2007 11:41:13 AM

If this is to be just a consolidation kind of day then watch for support near yesterday's lows. It might even make for a good scalp play on the long side. The light red wave counts on my DOW and SPX 60-min charts posted last night are looking like the ones.

Jeff Bailey : 7/27/2007 11:41:05 AM

NYSE, NSDQ, SPX and RUT New High/New Low Table that I keep at this Link

Comments to follow ...

Jeff Bailey : 7/27/2007 11:21:51 AM

11:00 Internals found at this Link

Thursday's Internals Link

Jeff Bailey : 7/27/2007 11:03:18 AM

11:00 Market Watch found at this Link

Jeff Bailey : 7/27/2007 11:00:13 AM

Session high on CROX has been $59.54.

Jeff Bailey : 7/27/2007 10:58:41 AM

Any CROX bulls out there?

Might go back and take a look at 7/29/07 MM and RIMM.

Jeff Bailey : 7/27/2007 10:56:43 AM

Watch Listed Novastar (NFI) $4.40 ... NOT down 75%. Stock looks to have closed about $4.48 yesterday.

Jane Fox : 7/27/2007 10:56:31 AM

Oh goodness gracious the Wilshire 5000 weekly is turning red. That means I will be taking the funds in my 401(k) out of the market. Link

Jane Fox : 7/27/2007 10:54:19 AM

I find it amazing that will all the bullish we have seen so far today that the overnight highs have mostly held. Link

Jeff Bailey : 7/27/2007 10:53:39 AM

VXO 22.81 +4.77% ... DAILY Pivot 22.38

Jeff Bailey : 7/27/2007 10:53:07 AM

VIX 20.82 +0.38% ... DAILY Pivot just ahead at 21.13.

Jeff Bailey : 7/27/2007 10:52:22 AM

YM 13,473 ... NOW the risk at DAILY 61.8%.

Jeff Bailey : 7/27/2007 10:51:44 AM

Potential REWARD didn't begin until a move above DAILY Pivot.

Jeff Bailey : 7/27/2007 10:50:54 AM

THAT was a bad trade for the YM long this morning.

Jeff Bailey : 7/27/2007 10:48:35 AM

With volatility high ... anything a WB long can do with covered calls?

Jeff Bailey : 7/27/2007 10:47:56 AM

Nice dividend yield ...

Jeff Bailey : 7/27/2007 10:47:11 AM

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

Don! WB has been in the "Watch List" for a couple of weeks too. It is/was #6 weight in XLF.

Jane Fox : 7/27/2007 10:47:03 AM

And the Mid Caps are bearish as well. Link

Jane Fox : 7/27/2007 10:46:06 AM

Of course on the other hand there is the Russell 2000 and it is clearly bearish. Link

Jane Fox : 7/27/2007 10:45:20 AM

NDX has also not broken its support at 1950. Link

Jane Fox : 7/27/2007 10:43:17 AM

Although the DOW did break the resistance that I thought would turn to support, this market has only returned to its trading range from early May. I would not discount the bulls until I see a close below this range. Once this happens I will turn much more bearish but until then like I said before I will not discount the bulls for they have been too strong to think they have given up the ghost. I will need a lot of confirmation before I become bearish. Link

Keene Little : 7/27/2007 10:39:36 AM

If SPX rallies back up to 1490 watch for potential resistance there at the bottom of its broken parallel down-channel. Link This is often a resistance level on rebounds. Either that or 1494 where the bounce off yesterday's low will have two equal legs up. But draw a trend line along the lows and highs since yesterday's lows and you'll see a small ascending wedge with the top now near 1490.

Jane Fox : 7/27/2007 10:37:21 AM

Adding to McMillan's commentary. I saw SPX's break of 1540 as back to the trading range and not all that bearish but the break and close below 1490 was bearish. Notice now it is not able to break back above 1490. Link

Jeff Bailey : 7/27/2007 10:33:48 AM

YM 5-minute interval chart Link

Jane Fox : 7/27/2007 10:32:42 AM

Here is McMillan's weekly commentary.
Several factors came together this week to produce a very nasty decline. The over-riding technical factor, in my opinion, was the breaking of the 1535 level on $SPX. If you'll recall, when both the Dow and $SPX broke out to new all-time highs (was it really only two short weeks ago?), $SPX left behind a well-defined support level at 1535-1540. This past Tuesday, when the market started its sharp decline, it was clearly noticeable that selling accelerated greatly as soon as the 1535 level was penetrated on the downside.

The equity-only put-call ratios have been neutral of late, as they have not trended in either direction. True, they are on the lower part of their charts, which is overbought territory, and there were sell signals a month or so ago, but recent action has not been conclusive from these indicators. Now, the standard ratio is back on a sell signal again.

Market breadth has not been a particularly useful indicator for some time. It has mostly just followed whatever the market was doing. But in the last couple of weeks, breadth diverged from the broad market. It did not rise to new highs when the Dow and $SPX did. But now breadth has become more meaningful. Currently, both breadth is extremely oversold. While this means that sharp, but short-lived rallies are possible, it is most definitely not a buy signal. Some of the worst declines occur while conditions are "oversold."

Volatility has continued to rise. $VIX spiked up to above 23 today, its highest reading since June 2006 -- and then April 2003 before that. It closed at 20.74, 2.62 below its peak. A spike peak in $VIX would be a buy signal. It hasn't quite qualified for that yet -- and often the very first spike peak is not the eventual peak -- but a close below 20 by $VIX would qualify as a spike peak buy signal. To summarize the technical indicators then: the $SPX chart is bearish, having broken out on the downside; breadth is deeply oversold, but not yet on a buy signal; $VIX is potentially about to give a spike peak buy signal; and the equity-only put-call ratios are bearish. This adds up to an intermediate term bearish signal. However, because of the extreme oversold conditions in both $VIX and breadth, sharp but short-lived rallies are possible. One plausible scenario is that the market rallies enough to satisfy the short term signals and work off the oversold conditions, and then declines to retest today's lows near $SPX 1465. If that holds and if the put-call ratios can roll over to buy signals, that might be the end of the decline. If not, a true correction -- which historically has been defined as a decline of 10% -- might well emerge, taking $SPX down to 1400 or slightly lower.

Jane Fox : 7/27/2007 10:29:19 AM

WASHINGTON (MarketWatch) -- With gasoline prices falling and stock markets hitting nominal highs during the month, the mood of U.S. consumers brightened in July, Reuters and the University of Michigan reported Friday.

The consumer sentiment index rose to a reading of 90.4 from 85.3 in June. It marked the best reading since February.

The index stood at 92.4 in mid-July.

Jeff Bailey : 7/27/2007 10:27:53 AM

RUT.X 792.94 +0.18% ...

Jeff Bailey : 7/27/2007 10:27:25 AM

DAILY Pivot 13,574 stronger than MOTHLY Pivot 13,551.

Jeff Bailey : 7/27/2007 10:26:11 AM

YM long stop alert 13,540

Jeff Bailey : 7/27/2007 10:22:23 AM

Until YM gets above DAILY Pivot, going to keep a tight stop on things. WIDE DAILY Pivot today.

Jeff Bailey : 7/27/2007 10:20:40 AM

YM long raise stop alert ... to 13,540.

Jane Fox : 7/27/2007 10:17:45 AM

Here are the DOW jtHMA charts and as you can see they are not giving a buy signal yet and I don't suspect we will get on until next week. Link

Jane Fox : 7/27/2007 10:15:59 AM

Only ER has been able to break its overnight highs so far. Link

Jeff Bailey : 7/27/2007 10:15:10 AM

Stop goes 13,540. Target 13,640.

Jane Fox : 7/27/2007 10:14:11 AM

WE have the VIX to new daily lows and AD volume to new daily highs. Oh and BTW both AD line and volume are now above 0. The bulls are back guys.

Jeff Bailey : 7/27/2007 10:13:58 AM

YM long alert here at 13,565.

Jeff Bailey : 7/27/2007 10:11:45 AM

What we should also find is that institutional traders are going to also note the premium for options. You I buy 1, 5, 10, 20-lots. They buy 100, 200, 500 lots. Prices look to have risen .... ~20%.

One reason perhaps we've seen such heavy equity volumes lately.

Jane Fox : 7/27/2007 10:09:20 AM

These are painting a bullish picture but the AD line and volume are still below 0. Link

Jeff Bailey : 7/27/2007 10:08:30 AM

10:05 Market Watch found at this Link ... Wasn't getting a QQQQ feed.

Jane Fox : 7/27/2007 10:06:34 AM

AD volume is below 0.

Jane Fox : 7/27/2007 10:06:24 AM

AD line is a bearish -560 but was down to -1494 so it has improved.

Jeff Bailey : 7/27/2007 10:02:55 AM

YM 13,510 ... here

Jeff Bailey : 7/27/2007 10:02:30 AM

Hmmm ... here's 6/28/07 11:00 Market Watch Link

VIX was 15.54.

Check out the indices.

Jeff Bailey : 7/27/2007 9:58:18 AM

The point here is VIX 20.49 , VXO 21.91 and VXN 19.60.

If looking to BUY CALL, stay IN the money.

The thought being if a rally does take hold and volatility falls, if you go OUT the money, you may end up disappointed.

Jane Fox : 7/27/2007 9:57:20 AM

Feels like we are in rally mode but no market has broken its overnight high yet. Link

Jeff Bailey : 7/27/2007 9:55:13 AM

Volatility impact ... With OLN $20.56 ... the OLN-AD are $1.85 x $2.20.

Just about 1 month ago, we paid $2.00 offer with stock at same price benchmark.

Jeff Bailey : 7/27/2007 9:40:01 AM

This action in December Fed Funds may be the market sending a message to the Fed that the tightening credit markets need some "help."

Jeff Bailey : 7/27/2007 9:38:10 AM

December Fed Funds futures (ff07z) alert! 94.94 ... action here predicting 75% probability of 25 basis point cut by end of year.

Tab Gilles : 7/27/2007 9:31:27 AM

The RUT has already broken its 50,100, and 200 ma. The SPX the 50 and 100, the NDX 50ma. Link Link Link

Jane Fox : 7/27/2007 9:30:15 AM

Crude has come off its highs but still above $74.00/bl.

The DAX actually broke its PDL overnight whereas the American markets did not.

The US$ is in rally mode and that is putting a lot of downward pressure on Gold. I like to plot the big Gold Contract (GC) but I have had to switch to the Gold Emini contract because (GC) is not plotting correctly. I need to call Tradestation today about it. Link

Jeff Bailey : 7/27/2007 9:28:11 AM

2,000,000 million shares blocked in IBM pre-market at $116.53.

Keene Little : 7/27/2007 9:27:39 AM

Nice recovery in the futures to the flat line for the opening. Don't be surprised to see a retest of the overnight lows this morning.

Jane Fox : 7/27/2007 9:12:34 AM

All the overnight patterns are pretty well tick for tick but ER actually was able to retest its PDL overnight since its late day recovery was only 38.2% whereas say NQ's recovery was 50% of its daily range. Link

Jane Fox : 7/27/2007 9:09:37 AM

Economic Reports due today:

10:00a.m. End-July Reuters/U Of Mich Sentiment Index. Expected: 91.2. Previous: 92.4.

Jane Fox : 7/27/2007 9:07:06 AM

WASHINGTON (MarketWatch) -- After hitting a pothole in the first quarter, the U.S. economy rebounded in the second quarter, growing at an annual rate of 3.4%, the fastest pace since the first quarter of 2006, the Commerce Department said Friday.

The increase in real gross domestic product was slightly below market expectations for a gain of 3.6%, according to a survey of economists conducted by MarketWatch.

GDP rose just 0.6% in the first quarter. Economists said the weakness in the first quarter and the subsequent strength in the second quarter are both overstated, and the best way to understand the economy was to average the growth rate over the past six months. This produces a 2.0% average growth rate in the first half of the year.

Keene Little : 7/27/2007 8:45:47 AM

Interestingly, NQ is the most bullish this morning and as I showed on the NDX chart last night (below), it also maintains the bullish potential to give us a new high. If you want to play the long side of this market, that one just might be your ticket. If you like the short side then the RUT and SPX would be my choices.

Keene Little : 7/27/2007 8:08:32 AM

To show you an example of what could play out today, using the ES 5-min chart, yesterday's late-day bounce could have been wave-a of an expected a-b-c bounce. Link

This morning's drop might be wave-b and has downside Fib projections at 1482 (equal legs down in the pullback from the late afternoon high) and then 1474.25 (2nd leg down 162% of the 1st). A 78.6% retracement of the late-day bounce is at 1476.00. Since ES is already well below 1482 I'd be looking at the Fib zone between 1474 and 1476 for support (1476.25 is the low so far).

It's possible of course price will just continue to drop to new lows, and it's also possible another rally leg will take off higher as per the dark red wave count on last night's charts. Bottom line is watch for volatility and don't overstay your welcome in a winning trade. If it goes on to be an even bigger winner just console yourself with "you can't go broke taking a profit".

Keene Little : 7/27/2007 7:55:53 AM

Equity futures are down hard again. With the deep pullback from yesterday's late-day bounce in the premarket futures it's looking like we might be on the light red price path that I have on the DOW and SPX charts posted last night (below). If so be very careful of the huge price swings and whipsaws over the next day or two.

The price swings will look relatively small on the chart but a 200-point swing in the DOW can play havoc on your trades. Stops will be very difficult to manage without getting hit constantly. We're in a period of high volatility right here. I don't need to remind credit spreaders that now is a particularly difficult time to sell credit spreads. There are good times and bad times for those and right now might not be a good time.

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