Option Investor
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Jeff Bailey : 8/15/2007 1:35:56 AM

Now look at the Sep options. I might profile a trade, but I will be out of the office from 8/25 to 9/03.

Have an IWM put currently profiled, and not sure I want to have another index put.

Jeff Bailey : 8/15/2007 1:35:48 AM

OK ... certainly wouldn't want to get caught "aggressive short" above 1,470 (that's what happened to NQ short that kept adding to position above 1,995 into July expiration). YM too I think.

Longs can also get sideways in a trade. Just know where the OI is into an expiration. Don't keep adding to a position that is moving against you. No matter HOW STRONG your convictions.

There's some interest at the 1,400 level on the put side. 1,450's and the 1,475 puts have some risk from the "long put" perspective.

A good/prudent market maker of those options (somebody sold to open the contracts) is either short the ES, or SPY should the SPX break at 1,420. Maybe long the 1,400 puts should things unravel a bit.

Jeff Bailey : 8/15/2007 12:53:25 AM

CBOE's SPX Aug Options Montage at this Link

Jeff Bailey : 8/15/2007 12:42:16 AM

Remember ... the recent VIX.X action would depict Call SELLERS/Put BUYERS outnumbering Call BUYERS/Put SELLERS.

One could assume that bulk of OI is Call SELLER/Put BUYER.

Jeff Bailey : 8/15/2007 12:36:25 AM

Shoot ... my QCharts SPX options montage terrible. Where's 1,395 to 1,495 strikes?

Jeff Bailey : 8/15/2007 12:33:13 AM

Checking the SPX options ... don't want to repeat the NDX/QQQQ mistake one trader made back in July. (looked only that the QQQQ, didn't look at the NDX) and got ... well ... Ring! Ring! ... Hello? ...

Jeff Bailey : 8/15/2007 12:33:08 AM

SPX PnF chart from Tuesday's Market Wrap Link

Jeff Bailey : 8/15/2007 12:32:54 AM

SPY AUGust Option Montage ... just looking at where the OI is at. SPX 1,470 is ROUGHLY equivalent to SPY $147. SPX 1,420 is ROUGHLY equivalent to SPY $142. Link

Jeff Bailey : 8/15/2007 12:08:14 AM

Reuters Nikkei-225 Link ... will take a look tomorrow morning. See how $NIKK finishes.

Thinking about an SPY put.

Jeff Bailey : 8/15/2007 12:04:00 AM

Kind'a, sort'a some similarity to this Link

Jeff Bailey : 8/15/2007 12:03:55 AM

Hey ... look at that $NIKK chart. Wednesday's trade has seen 16,528.

Jeff Bailey : 8/14/2007 11:58:59 PM

Nikkei-225 ($NIKK) Link now down 304 points, or -1.81% at 16,540 Link

When writing Tuesday Market Wrap, was down 267 points.

Jeff Bailey : 8/14/2007 11:53:47 PM

EUR/JPY Cross Rate PnF chart that I've added Tuesday and tonight's action to Link

Jeff Bailey : 8/14/2007 11:43:12 PM

EUR/JPY Cross Rate Live Link

Jeff Bailey : 8/14/2007 11:30:08 PM

National Hurrican Center Link

The "links" to Tropical Depression FIVE aren't working at this point. That's the storm in the Gulf of Mexico.

Jeff Bailey : 8/14/2007 11:28:40 PM

Tropical Storm Watch Issued For Part of Texas Coast

DJ (10:57:41 PM EDT)- A tropical storm watch was issued late Tuesday for parts of Texas and Mexico as a tropical depression formed in the central Gulf of Mexico.

At 11 p.m. EDT (0300 GMT Wednesday), the fifth depression of the Atlantic hurricane season was centered about 425 miles east-southeast of Brownsville, Texas, and about 425 miles east of La Pesca, Mexico.

The depression is moving toward the northwest at nearly 10 mph. It was expected to turn west-northwest by late Wednesday. Maximum sustained winds were near 30 mph. A tropical storm has winds of at least 39 mph.

The National Hurricane Center issued a tropical storm watch for the Texas coast from Freeport southward. The government of Mexico has issued a tropical storm watch for the northwest coast of Mexico from Rio San Fernando northward.

A tropical storm watch means that tropical storm conditions are possible within 36 hours.

I (Jeff Bailey) was not able to cover any of these developments in Tuesday's Market Wrap.

Jeff Bailey : 8/14/2007 11:19:28 PM

Bank of Japan Drains Y1.5 Trillion From Money Market

DJ (08:45:20 PM)- The Bank of Japan drained funds from the money market at its regular 0020 GMT operations for the second day straight day on Wednesday.

It drained Y1.5 trillion, after draining a total of Y1.6 trillion on Tuesday. The overnight call rate was last at 0.25%, below the BOJ's target of 0.50%, but higher than 0.21% before the BOJ operation.

As Wednesday is the final day for the BOJ's monthly reserve maintenance period, and because financial institutions have already accumulated more funds than required by BOJ regulations, a large amount of funds are in the market, depressing the key overnight rate.

I (Jeff Bailey) discussed yesterday's Y1.6 trillion drain in tonight's Market Wrap.

Jeff Bailey : 8/14/2007 11:02:33 PM

Stay BEARISH the weakness, LONG the STRONG.

If the WEAKNESS rebounds, DON'T be short the strong.

If the RUT.X has another leg up in it, the INDU should easily make a new high.

Keene Little : 8/14/2007 11:03:06 PM

Wednesday's pivot tables: Link and Link

The 60-min charts of the DOW, SPX and NDX show the same setups for either a continuation of the decline tomorrow or a bounce first and then a price collapse. But both scenarios are bearish and I'm having a lot of trouble finding a way to make a bullish case from here. Obviously things can change but right now the price pattern is turning very bearish.

The one index that still gives me the impression we're going to see another rally leg as part of a larger upward correction is the RUT. The drop from its high on August 8th doesn't look impulsive and has been leading me to believe we've got another leg up that's coming (shown with the pink wave count on its chart). The RUT has been a pretty good pattern to follow lately so I'm watching this one closely. If this one is correct then we'll get a strong rally for the remainder of this week. Next week will be bad but the RUT still says a bullish week is possible for this week.
DOW: Link
SPX: Link
NDX: Link
RUT: Link

Even GOOG is at a level where it could go either way and if it drops it could start the next large decline. It's still in its bear flag pattern since making its low after the gap down so it could bounce back up inside the flag but at the moment it looks like it could start to break down. Link

The other high flyer I've been following, CME, has developed a bad case of corrective price behavior. It's not showing any follow through in either direction with anything other than 3-wave moves. This leaves me only guessing where it's headed next, and EW analysis on this one is no better than a coin toss until the price pattern clears up some. I'll keep an eye on it but right now I think there are better stocks to trade.

OI Technical Staff : 8/14/2007 9:59:59 PM

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Jeff Bailey : 8/14/2007 8:45:41 PM

YM alert! 13,050

Jeff Bailey : 8/14/2007 6:01:56 PM

Seven Ways to Be Home Equity Savvy ... Link

Jeff Bailey : 8/14/2007 5:18:40 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 8/14/2007 5:10:45 PM

Closing Internals at this Link

Jeff Bailey : 8/14/2007 4:31:01 PM

Shell To Shut In 5mcf Gas In Gulf Of Mexico Due To Storm

Jeff Bailey : 8/14/2007 4:30:07 PM

Shell To Evacuate 100 More Workers Tuesday From Gulf of Mexico

Jeff Bailey : 8/14/2007 4:21:20 PM

She thinks "black box" models moved to GROWTH strategies a couple of month's ago, but the uncertainty from credit markets in recent months put those black box models in trouble.

Underiding theme from Merrill's analyst was that black box models on the "growth" side, or high beta have been sideways, and redemptions among investors in recent months (small cap?) an poor liquidity environment simply exacerbate weakness.

Keene Little : 8/14/2007 4:19:21 PM

NDX and RUT look the same. The RUT isn't breaking last Monday's lows and is relatively stronger than the blue chips but I think that is about to change.

Linda Piazza : 8/14/2007 4:19:21 PM

Keene reported in an earlier post my question about the three-day repos that the Fed used to infuse the market with liquidity on Friday. We used to have a great writer, Jonathan Levinson, on the site who kept up with the Fed's open market operations, and he's sorely missed during times like these. I'm a neophyte when looking at the Fed's actions, but I believe they conduct them through the Federal Reserve Bank of New York. I checked the last 25 operations there, and none mature tomorrow. It appears that all the three-day repos matured Monday, not three trading days from when they were offered as I had first assumed. This information should not be considered confirmed as I have not made a habit of studying these open market operations. However, I was worried earlier and am somewhat less worried now, at least on this aspect of what's happening. If you'd like to check those operations yourself, they can be found here: Link

Keene Little : 8/14/2007 4:18:14 PM

Same setup on the DOW as I showed for SPX--either immediately bearish from here or a bounce tomorrow that retraces a Fib portion of the decline from yesterday's high and then the bottom will drop out. I can't comfortably add a bullish wave count to this price pattern anymore so I've taken it off. This market is in trouble. Link

Jeff Bailey : 8/14/2007 4:15:44 PM

Excellent, excellent interview on CNBC with Merrill's QUANTITATIVE stategist.

Keene Little : 8/14/2007 4:02:10 PM

No bounce into the close. The move down from yesterday's high still needs to be corrected so I think it's too late to chase this lower. Hopefully we'll get a nice bounce tomorrow as an opportunity to load the truck with some put options. It could be the last opportunity for people to get out of their long positions so make your plans accordingly.

Jeff Bailey : 8/14/2007 3:59:25 PM

Russell 2000 Index (RUT.X) Alert! 763.86 -2.06% ... Probes 50% retracement of 7/21/06 low close to recent 7/13/07 high close.

Jane Fox : 8/14/2007 3:45:00 PM

Economic Reports tomorrow:

8:30a.m. July Consumer Price Index. Expected: +0.1%. Previous: +0.2%.

8:30a.m. July CPI, Ex-Food & Energy. Expected: +0.2%. Previous: +0.2%.

8:30a.m. Aug NY Fed Manufacturing Index. Expected: 17.75. Previous: 26.46.

9:00a.m. June Treasury International Capital Flows. Previous: $112.6B.

9:15a.m. July Industrial Production. Expected: +0.2%. Previous: +0.5%.

9:15a.m. July Capacity Utilization. Expected: 81.7%. Previous: 81.7%.

Tab Gilles : 8/14/2007 3:42:36 PM

Thornburg Mortgage (TMA)$7.67 -$6.67; Halted pending news.

Keene Little : 8/14/2007 3:33:17 PM

I don't follow the Fed's monetary actions but this from Linda:
All those three-day repos that were done last week will come due tomorrow, right? That wasn't today? So, if the central banks don't infuse a fairly hefty amount tomorrow morning, the drain is going to be huge? Yikes.

I also don't know when the repos are due. Some I understand can be 30-day loans so I'm just not sure. But I find it more than a little interesting that the EW pattern is setting up for a crash leg at the same time the Fed (and other central banks) might drain liquidity from the market. If they do drain some money and then are forced to quickly inject it again it will look like they're panicking and that would likely panic the market even further.

Tab Gilles : 8/14/2007 3:34:56 PM

Believe or not some stocks are up today. CBAK +11.6% on HP laptop battery, KALU & ARTX both up +9% on earnings adn ANST +8% it reports after the close. But the best one that got a chuckle out of me was i-Robot IRBT up +12% on a deal with DOD. Read... Link

Keene Little : 8/14/2007 3:24:58 PM

While there is still the possibility we'll get a big leg up as part of a larger 3-wave bounce off last Friday's low, shown with the pink wave count on this SPX 60-min chart: Link , my preferred count is the dark red one which calls for a bounce followed by essentially a crash leg down (3rd of a 3rd of a 3rd wave down). It could get very ugly very soon if that more bearish wave count is correct.

Jeff Bailey : 8/14/2007 3:23:34 PM

Swing trade put lower stop alert ... for the iShares Russell 2000 IWM Sep $78 Put (IQQ-UZ) down to $78.50 in the underlying.

IWM $76.77 -1.15% ...

Jeff Bailey : 8/14/2007 3:14:09 PM

03:00 Internals found at this Link

Jeff Bailey : 8/14/2007 3:02:40 PM

03:00 Market Watch found at this Link

Jeff Bailey : 8/14/2007 2:46:50 PM

Swing trade put alert for one (1) of the Countrywide Financial CFC Sep $22.50 Puts (CFC-UX) at the offer of $3.10.

No stop for now, target $15.00.

CFC $24.65 -7.36% ...

Jeff Bailey : 8/14/2007 2:42:15 PM

All equity-based indices now red. BTK.X 762.20 -0.01% ...

Jeff Bailey : 8/14/2007 2:41:31 PM

10-year Treasury Yield ($TNX.X) down 4.4 bp at 4.734%.

Jeff Bailey : 8/14/2007 2:40:59 PM

Mexico's 10-year Bond Yield Up 0.28 Pct Pt To 7.90%

Jeff Bailey : 8/14/2007 2:38:14 PM

Really start to question last night's BOJ moves.

Jane Fox : 8/14/2007 2:33:53 PM

Here is the SPX. Link

Jeff Bailey : 8/14/2007 2:33:41 PM

European Markets at this Link

Jane Fox : 8/14/2007 2:33:10 PM

DOW bulls better get their act together. Link

Keene Little : 8/14/2007 2:30:04 PM

Now I'd like to see a bounce that retraces some Fib portion of the drop from yesterday's high (which would still be a tradeable long play) to set up a very good short play. It's taking a little bit of effort to get on the right side of this market but at least that direction is clearing up some now. Long for now but not for long.

Jane Fox : 8/14/2007 2:29:59 PM

US$'s double bottom has confirmed and is in major rally mode. Link

Jeff Bailey : 8/14/2007 2:29:44 PM

iShares Silver (SLV) $126.21 -0.73% ...

Jeff Bailey : 8/14/2007 2:29:18 PM

StreetTracks Gold (GLD) $66.11 -0.22% ...

Jeff Bailey : 8/14/2007 2:28:04 PM

RUT.X 769.29 -1.34% ...

Jeff Bailey : 8/14/2007 2:27:48 PM

NDX 1,912.37 -1.13% ...

Jeff Bailey : 8/14/2007 2:27:32 PM

OEX 666.26 -1.22% ...

Jeff Bailey : 8/14/2007 2:27:10 PM

SPX 1,434 -1.31% ...

Jeff Bailey : 8/14/2007 2:26:57 PM

INDU 13,072 -1.24% ...

Jeff Bailey : 8/14/2007 2:26:35 PM

US Dollar Index alert! 81.47 +0.52% ... probes its WEEKLY R2.

Jeff Bailey : 8/14/2007 2:11:15 PM


DJ- Money-market fund won't satisfy redemption requests from clients and has stopped accepting new money, says CME Group, adding Sentinel manages roughly $1.5 billion and none of that money is on deposit with its clearing unit.

Jeff Bailey : 8/14/2007 2:09:58 PM


DJ- Shares of Beazer Homes are off by more than 9% after Fitch Ratings further downgraded its issuer default rating on Beazer and Moody's placed the struggling home builder on review for downgrade.

BZH $11.18 -9.40% ...

Jeff Bailey : 8/14/2007 2:08:15 PM

Me thinks bears saw that this morning and leveraged the DAILY Pivots.

Jeff Bailey : 8/14/2007 2:07:12 PM


DJ- The Federal Reserve Bank of New York refrains from adding reserves to the financial system by its normal intervention time of 9:30 a.m. EDT, in a sign that liquidity levels are returning to normal.

Jeff Bailey : 8/14/2007 2:06:12 PM


DJ- Bank's net profit surges on the windfall from selling a 20.7% stake in Julius Baer Holding, beating expectations, but the bank's revenue is hit by more losses from its in-house hedge fund Dillon Read Capital.

UBS $52.05 -3.77% ... probes session low. WKLY S2 $51.83.

Keene Little : 8/14/2007 2:06:02 PM

Nasty little spike down. This turns it more bearish now because the decline from yesterday's high now looks like a 5-wave decline. That means we should get a bounce soon to correct the decline from yesterday's high but it will be the opportunity to get short. The higher bounce idea that I had on the chart has now essentially been negated so at least we're closer to having a firm answer as to which way the market will head this week and it's very likely going to be down hard.

Jeff Bailey : 8/14/2007 2:04:49 PM


DJ- Home-improvement retailer may trim its $22.5 billion buyback plan if the sale of its supply unit doesn't go through amid credit-market turmoil.

HD $34.18 -3.00% ...

Jeff Bailey : 8/14/2007 2:03:14 PM


DJ- Toy maker recalls 436,000 die-cast cars that contain lead paint and 18.2 million magnetic toys, including Polly Pocket dolls and Batman action figures, expanding a crisis that could grow more problematic as the holiday shopping season nears.MAT $22.88 -2.92% ...

Jeff Bailey : 8/14/2007 1:56:09 PM

YM 13,115

Jane Fox : 8/14/2007 1:52:01 PM

Except for NQ the markets have pretty much used overnight lows as resistance intraday. Link

Jane Fox : 8/14/2007 1:49:54 PM

Internals are telling you that the bears have the ball but price is telling you they are fumbling it. The problem for the bulls is that once the bears get a firm grip of the dang ball they may be able to run for a touchdown. To make a long story short, the highest odd trade is a short. Link

Jeff Bailey : 8/14/2007 1:47:10 PM

YM 13,157 ...

Jeff Bailey : 8/14/2007 1:46:57 PM

Trading the YM today (long/short) for me was like holding one of those peanut brittle cans that you can shake, but don't hear anything rattling inside.

Get the feeling something is going to sprink out either end.

Keene Little : 8/14/2007 1:42:14 PM

Got the bounce so now raise your stop to just below the low of this last dip. If that low gets violated I would stop out of your entire long position. This should now give us at least two equal legs up off this morning's low which would be at SPX 1448.64 (ES 1456.75) and DOW 13204 (YM 13249). But if we're starting another rally leg then it should keep heading higher beyond those targets.

Jeff Bailey : 8/14/2007 1:39:46 PM

Juniper Networks (JNPR) $32.65 -1.50% ... just saying its products protect customers from new Microsoft vulnerabilities disclosed today.

Jeff Bailey : 8/14/2007 1:37:45 PM

YM 13,184 ... back to 38.2% dynamic. That last YM short post-profile low found support at 19.1% dynamic.

Jeff Bailey : 8/14/2007 1:36:24 PM

YM 13,172 ... and a 5-minute close back above DAILY S2.

Jeff Bailey : 8/14/2007 1:35:53 PM

It's "wish wash" in my opinion from here. Some downside potential, but YM just wouldn't "break"

Jeff Bailey : 8/14/2007 1:34:09 PM

YM short stop alert 13,172.

Jeff Bailey : 8/14/2007 1:29:03 PM

Switch to 3-minute interval chart, but need the 21-pd (13,171) and 50-pd (13,163) to keep some retail sellers interested.

Jeff Bailey : 8/14/2007 1:27:55 PM

YM short adjust stop alert to 13,172.

Keene Little : 8/14/2007 1:25:28 PM

SPX has now retraced 62% of this morning's bounce and now has two equal legs down in its pullback so this would be the next place I'd try a long play. But your stop needs to be at a new daily low so your trade size needs to be based accordingly.

Jeff Bailey : 8/14/2007 1:22:15 PM

This will likely be my last YM trade of the day. If they're going to get a YM trend day lower, then I'd have to think this is were they start.

Jeff Bailey : 8/14/2007 1:21:24 PM

YM short alert 13,156. Stop 13,166. Target 13,050.

Jeff Bailey : 8/14/2007 1:20:39 PM

YM 13,163 on that 5-minute close.

Jeff Bailey : 8/14/2007 1:19:47 PM

01:00 Internals found at this Link

Jeff Bailey : 8/14/2007 1:16:59 PM

YM 13,150

Jeff Bailey : 8/14/2007 1:12:53 PM

That's the first break back below DAILY S2 since move above

Jeff Bailey : 8/14/2007 1:12:25 PM

YM long stop alert ... 13,160

Jeff Bailey : 8/14/2007 1:07:49 PM

YM long alert! ... here at 13,182. Tight stop 13,160. Target 13,250.

Jeff Bailey : 8/14/2007 1:03:31 PM

01:00 Market Watch found at this Link

Jeff Bailey : 8/14/2007 12:52:28 PM

Macadamia Orchard (NUT) $4.85 -1.82% ...

Jeff Bailey : 8/14/2007 12:51:36 PM

Hurricane Flossie Downgraded To Category 2 From Category 3

DJ- Hurricane Flossie was downgraded to a Category 2 hurricane Tuesday, but stayed on course to brush the main Island of Hawaii.

The eye of the storm had maximum sustained wind of 110 miles per hour, hurricane specialists noted in downgrading the storm from the earlier Category 3. It was expected to pass less than 100 miles from the Hawaiian Islands, lashing the shores with strong wind and up to 15 inches of rain, meteorologists said.

Jeff Bailey : 8/14/2007 12:49:43 PM

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

Keene Little : 8/14/2007 12:49:19 PM

The pullback from this morning's bounce looks corrective so far so I still like the long position from this morning's low. Watch the Fib retracement levels for potential support to start another leg up.

Jane Fox : 8/14/2007 12:45:27 PM

Lately most days the AD line is well above +1000 or below -1000 and today is no different - it is -1750. AD volume is making new daily lows. Guess who has the ball today.

Jeff Bailey : 8/14/2007 12:44:29 PM

YM ... now a 10-minute interval chart Link ... YM 13,166.

Jane Fox : 8/14/2007 12:42:50 PM

The VIX and the S&P futures are in sync today so you should be watching for divergences to give you a higher odds trade. Those divergences could be if ES makes a lower low but the VIX does not then the odds are in your favor that a temporary bottom has been made. On the other hand if ES makes a higher high but the VIX does not then the odds are in your favor that a temporary top is in. Link

Jane Fox : 8/14/2007 12:37:26 PM

The DOW has now come up with a support zone as well and it is getting very close to breaking through it. Link

Jeff Bailey : 8/14/2007 12:37:23 PM

YM short stopped alert 13,188

Jeff Bailey : 8/14/2007 12:34:00 PM

YM Short lower stop alert ... to 13,188.

YM 13,170.

Jeff Bailey : 8/14/2007 12:32:52 PM

YM 13,178

Jeff Bailey : 8/14/2007 12:32:42 PM

YM 13,185

Jeff Bailey : 8/14/2007 12:30:25 PM

YM 13,171

Jeff Bailey : 8/14/2007 12:30:00 PM

20/20 right? 20-points risk to 13,184. 20-points risk to 13,145.

Jeff Bailey : 8/14/2007 12:29:18 PM

YM alert ... 13,164 ... on test of DAILY S2.

Jeff Bailey : 8/14/2007 12:28:08 PM

YM short lower stop alert ... to 13,194.

YM 13,175

Jeff Bailey : 8/14/2007 12:24:44 PM

There is some pretty good bullish divergence on YM's 10-minute interval chart.

MACD well above Friday's MACD low reading, yet YM made EQUAL PRICE low.

Jeff Bailey : 8/14/2007 12:22:58 PM

YM 13,197

Jeff Bailey : 8/14/2007 12:22:50 PM

Getting some "green" on the Market Watch screen ... BTK.X +1.04%, OIH +0.82%, but SMH, DDX.X and XNG.X all up just +0.02% ...

Jeff Bailey : 8/14/2007 12:20:20 PM

YM 13,202 ... back for another look at DAILY S1.

Jeff Bailey : 8/14/2007 12:14:44 PM

All of my futures trades are ONE (1) contract unless I specify otherwise.

Jeff Bailey : 8/14/2007 12:10:59 PM

RUT.X 773.91 -0.75% ... couldn't quite make it back up to WEEKLY Pivot. Its DAILY S1 773.20, DAILY S2 at 766.45.

Jeff Bailey : 8/14/2007 12:09:30 PM

Should YM edged back lower to DAILY S2, then a YM short begins to lower his/her stop.

Jeff Bailey : 8/14/2007 12:08:48 PM

YM 13,180

Jeff Bailey : 8/14/2007 12:08:38 PM

Note this YM bounce has come right to 13,209 and just shy of DAILY S1. That's "the zone" to day trade short against.

Jeff Bailey : 8/14/2007 12:07:47 PM

YM 5-minute chart updated Link

Using the "2 level rule" with you're dynamic. YM SHOULD NOT see a 5-minute interval close 2 levels above 13,145. If it does, that's showing some "strength" for day trader observation.

2 levels above 13,145 is 13,209.

Jeff Bailey : 8/14/2007 12:01:26 PM

YM short alert ... here at 13,194. Stop goes tight at 13,218. Target is 13,150

Keene Little : 8/14/2007 12:00:37 PM

If you're trading multiple contracts then take a partial profit when this bounce looks ready to roll over for a correction. If the higher low holds put your full position back on. If it drops to a new low you will at least have taken some profits off the table.

Jeff Bailey : 8/14/2007 11:59:05 AM

YM 13,200 ... still rebounding ...

Jeff Bailey : 8/14/2007 11:58:41 AM

YM traders will remember that Friday's low came SMACK on my WEEKLY S1.

Keene Little : 8/14/2007 11:58:21 AM

If you tried a long play at the test of last Friday's low for the DOW you know where you're stop belongs now--at a new daily low. Wait for the next pullback which will hopefully be to a higher low and then raise your stop to just below that. Then we'll walk the stop up behind the rally as it goes (assuming it goes).

Jeff Bailey : 8/14/2007 11:57:00 AM

YM 13,181

Jeff Bailey : 8/14/2007 11:54:20 AM

Will monitor RUT.X 775.40 ... and what it does at its WEEKLY Pivot.

Jeff Bailey : 8/14/2007 11:52:49 AM

YM 13,164 ... now if we get a bounce up to 13,214, a YM trader still looking short (pretty strong bid into treasuries) has some good downside targets.

Jeff Bailey : 8/14/2007 11:50:58 AM

YM ... day trader simply looks at each level as a RISK or a REWARD. When YM got above 13,145, BEAR RISK was to at least DAILY S2.

Jeff Bailey : 8/14/2007 11:49:16 AM

YM 13,163 ... let's sit it out for a few minutes. MACD is hooking up, might see YM 13,215 and MACD up to zero.

Jeff Bailey : 8/14/2007 11:47:38 AM

YM 5-minute interval day trader's chart Link

Keene Little : 8/14/2007 11:35:13 AM

As I just mentioned, it's possible the correction to last week's decline finished at yesterday's high and we're now at the start of a serious decline (3rd of a 3rd wave down) in which case the selling should start to really accelerate over the next couple of days. Opex could exacerbate that. But if we're in a larger correction from Friday's low then another rally leg will likely be sharp and strong as shown on this DOW 60-min updated chart: Link

A typical Fib projection for the leg up is 162% of the 1st leg up which gives us an upside target of 13507 (based off this morning's low). That would make for a nice trade on the long side and would cause the shorts some significant pain so don't let a rally from here go much against your position. On the flip side, if you're long don't let this drop much further without stopping you out. This could drop a 1000 points this week by the bearish wave pattern setup.

Jeff Bailey : 8/14/2007 11:35:30 AM

"Dynamic" is a retracement a day trader can place at REGULAR session high and low. 50% is 13,209.

19.1% is 13,145

Jeff Bailey : 8/14/2007 11:34:04 AM

YM could get a "bigger bounce" back up to 50% dynamic and DAILY S1.

Jeff Bailey : 8/14/2007 11:32:47 AM

YM 13,135

Jeff Bailey : 8/14/2007 11:32:37 AM

YM short cancel setup alert ... from 11:20:26.

Will look short there, but have 11:00 updates done.

Regular session h/l has been 13,313 / 13,105.

Jeff Bailey : 8/14/2007 11:31:09 AM

11:00 Internals found at this Link

Jane Fox : 8/14/2007 11:26:34 AM

Here is a quick look at the internals. Can you say "bearish"? Link

Jeff Bailey : 8/14/2007 11:20:26 AM

YM short setup alert ... Look for a bounce back to DAILY S2 and short there. Stop would go 13,176. Target 13,120

Keene Little : 8/14/2007 11:20:06 AM

The DOW is testing Friday's low and if it turns back up here then it will leave a nice bullish divergence on the 30 adn 60-min charts. The key word is "if". It could be a very nice bullish trade if it does turn back up since the type of correction from Friday's low would typically see a very strong and fast rally back up above yesterday's high. So it's not a bad spot to try a long play but don't let it get away from you since there are likely a whole slew of stop orders just below.

Jeff Bailey : 8/14/2007 11:17:49 AM

YM short stopped alert 13,134

Jeff Bailey : 8/14/2007 11:17:08 AM

YM short lower stop alert! ... to 13,134.

YM 13,124

Jeff Bailey : 8/14/2007 11:10:14 AM

YM short lower stop alert! ... to 13,149.

YM 13,109.

Jeff Bailey : 8/14/2007 11:04:35 AM

11:00 Market Watch found at this Link

Keene Little : 8/14/2007 11:03:02 AM

Still no bullish divergences and therefore I'm not willing to step in front of the train yet. One reason I want to be a little more cautious here is because the retracment of last week's decline stopped at 50% on the nose for SPX and could have been it for the bounce. In other words we could already be starting the next serious decline. A break below Friday's low, without bullish divergences against that low, would be bearish.

But I'm waiting for some better evidence as to which way this could go since there will be plenty of points in either direction to get a good chunk out of the middle if the turn is missed.

Jeff Bailey : 8/14/2007 11:01:42 AM

YM short alert here at 13,144. Stop 13,166. Target 13,050.

Jeff Bailey : 8/14/2007 10:53:23 AM

XLF Alert! $32.75 -0.90% ... probes 80.9% retracement of 6/14/06 low close to recent 5/31/07 high close. Set to test yesterday's low.

Jeff Bailey : 8/14/2007 10:46:23 AM

NHC: Tropical Storm Dean Forms In Eastern Atlantic ... DJ- Tropical Storm Dean has formed in the open Atlantic, midway between Africa and the Lesser Antilles, with maximum sustained winds of 40 miles per hour, the National Hurricane Center reported on its Web site Tuesday.

The storm is moving to the west at 23 mph and is expected to remain on that path, the NHC said.

Keene Little : 8/14/2007 10:37:49 AM

I'm not seeing bullish divergences at today's lows so I'm not willing to call a bottom yet. But if we get a little consolidation followed by another low with bullish divergences then I think it will be time to try a long play. Just try not to get cut catching falling knives.

Jeff Bailey : 8/14/2007 10:32:21 AM

Dow Industrials (INDU) 13,157 -0.60% ...

Jeff Bailey : 8/14/2007 10:31:33 AM

iShares Russell 2000 (IWM) $76.98 -0.88% ...

Jeff Bailey : 8/14/2007 10:30:15 AM

RUT.X alert! 773.30 -0.83% ... breaks below its WEEKLY Pivot.

Jeff Bailey : 8/14/2007 10:29:25 AM

S&P Retail Index (RLX.X) 462.28 -2.06% Link ... Could be a "key index" near-term. HD and WMT both getting hit to the downside this morning. Add to the "credit crunch" and 460 area becomes a rather important area. Break much below here could have rather NEGATIVE/BEARISH technical impact on broader market.

Jane Fox : 8/14/2007 10:28:21 AM

SPX is not yet testing its support zone. Link

Jane Fox : 8/14/2007 10:27:06 AM

Dow is seriously testing its support. Link

Jane Fox : 8/14/2007 10:25:09 AM

All overnight lows have been broken.

Jane Fox : 8/14/2007 10:16:51 AM

Very choppy price action today but I would be concentrating on the short side.

Jane Fox : 8/14/2007 10:15:46 AM

Internals are bearish but the internals have not been all that reliable of late. I think this is mostly due to the fact there is other factors affecting the market now that have nothing to do with "normal" market conditions. Link

Keene Little : 8/14/2007 10:14:18 AM

I had speculated that we would get a deeper pullback this morning before getting another rally leg higher. For SPX I had projected a move down to 1440 and then a rally into the latter part of this week up to 1475. I don't see a reason to change that yet so watch to see if support comes in at that level to get long the market. It should make for a nice trade.

Jane Fox : 8/14/2007 10:13:41 AM

AD line is now -708 and AD volume making new daily lows. TRIN is a bearish 1.31.

Jane Fox : 8/14/2007 10:11:45 AM

DOW and S&P are losing their PDLs.

Jane Fox : 8/14/2007 10:06:58 AM

Dow is finding support at its PDLs. Link

Jeff Bailey : 8/14/2007 10:04:28 AM

10:00 Market Watch found at this Link

Jane Fox : 8/14/2007 10:00:01 AM

AD line is a -31. Quite different from previous days.

Jeff Bailey : 8/14/2007 9:57:12 AM

VMware Announces Completion of Exchange Offer ... Company Press Release Link

VMW $55.00

EMC $19.45 +2.09% ... Atop this morning list of most actives.

Jeff Bailey : 8/14/2007 9:52:11 AM

Dow Components at this Link

Jeff Bailey : 8/14/2007 9:45:45 AM

Home Depot Profits Fall 14.8% ... AP Story Link

HD $34.61 -1.78% ... #25 weighting in DIA.

Jeff Bailey : 8/14/2007 9:43:35 AM

Wal-Mart Profits Jump, But Outlook Cut ... AP Story Link

WMT $43.98 -4.74% ... #19 weighting in DIA.

Keene Little : 8/14/2007 9:25:13 AM

Futures have a nice positive start to the day. It's interesting that what used to be a big gap up is now just in the noise category. The jump up this morning won't even threaten the short term downtrend line from yesterday's high. I'm expecting another rally leg but the question is whether or not we'll get a slightly deeper pullback first (which is the way I'm currently leaning). It could be a choppy and volatile morning so be careful.

Jane Fox : 8/14/2007 9:23:27 AM

Of course, if the SPX did close above/below its resistance/support the other markets would have to make the same kind of move and close above/below their respective resistance/support zones as well. As we saw yesterday you cannot have one market falling and expect the others to rally or vice versa. Link

Jane Fox : 8/14/2007 9:20:07 AM

Here are the support and resistance zones on the Wilshire 5000 chart. This chart is very similar to the SPX chart. Link

Jane Fox : 8/14/2007 9:18:59 AM

Here are the support and resistance zone I see as crucial. If we have a close above the resistance zone I think the bulls have pulled the proverbial rabbit out of the hat. If we get a close below the support zone I believe we may be headed for our first bear market in years. Link

Jane Fox : 8/14/2007 9:15:38 AM

DAteline WSJ - Euro-zone money market conditions have "progressively gone back to normal," European Central Bank President Jean-Claude Trichet said. The ECB earlier offered the euro-zone money market short-term cash for the fourth day running, but the amount of cash the bank pumped into the market fell far below recent days' highs.

"As I did after our last meeting [Aug. 2] I call on all parties to keep their composure," Mr. Trichet said in a statement, adding that this attitude has been "welcome and effective" in recent days. Mr. Trichet noted that recent market "nervousness" has brought about a significant re-appreciation of risk.

"In some respects, what has been observed can be interpreted as a normalization of the pricing of risk," Mr. Trichet said.

The ECB's move came as the Bank of Japan and the Reserve Bank of Australia drained cash from financial markets, signaling a return to business as usual for the first time since market turmoil spurred global monetary authorities into crisis mode last week.

Jane Fox : 8/14/2007 9:12:55 AM

Crude seems to have found support at $70.00/bl. If crude cannot make it back to at least $74.00 (50% retracement from $70.00 to yearly highs at 78.77) I suspect the $70.00 support will not hold once it is retested. We have some hurricanes threatening the eastern coast again which should help keep the price of crude above $70.00 though. Link

Jane Fox : 8/14/2007 9:06:43 AM

A series of higher highs and lows means the trend is up and it looks like the Russell 2000 is back in sync with the rest of the market.

Yesterday the internals were quite bullish but the bulls were not able to make much head way due to all the selling in the Russell 2000. From what I can see all the selling took place intraday yesterday and the Russell has stabilized for now. Link

Jane Fox : 8/14/2007 9:01:15 AM

WASHINGTON (MarketWatch) -- Shrugging off the higher cost of imported fuel, the U.S. trade deficit narrowed unexpectedly in June.

The trade deficit narrowed by 1.7% to $58.1 billion as exports set a monthly record, the Commerce Department said Tuesday.

Exports increased 1.5% to a record $134.5 billion. Imports also increased, by a slim 0.5% to a record $192.7 billion.

Economists had expected the trade deficit to widen to $61.3 billion, according to a survey conducted by MarketWatch. The deficit in May was revised down slightly to $59.2 billion from the initial estimate of $60.0 billion.

The trade-gap report is the final piece in the puzzle for the gross domestic product in the second quarter. Economists have already estimated that the Q2 GDP will be revised higher than the initial estimate of a 3.4% growth rate. The better-than-expected deficit may raise estimates even further.

There is also a growing sense that the deficit is stabilizing this year, after a decade of steady deterioration. The year-to-date deficit is down 7.7% to $352.7 billion.

Last year, the deficit totaled a record $758.5 billion.

Jane Fox : 8/14/2007 8:58:30 AM

WASHINGTON (MarketWatch) -- Led by a 2.5% increase in energy prices, wholesale prices increased a larger-than-expected 0.6% in July, the Labor Department reported Tuesday.

Wholesale food prices fell 0.1%, the third straight decline after hefty increases at the beginning of the year.

Excluding food and energy prices, the core producer price index increased 0.1%, as expected.

Economists surveyed by MarketWatch were expecting the PPI to rise 0.3% in July after a 0.2% decline in June.

Producer prices are up 4% in the past year, while core prices are up 2.3%, the biggest gain in nearly two years

Jane Fox : 8/14/2007 8:56:18 AM

Dateline WSJ - Euro-zone money market conditions have "progressively gone back to normal," European Central Bank President Jean-Claude Trichet said.

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