Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
Keene Little : 8/27/2007 10:35:18 PM

Tuesday's pivot tables: Link and Link

End of day re-post on SPX:

As a reminder for why I want to be on the short side of this market, even if we're going to get a larger 3-wave upward correction, as per the dark red a-b-c bounce shown on the SPX daily chart, Link it should still get us down to the 1430 area before bouncing (which could then be a very good long play).

Also shown on the chart is a time projection for the larger bounce where that a-b-c bounce would typically play out in slightly more time than the July-Aug decline and that points to around Sept 24th (opex Friday). But if more bearish things are about to happen then the pink wave count is about to unfold which has us declining to new lows from here.

This weekly chart shows a projection for the more bearish wave count: Link It's basically set up for some strong selling and I show a projection for the next leg down to the 1220 area by the end of October, a small bounce into the end of the year and then a final low to a Fib projection near 1071 (which is also near the 2004 low) sometime in the first quarter of 2008 (this fits some cycle studies as well). This is obviously speculation but gives you an idea of the potential in front of us.

Assuming we're going to get a pullback this week, the key level for the more bearish (pink) wave count on the daily SPX chart will be 1412. As shown on this 60-min chart, this 1412 key level is a 62% retracement of the rally off the August 16th low: Link If we get a 3-wave decline to that level or above then I'll be looking to buy it to see if we get the next rally leg (dark red wave count) but if the decline looks impulsive and blows through 1412 then the more bearish wave count will begin to look like a better possibility.

OI Technical Staff : 8/27/2007 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The Market Monitor has been archived.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.

Keene Little : 8/27/2007 6:59:16 PM

Assuming we're going to get a pullback this week, the key level for the more bearish (pink) wave count on the daily SPX chart will be 1412. As shown on this 60-min chart, the key level for the market is located at 1412 which is a 62% retracement of the rally off the August 16th low: Link If we get a 3-wave decline to that level or above then I'll be looking to buy it to see if we get the next rally leg (dark red wave count) but if the decline looks impulsive and blows through 1412 then the more bearish wave count will begin to look like a better possibility.

Keene Little : 8/27/2007 6:29:50 PM

As a reminder for why I want to be on the short side of this market, even if we're going to get a larger 3-wave upward correction, as per the dark red a-b-c bounce shown on the SPX daily chart, Link it should still get us down to the 1430 area before bouncing (which would then be a very good long play).

Also shown on the chart is a time projection for the larger bounce where that a-b-c bounce would typically play out in slightly more time than the July-Aug decline and that points to around Sept 24th (opex Friday). But if more bearish things are about to happen then the pink wave count is about to unfold which has us declining to new lows from here.

This weekly chart shows a projection for the more bearish wave count: Link It's basically set up for a market crash and I show a projection for the next leg down to the 1220 area by the end of October, a small bounce into the end of the year and then a final low to a Fib projection near 1071 (which is also near the 2004 low) sometime in the first quarter of 2008 (this fits some cycle studies as well). This is obviously speculation but gives you an idea of the potential in front of us.

Keene Little : 8/27/2007 4:18:25 PM

The first downside target is at SPX 1462.47 (ES 1465.25) for two equal legs down from Friday afternoon's high. If we're due a deeper retracement at a minimum (as I think we are) then we should easily exceed that level. A quick retracement of the ascending wedge should have SPX revisiting 1430 quickly. But hitting that first downside target would be an opportunity to scalp a few points off the table.

Keene Little : 8/27/2007 4:09:09 PM

There's plenty of cushion to hold ES short overnight if you shorted it anywhere near 1478. Normally at this time I'd lower my stop to just above that last bounce up to 1475.75 (so 1476.50). It's not much but it could at least get your stop to break even. However I'm going to wait until tomorrow morning before I lower my stop.

Keene Little : 8/27/2007 3:49:44 PM

The junior traders have been left in charge this week as the senior traders get in their last week of vacation out at the Hamptons. Junior has only one instruction--"don't panic and sell out. My bonus and your job rests on you holding this up. Call me if you start to get worried, and oh by the way, my wife says you better not be calling. The last thing she wants to see is me on my Blackberry or cell phone when I should be playing in the water with the kids. See you after the holiday and don't screw this up."

Jane Fox : 8/27/2007 3:47:02 PM

Tomorrow's Economic Reports include

9:00a.m. Aug Richmond Fed Manufacturing Index. Previous: 4.

10:00a.m. Aug Conference Board Consumer Confidence. Expected: 105. Previous: 112.6.

Keene Little : 8/27/2007 3:08:48 PM

ES did a perfect tag of its 1478.75 level (two equal legs up) while SPX missed its 1474.91 level by 27 cents. Must be because of the junior traders at the desk this week. So, if you shorted that bounce then that's also where your stop should be-- 2-3 ticks above 1478.75 so 1479.50. The bearish wave pattern calls for a steep decline so I wouldn't mind holding this overnight if we get some breathing room into the close. If it continues chopping higher then it will be bearish but I'll wait for a breakdown before trying it again.

Linda Piazza : 8/27/2007 2:51:47 PM

The USD/yen pair hs been rising along a trendline that it began establishing this morning, when it tested that Keltner support near the USD/yen low of the day. Now the USD/yen has moved up to 116.15 as I type, moving closer to the resistance band that was giving it so much trouble late last week. The afternoon high was 116.23. That resistance band consists of the 38.2% retracement of the USD/yen's decline over recent weeks, with that Fib level at about 116.40; the 20-sma at 117.08 and last week's high at 117.09. So far, it's just moving up within a consolidation range from the last few days, and it's difficult to draw any conclusions from its actions, other than over the very short term, it's been supporting a tepid equity rise over the last couple of hours. The USD/yen pair has established a Keltner target that would send it right up to that 38.2% retracement level. Will it get there? I don't know, but you might be particularly watchful for what happens next if it does. While I'm drawing back a little from thinking that the USD/yen action will impact equities as strongly as it has in recent times, I still do think it has some bearing on what happens.

Jane Fox : 8/27/2007 2:49:51 PM

These charts of the previous day ranges are interesting. The Dow futures are tagging PDHs and making new daily highs. The NAZ is testing daily highs but not yet to its PDH. S&P and Russell futures are not even testing daily highs yet. Link

Jane Fox : 8/27/2007 2:35:44 PM

The AD line is still well under 0 at -922 but it is quite an improvement from the earlier reading at -1739

Linda Piazza : 8/27/2007 2:35:09 PM

I've been watching the ten-year yields closely lately, turning my attention to them again today. Here's the chart that I posted last Thursday, updated to show today's and Friday's action: Link

Keene Little : 8/27/2007 2:34:13 PM

It looks like this rally could be the 2nd leg up in an a-b-c bounce off this morning's low. Two equal legs up for SPX is at 1474.91 (ES 1478.75)so watch to see if this tops out near there.

Keene Little : 8/27/2007 2:02:50 PM

If SPX now drops to a new daily low and you're short against Friday's high, that will be the time to lower your stop to just above the bounce high at 1:00. The risk in doing so is that we could get another leg up in the bounce that still fails to make a new high above Friday's. The next uptrend line for potential support will be the one from the pullback on Friday August 17th, currently near 1461.30. Link

Keene Little : 8/27/2007 12:47:53 PM

It's looking as if the DOW could give us a new high but I'm not so sure about the others. In fact it's looking like we could be getting some rotation out of techs and small caps and into the DOW and other blue chips. If so then it would appear that fund managers are preparing for the possibility of a bad Sept/Oct period (which is what I'm thinking we'll have).

Linda Piazza : 8/27/2007 12:40:23 PM

I just did a historical search from July 2 to July 31 and found no repos maturing today in that period. It looks then as if this might be a total add for the day.

Linda Piazza : 8/27/2007 12:38:44 PM

Thanks, Denise, for reminding me about the Fed's repo action today. I see a repo in the amount of $9.5 billion, maturing Thursday, September 6. In the Fed's last 25 actions, I don't see anything else that's maturing today, so that would be a total add. However, there might have been something previous to those last 25 actions which spanned back to Tuesday, July 31.

Linda Piazza : 8/27/2007 12:27:26 PM

The USD/yen has also found support at the levels I mentioned earlier, with today's low at 115.87, sitting right on Keltner support that's now at 115.89. So far, this currency pair has remained in a tight range today, with Keltner support and resistance now ringing it.

Linda Piazza : 8/27/2007 12:25:39 PM

I return to find that the SPX did hit that Keltner support listed in my 11:14:55 post, but managed a close above it and bounce from it. Now the question is whether the SPX can begin closing back above the 15-minute 9-ema. At 1470.64 as I type, the SPX is sitting right on it.

Jane Fox : 8/27/2007 12:22:04 PM

Natural Gas is making new yearly lows however last year, 2006 it made it all the way down to 4.40 so it makes one wonder if it is on its way to retest that level again. Link

Jane Fox : 8/27/2007 12:18:30 PM

Here is the jtHMA charts for the SPX. I am waiting for the weekly jtHMA indicator to turn back green before I venture back into any bullish positions Link

Jane Fox : 8/27/2007 12:15:40 PM

I was going to make a comment that the internals were not telling us much today but the AD volume is talking loud and clear. The VIX hovering at daily highs is also telling me the next move will be down. Link

Keene Little : 8/27/2007 11:21:34 AM

SPX is now tagging the bottom of its wedge so look for a bounce. A bounce followed by a new low (or a continuation lower right from here) would confirm that the high is in for now.

Linda Piazza : 8/27/2007 11:14:55 AM

SPX Keltner support (and target) on 15-minute closes has now risen to 1468.28. Next potential support and target below that, if that support doesn't hold, is now at about 1459. I have to leave for an hour or two, but bears want to see continued 15-minute closes beneath the 9-ema at 1472.05, currently.

Keene Little : 8/27/2007 10:55:43 AM

We've got some mixed signals from the pattern of the pullback from Friday afternoon's high. The RUT's decline looks impulsive while the DOW looks clearly corrective (only a 3-wave pullback). It's hard to judge the pattern on the 5-min chart so I don't want to hang my hat on that, and the mixed patterns tells me we could be in for a bit of chop today. Bottom line is don't get tied to just one direction today. Hit and run may be the best way to trade this (or not at all--flat is a position). If you like the short side then short against Friday's high is the right play.

Jane Fox : 8/27/2007 10:54:40 AM

Here is an update of the Russell 2000 resistance. I have puts on the Russell 2000 ETF, IWM. Link

Jane Fox : 8/27/2007 10:53:13 AM

The VIX has not been too terribly helpful today. It is hovering at daily highs while the S&P futures make new daily lows. The VIX hovering at daily highs is bearish but it needs to actually make a new daily high (that sticks) before you can say ES will continue to make new daily lows. Link

Linda Piazza : 8/27/2007 10:49:21 AM

In case you're wondering why I didn't tell you about my bearish SPX play when I instituted it myself, I am absolutely not trading this. I'm using this time as I said I would: doing research and watching over the (fewer than normal) condors I have and the SPY cheap time-bomb butterflies I'm testing. However, I wanted to provide what guidance I could for the benefit of those who are in plays.

Keene Little : 8/27/2007 10:48:05 AM

In addition to the Keltner support for SPX 1467.75 that Linda mentioned, that's now where the bottom of its wedge is located (which is the uptrend line from last Monday).

Linda Piazza : 8/27/2007 10:46:15 AM

The 1467.75 potential SPX Keltner support on 15-minute closes that I mentioned in my 10:08:19 post has now risen to 1468.08 on 15-minute closes. It's still rising slightly. I mentioned earlier that I wouldn't be surprised to see it tested. That's somewhat dependent on continued 15-minute closes beneath the 9-ema, however, with that now at 1472.64.

Linda Piazza : 8/27/2007 10:13:48 AM

Potentially significant short-term support for the USD/yen lies at about 115.80-115.90 on 30-minute closes. So far, it holds, as it did last Thursday when tested, but a 10 day moving average test might be next if that fails. The USD/yen is at 116.03 according to one of my quote sources, that support still holding for now.

Jane Fox : 8/27/2007 10:11:55 AM

Interestingly the S&P daily chart has already broken out of its downward channel putting in doubt that the DOW's downward channel can be trusted. However, I do see a resistance level at the confluence of the 50 and 100 EMA. Link

Linda Piazza : 8/27/2007 10:08:19 AM

Since the 3:15 fifteen-minute candle last Thursday, the SPX had been closing all 15-minute periods above the fifteen-minute 9-ema, bouncing from it on numerous tests throughout Friday. This morning's first two fifteen-minute periods instead closed beneath that 9-ema, and the currently forming one is also beneath that 9-ema, with that average now at 1474.35. A normal retreat to the bottom of the Keltner channel is overdue, with that short-term channel line now at 1470.75, but remember that this is a dynamic channel. I wouldn't be surprised to see the SPX retreat all the way to . . . oops, it started dropping to that channel line as I typed and has now momentarily, at least bounced from it. Next support if this doesn't hold is at 1467.75, and I wouldn't be surprised to see that tested.

Jane Fox : 8/27/2007 10:04:58 AM

NEW YORK (MarketWatch) -- Gold futures edged lower Monday, reversing the metal's strong prior-session gains, as the dollar traded mixed against other major currencies.

Gold for December delivery fell $2.40 to stand at $675.10 an ounce on the New York Mercantile Exchange.

"The new week in gold commenced on a mixed note as ... participants attempted to gauge the depth of positive sentiment after last week's $11 gains," said Jon Nadler, metals analyst at Kitco Bullion Dealers, in a research note.

On Friday, gold ended at $677.50 an ounce, the contract's highest closing level since Aug. 15. It was up $9.10 an ounce for the session and ended the week higher by $10.70, or 1.6%

Jane Fox : 8/27/2007 10:03:04 AM

WASHINGTON (MarketWatch) - Inventories of unsold single-family homes increased 2.2% to 3.85 million in July, sending the inventory in relation to sales to the highest level in 16 years, the National Association of Realtors reported Monday.

Resales of homes fell 0.2% to a seasonally adjusted annual rate of 5.75 million, stronger than the 5.69 million sales pace expected by economists surveyed by MarketWatch.

Sales of single-family homes fell 0.4% to a 5.0 million seasonally adjusted pace.

Sales were essentially unchanged, despite disruption in the pipeline for mortgage loans, the NAR said.

Inventories of single-family unsold homes represented a 9.2-month supply at the July sales pace, the highest since October 1991

Keene Little : 8/27/2007 9:55:20 AM

The bottom of the ascending wedge for SPX is near 1466 and that will be the real test. Also expect a bounce from there if tagged.

Keene Little : 8/27/2007 9:53:48 AM

SPX is breaking its short term uptrend line from late Thursday so that leg up should be completed and that should have been the last leg up in the bounce from Thursday August 16th. If true then we've started what should be a much deeper correction of the rally from the 16th if not a new decline.

Jane Fox : 8/27/2007 9:51:10 AM

I believe there is a very good chance the DOW will retreat back to at least its lower trendline before it takes another run at the swing high made on August 8th at 13700. Link

Jane Fox : 8/27/2007 9:48:48 AM

AD line and volume are both breaking to new daily lows now.

Jane Fox : 8/27/2007 9:45:58 AM

The VIX made a new daily low but by about 1 tick and the S&P futures did test its daily highs however both have retreated back to their daily ranges. I do believe that will be how this whole day plays out and, as Keene mentioned in his 9:25 post, probably the rest of the week.

Keene Little : 8/27/2007 9:43:53 AM

Linda, I probably speak for many when I say I've really appreciated your thoughts and comments in the last week about the USD/YEN/EUR relationship and what it could mean for equities. With so much to follow in the market it's been great reading your commentary.

Linda Piazza : 8/27/2007 9:42:58 AM

The euro/yen pair had closely approached strong potential resistance in the 159.40-160.00 region, but has now drawn back to 158.23. Its 10-sma is at 156.17 and its 38.2% retracement is at 157.74, so equity bulls would also like to see that support zone maintained on a daily close.

Linda Piazza : 8/27/2007 9:41:11 AM

With my 9:38:04 comments in mind, the USD/yen is at 116.06 as I type, again back below a 38.2% retracement of its summertime steep decline. Movements in this currency pair have shown some slight relationship to the 10-sma, which is now below at 115.52, so equity bulls want to see that support maintained on a daily close.

Jane Fox : 8/27/2007 9:40:00 AM

OK I now see the VIX making new daily highs telling me the buyers have arrived.

Jane Fox : 8/27/2007 9:39:05 AM

TICKS have traded below 0 since the open and although the TRIN is below 0 it is climbing and making new daily lows.

Linda Piazza : 8/27/2007 9:38:04 AM

I've been doing a lot of thinking about the yen carry trade this weekend, and here's what I'm thinking. The yen carry trade's benefit to equities depends on two factors: the ability for the globe's traders or investors to borrow yen cheaply and their willingness to then invest borrowed monies into equities, particularly U.S. equities. Are the globe's investors willing to do that? To sink a lot of money back into equities?

I guess that's what we'll be finding out. This is supposedly the smart-money group we're talking about, and perhaps that group feels more confident than the rest of us do. However, for now, this is going to be my approach: While I believe that downturns in the USD/yen (and euro/yen) relationship are worrisome for the markets, they may begin to lose some of their potency if the yen carry trade has indeed unwound. For now, I haven't seen any indication that the USD/yen movements have lost their predictive or corroborative effect on equities, but I'll begin to adopt a bit of wariness in watching. My attitude is the same when watching the upturns in the USD/yen and euro/yen relationships. While I haven't seen any proof yet that they've stopped being effective predictors or corroboration of equity strength, I will be a bit wary of their continued service in that capacity.

Jane Fox : 8/27/2007 9:37:21 AM

The S&P and DOW futures are testing their overnight lows. NAZ and Russell futures have broken those lows.

Jane Fox : 8/27/2007 9:35:33 AM

AD line opens at -821 telling you the bears have the ball.

Jane Fox : 8/27/2007 9:29:22 AM

The Russell 2000 cash index has given us a very clear resistance demarcation line and a close above this resistance is a sign that I need to bail on my IWM puts. Link

Keene Little : 8/27/2007 9:25:43 AM

Keep in mind that this week will be one of the lowest volume periods we've seen (as was Friday). It means the market will be vulnerable to having the pile pushed around easily so stay cautious of whipsaws. By the same token, if sellers arrive and there aren't many buyers then that would help explain why we could get a quick retracement of the ascending wedge patterns I showed on the 60-min charts last night (below).

Keene Little : 8/27/2007 9:23:22 AM

It was a relatively quiet overnight session for the futures but so far we look to have a negative opening ahead of us. As I had mentioned for the setup this morning it looks ready for a decline but it needs to get going right away (other than perhaps a quick pop higher). Until and unless we get a continuation of the rally from last week I think short will be the place to be.

Jane Fox : 8/27/2007 9:19:20 AM

Crude is testing its previous day highs (PDH) at $71.00/bl

During the overnight session the US$ bumped along its PDLs and Gold bumped along its PDHs so these two are in sync.

Some days the DAX can be used to help you determine the direction of the American Indexes for it seems to be tethered to the Dow. The problem is sometimes the DAX leads the DOW and sometimes it is the DOW leading the DAX. Link

Jane Fox : 8/27/2007 9:12:17 AM

A series of lower lows and highs says the trend is down, which is bearish however the overnight session looks more like a sideways move at previous day highs which is bullish. I will be watching those overnight lows and highs for intraday support and resistance and keeping an eye on the ON highs and lows is why I like to watch the futures instead of the cash indexes. Link

Jane Fox : 8/27/2007 9:05:40 AM

Economic reports out today include:

10:00a.m. July Existing Home Sales. Expected: +0.5%. Previous: -3.8%.

10:30a.m. Aug Dallas Fed Mfg Production Index. Previous: -9.7.

12:00p.m. Chicago Fed Midwest Mfg Index. Previous: Unch.

Jane Fox : 8/27/2007 9:04:36 AM

Dateline WSJ - WASHINGTON -- The combined risk of mortgage defaults and heavy debt loads has overtaken terrorism as the biggest short-term threat to the U.S. economy, according to a survey of economists being released today.

The National Association for Business Economics says almost a third of its survey respondents listed debt-related problems as their top worry: About 18% cited the effects of subprime-loan defaults and 14% listed excessive household or corporate debt.

About 20% of the 258 members responding put defense concerns and the possible economic disruption of a terror attack at the top of their list, down from 35% in the group's March survey. Energy prices were the top-cited risk among 13% of the group, which largely includes economists working at U.S. corporations or with think tanks and universities.

Jane Fox : 8/27/2007 9:02:00 AM

Dateline WSJ - WASHINGTON -- Attorney General Alberto Gonzales will announce his resignation later today, an administration official said.

The embattled attorney general called President Bush on Friday to tender his resignation, and the president accepted it. After Congress left for its summer recession, Mr. Gonzales decided that what the administration deems to be unfair criticism of his tenure and integrity had become "a distraction to the department," and that is his primary concern, the official said.

Mr. Gonzales's office said he will make a public statement at 10:30 this morning at the Justice Department.

A senior Justice Department official said that a likely temporary replacement for Mr. Gonzales is Solicitor General Paul Clement, who would take over until a permanent replacement is fo

Market Monitor Archives