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Keene Little : 8/28/2007 10:38:47 PM

Wednesday's pivot tables: Link and Link

DOW, SPX and NDX continue to look similar in their charts and now with the steep pullback on Tuesday they all look like they're due a bounce. The impulsive decline from Monday means another leg down will come after the bounce and after the 2nd leg down is when we'll start to find out which bearish price path the market is on. 60-min chart updates:
DOW: Link
SPX: Link
NDX: Link
RUT: Link

This SPX 10-min chart is the one I was using during the day on Tuesday and shows price dropped to the bottom of the parallel down-channel and to the Fib projection for the extended 5th wave down into the close (at 1431.47): Link

The wave count for this move down suggests we'll start a rally right away Wednesday morning (perhaps after an initial bout of selling at the open). Try early weakness for a long play. If it doesn't turn back up almost immediately then selling could get frantic on Wednesday so don't let a play move much against you.

The SPX and RUT daily charts show how the next moves fit in the bigger picture: Link and Link

OI Technical Staff : 8/28/2007 9:59:59 PM

The Market Monitor has been archived.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

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Tab Gilles : 8/28/2007 4:10:20 PM

Looking @ the $HILO charts: Link Link

Euro/Yen/$SPX Link

Keene Little : 8/28/2007 3:58:27 PM

So much for short covering. The move has extended to the downside but I'd be very surprised if we don't get a rally out of this tomorrow morning. The two bearish scenarios that I've had on the 60-min charts both call for a bounce and another leg down. After the 2nd leg down is when the market will show its hand as to what's next (pink vs. dark red wave count). Link

Jane Fox : 8/28/2007 3:58:14 PM

The DOW has broken its August 6th lows. Link

Jane Fox : 8/28/2007 3:55:36 PM

The DOW is down 286 points

Linda Piazza : 8/28/2007 3:51:05 PM

No improvement as the market-on-close orders became visible, either. Like the USD/yen and RUT before it, the SPX not only hit its 15-minute target but broke beneath it. It's not a good day for bulls, but it certainly has been for bears. I've been cautioning about approaching potential support levels today when they haven't mattered so far, but the SPX does approach the 1430-1433 zone which produced a number of opens, closes and lows over the last weeks. If you've amassed a lot of profit today in your bearish options plays, decide soon whether you want to lock in some or all of that profit before the close. The decision will differ for each of you depending on how much profit you've amassed, the percentage of your trading account locked up in the play and the time frame in which you envisioned holding the play.

Keene Little : 8/28/2007 3:50:34 PM

The decline is not letting up and I'm not seeing bullish divergences to entice me into a long play yet. If you've been chasing this lower with the downtrend line then you're still short. The next downside Fib projection for the 5th wave down is where it becomes 162% of the 1st wave and that's at 1431.47, which is also the bottom of its parallel down-channel. Watch for potential support there. Link

Jane Fox : 8/28/2007 3:47:14 PM

I suspect SPX will find support at its August 6th lows at around 1425-1430.

Keene Little : 8/28/2007 3:43:43 PM

Keene, I'm new to the Monitor so correct me if I'm wrong but is this strictly for day trading? Regards, William

The Market Monitor was set up for intraday analysis, commentary and trading suggestions (we're an education site so all trade suggestions are for your consideration and not necessarily trades we would take ourselves, blah, blah, blah and all the rest of the legalese at the bottom of the Monitor). So I think you'll find a lot of day-trading suggestions on this site.

I tend to look more for swing trades and the short trade I set up yesterday was intended to last into today. I'm suggesting covering that trade now and look for an opportunity to buy for a bounce into tomorrow. Following that bounce I will again be trying to set us up for a 1 to 3-day decline. You'll also see recommendations for longer term plays (typically with options whereas many of the day trades are with the e-mini futures contracts).

So you'll find a mixed bag from the various writers and trading suggestions for trades that last minutes (if stopped out right away) to ones that might last more than a month. Depending on your trading preferences we're hoping to meet the needs of many different types of traders, and welcome your commentary and observations.

Jane Fox : 8/28/2007 3:37:50 PM

And once again the market is overdoing itself. I suspected we would have a retracement but geesh I didn't think it will all be today. Watch tomorrow - we will have a reversal just as strong. Link

Keene Little : 8/28/2007 3:35:00 PM

SPX is "in the zone" so be careful about some buying kicking in in a hurry.

Jane Fox : 8/28/2007 3:29:54 PM

TAke note of the TICKS and how they have traded mostly below 0 and no +800 TICKS even.

Jane Fox : 8/28/2007 3:28:35 PM

This is about as bearish as it gets. Link

Keene Little : 8/28/2007 3:28:01 PM

This should be the last leg down so draw a downtrend line along the highs since 2:00 PM and that's where your stop should be. Chase this lower now with a tight stop so that you're out with maximum profits if we all of a sudden get a short-covering rally into the close.

Jane Fox : 8/28/2007 3:27:55 PM

Looks like the buyers have left the building.

Linda Piazza : 8/28/2007 3:25:41 PM

I realize that I typed "taht" instead of "that" in the post below, but if we edit posts, the time stamp on them changes. I'm not going to change it because that would make it difficult for you to benchmark my observations against what was happening at the time.

Linda Piazza : 8/28/2007 3:18:07 PM

The SPX has now touched and momentarily bounced from the 15-minute Keltner target, now near 1441.30 on 15-minute closes. These targets sometimes serve as support or resistance, also, so be forewarned if in short-term bearish plays. I do note, however, that the RUT broke right through the congruent Keltner level earlier today as did the USD/yen, so there's no guarantee taht support will hold. I'm not seeing anything particularly bullish about the USD/yen yet, other than perhaps some bullish divergences beginning to show up as it tests tentative new daily lows.

Jane Fox : 8/28/2007 3:15:11 PM

Bery bearish day. Link

Linda Piazza : 8/28/2007 3:03:54 PM

The bond market is now closed. Sometimes equity markets respond differently after this 3:00 period, but I don't see any big changes at work in the last couple of minutes. Probably, as soon as this post is uploaded, something will begin happening. Smile.

Jane Fox : 8/28/2007 2:54:05 PM

That TRIN has not let up all day. Acutally reached a high of 2.93.

Keene Little : 8/28/2007 2:50:48 PM

I had mentioned SPX 1439 as a good downside target based on the 5-wave move down and equality between the 1st and 5th waves. A 38% retracement of the August rally is near 1438 so I'd say 1438-1439 makes for a good spot to cover your short and try a long play--confirm with some bullish divergences before trying a long.

Jane Fox : 8/28/2007 2:49:05 PM

To heck with Follow the Money all you needed to do today to make the money is Follow the AD volume. Link

Linda Piazza : 8/28/2007 2:46:28 PM

Here's a snapshot of the SPX approaching that 15-minute Keltner target that I mentioned earlier, with my urging to remember that such targets can serve as both targets and potential support. It didn't for the USD/yen or the RUT, but some bullish divergences are beginning to show up now, so be careful about your profitable bearish plays. Link

Linda Piazza : 8/28/2007 2:33:58 PM

A USD/yen rise above 114.92 will confirm a higher low on the USD/yen's 15-minute chart. It's at 114.73 as I type, still below key resistance.

Jane Fox : 8/28/2007 2:23:53 PM

Dateline WSJ - WASHINGTON -- Days before cutting the discount rate on Aug. 17, U.S. Federal Reserve officials were worried enough about eroding financial conditions to consider that they may need to take policy action, according to the minutes of the Federal Open Market Committee's Aug. 7 meeting released Tuesday.

"A further deterioration in financial conditions could not be ruled out," the Fed said in the meeting minutes, released with the usual three-week lag, and such a development "might require a policy response" if it affects economic growth.

Still, with the full extent of market fragility not known when officials met three weeks ago, the Fed still thought that inflation remained the "predominant" concern, even though they acknowledged that a "deeper and more prolonged" housing downturn was possible.

The Fed voted unanimously at its Aug. 7 meeting to keep the federal funds rate unchanged at 5.25% for a ninth-straight time dating back to last summer. It also maintained an anti-inflation bias, though officials inched closer to a neutral stance by acknowledging in the policy statement that downside growth risks had "increased somewhat."

Linda Piazza : 8/28/2007 2:20:38 PM

SPX, USD/yen and TNX all approaching or testing day's lows. Some bullish divergences show up on 15-minute charts. They're not absolute proof of anything, other than that you need to guard bearish profits, just in case.

The SPX downside Keltner target on the 15-minute chart has now risen to just under 1442. No guarantees in these Keltners, but I like the fact that they give us potential targets and support/resistance levels.

Keene Little : 8/28/2007 2:13:16 PM

That little pop at 2:00 might have been it for the end of the 4th wave correction and now we'll get the 5th wave down. If so, wave-5 = wave-1 at SPX 1438.99 (about ES 1441). That's when you'll want to cover your short position and think about a small long play for a bigger bounce into tomorrow.

Tab Gilles : 8/28/2007 2:04:22 PM

FOMC Aug.7th minutes Link

Linda Piazza : 8/28/2007 1:59:23 PM

The bounces in the TNX and USD/yen so far are just bounces into resistance.

Linda Piazza : 8/28/2007 1:58:43 PM

TNX and USD/yen are both bouncing ahead of the release of the Fed minutes, but let's see what happens afterwards. Decide quickly if you want to remain in your plays through the release, in just a couple of minutes.

Keene Little : 8/28/2007 1:29:02 PM

It's looking like the consolidation that I was expecting so now I'm watching for what form it will take. If it forms a sideways triangle pattern then we'll continue to consolidate within the recent low and bounce high. If we get two equal legs up then for SPX that would be at 1452.30 (ES 1456), assuming we rally up to that level from here.

Linda Piazza : 8/28/2007 1:19:47 PM

USD/yen now at 114.67, turning down since my 12:52:01 post noting that it wasn't showing signs of strength yet. The TNX rolled down, too, and is now at 45.33 (4.53%). I'd still be keeping good account-management practices, though, making sure my bearish equity play's profit didn't turn into a loss, particularly as equities, the USD/yen and TNX press toward previous day's lows.

Linda Piazza : 8/28/2007 12:52:01 PM

A 15-minute chart of the USD/yen: Link

Keene Little : 8/28/2007 12:44:21 PM

Between the downtrend line from July 19th near 1452, which SPX is back under, and the 30-min 100/130 moving averages near 1456 and the top of the parallel down-channel I just showed on the 10-min chart, which will be near 1455 at 2:00 (FOMC minutes), that could be the target area for a bounce. If it looks like a choppy bounce up to that area then it should be a very good setup for the next leg down to perhaps the 1440 area before setting up a larger bounce. Link

Linda Piazza : 8/28/2007 12:42:36 PM

The USD/yen has now pushed above its 15-minute 9-ema, an average that has served as resistance on each 15-minute close since 7:45 this morning. However, during the 15-minute period prior to this one, the USD/yen pushed above this average, only to retreat below it by the close of the period. Now the 114.90-115.00 zone that was tentative support earlier could be resistance, but, for this moment, the USD/yen's bounce is at least showing a bit more strength than it did earlier.

The TNX hasn't been able to push back above its 15-minute 9-ema, however. Mixed evidence here that's not giving a lot of faith in the SPX's attempts to steady, at least not yet. If the USD/yen continues higher and can press through that 115-ish zone, perhaps . . .

Keene Little : 8/28/2007 12:44:49 PM

Don't look now but with SPX trading at 1448, we are now trading BELOW Aug expiration opening settlement price (1450) and BELOW where the Fed announced their rate cut. Not a very promising sign to those expecting the FED to help support the market.

Another observation from the field. Thanks Austin.

Keene Little : 8/28/2007 12:26:39 PM

Linda's 11:29 comment is right on the money--can't go broke taking a profit and taking profits regularly is the fastest way to building up your account (instead of always waiting for the homerun play).

On the SPX 10-min chart I've added a parallel down-channel now that's based on the downtrend line between waves 1 and 3 (assuming for now that the last low is the end of wave-3--notice the bullish divergence between the wave-(iii) low and the wave-(v) low, as it should be and helps confirm the wave count). Attaching a parallel to wave-2 shows where wave-4 might head (or at least shouldn't break): Link It offers a guide at this point for where you want to place your stop if in a short play.

Jane Fox : 8/28/2007 12:17:27 PM

The VIX and S&P futures are in sync today. I am watching the VIX for signs the selling is over but I see none yet. Link

Jane Fox : 8/28/2007 12:05:02 PM

It is pretty clear who has the ball today. Link

Keene Little : 8/28/2007 11:38:44 AM

The 1 and 5-min charts are showing some bullish divergences so this is when I say the move down appears to be running out of steam. It could certainly continue lower but I wouldn't be chasing it lower here.

Linda Piazza : 8/28/2007 11:29:24 AM

That potential SPX 1441 downside target doesn't seem as outlandish as it did (to me, too) at 10:06:03, does it? However, the SPX has definitely moved into a potential support zone on the daily chart. I have no idea whether that support will hold, but here's how I'd be approaching things if I were in a short-term bearish play. I'd be resetting my stops so that there's no way I'd let a profit turn into a loss, and would keep lowering the stop as the SPX moved lower. Depending on the number of contracts I had, I might be beginning to step out of partial positions, locking in some profit. I'm fairly conservative, so my way might not be your way, but that's what I'd be doing.

Linda Piazza : 8/28/2007 11:15:44 AM

Both the USD/yen and the TNX are finding resistance so far today on each test of their 15-minute 9-ema's. You can follow their movements to see if that resistance continues to hold on 15-minute closes. A change in their patterns may indicate that any countertrend SPX bounce would have slightly more sticking power than it's had so far today. Remember that these intermarket relationships can change, too, according to what risk is taken more seriously. We went through a period not so long ago when a dip in interest rates would have been perceived as positive, but now, at least for right now, it might be being perceived as flight to safety, so as negative for equities. Then, too, as Keene pointed out in last night's Wrap, perhaps bonds are due for a slight downturn while yields bounce. So many factors can impact these relationships. Watch them, but use them the way you would any other indicators: to help you plan different scenarios. Don't act without price confirmation.

Keene Little : 8/28/2007 11:14:45 AM

Using divergences helps me in identifying the correct wave counts. For the decline from yesterday afternoon's bounce it now looks like a completed 5-wave move and the current low looks like it could leave a small bullish divergence as shown on the MACD on this SPX 10-min chart: Link

Note the Fib projection for wave-(v) is at 1450.26 (for equality with wave-(i)) which has now been tagged (and dropped a little lower as I prepare this post) so I'm watching to see if we now start a larger upward correction. That 5-wave move should complete the larger degree 3rd wave down in the decline from yesterday's high (so today's low is labeled wave-3). The reason I think it's wave-3 is because the 30-min chart is not showing any bullish divergences yet and therefore my expectation is for a 4th wave correction and then another low this afternoon: Link

This is of course not guaranteed but it provides a guide that I'm constantly testing against by watching the form of the bounces at this point. A 4th wave correction from here should be very choppy. If we then get another low this afternoon (assuming a bounce now through lunch) I would expect to see bullish divergences on the 30-min chart and will be a reason to cover a short position and maybe try a long play (maybe).

Keene Little : 8/28/2007 10:52:45 AM

2 Questions for you. 1- If someone sold 10 naked calls in XYZ company and later the company went into bankruptcy or the stock didn't trade what happens to the sold calls?

2- When you are posting for market monitor you sometimes post that this stock or index is running out of steam either to the upside or the downside. What are the indicators you are looking at that tells you that?

Thanks, Regan

1. My understanding is that CBOT keeps track of all such option trades and will settle them on or before expiration. If a company goes bankrupt then their options cease trading and the value of open options drops to zero. If not officially closed out you'd have to see how your broker handles the margin requirement for the position.

2. When I talk about "running out of steam" I'm referring to momentum. I like to catch turns so obviously I'm looking for the loss of momentum to help me find the top or bottom of a move. Momentum is measured by the oscillators and I look for divergences. When I see divergence beween higher prices and lower highs on the oscillators (or lower prices in a decline but higher lows on the oscillators) then that tells me the move is "running out of steam". MACD and RSI are my two preferred oscillators for this.

Linda Piazza : 8/28/2007 10:34:56 AM

Fifteen-minute SPX Keltner chart showing the lower target that I mentioned earlier, as well as potential near-term resistance: Link

Keene Little : 8/28/2007 10:30:12 AM

Thanks to Scott for a "report from the field":

I had a chance to talk to a gentleman that works in the register of deeds office in Wayne County Michigan who's job it is to investigate fraud. He found a 2.5 million dollar sale recorded on a property in Grosse Pointe the same day a deed was recorded, just before, for 1 million. His further investigation found the mortgage was a 1st payment default. Contacting the bank and even the end investor he was told they were not interested in pursuing legal action. THEY WERE O.K. WITH THE 1.5 MILLION DOLLAR loss ON 1 MORTGAGE.

My daughters friend bought a house in Grand Rapids, Michigan for $19,000.00, on a foreclosure, in a somewhat less desirable part of town. The Real Estate agent showed him the last recorded deed to be $119,000.00. This was a 1st payment default also.

These are just 2 examples of what the economy has to shake out and there is no way these are the only 2 out there. These things could not happen without unethical appraisers and mortgage brokers. So I'm sure this is far from over. It looks like the economy was built up on fraud too.

Gee if I knew investors didn't care about getting their money back I could have found much better use for it than that, like a new boat for me:->

We've experienced excesses never seen before so regardless of how long it takes we'll need to unwind those excesses. Personally I'd rather see a quick and painful correction rather than a slow and painful one. Let's get it over with and get back to a more fun bullish environment for the economy and stock market. But at least if we approach this unemotionally as traders we can not only protect our own assets but also make a little money and be one of the buyers when we finally start forming a bottom (maybe next year).

Linda Piazza : 8/28/2007 10:30:00 AM

SPX Keltner chart showing SPX in relationship to one of the targets I mentioned earlier: Link

Jane Fox : 8/28/2007 10:20:53 AM

Here is the story I am sticking to. The swing low made on August 6th at 1427 will serve as support and that this drop will not get much further. That will make a reverse H&S with a neckline at the August 8th highs at 1503. I also think that neckline will break before the end of the year. Link

Keene Little : 8/28/2007 10:17:13 AM

ES tagged 1457 (little lower) so if we now consolidate and it takes the same amount of time as yesterday's consolidation then that will take us to just after lunch. A typical retracement (if it's to be a 4th wave correction) would be back up as high as ES 1465 (SPX 1463) which would also be about 50% of this morning's gap so any higher than that and I'd get a little more nervous about being short. Instead of bouncing that high though, we could see more of a flat correction that perhaps forms a sideways triangle (which would be a good setup for a quick scalp short for the 5th wave down this afternoon).

Jane Fox : 8/28/2007 10:10:06 AM

WASHINGTON (MarketWatch) -- U.S. consumer confidence weakened sharply in August, the Conference Board said Tuesday. The consumer confidence index fell to 105.0 in August from a revised cyclical high of 111.9 in July. Confidence is at its lowest level since last August. The decline was the sharpest since the aftermath of Hurricane Katrina in September 2005. However, the decline was not bad as feared. Economists expected the index to fall to 104.0 from the initial estimate of 112.6 in July because of the relentless bad news from the credit crunch in financial markets. The present situation index fell to 130.3 from 138.3 in July, while the expectations index fell to 88.2 from 94.4 in the previous month.

Jane Fox : 8/28/2007 10:07:21 AM

AD line is fallng and is now -2004

Jane Fox : 8/28/2007 10:07:00 AM

TRIn still above 2.00 and AD volume telling you the buyers are no where to be found. Link

Jane Fox : 8/28/2007 10:05:20 AM

TRIN got over 2.00 and that is usually a sign that we are way too oversold and the markets could rally. I have found this to not be a great strategy but more like a heads up and take profits if short.

Linda Piazza : 8/28/2007 10:06:03 AM

USD/yen now at 115.01. TNX now at 45.65 (4.57%). Based on these same Keltner setups, if I look at the SPX, I'd say to be very careful of rollover potential in the 1461-1463 zone, if the SPX does bounce. The setup for a bounce isn't clear, however, with a potential short-term downside target just below 1452 and then possibly at 1441 if the SPX can't bounce hard enough to erase some of those downside targets. So, while any continued movements higher in the TNX and USD/yen might help support a counter-trend bounce, it's certainly not guaranteed yet.

Keene Little : 8/28/2007 10:02:28 AM

For the ES short play from yesterday I'd now lower the stop to just above yesterday's close. I'd be surprised to see this morning's gap get closed until we get the 5-wave move down but if it gets closed from here then I don't think it will stop so lower your stop.

Jane Fox : 8/28/2007 9:59:01 AM

And how the markets are trading in relation to their overnight ranges. Of course this is with the futures for they are the only markets that trade overnight. Link

Jane Fox : 8/28/2007 9:57:20 AM

Here is how the markets are trading in relation to their PDRs. Link

Keene Little : 8/28/2007 9:55:31 AM

The 10:00 Consumer Confidence report could be just in time to give us the bounce off support.

Keene Little : 8/28/2007 9:54:19 AM

A reminder of the e-mini futures contracts you'll see traded on the Monitor and the current front month:
DOW 30 (YM), September
S&P 500 (ES), September
Nasdaq 100 (NQ), September
Russell 2000 (ER--may be different on your charts), September
10-year Note (ZN), September
30-year Bond (ZB), September
Gold (YG), December
Silver (YI), September (move to December after this week)
Oil (QM), September

Linda Piazza : 8/28/2007 9:53:57 AM

While the USD/yen is hitting the downside target I detailed earlier, the ten-year yields are also hitting the congruent Keltner downside target. These targets can also serve as support, so at least be aware of the possibility of a bounce attempt that might begin soon. If this is going to be a cascade-lower type of day on equities today, then this support wouldn't likely hold, either, on the USD/yen or TNX, so you can at least use them as corroboration if not the ultimate trading guide. Here's the TNX: Link

Keene Little : 8/28/2007 9:52:24 AM

Approximate futures premium over cash (September futures):

YM -- +37
ES -- +2.50
NQ -- +5.25
ER -- +1.25

Jane Fox : 8/28/2007 9:51:16 AM

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

Linda Piazza : 8/28/2007 9:47:53 AM

The USD/yen is hitting the downside target and potential support that I detailed in my 9:37:37 post, with the USD/yen at 114.92 as I type. What does this mean for those trading equities? I don't use this to guide my trades, but I certainly would advise using it to draw up various scenarios and make plans. For example, now that the target has been hit, what if this support holds and the USD/yen bounces strongly? While I have no idea if that will happen, it might prompt at least a short-term bounce or steadying in equities if it did. So, if I were in short-term bearish positions, I'd be running a few what-if scenarios through my head, determining how much of a counter-trend bounce I'd be willing to endure.

Jane Fox : 8/28/2007 9:47:26 AM

Here is a chart of the Russell 2000 index. Last week I bot IWM puts thinking this market would find resistance at its August 8th swing high and take a little bit of breather. I don't expect this decline to break the swing low made on August 16th though. Link

Keene Little : 8/28/2007 9:45:16 AM

The equivalent level for ES is at 1457.

Keene Little : 8/28/2007 9:44:20 AM

That 1455 level for SPX is also back down to its broken downtrend line from July 19th so I would expect that trend line to offer some support. It's another good place to consider taking some profits off the table on a short play.

Linda Piazza : 8/28/2007 9:44:01 AM

Through the Federal Reserve Bank of New York, typically handling the Fed's temporary open market operations, the Fed has announced a $2.0 billion one-day repo that expires tomorrow. As far as I can determine, this is a net add for the day.

Jane Fox : 8/28/2007 9:43:56 AM

TRIN making new daily highs here and is now at +1.74.

Keene Little : 8/28/2007 9:42:35 AM

The move down in SPX is approaching the next Fib projection where I'd expect to see at least a consolidation if not a bigger bounce back up. The 2nd leg down from yesterday's high would achieve 162% of the 1st leg down at 1454.95 so watch for some support there. If it consolidates sideways/up then it should be followed by a 5th wave down. Link

Jane Fox : 8/28/2007 9:40:20 AM

TICKS have traded below 0 since the open.

Jane Fox : 8/28/2007 9:40:00 AM

TRIN is a very bearish +1.43

Jane Fox : 8/28/2007 9:39:43 AM

AD line is a very bearish -1573

Linda Piazza : 8/28/2007 9:37:37 AM

Here's a short-term look at the USD/yen and an approaching target (just below 115) and potential support. Link

Linda Piazza : 8/28/2007 9:34:18 AM

Is the action of the ten-year yields (TNX) showing a flight to the safety of bonds today (yields move in opposition to bond prices)? Ten-year yields dip beneath a key level this morning. Link

Jane Fox : 8/28/2007 9:32:35 AM

Vancouver has the Olympics in 2010 and some say that house prices have increased in some areas 100% due to the Olympics but realtors assure us that has little to do with long term house prices.

Jane Fox : 8/28/2007 9:30:15 AM

Keene have you seen anything as crazy in Seattle as the Vancouver market though?

Jane Fox : 8/28/2007 9:29:38 AM

The German DAX is another market you can watch for ideas as to where the DOW will go but this market sometime leads the DOW and sometimes follows so is not as good as the VIX (intraday) or the US/YEN currency pair.

US$ has taken a little jump that in turn caused Gold to fall and break its PDL. Link

Keene Little : 8/28/2007 9:27:53 AM

Jane, I certainly agree it's crazy. What the numbers for Seattle don't show is the slowing in the market. I've got a couple of realtor friends in Seattle who tell me the market has slowed way down. I see more For Sale signs staying up longer. The wealthy (thank you Microsoft) continue to buy and that has raised the average selling price but the rest of the market is languishing. Seattle will follow the rest of the country--we're a long ways from the bottom in housing and the price reductions yet to come.

Jane Fox : 8/28/2007 9:20:22 AM

It does not surprise me that house prices rose in Seattle. I was in Vancouver BC last week which is the Canadian counterpart to Seattle and just 2 hours north. My sister was looking to buy a 1700 sq. ft 1/2 duplex for $730,000! It is insane in Vancouver.

She decided to rent but is paying $3700/mo. for a 3000 sq. ft home.


Jane Fox : 8/28/2007 9:17:14 AM

WASHINGTON (WASHINGTON (MarketWatch) -- U.S. home prices fell 3.2% in the second quarter compared with a year earlier, Standard & Poor's reported Tuesday.

It's the largest decline ever in the 20-year history of the Case-Shiller home price index. A year ago, home prices were rising at a 7.5% pace nationally.

"The pullback in the U.S. residential real estate market is showing no signs of slowing down," said Robert J. Shiller, chief economist at MacroMarkets LLC, which computes the price index for S&P.

Meanwhile, prices fell 3.5% in the past year in 20 major cities and 4.1% in 10 major cities. Prices fell in 15 of the 20 cities, with prices down 11% in Detroit.

Prices have risen 7.9% in the Seattle metro region.

Jane Fox : 8/28/2007 9:14:58 AM

There was a bit of buying yesterday and the DOW was even able to break to new daily highs but the sellers stepped up to the plate and were able to turn it around. All future markets of the major American indexes closed at daily lows and the overnight session just added to that selloff. All markets have now broken their previous day lows (PDL) and then some. Link

Jane Fox : 8/28/2007 9:07:28 AM

Home prices fall in 15 of 20 cities in past year:

U.S. June 20-city home price index off 3.5% in past year

U.S. June 10-city home price index off 4.1% in past year

U.S. 2Q home prices down 3.2% vs. year ago: Case-Shiller

Keene Little : 8/28/2007 9:00:10 AM

If you shorted the market yesterday and carried it overnight (a nail biter these days) I'd now lower my stop a little. With the futures down since the European markets opened, ES dropped a little below the level I had mentioned would be a good place to peel a little money off the table--two equal legs down from yesterday's high is at 1465.25. ES is currently trading at 1463.25 after making a low at 1462.50.

I had mentioned that I expect the decline to drop below that but I'm tired of giving profits back to Ms. Market so if trading multiple contracts then take some off the table and give it to Momma. The stop on an ES short should now be just above the afternoon bounce to 1478.75 (so about 1479.50) although I'd use the downtrend line from yesterday's high to chase my stop lower). If the decline turns into a 5-wave move down then I'll cover my position and perhaps try a small long play. We'll see if and when that sets up.

Linda Piazza : 8/28/2007 8:34:33 AM

As I type, I show the USD/yen at 115.29, well below yesterday's 115.87 low, with the value now sitting right on its 10-sma. It probably won't be good for equities if that 10-sma support is lost, and even this amount of downturn is not supportive of equity strength, as futures are already showing us.

Strength or weakness in this currency pair (and in the euro/yen) has been highly predictive or corroborative of equity strength or weakness in the last couple of years. However, we must begin to be open to the idea that intermarket relationships can change. How could that happen? I'm not certain at this point, but what if the yen carry trade goes away, having been unwound and never wound back up again? What if that's happening in part because no one is interested in equities any longer? What if the dollar strengthens against other currencies because of perceived safety in a time of a severe global recession? I suggest that while we watch this currency pair and be reminded of its predictive or corroborative nature in the last couple of years, we always also look for signs that intermarket relationship is changing.

Linda Piazza : 8/28/2007 8:24:50 AM

A scan of the last 25 transactions our Fed made via the Federal Reserve Bank of New York turns up no repos maturing today. Therefore, unless I've missed something, any repos today would result in a net add.

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