Option Investor
Printer friendly version
Keene Little : 9/11/2007 11:46:29 PM

The SPX 60-min chart shows a hanging man doji at the end of the day just shy of its 62% retracement of the decline from Sept 4th: Link I show a decline from here and then we'll get to see if it's going to be just a pullback that leads higher (green count) or instead leads to the next big decline (red count). My preferred count is the more bearish one.

The SPX 10-min chart shows an expectation for an immediate decline on Wednesday (dark red count) and the market will have to be selling off immediately for this count to work. If it rallies even a little bit then the pink wave count is the next best choice and it shows a possible push up to close last Friday's gap at 1478.27. Link

I don't like the pink count because of the overlap between the 4th and 1st waves (in the move up from Monday's close) which is a violation of an EW rule but sometimes on the short term charts the rules need to be bent a little. So we'll know which wave count is correct first thing Wednesday morning and in reality it doesn't mean much except if you shorted against Tuesday's high at the end of the day--you will have to try it again at the new high.

The daily chart chart shows how price stopped at its broken uptrend line from July 2006 and I also show a potential price projection over the next month if the bearish pattern follows a typical wave relationship for the next leg down: Link This is not a crash leg (which is possible if the 1987/2007 price analog continues to play out) but instead is a more "normal" price decline even if it will be puntuated with some strong selling.

One other chart worth looking at again is the NDX 10-min chart since it was a great setup for a short at the end of the day: Link Like the SPX, the bearish wave count calls for an immediate sell off on Wednesday. It can't hang around but instead should sell off with a sharp and impulsive decline. Otherwise a push higher toward 2000 can be expected (and then short it).

Keene Little : 9/11/2007 10:54:39 PM

Wednesday's pivot tables: Link and Link

Tab Gilles : 9/11/2007 10:10:48 PM

Will our next fuel be from the sea? Interesting discovery... Link

OI Technical Staff : 9/11/2007 9:59:59 PM

The Market Monitor has been archived.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

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Jeff Bailey : 9/11/2007 5:26:30 PM

Closing Internals found at this Link

NYSE NH/NL Ratio Chart at this Link

Jeff Bailey : 9/11/2007 4:44:10 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 9/11/2007 4:28:23 PM

Carlyle Capital: Says Profitable in 3Q
Can Weather Market Crisis

Keene Little : 9/11/2007 4:26:48 PM

Making a price projection for SPX based on typical relationships between waves, in both time and price, here's a projection for the next leg down--1250 into early to mid-October (so back to the July 2006 area. From there we should get a good bounce into the end of the year (to another lower high). Link

Jeff Bailey : 9/11/2007 4:25:51 PM

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

Keene Little : 9/11/2007 4:15:15 PM

Today's daily chart for SPX shows price stopped right at its broken uptrend line from July 2006: Link Tomorrow should be an important day as far as giving us some important clues as to what's next.

Keene Little : 9/11/2007 4:13:15 PM

The 30 and 60-min charts are showing hanging man dojis for the today's final candlestick, a potential reversal signal, such as the one seen on this SPX 60-min chart: Link

Keene Little : 9/11/2007 4:18:27 PM

I had the wrong NDX chart on my previous post so here's the end-of-day chart: Link

Jane Fox : 9/11/2007 4:05:18 PM

AD volume sprinting into the close!!

Jane Fox : 9/11/2007 4:04:33 PM

And the internals once again have turned back. Odd!!!

Jeff Bailey : 9/11/2007 4:00:27 PM

US Policy On China Oil Deals Must Be Clear - China Official

Keene Little : 9/11/2007 3:58:59 PM

You didn't really think they'd let the bears get anything today did you?

Keene Little : 9/11/2007 3:52:49 PM

We might get a minor new low for this pullback and then a bounce into the close. That will be the short play setup if you missed the high. The hard part is carrying it overnight so try a few put options instead of a futures trade.

Linda Piazza : 9/11/2007 3:52:11 PM

It doesn't take much technical analysis ability to look at an SPX chart and see that a strong up day doesn't guarantee continued bullishness. Make up your minds before the close how you want to control your overnight risk if you're in bullish positions.

Jane Fox : 9/11/2007 3:47:31 PM

Interestinly the internals have all turned in opposite direction not.

Jeff Bailey : 9/11/2007 3:44:48 PM

IWM $77.65 +1.14% ...

IOW-VZ $3.35 x $3.40

IQQ-UT $0.64 x $0.68.

Keene Little : 9/11/2007 3:43:46 PM

Short any bounce against this afternoon's high now.

Keene Little : 9/11/2007 3:43:18 PM

I'm thinking that was it, we've seen the high.

Jeff Bailey : 9/11/2007 3:43:03 PM


DJ- FTC is sending warning letter to more than 200 advertisers and media outlets concerning mortgage advertisements on Web sites, in newspapers, magazines, and via mail that may be violating federal law.

Keene Little : 9/11/2007 3:37:18 PM

The RUT is testing its 50% retracement level at 782.55 and also looks ready to tip back over. Here's its updated 60-min chart: Link

Jeff Bailey : 9/11/2007 3:36:33 PM


DJ- Citigroup, Lehman Brothers and Merrill Lynch sell $1 billion of loans for Allison Transmission that they were forced to hold when investors wouldn't bite on them in early August.

Jane Fox : 9/11/2007 3:36:02 PM

On July 31st Crude closed at 78.21 and today I show a close of 78.24.

Jane Fox : 9/11/2007 3:35:18 PM

Dateline WSJ - NEW YORK -- Crude-oil futures rose to a record Tuesday, shrugging off a planned boost in oil production from OPEC as traders focused on depleting U.S. oil inventories and signs demand may increase.

The front-month October light, sweet crude contract on the New York Mercantile Exchange rose 74 cents, or 1%, to $78.23 a barrel, the highest-ever settlement for a front- month contract. It was the contract's seventh straight gain. Brent crude on the ICE futures exchange rose 96 cents to $76.43 a barrel.

The Organization of Petroleum Exporting Countries agreed to boost daily oil output by 500,000 barrels from Nov. 1 in a move that raises the cartel's breached quotas by 1.4 million barrels a day. Despite the boost being above expectations, traders believe that global crude markets will remain tight.

"The market is basically saying that the OPEC hike is just not going to be enough, with demand continuing to grow," said Tom Bentz, an analyst and broker with BNP Paribas Futures in New York. He said an expected cut in U.S. interest rates next week is being translated as good for crude-oil demand.

Jeff Bailey : 9/11/2007 3:34:46 PM


DJ- The price of reinsurance for U.S. exposures peaked last year in the aftermath of 2005's record storm season, but prices have dropped since and will continue to drop into the beginning of 2008, writes Lavonne Kuykendall.

American Intl. Group (AIG) $64.94 +1.23% ... #9 weighting in Dow Industrials.

Linda Piazza : 9/11/2007 3:34:12 PM

The RUT finally followed other indices and confirmed its inverse H&S. I still suggest that SPX longs need to have a profit-protecting plan in mind for this afternoon as the SPX is moving up into another potentially strong resistance band. Up ahead, just above 1478, is the midline of the price channel in which the SPX has been climbing. From about 1472, the SPX begins moving through one type of resistance or another.

Also keep in mind that tonight, a slew of economic releases occurs in Japan. That includes the important August Consumer Confidence Index.

Jeff Bailey : 9/11/2007 3:33:15 PM


DJ- Number of new aircraft orders should continue to exceed annual deliveries, says Jim McNerney, chairman and chief executive of Boeing, who calls the case for an extended strong order cycle 'very good.'

BA $97.57 +2.34% ... #2 weighting in Dow Industrials.

Keene Little : 9/11/2007 3:32:04 PM

The DOW is currently struggling with its 62% retracement of the decline from Sept 4th. It too looks like it could one more minor new high to finish off its rally. Do you see the big H&S pattern developing if it tips back over here? DOW 13K will take on even greater importance in that case. Link

Jeff Bailey : 9/11/2007 3:31:48 PM


DJ- The National Association of Realtors expects housing starts and sales of new homes to continue falling through 2008, but forecasts a mild recovery in sales of existing homes next year.

Jane Fox : 9/11/2007 3:30:59 PM

Now the bulls need to close the SPX above the 50EMA tomorrow. Link

Jeff Bailey : 9/11/2007 3:29:03 PM

DJ- President Bush To Announce Pullout Of 30,000 Troops From Iraq By Summer

Jeff Bailey : 9/11/2007 3:28:04 PM

DJ- Oil Futures: Nymex Crude Rises To Record After OPEN Meeting

Jane Fox : 9/11/2007 3:24:12 PM

Internals are very bullish and have been all day. This has certainly been a "get long and stay long" type of day and the internals were talking to you all day.

Jeff Bailey : 9/11/2007 3:21:57 PM

Procter & Gamble (PG) $66.83 +1.41% ... threatens a close at a new 52-week high.

#8 weighting in the Dow Industrials.

Keene Little : 9/11/2007 3:21:08 PM

Keep in mind that the risk in trying a short this afternoon, especially this late in the day, is that there could be an effort to keep the sellers at bay today to ensure we finish near the high. There's a political statement being made today and it's always possible that that "normal" Fib projections could be trampled a bit.

Keene Little : 9/11/2007 3:18:43 PM

The upside target for NDX at 1992 looks like it could be exceeded by a little bit. I like the 1995.35 Fib target based on the internal wave projections within this afternoon's 5-wave advance, as shown on this 10-min chart: Link

Jeff Bailey : 9/11/2007 3:16:42 PM

03:00 Internals found at this Link

Jeff Bailey : 9/11/2007 3:03:11 PM

03:00 Market Watch found at this Link

Keene Little : 9/11/2007 2:55:17 PM

Getting close now. The SPX 5-min chart shows the need for one more new high to finish a 5-wave move up from today's mid-day low. Ideally that new high will get close to its upside Fib target near 1474.50 (cash) with bearish divergences against that last high just put in. If so then it will be time to try a short. A drop below 1465 now would be immediately bearish so we'll see which gets hit first. At this point it's looking like they'll be able to push it higher right into the close for a nice bullish finish for this 9/11 day. Link

Linda Piazza : 9/11/2007 2:47:33 PM

If you haven't already, I would begin making profit protecting plans for your long SPX positions as the SPX moves into the 1472-1478 zone.

Linda Piazza : 9/11/2007 2:44:10 PM

The TRAN hit that 30-minute 120-ema I was watching above 4782, but closed on that line rather than securely above it. The TRAN has pulled back to 4776.99, still well within striking distance. The RUT is attempting a confirmation of its inverse H&S, too, but it's having some trouble with the neckline at about 780.68, with the RUT currently at 779.15. The USDJPY still moves higher. So far, so good, but it would be better if both the TRAN and the RUT were confirming their formations a bit more soundly.

Keene Little : 9/11/2007 2:27:30 PM

I'm a big fan. Thanks for your excellent and profitable recommendations in OI Daily and MM. With December Gold closing today at 721.10, above the key 717 level, what's your current thinking/projections for this market? Thanks, Peter

Ah, flattery will get you everywhere Peter. Gold has surprised me how much it has rallied and it has forced me to change the EW count based on it exceeding 688 nevermind 717. But I believe this is the last hurrah for gold as it should join the selling once equities start to sell off hard again. The lack of participation by silver (relatively speaking) is a big bearish statement for the gold rally. It should turn into a bull trap for gold bulls.

This weekly chart shows a new EW count and satisfies the one gnawing question that's been on my mind since the high in February. Price action has been whippy and corrective looking. I should have taken that as more of a clue that price action since February has been part of a larger corrective pattern and that's what I show on the weekly chart: Link

The triangle consolidation pattern following the 3-wave rally into February 2007 was an indication that there was to be one more leg up to finish a larger A-B-C correction to the 2006 decline. Triangle patterns precede the last leg of the move prior to a reversal and that means the current leg up is finishing the larger correction and Not the start of something more bullish. This is very important to understand. The 3-wave rally into February 2007 already gave us a heads up that it was a correction to the 2006 decline and now the current leg up is finishing the larger correction.

So it's time to identify potential upside targets and gold is getting very close to its first target at 725.67 which is where wave-C = 62% of wave-A (common with commodities). The short term pattern in gold makes it look like it needs at least another small push higher. Today's high is 723.90 so another push higher should tag that Fib level.

There's another much higher target at 771.40 but I'm thinking it's too far. That's subjective based on my belief gold will sell off with equities and equities are close to selling off. So based on this, get ready to short gold.

Linda Piazza : 9/11/2007 2:26:51 PM

I keep finding signs that tell me to urge caution when SPX prices, at least, keep charging higher. However, I'm watching all these little inverse H&S's and the indices that often lead--TRAN, SOX and RUT, for example--aren't really performing that way today. The RUT, for example, hasn't confirmed its inverse H&S. Depending on how you draw the neckline, the TRAN may or may not have done so, but I'm waiting for that 30-minute close above 4782.28 before I believe it confirmed. So, they're being by indices such as the SPX led rather than doing the leading. So far, that hasn't mattered. Just keep sound account-management tactics.

Keene Little : 9/11/2007 2:12:54 PM

Nice patriotic rally wouldn't you say? Just don't get sucked into feeling bullish about this. It's going to end up as a bull trap. Until it smokes up through SPX 1475 in which case I'll be back on the sidelines trying to figure out the larger pattern. In the meantime our short play setup is getting closer.

Linda Piazza : 9/11/2007 2:12:51 PM

The TRAN is finally breaking above that 4759 zone on the current 15-minute candle. As I mentioned earlier, I don't consider the inverse (or reverse) head and shoulders there confirmed until there's a 30-minute close above the Keltner line (120-ema) currently at 4782.24.

Jane Fox : 9/11/2007 2:08:42 PM

Oh BTW AD volume is making new daily highs as are the DAX and USDJPY.

Jane Fox : 9/11/2007 2:08:06 PM

Right on cue both the S&P and DOW futures break to new daily highs. Ya gotta love that VIX.

Jeff Bailey : 9/11/2007 2:05:47 PM

US Gasoline Demand Down 0.8% On Week- MasterCard SpendingPulse

DJ- U.S. gasoline demand, as measured by purchases at the pump, fell 0.8% last week, according to a report by MasterCard Advisors LLC, a division of MasterCard Inc. (MA), released Tuesday.

Gasoline demand decreased by 579,000 barrels, or 82,714 barrels a day, to 67.570 million barrels, or 9.653 million barrels a day, for the week ended Sept. 7, said the report, which is compiled from SpendingPulse, a retail data service of MasterCard Advisors.

Overall consumption remains relatively strong despite the dip in the weekly data, said Michael McNamara, the report's chief author.

The typical demand decline that occurs in September has been smooth so far, but he expects to see a more significant decrease later in the month, perhaps for the week ending on Sept. 21.

Last year, consumption fell by 3 million barrels week-to-week in September before rebounding slightly, he said. Data show demand has fallen only 1.482 million barrels in the last two reporting periods.

SpendingPulse's Sept. 7 total demand figure is 2.8% higher compared to weekly demand a year ago. The four-week average demand level was 69.135 million barrels, or 9.876 million barrels a day, 4.5% higher than the four-week average a year ago.

The report, which also tracks retail gasoline prices, showed an average price of $2.81 a gallon, up 5 cents compared to the previous week. All regions rose but the Midwest showed the biggest rise, climbing 10 cents to an average $2.98 a gallon.

SpendingPulse is a macroeconomic indicator that reports on national retail sales and is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check. MasterCard SpendingPulse doesn't represent MasterCard financial performance.

The Energy Information Administration is scheduled to issue its weekly petroleum data, including gasoline demand, on Thursday at 10:30 a.m. EDT.

The EIA, which is the Energy Department's statistical and analytical wing, doesn't count how many gallons are sold. Instead, it offers a "Product Supplied," or implied demand figure, in its weekly report. "Product Supplied" represents the total volume of gasoline that has moved from refineries, pipelines, blending plants and terminals on its way to supplying retail stations.

Keene Little : 9/11/2007 1:52:00 PM

Here's an update to the NDX 60-min chart I posted last night: Link . It continues to look like a good setup to watch for a shorting opportunity at 1992 (maybe as high as 1995 which is where the move up from yesterday afternoon's late-day pullback will have two equal legs up).

Jane Fox : 9/11/2007 1:49:26 PM

The VIX hovering at daily lows tells me the markets will see higher highs at some point today. Link

Linda Piazza : 9/11/2007 1:44:54 PM

The SPX now challenges the 10-sma on the daily chart again. So far, so good for equity bulls. Doing a check of other indicators I watch, including other indices, I see that the SOX has also climbed back above 500 again, although barely (500.28), the USDJPY remains above 114.05-114.07, although barely (114.13), but the TRAN is again turning down, although slightly (4747.97) from its test of Keltner resistance now near 4759. Some ducks have lined up, if tentatively, and some are still wandering around a bit. This remains a climate for good account management skills, if ever there was one.

Jeff Bailey : 9/11/2007 1:43:27 PM

Burger King (BKC) $24.11 +2.99% ...

Jeff Bailey : 9/11/2007 1:42:14 PM

McDonald's (MCD) $52.10 +3.88% ...

Jeff Bailey : 9/11/2007 1:41:46 PM

YUM Brands (YUM) $31.89 +1.27% ...

Jeff Bailey : 9/11/2007 1:41:13 PM

US Judge Strikes Down NYC Fast-Food Calorie-Content Rule

Jane Fox : 9/11/2007 1:36:00 PM

So if you must trade keep it long.

Jane Fox : 9/11/2007 1:35:48 PM

But keep in mind the bulls have the ball and the bears are trying to wrestle it away from them.

Jane Fox : 9/11/2007 1:35:09 PM

AD volume continues to make new daily highs but the VIX is now making new daily lows telling me have the proverbial bull/bear fight and you should not be trading.

Keene Little : 9/11/2007 1:28:59 PM

The big reason not to feel bearish this market is Jim Cramer. Yesterday he was declaring (again) that the Fed just doesn't get it and they're leading us into a recession and that it's time to sell all of your stocks. He's usually a good contrarian indicator so the question is whether he's representative of too much negativity which from a contrarian sense is bullish.

I believe he's only partially right and wrong on all the rest--we are very likely headed for a recession (and a deep one). But it's not the Fed who's causing it. As I've said many times, the Fed just follows the market and people like Cramer just don't get it. The belly aching by the monied right now, who made their money on the backs of everyone else, is just sickening. Play the downside right and you'll be the one buying their yachts at distressed sales prices.

Jeff Bailey : 9/11/2007 1:30:00 PM

US 4-Week Bills: 4.00%; 52.49% At High

DJ- The U.S. Treasury awarded $18.00 billion in four-week bills at Tuesday's auction at a high rate of 4.000%.

The Treasury received bids totaling $50.22 billion and accepted $18.00 billion, including $374.12 million of noncompetitive tenders. The dollar price was 99.688889 and the investment rate, or bond-equivalent return, was 4.079%.

The Treasury sold no bills to foreign and international monetary authority accounts on a noncompetitive bidding basis.

The bid-to-cover ratio, an indication of demand, was 2.79, Treasury said.

Tenders submitted at the high yield were allotted 52.49%.

The Federal Reserve purchased $2.63 billion in bills for its own account. When the auction was announced, the Fed held $16.68 billion of maturing bills, and in Monday's auction the Fed purchased $14.05 billion in three- and six-month bills.

The bills awarded to the Federal Reserve are in addition to the public offering amount.

The median rate was 3.870%; that is, 50% of the amount of accepted competitive bids were tendered at or below that rate.

Of the competitive bids accepted, 5% were tendered at or below the rate of 3.800%.

Accepted indirect bids for the four-week bill were 14.6% of the total competitive amount, down from 15.9% in last week's four-week bill auction.

The high rate was down from 4.280% at the previous four-week bill auction.

The high rate was the lowest since the rate of 3.950% at the four-week bill auction on Jan. 18, 2006.

The issue is dated Sept. 13 and matures on Oct. 11, 2007.

The CUSIP number on the four-week bill is 912795A50.

Jeff Bailey : 9/11/2007 1:23:26 PM

01:00 Internals found at this Link

Keene Little : 9/11/2007 1:20:49 PM

Updating the SPX 10-min chart I showed earlier ( Link ) this 5-min chart zooms on the rally from yesterday's low. It's looking like it will be the pink count on the 10-min chart, now shown in dark red (for clarity) on the 5-min chart. Link

Hopefully we'll get the last leg up to complete the rally up to the 1474 area. The minimum price objective at 1465.74 has been met and that's why a break of its uptrend line from yesterday's low, now at 1457.40, would be a sell signal. So far I've got the wave count as a double zigzag (a-b-c-x-a-b-c) and the two a-b-c moves achieve equality at 1474.43. In the 2nd a-b-c, which is the move up from yesterday afternoon's low, equality between the two up legs is at 1474.40. The 62% retracement is at 1474.58. That level is definitely important if price can make it up there.

Right now we could be in a larger sideways consolidation for wave-b so we might not have started the last wave-c up yet. So I sit and I watch to see what sets up here.

Jeff Bailey : 9/11/2007 1:11:11 PM

Google (GOOG) $520.14 +1.08% ... WEEKLY Pivot just ahead at $521.27.

Jeff Bailey : 9/11/2007 1:10:26 PM

QQQQ $48.77 +1.18% ... sticks its head back above WEEKLY Pivot ($48.73).

Linda Piazza : 9/11/2007 1:03:26 PM

The TRAN is rising again up toward the neckline. I see a lot of potential Keltner and historical resistance ahead, particularly near 4759 and again near 4774-4783. The TRAN is at 4747.35 as I type. SPX, OEX and Dow bulls want to see the TRAN drive right through that resistance.

Jeff Bailey : 9/11/2007 1:02:35 PM

01:00 Market Watch found at this Link

Keene Little : 9/11/2007 12:51:58 PM

From an experienced realtor friend, in response to my last post on CFC (thanks Denise):

Yes they will give $$ to C/W but I have been trying for months to get them to re-open the credit line I have they closed in error. I have all the docs from them saying I have it...but they can't get anyone in the head office to take responsibility or fix it...and it just $28K!! I have only been a customer for 30 years. I suppose, like my current re-fi elsewhere, I will be told I am denied due to "current mkt conditions"--nothing personal. :-) You can bet my spending wil be constrained due to this credit freeze!

Now multiply this by many thousands and you can see where we're headed. BTW, if BAC loved CFC at $25 (or wherever they bought them), then surely they'll love 'em at $15. Then pick up some more at $5... Link

Linda Piazza : 9/11/2007 12:46:09 PM

The SPX is coming up toward the neckline of its inverse/reverse head-and-shoulders formation, but the TRAN isn't yet. Bulls would like to see the TRAN leading, not following. USDJPY is at 114.15, however, maintaining its breakout above 114.05-114.07 for now. If in bullish positions, just keep adjusting your stops appropriately.

Jeff Bailey : 9/11/2007 12:42:39 PM

US Oil Fund (USO) $58.21 -0.98% ... $0.50 box chart (to match futures) Link

Linda Piazza : 9/11/2007 12:41:15 PM

USDJPY at 114.11, moving into Friday's gap. Bulls want to see it continue to maintain values above 114.05 and not be knocked back again.

Keene Little : 9/11/2007 12:32:22 PM

On the CFC news (see Jeff's post at 12:03) I guess it's time for the government to hand Bank of America (BAC) another $2B to invest in CFC. I say that tongue-in-cheek of course since we know the government doesn't get involved with our free markets (cough).

Go ahead BAC, just keep doubling down on it as it heads for bankruptcy. Between that investment and the enormous increase in consumer credit card debt (the next big default area), BAC should be a sell. It failed to recapture its 200-dma on the August bounce and appears ready to drop back below its 50-dma. The daily moving averages are in declining mode (shorter averages below longer averages and declining).Its weekly chart is no worse than the banking index in general but shows its struggles with the weekly moving averages as well: Link

Jeff Bailey : 9/11/2007 12:32:14 PM

Jeff, If you don't have a futures account, is the ETF USO the best way to play the price of crude oil? Seems the OIH does not always mirror crude prices.

Reply: Yes!

Jane Fox : 9/11/2007 12:30:10 PM

USDJPY and AD volume to new daily highs telling you the bulls are still in control.

Jeff Bailey : 9/11/2007 12:20:42 PM

DERIVATIVES DIARY ... Subprime Woes Spread To Mutual Funds

After hurting hedge funds, foreign central banks, commercial paper and stock markets, risky home loans are denting prospects for so-called enhanced index funds, which are lagging behind market benchmarks in performance.

Keene Little : 9/11/2007 12:13:48 PM

Hello Keene, would you please explain which is better to use on options---Stops or Trailing stops. Thanks, Ed

Ed, which do you prefer, vanilla or chocolate ice cream? (wink)

The answer to this question is completely dependent on where I am in the trade. As an example, at the start of the trade, and let's say I'm buying a put option with the expectation that the market is going to decline, I obviously use a stop above my trade entry (and hopefully above a resistance level) and I keep it there until I see the trade working. Then in the early stages of the trade I'll lower it to breakeven as soon as I comfortably can.

This typically means lowering the stop to just above a bounce high. Once the trade is well underway I then trail the stop lower but not by a certain amount of money or points. I'll use a previous high or a downtrend line to manage my stop.

I always use the underlying for my stop and not the value of the option itself. Option values can spike up and down just on volatiliy premium changes and with call options the value of the option can drop even while the underlying is rising (maybe that's only happened to me).

This is my method but it's only one of many. I will also use target prices and exit once my target has been hit. In this case I use OCO (one cancels other) orders so that I can have a target and a stop entered and whichever one is triggered first then cancels the other order. I like to place conditional orders so that trades are executed on the underlying.

Linda Piazza : 9/11/2007 12:04:52 PM

Something else to watch: The TRAN is perhaps forming an inverse (or reverse) head-and-shoulders formation, with the formation setting up since Friday. If so, the current pullback could be part of the right-shoulder formation. It took a full day to form the left shoulder, and there's the possibility that it could take a full day before we'll know whether the TRAN will confirm this formation with a push above the neckline (I'd use a 30-minute close above the 30-minute 120-ema as confirmation) or whether this whole formation will unravel and fall apart as the TRAN declines past the appropriate right-shoulder level at about 4700. We don't know the outcome yet, but watching the TRAN may give you a heads up as to whether the bulls or bears are currently winning their battle.

Jeff Bailey : 9/11/2007 12:04:38 PM


DJ- Algeria's Oil Minister Chakib Khelil is to take over the presidency of the Organization of Petroleum Exporting Countries from his UAE counterpart, Mohamed Al Hamli, on Jan. 1.

Jeff Bailey : 9/11/2007 12:03:51 PM


DJ- Hedge funds lose 1.3% in August, their worst performance since May 2006 and the first losing month this year, dragged down by losses in stocks, emerging markets, junk bonds and so-called macro strategies, or funds that make bets on broad global markets.

Jeff Bailey : 9/11/2007 12:03:09 PM


DJ- Shares fall 4% after a report says the home-mortgage lender is putting together a multi-billion dollar bailout plan while it continues to struggle amid the global credit crunch and declines in the housing market.

CFC $16.47 -4.29% ...

Jeff Bailey : 9/11/2007 12:02:00 PM


DJ- August same-store sales climb 8.1%, helped by strong overseas results, its breakfast business and new food offerings in the U.S. same-store sales increase 7.4% in the U.S.

MCD $52.39 +4.46% ...

Linda Piazza : 9/11/2007 11:59:27 AM

Still, the USDJPY can't maintain its breakout. It hasn't retreated far, though, only to 113.94. It still maintains a rising trendline off Friday's low, with that trendline now crossing at about 113.48. Is this rising channel off Friday's low a bear flag rising into resistance or something more bullish? Right now, we just don't know and should avoid too many assumptions about what might happen next.

Jeff Bailey : 9/11/2007 11:59:03 AM

OPEC Oil Output Hike Effective From Nov. 1

Jeff Bailey : 9/11/2007 11:58:35 AM

OPEC Agrees To Raise Output Quotas By 500,000 B/D

Jane Fox : 9/11/2007 11:53:15 AM

Here is a chart of the long bond. Very very strong. Link

Jane Fox : 9/11/2007 11:52:14 AM

WASHINGTON (MarketWatch) -- The U.S. housing industry is in for a much deeper downturn, the National Association of Realtors said Tuesday as it slashed its forecasts for home sales and construction for this year and next.

Tighter credit conditions will likely postpone the recovery even further, said Lawrence Yun, senior economist for the real estate trade group.

In their monthly forecast, the realtors cut their estimates for all housing-related indicators for this year and next year compared with last month's forecast. The group expects housing starts and sales of new homes to continue falling through 2008, but forecasts a mild recovery in sales of existing homes next year.

Housing starts are now expected to fall 24% this year and an additional 8% next year to 1.26 million, about 10% less than the realtors' forecast from just a month ago. That would be the lowest since 1992.

Starts of single-family homes are projected to fall 26.5% this year and an additional 11% next year to 954,000, about 11% less than last month's forecast. It would be the lowest total since 1991.

Jane Fox : 9/11/2007 11:51:13 AM

WASHINGTON (MarketWatch) -- Federal Reserve Board Chairman Ben Bernanke said there has been some progress in recent months in reducing the global trade imbalances.

In a speech in Berlin on Tuesday, Bernanke did not address the current financial market turmoil or credit crunch.

His comments stuck to the troubling issue of the large U.S. current account gap and corresponding surpluses in China and oil-exporting countries. Many economists and the International Monetary Fund have worried for years that there might be a sudden, sharp decline in foreign appetite for U.S. dollars, requiring higher U.S. interest rates to attract the necessary foreign capital to fund American's spendthrift ways.

Jane Fox : 9/11/2007 11:50:39 AM

My goodness the US$ is very weak again today. This is only good news for us Goldbugs. Link

Jeff Bailey : 9/11/2007 11:33:10 AM

ECB's Noyer: ... Possible Globalization Effects Reversed In Future
Money Can Provide Important Info On Future CPI
Policy Doesn't React Mechanically To Money Aggregates
Must Distinguish Between Money Supply, Demand Shocks
Market Developments May Complicate Data Interpretation.

Jeff Bailey : 9/11/2007 11:30:11 AM

Trichet Q&A: ... The ECB Will Not Bail Out Investors.
Euro Zone Growth To Remain Around Potential

Jeff Bailey : 9/11/2007 11:28:05 AM

December Gold Jumps to 14-Month High

Jeff Bailey : 9/11/2007 11:26:04 AM

ECB's Trichet: Monetary Stance Still On Accommodative Side

DJ- The European Central Bank's monetary stance remains on the accomodative side as risks to price stability "remain on the upside" in the euro zone, ECB President Jean-Claude Trichet said Tuesday.

But the ECB's governing council "needs to gather additional information...before drawing conclusions," Trichet told the Committee on Economic and Monetary Affairs in Brussels.

The current market environment is defined by a "high level of uncertainty", Trichet said.

The ECB kept its key policy rate at 4.0% at its monthly rate-setting meeting Sept. 6, citing "market volatility and increased uncertainty" in global finance.

Trichet reiterated Tuesday that the market has entered "a correction phase" that can lead to "overshooting" in the pricing of market instruments.

"We aren't yet at the end. We must be very prudent to draw conclusions," Trichet said.

Keene Little : 9/11/2007 11:24:02 AM

Assuming SPX will make up to its 1474-1475 target, there are a couple of ways it could get there. This 10-min chart shows two potential corrective wave counts, the pink one being more direct and faster whereas the dark red count shows a choppy ascending wedge kind of rise: Link It takes a break of the lower uptrend line from yesterday's low, currently near 1454 to tell me the bounce is finished. This bounce should be able to finish today.

Jane Fox : 9/11/2007 11:30:14 AM

AD volume to new daily highs so it is a "buy the dips" day so far.

Tab Gilles : 9/11/2007 11:21:03 AM

Bernake Speech Link

Jeff Bailey : 9/11/2007 11:21:34 AM

Bernanke: Global Savings Glut Remains in Place
US Current Acct. Gap Can't Persist "Indefinitely"
US Current Acct. Gap Not A Big Economic Burden
US Saving Rate Should Be Higher
Term Premiums Up From Unsustainably Low Levels

Jeff Bailey : 9/11/2007 11:17:18 AM

11:00 Internals found at this Link

Note: It would take a closing measure of 32.00% or lower for the NYSE 5-day NH/NL ratio to reverse lower.

Linda Piazza : 9/11/2007 11:14:12 AM

The USD/yen (USDJPY) could not maintain its breakout, and turned down along with RSI. As I mentioned on the chart linked with my 10:39:29 post, RSI doesn't usually trend at the levels it had reached, usually turning down and bringing the value lower, too. As I type, the USDJPY is at 113.74, still holding to the rising trendline off Friday's low. So far, it's just chopping back and forth within a tight rising channel, a channel that could be a bear flag, so remain wary with your bullish plays.

Jeff Bailey : 9/11/2007 11:02:41 AM

11:00 Market Watch found at this Link

Linda Piazza : 9/11/2007 10:46:00 AM

SOX has just made it back over 500 again, although only barely. It's at 500.22 as I type. Friday's and Monday's pushes over 500 were knocked back, so it's important for SOX bulls that that this push above 500 holds.

Jane Fox : 9/11/2007 10:41:10 AM

The NDX futures have been the stronger market of late but today leadership has changed back to the S&P and DOW futures for they are the two markets that have broken their respective PDHs. Link

Linda Piazza : 9/11/2007 10:39:29 AM

Tentative breakout on the USDJPY, but remain careful because of the RSI: Link Today, price appears to be leading this currency pair rather than the other way around, but is it instead urging continued caution with equity longs? Just remain on your toes with your long plays, following prices higher with your stops. Don't let a winning play turn into a losing one.

Jane Fox : 9/11/2007 10:35:22 AM

Internals are quite bullish this morning and not a time to be short. Link

Jeff Bailey : 9/11/2007 10:31:29 AM

Swing trade call option alert! ... for one (1) of the Google GOOG Sep $530 Calls (GOP-IW) at the offer of $3.60.

No stop for now. Target $530.

GOOG $519.00 +0.87%

Linda Piazza : 9/11/2007 10:26:46 AM

USDJPY or USD/yen is now 113.92 according to my feed. Like the SPX and some other indices, it's challenging resistance, but not clear of it yet.

Thinking about this anniversary date, I'm thinking that there will be a push to support indices today. I don't know whether it's going to be enough to sustain big rallies.

So, I'm looking at the USDJPY to give me guidance. Just as I wouldn't make big bullish bets or would be careful of any bullish bets I'd already made until and unless it breaks above resistance, I wouldn't be making big bearish bets as long as it maintains its ascending trendline off Friday's low, either. That should be at about 113.40 currently, if I'm eyeballing it correctly.

Jane Fox : 9/11/2007 10:14:06 AM

The Russell 2000 is in a world unto itself. Link

Jane Fox : 9/11/2007 10:13:21 AM

Of course the DOW will have to confirm any trend continuation or trend change you may see in the SPX. Link

Jane Fox : 9/11/2007 10:12:22 AM

The SPX has made it very clear its trend is up but what is not clear however is if that trend will continue. You have your swing high made September 4th and your swing low from yesterday to guide you. Link

Linda Piazza : 9/11/2007 10:09:57 AM

No breakout yet in the USD/yen (USDJPY). It's at 113.90 as I type. At the same time, yesterday's high and the 200-sma as well as Keltner resistance are giving the SPX some trouble. Those hoping for continued equity gains want to see a confirming breakout in the USDJPY.

Keene Little : 9/11/2007 10:05:16 AM

If this sets us for the MOAP today, would you buy September or October puts and which index would you buy, SPY, DIA or RUT?

Forgive me for answering this with another question--do you prefer vanilla or chocolate ice cream? Depending on which market you like to trade and what your time horizon is (day trader, swing trader or position trader) will determine which trade will work best for you. We have every imaginable trader type and therefore a one-size-fits-all trade recommendation doesn't work.

Having said that, here's what I'd recommend for consideration (assuming the MOAP setup is going to work). Yesterday (actually Sunday night but it was at the beginning of Monday's postings) I posted a chart of SPX showing where it could head after a 2nd wave correction finishes (dark red count): Link

This shows a move down to the 1360 area by the end of opex week. This is of course just a projection and the market may not get there or it may not stop there. But assuming for the moment that it does then you have to ask yourself whether to use front month (Sept) options, which will bleed off all time premium by opex Friday or use something further out so as to not lose much time premium. If you were to buy a deep ITM Sept put option then you wouldn't have much time premium to worry about. Your choice.

As for which vehicle to trade I'm not sure who will lead to the downside. Typically the techs and small caps, so NDX and RUT, lead the way. But if banks are going to lay a stink bomb on the market (LEH and BSC report this week I believe) then SPX might be a good choice. The DOW should be an obedient dog and just follow the crowd.

Lots to consider so good luck with your choice. Let's hope it sets up nice which will give us a good entry AND a good stop level.

Jeff Bailey : 9/11/2007 10:02:27 AM

10:00 Market Watch found at this Link

Jeff Bailey : 9/11/2007 9:59:56 AM

OPEC to Decide on Oil Production Quota Link

Linda Piazza : 9/11/2007 9:56:58 AM

USD/yen (USDJPY) now at 113.83. Still no breakout.

Linda Piazza : 9/11/2007 9:50:58 AM

USD/yen or USDJPY 113.90. It's moving up but hasn't broken through resistance yet. If you remember a late-day post from yesterday, even after the USDJPY breaks through that resistance, it's just breaking through into a gap zone where resistance might be found, particularly at the bottom (where it has been this week), midpoint or top. I likened moving up through that gap zone to the SPX moving up through the rising price channel on its daily chart: good to see if you're a bull, but still a little worrisome because one doesn't know whether the price channel is just a good old rising channel or a bear flag.

Jeff Bailey : 9/11/2007 9:47:35 AM

China's CPI Hits 10-year high, trade surplus +33% Link

Jane Fox : 9/11/2007 9:45:28 AM

On Tuesday, September 11, 2007, The NASDAQ Stock Market will observe a moment of silence from 10:29 to 10:30 ET (to coincide with the fall of the second tower), in remembrance of those who lost their lives on September 11, 2001.

Linda Piazza : 9/11/2007 9:45:24 AM

USD/yen 113.81.

Linda Piazza : 9/11/2007 9:44:09 AM

The Fed has announced a repo in the amount of $3.50 billion. Since yesterday's repo of $2.750 billion expires today, that leaves an $0.750 billion net add for today.

Jeff Bailey : 9/11/2007 9:43:51 AM

ImClone (IMCL) $46.57 +22.62% ... surging on positive Erbitux study. Link

Jane Fox : 9/11/2007 9:38:38 AM

Well it didn' take too long for the AD line to get above +1000 it is now +1158

Linda Piazza : 9/11/2007 9:35:30 AM

USD/yen (USDJPY) is now at 113.76. Still no breakout above resistance.

Jane Fox : 9/11/2007 9:32:11 AM

AD line is a neutral +485.

Linda Piazza : 9/11/2007 9:23:44 AM

Based only on what I'm seeing with the USD/yen, which is currently at 113.89 and still below the gap zone from last Friday, I urge just a little caution about the sustainability of any early rally. Maybe this will be one of those rarer times when equities lead the currencies, and the USD/yen admittedly has been rising off the Friday low, but it just hasn't been able to break back above that 114.05-114.07 resistance, and that failure doesn't signal jubilant and sustained breakouts ahead. At least not yet. If you're planning on participating with a long play anyway today or are already in one, just be aware that not all ducks are in a row yet, and you need to be vigilant about your stops.

Jane Fox : 9/11/2007 9:18:42 AM

I can't believe I missed this rally. I was dealing with the crash in the stock market last month and took my eye off Gold and look at what I missed. Well I guess I will have to get back on board on a dip. Link

Jane Fox : 9/11/2007 9:16:43 AM

Yesterday Crude hit a high of 78.47 tagging its yearly high made August 1st at 78.77. I expect crude to retreat from here and that support at $74.00 will hold. This is of course a purely technical point of view and does not include anything that may influence the price of Oil such as political turmoil or weather. Link

Jane Fox : 9/11/2007 9:11:43 AM

American index futures markets are in rally mode with the DOW futures almost tagging its previous day high (PDH). Link

Jane Fox : 9/11/2007 9:09:59 AM

Dateline WSJ - Mr. Ben Bernanke will be speaking in Berlin at 10 a.m. EDT, in what could be his last opportunity to give clues as to what the U.S. central bank will do next week regarding interest rates. But the speech isn't on monetary policy -- the subject is global imbalances -- so there's a possibility he won't address the economy at all.

Linda Piazza : 9/11/2007 9:07:39 AM

The only repo that matures today is a $2.750 billion from yesterday. So far, no repos have been announced today, but that's not unusual. The first one, if any are to be made, is typically announced at 9:40.

Jane Fox : 9/11/2007 9:04:16 AM

WASHINGTON -- The U.S. trade deficit narrowed slightly in July, as exports of high-value capital goods offset the impact of higher oil prices on imports.

The U.S. deficit in international trade of goods and services shrank 0.3% to $59.25 billion from June's revised $59.43 billion, the Commerce Department said Tuesday. The June trade gap was originally reported as $58.14 billion.

The July trade gap came was in line with Wall Street expectations. Economists surveyed by Dow Jones Newswires ahead of the report had predicted a $59.20 billion deficit. Demand abroad for American-made products has been an important contributor to U.S. economic activity this year and Tuesday's report indicated that trend continued into the third quarter.

In July, growth in U.S. exports, up 2.7% to $137.68 billion, outpaced the growth in imports. Imports climbed 1.8% to $196.93 billion.

Keene Little : 9/11/2007 8:40:11 AM

Two equal legs up for SPX from yesterday's low is at 1474.43 which is right on top of its 62% retracement at 1474.58.

Keene Little : 9/11/2007 8:23:28 AM

Are you ready for your next MOAP (Mother of All Puts)? This NDX 60-min chart shows the setup: Link As with the SPX and RUT charts I posted last night (below), it would look best with another leg up to finish an a-b-c 2nd wave correction to the decline from last week. With futures up this morning it's looking like that's a good possibility.

Two equal legs up from yesterday's low is at 1992 (about 30 points above yesterday's close) and that places it between a 50% and 62% retracement of the decline. It would be a retest of its broken uptrend line from August 16th. It's a sweet setup and now we'll watch to see if we get it. It's a MOAP because the next wave down (assuming the wave count is correct) will be a 3rd wave and the move that will kick start the next leg down to new lows.

Market Monitor Archives