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Keene Little : 9/18/2007 2:16:42 AM

Tuesday's pivot tables: Link and Link

I had mentioned on Monday that the pattern of the overlapping highs and lows as SPX works its way lower from last Thursday's high looks potentially bullish--pink count on this 60-min chart: Link The alternative interpretation is that it's a very bearish pattern (series of 1st and 2nd waves to the downside that calls for some strong 3rd waves down).

The key levels for SPX are last Thursday's high and the 62% retracement of the rally off the Sept 10th low. A drop below 1460 would be a break of its uptrend line from August 16th through the Sept 10th low and it would be too much of a break below a potential descending wedge that I've drawn on the chart. A break below the descending wedge (other than a quick throw-under) would be very bearish just as we've seen rallies above the tops of ascending wedges turn into very strong rallies.

But a dip (maybe a post-FOMC spike down) that holds at or above 1465 and then breaks above 1480 would begin to look more bullish. A break above 1490 would target 1510-1520 by a few Fib projections, and it could get there by Friday (end of opex). That kind of rally would be a GMOAP (Grand Mother of All Puts) but let's see what happens first between now and then.

The other indices have a very similar setup even if we're seeing a lot of intermarket divergence between them right now. The NDX pattern looks the same: Link The key level to break to the upside is 2006 and to the downside is 1944 although a break below 1963 would be a heads up.

Jeff Bailey : 9/18/2007 1:06:50 AM

Russell 2000 Index ($RUT.X) ... daily interval bar chart at this Link

PnF chart Link

Jeff Bailey : 9/18/2007 1:05:12 AM

NASDAQ-100 Index (NDX) daily interval bar chart Link

PnF chart Link

Jeff Bailey : 9/18/2007 12:34:51 AM

Dow Industrials (INDU) daily interval bar chart Link

PnF Chart Link

Jeff Bailey : 9/18/2007 12:16:21 AM

S&P 100 (OEX) daily interval bar chart Link ... slightly "stronger" within convention retracement(s) as compared to the broader S&P 500 (SPX).

Jeff Bailey : 9/17/2007 11:47:39 PM

S&P 100 Bullish % (BPOEX) via Dorsey/Wright and Assoc. unchanged at 67% bullish (33% bearish). (See Monday's Market Wrap).

If this were a game of "Texas Hold'em," I'd suggest playing your hand, but check to opponent and see if you can't get a read for free. Don't go "all in" here.

OI Technical Staff : 9/17/2007 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 : 9/17/2007 7:06:40 PM

Global Equity Indexes / Currencies Table at this Link

Far right "% Since 7/2/2007" would be an approximate Q3-to-date percentage change.

Note impact of STRONGER yen vs. US$ and euro with Nikkei-225 -11.13%.

Shanghai in a world of its own and +41.32%!

Here at home, small caps of the RUT.X -8.19%, NDX +1.48%.

Jeff Bailey : 9/17/2007 6:25:00 PM

Closing Internals found at this Link

NYSE NH/NL Ratio Chart Link

At today's close, the NYSE 5-day NH/NL ratio would see a 3-box reversal higher (from 30%). In Friday's Market Monitor @ 04:44:43 Link , I posted/reviewed the recent inflection points.

At 04:49:46 PM Link , I showed an IF, THEN, ELSE "statement" that institutional computers, if not traders/investors like you and I might be able to utilize regarding the NYSE Nh/Nl figures.

Jeff Bailey : 9/17/2007 5:25:04 PM

E*Trade Financial Down 8.5% Late Trading After Warning On Mortgages

Jeff Bailey : 9/17/2007 5:11:18 PM

Adobe Systems (ADBE) $43.06 -0.80% ... jumps to $44.73 on headline numbers.

Earnings Press Release Link

Consensus was for non-GAAP EPS of $0.40 on Revenue of $789.25M.

Jeff Bailey : 9/17/2007 4:45:51 PM

S&P Price/Earnings Ratio At 16.75, Down From 16.83

DJ- The price/earnings ratio of the Standard & Poor's 500 Index at the close of trading Monday was 16.75.

On Friday, the ratio ended at 16.83.

The price/earnings ratio for the S&P 500 measures the index's closing level divided by the index's total earnings, as reported under generally accepted accounting principles, or GAAP, for the most recent year.

In 2006, the most recently reported year, S&P 500 companies reported earnings of $88.18 a share.

Jane Fox : 9/17/2007 4:21:02 PM

Economic Reports for tomorrow.

7:45a.m. 8:30a.m. August Producer Price Index. Expected: -0.2%. Previous: +0.6%.

8:30a.m. August PPI, Ex-Food & Energy. Expected: +0.1%. Previous: +0.1%.

9:00a.m. July Treasury International Capital Flows. Previous: $107B.

1:00p.m. Sep NAHB Housing Market Index. Previous: 22.

2:15p.m. FOMC meeting; interest rate decision.

Jane Fox : 9/17/2007 4:16:58 PM

It was not a bullish day but it also did not do too much damage to the SPX chart. Link

Jane Fox : 9/17/2007 4:08:11 PM

Oh my gosh Crude is breaking out again. From a technical point of view this should take off to higher highs but from a seasonal and economic point of view we should be seeing a fall any day now. Link

Keene Little : 9/17/2007 4:02:26 PM

The pullback in SPX is taking on more and more of a corrective appearance since last Thursday's high. This might actually be setting up for a bullish post-FOMC resolution (pink wave count on this updated 60-min chart): Link Either that or it's an extremely bearish pattern that has a bunch of 3rd waves to the downside coming. We'll have to see if it drops down to support tomorrow otherwise a choppy rally instead into tomorrow would likely be at least short term bearish.

Keene Little : 9/17/2007 3:55:42 PM

Finally got a decent connection just as we head into the close. NDX has a corrective looking bounce after this morning's sharp drop and that gives me the impression another leg down is coming. But the upside pattern doesn't look complete yet and suggests a little higher before it should be ready to roll back over. So perhaps another small bounce tomorrow morning which should set up another shorting opportunity. But overall it's certainly looking like a holding pattern until we get through FOMC. Link

Jeff Bailey : 9/17/2007 3:52:55 PM

Towards the close ... NYSE NH/NL 54:118 . The 118 new lows still shy of the 133 found on 9/10/07.

Today's daily ratio is 31.4% and a bit stronger than 9/10/07's 21.8%.

Jane Fox : 9/17/2007 3:39:39 PM

And as you can see the markets have not moved far from their overnight ranges either. Link

Jane Fox : 9/17/2007 3:38:25 PM

Here is how the markets are trading in relation to their previous day ranges. Link

Jeff Bailey : 9/17/2007 3:38:55 PM

Baide Rises After Price Target Increase ... AP Story Link

BIDU $251.07 +6.89% Link ... "good gravy!"

Linda Piazza : 9/17/2007 3:37:26 PM

Writing for the Market Monitor on the days leading up to an FOMC meeting is always difficult. How many times and ways can you say that it may not be about technical analysis and all about positioning ahead of that meeting? There's a tendency to over-analyze just to have something to write, but I'm going to try to avoid that tendency. Be careful of the last 20 minutes, when MOC (market on close) orders appear, but, so far, I don't see anything that predicts anything other than what we've had today. Chop.

Jane Fox : 9/17/2007 3:36:38 PM

AD line continues to make new daily lows but the other internals are not confirming so we remain in a choppy mess, just like we have been all day.

Jeff Bailey : 9/17/2007 3:27:20 PM

VIX.X 30-minute interval chart with WEEKLY (blue) and MONTHLY (pink) pivot retracement at this Link

Linda Piazza : 9/17/2007 3:20:28 PM

I just noticed Jane's 12:43:13 post. I wish we could trade with each other, and my feed service provided the ratio, which I haven't found yet. I prefer the ratio for advance/decline information. Here's why. When you have a low-volume situation, such as during the lunchtime lull or the day before a holiday, the subtracted numbers can be distorted. For example, imagine that you had a day when advancers were far outstripping decliners: the breadth was strongly bullish. When volume dipped during the lunchtime lull, though, the difference between the advancers and the decliners might go way down just because the volume is down, and it might appear that the internals are reversing. If you're looking at the ratio, however, you might see that the proportion of advancers to decliners stays about the same and so won't conclude, perhaps wrongly, that breadth has changed.

Jeff Bailey : 9/17/2007 3:16:25 PM

VIX.X 26.14 +4.89% ... after late-morning kiss of MONTHLY Pivot (26.74).

Jeff Bailey : 9/17/2007 3:15:07 PM

BIX.X 360.52 +0.08% ... edges green.

Jeff Bailey : 9/17/2007 3:13:43 PM

03:00 Internals found at this Link

Jeff Bailey : 9/17/2007 3:03:17 PM

03:00 Market Watch found at this Link

Linda Piazza : 9/17/2007 3:01:45 PM

Just as I worried might happen earlier today, the violation of the neckline on that SPX H&S meant nothing. Neither did the violation of the 30-minute Keltner support. The USDJPY has never broken out of its triangle building over several days and that warned us not to trust what looked like an SPX breakdown. Keltner channels are beginning to line up one within the other, their central basis lines cycling down until they're nearly aligned with each other, in a way that's oh-so familiar before an FOMC meeting.

Linda Piazza : 9/17/2007 2:40:24 PM

A reader notes doji ("doji" is both singular and plural) on the Dow, SPX, SOX and Nasdaq on Friday and asks for an interpretation. First, good eye for picking up on the number of doji or near doji that were produced that day. Unless my charts are lying to me, I don't see a doji on the Nasdaq's chart for Friday, but I did find them easily on the other charts mentioned. Second, these doji proved strange to interpret and quite interesting. Here's why: the SPX's doji appeared at the top of a climb off the 9/10 low, although it was entirely within Thursday's range, so I don't know if we can really say top; the SOX's near-doji (there was a small body) was at the bottom of a decline off the 9/04 high; and the Dow's near-doji was at the top of the climb off the 9/10 low.

Normally when doji are produced at either the top of a climb or the bottom of a decline, they're considered potential reversal signals, with the emphasis on "potential." If you think about how the doji is produced (prices open, swing higher and lower or vice versa and then end up right back where they started), it's clear that they indicate some indecision. When they come at the top of a climb or the bottom of a decline, they might be indicating that bulls are uncertain about sending prices higher in a rally and bears are uncertain about sending prices lower in a decline. Or it might indicate that bullish and bearish forces are more closely balanced than they have been. Momentum that pushed prices in a trending move may be waning.

When doji occur in a congestion zone, they don't have the same meaning. They simply provide a visual of the emotion or balanced forces that are causing the congestion in the first place.

So, what do we make of doji produced at the top of climbs and the bottom of declines on the same day, on different indices? First, we know that markets were somewhat bifurcated, obviously. Second, we can conclude that messages were mixed. Third, when we really draw back and look at price action, we can see that although the SPX's version was at the top (or nearly) of a climb, that climb was still inside a congestion zone. Same with the Dow's.

Next, although I'd consider myself more of a technical analyst than a fundamental one, I learned long, long ago never to ignore the possible impact of a looming FOMC meeting. We tend to get prices that either zoom around or are clamped down in the days leading into an FOMC meeting as people position themselves.

So, what would I have concluded? First, the SOX has been unintelligible to me for months, so I likely wouldn't have given the SOX's action as much weight. I would have given the doji on the SPX and Dow a bit more weight and considered the possibility of a pullback today, although that's really easy for me to say today since I have the benefit of seeing the action. I wouldn't have counted on a pullback--see the 8/21 and 8/30 daily candles for a warning of why we can consider these only potential reversal signals and not count on their signals--but I would have certainly made plans for what I would do if a pullback did begin.

Here's what I would have thought for the SPX and what I still think. Barring some big news ahead of the FOMC meeting, I wouldn't be surprised to see the SPX churn around between 1462-1465 downside support and/or 1490-1492 upside resistance ahead of the FOMC decision tomorrow. I don't know whether big money will decide to park the prices at resistance or at support, but I just wouldn't be surprised if that parking gets done into the FOMC meeting.

I think markets are particularly jittery right now, though, and it wouldn't take much to get something big going, undoing the normal pre-FOMC action. I sound as if I'm hedging all bets, and that's exactly what I'm doing because I don't see anything clearly right now and I don't think anyone else does, either. That's what I'm hearing when I'm up during the night listening to CNBC Europe, that's what I read in THE LONDON TIMES business section, that's what I heard on BBC radio when driving across Texas to a funeral on Friday. I will be watching the USDJPY to help guide my decisions.

How am I positioning my portfolio? I've discussed this before. I'm mostly in cash right now. I had fewer than normal September condors (45 contracts of condors) and I spent the last couple of weeks paying up to $0.20 per side to close each out, giving up more of my profit than I normally would. I'm out of all September contracts then, and in even fewer October positions. I've been trying to close those out, too, but MM's aren't cooperating. Smile. So, I am hunkering down until I have more clarity.

Long answer. Sorry about that.

Jeff Bailey : 9/17/2007 2:28:23 PM

SPY Option Montage so far today. (OI as of Friday's close) at this Link

Jeff Bailey : 9/17/2007 2:10:17 PM

SPX Option Montage so far today (volume is CBOE only, Open Interest is all exchanges) at this Link

SPX Option Chain from Friday at 02:23:27 PM EDT Link

I ran out of time Friday to capture the SPY's option montage, and it also needed to be captured for complete analysis. However, we can still do some work and note that on Friday we must have witnessed NAKED CALL BUYING in the 1,500 strike, as OI has fallen by 11,699 contracts. Today, we see CALL SELLING (NAKED? or LONG LIQUIDATIONS?). in the 1,500 calls and 1,490 calls.

Should OI INCREASE with tomorrow's option montage, then we could analyze that current 1,490 call and 1,500 call action is NAKED CALL SELLING. Should OI DECREASE, then we could analyze LONG LIQUIDATION.

Linda Piazza : 9/17/2007 2:03:04 PM

I'm back. While I was gone, the SPX rose to retest the neckline of the H&S, with that neckline violated earlier today, and now it's rolling down from that retest. It looks like a classic retest of broken support to see if it holds as resistance, but the USDJPY still hasn't broken out of that narrowing triangle, so I still suggest some caution about bearish conclusions. The USDJPY is at 115.05.

Jane Fox : 9/17/2007 1:39:35 PM

AD volume just took a dive and the markets reacted but the VIX is not anywhere near its daily highs so the dip was very short lived.

Jeff Bailey : 9/17/2007 1:24:48 PM

01:10 Internals found at this Link

Jeff Bailey : 9/17/2007 1:12:49 PM

01:10 Market Watch found at this Link

Jeff Bailey : 9/17/2007 1:04:16 PM

Barry! Just saw another e-mail from you. Good job!

Jeff, ... I think I just figured out my last question if you were referring to those who sold naked calls and now have to buy the underlying to cover.

Barry

Linda Piazza : 9/17/2007 12:57:42 PM

I've got to be out of the office for an hour or two. The USDJPY is rising again, bouncing up through the triangle in which it's chopped for a few days. The SPX is rising to test Keltner resistance near 1477.60 on 15-minute closes. No verdict yet, and with the USDJPY inside that triangle, there may not be. The top of that triangle is not at about 115.30, but I'd certainly use at least a 15-minute close above that, if not a 60-minute one, as verification of an upside break, and I'd also want a quick move above the 115.46 high from Thursday. It's at 115.12 now, right in the middle of the triangle's support and resistance.

Jeff Bailey : 9/17/2007 12:58:30 PM

Email Question: Jeff, how can there be Naked Call buyers? Doesn't Naked imply you are selling puts or calls without owning the underlying? The only risk in buying a call or put is the option price itself and you are not exposed (Naked) to any other risk?

Barry

Reply: Barry is correct in that the only risk in buying a call or put is the option price itself.

NAKED call buying takes place when a PREVIOUSLY "sell to open" call trader comes back and "buys to close" the position. For example, an index/stock trader that was not long an underlying security, may have SOLD NAKED an in/at/out the money call, with technical/fundamental reasoning that the security would NOT reclaim the specific strike sold NAKED on or before expiration.

However, news, funamentals, or more importantly technicals change from initial sell to open, which could then have the trader buying to close the NAKED position.

When we see Open Interest FALLING in a Call Option when UpTick Volume has been heavy, it suggests to us that NAKED CALL BUYING is present.

Jeff Bailey : 9/17/2007 12:44:37 PM

A&L Says It Has Not Sought Aid From Bank of England

DJ- U.K. mortgage lender Alliance & Leicester PLC (AL.LN) said Monday that it hasn't sought financial assistance from the Bank of England and that it has no plans to do so.

Jane Fox : 9/17/2007 12:43:13 PM

I get a lot of questions about the AD volume and AD line that I use for my internals. The ones I use were an adaptation of Tradestation's AD ratio indicators. As you can see you can use either but TS's version is a ratio and I like the absolute values. Link

Jane Fox : 9/17/2007 12:37:54 PM

The USDJPY currency pair is almost to its daily highs (using a 9:30 open) but the other internals are still quite bearish. Link

Keene Little : 9/17/2007 12:31:13 PM

I'm about to run into areas that have spotty wireless internet service (either nobody lives out here or I'll be in the mountains) so my coverage the rest of the day will be hit and miss. As a guide for today, watch the SPX 1470 area for potential support (1460 below that if 1470 breaks) and NDX 196-1968.

A small consolidation here should be followed by more downside but I thought the same thing on Friday which was then followed by that choppy ugly rise for the rest of the day (which did turn out to be bearish as I thought it would). Until we get through FOMC we should expect strange price action. Trade safe (take profits often).

Jane Fox : 9/17/2007 12:30:33 PM

WASHINGTON (MarketWatch) -- With mortgage debt climbing faster than market values of their homes, U.S. homeowners' equity in residential real estate fell by $6 billion in the first quarter, the first decline since 1994, the Federal Reserve reported Monday in its quarterly report on the flow of funds.

Homeowners' equity in real estate fell to a record-low 51.7% of the total market value of their homes.

Household net worth -- defined as assets minus liabilities -- rose by $1.2 trillion, or 8% annualized, to $57.9 trillion, the Fed said, as gains in real estate, corporate equities and other assets increased faster than debts.

Assets increased $1.5 trillion to stand at $71.7 trillion, while liabilities rose $301 billion to $13.8 trillion.

Jeff Bailey : 9/17/2007 12:23:09 PM

DJ NEWSWIRES SURVEY - August PPI Seen Down 0.3%, Core Up 0.1%

The U.S. producer price index for August is expected to show some slippage due to lower gasoline prices, with economists forecasting a 0.3% decrease in the overall PPI after a 0.6% increase in July, pulled down by energy prices.

Jeff Bailey : 9/17/2007 12:19:29 PM

BANK OF AMERICA UNVEILS SPECIAL MORTGAGE OFFER

DJ- Bank of America introduces special pricing for borrowers seeking to refinance their mortgages with traditional, conforming 30-year and 15-year fixed rate loans and non-conforming 30-year fixed rate loans. Offer runs through Nov. 30.

Jeff Bailey : 9/17/2007 12:16:56 PM

HOUSE PANEL TO VOTE ON BANK REGULATORY BILLS

DJ- House Financial Services Committee plans to vote on two bills aimed at redistributing regulatory oversight for the banking industry. Both bills were introduced by Committee Chairman Barney Frank, D-Mass.
(see also 12:12:52 PM)

Jeff Bailey : 9/17/2007 12:15:22 PM

FITCH CUTS FIRST DATA TO JUNK GRADE

DJ- Fitch Ratings cuts First Data Corp.'s ratings to B+, well into speculative-grade junk territory, the day bankers are set to launch the first part of their massive fundraising effort for Kohlberg Kravis Roberts' $26 billion leveraged buyout.

FDC $33.60 +0.14% ...

Jeff Bailey : 9/17/2007 12:13:50 PM

BEAZER HOMES GETS POTENTIAL DEFAULT WAIVERS

DJ- Beazer Homes receives waivers of potential defaults arising from possible breaches of some covenants related to matters underlying its previously disclosed audit committee investigation.

BZH $9.21 -2.12% ...

Jeff Bailey : 9/17/2007 12:12:52 PM

US PAULSON SAYS REGULATORS MUSTN'T OVERREACT TO TURMOIL

DJ- U.S. Treasury Secretary Henry Paulson warned that regulators shouldn't rush to impose new rules on financial markets in reaction to the recent crisis in credit markets. Adds policymakers have time to be cautious because the global economy is strong.

Jeff Bailey : 9/17/2007 12:09:32 PM

US CEOs See Limited Effect From Credit Woes (Survey)

DJ- U.S. corporate executives think the effect of recent credit market problems on their businesses will be limited, according to a survey released Monday by the Business Roundtable.

Sixty percent of chief executives surveyed said they did not expect "substantial" effects from credit market turmoil on business prospects. Forty percent said they did foresee substantial effects, according to the Business Roundtable, an association of chief executives at major companies with combined annual revenues of $4.5 trillion and more than 10 million employees.

The organization's third quarter outlook index - which combines expectations for sales, investment and payrolls - fell 4.5 points from the previous quarter to 77.4. Still, that's well above the breakeven level of 50 between expansion and contraction.

"While the latest (survey) results continue a pattern of gradual decline in expectations since the beginning of the year, America's business leaders remain confident in the overall business environment," said Harold McGraw III, chairman of Business Roundtable and chief executive of The McGraw-Hill Companies.

Jeff Bailey : 9/17/2007 12:07:47 PM

US Household Net Worth Up 2.1% To $57.86 Trillion In 2nd Quarter
US Nonfinancial Debt Grew At 7.1% Annual Rate In 2Q

Jeff Bailey : 9/17/2007 12:04:28 PM

ITT To Buy Defense Contractor EDO For $1.4B

ITT $63.79 -0.77% ...

EDO $54.86 +6.50% ...

Jeff Bailey : 9/17/2007 12:01:28 PM

Fitch Cuts UBS Outlook: Sees 3Q Subprime Storm Ahead

DJ- UBS AG's (UBS) outlook was downgraded by a ratings agency Monday, another sign that investors believe the worst of the U.S. subprime mortage crisis is yet to hit the Zurich-based bank.

Swiss banking giant UBS' outlook was downgraded to negative from stable by Fitch Ratings, which said the Swiss banking giant's U.S.-based investment bank will continue to suffer from market volatility sparked by the subprime meltdown. The long-term issuer default rating was confirmed at AA+.

What's more, UBS' flagship private bank, the second-largest bank unit by profits and reason UBS and other major private banks command a higher valuation than investment banking rivals, may not be enough to buffer the turbulence this quarter, according to the Fitch analysts.

"In severe market conditions, this ability could become stretched and could test Fitch's tolerance to earnings volatility at 'AA+'," Fitch analyst Gordon Scott wrote in a note.

UBS shares extended the day's losses after Fitch made the note public, ending down CHF0.65 - or 1.1% lower - at CHF60.90, giving UBS a market capitalization of $107 billion.

To be sure, investors hadn't thus far been expecting UBS to submerge from the subprime shakeout unscathed. The bank was already well into the third quarter in mid-August when it issued an unusually dour trading outlook for the current quarter, in sharp contrast to European rivals such as Deutsche Bank AG (DB) and Credit Suisse Group (CS).

The main reason was that UBS admitted it is sitting on a heap of illiquid, doggy subprime bets from a hedge fund that has since been halted after sizable losses. Should poor market conditions prevail, UBS in August said the current quarter's trading would prove "very weak."

Fitch analyst Scott cited UBS' August comments in his report, saying market volatility has continued unabated since then with little sign of relief, making the prospect of a weak third quarter more of a reality.

"In common with many global banks, UBS is likely to suffer from mark-to-market valuation losses on subprime assets held in its trading portfolio," Scott said.

Tatjana Domke, a spokeswoman for UBS, declined to comment on potential third-quarter losses or the earnings report, which is scheduled for Oct. 30.

The downgrade comes as investors brace for a spate of what are expected to be poor earnings this week from Wall Street banks Bear Stearns Cos. (BSC), which reports Tuesday, and Lehman Brothers Holding Inc. (LEH) and Goldman Sachs, which report the quarter Thursday.

The U.S. investment banks reporting close their accounts one month earlier than the Europeans, but are widely used as gauge for how the Europeans are faring because of the vast overlap in investment banking areas such as fixed income.

UBS shut in-house hedge fund Dillon Read Capital Management down in May after racking up CHF150 million in trading losses. The episode is widely believed to have contributed to former UBS Chief Executive Peter Wuffli's surprise sacking in July.

Linda Piazza : 9/17/2007 11:57:28 AM

The USDJPY at 114.90 is now dropping toward the ascending trendline that has been building since 9/09 and a narrowing triangle's supporting trendline. Those cross from about 114.78-114.83.

Jeff Bailey : 9/17/2007 11:48:17 AM

Baker Hughes N. American Rig Counts as of Friday at this Link

Jane Fox : 9/17/2007 11:45:01 AM

WE are into a get short and stay short kind of day but the challenge today is to pick the right market. NDX is now testing its PDLs and that may give it some support, which in turn could affect the Russell.

Linda Piazza : 9/17/2007 11:44:51 AM

SOX still can't maintain a bounce. If we're using the typically leading indices such as the SOX, RUT, MID and TRAN as barometers of the health of intraday market movements, they're not painting a healthy picture, as all are having trouble maintaining any kind of bounce attempt. But while I've been warning lately that we should begin to watch for times when the movements of the USDJPY are not as predictive or corroborative as they've been over the last few years, I'm not sure that we should completely discount the fact that it's not confirming the weakness just yet. It's just chopping around. If asked to group these together and come up with some kind of rating, I'd have to rate them mixed but leaning toward the bearish side. I'm just not accustomed lately to discounting what the USDJPY has to say, though, and it's the most neutral of the bunch, at least on an intraday chart. On a daily chart, it's pulling back from a resistance test of a triangle it broke through on 9/07.

Keene Little : 9/17/2007 11:41:28 AM

NDX is the weakest index today and has a very impulsive decline in progress. That's either the start of something much bigger to the downside or the ending of an A-B-C pullback from last Wednesday. If it's an A-B-C pullback then I would expect to see NDX find support around 1465-1468 where there is a 162% Fib projection and a 62% retracement in close proximity to each other: Link

If the raly off the Sept 10th low is going to be followed by another one like it then buying this pullback could be a great long play. If I didn't feel fundamentally bearish about this market (from an economic as well as seasonal/decennial pattern standpoint) I'd recommend that play. But I can't shake the feeling we've got a downside surprise coming, or at least I'd rather not be exposed to the long side right now.

Jane Fox : 9/17/2007 11:40:21 AM

DAX is confirming the bearishness but the USDJPY currency pair is not. This is bothersome.

Linda Piazza : 9/17/2007 11:37:16 AM

USDJPY is not breaking down out of its triangle formation, so it's not confirming SPX weakness. Either the typical relationship has become unbuckled or . . . I wouldn't count on the SPX dropping too far. I honestly don't know which it is at this point.

Linda Piazza : 9/17/2007 11:34:08 AM

The SPX is now dropping low enough to confirm the H&S on its 30-minute chart, the one that began building about last Wednesday. Be careful with stops on bearish plays because we've seen a lot of these confirmed only to see prices then climb and invalidate the things. The 30-minute Keltner chart sets a tentative downside target of 1467.37, so start making plans about how you'll treat that zone if the SPX should drop that low. Don't count on absolutely anything on a day before the FOMC meeting, though, and keep that huge repo in mind.

Jane Fox : 9/17/2007 11:30:55 AM

S&P and DOW futures have still not broken their overnight lows. Link

Jane Fox : 9/17/2007 11:28:11 AM

AD line is -1374

Jane Fox : 9/17/2007 11:27:57 AM

VIX to new daily highs and AD volume to new daily lows is all I need to tell who has control today.

Linda Piazza : 9/17/2007 11:20:24 AM

Meanwhile, the SPX is hovering around the lows of the day, retesting Friday morning's early low, too. It's below Keltner support that's now at 1476.55 on 15-minute closes, but above the congruent Keltner basis line (120-ema) on the 30-minute chart, with that line at 1474.60 on the 30-minute chart. It's not looking strong, for sure, but it's resisting, so far, confirming that H&S visible on both intraday charts.

Linda Piazza : 9/17/2007 11:17:39 AM

USDJPY at 115.09. It's giving us no guidance at all as it's still just chopping around inside a triangle formation.

Jeff Bailey : 9/17/2007 11:16:53 AM

11:00 Internals found at this Link

Note: It would take a closing session measure of 36.00% or greater to have the NYSE 5-day NH/NL ratio reversing back up into a column of X.

Jeff Bailey : 9/17/2007 11:03:36 AM

11:00 Market Watch found at this Link

Jeff Bailey : 9/17/2007 10:56:04 AM

Disclosure: I currently hold bearish position in the IWM.

Jeff Bailey : 9/17/2007 10:55:24 AM

Swing trade put alert! ... for an additional iShares Russell 2000 IWM Oct. $78 Put (IOW-VZ) at the offer of $3.40.

IWM $77.30 -1.01% ...

Jeff Bailey : 9/17/2007 10:53:38 AM

Russell 2000 Index (RUT.X) alert! 775.95 -0.96% ... See Saturday's MM.

Jeff Bailey : 9/17/2007 10:52:29 AM

Microsoft Loses European Appeal ... AP Story Link

MSFT $28.68 -1.23% ...

Linda Piazza : 9/17/2007 10:49:18 AM

The SOX is not maintaining any bounce this morning. Not so far. Still no bullish price/RSI divergences, either, on the 15-minute chart.

Jeff Bailey : 9/17/2007 10:49:08 AM

Doha Deal Could Boost Economic Confidence And Insure Against RecessionDJ- Speaking at the Council of Foreign Relations in New York, EU Trade Commissioner Peter Mandelson today said that a successful conclusion of the Doha Round of world trade talks would top up economic confidence and lock in the current level of the openness in the global economy as a guard against future recession and protectionism.

Mandelson argued that Doha negotiations had made more progress than many had thought and that "we nearly have a deal on the key issues." He argued that - especially given the current turbulence in global markets - both the EU and the US have the strongest possible interest in working for a deal that locks in the current openness of global trade and strengthens the global economic governance system.

Full text of Mandelson's remarks:

"At a time when our economies may be at risk as a result of the turbulence in the financial markets, the Doha world trade round offers insurance against protectionism and recession.

Europe and America have a shared interest in a global deal now on trade, one that reinforces openness on a multilateral basis, through the application of strengthened trade rules. One that keeps the international trading system running, with the fast-emerging new Asian and Latin American economies anchored firmly inside. The EU and the US are joint custodians of this governance system. After all, they created it.

This is, in the final analysis, what Doha is ultimately about. We focus on a few tons of poultry imports here, or a couple of billion farm subsidies there or half a point off an automotive tariff somewhere else. Lowering tariffs and subsidies is important. Doha will do both of those things. But every bit as important is topping up economic confidence and strengthening the rules that bind world trade relationships.

The Doha negotiations have made more progress than people realize. While everybody has said that the talks are failing they have in fact been moving forward and we nearly have a deal on the key issues. There are draft texts on the table, others are not far behind. The next stage will now see further revisions, adding detailed nuts and bolts where a number of blanks exist.

The European Union is ready to do a deal as is, I believe, the US. I know it is politically difficult in the US, but all of us need to see beyond the limits of agricultural protection and grasp the gains where the huge bulk of our trade takes place, in manufacturing and services.

There is in excess of a $200 billion a year trade deal in goods and services on the table. And this is a conservative estimate. A Doha success would mean making current levels of openness largely irreversible. Doha is like a ratchet in the global economic machine that will stop it sliding backwards.

In the final stages, we will all need to negotiate hard, but we also need to see beyond the immediate negotiation to our real long term interest. This is one of those times when politicians need to think and act like statesmen.

I do think that the US has a key role to play at this stage in moving to the final negotiating phase. But all in the WTO need to contribute to the limit of their ability to do so. It is not only for the US to make difficult decisions."

Keene Little : 9/17/2007 10:47:57 AM

After a little bounce the RUT is proceeding lower. If the decline continues then support could come from the broken downtrend line from July 19th near 768 which would be close to two equal legs down from Thursday. A larger upward correction pattern (pink count) then calls for another strong rally leg up to around 795 (why it would do that I have no clue). But the more immediately bearish pattern says price will just keep dropping (dark red). RUT 60-min update: Link

Linda Piazza : 9/17/2007 10:47:47 AM

The SPX did turn down from the resistance I mentioned in my 10:04:42 post and now tests the support mentioned in that test. It pierced the 15-minute Keltner support, as I suspected it would, dipping toward next support now near 1474.60, but it's just maintained 15-minute Keltner support on the 15-minute close. Meanwhile, the USDJPY has dropped back from its resistance test, but it's just dropped back within its triangle, with no breakout either direction. No conclusion yet.

Jeff Bailey : 9/17/2007 10:41:31 AM

Banks Balking At Funding Part Of PHH Takeover

DJ- The buyout of mortgage lender and vehicle-fleet manager PHH Corp. (PHH) has been called into question as private-equity firm Blackstone Group LP (BX) has run into trouble with its lenders over its portion of the deal's financing.

The news sent shares of PHH sharply lower, with the stock recently down $4.21, or 15%, to $24.29.

The Blackstone entity which would buy PHH's mortgage business from General Electric Co. (GE) sent a letter Friday to GE Capital which said JPMorgan Chase & Co. (JPM) and Lehman Brothers Holdings Inc. (LEH) "revised interpretations as to the availability of debt financing under the debt commitment letter."

The changes "could result in a shortfall of up to $750 million in available debt financing" compared with what was committed when the takeover deal was announced March 15. The Blackstone entity, which admitted "it is not optimistic," intends to get the originally agreed-to financing for the deal.

A vote on the takeover is set for Sept. 26, and PHH intends for it to proceed as scheduled. In addition, the company said it expects GE to complete the takeover.

The deal calls for GE to acquire Mount Laurel, N.J.-based PHH for $31.50 a share and then sell PHH's mortgage operation to Blackstone. GE will retain PHH's fleet-management business.

The skittishness from JPMorgan and Lehman to fund the mortgage portion of the buyout comes amid lots of turmoil in the sector as delinquencies and foreclosures rise and home sales slow. In addition, investor demand for mortgage-backed securities have essentially dried up as their valuations have come into question.

Jeff Bailey : 9/17/2007 10:39:13 AM

German Finance Minister: ... Sees Limited Spill-Over From Financial Crisis.

Jane Fox : 9/17/2007 10:35:00 AM

Here are your overnight charts showing just how bizarre the markets are trading today. Link

Jane Fox : 9/17/2007 10:32:02 AM

This is pretty weird but all the markets seem to be on their own agenda's this morning. Link

Jane Fox : 9/17/2007 10:30:04 AM

LONDON (MarketWatch) -- Shares of Northern Rock plummeted again Monday as customers cashed out of the embattled U.K. mortgage lender, setting a sour tone for trading in London.

The shares got routed to the tune of another 34%, to 289 pence, adding to losses of more than 30% sustained on Friday, when the lender said it needed a Bank of England bailout and warned on its 2007 profit.

Keene Little : 9/17/2007 10:22:46 AM

This is a very fractured market right now with the DOW the only one doing reasonably well. It's just not a healthy sign.

Keene Little : 9/17/2007 10:21:07 AM

The gold e-mini (YG) is pressing higher and is nearing its broken uptrend line from August 30th, currently near 730. Another failed retest there could be a great short entry. Link

Linda Piazza : 9/17/2007 10:18:50 AM

As I suspected might happen, as per my 10:04:42 post, the SPX is testing Keltner resistance near 1481.40 on 15-minute closes (it since moved a little higher as price did) as the USDJPY approaches resistance near 115.30 on 15-minute closes. The USDJPY is at 115.22 as I type, down a little from its 115.24 high. No breakout yet on the USDJPY, so don't be too quick to draw conclusions on the SPX, either.

Keene Little : 9/17/2007 10:18:24 AM

If you think gold is going to sell off with the next decline in the equities, as I do, then Friday's and today's rally is setting up the short play. The first Fib projection at 725.68 was tagged on Friday and there are plenty of negative divergences at recent highs to suggest we're going to get at least get a pullback. The larger wave count says the pullback could get a whole lot worse as the next large decline kicks into gear. Weekly chart update (December contract): Link

Jeff Bailey : 9/17/2007 10:16:16 AM

StreetTracks Gold (GLD) $71.11 +1.61% ... probes all-time close high.

Linda Piazza : 9/17/2007 10:15:07 AM

Thursday night, when writing the Wrap, I expressed concern that the SOX, RUT and MID weren't corroborating the gains in other indices. Friday morning, the SOX dropped further. This morning, the SOX is testing Friday morning's 483.95 low, exceeding it by a bit. The SOX is at 483.83 as I type, but has been as low as 483.75. It's also testing 15-minute Keltner support near 483.45 on 15-minute closes. Unfortunately for bulls, I don't see any bullish divergences (price/RSI) as yet. Still, bears in semi-related stocks should be aware of potential support here. So far, there's no sign of a rebound, though.

Keene Little : 9/17/2007 10:09:32 AM

If fact the RUT is running the other way and is making new lows as the DOW bounces. You know where the weakness lies for the short side.

Jane Fox : 9/17/2007 10:07:51 AM

I don't expect the SPX to even attempt a run at the September 4th swing high until after the FED meeting tomorrow. Link

Keene Little : 9/17/2007 10:07:45 AM

The DOW is getting a nice little bounce here and somewhat less in SPX but NDX and RUT have barely twitched off their lows. More rotation? Bearish if so.

Jeff Bailey : 9/17/2007 10:06:15 AM

NYSE NH/NL 29:45

NASDAQ NH/NL 34:31

Jane Fox : 9/17/2007 10:05:45 AM

WASHINGTON (MarketWatch) -- Former Federal Reserve Board chairman Alan Greenspan says he tried to raise mortgage rates to head off a housing bubble, but the effort came to naught because of "global forces" that had the effect of keeping long-term interest rates low.

In an interview early Monday with NBC News's "Today Show," Greenspan said he does not accept blame for the nation's housing bubble. He noted that 20 to 30 other countries have experienced housing bubbles, adding that these were "all caused by the same thing, this global sharp decline in long-term interest rates, specifically mortgage rates.

"We tried to get mortgage rates up. We failed. The reason we failed is global forces are overwhelming," he said.

Greenspan also said that he supported President Bush's tax cuts but was ignored when he argued that the cuts should be paid for by spending reductions.

Linda Piazza : 9/17/2007 10:04:42 AM

Here's what I see on the SPX's 15-minute Keltner chart. Right now, the SPX bounces from the morning's low as the USDJPY bounces. Watch for potential resistance near 1481.40 on a 15-minute close, as I suspect the USDJPY might also be approaching 115.29-ish resistance at about the same time. USDJPY is now at 115.13.

If the SPX should roll down, potentially significant SPX support lies at 1475.90-1476.50 on 15-minute closes. If you're an old-style technical analyst, you're also noting that a neckline for a head-and-shoulders formation lies at about that zone, too, but we know that these formations are no longer so reliable. I wouldn't be surprised to see that, if that zone's support was pierced, the SPX then bounced from about 1474.50, so be careful about your bearish conclusions.

Be careful about any conclusions. The action today will be about positioning ahead of the FOMC decision. Even big money might be jittery today, which could result in either clamped-down prices or prices that blow with any wind offered by any significant speaker or company news. Neither is particularly amenable to technical analysis.

Keene Little : 9/17/2007 10:03:38 AM

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

Jeff Bailey : 9/17/2007 10:01:43 AM

10:00 Market Watch found at this Link

Jane Fox : 9/17/2007 10:01:30 AM

WASHINGTON (MarketWatch) - Manufacturing activity in the New York area slowed a bit in September, the New York Federal Reserve Bank said Monday.

The bank's Empire State Manufacturing index fell to 14.7 points in September from 25.1 in August. Economists had forecast the Empire State index would fall to 18.0 in September from the initial estimate of 25.1 in August.

Readings over zero indicate expansion. The Empire State index is of interest to traders primarily because it's seen as an early forecast of the national Institute for Supply management survey due out in two weeks. In August, the ISM factory gauge inched lower to 52.9 in August from 53.8 in the previous month.

Keene Little : 9/17/2007 10:00:37 AM

Approximate futures premium over cash (December futures):

YM -- +106
ES -- +14.00
NQ -- +26.00
ER -- +5.50

Jeff Bailey : 9/17/2007 9:58:21 AM

YM 13,515 ....

Jeff Bailey : 9/17/2007 9:58:05 AM

YM Daily/Weekly/Monthly Pivot Levels found at this Link

Keene Little : 9/17/2007 9:57:44 AM

Monday's pivot tables: Link and Link

Linda Piazza : 9/17/2007 9:53:24 AM

USDJPY at 115.04 as I type. It's bouncing from this morning's early test of the rising trendline off the near-midnight 9/09 low. See my 8:45:53 post for an explanation. Prices remain within the narrowing triangle that began setting up Thursday, however. No conclusion as yet. It's just chopping around within that triangle. I believe the top trendline is now at about 115.25, but a 60-minute close above that might be necessary to conclude that any upside breakout had occurred, and even then, I'd be watchful for a potential reversal near Thursday's 115.46 high. Sometimes triangles are just widened into rectangles.

Linda Piazza : 9/17/2007 9:49:22 AM

The Fed has announced a repo in the amount of $16.750 billion. Unless I missed something, only $3.000 billion mature today, and I went all the way back to July 20, checking. That means today's add is a $13.750 net add. Hmm.

Jane Fox : 9/17/2007 9:44:57 AM

AD volume is making new daily lows and is under 0 so there is little hope for bulls right now but the VIX is not making new daily highs so little hope for the bears. This is a perfect time to just sit and watch.

Jane Fox : 9/17/2007 9:42:09 AM

Here are my internals. The VIX and the AD volume do not give a very clear picture this early but I would like to you take a look at the DAX and the USDJPY. Those two are almost tick for tick. Link

Keene Little : 9/17/2007 9:39:50 AM

If we get a pullback today then the first downside target for SPX is 1469.59 which is where it would have two equal legs down from last Thursday's high and is about 10 points below the current price. If we're in a larger upward correction then that may be all we get. But if we're starting something bigger to the downside then that level shouldn't even be a speed bump.

Jane Fox : 9/17/2007 9:36:12 AM

AD line is a bearish -811 and of course the AD volume is below 0.

Jane Fox : 9/17/2007 9:22:19 AM

The DAX is testing its overnight highs telling me the American Markets will follow.

The fact that Crude is under $79.00/bl should help the markets but I have not found crude to be much of a factor in the markets of late.

Gold is breaking out and on it way to test its previous day highs so I suspect the US$ will at least test its previous day low. I am very bullish Gold now but since I missed the last breakout I need a dip to buy. Link

Keene Little : 9/17/2007 9:17:06 AM

As I travel west (currently in Billings, MT) I'm at the mercy of connections and since last night's arrival I've been struggling to get charts to update. Therefore I haven't been able to update the pivot tables yet. Still working on it and will post as soon as I'm able to get a good connection.

Jane Fox : 9/17/2007 9:13:39 AM

Marketwatch.com's headline is "UK Lender Northern Rock and Greenspan's gloom dampen Monday Mood" but the overnight charts of the major American index markets do not reflect that gloom. The Russell futures (ER2) is almost to its ON high. Link

Jane Fox : 9/17/2007 9:10:35 AM

Dateline WSJ - WASHINGTON -- Former Federal Reserve Chairman Alan Greenspan spent much of the past 40 years as an influential economic adviser to both Republicans and Democrats, but today feels estranged from both. News coverage of his memoir has focused on his criticism of Republicans for forsaking their small-government principles. But in an interview with The Wall Street Journal, Mr. Greenspan expressed just as much dismay with the Democratic Party.

Mr. Greenspan, a self-described libertarian Republican, said he was "fairly close" to President Clinton's economic advisers -- Treasury secretaries Robert Rubin and Lawrence Summers and Deputy Treasury Secretary Roger Altman. "The Clinton administration was a pretty centrist party," he said. "But they're not governing again. The next administration may have the Clinton administration name but the Democratic Party...has moved...very significantly in the wrong direction," he said, referring to the Democratic Party's populist bent, especially its skepticism of free trade.

Mr. Greenspan told CBS's "60 Minutes" in an interview broadcast last night that Democratic presidential candidate Hillary Clinton is "unquestionably capable" and "very smart," but, still, his "tendency would be to vote Republican." Yet in his interview with The Wall Street Journal, he said he isn't sure how he will vote. "I doubt if I would vote Democrat," he said. "I just may not vote. At the moment it's extremely hard to say.

"I'm saddened by the whole political process, and it's not an accident that Republicans deserved to lose in 2006 -- it wasn't that the Democrats deserved to win," he said. "When it came time to rule, all of a sudden their ratings collapsed, and the reason they collapsed is they're just as negative as the Republicans."

Keene Little : 9/17/2007 9:07:16 AM

Equity futures were down hard last night but have recovered some. The bearish setup called for immediate selling and that's what we've got to start the day. The big question between now and Tuesday afternoon is whether the market will essentially go on hold or start a larger decline in front of it (from fear that the Fed may not give the market what it wants in either a large rate reduction or their language). Or it will chop its way higher which becomes more bearish if the negative divergence and weak market breadth continues.

Jane Fox : 9/17/2007 9:07:01 AM

LONDON (MarketWatch) - U.S. stock futures were pointing to a sharp decline on Monday, with comments from ex-Federal Reserve Chairman Alan Greenspan and continued trouble at U.K. lender Northern Rock adding to pessimism a day before a key U.S. interest-rate decision.

S&P 500 futures dropped 8.7 points at 1,489.30 and Nasdaq 100 futures declined 10.25 points at 2,014.75. Dow industrial futures slipped 59 points.

U.S. stocks closed Friday with a minor gain, with the Dow industrials adding 17 points, the Nasdaq Composite rising a point and the S&P 500 up a fraction of a point.

Former Federal Reserve Chairman Alan Greenspan told "60 Minutes" in an interview that the outlook for the U.S. economy is "pretty gloomy" and said it's unclear whether current financial market turmoil will have a deep, lasting impact on the economy.

Treasury Secretary Hank Paulson said in Paris that the global economy remains strong, though turbulence in global markets "will take a while to work through."

For Monday's session, the docket is light heading into Tuesday's interest-rate decision, with the highlight the release of the New York Fed's Empire State survey of manufacturing for September.

Linda Piazza : 9/17/2007 8:45:53 AM

All last week, the USDJPY climbed off a trendline that was built off a low established near midnight on 9/09. Friday, while I was at a funeral, the USDJPY did pierce that trendline but closed back above it on a 60-minute close. It's threatening to break below it again this morning, with the current 114.81 value appearing to sit right on that trendline. The pattern over Thursday, Friday and last night's overnight trading has been of a narrowing triangle, however, so I'm going to be conservative in my interpretations. It's not that unusual to see a small violation of a triangle, only to have prices reverse and head the opposite direction. I'd be particularly watchful for support near 114.70, 114.30 and again at about 114.20.

Linda Piazza : 9/17/2007 8:36:49 AM

The only repo maturing today is a $3.000 billion from Friday.

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