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Keene Little : 9/20/2007 12:18:59 AM

Thursday's pivot tables: Link and Link

Using the DOW and SPX I'm showing an expectation for another relatively small leg up on Thursday to complete a 5-wave move up for wave-C of an A-B-C move up from Sept 10th (which should complete a larger more complex bounce off the August 16th low). The DOW 60-min chart shows the top of its parallel up-channel for price action from the August low currently near 13930: Link

The SPX 30-min chart looks a little closer at the move up from Sept 10th and the expectation for one more push up, ideally to the 1553 area which has Fib projections and the top of its parallel up-channel coinciding: Link

At the end of the day Wednesday I noticed an interesting setup on the futures charts which point to the possibility that we've already made the 5-wave move up from Monday's low. As I had mentioned, I don't usually like to use all-hours for EW analysis on the futures because I prefer the cash indices which obviously trade only during RTH (regular trading hours).

Having said that, if we get a bigger decline right away on Thursday (instead of getting the final leg higher as shown on the DOW and SPX charts above) then we may have already put in the high. The ES 60-min chart, using all-hours, shows a completed 5-wave move up from 1:30 AM Tuesday morning for the completion of wave-C which completes the bounce from August 16th. Link

Note too that the 5th wave achieved equality with the 1st wave when it tagged 1550.25 on Wednesday. For this reason any further decline on Thursday would look like the start of the next major decline. Doing the same analysis on the DOW futures with YM, I get 13966 for an upside target to finish its 5-wave move and Wednesday's high was 13962. The wave count looks complete using all-hours trading so heads up for the potential to see a selloff start immediately. Link

OI Technical Staff : 9/19/2007 9:59:59 PM

The Market Monitor has been archived.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

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Jeff Bailey : 9/19/2007 7:27:44 PM

Well ... my "honey" trade for today didn't unfold as I had planned. I was looking for some profit taking this morning in the major averages and GOOG $546.85 +2.16% to pull back to $530, which would have had those same GOP-IW's $~3.20 or so. GOOG gapped higher at the open and sprinted.

Jeff Bailey : 9/19/2007 7:15:44 PM

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

CLOSED out the one (1) IOW-VZ from 9/07/07 at the bid of $1.06 today.

Jeff Bailey : 9/19/2007 7:15:39 PM

Closing Internals found at this Link

Jeff Bailey : 9/19/2007 7:15:33 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 9/19/2007 7:15:24 PM

I don't like using all hours either, except for the dollar.

I don't use them for YM tabulation pivot levels. Regular session only.

Jeff Bailey : 9/19/2007 5:42:39 PM

Per 04:19:05 ... Now throw on the WEEKLY Pivot levels Link

Jeff Bailey : 9/19/2007 5:36:32 PM

Per 04:19:05 ... Now here's a 30-minute interval chart. A view of the SPY since FOMC's 50bp cut in the Discount Rate. Link

Keene Little : 9/19/2007 5:31:45 PM

Doing the same analysis on the DOW futures with YM, I get 13966 for an upside target to finish its 5-wave move and today's high was 13962. The wave count looks complete using all-hours trading so heads up for the potential to see a selloff tomorrow. Link

Keene Little : 9/19/2007 5:22:52 PM

I don't usually like to use all-hours for EW analysis on the futures because I prefer the cash indices which obviously trade only during RTH (regular trading hours). Having said that, if we get a bigger decline tomorrow (instead of getting the final leg higher as I was showing for the DOW and SPX) then we may have already put in the high. Link

ES, using all-hours, shows a completed 5-wave move up from 1:30 AM Tuesday morning for the completion of wave-C which completes the bounce from August 16th. Note too that the 5th wave achieved equality with the 1st wave when it tagged 1550.25 today. For this reason any further decline tomorrow would look like the start of the next major decline.

Jeff Bailey : 9/19/2007 5:15:11 PM

Per 04:19:05 ... Here would be a "5-MRT" response to the 8/17/07 FOMC decision to lower the Discount Rate by 50 bp. Link

I keep those levels into yesterday's trade, then measure a "5-MRT" response to yesterday's FOMC decision. Here's that chart Link

Jeff Bailey : 9/19/2007 4:19:05 PM

Email Question: ... Jeff, What do you think the charts tell us about where the markets are headed based on yesterday's reaction to the Fed decision?

Reply ... That's the toughest question of the week. How about $163 on the SPY?

Jeff Bailey : 9/19/2007 4:10:17 PM

RUT.X 817.40 +1.33% ... juuuust above DAILY R1 and juuuuust below MONTHLY R1.

Jeff Bailey : 9/19/2007 4:07:45 PM

YM 13,907 ...

Keene Little : 9/19/2007 4:04:06 PM

Got a quick pullback against this afternoon's bounce so if it can now push higher that will have been the 1st and 2nd waves of the last leg up (should be the last leg) and now a rally tomorrow morning for the 3rd wave, a little 4th wave consolidation and then the final 5th of the 5th wave to get shorty. That's the plan and hopefully we'll be short before lunch.

Jeff Bailey : 9/19/2007 3:56:42 PM

Come on bears, don't give in. Not now.

Jeff Bailey : 9/19/2007 3:56:03 PM

CBOT Electronic Trading To Resume At 04:05 PM EDT

Linda Piazza : 9/19/2007 3:53:00 PM

SPX channel resistance held. The SPX has been climbing through a rising and rather broad channel off the summer low (drawn excluding a couple of lower shadows). It punched up through the upper trendline today but then is falling back to the trendline or slightly below it into the close. Any further than the current 1526.65 and it will definitely be back inside the channel. This isn't a doji, not yet, but it's leaving a long upper shadow and the candle will function the same way. Don't jump to too many conclusions yet, but be aware that resistance held on a daily close.

Keene Little : 9/19/2007 3:52:15 PM

Come on bulls, don't give up now.

Jeff Bailey : 9/19/2007 3:51:13 PM

Calpers Chief Investment Officer Does Not Expect Recession

SPX 1,527 ...

Jeff Bailey : 9/19/2007 3:37:09 PM

FREDDIE REACHES PACT WITH AMERICAN HOME

DJ- American Home Mortgage agrees to let Bank of America temporarily service 4,547 Freddie Mac mortgages, resolving a quarrel that the government-backed lender said put thousands of owners at "imminent risk" of losing their homes.

Keene Little : 9/19/2007 3:34:52 PM

If the DOW pulls back and finds support at or above 13810, its broken downtrend line from this morning's high, that would be a good setup for a scalp long trade into tomorrow. I happen not to like holding a long play (futures) overnight but maybe a front-month, close to ATM call would be an appropriate play. It's just a one-day play at most and at least you know how much you'd be risking (it should be a lottery play on any front-month option plays during opex).

Linda Piazza : 9/19/2007 3:34:14 PM

Did Art Cashin just say that Fed head Bernanke is testifying before Congress tomorrow? I don't see that scheduled on the Federal Reserve's website.

Keene Little : 9/19/2007 3:30:10 PM

A similar closer view of the SPX, with this 30-min chart, shows the first Fib projection for the 5th wave at 1541.23 (for equality with the 1st wave in the move up from Monday) and then 1553 (162% of the 1st wave). This upper Fib projection is right on top of the Fib projection for wave-C = 162% of wave-A (the 3-wave move up from Sept 10th). This also coincides with the top of its parallel up-channel tomorrow and is very close to a retest of the July high. I like this setup for the short side and my only hope now is that we get the new high tomorrow. Link

Jeff Bailey : 9/19/2007 3:18:37 PM

Oil Service HOLDRs (OIH) Alert! $191.97 +2.08% ... that's a new 52-weeker.

Linda Piazza : 9/19/2007 3:18:22 PM

The TRAN broke above its 15-minute 9-ema and ran up to test resistance again. It's attempting another upside breakout (on the 15-minute chart), but hasn't convincingly broken out again and still has the day's high near the daily 200-sma to contend with, if it does.

Keene Little : 9/19/2007 3:17:51 PM

A little closer view of the DOW's parallel up-channel and the wave count for the rally from Sept 10th: Link As I mentioned earlier, the triangle consolidation between last Thursday and Monday pointed to a final leg up and it needs to be a 5-wave move for wave-C. The count for the move up from Monday afternoon (the end of an a-b-c-d-e triangle) is shown and today's pullback should be the 4th wave (wave-(iv) on the chart).

That means one more new high to finish off the bounce from August 16th which should finish the correction to the July-August decline. In other words we're close to MOAP time. The 5th wave up would equal the 1st ave at 13899 and 162% at 13973. In between is the top of the parallel up-channel near 13930.

Assuming we get the rally to there it should leave a clear bearish divergence against this morning's high which would add to my confidence level in calling for a short play. In fact it would be a pound-the-table short play and I don't do that very often (a pound-the-table trade call is where you back up the truck). They're not always right, or the trade may not have lasted as long as I thought it would, but the setup is one of those must-take trades so that's what I'm hoping to see set up tomorrow.

Linda Piazza : 9/19/2007 3:16:00 PM

While maintaining support of a trendline rising off this morning's low, the VIX is not maintaining values above the 15-minute 9-ema. No confirmed change in trend yet.

Jeff Bailey : 9/19/2007 3:05:11 PM

03:00 Market Watch found at this Link

Jeff Bailey : 9/19/2007 3:04:43 PM

Iraq Starts Exporting Oil To Jordan After 4-Year Halt ...

Jeff Bailey : 9/19/2007 3:01:48 PM

US Fed: OKs Discount-Rate Cut By 3 Remaining Banks To 5.25%

Keene Little : 9/19/2007 3:01:11 PM

SPX has now broken today's downtrend line but the DOW is coming up to test its line. If you're short YM use an ES long to hedge your play. It will at least come close to locking in wherever YM would currently be trading.

Jeff Bailey : 9/19/2007 3:00:27 PM

Ultra Petroleum (UPL) $55.99 -0.46% ... being started at "outperform" by Wachovia.

Jeff Bailey : 9/19/2007 2:57:56 PM

Last time eCBOT went down was 08/23/07 ... (see MM) ... we (you and I) had a YM trade open at that time.

Jeff Bailey : 9/19/2007 2:55:41 PM

CME Spokesman: All CBOT Elec Mkt Having Technical Problems ... open outcry still underway. Have your boker's number handy at all times!

Jeff Bailey : 9/19/2007 2:54:04 PM

NYSE: Margin Debt Fell 13% To $331.4B In Aug From July.

Jeff Bailey : 9/19/2007 2:50:59 PM

Barry! ... Looks like some other traders noticing similarity with July's action today. ;)

Jeff Bailey : 9/19/2007 2:48:59 PM

DIA $138.06 +0.51% ...

YM's last eCBOT quote was 13,900 at 02:15:11

Linda Piazza : 9/19/2007 2:46:08 PM

Think the credit crunch is over? Think again. Today, the BBA LIBOR rate jumped to 6.55125 percent. The Bank of England's targeted benchmark rate is 5.75 percent. The BBA LIBOR is typically only about 0.41-0.45 above the BOE's rate. (I'll be covering this in a Trader's Corner article this weekend, already roughed out.) This jump is excessive and has forced the hand of the BOE's governor. Although he said last week that injecting funds was excessively risky, the BOE made a huge injection today, to add to one made earlier in the week, promting some to believe that this central bank governor is certainly behind the ball. Why should we care? The BBA LIBOR is the benchmark used across many countries of the world, with the BBA (British Bankers' Association) describing it as the true rate at which banks loan to each other. Not lately, it isn't.

Jeff Bailey : 9/19/2007 2:45:18 PM

CBOT: Electronic Trading Of Treasury Futures Down

Jeff Bailey : 9/19/2007 2:44:37 PM

CME Spokesman: eCBOT Platform Experiencing Tech Problems

Keene Little : 9/19/2007 2:44:13 PM

Keene, could they be taking the play out of the July OPEX play book, run SPX up into settlement on Friday then tank it for newly purchased cheap OEX puts Friday AM. July OPEX OEX 715 puts sold for .70 in the AM, I know I bought 10 contracts, they went over 7.00. (unfortunately I sold for 4.00). I don't think they will want to give up all that profit or sell prior to settlement and give any back to commissions do you? ;-) Scott

Makes for a nice lottery play at the end of day tomorrow or first thing Friday morning Scott, especially if we get the "one more new high" that I'm expecting tomorrow.

Jeff Bailey : 9/19/2007 2:38:35 PM

Conoco: Gulf Evacuations Have No Impact On Production

Linda Piazza : 9/19/2007 2:36:04 PM

Now the TRAN is bouncing down from tests of its 15-minute 9-ema, rather than bouncing up from tests of that average. Shortest-term, the trend is down until that changes. The TRAN is at 4889.66 as I type: that average, 4898.69.

Jeff Bailey : 9/19/2007 2:33:56 PM

What? China "freezing" export of commodities? ... (CNBC)

Jane Fox : 9/19/2007 2:33:03 PM

I was just told my Tradestation Brokerage they have not been told yet but CBOT how the outstanding orders will be handled.

Jeff Bailey : 9/19/2007 2:30:35 PM

If they aren't going to sell weakness, they aren't going to sell strength.

Jeff Bailey : 9/19/2007 2:30:06 PM

I'm thinking it is because the IWM didn't fill its gap?

Jane Fox : 9/19/2007 2:22:52 PM

OK why is the DOW Futures (YM) not moving.

Jane Fox : 9/19/2007 2:21:56 PM

I suspected the bullishness to evaporate today and for the SPX to return to at least the 50 EMA but gee willikers not all in one day. Link

Keene Little : 9/19/2007 2:21:13 PM

The selling is picking up some speed. Glad I decided to wait for a break of its downtrend line before thinking about the long side. The choppy overlapping highs and lows in the decline for the DOW, and to a lesser extent SPX, is what is keeping me from recommending a short play here. Until I see evidence to the contrary I'm still looking for another rally leg. Maybe they're allowing a drop here to suck in some bear fuel for the next short-covering rally.

Linda Piazza : 9/19/2007 2:17:38 PM

The TRAN is dropping strongly again and it's now below the breakout level on its 15-minute chart. It's at 4882.34, with next support on that chart at 4868.07. It gave us a heads-up and so, if you're in short-term bullish plays, you've had time to think about your plan for dealing with a doji-type day or actual decline, if one should get started. You can enact your plan if price dictates that you do so. Whatever you do, don't let a profitable play turn into a loss.

Keene Little : 9/19/2007 2:17:05 PM

The Trannies look bearish being down on the day about -1.0% but it has now dropped to the level where it has two equal legs down from this morning's high (4882.73). So if it turns back up from near here then it will look like just a correction to its rally.

Linda Piazza : 9/19/2007 2:15:48 PM

The VIX has not been able to maintain values above its 15-minute 9-ema, so there's no confirmed change in trend there. It is, however, now hugging it. That means that it's showing slightly more strength (bad for bulls) than it was earlier, but only slightly so far. Nothing confirmed as yet.

Keene Little : 9/19/2007 2:14:09 PM

The fly in the ointment for another leg up is what I see for NDX--it's decline off this morning's high looks like a nice impulsive 5-wave move down which suggests a trend change. It should get a bounce to correct today's pullback and then if it were to drop lower again after that then it would be a good signal that we've already seen the high. Too soon to tell.

Linda Piazza : 9/19/2007 2:12:18 PM

The OEX got within 3 points of its July high this morning. Bulls absolutely do not want to see it go below its open today. The OEX is at 713.01 as I type, with the low of the day at 710.70.

Bears, don't use my comments as signs that you're on the right side and should hang on if your positions are hurting. You should evaluate according to your planned exits and your pain levels and all those other things. I'm merely pointing out what those in bullish plays should be watching out for today.

As the OEX and other indices have climbed off their summer lows, I can point out at least five instances when doji-type days, potential reversal days, were followed by days of strong gains. "Potential" does not mean "guaranteed," so be careful with your assumptions. If, by the close, there are pullbacks into the rising channels in which prices have been climbing off summer lows in some of these indices, then the usual highest probability next move would be either a pullback through to midline support on those channels or else a sideways move into the midline support as it rises, but who can guarantee that there won't be an upside breakout instead or that prices won't climb the upper channel line? No one can. You build scenarios, you take a position (or not) based on the scenarios, and you absolutely know when your scenario isn't working. I'm just showing you some potential scenarios.

Keene Little : 9/19/2007 2:12:17 PM

Use a downtrend line along today's pullback since a break of it should be an indication that the next leg up is in progress and would make a good buying opportunity, especially if you can get long a pullback to retest the broken downtrend line. I've seen enough of these corrective looking pullbacks suddenly take a dump otherwise I'd be looking to buy this dip down to the trend line along the lows of the pullback.

Jane Fox : 9/19/2007 2:08:27 PM

With the AD line at +919 I would be hesitant to go short but now that I have the ratio telling me the AD line and volume are getting much more bearish I have no problem with a short here.

Jeff Bailey : 9/19/2007 2:04:57 PM

Research in Motion (RIMM) $92.27 +2.10% ... not unlike BIDU, things look to end BADLY for bears at Friday's expiration.

Jeff Bailey : 9/19/2007 2:01:43 PM

(grinning) ... Keene (01:21:54) ... Never.

Linda Piazza : 9/19/2007 1:52:13 PM

The TRAN is at 4905.23 as I type, attempting to bounce from the Keltner breakout level I've been mentioning. As background, in order to maintain the breakout status (and, therefore, strong upward momentum), the TRAN needs to maintain 15-minute closes above this level. I've been concerned today on behalf of bulls for several reasons. First, the typical result after a day of such strong gains is a doji type day or even an actual decline, so I've been on the lookout for such a possibility. These are not typical times at all, because what the Fed did yesterday is not typical, so I'm certainly not pounding the table with the belief that we'll get the typical result. Neither are all the other forces at work in global economies. My second area of concern was the TRAN's lack of confirmation (based on the daily chart) of breakouts in other indices. Even though the TRAN also gained strongly yesterday, it remains below its 200-sma, for example. So, either the TRAN is signaling that something is wrong or else those other indices will eventually pull it higher and out of the relative doldrums.

So, short-term bulls want to see the TRAN push back above the 15-minute 9-ema, now at about 4911, and stay above that average. They don't want to see the TRAN fall below 4899 and stay below that on 15-minute closes.

I'm watching the TRAN only the way I would RSI or CCI. I'm using it to give me (and you) a heads-up on whether we truly could see those doji-type days on the SPX, OEX and Dow. Price has to be the final determination, of course. I'm not trying to scare anyone, but it's just silly to ignore other possibilities that could help you build what-if type scenarios and make profit-protecting plans if they come true.

Keene Little : 9/19/2007 1:45:59 PM

Another leg up for the DOW to hit the top of its parallel up-channel tomorrow could have it pushing up to around 13930. It has achieved its Fib projection at 13843 but the internal pattern and today's consolidation supports another leg up. Link

Linda Piazza : 9/19/2007 1:44:37 PM

Thank you, Jane. I only wish I could find that ratio on my service, too!

Jane Fox : 9/19/2007 1:37:22 PM

Notice how the S&P futures have caught up with the VIX. Link

Keene Little : 9/19/2007 1:37:17 PM

How about a Friday settlement price for SPX at 1550? I would bet a lot of options players weren't counting on that kind of move before opex Friday.

Jane Fox : 9/19/2007 1:35:06 PM

AD line ratio is also making new daily lows. The bullish party is over for now.

Jane Fox : 9/19/2007 1:33:27 PM

My internals' charts are getting way too busy and I will need to clean them up but I am very excited about the additions I have been able to make to them based on Linda's comments. Thank you Linda.

Jane Fox : 9/19/2007 1:32:26 PM

Boy am I glad Linda has come back to the monitor. First of all she gave me the USDJPY, which I am finding invaluable and now she has given me another internal to look at (as if I don't have enough already).

A couple of days ago I was showing the AD line and volume with my absolute numbers and Tradestation's ratio. Linda mentioned that she liked the ratio better than the absolute numbers so I decided to watch it a bit closer. Well lo and behold she has solved one of the things that had been bugging me for months, "how do I tell when the AD volume is actually turning on very bullish or bearish days."

If you take a look at the AD volume ratio (middle chart with the grayish background) you will see the ratio is making new daily lows but the AD volume absolute number is not. Now we have all the internals bearish. Link

Keene Little : 9/19/2007 1:32:17 PM

Today's decline off the high continues to look corrective and therefore suggests another push higher to come. The top of the parallel up-channel for SPX that I showed earlier on its 120-min chart ( Link ) crosses its all-time high level near 1556 tomorrow morning. Support for this pullback could be found near 1526.40 which is the trend line from the highs of Aug 24th and Sept 24th. From an EW perspective the count will look satisfactorily complete with another leg up as shown: Link

Jeff Bailey : 9/19/2007 1:32:02 PM

Hmmmm ... for 2nd week in a row, the U.S. Govt. has added to the SPR.

Linda Piazza : 9/19/2007 1:27:28 PM

The SOX has dropped slightly below the psychologically important 500. It's only slightly below, at 499.83, so I'd consider it testing this psychologically important area, not yet truly violating it.

Linda Piazza : 9/19/2007 1:30:47 PM

Another sign I've been watching and mentioning: the TRAN has now dropped to a new day's low. It's at 4895.36 as I type, testing the breakout level (actually just below it) on the 15-minute chart. It's needs to hold up here to maintain its breakout status. The TRAN often leads the SPX, OEX and Dow, and bulls want it to maintain its upward momentum by maintaining its breakout status.

Jane Fox : 9/19/2007 1:22:55 PM

VIX to new daily highs, USDJPY to new daily lows, DAX to new daily lows so it looks like the bulls have fumbled the ball and the bears are trying their darnest to grab it but they have not yet (AD line is still above +1000).

Keene Little : 9/19/2007 1:21:54 PM

Actually Jeff, re: your 12:57 comment, my concern for another 1930s event are still true. You didn't think I changed my bear fur coat did you? ;-)

We are still in danger of a bad recession or worse on the way. I won't use the big 'D' word here, but will use Greenspan's words "a serious slowing in inflation" to paraphrase.

Jeff Bailey : 9/19/2007 1:20:11 PM

01:00 Internals found at this Link

Linda Piazza : 9/19/2007 1:15:39 PM

The VIX, at 20.15 as I type, is pushing above the 15-minute 9-ema for the first time since the post FOMC period yesterday. It has not been able to maintain values above that 9-ema, now at 20.0035, since Monday afternoon, so a single push above it is not a guarantee of anything. However, if it does maintain values above that 9-ema and begins bouncing from it, then we're getting a heads-up that the short-term tenor has changed.

Jeff Bailey : 9/19/2007 1:01:34 PM

01:00 Market Watch found at this Link

Linda Piazza : 9/19/2007 1:01:23 PM

I was just looking at the Nasdaq's chart. We of course are seeing the small-bodied type candle that could be expected after such a large-range day. I show that candle occurring at resistance from some long-term rising trendlines that I'll show when I substitute for Keene tonight writing the Wrap. However, I just wanted to note sometime before the close today that the presence of this morning's gap higher and that potential small-bodied candle sitting alone up there at resistance (if the candle ends the day that way) leave open an ugly possibility for tomorrow. If the Nasdaq were to gap lower again tomorrow, isolating today's candle up there, some old-style technical analysts will see it as an ugly sign. Since I see the Nasdaq as just moving back and forth within a rising channel that it began establishing off the summer's low, I'm not concerned until and unless the Nasdaq violates that rising channel's support, currently near the 50-sma, on a daily close, but if you're in a short-term long play, particularly with Nasdaq-related September calls, you probably don't want to weather such a pullback sometime before opex. I don't know that it will happen, of course, and I really don't even have a strong opinion about its probability. All I'm suggesting is that you run this scenario through your thoughts, planning how you'll address the possibility. If in options plays, always have a plan for what you'll do if markets go the direction you want, go the wrong direction or go nowhere at all.

Jeff Bailey : 9/19/2007 12:57:16 PM

Fascinating Keene (12:42:53) ... and nothing like your 1930's scenario/warning.

Jeff Bailey : 9/19/2007 12:43:26 PM

COUNTRYWIDE CEO 'BULLISH' ON FIRM'S FUTURE

DJ- Countrywide Financial Chief Executive Angelo R. Mozilo says the largest U.S home lender plans to double the number of financial centers over the next four to six months to become more "bank like."

CFC $20.77 +4.47% ...

Keene Little : 9/19/2007 12:42:53 PM

Tab, I'm not sure how the world's currencies will play into your commodity question (12:29). But for the first time in history the global economies are inexorably linked. We will all rise and fall together like never before seen. Therefore a global economic slowing would reduce demand for commodities. And if economies are slowing and stock markets are tumbling, the US dollar will continue to be a safe haven, thus driving price up.

Jeff Bailey : 9/19/2007 12:42:04 PM

A hedge fund that focuses on penny stocks? Crazy!

Keene Little : 9/19/2007 12:39:32 PM

Yields have risen post-FOMC, continuing their bounce off the Sept 10th low. The selling in bonds could be the money that's been rotating into stocks so watching bond yields could offer a heads up on the equity rally. So far it looks like bonds have further to go in their selling.

Is it possible the bond market is sniffing out some inflation? The core PPI is still above the Fed's target zone of 1%-2% and the year-over-year comparisons will make it difficult for the rest of this year to show a drop in inflation. And high energy prices threaten to add to the problem.

Jeff Bailey : 9/19/2007 12:39:26 PM

ABSOLUTE CAPITAL HALTS FUND REDEMPTIONS

DJ- Shares in Absolute Capital Management sink a further 48% today as troubled hedge-fund group says investors won't be able to withdraw their money from its equities funds because many of them hold illiquid penny stocks.

Jeff Bailey : 9/19/2007 12:36:35 PM

HONEYWELL WINS $16B AIRBUS CONTRACT

DJ- Honeywell International's aerospace unit wins a $16 billion contract to develop major mechanical systems for the new Airbus A350XWB, a wide-body, long-range aircraft.

HON $58.34 +1.85% ... #12 weighting in Dow Industrials.

Linda Piazza : 9/19/2007 12:33:28 PM

The VIX is testing its 15-minute 9-ema from the underside. It hasn't been able to produce a 15-minute close above that since the FOMC meeting and hasn't been able to maintain 15-minute closes above it since about 12:45 Monday afternoon. Therefore, if the VIX were to produce sustained 15-minute closes above it, that would be a slight change in tenor for the VIX, signaling a slight decrease in bullishness for equities. Until then, I don't see anything as signaling a change in tenor from the VIX, although I'm of course watching closely since it approached a Keltner level on the daily chart that has been key in the past. At 19.95 as I type, the VIX is just about 0.02-0.03 below the 9-ema on that chart.

Tab Gilles : 9/19/2007 12:29:30 PM

Keene...are commodites only tied to the U.S. Dollar or with globalization how do other currencies play into it? Link

Jeff Bailey : 9/19/2007 12:29:30 PM

HOVNANIAN CEO SEES HOUSING STARTS SLOWING ... Ara Hovnanian expects housing starts to continue to come down, regardless of the Fed rate cuts, and thinks the Fed should reduce rates to 4.25% in the coming months to improve consumer confidence, CNBC reports.

Jeff Bailey : 9/19/2007 12:28:37 PM

US Jobless Claims Seen Up 1K ... DJ- Economists expect jobless claims to rise to 320,000 in the week ended Sept. 15. Labor Dept. is due to release the jobless claims data at 8:30 a.m. EDT tomorrow.

Keene Little : 9/19/2007 12:25:57 PM

I had mentioned yesterday that the pattern for the rally from Monday looks like it needs to stair step higher with little flat corrections in between new legs up. Today's consolidation fits the bill so I'm still expecting this market to push higher, probably at least into the end of the day tomorrow (getting SPX to settle at a higher price). Stay long if you're long and hold off if you're looking to short.

Jeff Bailey : 9/19/2007 12:20:04 PM

Chevron Evacuating Non-Essential Staff From Gulf Of Mexico

Linda Piazza : 9/19/2007 12:15:45 PM

I don't think investors in Bear Stearns (BSC) were too happy with Morgan Stanley's (MS) earnings report. BSC reports tomorrow, as does GS. So far, I don't see a lot of damage on the BSC daily chart although today's candle itself is ugly. So far, it's just chop within a choppy zone.

Keene Little : 9/19/2007 12:10:45 PM

It's likely commodities will not start a decline in price until the US dollar starts to rally and I continue to believe we're close to a bottom in the dollar. The weekly chart continues to show the bullish divergences at new lows. When a rally starts it should be a strong one. This is a reason I'm staying bearish on gold longer term (at least the next year), plus the fact that gold will get sold along with other assets in a stock market decline. Link

Tab Gilles : 9/19/2007 12:03:17 PM

Looking at $XED/$XJY it is trading in an uptrending channel. Taking a look at a weekly and daily chart along with $SPX; GLD & XLE. Bernanke cut rates...does he see inflation as not a threat? If so does that mean oil and gold have had their run? Hmmm.... I wonder....??? Link Link

Tab Gilles : 9/19/2007 11:59:11 AM

Google (GOOG) Followup to 9:28 AM post...

Testing $550 level. Link

Keene Little : 9/19/2007 11:56:28 AM

A lot of commodities are showing a similar bearish setup that I see for equities heading into the end of the year. Right now oil has done a throw-over above the top of its ascending wedge pattern from the January 2007 low (using the December contract here): Link

Assuming this is the correct interpretation of this year's price action, if oil now drops back below about 78.60, the top of the wedge, that would be a sell signal. So it's a little early to issue a sell signal here but I'm watching this one carefully. Once the 2007 rally is finished I expect to see oil back below $50 next year.

Jeff Bailey : 9/19/2007 11:40:57 AM

MBA's Weekly Application Survey Link

Linda Piazza : 9/19/2007 11:25:09 AM

Well, so far, we're getting the doji type day that's so common after a big-range day, but it's showing up on the TRAN rather than the other indices we more typically watch. Something is likely off here: either the other indices are eventually going to pull the TRAN higher or else the TRAN is indicating that those other might be susceptible to a pullback by the end of the day. Ordinarily, I would come down strongly on the side of the TRAN signaling that we should expect a pullback, but these just aren't ordinary times. The FED doesn't often do what it did yesterday.

Jeff Bailey : 9/19/2007 11:22:58 AM

For those still with us that were here in July, you should have an idea what is now building, or underway.

Jeff Bailey : 9/19/2007 11:21:41 AM

RUT.X 822.40 +1.95% ...

Jeff Bailey : 9/19/2007 11:21:13 AM

Swing trade put close out one (1) alert! ... Sell to close one (1) of the iShares Russell 2000 IWM Oct. $78 Puts (IOW-VZ) at the bid of $1.06.

IWM $82.07 +1.92% ...

Jeff Bailey : 9/19/2007 11:18:34 AM

NASDAQ-100 (NDX.X) Alert! 2,055.22 +0.95% ... Challenges its all-time high close here.

Overhead supply limited.

Jeff Bailey : 9/19/2007 11:17:21 AM

11:00 Internals found at this Link

Linda Piazza : 9/19/2007 11:12:29 AM

Yesterday, I mentioned that the VIX hadn't yet hit potential daily Keltner support at 19.10 on daily closes. This morning, that Keltner line (120-ema) has risen to 19.112 and the VIX closely approached it. The VIX doesn't always adhere to this support/resistance exactly, sometimes closing just above it when resistance is being tested or just below when support is, but this, down to about 18.90, is a key zone, at least, in my opinion. A daily close much below it might setup a target near 15.40, a target that bulls would love to be set for the VIX. A bounce from this potential long-term support? Well, let's just say that bulls probably wouldn't like to see that, but if it occurs, we should be aware of potential resistance in the 22.80-23.50 zone.

Keene Little : 9/19/2007 11:11:41 AM

GOOG is the other high flyer that looks interesting right here as it has rallied up to the top of a parallel up-channel for price action since the July low and at the same place is hitting the trend line along the highs since January 2004 (excluding the over-throw high in July). Link

A rally above 550 could carry up to a retest of its 558 high but based on what I see here this could be a good setup for a short play now. The bounce off the August low looks like a very clear corrective wave structure and therefore I'm expecting another big leg down once the bounce is complete. Will it lead the way lower from here?

Linda Piazza : 9/19/2007 11:05:55 AM

So far, bulls are getting what they want, from the TRAN and many other indices, too. The TRAN managed to hold support on the 15-minute 9-ema through four or five 15-minute candles and is now attempting a bounce from that support. It's at 4926.06 as I type. It has not managed a new high, though, unlike some other indices, so some caution should still be employed, still keeping in mind that potential doji-type situation for a day like today. There's absolutely no guarantee that it will happen, but it sometimes does, so just keep it in mind and know how you'll react if it does.

Keene Little : 9/19/2007 11:02:44 AM

Funny that Jeff just posted the PnF chart on CME as I was also just looking at it. It hasn't participated in all the excitement and has a wave pattern that is quite bearish here--ready for a 3rd of a 3rd wave down and it should start down from here after hitting a Fib projection for the bounce at 554.74. Daily chart update: Link

Jeff Bailey : 9/19/2007 11:02:27 AM

11:00 Market Watch found at this Link

Jane Fox : 9/19/2007 11:02:06 AM

Markets are breaking out and VIX and USDJPY are not confirming.

Jeff Bailey : 9/19/2007 10:58:48 AM

CME's PnF chart at last night's close Link

Jeff Bailey : 9/19/2007 10:57:47 AM

VIX.X 19.87 -2.35% ...

Jeff Bailey : 9/19/2007 10:57:00 AM

Swing trade call alert! ... for one (1) of the CME Group CME Oct. $600 Calls (CNM-JX) at the offer of $3.30. CME $51.76 -0.13% ...

No stop for now, target $600.

Keene Little : 9/19/2007 10:51:06 AM

Continuing with the parallel up-channels for price action since the August low, the RUT could make it up to the 830 area which would also coincide with a 78.6% retracement of the July-Aug decline. Link

Jane Fox : 9/19/2007 10:49:22 AM

As long as the AD volume is making new daily highs I would not be short but then again as a long as the VIX is making new daily highs I would not be long. GEESH!! Link

Linda Piazza : 9/19/2007 10:49:42 AM

TRAN approaching its day's low of 4905.04. It's at 4908.24 as I type. Bulls (in SPX, Dow and OEX, too) don't want to see it violate that low and particularly don't want to see it drop below 4884 on a 15-minute closing basis. Be keeping that potential doji-type day in mind as you watch the TRAN and other indices.

Jane Fox : 9/19/2007 10:44:09 AM

VIX is now making new daily highs and that is a huge warning sign for bulls.

Linda Piazza : 9/19/2007 10:34:02 AM

Not much reaction by the TRAN yet to the crude inventories number (greater than expected draw in crude, unexpected build in gasoline, about where expected in distillates, refinery utilization that dropped but was expected to drop). TRAN at 4919.26 as I type.

Jane Fox : 9/19/2007 10:26:56 AM

This consolidating at daily highs suggests we will see higher highs however, I wish the VIX were supporting that point of view and consolidating at its daily lows. Unfortunately it is actually consolidating at daily highs as well and this does not bode well for higher highs having any kind of follow through if they happen at all. Link

Jane Fox : 9/19/2007 10:22:18 AM

WASHINGTON (MarketWatch) -- Housing starts and permits fell once again in August in another sign of the weak U.S. housing market, the Commerce Department reported Wednesday.

Starts of new homes fell by 2.6% to a seasonally adjusted annual rate of 1.331 million, which was the lowest since June 1995.

Authorized building permits, meanwhile, fell by 5.9% to a seasonally adjusted annual rate of 1.307 million, also the lowest since June 1995. Both starts and permits fared worse than analysts were expecting.

Economists surveyed by MarketWatch had, on average, expected both housing starts and building permits to fall to a seasonally adjusted annual rate of 1.35 million in August.

Linda Piazza : 9/19/2007 10:19:08 AM

I have an ear infection that's not promoting good sleep, so I spent a lot of time listening to CNBC Asia and Europe last night. According to commentators on those programs, the Bank of Japan's Fukui professed concern about the state of the U.S. economy in his post-decision address last night. The Bank of Japan also reportedly professes that it wants to go ahead with its plan to raise rates, but guest analysts avowed that a slowing U.S. economy may slow Japan's enough that the bank might not be able to do that. The bank's leaders might have their hands tied. At least that was the gist of what was concluded by several commentators.

One guest set a target for the USDJPY at 105, thinking that the dollar will weaken much further! As I missed his name and credentials, I have no idea if this analyst is the Boone Pickens of the currency world or is rather known for his erroneous conclusions, but that woke me up, you bet. The USDJPY is at 116.22 as I type, facing yet another resistance zone.

Keene Little : 9/19/2007 10:12:57 AM

The same parallel up-channel for the DOW is near 13900 but it now near its Fib projection level (2nd leg up = 162% of the 1st from the July 10th low) at 13848. All this means is that the bulls could run out of steam for this move very soon. Link

From an EW perspective it's important to understand that the little sideways triangle (wave-B) that formed from last Thursday through Monday pointed to the last leg up, which is the current one. Once it completes we will get a reversal back below that consolidation, so back below 13400. From the larger wave pattern that kind of drop would then be bearish. I suspect we will see a post-opex/post-FOMC hangover next week.

Jane Fox : 9/19/2007 10:07:52 AM

Needless to say I bailed on my XLE and USO puts yesterday (albeit a little late). However, I do expect Crude to fall at back to at least $74.00/bl but it will have to do it without me. Link

Linda Piazza : 9/19/2007 10:06:46 AM

Bulls don't want to see the TRAN break back below about 4878 on a 15-minute closing basis, as that erases the breakout status on that chart. And if the TRAN can erase its breakout status . . . well, you get the drift. It will eventually as the post-FOMC frenzy dies off, but bulls who don't want to see that typical doji-type day today don't want the momentum to ease today. The TRAN is at 4908.29 as I type.

Jane Fox : 9/19/2007 10:01:18 AM

Did you all pick the VIX? Yup it is making new daily highs and that is NOT bullish. Start pulling in your bullish horns now.

Jane Fox : 9/19/2007 10:00:21 AM

See if you can identify the proverbial "Fly in the bullish ointment." Link

Keene Little : 9/19/2007 9:58:26 AM

Is SPX heading for a double top against the July high? A Fib projection for the 2nd leg up in the rally from Sept 10th, where it will equal 162% of the 1st leg up, is near 1553. The July high was near 1556. That Fib projection crosses the top of a larger parallel up-channel, for price action since the August low, at the same 1553 level at the end of today. Makes for an interesting possibility for a high for this move. Link

Jane Fox : 9/19/2007 9:57:35 AM

AD line is a very bullish +1636

Jane Fox : 9/19/2007 9:57:11 AM

The Russell 2000 is also looking at its resistance in the rear view mirror but there is a very good chance it will return to this old resistance for its support in your classic resistance turned support. Link

Jane Fox : 9/19/2007 9:54:26 AM

The DOW has broken out of its upward trendline and that is a very strong indication it will retrace for the balance of this week. I think the 50EMA will be support and the springboard for the next leg up. Link

Linda Piazza : 9/19/2007 9:51:14 AM

Just a heads up . . . TRAN dropping harder now. It's at 4910.45 as I type . . . nope 4909.49 and if I don't get this posted quickly it may soon be lower.

Linda Piazza : 9/19/2007 9:49:04 AM

The Fed has announced a repo in the amount of $9.750 billion, exactly matching yesterday's repo that matures today. No net add or net drain.

Linda Piazza : 9/19/2007 9:47:59 AM

Ahead of the release of the crude inventories number, the TRAN has zoomed up to test its 200-sma, at 4966.11, and has now pulled back to 4942.39. It's still above the 200-ema, important on the TRAN's chart, but it's also important to note that the 50% retracement of the drop into the summer low is at about 4989, too, so just ahead. The TRAN's high today was only less than 6 points above its 8/23 high, so I don't believe it's convincingly broken out of its congestion zone. It's not confirming the action of its sister index, the Dow, but the TRAN's action sometimes changes significantly on Wednesdays, after the crude inventories number.

Why is the TRAN significant? It's sensitive to both economic forces and the price of crude, of course, so its sort of a measure of how things are going. If the indices such as the Dow, SPX and OEX are zooming some direction or the other and the TRAN is not leading or even going along, then something might not be right. The TRAN gained hugely yesterday, so it certainly went along with gains. It's underperforming only in the sense of not yet breaking out of congestion and being still below its 200-sma. But still . . .

Linda Piazza : 9/19/2007 9:40:48 AM

The Russell 2000 has jumped above the 200-sma. That's good for bullish hopes . . . as long as it stays there.

Keene Little : 9/19/2007 9:39:10 AM

Continue to keep in mind that if history repeats, again, when the Fed embarks on a rate reduction campaign it has not been good for the stock market. So the challenge now is figuring out where the euphoria wears off and the fear returns.

Jane Fox : 9/19/2007 9:38:41 AM

There is a very good chance the SPX will return back to it's the 50EMA before it resumes its upward trend. Link

Linda Piazza : 9/19/2007 9:38:40 AM

Here's where the SPX is on the daily chart: Link A reversal back inside the channel, leaving a long tail that pierced it, would fit with the typical doji-type day that is one of the usual reactions after such a large-range day. There's no guarantee that any such thing will happen, but just remain aware of the possibility.

Jane Fox : 9/19/2007 9:36:50 AM

Oh my gosh any doubts as to who has control now? I expected the markets to make new yearly highs this year but not this month. LOL Link

Keene Little : 9/19/2007 9:33:18 AM

I see the bullfest continues. I'm not so sure it will continue up strongly today and the risk is for a gap n crap today although maybe just gap closure. The shorts are running scared now and opex is likely helping the bulls as naked call sellers are forced to buy the market. Waiting to see how the early morning shakes out.

Linda Piazza : 9/19/2007 9:28:54 AM

Under normal circumstances, I would expect the best-case scenario for today to be a doji-type day as yesterday's gains were digested. This would mean that any early climb or decline would likely be reversed. These are not normal circumstances, so I'm not sure whether we should throw out normal expectations or not. Just be aware that's a normal expectation for a day following such big gains. The worst-case scenario, of course, is a reversal of many of the gains.

Tab Gilles : 9/19/2007 9:28:23 AM

Google (GOOG) Bullish Chart...

Daily: Link

Weekly: Link

PnF Link

Linda Piazza : 9/19/2007 9:27:12 AM

Today, a $9.750 billion repo from yesterday matures. I don't see any other repos maturing today, so anything below that will be a net drain and anything above it, a net add.

Jane Fox : 9/19/2007 9:18:38 AM

US $ took a drubbing yesterday which was quite beneficial for Gold. I will also take a look at the daily charts of the $ and Gold later.

Crude is certainly holding on to its $80.00/bl level but the equity markets don't seem to care much do they.

The DAX is supporting the bullishness we are seeing in the American index futures overnight. Link

Jane Fox : 9/19/2007 9:13:14 AM

Looks like the markets liked the CPI data out this morning and have been adding to the monstrous gains from yesterday. I will take a look at the daily charts later to see where we are and what may be in store for us for the rest of the week. Link

Jane Fox : 9/19/2007 9:00:57 AM

Dateline WSJ - WASHINGTON -- U.S. consumer prices were under wraps last month on falling energy and apparel prices and tame housing costs, giving Federal Reserve officials some measure of support for their surprisingly aggressive rate reduction Tuesday.

Meanwhile, home builders slowed construction to the lowest rate in 12 years during August, and permits for future groundbreakings also fell, suggesting a continuing U.S. housing slump.

The consumer price data, which come on the heels of a steep drop in August wholesale prices, suggests that underlying inflation worries shouldn't stand in the way of future rate cuts, either, if the economic outlook erodes.

The consumer price index fell 0.1% in August, the Labor Department said Wednesday, its first decline since October 2006. The CPI rose 0.1% in July. The core CPI, which excludes volatile food and energy prices, advanced 0.2%, though it was nearly rounded down to 0.1%.

Unrounded, the CPI fell 0.139% last month. The core CPI advanced 0.150% unrounded. Wall Street economists had expected no change in overall consumer prices and a 0.2% rise in the core index.

Overall consumer inflation was up 2% from a year ago. The core CPI was up 2.1% compared to the same month a year ago, down slightly from July and matches the lowest annual rate since September 2005.

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