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Keene Little : 9/27/2007 10:30:38 PM

Friday's pivot tables: Link and Link

I posted two NDX charts at the end of Thursday's trading day to point out the possibility that we're very close to seeing a high for NDX. I had pointed out earlier in the day how stretched NDX is to the upside (beyond its 200-week moving average) so I'm now looking for signals that tell us a top is close at hand:

The NDX daily chart shows a potentially bearish reversal signal with a hanging man doji today (hard to see) right up against the top of its parallel up-channel from 2006. We could see a corrective pullback and another press higher within an ascending wedge pattern (shown in pink) but with the oscillators overbought up against resistance with a hanging man doji and an EW count that can be called complete here, I must say I like the short side on this one. Link

The only caution, as always, is that it could press a little higher above the top of the channel, as it did in July. Plus I see a little more upside potential for the DOW and SPX. If by chance we start seeing rotation out of the techs (now that fund managers can effectively close their books on the EOM/EOQ run) and into the blue chips then that will be a generally bearish signal but we'll have to wait to see if that happens.

I had received an email question about how can I figure out where the market might top since it's just been inching its way higher even as I keep calling for a top soon. I thought I'd take you through the steps in evaluating a symbol--I'm going to use the NYSE tonight. This is the process I go through and I of course could be wrong (I remember that once happening to me--wink) but it's the way I set up my trades. Hopefully you'll find it useful.

I studied the NYSE chart and thought it would be interesting to show how I'm drilling down from above to make a case for an end to the rally here. Starting with the monthly chart (to show price action since the October 2002 low) I have some parallel channels identified that are based on the uptrend line from March 2003 through the June 2006 low: Link

You can see how price action tended to stay inside the middle channel and when it strayed outside it reversed at the boundaries of the wider channel. These parallel channels can be very powerful ways to trade a market. The weekly chart shows these channels a little more closely and notice where price has currently rallied to: Link

Flip back to the monthly chart and you can see that price has never gone from one side of the wider channel to the other except for the drop from July (so that was a bearish signal). It has instead gone to the other side of the inside channel and reversed. Will it do a complete reversal of that decline and rally all the way up to the top of the wider channel? It could and that would be a nice rally from here--up to about 10500. I'm not sure I'd want to bet that way yet. You can also see how prices traded around the mid line of the up-channel (dotted) on the way up.

The daily chart zooms in even closer so we can see what the rally from the August low looks like: Link I've got it counted as an A-B-C bounce (because of the overlapping move around the end of August and beginning of September) and the c-wave needs to be a 5-wave move. The leg up from Tuesday is the 5th wave and has run into the top of the inside channel which could be strong resistance. With this closer view you can also see how price bounced between the two upper trend lines into the July high.

Finally, moving in even closer with the 60-min chart you can see the 5-wave move up from Sept 10th: Link The 5th wave (wave-(v) on the chart) is showing bearish divergence against the 3rd wave, as it should, and it's nearing the first Fib projection for the move where the 5th wave will equal 62% of the 1st wave (at 10083.60).

It could certainly continue higher to the next Fib projection at 10211.90, for equality between the 1st and 5th waves, but then it would have clearly rallied above the top of the middle channel shown on the other charts. So when I put all these pieces together I like a top at that 10084 Fib projection and recommend shorting the market at that level if price stalls there (or starts a decline at any time from here).

Assuming we start a pullback then it will be time to test it to see if the bears are gaining control. If it instead pulls back correctively then we can anticipate another rally that will in fact take NYSE to the top of the wider channel. But that comes after we start a pullback since even that kind of move will need to stair-step higher to get there. At most I'd expect the 10200 area to be next resistance before pulling back and any rally above 10100 would likely target 10200 next. So the closer NYSE gets to 10100 before rolling over the tighter your stop could be. Even if you're not trading the NYSE keep an eye on it for these key levels.

OI Technical Staff : 9/27/2007 9:59:59 PM

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

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

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

Jeff Bailey : 9/27/2007 9:15:04 PM

Educational (Update) "Best" Email Question ...

Rockies Go For 11th Straight and are now 1 game back in the Wild Card, and just 2.5 games back of division leader Arizona.

"I counted them out," said one observer that refused to give his name. "After dropping 3 of 4 to the Marlins in mid-September, I thought their grave had been dug and I admittedly started to shovel dirt on top of them."

CME's Late-Month Surge Keeps Trader's Confidence High Link

"I counted him out," said one blogger that refused to give his name. "After that BIDU debacle into September's expiration, I figured the month was a total loss."

"It's never over until it's over," said Manager Bailey, "I knew it was going to be a tough month when BIDU broke to another 52-weeker on 9/11, so I simply started the process of booking the big gains when we got them, then rolling bullish capital to strengthening areas of the market, and bearish capital to areas that looked weaker."

When asked about his teams chances in the playoffs, Bailey said, "Playoffs? Don't talk about playoffs! We're just focused on winning each day, week, month and quarter!"

Bailey then winked to a reporter in the back and added, "Put that fork away. We aint done yet. Not by a long shot."

Jeff Bailey : 9/27/2007 8:02:42 PM

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

Jeff Bailey : 9/27/2007 6:58:31 PM

Closing Internals found at this Link

NYSE NH/NL Ratio Chart at this Link

Tab Gilles : 9/27/2007 6:53:06 PM

Follow Up Since the 8/7/07 10:15 PM post were I recommended getting long and into these leverage Profunds heres how they peorformed since then in the last 7 weeks.

Profund Ultra Small Cap UAPIX In at $29.58 now $32.21 up 8.9%

Profund UltraBull ULPIX In at $74.37 now $79.70 up 7.25%

Profund UltraMid cap UMPIX In at $52.89 now $55.98 up 5.8%

Profund Ultra OTC UOPIX In at $30.51 now $34.33 up 12.5%

Charts Link Link

Keene Little : 9/27/2007 6:27:29 PM

The NDX daily chart shows a potentially bearish reversal signal with a hanging man doji today (hard to see) right up against the top of its parallel up-channel from 2006. We could see a corrective pullback and another press higher within its ascending wedge pattern (shown in pink) but with the oscillators overbought up against resistance with a hanging man doji and an EW count that can be called complete here, I must say I like the short side on this one. Link

The only caution, as always, is that it could press a little higher above the top of the channel, as it did in July. Plus I see a little more upside potential for the DOW and SPX. If by chance we start seeing rotation out of the techs (now that fund managers can effectively close their books on the EOM/EOQ run) and into the blue chips then that will be a generally bearish signal but we'll have to wait to see if that happens.

Jeff Bailey : 9/27/2007 5:42:43 PM

Closing U.S. Market Watch at this Link

New 52-week closing high for NDX/QQQQ!

MSH.X, IIX.X, IXTCX, HMO.X.

Jane Fox : 9/27/2007 4:11:00 PM

Tomorrow economic Reports include :

8:30a.m. August Personal Income. Expected: +0.3%. Previous: +0.5%.

8:30a.m. August Personal Spending. Expected: +0.4%. Previous: 0.4%.

9:45a.m. Sep Chicago PMI. Expected: 53.0. Previous: 53.8.

10:00a.m. End-Sep Reuters/U Of Mich Sentiment Index. Previous: 83.8.

10:00a.m. August Construction Spending. Expected: -0.2%. Previous: -0.4%.

Jeff Bailey : 9/27/2007 4:02:35 PM

Olin Corp. (OLN) $22.71 +2.29% ... note action headed into end of Q2 (6/29/07 close). Link

Linda Piazza : 9/27/2007 4:02:25 PM

The MID never did reach its original upside target above 889.00 today, but it did reach a high of 888.22, as doubtful as its climb looked today. It did need to dip to next support to recharge before climbing higher.

Jeff Bailey : 9/27/2007 4:00:44 PM

OLN Corp. (OLN) $22.73 +2.38% ... I thought it could! New 52-weeker.

Keene Little : 9/27/2007 3:49:54 PM

It looks like we could have an ascending wedge developing for SPX since Tuesday's low. I like an upside target for this pattern just under 1540 where internal Fib projections off wave relationships coincide: Link The uptrend line from Tuesday, currently near 1528.70, needs to hold in order for this pattern to complete and the bearish divergences suggest that a break at any time would signal the upside is finished.

How this move fits into the larger pattern is the bigger question. It's possible the ascending wedge is the 5th wave (common pattern for a 5th) in the move up from Sept 10th which would complete the bounce off the August low, shown with the dark red wave count: Link The other interpretation says the bounce off Tuesday's low is part of a larger sideways correction (needing a leg down to finish it) before proceeding higher again, shown in pink.

The key level will be a break of the uptrend line from August 16th, currently down near 1500. Until that uptrend line breaks we're still in an uptrend but a break of the uptrend line from Sept 10th should be good for at least a short term trade on the short side.

Jeff Bailey : 9/27/2007 3:32:45 PM

I think it can, I think it can ...

Jeff Bailey : 9/27/2007 3:18:57 PM

03:00 Internals found at this Link

Jeff Bailey : 9/27/2007 3:18:19 PM

03:00 Market Watch found at this Link

Linda Piazza : 9/27/2007 2:53:17 PM

USDJPY slipping back below its bull flag's upper boundary again, with that at about 115.58 and with the USDJPY at 115.56. That's not much of a move below that trendline, but what has changed is that the USDJPY is now finding resistance at its 15-minute 9-ema, currently at 115.61, on 15-minute closes. So far, this still constitutes a retest of former resistance to see if it holds as support, but the USDJPY needs to bounce if it's to be considered as confirming further equity strength. Otherwise, the breakout could be considered a false one.

Tab Gilles : 9/27/2007 2:49:43 PM

$WTIC has been rising of late while gasoline $GASO has been declining.

Is Valero a Buy here? Link

Keene Little : 9/27/2007 2:47:25 PM

With an apparent attempt to hold the market up into EOM/EOQ, and now within the 3-day window where stocks can be sold but still show on the books, we could see some selling start at any time. I'm watching the uptrend lines from Sept 10th as a break of those would be a sell signal. I don't like the upside but I'm not interested in the short side until I see support break. Flat is a (boring) position in the meantime.

Linda Piazza : 9/27/2007 2:34:20 PM

The RUT is hitting potential Keltner resistance on the 30-minute chart, with that resistance at the current 813.20 level. As long as it continues 30-minute closes above its 30-minute 9-ema, currently at 811.57, those tests of Keltner resistance might continue, but traders should be cognizant of the current resistance test. Resistance can be and is breached, of course.

Jeff Bailey : 9/27/2007 2:32:36 PM

Stock symbol of the day ... KongZhong Corp. (KONG) $7.92 +59% ... #5 most active at NASDAQ.

Jane Fox : 9/27/2007 2:28:48 PM

NDX is just up up and away and continues to make new yearly highs. Link

Jane Fox : 9/27/2007 2:27:18 PM

The DAX has broken its September 4th swing high and then used it as support. This is bullish for its American counterparts. Link

Jane Fox : 9/27/2007 2:25:39 PM

The SPX and Wilshire 5000 trade very similar to one another. Link

Jane Fox : 9/27/2007 2:24:41 PM

And here is another example of previous swing high serving as support. As you can see support is more of a zone than an actually number. Link

Jeff Bailey : 9/27/2007 2:27:42 PM

US 5-year Notes: 4.25%; 5.26% At High

DJ- The U.S. Treasury awarded $13.00 billion in five-year notes at Thursday's auction at a high rate of 4.25%.

The Treasury received bids totaling $37.17 billion and accepted $13.00 billion, including $118.96 million of noncompetitive tenders, down from $197.86 million in noncompetitive tenders accepted at the previous five-year note auction on Aug. 30.

The Treasury received no bids from foreign and international monetary authority accounts on a noncompetitive bidding basis.

The bid-to-cover ratio, an indication of demand, was 2.86, Treasury said.

Tenders submitted at the high yield were allotted 5.26%.

The dollar price was 99.999760 and the coupon rate was set at 4.25%.

The median rate was 4.230%; that is, 50% of the amount of accepted competitive bids were tendered at or below that rate.

The Treasury received bids totaling $37.17 billion and accepted $13.00 billion, including $118.96 million of noncompetitive tenders, down from $197.86 million in noncompetitive tenders accepted at the previous five-year note auction on Aug. 30.

Of the competitive bids accepted, 5% were tendered at or below the rate of 4.200%.

Accepted indirect bids for the five-year note were 45.2% of the total, up from 22.8% in August.

The high rate was up from 4.248% at the previous five-year note auction. The high rate was the highest since 4.640% at the five-year note auction on July 26.

The issue is dated Oct. 1, and matures on Sept. 30, 2012.

The CUSIP number on the five-year notes is 912828HE3.

Jane Fox : 9/27/2007 2:22:38 PM

Here is an excellent example of using a previous swing high as support. I did suspect this support to break eventually but it looks like it held very nicely. Link

Jeff Bailey : 9/27/2007 2:18:51 PM

BRITISH AIRWAYS ORDERS 24 BOEING 787, 12 AIRBUS A380 JETS

DJ- U.K. carrier is splitting a multibillion dollar order for new long-haul planes between Boeing and Airbus, giving European manufacturer a big boost for its A380 program. Total list price for planes and engines is seen near $8.2 billion.

Linda Piazza : 9/27/2007 2:17:55 PM

After breaking above bull flag resistance and setting a short-term upside target of 115.81-115.91 (as per my 11:58:18 post), the USDJPY hit a daily high of 115.85 and began pulling back. It's now testing the bull flag's former resistance, to see if holds as support. In doing so, however, it dropped back below the week's previous high at 115.71, achieved yesterday, so I don't consider the bull flag breakout fully confirmed yet. It has to maintain prices above that former swing high and it's just not doing it yet. It's at 115.62 as I type.

Jane Fox : 9/27/2007 2:16:49 PM

This has been tough slugging today. Link

Jane Fox : 9/27/2007 2:15:27 PM

VIX to new daily lows and AD volume to new daily highs - that is enough for me to say it is Ok to get long now.

Keene Little : 9/27/2007 2:14:58 PM

Never short a dull market is the suggestion today.

Linda Piazza : 9/27/2007 2:12:46 PM

MID to a new high after dipping toward Keltner support and recharging. Needs to again maintain 15-minute closes above the 9-ema, now at 885.82, to maintain that upside target now at 889.45. It's at 886.87 as I type.

Jane Fox : 9/27/2007 2:10:54 PM

I see internals turning a bit more bullishness now - AD volume making new daily highs but the ratio unfortunately is not. VIX is falling but not to new daily lows yet.

Jeff Bailey : 9/27/2007 2:07:56 PM

DJ- US Consumer Newsprint Stocks Rise 1.44% In August

Jane Fox : 9/27/2007 2:07:31 PM

These charts of the VIX and the S&P futures show there has been very few trading opportunities to day and very little, if any at all, follow through. Link

Linda Piazza : 9/27/2007 1:59:13 PM

As I suspected it would do (see my 1:09:15 post), the MID dipped toward Keltner support now at 884.66 but then at 884.20, although it didn't quite touch that support. It dipped to 884.93. Unless it can push above about 885.90 on a 15-minute close, however, it may yet be vulnerable to that 884.66 level. It's at 885.71 as I type.

Jeff Bailey : 9/27/2007 1:38:55 PM

GOOGLE TO EXPAND WORKFORCE BY ONE-THIRD

DJ- Internet giant is planning to expand its workforce by a third, hiring several thousand engineers in Europe for a research-and-development team that will be as big as the one it has in the U.S., the Financial Times reports.

GOOG $567.00 -0.15% Link ...

Linda Piazza : 9/27/2007 1:37:12 PM

We're entering a prime stop-running period of time, so it might be that equities will be run up or run down as traders returning from lunch try to determine if resistance or support will hold. I don't have a strong guess which direction might be tested, if any, but watch for the test if it occurs and understand what's happening. It's not an effort to stop out as many people as possible but rather an effort by big money to determine whether it's safe to run equities higher or send them lower.

Jeff Bailey : 9/27/2007 1:34:21 PM

Forex Currencies Live! Link

Jeff Bailey : 9/27/2007 1:30:10 PM

USD/JPY Cross Rate as of last night's close Link

Thanks for the "heads up" Linda!

Jane Fox : 9/27/2007 1:28:03 PM

NEW YORK (MarketWatch) - Natural gas and oil services stock rose Thursday, as investors waded into the sector as oil prices edged up.

Traders kept an eye on Tropical Depression 13, which may strengthen in the Gulf of Mexico as it moves toward Tuxpan, Mexico, said the U.S. National Hurricane Center.

Crude futures rose $1.13 to $81.43.

Keene Little : 9/27/2007 1:26:08 PM

On the daily SOX chart you can see the H&S pattern that's been developing this year. A break of the August low would likely usher in a lot of selling since many would be seeing the same pattern.

Keene Little : 9/27/2007 1:23:17 PM

The tech stocks have rallied very strongly in the last month but they've done it without the semiconductor stocks. Like a broader rally without MER, a tech rally without the semis is usually doomed for failure. The longer term chart is one only the bears could love (monthly): Link

The long sideways triangle after the 2002 low is again a continuation pattern--it's calling for another leg down and the EW count shows the pattern complete at the July high. Since that high we've seen a sharp drop and then another choppy triangle consolidation pattern. It could bounce a little higher first but this looks bearish (daily): Link

Jeff Bailey : 9/27/2007 1:17:30 PM

01:00 Internals found at this Link

Linda Piazza : 9/27/2007 1:09:15 PM

The MID still bounces from the 15-minute 9-ema, now at 885.40, but those 15-minute candles are getting smaller and smaller. Not much conviction there. I've always been leery of that upside target, now set at 889.41, and now I'm wondering if the MID won't have to drop back toward 884.20 to gather energy and test support before it climbs much further. This is just speculation based on those 15-minute candle and the slight flattening of the 9-ema. The MID is at 885.89 as I type.

Keene Little : 9/27/2007 1:04:30 PM

Even though the broader market has rallied strong since the August low, MER, our canary in the coal mine is telling us the oxygen level is just about depleted. The ol' canary is getting ready to drop from its perch: Link

The sideways triangle pattern since August is a classic continuation pattern and says we should be looking for another leg down. A rally without Mother is like a day without sunshine. A break below $70 is a sell signal which would be confirmed with a break below $67.

Jeff Bailey : 9/27/2007 1:03:01 PM

01:00 Market Watch found at this Link

Jeff Bailey : 9/27/2007 12:53:30 PM

Intercontinental Exchange (ICE) $153.40 +0.98% ... Here's my daily interval bar chart with "nested" retracement Link

Jane Fox : 9/27/2007 12:45:24 PM

SAN FRANCISCO (MarketWatch) -- The dollar rose against the yen and pared losses against other rivals Thursday after the release of encouraging U.S. jobless data and despite weak home-sale numbers.

The euro was at $1.4151, down from a fresh record high of $1.4188 hit earlier but well above $1.4124 late Wednesday. The dollar was buying 115.60 yen, up from 115.40 yen earlier and 115.52 yen late Wednesday.

"The dollar perked up a bit following the lower initial [jobless] claims print, while the about as-expected GDP revision likely had limited impact due to its rear-view-mirror nature," said analysts at Action Economics. "Short covering interest stepped in when further dollar selling did not materialize following the weak house data."

Keene Little : 9/27/2007 12:28:29 PM

GOOG looks to be in an ending pattern to the upside the way it's been chopping higher since Monday. Either that or it's part of a slightly larger consolidation (needing another drop to perhaps 560 to finish it) before finishing a 5-wave move up from August (shown in pink): Link

The fact that it's pressing against the trend line along the highs from November 2005, with what looks like an ending pattern, combined with the NDX being so stretched above its 200-week moving average, I'd have to say GOOG looks like it could be putting in a top here (ideally with one more push slightly higher to maybe 575).

Keene Little : 9/27/2007 12:12:24 PM

CME got a big pop up from its recent consolidation which was a bit of a surprise (to me). So that changed the wave count from what I had last posted on Monday ( Link ). It now looks like a larger a-b-c bounce off he August low (better match with the broader market as well): Link

Two equal legs up from August (wave-c = wave-a) is at 601.82 which would be very near a new high and a great place to try a short on CME with a tight stop at a new high. The pattern of the rally from Tuesday's low looks like it could be complete so it might not make it up to the 601.82 level. A drop below 580 would likely be a signal that the top is in.

Linda Piazza : 9/27/2007 12:08:44 PM

MID at 886, still maintaining its (current) 889.68 upside target, a target I still consider somewhat tentative. The MID is facing the previous high of the day right now, with that at 886.30. So far, it's maintaining support at the 15-minute 9-ema, but that 9-ema is beginning to flatten, a sign that momentum could be waning. Nothing major here.

Linda Piazza : 9/27/2007 11:58:18 AM

The USDJPY has now broken above bull flag resistance. It's at 115.73 as I type, with an tentative upside target of 115.81-115.91.

Jeff Bailey : 9/27/2007 11:51:06 AM

EIA: Weekly Nat. Gas Storage Table at this Link ... Build of 74 Bcf

Keene Little : 9/27/2007 11:50:19 AM

It's looking like the market is going to be on hold until we get through the week. There's too much interest in holding the market up into the end of the quarter but I don't think there's enough buying power to drive it much higher. That's obviously a subjective evaluation but the bearish divergences and choppy climb tell me we're in an ending pattern right now.

Whether that leads to just a pullback or something more is the bigger question. But for now I'd say your trading opportunities through tomorrow are likely scalp trades only. We might see some selling start tomorrow once fund managers are satisfied with how their end-of-month/quarter books are going to look.

Linda Piazza : 9/27/2007 11:39:02 AM

The MID maintains, barely, its tentative upside target now at 889.65. It's so far maintaining 15-minute closes above its 9-ema, currently at 884.39, which keeps that upside target in place. However, as I mentioned in an earlier post, I'm a bit leery of this upside target because of the USDJPY's failure to break out of the formation in which it's moving. The MID is at 884.81 as I type.

Jeff Bailey : 9/27/2007 11:37:25 AM

11:00 Internals found at this Link

Note: At yesterday's close, the NYSE 5-day NH/NL ratio did reverse back lower (3-boxes, or 6.00%) at 58.00%.

Jane Fox : 9/27/2007 11:33:11 AM

When daytrading a stock what is the best indicators to determine support and resistence? Maybe you could show an example using VLO.

Thanks

Regan - I use swing highs and lows almost exclusively for finding support and resistance. Of course if a MA happens to correspond to one of those swings then that is all the more reason to use it. Here this daily chart of VLO show resistance at the September 6th high and support at the September 12th low Link

Swing highs and lows are what I use for support and resistance in my daytrading as well. I do not daytrade stocks but when I trade the index futures and say I get a long signal I will always make sure my entry is above any significant swing highs. If I were going short I always put an entry below swing lows.

Here is a 5 minute VLO chart. Link and I would expect to see support here. MACD is telling me any bounce will probably not be much but could be a good place to take profits if short.

Keene Little : 9/27/2007 11:31:50 AM

The DOW's uptrend line is near 13846 and NDX's is closer at just under 2090.

Keene Little : 9/27/2007 11:29:50 AM

Looks like we'll get gap closure next and then we'll see if it holds. If not then watch for support at the uptrend lines from Tuesday. For SPX that's currently near 1523.50 (cash).

Linda Piazza : 9/27/2007 11:29:10 AM

Summary of what I see currently: The TRAN is still not acting all that well, currently cycling down again toward Keltner support at 4818.44 on 15-minute closes and the previous low of the day at 4818.98. It's at 4824.78 as I type. The USDJPY is pulling back after testing that bull flag resistance, not able to break through. That resistance is near 115.60-115.63 and the USDJPY is currently 115.55.

There's nothing terrible here yet, but these two indicators that I watch are not supportive of the rallies, either, which makes me question whether gains will be capped. I had some of the same worries yesterday, all for naught, and I note that the VIX still can't maintain 15-minute closes above its 45-ema, at least not yet. That would tend to support the bullish case. My advice would be to remain aware that not all the ducks are in a row for bullish plays. Keep your profit-protecting plans in place if in bullish positions.

Linda Piazza : 9/27/2007 11:20:01 AM

A reader asks why I'm posting information about repos, and why they matter. Some people feel that it's important to look at how much liquidity is being injected into the financial system, particularly right now when there are so many worries related to the credit crunch. The whole world is debating, for example, whether the Bank of England's head was right or wrong to infuse the system with cash last week. Some feel that questions over what type of requests for funds and how they're backed are important to understand to get a feel for how well our Fed is handling the credit crunch, what they're willing or not willing to do. For example, are mortgage-backed assets accepted as collateral?

The Fed is sometimes acting to bring its overnight lending rates back in line with its targeted lending rates. This is true of all central banks. Recently, for example, the BBA LIBOR had gapped way over the usual spread between that rate and the Bank of England's targeted rate. This made obtaining credit tough, and it was believed to have contributed to Northern Rock's problems, which ultimately, of course, contributed to equity problems as financials dove and investors worried about the stability of the financial system, whether those worries were justified or not.

I think the information has to be taken in context. What are the prevalent worries and what is the Fed doing about them? When Jonathan used to report on these, it seemed that there seemed to be a stronger correlation between net adds and net drains and gains and losses on the stock markets than there is now. Yesterday's net drain did not result in a down day, for example. But what were the concerns yesterday? One was the slide in the dollar, and perhaps a net drain helped strengthen the dollar. I'm not certain about that because my background in economics is not strong enough to ascertain that, but it's just an example of the kind of background concerns that might be figured into a study of these numbers. Perhaps in this climate, with the concerns about the credit crunch--just heard it debated on CNBC again--it proved somewhat reassuring that there could be a big net drain yesterday and the markets could perform relatively well. Perhaps it was even a sentiment boost.

I would consider this as a fundamental and not a technical indicator, but sometimes we can't eschew all fundamentals, even if we are technical traders.

Keene Little : 9/27/2007 11:09:11 AM

Jeff, I've gone out to the December contract for oil only to be able to follow the developing pattern over time. As you mention, the November contract is the front month.

Jeff Bailey : 9/27/2007 11:03:15 AM

11:00 Market Watch found at this Link

Jeff Bailey : 9/27/2007 11:00:32 AM

Keene! ... Per last night's Wrap. Should be following November Crude (nymex:cl07x)

Keene Little : 9/27/2007 10:51:58 AM

There's an effort to hold the market up into the end of the month/quarter. This has been especially obvious in the sexy techs which have been outperforming the broader market. This is an interesting chart from elliottwave.com that shows how stretched NDX is to the upside right now: Link

The disparity index is a measure of how far NDX is from its 200-week moving average (currently 2.35 standard deviations away). This is not likely to hold and after the end-of-month/quarter rally I'm thinking we'll see a reversal, potentially a sharp one.

Jeff Bailey : 9/27/2007 10:49:37 AM

CME Group (CME) $590.42 +1.69% ...

Jeff Bailey : 9/27/2007 10:47:09 AM

Thanks Tab! Any good plays? (long, or put?)

Jeff Bailey : 9/27/2007 10:46:09 AM

Swing trade call alert! ... for one (1) of the Intercontinental Exchange ICE Nov $170 Calls (IHH-KN) at the offer of $4.60.

No stop for now, target $170.

ICE $152.00 +0.16% ...

Tab Gilles : 9/27/2007 10:43:19 AM

Jeff, In reference to your CBAK mention...yester I noted the same...

Tab Gilles : 9/26/2007 2:18:52 PM

Highly active Chinese stocks today... GSOL,JRJC,CBAK,KUN,CDS,SHA-WT, XFML

I have been watching Global Sources (GSOL) a B2B internet company; $940 million market cap; EPS FY06A $0.49, FY07E $0.67 & FY08E $0.91.

Averaging 36% annual earnings growth, the stock now trading at $21.61 or 23.7 forward '08 earnings seems cheap when compare to some other Chinese stocks.

PnF has a $31.5 Price Objective, or about 35 times 2008 earnings... Link

This stock has some more room to run on the upside. Link

Linda Piazza : 9/27/2007 10:42:30 AM

Okay, I'm going to take a break here. I was looking at the MID's chart in my 10:36:21 and 10:36:39 posts but typing RUT because I wanted to look next at the RUT's chart next, and had it on my mind. I have corrected those posts. The MID and RUT both tend to trade a bit more in concert with the USDJPY, or did.

The RUT had set an upside target which it then erased, but that target was nowhere near 889, of course. That was the tentative upside target set for the MID. The RUT had set a tentative upside target of 819.48, quickly erased.

My conclusions were what I meant to convey, however. Equity bulls want to see the USDJPY break out above the resistance of its bull-flag looking formation, with that resistance at about 115.60 now and with the BUSDJPY testing it, now at 115.62. SPX, OEX and Dow bulls, in particular, want to see the TRAN continue the current bounce and break above resistance currently at 4855-4863.20 on 15-minute closes.

Jane Fox : 9/27/2007 10:41:50 AM

The USDJPY has been trading in an almost straight upward tajectory since 9:30ET.

Keene Little : 9/27/2007 10:41:17 AM

Price is chopping up and down and I can't get a bead on direction. Gaps weren't closed and now we're getting another bounce back up towards this morning's highs. But short term bearish divergences have me thinking it's not time to buy it. Watch the whipsaws.

Jeff Bailey : 9/27/2007 10:37:17 AM

SLM SHARES CLIMB EVEN AS BUYERS BALK

DJ- Shares of student lender Sallie Mae rise more than 7% despite yesterday's news that the private-equity suitors seeking to buy the company are refusing to do so under the agreed-upon terms.

SLM $48.20 +7.08% ... traded as low as $41.73 yesterday.

Linda Piazza : 9/27/2007 10:34:22 AM

And the RUT pulls back from its breakout attempt, already erasing that upside target for now.

Jeff Bailey : 9/27/2007 10:34:29 AM

For 2nd Quarter (April-June) ... The SPX gained 82.49 points, or +5.9% and closed June 29, 2007 at 1,503.35.

Linda Piazza : 9/27/2007 10:36:39 AM

For those who think I'm switching sides here--mentioning the MID's bullishness right after mentioning my concerns about the TRAN's action--I'm not switching sides but rather saying that bulls wanting to see the current gains sustained want to see the TRAN and the USDJPY both move up in concert with equities. Of course equities can gain without those two indicators I watch (TRAN and USDJPY action) also showing gains, but I've learned that having just-in-case-they're-needed exit plans is a good idea if in bullish plays without the corroboration of these two.

Linda Piazza : 9/27/2007 10:36:21 AM

The MID has broken above the neckline of a continuation-form inverse H&S on its 15-minute chart. My Keltner's now set up a potential short-term upside target at 889.65. I mention this with some trepidation because the MID, like the RUT, sometimes tends to move most in concert with USDJPY movements. The currency pair is climbing, but it's just now approaching potential resistance, near 115.60, and we don't know the outcome of that test yet. It's not like the MID, having already broken free of its current formation's resistance. The USDJPY is at 115.58 as I type.

Jeff Bailey : 9/27/2007 10:29:51 AM

US 2Q GDP REVISED DOWN TO 3.8% GROWTH

DJ- Gross domestic product rises at a still-robust 3.8% annual rate from April through June, down from a previously reported 4.0% increase, as some gauges measuring 2Q price inflation are raised slightly, according to data revisions.

Linda Piazza : 9/27/2007 10:26:56 AM

The Fed has announced another repo. That totals $38.000 billion in repos today against $49.000 billion maturing today, for a net drain of $11.000 billion, so far.

Jeff Bailey : 9/27/2007 10:21:31 AM

Seeing some sign the last few days that "everything China" finding a bid.

China BAK Battery (CBAK) $8.75 +18.72% ...

Linda Piazza : 9/27/2007 10:21:09 AM

The TRAN just sank to a new low of the day, at 4818.98. It's now slightly above that at 4822. It's been sinking since its first 15-minute candle. Dow, SPX and OEX bulls want to see better performance than this from the TRAN because its pattern this morning is not supporting further gains in those indices. A look at the daily chart shows it just consolidating within a tight consolidation zone, however, with prices trying to find support at the converging 10- and 20-sma's and so far doing it.

Linda Piazza : 9/27/2007 10:17:24 AM

After the release of the 10:00 data, the USDJPY did some jumping around, only to settle back to its current 115.41 level, about where it's been for most of the morning.

Keene Little : 9/27/2007 10:15:14 AM

Getting closer to gap close. If we've got more bullish things to come then that should be support. Watch to see if a long play sets up there. Otherwise we could see at least a larger retracement of the rally from Tuesday's low.

Jeff Bailey : 9/27/2007 10:14:56 AM

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

"Best" Email Question (from 9/21/07) ... when you see an out-the-money current month 100% option gain slip away (SLM-VI traded $5.00 yesterday), don't let it happen again the next day CNM-JX.

Jeff Bailey : 9/27/2007 10:04:05 AM

10:00 Market Watch found at this Link

Jane Fox : 9/27/2007 10:03:51 AM

WASHINGTON (MarketWatch) - Sales of new homes dropped 8.3% in August to a seasonally adjusted annual rate of 795,000, the slowest sales since June 2000, the Commerce Department estimated Thursday.

Sales are now down 21.2% in the past year, with no sign of a bottom in the crippled housing market.

August's sales pace was weaker than the 825,000 expected by economist surveyed by MarketWatch. In addition, sales in May, June and July were revised down.

The sales figures do not account for canceled sales contracts

Linda Piazza : 9/27/2007 10:02:10 AM

The Fed has announced another repo, this on in the amount of $7.000 billion. That makes today's total in repos $33.000 billion against a maturing $49.000 billion. The net drain now stands at $16.000 billion.

Jane Fox : 9/27/2007 10:01:17 AM

I do not have the 10:00 news yet but the market reacted to it.

Jane Fox : 9/27/2007 9:58:20 AM

Remember the news at 10:00

10:00a.m. August New Home Sales. Expected: -5.2%. Previous: +2.8%.

10:00a.m. August Help-Wanted Index. Previous: 25.

Linda Piazza : 9/27/2007 9:54:30 AM

The overnight low on the USDJPY, reached during our premarket session on the 8:15 fifteen-minute candle, was 115.10. If the USDJPY still has any correlation to equity behavior, then equity bulls don't want to see the USDJPY sustain values below that overnight low. It's at 115.37 as I type.

Linda Piazza : 9/27/2007 9:52:13 AM

The Fed has now announced repos of $27.000 billion for today. That leaves a net drain of $23.000 billion for today, unless further repos are announced later.

I've been wondering if, now that market watchers have started breathing again after holding their breath with the credit-crunch scares, if the Fed isn't allowing some of the net drains we've seen lately in an effort to plump up the dollar or at least not to undermine it further. Lacking a sufficient economic background to know whether this is even possible, I may be way off base here.

Jane Fox : 9/27/2007 9:50:50 AM

DAX is now climbing back up following the USDJPY but the VIX is still bearish.

Jeff Bailey : 9/27/2007 9:50:06 AM

Intercontinental Exchange (ICE) $151.65 -0.16% ...

Jane Fox : 9/27/2007 9:48:54 AM

The USDJPY is making new daily highs (based on a 9:30 open) but I use this market as an internal compared to the DAX and the DAX is making new daily lows so those two cancel one another out. AD volume is making new daily highs but the ratio is making new daily lows so those two cancel each other out. That leaves the VIX and it is making new daily highs so the nod goes to the bears.

Keene Little : 9/27/2007 9:41:44 AM

This morning's high looks like a good finish to a 5-wave move up from yesterday afternoon to be careful of a gap n crap here. At a minimum we could get a gap closure next.

Jane Fox : 9/27/2007 9:39:57 AM

AD line is +1325 now so even though the bulls may have fumbled and stumbled this morning I think they still have control.

Jeff Bailey : 9/27/2007 9:38:48 AM

Swing trade call exit alert! ... for the one (1) CME Group CME Oct. $600 Call (CNM-JX) at the bid of $10.50.

CME $583.49 +0.41%

Jane Fox : 9/27/2007 9:36:25 AM

Although the AD line is bullish AD volume ratio is falling, VIX is climbing and both DAX and USDJPY are falling. The bulls may have had the ball first thing but they have fumbled it.

Jeff Bailey : 9/27/2007 9:33:22 AM

Swing trade put stop alert! ... for the one (1) SLM Corp. SLM Oct. $45 Put (SLM-VI) at the bid of $1.60.

SLM $47.80 +6.28% ... what a WILD ride yesterday!

Jane Fox : 9/27/2007 9:33:16 AM

AD line is a bullish +926 and climbing.

Linda Piazza : 9/27/2007 9:33:17 AM

The action of the USDJPY wasn't all that supportive of equity gains during the overnight session. Yesterday, I was talking about the USDJPY facing Keltner resistance that was then near 115.70. It fell back from that resistance during the overnight session, dropping all the way to and below the 120-ema on that chart. It's now back above it, at 115.37 as I type. I do include the overnight session in my charts for currencies, as I've mentioned before, because currencies are different than futures. Having traded the forex markets for a few months--or should I say having "attempted" to trade them--I know that moves that occur overnight when the Nikkei is trading can be as important to the USDJPY as moves that occur when our markets are open.

The overnight move could perhaps be part of a bull flag pullback, but equity bulls are going to want to see better performance from this equity pair today to support equity gains or else there's the possibility that the gains won't be sustainable.

Jane Fox : 9/27/2007 9:32:27 AM

US$ is consolidating at yearly lows suggesting it may take a small bounce but continue it downward trek. Link

Jane Fox : 9/27/2007 9:30:12 AM

Crude had a very nice bounce off support. Link

Linda Piazza : 9/27/2007 9:28:19 AM

What's going on with jobs? Is the job market so tight that wage pressures could be adding to inflation pressures, as initial claims under 300,000 sometimes indicates? Or were the non-farm payrolls more correct in showing that the job market is weak? The articles I'm reading show some confusion on the part of others more versed in economics than I am, too.

Linda Piazza : 9/27/2007 9:21:04 AM

So far today, the Fed has offered repos in the amount of $6.000 billion against $49.000 billion that mature today. So far, then, that leaves a net drain of $43.000 billion. I'll update again after the usual 9:40 EST update on the website of the Federal Reserve Bank of NY, through which the Fed usually conducts its temporary open market operations such as these repos.

Jane Fox : 9/27/2007 9:20:01 AM

LONDON (MarketWatch) -- Crude oil prices spiked above $81 a barrel in electronic trading Thursday, adding to a technical rally seen late in the previous day. Wednesday's late rally followed a drop in prices after weekly inventory data were less bearish than expected. The November-dated light crude contract added 78 cents at $81.08 a barrel.

Keene Little : 9/27/2007 9:17:12 AM

Nice bullish overnight session. Equity futures took a big dip after the European markets opened but have since recovered most of the overnight gain. DOW 14K here we come. This is getting a little worrisome now with prices pressing higher but showing bearish divergences. It could end quickly so don't get complacent about the upside.

Jane Fox : 9/27/2007 9:14:25 AM

WASHINGTON (MarketWatch) -- First-time applications for unemployment benefits fell by 15,000 in the latest week to 298,000, the lowest since the week ended May 12, the Labor Department said Thursday.

The four-week moving average of new claims for the week ended Sept. 22, meanwhile, fell by 9,750 to 311,500. This is the lowest level since the week ended Aug. 4.

Jane Fox : 9/27/2007 9:13:29 AM

WASHINGTON (MarketWatch) -- U.S. economic growth accelerated in the second quarter to the fastest pace in more than a year, the Commerce Department reported Thursday in its final estimate measuring gross domestic product for the April-through-June interval.

After growing just 0.6% in the first quarter, real GDP increased at a 3.8% annual rate during the June quarter, less than last month's estimate of 4%. The downward revision to growth was largely due to an upward revision in imports.

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

Overnight charts are bullish with ER and NQ leading the pack. Link

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