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Keene Little : 10/16/2007 1:27:45 AM

Jeff has mentioned the Pacholder High Yield Fund (PHF) as potentially bullish the way it's holding up. This is important for the bulls since it's basically a measure of the willingness of traders to hold the riskier paper. Think of it as the tech stocks of the bond market.

Speaking of which, whenever you see tech stocks sprinting ahead of the broader stock market after a rally has been well underway, that's usually the sign of the end. The last of the wannabe bulls jump into the sexy techs hoping they haven't missed the rally. Longer term data supports this when you measure Nasdaq advance-decline volume as a percentage of NYSE a-d volume.

But back to PHF, the daily chart shows an impulsive decline into the August low followed by a consolidation. Monday's high is testing the first high (9.24) off the August low. A typical retracement is back to the 4th wave which is the high at 9.35 in early August. A 62% retracement of its decline is just under 9.31. So keep an eye on this area for a top to its bounce before it rolls back over. Link

This will likely trade similarly to the stock market since it is more closely aligned with the riskier stock market than the perceived safety of "normal" bonds. In fact its consolidation (other than the first sharp bounce off the August low) looks a lot like the banks, trannies and SOX which have not been confirming the broader market rally (giving us a bearish non-confirmation).

And speaking of the SOX, last Thursday's drop broke its consolidation pattern and now points lower: Link . A tech rally without the SOX has been and for the foreseeable future will be bearish non-confirmation. The market is talking to us with all these non-confirmations so don't shoot the messenger when I point these things out. It doesn't say the high is here and now but what it does tell us is the market is now vulnerable to a "dislocation", meaning surprises could come to the downside.

Jeff Bailey : 10/16/2007 12:50:11 AM

Reminder: ... October option expiration is Friday.

Jeff Bailey : 10/16/2007 12:49:33 AM

Correction to tonight's Market Wrap Link ... It was 20-years ago today that "Black Monday" took place.

Keene Little : 10/16/2007 12:22:14 AM

At the end of the day Monday I posted two 60-min charts, one for the DOW and the other for SPX, each showing a different scenario that could play out this week and into next. The DOW chart shows, in pink, the potential for a new low (possibly after a little more bounce first), which should stay at or above its uptrend line from August (currently near 13830).

This new low would then be followed by a rally into the latter part of the month to new all-time highs again with upside targets around DOW 14400, SPX 1600 and OEX 745. This scenario should see the new low accompanied by bullish divergences as a guide for a bullish play entry. We could also see a rally directly from here (without the need for a new low first).

The SPX chart shows a much more bearish setup where the EW count says the market has already put in its final high and is now set up for a quick decline back to the start of its rising wedge, so back to the 1510 area, probably before the week is out.
DOW: Link
SPX: Link

SPX will look more bearish if it fails the retest of its most recent broken uptrend line from August (tagged just before Monday's close). But the DOW doesn't test its uptrend line from August until closer to 13830 and that kind of drop would accommodate a new low for SPX (maybe around 1527). Both of those levels would keep a potential 5-wave count up from August alive and therefore wouldn't be a crippling drop for the bulls.

What all this means is that I think we need to see the DOW break 13800 before the bears can claim a victory since I think that would be the evidence they need to blow raspberries at the bulls and claim we've seen the top. Until that happens stay cautious and watch the chop and whipsaws.

Keene Little : 10/16/2007 12:06:50 AM

Tuesday's pivot tables: Link and Link

OI Technical Staff : 10/15/2007 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 : 10/15/2007 7:57:08 PM

Bernanke: via Dow Jones ... U.S. Federal Reserve Chairman Ben Bernanke signaled Monday that he is keeping his options open by standing ready to "act as needed" if recent credit-market and housing turmoil affects the economy yet also being prepared to "reverse" last month's rate cut should inflation return. But with the latest data still consistent with "moderate" inflation and housing a "significant" drag on the economy into 2008, Bernanke's remarks suggest he still sees weak growth as the primary concern, at least in the short term. "The Federal Reserve will continue to watch the situation closely and will act as needed to support efficient market functioning and to foster sustainable economic growth and price stability," Bernanke said in prepared remarks to the Economic Club of New York. The Fed last month lowered the federal-funds rate, the rate at which banks lend to each other, by a surprisingly aggressive 50 basis points, to 4.75%. That was the first fed-funds reduction in over four years. Though the Fed's dual mandate is for stable inflation and maximum employment, Bernanke said risk management played a role last month as well. "By doing more sooner, policy might be able to forestall some part of the potential adverse effects of the disruptions in financial markets," which, if they led to a broad weakening in the economy, would be "difficult to arrest," Bernanke said. Initially, that rate cut fueled hopes of even more aggressive easing in coming months, with some estimates having the fed-funds rate all the way down to 4% by year-end. But since the Sept. 18 rate cut - which included a second half-point reduction in the discount rate charged to banks that borrow directly from the Fed - economic data have been largely positive, particularly on employment, spending and trade. That has caused Wall Street to scale back expectations for another rate cut at the end of the month, though it is still seen as a close call. The Fed's actions in August and September have "served to reduce some of the pressure in financial markets, although considerable strains remain," Bernanke said. A full recovery will likely "take time," Bernanke said, and "we may well see some setbacks." Indeed, many private-sector economists expect the brunt of the recent credit crunch to be felt in the fourth quarter, a sentiment echoed earlier Monday by former Fed Chairman Alan Greenspan. Bernanke appeared to concur with that assessment, saying "the further contraction in housing is likely to be a significant drag on growth in the current quarter and through early next year," though growth appeared "moderate" last quarter. Subprime mortgage delinquencies should rise further, he said, and conditions in both prime and subprime mortgage markets "remain difficult." Bernanke said it is too soon to tell whether the housing slump and credit crunch will translate into consumer and business spending, though Fed officials reported that their business contacts were growing more cautious. The Fed will watch data on those sectors, which make up most of economic activity, "closely," Bernanke said. And Bernanke's remarks suggest he doesn't see inflation as a near-term impediment to further rate cuts should they prove necessary to keep growth on track. Core inflation, which excludes food and energy, has improved over the past year, he said, and any inflation risks resulting from last month's rate cut "seemed acceptable." While factors such as high resource utilization, elevated oil and commodity prices and a weaker dollar are inflation risks, "overall, the limited data that we have received since the September FOMC meeting are consistent with continued moderate increases in consumer prices," he said. Still, the FOMC "was prepared to reverse the policy easing if inflation pressures proved stronger than expected," Bernanke said, and will keep monitoring inflation "carefully." Earlier this month, Fed Vice Chairman Donald Kohn made similar remarks about the possibility of taking back some of last month's ease if needed. Indeed, Bernanke's speech seemed consistent with Kohn's remark about the need for the Fed to be "nimble" in adjusting policy. Despite all the recent housing and financial market turmoil, and the strains it may still bring to the economy, there is a silver lining, Bernanke suggested. "Rather than becoming more crisis-prone, the financial system is likely to emerge from this episode healthier and more stable than before," he said.

Jeff Bailey : 10/15/2007 7:55:36 PM

Bernanke: ... Ready to "reverse" easing if inflation returns.
Markets better, but "considerable strains" remain.
September rate cut reduced financial strains.

Keene Little : 10/15/2007 7:25:27 PM

I showed on the DOW 60-min chart (4:15) how we could get an upside resolution out of the current pullback and head to new highs into the latter part of this month. I'm not saying it will happen but the potential is there, especially if we see a minor new low with bullish divergences and then a rally back up that breaks its downtrend line from last Thursday's high.

Using the SPX 60-min chart I'm showing the bearish wave count that calls last week's high THE high and we've just started the next big decline. Notice how broken uptrend lines are being tested and we'll see tomorrow if SPX fails the current test: Link

This afternoon's bounce stopped right at its broken uptrend line from August 16th. I'd like to see the DOW break below 13800 to confirm but the setup here is for a strong decline in a 3rd of a 3rd wave down that would likely have it dropping relatively quickly to the 1510 area (to retrace its rising wedge).

Jeff Bailey : 10/15/2007 6:41:43 PM

Global Equity Benchmarks and Currencies Table at this Link

Jeff Bailey : 10/15/2007 6:41:38 PM

Closing Internals found at this Link

Jeff Bailey : 10/15/2007 6:41:32 PM

Closing U.S. Market Watch found at this Link

November Crude Oil (cl07x) settled up $2.44, or +2.92% at $86.13.

Jeff Bailey : 10/15/2007 4:22:53 PM

S&P Price/Earnings Ratio At 17.56, Down From 17.71

DJ- The price/earnings ratio of the Standard & Poor's 500 Index at the close of trading Monday was 17.56.

On Friday, the ratio ended at 17.71.

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

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

Jeff Bailey : 10/15/2007 4:21:02 PM

Altria (MO): Charges Expected To Weigh On Profit

Keene Little : 10/15/2007 4:10:15 PM

The end-of-day stick save keeps the bulls' hopes alive here. Either we're ready to begin rallying tomorrow (making today just a head fake day for some opex gains later this week) or else we'll get the up-down sequence I showed on the DOW to finish the pullback perhaps late tomorrow. It's certainly a week to stay cautious. There are better times to trade unless you like to get in there and duke it out with the Boyz (who by the way change the rules as we go along so that you're always at a disadvantage).

Keene Little : 10/15/2007 4:15:53 PM

If there's more upside to come, here's how I envision it unfolding on the DOW 60-min chart, shown with the pink wave count: Link . Ideally the pullback pattern from last Thursday's high will need a little choppy move higher to perhaps the DOW 14K area and then another leg down to its uptrend line from August 16th, which would coincide with a Fib projection down to 13869 by the end of the day tomorrow. From there a big rally into the end of the month with an upside target for the DOW up above 14400.

That's for the bulls to hope for. The bears need to hope for a break below that uptrend line from August 16th. That would in all likelihood be the confirmation that the bears are back in control. Until this gets resolved be careful about lots of chop and whipsaw, especially this week.

Linda Piazza : 10/15/2007 3:53:21 PM

In my 2:14:20 post, I counseled short-term bearish traders to start following the SPX lower with stops and longer-term ones to either reset stops to breakeven or find a stop that was an account-appropriate distance above the former rising trendline off the summer's low, with that trendline today at an estimated 1547.50. I think what we having going on is a retest of that trendline, but end-of-day positioning could result in some weird movements. What are you going to do? Honoring those stops you set in calmer times would be the best idea, if they're hit.

Jeff Bailey : 10/15/2007 3:51:38 PM

iShares Silver (AMEX:SLV) $136.90 -0.36% ... slips red.

Keene Little : 10/15/2007 3:49:39 PM

The shorts are making a collective sigh at this point and thinking "here we go again" as they start covering. It's almost becoming too predictable. It'll keep on working until it doesn't.

Linda Piazza : 10/15/2007 3:50:09 PM

As expressed in my 3:33:49 post, I wasn't sure the SPX and OEX downside targets would be hit. And here's the SPX, pushing right back to the site of the rising trendline off the summer's low and even slightly above it as I type. I guess those bullish divergences meant something, as well as the lack of a VIX push above 20. All day, I've been worried for bears' sakes about what would happen when VIX 20 was tested.

Jeff Bailey : 10/15/2007 3:49:59 PM

Petroleum Dev. (PETD) $48.75 -0.26% ...

Jeff Bailey : 10/15/2007 3:49:55 PM

Petroleum Development To Buy Stake In 760 Pa. Gas Wells

DJ- Petroleum Development Corp. (PETD) said Monday it agreed to buy a majority working interest in about 760 natural gas wells in southwestern Pennsylvania for about $53 million. The Bridgewater, W. Va., oil and gas company said the wells are operated by Castle Gas Co. The company expects the deal to close by the end of October. Petroleum Development said it expects the acquisition to immediately add to its earnings and cash flow per share.

Jeff Bailey : 10/15/2007 3:47:04 PM

S&P Cuts Linens'n Things Corp. Credit Rating to "B-"; Off Watch

Linda Piazza : 10/15/2007 3:33:49 PM

Seeing lots of bullish price/RSI divergences on the SPX's 15-minute chart. Time for a bigger bounce? So far, it's maintained 15-minute closes beneath the 9-ema, now at 1545.12, but be aware of the possibility that when MOC (market on close) orders come in, in about 7-8 minutes, the tenor could change. SPX at 1542.73 and no tenor change yet.

Keene Little : 10/15/2007 3:42:49 PM

I've been looking over the long term chart of OEX to see what the upside possibilities are if we haven't seen a top yet (jury is still out on that one). The OEX, being traded more by professionals than retail, may be a better index to keep an eye on rather than SPX. This weekly chart shows price action since the 2002 low and shows an interesting possibility for a higher high (as long as the bulls can pull themselves back together today): Link

The overall pattern for the rally from the 2002 low can be labeled a few different ways and I'm showing what I believe is the best count. It shows two equal legs up for an A-B-C bounce off the October 2002 low at 744.42. That's near a 78.6% retracement of the 2000-2002 decline (749.41). That kind of move would likely have SPX rallying up to a higher Fib target near 1606.

This may become a moot point (as for additional upside potential) if SPX can't recover 1550 and the RUT breaks below 825. That would look more bearish but keep in mind the DOW chart I posted this morning (11:09) where the bottom of its up-channel (uptrend line from August 16th) is near 13820. Drawing an equivalent parallel up-channel for SPX would have support around 1527 for the end of a 4th wave pullback.

Things turned more bearish as I've been typing so now that raises the question about October 17th which is a turn date--will it be a low or a high?

Linda Piazza : 10/15/2007 3:30:50 PM

The VIX might not have hit a new HOD, but the USDJPY hit a new LOD, at 117.09. That's just a penny below the previous LOD, so not a big deal, but it was a slightly lower low. So far, that supports the downside, but it would support it more if it dove all the way below 117.00, and specifically below about 116.80.

Jeff Bailey : 10/15/2007 3:29:07 PM

SPY $153.99 -1.49% ...

Jeff Bailey : 10/15/2007 3:28:15 PM

Establishing setup for bullish SPY call play.

Jeff Bailey : 10/15/2007 3:27:47 PM

IWM $82.06 -2.08% ... back at session low.

Linda Piazza : 10/15/2007 3:27:18 PM

Downside target and potential support for the SPX has now drifted down to 1540.02 on 15-minute closes; the OEX, 718.12. The VIX has not reached a high HOD, so I'm not sure whether or not we should count on those targets being met.

Jeff Bailey : 10/15/2007 3:25:46 PM

PetroChina (PTR) $231.83 +7.27% ... up a healthy 27.6% since last Monday's close.

Jeff Bailey : 10/15/2007 3:23:42 PM

Hang Seng ($HSI) went out at 29,540. Up 6.37% since last Monday's close.

Jeff Bailey : 10/15/2007 3:22:20 PM

Greenspan: ... Sees effect of credit crunch in current quarter.
Odds of recession less than 50/50
Rising China stock markets not sustainable for very long.

Jeff Bailey : 10/15/2007 3:20:25 PM

International Shipholding Corp. Retires 7 3/4% Senior Unsecured Notes

Jeff Bailey : 10/15/2007 3:07:31 PM

Analysis: Need VIX @ WKLY R2 and IWM at WKLY S2 to have a shot at salvaging the IOW-VZ at $0.40.

Jeff Bailey : 10/15/2007 3:06:34 PM

VIX.X 19.50 +9.98% ... WEEKLY R1 19.25. Session high has been 19.99.

Keene Little : 10/15/2007 3:06:25 PM

The thing to watch for now, and what the bulls don't want to see happen, is a failure on a retest of the broken uptrend line near SPX 1550. The bulls need to recover that line.

Jeff Bailey : 10/15/2007 3:05:43 PM

IWM alert! $82.56 -1.50% ... back for a look at WEEKLY S1. Session low has been $82.10.

IOW-VZ are $0.10 x $0.12. Session high of trade has been $0.15.

Jeff Bailey : 10/15/2007 3:03:07 PM

November Nat. Gas (ng07x) $7.44 +6.68% ... would take a trade at $7.60 to see a reversing higher PnF buy signal. Would be first "buy signal" since early September 2006 and reversing lower PnF sell signal at $9.20.

Keene Little : 10/15/2007 3:02:49 PM

Comcast surprised me and got my connection back faster than they said they'd do. Getting back up to speed now with regular charts. This afternoon's bounce is looking pretty anemic so far and SPX needs to work on getting back above 1550 in order to hold its uptrend line. It's only 5 points away so it wouldn't take much and it would leave only a tail below the trend line on its daily chart.

Jeff Bailey : 10/15/2007 3:00:48 PM

Permian Basin Trust (PBT) $15.51 +2.24% ... session high.

Linda Piazza : 10/15/2007 3:00:40 PM

During the current 15-minute period, the SPX popped above its 9-ema (1546.48) but it was soon pushed back. The SPX is at 1545.30 as I type. It's resisting going lower, but so far, it's maintaining its short-term bearish tenor. One or the other has got to change soon.

Jeff Bailey : 10/15/2007 2:59:48 PM

Chesapeak Energy (CHK) $37.70 +0.56% ... major U.S. natural gas producer. Threatens to close a new 52-weeker.

Linda Piazza : 10/15/2007 2:40:32 PM

Lately, we've seen the TRAN failing to confirm SPX strength. Today, the TRAN is failing to confirm a breakdown below the rising trendline off the summer's low. Drawing trendlines is more of an art than you might expect: should one exclude that lower shadow on 10/11 for example, because excluding it includes more touch points on other days? At any rate, in this case, I think I'd use the 50-sma as confirmation or non-confirmation that the TRAN had broken through the trendline. That's at 4859.81 with the TRAN at 4883.06. This failure to confirm weakness on other indices should also keep bears on their toes as the SPX rises to test its 15-minute 9-ema again at 1546.78.

Jeff Bailey : 10/15/2007 2:33:48 PM

F5 Networks (FFIV) $41.58 +0.02% ... inches green.

Linda Piazza : 10/15/2007 2:28:37 PM

VIX 19.96. Still having trouble with 20.00. Bears, keep on your toes and don't be too complacent.

Linda Piazza : 10/15/2007 2:27:22 PM

SPX's current downside target on the 15-minute chart (and potential support) is now 1540.91. OEX, 718.53. Both must continue 15-minute closes beneath their 9-ema's to maintain those targets. Those are 1546.70 on the SPX and 720.96 on the OEX. I think it would take a climb a bit higher than that on each to change the bearish tenor, but a climb above that would temporarily, at least, erase those upside targets. SPX at 1544.10 and OEX at 719.92 as I type.

Linda Piazza : 10/15/2007 2:24:49 PM

The USDJPY is now at 117.19 after hitting a low of 117.10, potential next support. I wouldn't be surprised now to see the USDJPY bounce back up toward 117.30-117.40 to retest broken support. So far, though, it's still trending down, still producing lower lows, still corroborating lower lows on the SPX.

Linda Piazza : 10/15/2007 2:21:38 PM

VIX hit a high of 19.99 before pulling back a bit. It's at 19.85 as I type. I've been a little worried (on bears' behalf) about what would happen when the VIX moved to 19.76-20.00 today. So far, there's no damage to the bearish tenor displayed by this indicator, but bears don't want to see the VIX collapse lower or even begin trending lower.

Keene Little : 10/15/2007 2:19:47 PM

The bullish divergences at this afternoon's lows points to a bigger bounce coming.

Linda Piazza : 10/15/2007 2:19:02 PM

SPX's current 15-minute downside target is 1540.97, but sustained closes above 1546.85 calls that into question although I believe it would take a 15-minute close above 1550.11 to change this chart's tenor.

Jeff Bailey : 10/15/2007 2:18:38 PM

SPY $154.39 -1.24% ... has backfilled its 10/04/07 to 10/05/07 gap.

Linda Piazza : 10/15/2007 2:14:20 PM

I couldn't type it fast enough, but I was preparing a post staying that a new VIX high suggested we'd soon see a new SPX low. It occurred while I was typing.

If in a bearish position, it's time to start following the SPX lower with your stops if the position is a short-term one. If in a longer-term one, either reset your stop to breakeven now or find a stop an account-appropriate distance above the former rising trendline off the summer's low, with that trendline today at about 1547.50 or so (estimated).

Linda Piazza : 10/15/2007 1:45:29 PM

Not much of a bounce so far. It's inexact, but it looks to me as if the SPX has bounced up to just under the rising trendline off this summer's low, with that trendline maybe at about 1547.50-1550.00, depending on how it's eyeballed. What does this say? This says that we should watch for either a rollover (confirmed by a new low) or a strong punch back up through that trendline. SPX at 1546.67 as I type.

Linda Piazza : 10/15/2007 1:32:56 PM

Just a warning: the typical stop-running time of day from about 1:35 to 1:55 EST is fast approaching. Sometimes a move is made in a certain direction, say down. If the dip is bought, then bulls are energized; if not, bears are. So, you can't say that if a move occurs first in a certain direction, that it will necessarily be the reverse direction that is the ultimate one. It depends entirely on what happens as the first move is made. What do you do about it? Depends on your outlook and your trading type. Some will widen stops not to get stopped out and give it a little more room during this period; some will just honor their stops and get back in if action warrants it. I'll say today that widening your stops might be a dangerous idea because we're standing on the precipice here, perhaps, where bulls might decide the dip is a time to buy or where the ground might give out under them.

Keene Little : 10/15/2007 1:29:25 PM

The RUT needs to hold here as it's hitting its uptrend line from Sept 10th. This is the bottom of its rising wedge and a break much below 825 would create a sell signal by this wedge pattern. A quick retracement of the wedge, so back down to 760, would be the next move in that case. But until it breaks down there's still the chance for another leg up inside its wedge pattern (to the 857 area). That's why a long play could be a good play from here, especially since you can keep your stop nearby.

Linda Piazza : 10/15/2007 1:28:17 PM

The USDJPY is now at 117.27. It has now produced an equal low at 117.23, but still hasn't confirmed the SPX's new low of the day with a new low of the day of its own. It is still finding resistance at the 10-minute 9-ema. This isn't as strong a corroboration as might have been wanted, but the VIX did produce a higher high as the SPX did a lower low. The VIX is now at 19.71, having pulled back a little off that higher high.

Linda Piazza : 10/15/2007 1:25:18 PM

For you OEX traders: The ten-minute chart shows that the OEX's 10-minute 9-ema is now at 721.32, and that's been providing resistance all day. Until and unless the OEX begins sustaining 10-minute closes above that and probably above 722.68, it's tenor likely hasn't changed.

Rolling up to the 15-minute chart for a next target shows the downside target at 718.73 as long as 15-minute closes remain at or below the 9-ema on that chart, now at 721.75. The OEX is at 720.29 as I type.

Jeff Bailey : 10/15/2007 1:24:51 PM

TRAN 4,893.16 -0.96% ...

Jeff Bailey : 10/15/2007 1:23:36 PM

Would look to cover a YM short here at 14,011

Linda Piazza : 10/15/2007 1:20:11 PM

Breakdown mode now on the SPX's 10-minute chart, so I'm rolling up to the 15-minute chart now for targets. I'll probably be switching back and forth between the two since the confirmation of a breakdown on the 10-minute chart was so minimal, so I want to say first that until and unless there's a 10-minute close above the 9-ema at 1547.85 and probably not until and unless there's a 10-minute close above 1551.37 has the tenor changed.

Now for the 15-minute chart. That suggests a downside targt of 1541.30 until and unless the SPX produces 15-minute closes above 1548.57. SPX at 1545.36 as I type.

Linda Piazza : 10/15/2007 1:07:28 PM

SPX testing Keltner support at 1545.38 on 10-minute closes, with plenty of time left before that 10-minute close yet. The support is of course violated right now. The VIX is at 19.79, a new high of the day, so it's not showing any bullish divergence with prices as this SPX low is hit.

Linda Piazza : 10/15/2007 1:02:52 PM

I see this as a particularly difficult point for both bulls and bears. I show the SPX as now having violated that rising trendline off the summer's low, but only in a very minor way so far. What we should see now, if this is a valid third trendline for the corrective fan principle, is a steep decline maybe by the end of the day, maybe tomorrow. What we could see instead is a steep bounce as bulls, eyeballing that trendline, decide this is the place to buy. So, if you've been testing the bearish side, you need to be particularly vigilant now and have your stops in place. If you were bright enough and brave enough to go long in August or even if you're trying it today, you also need your stops to be an account- and play-appropriate amount below that rising trendline and honor those stops if hit. So far, internals are still on the side of the bears.

Keene Little : 10/15/2007 1:00:52 PM

It looks like I'm going to be struggling with my internet for the rest of the day. Comcast will not be out until after the market closes (naturally). I can't even get my wireless internet card to give me a signal. There could be a message here for me (wink).

Linda Piazza : 10/15/2007 12:57:07 PM

USDJPY is at 177.30 again, bouncing a little after another dip to 117.25, just above the 117.23 low of the day. So, the USDJPY did not make a new low with the SPX. Bullish divergence? Perhaps, but I wouldn't give it a huge amount of credence just yet.

Linda Piazza : 10/15/2007 12:55:15 PM

The VIX hit a new high of the day a few minutes ago. If Jane were here today, she'd tell us that's a confirmation of the new low of the day on the SPX. It's still not above Friday's 19.73, much less 20, though, so I'd like to see it keep climbing if we're going to continue to see it as confirming bearishness.

Keene Little : 10/15/2007 12:50:53 PM

Watch for a possible retest of this morning's low with bullish divergences to tell you whether or not it's safe to try another long play (I'm assuming stops have been hit on this pullback). My connection is very slow and I'm struggling to pull up charts and therefore can't make any timely calls at the moment.

Jeff Bailey : 10/15/2007 12:50:43 PM

IOW-VZ $0.12 x $0.15.

Jeff Bailey : 10/15/2007 12:50:00 PM

IWM $82.35 -1.75% ...

Jeff Bailey : 10/15/2007 12:49:13 PM

SPY alert! $154.60 ... new session low.

Linda Piazza : 10/15/2007 12:48:18 PM

No change in tenor yet on the OEX, either, at least according to certain parameters on the Keltner charts. It still finds resistance at the 9-ema on 10-minute closes, with that at 722.61 currently. Resistance above that is 722.99 and 723.73, and until and unless the OEX begins closing 10-minute periods above those, it doesn't look as if it's changed its tenor to me. Support is 720.91 and then 720.53 on 10-minute closes. OEX at 721.52 as I type.

Linda Piazza : 10/15/2007 12:45:57 PM

SPX support is sinking. It's now at 1546.80 and 1545.84.

Linda Piazza : 10/15/2007 12:44:23 PM

USDJPY now at 117.30. It's not bouncing yet, either.

Linda Piazza : 10/15/2007 12:43:55 PM

No bounce in the advdec line yet.

Jeff Bailey : 10/15/2007 12:43:00 PM

If you sold short the high this morning, now would be a good time to lower a YM stop to 14,059.

YM 14,031.

Linda Piazza : 10/15/2007 12:42:40 PM

So far, the SPX hasn't changed its tenor, at least as measured against certain Keltner lines, but it trades sideways, refusing to fall further. As I said earlier, if bears can't push it lower again, then bulls are going to attempt to push it higher instead. Keltner resistance now at 1551 and then at 1551.84 and 1553.33 on 10-minute closes. Until it's sustaining values above the highest of those, it won't look as if it's changed its tenor to me. The VIX can't push above its resistance, though, and that's also going to encourage bulls to attempt a bounce soon, if something doesn't change. I'm honestly not sure how successful a bounce attempt would be. If it happens, it's coming from a trendline that has bounced prices higher several times, but RSI suggests that trendline may soon be broken.

Keene Little : 10/15/2007 12:39:23 PM

I've lost my cable connection (TV and internet) and trying to get things restarted on dial-up. I'll be back when I get charts back up.

Keene Little : 10/15/2007 12:16:08 PM

So far the bounce looks corrective (choppy and overlapping highs and lows) and that should have you trailing your stop up closer if you bought this dip. Give it a little breathing room since it could chop up and down some more before making higher highs but try to get your stop to breakeven as soon as you can. Better to get stopped out even and then miss a move than to let it got against you.

Linda Piazza : 10/15/2007 12:10:41 PM

For you OEX traders, next resistance is at 723.19 and then at 723.53 on 10-minute closes. Until and unless those (and maybe even 724.58) are breached on 10-minute closes, the tenor remains the same. Potential support at 721.44 and 720.76 on 10-minute closes. OEX at 722.46 as I type.

Linda Piazza : 10/15/2007 12:09:19 PM

If a bounce is attempted, the SPX's next resistance is at 1551.78 and then at 1552.67 on 10-minute closes. Until and unless those (and maybe even resistance at 1554.94 on 10-minute closes) are breached to the upside, the tenor remains the same. SPX now at 1550.20. Support now at 1547.92 and then at 1546.32 on 10-minute closes.

Linda Piazza : 10/15/2007 12:07:38 PM

USDJPY 117.30, not recovering much yet. VIX 19.48, near the day's high but not yet above the 19.76-20.00 level, so still vulnerable to a decline from this level as happened Friday. TRIN barely above 1.00, at 1.03. ADVDEC line hovering near the low of the day. The evidence is all still on the bearish side, but unless it changes soon, I'd say that the lack of a skid lower (or toward even more bearish indicators) might encourage bulls to attempt a bounce.

Jeff Bailey : 10/15/2007 12:00:20 PM

EWJ $14.37 -1.03% ... EWJ-WO are $0.65 x $0.75.

Jeff Bailey : 10/15/2007 11:59:40 AM

PTR $234.29 +8.40% ... PTR-WL are $1.40 x $1.60 (now becomes more of a hedge for the 1/2 position long in PBT).

Jeff Bailey : 10/15/2007 11:58:08 AM

FFIV $41.45 -0.28% ... FLK-AH are $5.30 x $5.50

Jeff Bailey : 10/15/2007 11:57:38 AM

GG $32.85 +0.98% ... GG-AZ are $3.20 x $3.50

Jeff Bailey : 10/15/2007 11:57:07 AM

IWM $82.95 -1.03% ... IOW-VZ are $0.10 x $0.12

Jeff Bailey : 10/15/2007 11:55:49 AM

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

Keene Little : 10/15/2007 11:41:38 AM

If you bought this low then now's the time to raise your stop to just below the low. This bounce should make it higher now and I'll be watching the Fib retracement zone and form of the bounce for the next clue to our puzzle here.

Linda Piazza : 10/15/2007 11:40:56 AM

OEX next resistance on the 10-minute chart is at about 722.80 on 10-minute closes, with next resistance at 723.89 on ten-mintue closes.

Linda Piazza : 10/15/2007 11:40:12 AM

RSI has reached an extreme level on my 10-minute charts. The trouble with that as an indicator that a bounce is due is that RSI can trend on this time interval's chart. So all it tells us is that momentum is strong. As I type, though, a bounce does begin. Resistance now at 1550.80 on ten-minute closes, but stronger at 1553.37.

Linda Piazza : 10/15/2007 11:31:54 AM

The USDJPY is now at 117.30, having dropped steeply from this morning's piercing of the 117.81 resistance. It's high of the day was 117.91.

Linda Piazza : 10/15/2007 11:29:40 AM

Now the SPX has dropped down to test its target and potential support that's now down to 1546.82 on 10-minute closes. (OEX: 721 on 10-minute closes.) I show the SPX sitting right on that rising trendline off the summer's low or perhaps even violating it slightly at the low of the day. SPX now at 1548.66. I'd frankly feel better about continued downside potential if the VIX were above that 19.76-20.00 zone.

Jeff Bailey : 10/15/2007 11:27:50 AM

IWM $82.60 -1.44% ... sits at WEEKLY S1.

Jeff Bailey : 10/15/2007 11:27:19 AM

VIX.X alert! 19.51 +9.98% ... sticks its head above WEEKLY R1.

Keene Little : 10/15/2007 11:27:11 AM

After this morning's 5-wave move down if we get a larger bounce that is then followed by new lows then that would be a strong signal that we are headed much lower (plus that move would break all kinds of support levels). But right now there's an equal possibility that the pullback is ending and we're going to get another leg up above this morning's high. For now watch for an opportunity to buy this dip.

Linda Piazza : 10/15/2007 11:27:05 AM

ADVDEC line still dropping. VIX still climbing (but not yet above the 19.76-20.00 resistance zone yet, at 19.47). TRIN at 1.11. Still supporting the bearish side so far.

Keene Little : 10/15/2007 11:24:50 AM

We've now got a nice impulsive decline this morning so the question is whether this leg down is completing the consolidation pattern from Friday or if it is instead wave-1 of a larger decline that's coming. The Fibs or the move down point to the likelihood that support will be found at or above SPX 1546 and it's currently hitting its uptrend line from August 16th so be careful if you're short.

Jeff Bailey : 10/15/2007 11:23:50 AM

Reminder! ... October Option Expiration is this Friday.

Linda Piazza : 10/15/2007 11:19:28 AM

Remember that if you're considering a new bearish entry on any trendline break, you should know, right now, where you want to put your stop and should adhere to it. We aren't the only ones who can draw trendlines and big money could be just testing the waters to see if support will be bought. If it is, they'll send prices higher again and you don't want to be on the wrong side of a contest with big money.

My daily Keltner charts show SPX support on daily closes at about 1551.50, further emphasizing the support that might exist in this zone and the importance of that support, if broken. The next Keltner target on that daily chart, if support is broken on a daily close, is at about 1536.

The price trendline off the summer's low has not yet been broken. The VIX has not broken above Thursday's high nor above the 19.76-20.00 resistance. So, there's danger here for bulls and possible opportunity, but it's not danger or opportunity that's been confirmed yet.

Jeff Bailey : 10/15/2007 11:17:50 AM

Swing trade put target adjustment ... with just 4.75 days left until expiration and volatility (VIX.X) unknown, cancel the iShares Russell 2000 IWM Oct. $78 Put (IOW-VZ) target of $81.40 and replace with a target on the one (1) option to $0.40.

IWM $82.79 -1.22% ... WEEKLY S2 is $81.51. WEEKLY S1 $82.58 has found buyers.

IOW-VZ $0.11 x $0.13.

Linda Piazza : 10/15/2007 11:11:26 AM

Last Thursday, RSI broke through a rising trendline on the SPX's daily chart. That trendline began to be put in place as the SPX also began rising off its summer low. As noted in my Trader's Corner article this weekend, this could be the third trendline of a corrective fan principle's fan, the one when broken signals the end of a trend. RSI sometimes leads and so was suggesting that a trendline break could occur, but price has to be the final determinant, especially since RSI had risen to high that it had to break its trendline at some time, since RSI can't climb past 100.

Price has to be the determinant, but that corrective fan principle means that bulls don't want to see a break of the rising price trendline sustained. Here's the chart: Link It's difficult to tell on this chart, but I believe the rising trendline to be located somewhere near 1547.50. If your charting service allows you to draw a trendline, place the cursor on that trendline and see the value, then use that value of the trendline off the summer low.

Keene Little : 10/15/2007 11:09:14 AM

I've mentioned Thursday's lows as important since a break of them could signal the top is in. Looking at the DOW's daily chart and its uptrend line from August 16th, currently near 13820, I'm thinking that's actually the more critical area for the bulls to hold. The whole choppy mess we've seen since the Oct 1 high could be a 4th wave correction which would mean we're still waiting for the 5th wave up to complete the rally off the August low: Link

The pink wave count on the chart, looking for another rally leg up, would also account for the lack of negative divergence on the daily chart at its most recent high. The negative divergence is not a requirement but instead is a nice-to-see confirmation that a top has been put in. Basically it says we need to continue to trade this market shorter term until the pattern becomes clearer as to what could be next.

Jeff Bailey : 10/15/2007 11:07:44 AM

QQQQ $53.17 -0.67% ... breaks below WEEKLY Pivot.

Jeff Bailey : 10/15/2007 11:03:48 AM

DIA $139.93 -0.84% ...

Linda Piazza : 10/15/2007 11:03:38 AM

My ten-minute Keltner charts pinpoint the OEX's next target (and potential support) at 721.21. This is just a ten-minute chart, however, and so it's evidence isn't as trustworthy as longer-term ones. A 30-minute chart pegs the target at 722.45 instead.

Jeff Bailey : 10/15/2007 11:03:35 AM

SPY $155.17 -0.74% ...

Jeff Bailey : 10/15/2007 11:02:37 AM

Russell 2000 Index (RUT.X) alert! 830.51 -1.26% ... gets the trade at WEEKLY S1.

Linda Piazza : 10/15/2007 11:01:49 AM

The SPX has now hit that target I mentioned in my 10:48:06 post and even exceeded it slightly. This was a target and potential support on 10-minute closes, however, and the SPX is trying to hold onto that support. If it can't, the next potential target according to my 10-minute charts is 1547.31. Earlier I had thought that I was showing a more important long-term trendline (off the summer's low, if I've drawn it correctly) somewhere near 1550-1552, but I actually think it's somewhere near 1547-1550 now that I've looked at a month-to-date chart instead of a three-month one. My charting service doesn't make it easy to put your cursor somewhere and see the value, so I was eyeballing it.

Jeff Bailey : 10/15/2007 11:00:58 AM

TRAN 4,900 -0.82% ... (See last Monday's Wrap)

Jeff Bailey : 10/15/2007 11:00:36 AM

BIX.X 360.76 -0.91% ...

Jeff Bailey : 10/15/2007 11:00:19 AM

SMH $36.30 -0.11% ...

Jeff Bailey : 10/15/2007 11:00:01 AM

QQQQ $53.36 -0.31% ...

Jeff Bailey : 10/15/2007 10:59:43 AM

DIA $140.06 -0.75% ...

Jeff Bailey : 10/15/2007 10:59:28 AM

SPY $155.28 -0.67% ...

Jeff Bailey : 10/15/2007 10:59:10 AM

Russell 2000 (RUT.X) alert! 831.59 -1.14% ... probes MONTHLY Pivot.

IWM $82.71 -1.33% ...

Linda Piazza : 10/15/2007 10:57:47 AM

TRIN now 1.08. VIX still rising and now 18.69. USDJPY still dropping. Advdec line still dropping, but now approaching Thursday's low. So far, all this evidence is on the bearish side. Some of these are soon to test support or resistance levels, so keep your viewpoint open, but so far, it's all in the bears' favor over the short-term at least.

Linda Piazza : 10/15/2007 10:55:41 AM

The USDJPY is now 117.48. So far, the drop while our markets have been open, a drop from a resistance test that I thought might have been a bit untrustworthy because of when it was occurring (see earlier USDJPY posts), has been negative for equities. I show a rising trendline that has been in place across ten days now at about 117.35.

Jeff Bailey : 10/15/2007 10:55:10 AM

Email Question: ... regarding the purchase (long) in the Semiconductor HOLDRs (SMH) $36.40 +0.16%.

Jeff Reply: ... I would only look bullish/long should the SMH be able to hold a CLOSE at, or above $37.05 this week.

Linda Piazza : 10/15/2007 10:49:32 AM

The OEX is testing nearby support on ten-minute closes at 725.20 with stronger support (and potential downside target now) at 724.34. The OEX is at 725.41 as I type. Potential resistance is at 726.28 on 10-minute closes.

Linda Piazza : 10/15/2007 10:48:06 AM

The SPX is testing Keltner support at 1556.10 on ten-minute closes with stronger potential support (and potential downside target now) at 1554.35. The SPX is at 1556.11. Resistance is now at 1558.46 on ten-minute closes.

Jeff Bailey : 10/15/2007 10:47:10 AM

NASDAQ-100 Tracker (QQQQ) $53.43 -0.18% ... Heatmap Link

Linda Piazza : 10/15/2007 10:46:44 AM

The short-term charts aren't showing us much of anything yet other than that the SPX and some other indices are still chopping around in tight ranges. Is anything else giving us a heads up as to next direction? The VIX is up, but it's up within a consolidation zone of its own, a zone that tops out near 19.73 lately, but 20.00 often having psychological significance for the VIX. With the VIX at 18.60 as I type, it hasn't punched above that 19.73-20.00 zone. Conclusion? A rising VIX is of course more bearish than bullish, but it hasn't exactly broken out of its recent range yet, so there might still be room for some hesitancy here in interpreting the rise as too bearish. The TRIN is at 0.98, near neutral. The ADVDEC line, however, has been turning down. The USDJPY is at 117.54, having been knocked back again after its test of 117.81, this time having punched above that resistance level for a short time.

All in all, the evidence is short-term bearish, but it certainly isn't a case of all the ducks being in a row just yet.

Jeff Bailey : 10/15/2007 10:46:34 AM

Biotech HOLDRs (AMEX:BBH) $183.93 +2.21% ...

Jeff Bailey : 10/15/2007 10:45:56 AM

Biotech Index (BTK.X) 859.21 +1.66% ...

Jeff Bailey : 10/15/2007 10:45:01 AM

Biogen IDEC (BIIB) $84.50 +21.67% ... surging on news that the company's board has authorized management to explore sale.

Jeff Bailey : 10/15/2007 10:26:31 AM

For those "junk bond bulls" that followed my lead on 08/01/07 Link with some PHF, you can look to add to positions.

Cost basis on initial reduced by $0.15/share with monthly $0.075 dividends paid on 09/10 and 10/10.

Keene Little : 10/15/2007 10:23:11 AM

Techs are still the darlings of the market right now and they should lead the way higher if there's another leg up coming.

Jeff Bailey : 10/15/2007 10:22:27 AM

Pacholder High Yield (PHF) ... recent NAV reported on 10/11/2007 was $9.89. Link

Jeff Bailey : 10/15/2007 10:21:27 AM


Jeff Bailey : 10/15/2007 10:19:21 AM

Pacholder High Yield (PHF) Alert! $9.23 +0.87% ... has NOT been able to hold a close above $9.19 since the "credit crunch" became more known.

Linda Piazza : 10/15/2007 10:16:55 AM

OEX support at 725.33 on ten-minute closes with stronger support at 724.21 on ten-minute closes. OEX now at 726.45.

Linda Piazza : 10/15/2007 10:16:20 AM

SPX nearest support is 1556.54 on 10-minute closes, but stronger support is below that, at 1554.07 on 10-minute closes. SPX now 1558.63. Still chopping around.

Linda Piazza : 10/15/2007 10:13:15 AM

USDJPY is now at 117.73, being knocked back below the 117.81 level after having breached it.

Jeff Bailey : 10/15/2007 10:01:54 AM

PBT's Recent Cash Distribution Press Release Link

Jeff Bailey : 10/15/2007 9:59:21 AM

Bullish swing trade long alert! ... for 1/2 position in the Permian Basin Royalty Trust (NYSE:PBT) $15.36 +1.25% ... at the offer of $15.38. Place stop at $14.25, target $18.00.

Linda Piazza : 10/15/2007 9:58:22 AM

The Fed has announced a repo in the amount of $14.750 billion, with a repo of $7.500 billion maturing today. That results in a net add of $7.250 billion and a total sloshing through the system (repos not yet matured of )$44.750 billion.

Linda Piazza : 10/15/2007 9:53:33 AM

SPX and OEX resistance held on the first ten-minute closes and look as if they will on this one, too. Both are poised near central-channel basis lines currently, though, with the OEX a little below and the SPX perched on the basis line. Conclusion? No conclusion so far. Just continuation, so far, of Friday's chopping around within a tight range. I would be concerned about an SPX decline below about 1550-1551, however, as that would be a break below the rising trendline off the summer's low. The ten-minute chart shows the support level at 1547.50 rather than 1550. SPX at 1560.32 as I type.

Jeff Bailey : 10/15/2007 9:52:23 AM

Fitch: Robust Liquidity For U.S. Food, Tobacco & Restaurants to Navigate Uncertain Credit Markets

DJ- Most companies in the U.S. food, tobacco and restaurant industries have substantial liquidity to withstand the tightened credit environment, according to a report by Fitch Ratings. Fitch's review covers a total of 23 issuers in its rated portfolio across the packaged foods, restaurant, tobacco and agribusiness sectors.

In aggregate, these companies have generated nearly $8 billion of free cash flow (cash flow from operations less capital expenditures and dividends) for the latest 12 months (LTM) and have more than $23 billion of cash on their balance sheets. Internally generated liquidity is $31 billion for these sectors, which is more than adequate for $20 billion of maturities due in 2008-2009.

Total liquidity rises to nearly $54 billion when availability under revolving credit facilities and accounts receivable securitizations are included.

'Most of these companies have stable operating earnings and cash flow to weather the recent volatility and tightening in the credit markets,' said Wesley Moultrie, Senior Director, Fitch Ratings. 'Even in this environment, refinancing risk is low.'

Fitch initiated its global liquidity review in May 2007 for rated issuers across corporate finance as a number of liquidity-based sensitivities in the market continue to influence both issuer and investor decisions. The review's goal is to gain a better perspective on the magnitude of maturities that would be coming due over the next 24 months per each North American corporate sector, and what organic and contingent sources were available to meet these obligations during this period of the credit cycle.

The full report 'Robust Liquidity Allows U.S. Food, Tobacco and Restaurant Companies to Navigate Uncertain Credit Markets' can be found on the Fitch Ratings' web site . Link (registration required)

Keene Little : 10/15/2007 9:50:16 AM

Be careful about this morning's early pullback. It could be part of the consolidation pattern from Friday since I don't see a good ending pattern to the upside yet for the bounce. Friday afternoon's low should hold for now, or break by only a minor amount. The RUT is already below Friday's low but its whole pattern from Friday looks more like a bull flag.

Jeff Bailey : 10/15/2007 9:45:28 AM

With just 5-days left until October expiration and not getting a move either side of the $45 and $50 strike in Dow Chemical (DOW), probably best to exit that type of strangle.

Jeff Bailey : 10/15/2007 9:37:49 AM

Swing trade DOW Strange Exit Alert! ... sell the DOW-JJ and the DOW-VI at their respective bids of $0.20.

DOW $46.79 +0.62% ...

Linda Piazza : 10/15/2007 9:35:15 AM

For SPX traders, I should have mentioned that the SPX also has resistance at about 1563 on 10-minute closes. The SPX is above that now, which is why I didn't mention it, but this first ten-minute close hasn't happened. %he higher resistance mentioned in my 9:32:51 post is the next resistance above that.

Linda Piazza : 10/15/2007 9:33:42 AM

For OEX traders, the OEX is facing resistance at about 728.20 on 10-minute closes, with next resistance at 729.54 on 10-minute closes. The SPX is at 728.17 as I type.

Linda Piazza : 10/15/2007 9:32:51 AM

For SPX traders, ten-minute Keltner charts show next potential resistance at 1565.57 on ten-minute closes. SPX at 1563.93 as I type, rising quickly.

Keene Little : 10/15/2007 9:32:45 AM

Gold (December contract) continues to work its way higher towards a Fib projection at 771.40 (wave-C = wave-A in its A-B-C rally off the October 2006 low) while forming yet another rising wedge. Gold doesn't have to get to 771 but that makes a good upside target. The negative divergence at the new high so far is a confirming signal that we should be looking for a top soon. A break of its uptrend line from August would confirm the top is in. Link

Linda Piazza : 10/15/2007 9:31:35 AM

The USDJPY is now at 117.89. Now that it's bumped up here above 117.81, bullish equity traders want to see it stay above that level. I'm not certain that the inter-market relationship we used to see with the USDJPY is as strong as in the past, but so far, this has still tended to be one that at least offers some corroboration if no longer always leading equity action.

Keene Little : 10/15/2007 9:27:31 AM

Equity futures chopped up and down overnight and are set to open near the flat line so we don't have a lot to guide us first thing this morning. All the more reason to watch and wait to see what sets up.

Linda Piazza : 10/15/2007 8:35:47 AM

About 3:30 this morning--after the Nikkei's close, I believe--the USDJPY hit an overnight high of 117.80, again testing that 117.80-ish resistance zone I've been mentioning as well as the 10/11 high of 117.76. Since neither the Japanese markets, I believe, nor the U.S. markets was open when that overnight high was reached, I would view it as akin to a futures movement during a low-volume period. Although I do believe that we should give credence to any currency move that occurs during the time either of the markets in a currency pair is open, I would still view this with some wariness. We may get another test during our market hours, however, as the USDJPY is at 117.74 as I type. Overall, I would view a USDJPY move above 117.81 that is sustained as positive for equities. At least such USDJPY moves above resistance have been in the past. I would be worried, however, if the USDJPY made a brief incursion above that level, only to be soundly rebuffed.

Linda Piazza : 10/15/2007 7:14:51 AM

A repo in the amount of $7.500 billion expires today. The amount sloshing through the system (repos not yet matured) is $30.000 billion, an often-seen amount these days, about in the middle of what has been typical over the last few weeks.

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