Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
Jeff Bailey : 11/1/2007 2:56:09 AM

EIA's This Week In Petroleum ... Link

Jeff Bailey : 11/1/2007 2:46:41 AM

Weekly/Monthly Index Pivot Matrix found at this Link

Keene Little : 10/31/2007 11:31:24 PM

I was reading one of Jeff Cooper's pieces on Minyanville and he was again referring to the potential symmetry in the market that could be playing out here. Basically he's referring to the possible mirror version of what we saw in 2002 for the SPX after the initial July low was followed by a slight underthrow of the October low. This year we've had a July high that was a slight overthrow of the October high.

He also pointed out how the March 2000 high for SPX was then followed five months later by the August retest of the high. The October 2002 low was followed six months later with the March 2003 test of the low. In 2007 the May high was a retest of the 2000 retest in August and this October (5 months later) has been a retest of the March 2000 high (see the "outside" symmetry there?). So we have symmetry between the 2000 and 2007 highs and mirror symmetry between the 2002 low and 2007 high.

This prompted me to take another look at the weekly chart of SPX going back to the 2000 high and I noticed a few more interesting relationships. Refer to this weekly chart to help make it a little easier to see: Link

I've mentioned the 1563 level before which is two equal legs up for the A-B-C bounce off the October 2002 low. I added a retracement of the 2000-2002 decline which shows the half way point is located at 1163 which is the February 2004 high.

I then put in the Fibonacci time projection starting at the October 2002 low and running the 100% projection to that February 2004 high. You can see the Fib projections to the right of that point and how the market turned at each one (and the June 2003 consolidation at the 50% point). And now here we are at the 361.8% projection this week as price is testing the March 2000 high, 5 months after May's retest of the August 2000 retest (with bearish divergences).

The market tends to have a memory for such relationships (or we unconsciously react to such patterns). The bottom line is I think this is a powerful setup for a reversal this week. Oh, and the March 2000 high was 1552.87 and today's high was 1552.76.

Keene Little : 10/31/2007 10:51:17 PM

Thursday's pivot tables (with updated monthly numbers): Link and Link

When looking at projections for what I believe is the 5th wave up in the rally from October 24th, each index has achieved its minimum projection based on the size of the 1st wave. So the pieces are in place for a reversal tomorrow if the bulls are done rejoicing (or was that just an end-of-month jam job courtesty of the PPT so as not to make the Fed boss look unloved?). Each chart shows some additional upside potential though and until the bulls prove they're done, don't fight the trend. We'll see if that changes tomorrow morning.
DOW: Link
SPX: Link
NDX: Link
RUT: Link

OI Technical Staff : 10/31/2007 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 : 10/31/2007 7:24:12 PM

Wednesday's Global Economic Calendar recap Link

Jeff Bailey : 10/31/2007 7:15:08 PM

Official CBOT close for YM07Z = 13,947 ; (settlement 13,936)

Official CBOT close for YM08H = 14,030 ; (settlement 14,016)

Jeff Bailey : 10/31/2007 7:02:57 PM

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

Closed out the two (2) XLF-KG at the bid of $1.40 when the underlying XLF traded stop of $33.65.

October's Trade Blotter of CLOSED trades that I (Jeff Bailey) have profiled at this Link

Linda Piazza : 10/31/2007 6:28:33 PM

I wanted to add to Keene's 5:34:54 post since I am in the midst of doing a series on the Greeks of option pricing for the weekend Trader's Corner articles. Also, I'm having trouble with my email and my emailed response to the subscriber isn't going through so far.

A couple of things might have been involved. I looked at the delta for that option now, and it's -0.17 now. The delta might have been slightly higher when GS was around $241, but it still would have been relatively low since it was well out of the money. What does a delta of -0.17 mean? Since it tells us how much the price of the put would change for each one-point change in GS, it would mean that a three-point drop would result in a gain of about $0.51 in the theoretical value of your put, with a caveat that I'll mention later. Since those options have a 0.15 bid/ask spread currently, and since you'd have to pay part of that when you buy and give up part of it when you sell, you might realistically expect to lose about $0.10 of those accumulated gains. Perhaps you'd profit by only about $0.41 for a three-point drop, even if all other conditions are ideal. Of course, delta changes a bit over a three-point spread (although gamma, the rate by which it changes, is only 0.01 now), but that option was still well out of the money. The delta probably wouldn't have been that much different.

That low delta is often the main culprit. In fact, I wrote a Trader's Corner article about delta just last weekend (Sunday night edition of the newsletter), pointing out that this is often the reason an option doesn't move as much as the trader expected. Also, as Keene has already pointed out, although the VIX might have climbed, the volatility in GS's options might have dropped. As of yesterday, implied volatility for GS was still a bit higher than the 30-day historical volatility, and the IV might have further reverted to the mean, dropping closer to the historical value. That would have deflated the option a bit, if that happened. Traders can go to ivolatility.com and click on the "Basic Calculator" on the left-hand sidebar and try a few trial calculations, substituting different values for the various inputs. A lower volatility, as this subscriber obviously already realizes from the way his question was phrased, would lower the value of the put.

Also, the carrying costs--based on interest rates--do impact option pricing, too. I honestly don't know whether today's rate reduction would have been immediately been factored into those carrying costs, but I wouldn't be surprised. If so, I wouldn't think that the decreased carrying costs would have impacted the option's value more than a penny or two, but if it was immediately factored in, it would have acted to decrease the value of those options by that penny or so.

Jeff Bailey : 10/31/2007 6:19:53 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 10/31/2007 6:07:52 PM

Per Keene's 05:34:54 PM ... see some of my intra-day posts and bid/ask action in the XLF-KG.

Options market makers for sure, backing away their bid/offers into the volatility.

(02:12:07) as one example.

Jeff Bailey : 10/31/2007 6:01:53 PM

Correction: ... to my earlier post at 02:25:28 PM EDT ... I was not getting a data feed for the DJUSHB at that time. When I was clicking through charts in my U.S. Market Watch, I saw the DJUSHB at what looked to be a new session high. However, that was the 02:05 PM EDT quote.

Once my data feed resumed, the DJUSHB first tick at 03:25 PM EDT was 369.51.

Keene Little : 10/31/2007 5:34:54 PM

Option pricing question--this morning I purchased some GS $230 Nov puts at $3.50 when GS was trading around $244. GS is now at $241 and the VIX is higher, yet the options still sit at $3.50. Seems they should have traded higher with price in the underlying down and the vix up?

I haven't checked but did you look at the implied volatilty (IV) of those puts when you bought them vs. what it was at the end of the day? It can go contrary to what the VIX does (which is dependent on what the OEX does). I don't want to say option market makers will manipulate the IV to their advantage (but they do) but my guess is the IV was higher this morning than at the close. It's the market maker's way of protecting themselves (I'm trying to be nice) in the event of a spike in volatility on a big news day. Always check the IV against historical to see if you're paying a premium.

Jeff Bailey : 10/31/2007 5:28:07 PM

CROX ... $56.92 ... breaks below extended session low ($57.00).

Jeff Bailey : 10/31/2007 5:20:35 PM

Extended session stopped alert! for shares of CROX $58.10.

Jeff Bailey : 10/31/2007 5:01:20 PM

Extended session long entry alert ... for CROX $59.10.

Jeff Bailey : 10/31/2007 4:59:54 PM

Disclosure: I currently hold bullish position in CROX.

Jeff Bailey : 10/31/2007 4:59:33 PM

Extended session long setup alert! ... for 1/2 position in shares of Crocs, Inc. (CROX) ... should they trade $59.10. Stop goes $58.10, target $63.40.

Jeff Bailey : 10/31/2007 4:06:46 PM

Crocs, Inc (CROX) $74.75 +3.68% ... darts to $63.37 on headline numbers.

Keene Little : 10/31/2007 4:03:35 PM

We got the push back up to a new high for NDX (not quite for the others) which sets up the decline tomorrow. But it could start out with a quick spurt of buying before the reversal.

Linda Piazza : 10/31/2007 4:00:56 PM

Is this the triangle that's going to form, then, not one encompassing the whole post-FOMC range, but rather with the widest part from about 1540-1553 and narrowing from there? It's a possibility.

Keltner resistance at 1552.06-1554.16 now. Support at about 1544.

Jeff Bailey : 10/31/2007 4:00:08 PM

Not seeing signs of a "top in gold" at this point as another wave of buying looks to be taking hold.

Jeff Bailey : 10/31/2007 3:59:05 PM

Goldcorp (GG) $35.05 +3.73% ... X gets the square.

Jeff Bailey : 10/31/2007 3:57:22 PM

Seeing rather large volume spike of 408,600 shares in the StreetTracks Gold (GLD) $78.48 +1.46% ... at a 5-minute closing price of $78.76 at 03:05 PM EDT.

That's pretty close in time to my $800 note at 02:55:48 PM EDT.

Tomorrow's low in the dollar better be the new Month's low.

Keene Little : 10/31/2007 3:50:56 PM

Keeping an eye on GOOG here. It made a marginal new high this afternoon but left a big ol' bearish divergence with it. I'm getting the feeling we're going to see a reversal of today's gains tomorrow.

Keene Little : 10/31/2007 3:45:46 PM

The RUT sports the same potential wave pattern possibilities as shown on the DOW and SPX. It has tagged its minimum upside Fib target just above 827 and has a higher one just under 836 if it can rally back up from here (negated if it drops below 820): Link . Notice the retest of the broken uptrend line on RSI. That was a heads up for the possibility that that's all there will be for this rally.

Jeff Bailey : 10/31/2007 3:41:26 PM

At the 03:00 close; the US Dollar Index (DXY) was 76.48.

That's BELOW MONTHLY S1.

Linda Piazza : 10/31/2007 3:37:13 PM

The SPX is right at the 15-minute 9-ema now. Is this support or resistance? We'll soon see. Next resistance is at 1546.35, with resistance above that at 1550 and 1553.76. Support is at 1539.35, with support beneath that between 1533-1534 and then at 1530.02. You can see that the SPX is roughly in the middle of all that support and resistance and just above the middle of the post-FOMC range. Not much to be told from this.

Keene Little : 10/31/2007 3:32:50 PM

Trying to surround NDX price action with trend lines is like trying to herd a bunch of cats. Bottom line for this index is that each new high continues to show bearish divergences so it's hard to trust the upside (but hard to short it obviously). And the larger pattern is still up for debate but today's rally looks ready for a reversal. Maybe one more new high to finish off this afternoon's rally. Link

Keene Little : 10/31/2007 3:26:28 PM

Getting the SPX and DOW charts in synch, here's the updated SPX chart: Link

Keene Little : 10/31/2007 3:21:05 PM

I'm fooling around with a couple of EW counts but the bottom line is that they point to the same potential upside targets for a 5-wave move up from Oct 24th. The parallel up-channel for the DOW should be a good guide to follow: Link . Upside Fib targets are 13936 (already tagged) and then the 14030-14040 area. As with SPX the move up from this afternoon's low would look best with another push higher but that would be negated with a drop back below 13839.

Linda Piazza : 10/31/2007 3:19:30 PM

This is why I expressed my worry in my 2:52:45 post about a breakout play if the SPX were to break out of its rectangular consolidation zone and head toward what was then a 1552.40 upside target. I thought it could be part of the typical post-FOMC volatility. Yes, the target was hit and even exceeded by a few cents, but the move was quickly reversed, and you'd have to be just as quick on your toes to have benefited from it. Unless you had an automatic exit at that target, your trade might be in trouble now, depending on when it was entered.

What happens next? Who knows because that's the nature of the post FOMC action. Keltner charts say that unless the SPX can get back above about 1546.08 and stay there on 15-minute closes, it might test 1543 at least, if not drop further. As I type, it's headed up toward resistance, to test that.

Jeff Bailey : 10/31/2007 3:18:43 PM

Nuveen's $785M, 8-Yr Notes (details) Link

Jeff Bailey : 10/31/2007 3:17:37 PM

Nuveen comes with $785M in 8-year notes. Rated B-. Price is Par, Yield 10.5%.

Linda Piazza : 10/31/2007 3:13:10 PM

Here's the RUT on the same Keltner setup, having hit the same Keltner channel resistance as I showed on the SPX's chart in my 3:03:55 post: Link Unless we're going to see breakout status on these charts, this should be time for pullbacks to their 9-ema's, at least, but here's what typically happens when the prices outrun the 9-ema's so much. Unless it's a pop-and-drop move, prices tend to consolidate sideways until the 9-ema gets closer. The 9-ema is the thin red line you see on the RUT and SPX charts. Honestly, though, anything goes on a post-FOMC afternoon.

Jeff Bailey : 10/31/2007 3:11:49 PM

JPMorgan Lowers Prime Rate to 7.5%

Jeff Bailey : 10/31/2007 3:10:59 PM

KeyCorp Lowers Prime Rate to 7.5%

Jeff Bailey : 10/31/2007 3:10:17 PM

Wells Fargo Lowers Prime Rate to 7.5%

Jeff Bailey : 10/31/2007 3:09:18 PM

Wachovia Lowers Prime Rate to 7.5% from 7.75%

Jane Fox : 10/31/2007 3:07:35 PM

My goodness gracious - it has been a while since I looked at Natural Gas. It seems to be following Crude upwards as well. Link

Jane Fox : 10/31/2007 3:04:48 PM

Techs stocks leading the way up. Link

Jeff Bailey : 10/31/2007 3:04:06 PM

03:00 Market Watch found at this Link

Linda Piazza : 10/31/2007 3:03:55 PM

The SPX hit its Keltner target and potential resistance. Here's where it is on the Keltner chart: Link Scan to the left of the chart, and you'll see what happened Monday morning when the SPX hit that same Keltner resistance. Doesn't mean it will happen this time, but know what you're facing if you've jumped on a bullish trade. Protect your profits.

Jane Fox : 10/31/2007 3:03:09 PM

Here is the break of the October 29th swing high I expected. Link

Keene Little : 10/31/2007 3:02:32 PM

Getting a nice short covering rally now. I was preparing an update to the SPX 60-min chart, showing a 5-wave move up from Oct 24th with Fib projections for the 5th wave at 1550.17 (62% of wave-1) and then 1563 (equality with wave-1): Link . SPX just shot above 1550 but is stalling. The move up from this afternoon's low would look better with a consolidation and then another high. But this is now setting up an interesting possibiliy for a market high.

Jane Fox : 10/31/2007 3:01:29 PM

Here is the drop in Gold I expected now I need to figure out where I will increase my long position. Link

Jeff Bailey : 10/31/2007 3:00:48 PM

Dow Transports (TRAN) 4,918 +1.57% ...

Tab Gilles : 10/31/2007 3:00:16 PM

Weekly EIA Report Link

Jeff Bailey : 10/31/2007 2:59:05 PM

Financial Select SPDRs (XLF) alert! $33.85 +1.71% ... sticks its head to new session highs.

Linda Piazza : 10/31/2007 2:57:09 PM

And the SPX follows shortly after. Keltner resistance (held on Monday on 15-minute closes) at 1552.79 now on 15-minute closes if the SPX can close this 15-minute period above 1547.48. It looks as if it might charge right up to the target before the 15-minute period even ends, though.

Jeff Bailey : 10/31/2007 2:55:48 PM

December mini-Gold (yg07z) alert! $800.10 +1.54% ... $800 an ounce!

Linda Piazza : 10/31/2007 2:55:35 PM

The MID has broken out and is charging toward its Keltner target at 906.91, with the MID at 905.23.

Jeff Bailey : 10/31/2007 2:54:31 PM

US Dollar Index (DXY) 76.64 (30-minute delayed) ... at 02:20 PM EDT, DXY did trade WEEKLY S1.

Linda Piazza : 10/31/2007 2:52:45 PM

Typical post-FOMC stuff. If it follows the typical pattern, the post-FOMC volatility may soon start tamping down, narrowing into a triangle formation. What argues against that is that it already has a rectangular formation that's been forming since Monday, with resistance roughly at 1545 (although my Keltner charts say at 1544.61 and 1546 on 15-minute closes) and support roughly at 1530. If there's an upside breakout out of that formation, bulls have a quandary because the Keltners say that on a breakout, there's potential for upside to 1552.40. It's early enough, however, that it could still be part of the post-FOMC volatility that will yet settle into a triangle shape. By now, you know I lean to the cautious side, so I'd probably be letting that upside breakout play, if a breakout should occur, go and I'd just stand on the sidelines since it would be impossible to tell whether it was a true breakout or just part of the post-FOMC volatility. VIX sure argues against that conclusion, though, doesn't it?

Keene Little : 10/31/2007 2:49:50 PM

The euro has tagged 1.45. This has been on the radar screen for a lot of currency traders so it will be interesting to see if the US dollar finds a bottom here.

Keene Little : 10/31/2007 2:47:56 PM

Pretty typical stop-running in both directions. NDX is now making new highs. Now we watch to see if they'll hold.

Jeff Bailey : 10/31/2007 2:47:53 PM

With Fed out of the way, will look for dollar strength (some time until further rate decisions).

Jeff Bailey : 10/31/2007 2:46:40 PM

Reduced XLF exposure near-term from 2/3 position. Establish "longer-term" 1/3 position.

Jeff Bailey : 10/31/2007 2:45:54 PM

VIX.X 19.59 -7.02% ...

Jeff Bailey : 10/31/2007 2:45:05 PM

Swing trade long alert! ... for one (1) of the Select Financial SPDRs XLF Dec $33 Calls (XLF-LG) at the offer of $1.75.

XLF $33.41 +0.39% ...

Jeff Bailey : 10/31/2007 2:37:33 PM

FOMC Statement (10/31/2007) Link

FOMC Statement (09/18/2007) Link

Keene Little : 10/31/2007 2:30:25 PM

Hey Jeff, good call earlier on TNX (since I agreed with you--wink). The bounce pattern from last week's low gives me an initial upside target at 44.81 for two equal legs up. From there is the bigger question in my mind. Link

Linda Piazza : 10/31/2007 2:29:33 PM

So far, the SPX appears to be trying to hold support on the 15-minute close at the 1530.17-1532.44 Keltner support. Whether that effort will be successful or not remains to be seen, with a potential confirmation of a double-top formation hanging in the balance. The SPX did confirm the double top when it dipped below 1529.55, but it didn't say there long and bounced right back above that level. All we can say is that so far, support is tentatively holding. Bulls do not want that double-top formation confirmed by sustained 15-minute closes beneath about 1530.23.

Jeff Bailey : 10/31/2007 2:25:28 PM

Homebuilders +1.38% ... break above morning highs.

Jeff Bailey : 10/31/2007 2:24:37 PM

EUR/JPY 166.315 x 166.353

Jeff Bailey : 10/31/2007 2:23:57 PM

Forex Currency (screen capture) Link

Jane Fox : 10/31/2007 2:21:54 PM

My US$ charts are delayed 20 minutes so I cannot see what the $ is doing for a while but the USDJPY is not making any huge moves so the US$ may not either.

Keene Little : 10/31/2007 2:19:23 PM

It was priced in and now the sell. But it's still early--we're still in the cha-cha-cha window.

Jane Fox : 10/31/2007 2:18:52 PM

Market going down for now but it may turn around.

Linda Piazza : 10/31/2007 2:18:17 PM

Next SPX Keltner support at 1532.18 and 1530.53. I should say "potential" support.

Jane Fox : 10/31/2007 2:17:51 PM

Words released "Some inflation risk remains."

Jeff Bailey : 10/31/2007 2:17:21 PM

Fed Lowers Discount Rate by 25 bp.

Jane Fox : 10/31/2007 2:17:01 PM

Just what the market wanted.

Jeff Bailey : 10/31/2007 2:17:01 PM

Fed Lowers Fed Funds Target by 25 bp.

Jeff Bailey : 10/31/2007 2:16:32 PM

XLF-KG $1.33 x $1.46 ... XLF $33.70

Jane Fox : 10/31/2007 2:17:16 PM

25 basis point cut

Jane Fox : 10/31/2007 2:16:21 PM

Market is just really jittery.

Jane Fox : 10/31/2007 2:15:53 PM

Sorry it is not out yet!

Jane Fox : 10/31/2007 2:15:31 PM

It out but I am not seeing anything on CNBC yet.

Jeff Bailey : 10/31/2007 2:15:23 PM

Educational: Impossible for an options trader to try and set stops/targets with the option itself.

Jane Fox : 10/31/2007 2:14:41 PM

Oh my goodness gracious!!! Crude up to 94.56. Link

Jeff Bailey : 10/31/2007 2:14:26 PM

XLF $33.69 +1.23% .... XLF-KG $1.45 x $1.50.

Jeff Bailey : 10/31/2007 2:12:07 PM

Good gravy! XLF-KG $1.37 x $1.47 ... had been 2-cent spread all morning.

Jane Fox : 10/31/2007 2:10:37 PM

What the heck was that all about. Link

Jeff Bailey : 10/31/2007 2:10:08 PM

Dinger of a sell program last 5-minutes.

Jeff Bailey : 10/31/2007 2:09:41 PM

FOMC decision eminent ....

Jeff Bailey : 10/31/2007 2:09:23 PM

Bank of Mexico: Estimates 2008 GDP Growth 3.25% To 3.75%.

Jeff Bailey : 10/31/2007 2:08:21 PM

Swing trade long stopped alert! for the Financial Select SPDRs XLF Nov $33 Calls (XLF-KG) at the bid of $1.40.

XLF $33.65

Keene Little : 10/31/2007 2:07:40 PM

If we get a post-FOMC spike to the upside keep an eye on SPX 1551 which is the first upside Fib projection for the 5th wave in the move up from October 24th. It's possible, based on today's price pattern, that that kind of move could finish off the rally.

Jeff Bailey : 10/31/2007 2:01:13 PM

Short squeeze alert! ... USO $73.10 +5.11% ...

Linda Piazza : 10/31/2007 1:59:48 PM

Still keeping prices shoved right up underneath resistance. I'm here and I'm watching, but there's just not a lot to be determined at this point. If you're already in a play, though, you have a few minutes to evaluate one more time whether you want to hold that trade open as the decision is announced or whether you want to close it now.

Linda Piazza : 10/31/2007 1:52:12 PM

As I type, the TRAN is at 4899.48, down just a tad from its 4903.50 high of the day. The TRAN is still inside a consolidation zone that it's been chopping out for a while, but the 200-ema is just ahead at 4915.79. Lately, the TRAN has traded across this -ema a bit, rendering it less important S/R than it was previously, but in the past, it has sometimes been either strong support or strong resistance.

Keene Little : 10/31/2007 1:51:56 PM

DOW bulls seem the most excited as it has shot higher but not followed by the others. Perhaps some rotation out of the others into the safety of the bluest of the blue chips. That's a defensive play but not necessarily bearish. If I were a fund manager who wanted to be positioned for a quick exit if necessary I'd be doing the same thing.

Jeff Bailey : 10/31/2007 1:49:17 PM

Swing trade call(s) establish stop alert! ... for the two (2) Financial Select SPDRs XLF Nov $33 Calls (XLF-KG) at $33.65 in the underlying.

XLF $33.77 +1.47% ...

XLF-KG $1.46 x $1.48.

VIX.X 19.87 -5.69% ...

Linda Piazza : 10/31/2007 1:46:13 PM

After climbing to an intraday high of 115.47, approaching but not yet touching the 50% retracement of the sharp decline from the 10/15 high into the 10/22 low, the USDJPY has now dropped back to 115.14. It's still above 115.00 and well above the 114.80-ish zone that might be important, but perhaps due to a retreat to that zone? Whatever happens with the FOMC's decision should impact this currency pair.

Keene Little : 10/31/2007 1:45:16 PM

I've got to hand it to them--these bulls are brave. No fear as we head into FOMC.

Jane Fox : 10/31/2007 1:43:24 PM

No more trading for me today. After the FED announcement my indicators will probably be all messed up for the rest of the day.

Jane Fox : 10/31/2007 1:42:02 PM

See it pays to be stubborn. Out at 13897.

Jane Fox : 10/31/2007 1:38:14 PM

This is a case of stubbornness. I lost a trade yesterday afternoon and I want full profit today. I probably should just take what I have and be done with it but as soon as I do it will zoom up to 13897.

Jane Fox : 10/31/2007 1:20:14 PM

If YM breaks daily highs at 13892 I will raise my stop to breakeven but I hope I don't even have the time before it reaches target my at 13897.

Linda Piazza : 10/31/2007 1:15:26 PM

I've just returned. About an hour ago, the SPX hit that possible target and likely strong resistance, at least on first test. It was resistance, but now the SPX is finding tentative support on the 15-minute 9-ema at 1541.47. As long as that's happening, the resistance, now at 15-minute closes at 1543.50, will go on begin tested. These Keltner lines on this time period are working pretty well for the last few days, but what they show me is that some indices, particularly the SPX, is being parked at resistance, as if all the cars are lining up at a stop light, just waiting for the green light to rev up their engines and start across that street, breaking through the resistance. The trouble is in knowing: is a green light the smaller rumored cut or the bigger one?

Jane Fox : 10/31/2007 1:16:03 PM

DAteline WSJ - LONDON -- Oil at $100 a barrel? That may not be the worst of it.

Several leading oil experts, gathered here yesterday for an annual energy conference, sketched a near-term future in which mounting global demand and shrinking supplies push oil prices well past the $100-a-barrel mark.

Consuming countries, they argued, will simply have to deal with the fact that new pockets of oil are getting far harder and more expensive to tap. That, combined with years of underinvestment by the industry, has led to a tapering off of new oil supplies that will continue for years, despite rising energy demand in Asia, the Middle East and some industrialized countries.

Jane Fox : 10/31/2007 1:08:31 PM

Now here is something we need to monitor. Look at how the USDJPY and DAX are moving in opposite directions; they should be moving in the same direction. I just hope my long YM position gets to target before this all plays out because I have a feeling it will not be bullish. Link

Jeff Bailey : 10/31/2007 1:07:40 PM

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

Jeff Bailey : 10/31/2007 1:03:31 PM

01:00 Market Watch found at this Link

Keene Little : 10/31/2007 1:00:23 PM

So far SPX has stalled at Monday's high (with bearish divergence) and the DOW has stalled at its downtrend line from Oct 11th through Monday's high. Maybe this is where the market will park itself until FOMC.

Keene Little : 10/31/2007 12:56:37 PM

Update to the NDX 60-min chart shows the current move up getting squeezed into the top of a potential rising wedge since the low on Oct 25th: Link . Keep an eye on the RSI uptrend line since a break of it will give a heads up. So far it's still bullish. If it does break down then the question will be whether it will break its uptrend line from August next or just pull back and then rally back up for another (final?) high.

Jane Fox : 10/31/2007 12:54:14 PM

I have now raised my stop to 13863.

Keene Little : 10/31/2007 12:29:03 PM

Stepping away for about 30.

Keene Little : 10/31/2007 12:27:57 PM

Jeff, I think the DJ Corporate Bond Index is different from the mortgage-backed securities that Markit is measuring. Those AA funds have not faired nearly as well as the corporate bonds that are probably tracked in the above index. In other words it's an apples vs. oranges comparison.

Jeff Bailey : 10/31/2007 12:19:01 PM

Dow Jones Corporate Bond Index Fact Sheet (Source: Dow Jones) Link

Jane Fox : 10/31/2007 12:17:28 PM

Raising my stop to 13855.

Jane Fox : 10/31/2007 12:16:06 PM

My long YM is almost to target at 13897.

Jane Fox : 10/31/2007 12:16:18 PM

Looks like my patience paid off today.

Jeff Bailey : 10/31/2007 12:14:51 PM

After quick research, I would have to question "Market AA" reports. Well above $100 at the offer here.

Jeff Bailey : 10/31/2007 12:13:37 PM

QCharts users ... Dow Jones Corp Bond Index (INDEX:DJCBP) $102.43 +0.02% ...

Jeff Bailey : 10/31/2007 12:07:41 PM

Dow Jones Corporate Bond Index Link

Keene Little : 10/31/2007 12:04:01 PM

ES has now closed its gap but bulls don't seem to be worried about rallying into the FOMC announcement with no pullback here.

Jeff Bailey : 10/31/2007 12:00:38 PM

Berkshire Hathaway (BRK.A) alert! $30,200 +1.08% ... that's a new 52-weeker.

If you can get their debt at $0.50 on the dollar ... BUY IT!!!!

Jeff Bailey : 10/31/2007 11:49:22 AM

Google (GOOG) $699.98 +0.74% ... got the $700.

Jeff Bailey : 10/31/2007 11:43:29 AM

Intel (INTC) $26.70 +1.63% ... probes WEEKLY R1 ($26.68). The "only" chip stock a bull needs to own.

Keene Little : 10/31/2007 11:40:55 AM

Markit AA down another 5% yesterday and now trading at $0.46/$1.00. 46 cents for AA can't be priced into the balance sheets of the big boys. This could be very ugly as it unravels.

Thanks Barry. For those who asked, Markit tracks ratings on various finanical instruments and the significance here is that investment grade bonds (AA) are now getting 46 cents on the dollar. Many funds continue to carry a value of $1 on their books so when they are forced to mark-to-market it's going to get ugly. Goldman Sachs might even be forced to join the confession party and report their true holdings instead of the phony stuff they reported for last quarter's results.

The Super SIV fund idea that was hatched by Henry Paulson is supposed to provide a fund that will buy investment grade funds for a bottom price of 94 cents. The likelihood of anyone bellying up to the bar to pay 94 cents for something worth less than half that is very unlikely. Meanwhile the stock market's whistling past the graveyard.

Jeff Bailey : 10/31/2007 11:35:04 AM

US Dollar Index (DXY) 76.76 ... overnight low came within a hundredth of a penny of WEEKLY S1 (76.61).

Jeff Bailey : 10/31/2007 11:31:59 AM

BIX.X 336.23 +0.47% ...

Jeff Bailey : 10/31/2007 11:31:00 AM

Semiconductor HOLDRs (SMH) alert! $34.40 +0.52% ... gets the trade at WEEKLY Pivot.

Jane Fox : 10/31/2007 11:28:49 AM

My two granddaddies, the VIX and AD volume, are bullish but the others are not. Since the price bars trump everything and they are flat I think the best trade right now is no trade.

I am in a long and will play it out because it is important to me to plan a trade and then trade the plan. This trumps everything for me. Link

Jeff Bailey : 10/31/2007 11:27:14 AM

EIA Weekly Refinery Capacity Table that I keep at this Link

Keene Little : 10/31/2007 11:25:42 AM

This is where it gets a little tricky trying to short gold. The YG 60-min chart shows it's pressing back up to test both the recent high and its broken uptrend line. Do you place your stop at a new high, wait for a failure here or short it against resistance and give your stop some breathing room? Those are all different trading techniques and it's not one size fits all.

Based on what I see on this chart, with the bearish divergences (so far) at a retest of Monday's high and up against the broken uptrend line I like a short play here. It could make a minor new high if it pushes up along the trend line. Link

Jeff Bailey : 10/31/2007 11:18:25 AM

EIA Weekly Inventory Table that I keep at this Link

Heating oil build of 473,000 barrels to 47.37 million. Still down 12.5 million, or 20.94% from year-ago.

SPR added just 92,000 this week to 693.9 million. Up 5.5 million, or +0.8% from year ago.

Jane Fox : 10/31/2007 11:11:49 AM

And although the window was pretty small on Gold I took advantage of this setup to get long GLD. Link

Jane Fox : 10/31/2007 11:10:30 AM

Here is the setup I used for my long USO entry. Link

Jeff Bailey : 10/31/2007 11:04:01 AM

US Oil Fund (USO) $72.12 +3.71% ... did challenge Monday's close of $72.50.

Jane Fox : 10/31/2007 11:03:43 AM

SAN FRANCISCO (MarketWatch) -- Google Inc.'s seemingly unstoppable stock set a new milestone Wednesday morning, topping the $700 mark to set a new all-time high for a company whose market value has already jumped by more than 50% for the year.

Jane Fox : 10/31/2007 11:03:13 AM

WASHINGTON (MarketWatch) -- Gains in spending on commercial and public construction projects offset another decline in spending on housing projects in September, pushing overall construction spending 0.3% higher, the Commerce Department reported Wednesday.

Private nonresidential construction spending climbed by 1.5% to an all-time high, while public construction spending rose 1.9% last month, the Commerce Department said. It was also a record high.

But spending on housing projects again fell, down 1.4% -- marking the 19th straight decline and a reflection of the ongoing slump in the housing and mortgage markets. That spending is down 16.4% in the last year.

Keene Little : 10/31/2007 11:03:09 AM

The price pattern for TNX supports Jeff's contention that yields may rise from here (bonds sell off). I've been showing an expectation for a rise in yields after testing the recent bottom and the only question in my mind (assuming the bounce continues) is how high it will get: Link

Jeff Bailey : 10/31/2007 11:02:46 AM

Crude oil, unleaded, heating oil .... surging ...

Jane Fox : 10/31/2007 11:02:21 AM

WASHINGTON (MarketWatch) -- Business activity in the Chicago region contracted in October, according to a survey of corporate purchasing managers released on Wednesday.

The Chicago purchasing-managers' index fell to 49.7% in October -- the weakest result since February -- from 54.2% in September. Readings below 50% indicate that more companies were contracting than expanding.

"Looking ahead, manufacturing sector growth is likely to suffer from ongoing woes in the housing and auto industries, with export demand providing a counterbalance to some degree," wrote Joshua Shapiro, chief U.S. economist with MFR Inc.

Shapiro added that "perky" results for various manufacturing indicators in the spring and early summer are "likely to continue to give way to less buoyant outcomes as output is adjusted in line with weaker final demand."

Jane Fox : 10/31/2007 11:00:16 AM

Sorry I was doing other things and I see I am long YM from 13871. My stop is 13844 and target is 13897.

Jeff Bailey : 10/31/2007 10:58:52 AM

10-year Yield ($TNX.X) up 3.3 bp at 4.416%.

Jeff Bailey : 10/31/2007 10:57:33 AM

If long the 10-year note futures, might want to take some profits off the table.

Jeff Bailey : 10/31/2007 10:56:40 AM

It has been my observation over the years of tracking the MBA's data, that notable increases in refinances tends to mark relative lows in treasury yields.

Jeff Bailey : 10/31/2007 10:55:19 AM

I should note that Refinances were very strong in the latest week. Week ended 08/03/07 refinances were +9.1% at 1,881.1. Week ended 03/02/07 refinances were up 15.0% at 2,234.2.

Jeff Bailey : 10/31/2007 10:49:02 AM

MBA's Weekly Application Survey at this Link

Linda Piazza : 10/31/2007 10:46:03 AM

I have to leave this morning but should be back in a couple of hours.

Linda Piazza : 10/31/2007 10:45:38 AM

The SPX is hitting the pushed-higher Keltner resistance now, with that at 1540.60. Next resistance is at 1543.68, and that should be stronger, but "should" is the operative word on a day like today. Support is at the 9-ema, now at 1537.38.

Keene Little : 10/31/2007 10:37:23 AM

Gold is pushing higher again so now I'm watching to see if yesterday's gap down gets closed and/or the uptrend line from Oct 24th gets tagged again, which GLD just hit: Link . Gap closure for GLD is at 78.15 so watch this area for a top to its bounce to try shorting it, stop at a new high (which is at 78.28).

Linda Piazza : 10/31/2007 10:31:29 AM

What typically happens on an FOMC meeting day? As you can guess, it's difficult to typify what will happen on any day, but one reaction that's commonly seen is a settling down akin to what we often see on an opex Thursday or Friday, with prices pinned either just underneath resistance or just above support. Then, after the decision is announced, there's often a brief expansion of volatility that eventually begins tamping down into some sort of recognizable pattern, often a triangle. While the widest part of the triangle is formed in the immediate post-decision volatility, those who took a position prior to the decision are often whipsawed out of their positions, and that's true of both bearish and bullish ones. That triangle's break is often the truer direction, although false breakouts do occur, of course. The breakout (or breakdown) might occur late in the day or the next morning.

Sometimes, instead, prices are front-run into the FOMC meeting, breaking out or breaking down, and that turns out to be the true direction after all. Those who had been waiting for that tamping-down action and the resultant break are left waiting at the curb. They've missed an opportunity to participate in the move. That's happened several times over the last year.

So, there you go. What are you going to do? I know my preference when I was day trading, and that was to take a wait-and-see attitude and watch for the final direction, but my attitude and yours might not be the same. Know what you're risking with either choice, however.

Linda Piazza : 10/31/2007 10:17:36 AM

The Fed has announced a repo in the amount of $5.500 billion. A repo of $5.000 billion matured today, leaving a net add of $0.500 billion. The amount sloshing through the system has risen to $48.500 billion, but $42.500 billion of that matures tomorrow. Thursday's tend to be a big day for maturing repos, though.

Jane Fox : 10/31/2007 10:16:13 AM

YM long how at 13871.

Linda Piazza : 10/31/2007 10:08:45 AM

SPX resistance at 1539.49 now, on 15-minute closes. Resistance above that at 1543.65. Next support from 1535.08-1535.70, on 15-minute closes.

Keene Little : 10/31/2007 10:08:17 AM

For SPX it's a battle between the downtrend line from the Oct 11th high (at 1539) and the uptrend line from Oct 24th (at 1534): Link . Whichever way it breaks could set the direction for at least the next few hours.

Jane Fox : 10/31/2007 10:03:07 AM

U.S. Sept. commercial construction spending rises 1.5%

U.S. Sept. residential construction spending falls 1.4%

U.S. Sept. construction spending rises 0.3%

Keene Little : 10/31/2007 10:00:20 AM

It's not exactly a gap n crap but it's not a ball of fire here either. More like a pop n stop. Market's on hold it seems. The DOW and RUT appear the weakest this morning based on what they've given back. ER is the only one to close its gap.

Jane Fox : 10/31/2007 9:54:39 AM

However, please remember the AD line and volume are well above 0.

Keene Little : 10/31/2007 9:53:58 AM

I don't trade GOOG but I like to keep an eye on it, and some of the other high-flyers, for a sense of the bullish zeal in this market. With the techs getting much of the attention lately (similar to late 1999) it's a pretty good sign that the market could flame out soon. So watching these high-flyers could give us a heads up in that regard.

Jane Fox : 10/31/2007 9:53:52 AM

VIX is making new daily highs as the S&P futures are making new daily lows - these means we have not seen a bottom yet and we have further to go.

Linda Piazza : 10/31/2007 9:52:52 AM

The RUT remains positive, but has pulled back significantly from its early high and is now into the gap zone from yesterday's close to today's open.

Jane Fox : 10/31/2007 9:50:54 AM

Remember the 10:00 Sept Construction Spending report - not a biggy though.

Keene Little : 10/31/2007 9:50:42 AM

And there's the new high for GOOG--702.40. That could be all she wrote.

Jane Fox : 10/31/2007 9:50:17 AM

October Chicago PMI 49.7% vs. 54.2% in September

Keene Little : 10/31/2007 9:47:04 AM

I see GOOG tagged its 700 level (high so far 701.47, right at the top of its parallel up-channel) and achieved a Fib target I had for this move at 700.84. Only the brave but I see this one as a short here (it might try for one minor new high based on the move up from yesterday afternoon). You're playing with fire when trying to short this one though. Gunslingers with money to burn only.

Jane Fox : 10/31/2007 9:46:56 AM

WASHINGTON (MarketWatch) -- U.S. compensation costs rose 0.8% in the third quarter, as benefits eased a bit, the Labor Department said Wednesday.

The increase in quarterly employment costs -- a statistic watched closely by Federal Reserve policymakers -- was below expectations, however. Economists had forecast a 0.9% gain.

Wages and salaries rose 0.8% in the third quarter, the same growth rate as in the second quarter.

Benefits rose 0.8% in the third quarter, down from a hefty 1.3% in the second quarter.

Calculated out over the past year, employment costs have increased 3.3%, the same pace as in the second quarter

Jane Fox : 10/31/2007 9:41:16 AM

I will be taking a long YM position at 13896, a ways away I'm afraid but that is all I am seeing here.

Keene Little : 10/31/2007 9:39:23 AM

Gold has pushed back up today but is still struggling with the broken uptrend line from Oct 24th. It achieved two equal legs up in its bouce off yesterday's low so short gold here with a tight stop above this morning's high would be a recommended play.

Jane Fox : 10/31/2007 9:39:21 AM

I am waiting for a similar setup, but in reverse of course, to take a larger long position in Gold. Link

Jane Fox : 10/31/2007 9:38:05 AM

Here are the jtHMA charts of the US$. Notice the nice short entry these charts gave you when the $ rallied and the daily jtHMA turned green. Link

Linda Piazza : 10/31/2007 9:36:50 AM

There's potential SPX resistance just overhead at about 1539.40 on 15-minute closes, but the stronger resistance and possible target is at 1543.58. Just before the close yesterday, the SPX seemingly confirmed a H&S on its 15-minute chart, one that had been forming since last Friday. I warned that confirmation might not mean much, particularly without a 15-minute close below the 120-ema, now at 1529.05. Now there's this climb, this attempt to invalidate that H&S. I don't consider it invalidated, but a climb much above 1539.40 would certainly invalidate it. Just don't put much faith in technical analysis today, either pre- or post-FOMC announcement. Sometimes it works beautifully but more often than not, trading the FOMC days is treacherous.

Jane Fox : 10/31/2007 9:34:50 AM

AD line is a bullish +1027.

Linda Piazza : 10/31/2007 9:33:27 AM

This morning, the USDJPY has come back up to test the underside of the rising trendline off the August low. The USDJPY broke through that trendline on 10/19, and has been chopping higher over the last couple of weeks. The shape of the climb doesn't look particularly bullish, giving this climb the look of a bear flag. A 50% retracement of the decline off the 10/15 high into the 10/22 low is just under 115.60, with a 61.8% retracement at about 116.12. If the USDJPY breaks appreciably higher than its current 115.24 level, it will be piercing that former rising trendline, but I would consider that 50% retracement possibly strong resistance, too. What am I saying? I'm saying that the USDJPY is at a vulnerable spot. Daily RSI says the upward push could still have more to go, but other chart characteristics hint otherwise.

Is this indicator as useful to us as it is at other times? I'm not sure it is. Typically, a rise in the USDJPY has been good for equities, but would it be today? What would it mean? It would mean that some expect to see some strengthening in the dollar, at least versus the yen. While that would be good for the yen carry trade, I don't think retail traders would like what it might take to strengthen the dollar because that's typically a raising or steadying of interest rates and not a dip in them.

Also, is the yen carry trade alive and well to the same extent it was before February? Have some traders become more cautious after being trounced twice? A few times lately, the USDJPY has seemed to reluctantly follow equity direction, not lead or corroborate it, so I'm not sure. However, for today, I'm not sure about the corroborative effect of the USDJPY moves on equity moves.

Keene Little : 10/31/2007 9:31:17 AM

I'm a little surprised to see futures up after this morning's economic reports which, to me, justify why the Fed will sit tight on rates (further supporting my opinion stated in last night's Wrap). I would think the bulls would be getting a little nervous that the Fed won't do what they want. Let's see if the opening gap holds.

Jane Fox : 10/31/2007 9:21:24 AM

I think today's price action will make a higher high so any type of bearish lopsided head and shoulders pattern will be negated. This is a bullish chart. Link

Jane Fox : 10/31/2007 9:18:41 AM

I also have a position in USO, a pure Crude play, but I am beginning to think my USO position is basically the same as my Gold play and I may be overdoing my Crude/Gold positions. Link

Jane Fox : 10/31/2007 9:15:21 AM

I am looking to take another long position in Gold but will wait until after the FED because Gold will react to the announcement and I suspect it will be down. Also MACD is telling me Gold needs to take a rest and I am waiting for $760.00 to buy more. I use the ETF GLD to make it a pure gold play that is not dependent on stocks which have more influence from the market than they do the price of Gold. Link

Jane Fox : 10/31/2007 9:11:19 AM

USDJPY is breaking its previous day highs (PDH) and in sync with the bullishness you are seeing in the equity markets.

On the other hand the US$/Gold/Crude markets are out of sync. The US$ up and Gold up is not the usual scenario and I suspect Gold will tumble.

Gold and Crude are in sync both up. Link

Jane Fox : 10/31/2007 9:05:05 AM

Well the bulls are in party mode because of the GDP news but now the FED's responsibility is to take the punch bowl away and I am not as sure as I was yesterday the FED will lower 25 basis points. He may not lower at all now. Link

Jane Fox : 10/31/2007 8:59:31 AM

Dateline WSJ - WASHINGTON -- The U.S. economy sped up last summer despite a much heavier drag by the housing sector as surging exports and stronger consumer spending helped turn growth surprisingly faster.

Gross domestic product rose at a seasonally adjusted 3.9% annual rate July through September, the Commerce Department said Wednesday in the first estimate of third-quarter GDP. Second-quarter GDP climbed 3.8% and GDP rose only 0.6% in the first three months of 2007.

Some price inflation gauges in the data grew at a lower pace in the third quarter. But one key gauge, seen as an important indicator of core inflation, accelerated.

Stronger exports helped power the economy through the housing slump and tighter credit conditions. Wall Street expected a solid but smaller GDP growth rate. The median estimate of 24 economists surveyed by Dow Jones Newswires was 3.2% GDP growth during summer.

The 3.9% increase represented the strongest growth in quarterly GDP since a 4.8% increase during the first quarter of 2006.

Market Monitor Archives