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Keene Little : 11/9/2007 12:30:25 AM

Friday's pivot tables: Link and Link

On tonight's DOW and SPX charts I show similar possibilities for what's next for the stock market. From what little bit of reading I've done after hours it's amazing how many traders are looking at the same thing--that big hammer candlestick at DOW support (200-dma and uptrend line from July 2006). I had mentioned late Thursday how similar the patterns in the July-Aug and Oct-Nov declines look, not just that hammer. The fractal pattern points to the possibility that the next move will be another rally to new highs, and I show that possibility with the bullish wave counts (green).

But if too many are seeing and expecting the same thing it does make me wonder what trick the market will have up its sleeve to disabuse anyone thinking bullish here. I'll have to wait to see how Friday plays out which will hopefully provide some clues as to what's next. I don't currently see a good setup for either direction (as you can tell by the multiple price paths shown on the charts.

I'm leaning toward seeing a little more consolidation before getting one more new low into early next week (opex week). That's shown in dark red but as noted on both the DOW and SPX charts, the bounce can't exceed the low on Nov 2nd otherwise the probability for a higher bounce takes on a greater likelihood. These 60-min charts show a couple of ideas how price could play out into next week:
DOW 60-min: Link
SPX 60-min: Link

I then tried to show some ideas how those various price paths could play out into the new year:
DOW daily: Link
SPX daily: Link

Mark (who is a past contributer to the Market Monitor) emailed me at the end of the day with this:
Good observation about the similarity of the Jun-July decline to the current one. I have to admit the similarities are striking. One thing I would point out that's different though is during the Jun-July decline they fled to the Generals for safety. Just look at the charts of GOOG, AAPL or any of the leaders and you'll see they advanced in Jun-July while the markets retreated. Not this time... they sold them hard today on volume. Anyway, I like the observation of similarity and it's definitely something to keep an eye on.

After reviewing the NDX price pattern I'd have to agree with Mark that something is different this time and that's why the dark red wave counts are currently my preferred counts and that's because of what I see playing out in the techs. It looks like at most we should look for a brief consolidation before getting another low, then a bounce into opex week followed by a very strong decline out of that. 60-min chart: Link

Like on the DOW and SPX daily charts I show a bullish wave count possibility on the NDX chart daily chart and even though I don't particularly like it, it must be considered if the others have the possibility: Link

OI Technical Staff : 11/8/2007 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 : 11/8/2007 6:27:24 PM

Current OPEN MM Profiles that I've made with correct OPTION bid pricing at this Link

I will be away from the Monitor tomorrow. I plan to return by Monday's opening bell.

Keene Little : 11/8/2007 5:54:43 PM

Excellent point made by Mark about what's going on with the techs:
Good observation about the similarity of the Jun-July decline to the current one. I have to admit the similarities are striking. One thing I would point out that's different though is during the Jun-July decline they fled to the Generals for safety. Just look at the charts of GOOG, AAPL or any of the leaders and you'll see they advanced in Jun-July while the markets retreated. Not this time... they sold them hard today on volume. Anyway, I like the observation of similarity and it's definitely something to keep an eye on.

After reviewing the NDX price pattern I'd have to say I feel bearish about this market. It looks like at most we should look for a brief consolidation before getting another low, then a bounce into opex week followed by a very strong decline out of that. Just speculation at this point but it's what the pattern is currently pointing to:
60-min chart: Link
daily chart: Link

Keene Little : 11/8/2007 4:45:51 PM

These SPX charts show the similar possibilities as I showed on the DOW charts. I'll have to wait to see how Friday plays out which will hopefully provide some clues as to what's next. I don't currently see a good setup for either direction (as you can tell by the multiple price paths shown on the 60-min chart: Link . And then on the daily chart I show how those possibilities could play out over the next few months, including the more bullish possibility into the new year (green). Take nothing for granted here. Link

Jane Fox : 11/8/2007 4:35:38 PM

Economic Reports for tomorrow include:

8:30a.m. Sep Trade Balance. Expected: -$59B. Previous: $57.59B.

8:30a.m. Oct Import Prices. Expected: +1.2%. Previous: +1.0%.

10:00a.m. Mid-Nov Reuters/U Of Mich Sentiment Index. Previous: 80.9.

Jeff Bailey : 11/8/2007 4:29:31 PM

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

CLOSED out the PTR-WL as PTR traded $192.44. PTR-WL traded a high of $1.00. Finish $0.50 x $0.80.

STOPPED out of the SIL-LD at the bid of $0.80 as SIL traded $18.90 stop.

Day trade CHK $41.06 +2.39% from the short side today. Once at $40.91 with cover at $40.66. Another at $40.80, cover $40.79. Heavy call OI at $40.00 feels naked based on today's observation.

Dec. Nat. Gas did reverse losses to settle up $0.089, or +1.17% at $7.713. CHK is a big hedger of their Nat. Gas production

Keene Little : 11/8/2007 4:05:13 PM

Have you noticed the similarity between the July-Aug decline and the Oct-Nov decline on the daily chart. Nice fractal pattern, especially with today's hammer at support again. If it is indeed a true fractal then we should be looking for another rally leg to start (as per the green bullish count). Oh stop your grumbling bears, you do know how to play the long side, right? (wink) Never say never with this market.

Keene Little : 11/8/2007 3:59:22 PM

It's a bit crowded with potential price paths from here but this updated DOW daily chart shows how the two possibilities that I showed on its 60-min chart would fit on the daily chart, with the more bullish possibility (green) added to the daily chart: Link

Even though today's candle is a bullish hammer (or even more bullish dragonfly doji), the lack of bullish divergences at today's low, including on the 60-min chart, has me questioning the bullish meaning of that candle. Believe it or not the hammer is not that reliable a signal. A strong positive day tomorrow though would strengthen its reversal signal.

Keene Little : 11/8/2007 3:52:42 PM

SPX back in the green--one heck of a recovery off today's low. Now will they be able to hold it in the green? From here I see several possibilities which means I'll need to see more price action before getting a better sense of what's next. This DOW 60-min chart shows just two of the most likely possibilities (imo)--either consolidate for a few days before heading lower or start a bigger rally back up to the top of its parallel down-channel from the October high. Link

Linda Piazza : 11/8/2007 3:41:58 PM

Remember what I said about the VIX in my 1:26:25 post? As I type, the VIX is at 26.30, below that Keltner channel resistance that I mentioned. If the VIX ends the day about here, that resistance has held, at least for today. If this were an equity, we'd say that yesterday's candle and today's, taken together, suggest a bearish evening-star pattern. We'd also be cautioning that any such pattern requires a third candle--a tall red candle--as confirmation, so we can't consider the potential reversal confirmed. In this environment, we absolutely should not jump our guns. In any case, I thought that such a "reversal," if it happened might suggest a pullback only into the mid- to low-20's, still quite high for the VIX as of late.

Jane Fox : 11/8/2007 3:36:35 PM

The SPX is building a doji suggesting tomorrow will be a bullish day but I'm not willing to get back into the market just yet. The SPX needs to break 1490 and close above it before I will get back in. Link

Linda Piazza : 11/8/2007 3:34:05 PM

The short-term tenor has changed, of course. As if we didn't already know it, the SPX just closed a 30-minute period above its 9-ema. Bulls want to see support maintained on that 9-ema on any tests, with that average at 1468.80 now. For the OEX, it's 683.85.

Keene Little : 11/8/2007 3:30:04 PM

Looks like it's going to be a drive back to at least the flat line if not back into positive territory. That would leave a very bullish looking hammer candlestick at support (200-dma and uptrend line from July 2006 for the DOW).

Linda Piazza : 11/8/2007 3:24:56 PM

I mentioned in my 10:55:48 post today that it might be a doji day and perhaps a long-legged doji, but even I didn't imagine a leg (lower candle shadow) this long.

Of course the day is far from over. I hope you bears had set up your profit stops appropriate to your entries, account size and temperaments. If so, let a stop that gets too high just take you out, and try not to regret any further gains that you might have participated in if the markets then roll down again. As I and others have also said, relief rallies can be brutal.

Jeff Bailey : 11/8/2007 3:24:54 PM

Morgan Stanley (MS) $53.46 +4.43% ... "busts a move" late.

Keene Little : 11/8/2007 3:23:47 PM

Downtrend lines have been broken so it no longer looks bearish here. Watch for a pullback to test the broken downtrend line from Tuesday and if it holds then try the long side.

Keene Little : 11/8/2007 3:21:59 PM

Turned right back around and we got the high and targets have been hit. Now we see if it acts as resistance here. Quick test and if it keeps going then cover your short.

Linda Piazza : 11/8/2007 3:17:12 PM

The SPX has now produced a slightly higher high (than its 1:45 high), confirming a higher low on its 15-minute chart. It's not much of a change in tenor and I don't know that it will matter at all this time of day. However, it's a first sign of some slight improvement.

Keene Little : 11/8/2007 3:13:10 PM

Beginning to look like those upside targets may not get hit. Don't chase it lower but if it now drops below the lows just before 3:00 PM I'd look to short the next bounce after that.

Keene Little : 11/8/2007 3:09:23 PM

At the same SPX 1467 level is the bottom of the parallel down-channel that it broke below this morning. These often become resistance once broken. But any rally above 1467 has the potential to continue much higher so a short there is a test of resistance and if it doesn't stop then get out of the way (or stop and reverse long). Link

Keene Little : 11/8/2007 3:03:14 PM

Getting the next leg up. Two equal legs off the low is now at ES 1472.75, SPX 1467--right at its downtrend line from Tuesday. Try a short there if tagged, 2 to 3-point stop.

Jeff Bailey : 11/8/2007 3:02:47 PM

"It wouldn't gravitate, it wants to elevate" from $40.00

Jeff Bailey : 11/8/2007 3:00:52 PM

Day trade short stopped alert! ... for Chesapeak Energy (CHK) $40.79

Jeff Bailey : 11/8/2007 2:57:31 PM

Day trade short lower stop alert! ... for the Chesapeak Energy (CHK) $40.71 +1.52% ... to $40.79

Keene Little : 11/8/2007 2:55:26 PM

We had a last-hour selloff yesterday and I see the possibility for that again today. Stay on your toes here--either sideways choppy or small rally into the close or it'll let go.

Jane Fox : 11/8/2007 2:50:47 PM

This head and shoulders pattern has now officially triggered and suggests SPX could revisit 1400. Link

Jeff Bailey : 11/8/2007 2:40:25 PM

CHK $40.66 ... be ready for ANYTHING.

Jeff Bailey : 11/8/2007 2:39:22 PM

This "action" (or no action) in CHK and these volume spikes you see intra-day, strongly hints to me of some pre op-ex trading.

CHK $40.76 +1.64% ....

XNG.X 557.69 -0.11% ... and just off new weekly lows.

Jeff Bailey : 11/8/2007 2:22:20 PM

Day trade short lower stop alert! ... for Chesapeak Energy (CHK) $40.74 +1.59% ... to $40.86

Keene Little : 11/8/2007 2:14:23 PM

It looks like we're either going to head for new lows from here or get stuck in a larger corrective pattern as it consolidates a little longer. In either case I don't see anything bullish here.

Linda Piazza : 11/8/2007 2:13:53 PM

Unfortunately for bulls, there hasn't yet been a 30-minute close above the 30-minute 9-ema for either the SPX or the OEX. Those averages are at 1467.20 for the SPX and 683.13 for the OEX. No change in tenor as yet, but keep on your toes, bears.

Jane Fox : 11/8/2007 2:11:31 PM

Stopped at 13156.

Keene Little : 11/8/2007 2:03:59 PM

That SPX 1470 projection will coincide with its downtrend line from Tuesday so that would be a shorting opportunity with a tight stop just above.

Keene Little : 11/8/2007 2:02:31 PM

The bounce started off looking corrective but is pressing higher again. A larger 3-wave bounce with equality would be at ES 1474 (SPX 1470).

Jeff Bailey : 11/8/2007 2:02:15 PM

CHK short $40.80. Stop goes $40.92. Target $40.45.

Jane Fox : 11/8/2007 2:01:57 PM

WE have a long ways to target on this long so let's just keep ratching up the stop. Stop to 13156 now.

Jeff Bailey : 11/8/2007 2:00:59 PM

Day trade short alert! for CHK at the bid of $40.80.

Jeff Bailey : 11/8/2007 1:58:01 PM

Day trade short stopped alert! for CHK $40.66.

Jeff Bailey : 11/8/2007 1:54:30 PM

CHK's post-short low has been $40.42.

Keene Little : 11/8/2007 1:53:23 PM

The downtrend for SPX isn't violated until it rallies above 1471 and from here that's a 12-point rally and a lot of points to give back if you're scalping a short today. Depending on your trading time frame you'll either want to let that kind of bounce play out or cover sooner and watch for a reentry opportunity.

Jeff Bailey : 11/8/2007 1:52:40 PM

Day trade short lower stop alert! ... for the Chesapeak Energy (CHK) $40.58 +1.19% ... to $40.66

Keene Little : 11/8/2007 1:51:13 PM

RSI has broken its uptrend line on the 60-min chart that I had pointed out as something to watch for. It has not been able to break above its downtrend line on the 10-min chart. So far that's confirming this bounce as just a correction within the downtrend.

Linda Piazza : 11/8/2007 1:48:40 PM

The TRAN is bouncing bigger than some other indices, at least on a Keltner basis. It's above its 15-minute 9-ema, having closed the previous 15-minute period above it. Conclusion? Mixed evidence at this time, but the TRAN is at least attempting to lead the pack, as bulls would like to see happen on any bounce attempts.

Linda Piazza : 11/8/2007 1:47:06 PM

The USDJPY isn't bouncing. It's at 112.35.

Linda Piazza : 11/8/2007 1:38:47 PM

First green candles since the 10:45 candles are showing up on the SPX and OEX's 15-minute charts. I'm going to start listing the 15-minute 9-ema's as the shortest-term gauge of what's happening, but I think it's the 30-minute that's a better gauge, especially during this time of day when the 15-minute version is sometimes violated. The 15-minute ones are at 1463.16 on the SPX and 681.05 on the OEX. The 30-minute versions are at 1468.63 for the SPX and 693.95 for the OEX.

Jeff Bailey : 11/8/2007 1:36:59 PM

Day trade short lower stop alert! ... for the Chesapeak Energy (CHK) $40.54 +1.09% ... to $40.85.

Jane Fox : 11/8/2007 1:36:01 PM

This long is going to be hard on the stomach.

Keene Little : 11/8/2007 1:33:39 PM

Getting a sharper bounce now but watch ES 1467 (two equal legs up) to see if it stops there--getting tagged as I type. If not then we've got the makings of something bigger to the upside. Next resistance though will be the overnight lows near 1468.

Jeff Bailey : 11/8/2007 1:31:29 PM

DUG $40.63 -0.70% ...

Jane Fox : 11/8/2007 1:30:43 PM

Stop is 13126 and target is 13230.

Jeff Bailey : 11/8/2007 1:30:56 PM

I will be out of the office tomorrow. No telling what might happen in Asian markets tomorrow, but after having been "no bid," I'd just as soon cut out of the PTR-WL's. Starting to get some of the put OI "in the money," but not overly certain PTR sees sub $160 by next Friday.

Jane Fox : 11/8/2007 1:30:07 PM

Long Ym at 13182.

Jeff Bailey : 11/8/2007 1:27:33 PM

PTR $192.44 -9.56% ...

VIX.X 28.62 +8.04% ...

Keene Little : 11/8/2007 1:27:09 PM

Keep an eye on the volume of these bounces--if they're accompanied with stronger volume as the bounce progresses (watching a 1- or 2-min chart), then that could signal a bottom has been found. But if the bounces remain little 3-wave affairs with volume that tapers off then it's likely to roll back over. And use downtrend lines to see when it breaks. A retest of a broken downtrend line is typically a good long play entry point. In the meantime stick with the trend--down.

Jeff Bailey : 11/8/2007 1:26:33 PM

Swing trade exit alert! ... for the PetroChina PTR Nov. $160 Put (PTR-WL) at the bid of $0.60.

Linda Piazza : 11/8/2007 1:26:25 PM

Sometimes the VIX adheres fairly well to Keltner channel boundaries, too. Not always. If so, then a VIX ending level today at or below 26.77 would suggest that the VIX tested resistance but that the resistance held. It might suggest a further pullback, say to about 26.50 or maybe even 23.50-24.00, which would of course suggest a relief rally. This is just speculation, just something to watch.

Jane Fox : 11/8/2007 1:25:09 PM

YM has made a double bottom and it is due for a corrective bounce so let's take advantage of it.

Jane Fox : 11/8/2007 1:24:29 PM

I will try a long YM at 13182 with a stop at 13126 and target 13230.

Jeff Bailey : 11/8/2007 1:24:16 PM

CDE $4.38 +3.05% ... holding VERY tough considering Thursday's move.

Jeff Bailey : 11/8/2007 1:23:27 PM

If we ever "just happen" to get bullish/bearish a stock/option and suddenly see AMEX come in with a large offer/bid on the option with a $0.40 spread, that may well have that trader/specialist knowing something I/we didn't know.

See 11/06/07 SIL-LD observation several minutes after bullish profile.

Linda Piazza : 11/8/2007 1:21:12 PM

Candlestick theory on the number of "record sessions," the number of candles with lower lows (or higher highs), would suggest that we're long overdue for a bounce. You SPX and OEX bears want to see the 30-minute 9-ema's hold as resistance on 30-minute closes. You equity bulls want a stronger bounce now.

Jeff Bailey : 11/8/2007 1:20:01 PM

Swing trade put stopped alert! ... for the two (2) Apex Silver Mines SIL Dec. $20 Calls (SIL-LD) at the bid of $0.80.

SIL $18.90

Jeff Bailey : 11/8/2007 1:14:06 PM

Intercontinental Exchange (ICE) 164.78 -4.97% ... getting hit.

Jeff Bailey : 11/8/2007 1:11:07 PM

Apex Silver (SIL) $19.20 -2.29% ...

Linda Piazza : 11/8/2007 1:10:42 PM

Obviously, there's been no change in tenor yet. The SPX's 30-minute 9-ema is at 1469.72; the OEX's, 684.43. In fact, the VIX is leaping up and indices are pushing lower. I keep warning about good account management when it hasn't been needed so far, at least for bearish trades, but do keep trailing those stops.

Jeff Bailey : 11/8/2007 1:10:31 PM

Goldcorp (GG) $34.44 -5.15% ... getting hit.

Linda Piazza : 11/8/2007 1:08:37 PM

VXO above 30. The VIX isn't far behind, at 28.54 as I type.

Keene Little : 11/8/2007 1:05:05 PM

One thing that I continue to find interesting, and potentially bullish for the stock market (at least for a bigger bounce that lasts a few weeks) is TNX, the 10-year yield. While it's making minor new lows over the past couple of weeks, including today, it's building bullish divergences on the charts. Since yields have been heading in the same general direction as equities (so bonds inverse to stocks) a stronger bounce in yields may mean the same for stocks. Bears need to stay on their toes and take nothing for granted here, no matter how bearish things start to look.

Keene Little : 11/8/2007 1:00:38 PM

Brokers (XBD) are hurting today, down -3.3%. I see potential Fib support near 196 for this index (currently just over 200 here) and then a sideways/up correction (lasting a couple of weeks) before continuing lower. If 196 doesn't hold then 188 (its 200-weekly moving average) would be my next guess. Link

Jeff Bailey : 11/8/2007 12:55:16 PM

Chesapeak Energy (CHK) $40.74 +1.59% ... here's a day trader's 5-minute interval chart, with QCharts' DAILY and WEEKLY Pivot levels turned on Link

Jeff Bailey : 11/8/2007 12:46:32 PM

Chesapeak Energy (CHK) $40.83 +1.82% ... should see a bid pull with Nat. Gas -0.76% ...

Jane Fox : 11/8/2007 12:46:02 PM

Internals are quite bearish today when they get this bearish the chances of them recovering are quite slim. Link

Jeff Bailey : 11/8/2007 12:45:51 PM

DUG $40.06 -2.10% ... Comes to DAILY Pivot ($40.10) and WKLY Pivot ($40.07) overlap.

Jeff Bailey : 11/8/2007 12:44:57 PM

US Oil Fund (USO) $74.80 +0.42% ... undercuts DAILY Pivot ($74.83) for 2nd-time today and probes session low.

Keene Little : 11/8/2007 12:44:50 PM

The high-flyers and other generals are down hard today. IBM (-5.1%), INTC (-4.2%), MER (-4.2%) to name just a few that I watch regularly. GOOG has already dropped to the 680 level, down 53 here (possible support by its uptrend line now). When the big ones drop it's worrisome.

Jane Fox : 11/8/2007 12:57:04 PM

The Oil stocks are holding up quite well today. Yesterday they took a beating but today they are OK.

Keene Little : 11/8/2007 12:42:12 PM

Just be careful of a v-bottom. A few strong buy programs at this point could get some serious short covering started.

Linda Piazza : 11/8/2007 12:42:02 PM

Dangerous time here, now that the testimony is finished. What's the next direction? The USDJPY still slides down along that neckline of the inverse H&S that it confirmed earlier today. That's a bit bearish, as the more bullish result of such a retest would be an immediate bounce. At 112.55, however, there was a slight bullish divergence at the last little new low and the 112.40-ish support hasn't been violated. Yet. The NYSE has just hit another new low for the day, as has the TRAN. So far, nothing has changed in the bearish tenor, but keep following lower with those stops. If you're in a bearish position, your task is easy, as all you have to do is decide how tight or wide you want those trailing stops to be.

Keene Little : 11/8/2007 12:40:31 PM

SPX has dropped through first potential Fib support at 1467. Next one is 1461. If that doesn't hold, hold onto your hats.

Keene Little : 11/8/2007 12:31:08 PM

ES came within 3 ticks of testing its overnight low so that's another potential support level. If all these support levels start to give way then you'll definitely want to hang onto your short position. But pull your stop closer at this point in case the market is now probing for a bottom.

Keene Little : 11/8/2007 12:26:04 PM

NDX is now approaching its 50-dma at 2104.54.

Jeff Bailey : 11/8/2007 12:25:25 PM

PTR-WL currently $0.15 x $0.35.

Jeff Bailey : 11/8/2007 12:24:37 PM

Swing trade put place order to sell alert! ... Place an order to sell the PetroChina PTR Nov. $160 Put (PTR-WL) for $0.50. This order is GTC (Good until canceled).

Keene Little : 11/8/2007 12:23:14 PM

This is where I'd rather be short but understand that bears may be at more risk than bulls. Protect your short position now.

Jeff Bailey : 11/8/2007 12:22:35 PM

PetroChina (PTR) alert! $196.02 -7.88% ...

Keene Little : 11/8/2007 12:22:14 PM

So far the new low here has bullish divergences on the 5- and 10-min charts. That's an early call since we haven't even seen a hint of a bounce yet but keep an eye on this since it's possible we're going to put in a low followed by a much stronger bounce into this afternoon.

Keene Little : 11/8/2007 12:15:16 PM

On the NDX daily chart I showed in last night's Wrap (which came out late this morning and not sure why so late), I pointed to a key level at 2141 (the low on Oct 24th). I said a break below that level would negate the last remaining chance for a bullish outcome to this pullback. At this point I'm declaring the top is in on the techs. Updated daily chart: Link . This weekly chart that I showed last week did a fine job of showing the coinciding time and price projection marking the high: Link

By the way, I noticed that I mistyped the link for the Dark Days in last night's Wrap. My apologies--this is the correct link: https://www.mta.org/eweb/docs/1998DowAward.pdf

Linda Piazza : 11/8/2007 12:13:01 PM

Absolutely no change in tenor yet, at least as evidenced by the SPX's and OEX's reactions to their 30-minute 9-ema's. Those are now at 1478.07 for the SPX, important on 30-minute closes, and 688.46 for the OEX. Keep following the prices lower with your stops in bearish positions as the tenor could change after Chairman Bernanke stops speaking.

Jeff Bailey : 11/8/2007 12:06:12 PM

Day trade short alert! ... for a full position in shares of Chesapeak Energy (CHK) at the bid of $40.91. Stop goes $41.26, target $40.10.

Keene Little : 11/8/2007 12:02:19 PM

And remember the potential support for the DOW at 13150-13175 if it gets down there. We're still in the "Dark Days" window through today but I would think that if that scenario were playing out we'd already be down several hundren points. Instead I'm looking for where this will find a bottom and I think it's not much lower (for a tradeable bottom).

Linda Piazza : 11/8/2007 11:56:49 AM

SPX and OEX 30-minute 9-ema's are at 1480.06 and 689.54, respectively.

Keene Little : 11/8/2007 11:53:03 AM

After bouncing off the bottom of its down-channel SPX has essentially been moving sideways and looks like a small 4th wave correction in the move down from Tuesday afternoon's high. If true then we need another drop lower in the 5th wave which would complete the leg down from Tuesday. In that case I think the 1461 Fib projection looks like a good downside target. I'll be watching to see if a new low (assuming we get one) is accompanied with a bullish divergence on the 10-min chart to match the one on the 60-min chart. If yes then I think it will set up a good long play. Link

Jeff Bailey : 11/8/2007 11:50:43 AM

DUG $39.27 -4.03% ...

Heavyweights are XOM +2.38%, CVX +2.81%, COP +2.65% and SLB +1.64%

Jeff Bailey : 11/8/2007 11:49:28 AM

US Oil Fund (USO) $75.44 +1.28% ... after near-kiss of Tuesday's close ($75.34). Session low has been $75.35. High $76.03.

Just refuses to backfill up-gaps so far.

Jeff Bailey : 11/8/2007 11:39:25 AM

Crocs (CROX) $37.01 -10.75% Link ... "whack!" breaking down from a little pennant on bar chart. Any other gap downs from a few days ago that look the same? Kind'a like the "bearish triangle" of a PnF chart.

Jeff Bailey : 11/8/2007 11:28:31 AM

Countrywide (CFC) $13.65 +1.26% ...

Jeff Bailey : 11/8/2007 11:28:04 AM

Swing trade put alert! ... for one (1) of the Countrywide Financial CFC Dec $15 Puts (CFC-XC) at the offer of $2.45. No stop for now, target $10.00.

Jeff Bailey : 11/8/2007 11:22:29 AM

HBC Holdings (HBC) Alert! $90.00 -0.95% ...

Keene Little : 11/8/2007 11:09:14 AM

As Linda often reminds us, the day after a large move is often a consolidation day. So far today is shaping up as exactly that. It would likely be bearish in that we'd be consolidating at support but maybe not until tomorrow or Monday. As I said, I don't like the upside but the short side may not work today either if all we're going to do is chop up and down today.

Jeff Bailey : 11/8/2007 11:06:52 AM

Chesapeake Energy (CHK) $41.17 +2.66% ... takes out yesterday's gap high open ($41.03). Nation's largest natural gas producer.

Jeff Bailey : 11/8/2007 11:01:20 AM

That reminds me ... ProShares introduced a new UltraShort FTSE/Xinhua China 25 (AMEX:FXP) $78.88 today.

Fact Sheet Link

Keene Little : 11/8/2007 11:01:18 AM

GOOG shows a clear breakdown on its daily chart. It's looking like a throw-over above its steep up-channel and now back inside the channel. Support should be found at its uptrend line near 680 but notice the clear and sharp break of the rising trend line on RSI. Link

Linda Piazza : 11/8/2007 10:58:58 AM

Chairman Bernanke is talking about the banks' balance sheets being impacted by the subprime problem. Here's a sneak peak at a paragraph from tonight's Wrap:

Last week, I reported that the outstanding level of commercial paper had dropped for the twelfth week in a row. Make that thirteen. It fell by $15.6 billion. Even worse, asset-backed commercial paper declined 3.4-percent drop for the week ending Wednesday. This was the largest decline in nine weeks, bringing the total decline to 29 percent or $338 billion. These are short-term loans that are backed by credit cards, mortgages or other receivables. This illustrates that investors still aren't interested in these asset-backed securities. Furthermore, this is not good news for banks, whose balance sheets will be impacted when the issuers of these asset-backed maturities must rely on banks for their funding needs.

Jeff Bailey : 11/8/2007 10:58:22 AM


DJ- More than 4 million Chinese-made toys sold in the U.S. as Aqua Dots are being recalled after reports surfaced that children fell into comas after swallowing the beads, which contain a chemical found to mimic the effects of the date-rape drug GBH.

Jeff Bailey : 11/8/2007 10:56:53 AM


DJ- Auto maker loses $380 million, or 19c a share, in 3Q compared with a loss of $5.2 billion a year ago tied to restructuring. Ford's loss from continuing operations excluding items was $24 million, or 1c a share.

F $8.40 +1.94% ...

Linda Piazza : 11/8/2007 10:55:48 AM

The SPX's 30-minute 9-ema is at 1483.30, and the OEX's, at 691.56. The SPX's is rather near the 200-sma, of course.

I keep warning about this, but make sure you practice good account management. It's important that you bears out there not let a rally get out of hand, because relief rallies can be brutal. I don't know that such a rally will happen. Perhaps markets will dive further and the SPX and OEX will continue to find resistance on 30-minute closes at those 9-ema's. I don't know how Chairman Bernanke will answer questions and how the markets will take his answers, but I can certainly conceive of an instance in which perhaps he's through without saying anything that's news to anybody, and a relief rally ensue. As I've said before, the more typical pattern after such a big-range day is a consolidation or doji (perhaps a long-legged one) type day, but with the VIX at 26.09 as I type, we've certainly moved into a more volatile environment than many newbies have experienced.

Jeff Bailey : 11/8/2007 10:55:33 AM


DJ- Mining firm Rio Tinto rejects rival's bid for the company in a deal analysts value at $100 billion and that would create the world's biggest diversified mining firm. Rio's shares surge 26% as investors anticipate a hostile takeover of the firm.

RTP $435 +21.67% ...

Jeff Bailey : 11/8/2007 10:54:16 AM


DJ- Retailers are posting a second-straight month of weak sales growth, with midmarket department stores in particular missing expectations and giant Wal-Mart reporting a modest 0.4% increase. But Target bucks the trend and gives impressive numbers, sending its shares up 3%.

RLX.X 425.59 -1.20% ...

WMT $43.40 -1.20% ...

TGT $58.72 -0.17% ...

Linda Piazza : 11/8/2007 10:49:39 AM

The USDJPY is at 112.58. It's still in testing territory, retesting the neckline of the inverse H&S that it confirmed early this morning, but it's certainly not inspiring great confidence in the way it's sort of sliding down along that neckline rather than springing up from it. Maybe forex traders are waiting to see what comes out of Chairman Bernanke's Q&A session?

Keene Little : 11/8/2007 10:46:52 AM

I just noticed GOOG--down hard this morning and now back under $700. I haven't checked some of the other tech leaders yet but a turn back down by them would be a bearish sign for techs and for the broader market. If they, the last who were rising, put in a top then it could be another sign of a major market high.

Jeff Bailey : 11/8/2007 10:42:34 AM

StreetTracks Gold (GLD) $83.22 +1.19% ... was trading $82.91 (roughly $829.10/ounce)

Jeff Bailey : 11/8/2007 10:41:36 AM

iShares Silver (SLV) $155.90 +2.76% ... was trading $154.78 (roughly $15.47/ounce)

Jeff Bailey : 11/8/2007 10:40:01 AM

USO $75.79 +1.75% ... was trading $75.71 at 10:00

Jeff Bailey : 11/8/2007 10:38:52 AM

US Dollar Index (DXY) 75.28 -0.16% (30-minute delayed) ... got "whacked" at 10:00 AM from 75.42.

Jane Fox : 11/8/2007 10:38:09 AM

Too early to tell but it looks like the SPX is trying to make a bottom here and if it does then it will need to break the support turned resistance at 1490. A close above 1490 would tell me it is time to dip my toes back into the water and take another long. Link

Linda Piazza : 11/8/2007 10:37:21 AM

The SPX's 30-minute 9-ema is now at 1483.73, quite near the 200-sma. The OEX's is at 691.86. When I roll down to a 15-minute chart, I see that both were knocked back by the 15-minute 9-ema a few minutes ago. Those are at 1479.66 for the SPX and 689.61 for the OEX. Please remember that all these numbers are important on closes of the relevant periods and that prices sometimes pierce them on intra-period moves, even if they're eventually going to be support or resistance.

Jeff Bailey : 11/8/2007 10:34:35 AM

DUG $39.30 -3.95% ...

Jeff Bailey : 11/8/2007 10:32:30 AM

EIA: Weekly Nat. Gas Storage at this Link ... Build of 36 BCF.

Jeff Bailey : 11/8/2007 10:31:07 AM

Bernanke Testimony: The economic outlook at this Link

Keene Little : 11/8/2007 10:30:27 AM

At the same time the DOW hit its 200-dma SPX tagged the bottom of its down-channel, also to the penny, that I've been showing on its 60-min chart. So support is holding for now and we'll see what the bulls can make of it. It's obviously a risky place to be short. I can't say I like the upside, at least not yet, so I'm waiting to see how price acts here.

Keene Little : 11/8/2007 10:27:42 AM

The DOW tagged its 200-dma almost to the penny and predictably bounced off it as if touching a live wire. If that holds then obviously the bulls could put something together here. If it consolidates above it then I would expect it to break.

Keene Little : 11/8/2007 10:23:43 AM

Big bounce now in ES (more than the others). It's looking a little volatile this morning.

Linda Piazza : 11/8/2007 10:16:22 AM

The SPX's 30-minute 9-ema has dropped to 1484.45; the OEX's, 692.52. Rolling down to the 15-minute chart (because my 30-minute's are still not giving me the lower boundary levels), the SPX maintains 15-minute closes above the lower boundary at 1470.35, but the OEX underperforms by this measure, not maintaining its lower boundary at 687.13 on 15-minute closes.

Jeff Bailey : 11/8/2007 10:13:42 AM

I would have to think energy bears want to see USO back below $75.34 (11/06/07 close).

Session high has been $76.00, which is 2-cents above WEEKLY R1. WEEKLY Pivot ($72.79) yet to be tested this week and still suggest strong near-term demand.

Jane Fox : 11/8/2007 10:12:02 AM

WASHINGTON (MarketWatch) - The U.S. economy not only faces the risks of a sharp slowdown from the housing market contraction, but also of a surge of inflation from sharply higher crude oil prices and the weaker dollar, Federal Reserve Chairman Ben Bernanke said Thursday.

In prepared testimony to the Joint Economic Committee of Congress, Bernanke painted a picture of an economy in a perilous position, even though it has shown remarkable resilience so far this year, with third-quarter gross domestic product rising at a solid 3.9% annual pace.

Bernanke said that he and his colleagues at the Federal Open Market Committee expect the economy to slow "noticeably" from the third-quarter growth rate and remain sluggish in the first half of 2008.

And there were "downside" risks to this subdued forecast, Bernanke said, citing the risks that banks will be more reluctant to lend money due to financial market conditions or if home prices weaken more than expected.

Jeff Bailey : 11/8/2007 10:10:25 AM

USO $75.68 +1.61% ...

Keene Little : 11/8/2007 10:10:19 AM

Those last two comments from Bernanke (Jane's 10:03 post) are important comments--a slowdown in growth with risks for rising inflation. It's the Fed's worst fear, stagflation.

Jane Fox : 11/8/2007 10:10:05 AM

So the internals are bearish but not overly so.

Jeff Bailey : 11/8/2007 10:09:59 AM

DUG $39.74 -2.88% ...

Jane Fox : 11/8/2007 10:09:42 AM

AD line is still above 0 but neutral at +170. AD volume is also above 0.

Keene Little : 11/8/2007 10:06:36 AM

YM has broken its overnight low so the next test will be ES, 6 points lower now.

Jeff Bailey : 11/8/2007 10:05:10 AM

Valero Energy (VLO) $70.69 +0.02% ...

Jeff Bailey : 11/8/2007 10:04:27 AM

December Unleaded (rb07z) $2.48 +1.63% ...

Jeff Bailey : 11/8/2007 10:03:44 AM

Valero has fire in unit at Port Aurthur, TX ... Reuters Story Link

Jane Fox : 11/8/2007 10:03:43 AM

Bernanke cites weaker dollar as key inflation risk

Bernanke sees inflation in range of price stability in '08

Bernanke concerned with recent spike in crude oil price

Bernanke says growth to remain sluggish in H1 2008

Bernanke says growth likely to slow 'noticeably' in Q4

Bernanke says strong Q3 GDP growth won't be sustained

Bernanke: Risks still in balance in days following Oct FOMC

Bernanke sees downside growth risks, upside inflation risks

Bernanke sees important upside risks to inflation

Linda Piazza : 11/8/2007 10:01:45 AM

I grew up in the Beaumont/Port Arthur region and still have many relatives there. To those subscribers who have relatives in the Valero plant, I hope all those relatives are well. For our readers wanting more information, all I can find on a search of the Beaumont Enterprise's site is that the explosion has caused the closure of Texas 82 between Texas 73 and 87.

Jeff Bailey : 11/8/2007 10:00:43 AM

7-Day RP results Link

Linda Piazza : 11/8/2007 9:58:56 AM

The USDJPY is now at 112.75, having dipped to 112.63 and retested the lower version of that inverse H&S neckline that I mentioned in an earlier post. For those who didn't read that post, during the overnight session, the USDJPY formed and confirmed an inverse H&S. This retest is important, as equity bulls now want to see the USDJPY bounce and surpass its early morning 113.35 high as a sign that the retest was successful. Equity bears want the USDJPY to keep dropping back below that neckline again, invalidating the formation if it sustains values below about 112.50.

Jeff Bailey : 11/8/2007 9:57:23 AM

Overnight RP results Link ... just $136M in Mortgage-backed.

Linda Piazza : 11/8/2007 9:55:59 AM

Two more repos have been announced. The three repos so far total $32.750, leaving a $7.250 net drain for the day. The total sloshing through the system has risen now to $40.750 billion.

Keene Little : 11/8/2007 9:54:27 AM

If this morning's drop continues then obviously we'll want to see if the overnight lows in futures hold. For YM that's a lot closer, about another 40 points lower to 13258. But for ES it's quite a bit lower, about another 11 points to 1466.75.

Linda Piazza : 11/8/2007 9:53:55 AM

Unfortunately, my 30-minute charts are not giving me the levels of the widest Keltner bands this morning, but I believe that both the OEX and SPX are testing them now, to the best of my memory. They'll pop back up on my charts in another 15 minutes or so, but for now, you have only my memory. On the 15-minute chart, both are threatening breakdowns, with the SPX's breakdown level now at 1471.60 and the OEX's at 687.68, both important on 15-minute closes. This is a precarious time because it signals that the downside is overdone, but also that momentum is strong. Keltner channels were developed to identify breakouts or breakdowns, as those can be lucrative plays although those who trade them suffer frequent whipsaws. What this says to you out there is that this is a time to keep lowering your stops on bearish positions in case there's a reversal. It is not, so far, a signal that longs will be a good bet. However, I do have to keep warning that Bernanke is about to speak and that early moves are often reversed after a big-move day like yesterday's. Just keep good account management.

The short-term trend has not begun to change until and unless the SPX and OEX close 30-minute periods above their 9-ema's, at 1486.77 and 693.97, respectively. That's a lot of profit to give up to allow that test, though, so decide now if you want to allow it if in bearish positions or you want a closer stop.

Jeff Bailey : 11/8/2007 9:52:50 AM

Fed Accepts $20B in 7-Day RPs

Jeff Bailey : 11/8/2007 9:52:25 AM

Fed Accepts $3.75B In Overnight RPs

Jane Fox : 11/8/2007 9:46:41 AM

AD line has now fallen to +483 and I consider this neutral.

Linda Piazza : 11/8/2007 9:40:25 AM

Repos in the amount of $40.000 billion mature today. Thursdays tend to have bigger amounts than any other day of the week. So far, the Fed has announced a single repo in the amount of $9.000 billion, but I'd imagine that another will be announced within minutes. So far, there's a net drain of $31.000 billion.

Keene Little : 11/8/2007 9:40:01 AM

If SPX can rally back up to 1490 this morning it will be interesting to see if it turns into resistance. It looks like a buy program hit, especially in NQ but it's been reversed quickly. That's usually not a good sign for the bulls.

Linda Piazza : 11/8/2007 9:38:45 AM

I'm sticking with the SPX's 30-minute chart for now. It shows the SPX facing potential resistance at about 1481.90 on 30-minute closes. The 30-minute 9-ema is at 1488.58, and that hasn't been breached on a 30-minute close since Tuesday, when it was providing support all day. Support all day one day, resistance all day the next: that's the way things have been going lately. Of course, there's the 200-sma just ahead, too.

Jane Fox : 11/8/2007 9:38:27 AM

I was thinking the US$'s MACD was forming a bullish divergence but this last drop in the $ brought the MACD with it and now the MACD has made a lower low so the bullish divergence is gone. Link

Jane Fox : 11/8/2007 9:34:51 AM

VIX falling to new daily lows supporting ES's new intraday highs.

Jane Fox : 11/8/2007 9:34:07 AM

AD line is a bullish +961 and climbing.

Linda Piazza : 11/8/2007 9:32:30 AM

If the cash SPX were to rally up the amount that futures were above fair value, then the SPX will likely be rallying up toward the 200-sma, now at 1483.12. The zone through there would represent obvious potential resistance and it might be reached just preparatory to Fed Chairman's address that begins at 10:00 this morning. Keep that in mind if you perhaps bought calls at the close yesterday. After such a big range day yesterday, you know that weird things can happen today. The typical pattern is for a choppy doji-type day, but please keep in mind that in high-volatility environments, relief rallies can be explosive.

Linda Piazza : 11/8/2007 9:25:37 AM

I haven't had time to check all the reports, so I'm not sure why this is happening, but the USDJPY has been falling over the last couple of hours from the 113.35 level it reached during the 7:15 candle, and is now at 112.83. The USDJPY formed and confirmed an inverse H&S during the overnight trading period, and I do include that because Japan's market is trading then. Depending on how you draw the neckline, it could be at the current 112.83 level or a bit lower, near 112.66. Essentially, then, we're seeing a retest of the neckline to see if it holds as support. Equity bulls certainly want it to do so, while equity bears of course would like to see the USDJPY head lower.

In reality, I don't know that any of us really want to see the dollar weaken much more. I certainly don't want to see the heightened inflation that comes from a too-weak dollar, for example. So, when I'm making these "want to see" comments, it's not that I ever want to think of our country's currency being devalued or our people's investments losing ground, either. My mother-in-law lives on the interest her investments bring, and it's been tough for her in a weakening dollar/weakening yields environment.

Jane Fox : 11/8/2007 9:22:55 AM

Let's take a look at the daily charts now and see if we can figure out what is going on. I have been saying there was a very good chance that the SPX support at 1490 would break, it was just too obvious and too many traders were watching it. My thoughts were it would/could break, close below that very important 1490 and then rally back up to a least test the swing high at 1550. This would inflect the most pain on the most traders, something the market is very very good at doing. So far we have the close below 1490 and since I don't know if this scenario will play out, I have decided to watch without the emotion of having money on the line. Link

Jane Fox : 11/8/2007 9:17:57 AM

Crude was able to hold $95.00/bl overnight and is now back above $97.00/bl. This has been a very volatile market of late and I know of a few traders who have been having a lot of fun daytrading it.

Gold and the US$ are both in a flat line mode.

Our canary in the mine market, the US$/YEN currency pair, is back into its PDR. Link

Keene Little : 11/8/2007 9:15:25 AM

Equity futures have had a big recovery off their overnight lows and even with a pullback from their early morning highs it looks like we'll have a bullish start to the day. Will those overnight lows get tested, or worse? With ES up 20 points from its low, that would be a long way back down. This makes it very tricky to figure out what it's going to do this morning.

Jane Fox : 11/8/2007 9:12:24 AM

The overnight session started as an extension of the previous day sell off then the sellers got tired and the buyers were able to rally all the markets back into their respective previous day ranges, all except the NDX futures (NQ), our leader the last few months. NQ has only been able to tag its PDL and has not been able to rally back into its PDR. Link

Jane Fox : 11/8/2007 9:04:04 AM

WASHINGTON (MarketWatch) -- The number of U.S. residents filing for unemployment benefits decreased by 13,000 last week to stand at 317,000, the lowest level in a month, the Labor Department reported Thursday.

Wildfires in California added 3,000 to jobless claims for the week ended Nov. 3, a Labor Department official said.

The four-week average of new claims rose by 2,000 to 329,750, the highest level since the week of April 21. The four-week average is considered a better gauge of labor market health than the volatile weekly number because it smoothes out one-time events such as weather, strikes or holidays.

Linda Piazza : 11/8/2007 7:32:18 AM

I haven't found it elsewhere, but my forex news source reports that the ECB has also kept rates steady, as expected.

Linda Piazza : 11/8/2007 7:18:37 AM

As expected, the Bank of England has left rates steady.

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