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OI Technical Staff : 12/28/2007 9:59:59 PM

The Market Monitor has been archived.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

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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 : 12/28/2007 6:57:48 PM

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

Trade Blotter of December CLOSED Trades at this Link

One-half day left in the MONTH and SPX down 0.2%, so difficult to tell if I'm on the "right side" of the market.

One day left in the QUARTER and SPX -3.2%, so blotter doing something right.

Out of office: I will be out of office on Monday. I plan on returning Wednesday morning.

Happy New Year!

Jeff Bailey : 12/28/2007 5:26:59 PM

CBOE Most Active Calls/Puts at this Link

Jeff Bailey : 12/28/2007 5:22:48 PM

KSS Jan $45 Puts one of today's most actives at CBOE.

KSS $45.21 +0.57% ...

Keene Little : 12/28/2007 4:59:17 PM

I'll leave you with an updated SPX 60-min chart that shows the highest odds moves in my opinion. With the current choppiness in the market there really aren't any high-odds moves so this is just a guide that I'll be updating as price makes its next move (up or down) on Monday. This ties in with the daily chart I posted last night. Link

Have a great weekend.

Keene Little : 12/28/2007 4:25:48 PM

After testing its downtrend line from October through the Dec 11th high the COMP closed below it. That's potentially bearish for a continuation lower on Monday. But I still like the potential for a bounce back up to correct some of the decline from Wednesday's high and then a turn back down: Link

Jane Fox : 12/28/2007 4:13:32 PM

Economic reports for Monday Dec 31st include:

9:45a.m. Dec Chicago PMI. Previous: 52.9.

10:00a.m. Nov Existing Home Sales. Previous: -1.2%.

10:30a.m. Dec Dallas Fed Mfg Production Index. Previous: -3.5.

Keene Little : 12/28/2007 4:09:58 PM

If the RUT is any indication I'd say we'll see some more selling (not necessarily a lot nor sustained) on Monday morning.

Keene Little : 12/28/2007 4:08:35 PM

A little selling in the last minute and that leaves SPX pinched between its two trend lines. We'll surely get some resolution out of it on Monday (which will be another very low volume trading day). Any bets the move will start with a gap?

Linda Piazza : 12/28/2007 4:03:43 PM

Have a good weekend, everyone!

Linda Piazza : 12/28/2007 3:56:42 PM

Barring any big movement in the last few minutes of trading, the SPX looks as if it will end the day with a long-legged doji. Many are accustomed to thinking of doji (open and close near the same level, so that there's no body to the day's candle, but just a bar across it) as reversal signals. However, when they occur in the midst of a consolidation zone, they're just a visual representation of the uncertainty in the markets. This one is occurring right in the middle of a narrowing triangle that's been forming since late October or mid-November, depending on how you draw it, so it's occurring neither at the top of a prolonged rise or the bottom of a prolonged drop. So, what do we know after today? No one wanted to make any decisions today. That's it, the total of what we know.

Keene Little : 12/28/2007 3:55:47 PM

SPX is pushing above its downtrend line into the close. Whether it's meaningful in the remaining minutes of trading is questionable.

Jeff Bailey : 12/28/2007 4:02:28 PM

Dow Jones Hedge Fund Strategy Benchmarks (Table) Link

Description of the Benchmarks:

Convertible Arbitrage strategies attempt to exploit anomalies in the prices of corporate convertible securities, such as convertible bonds, warrants and convertible preferred stock.
Merger Arbitrage seeks to capture the price spread between current market prices of corporate securities and their value upon successful completion of a takeover, merger, spin-off, or other types of corporate reorganizations.
Event Driven strategies focus on identifying investment opportunities that benefit from specific events or market conditions. For instance, in the broader perspective, event driven strategies often concentrate on taking positions in firms that are or are anticipated to be involved in mergers, bankruptcies or other special situations.
Distressed Securities portfolios invest in both debt and equity of companies that are in or near bankruptcy.
Equity Market Neutral managers attempt to identify overvalued and undervalued equity securities while neutralizing the portfolios exposure to market risk by combining long and short positions.
Equity Long/Short (US) managers attempt to generate returns from overvalued and undervalued securities without the express intent of having a zero exposure to the market. Besides using individual short positions to enhance returns, shorting exchange-traded futures and options is also used as a means for hedging market risk.

Linda Piazza : 12/28/2007 3:47:42 PM

The RUT is inching down toward the previous low of the day, just a few cents above it as I type.

Keene Little : 12/28/2007 3:38:45 PM

The gnat's butt cheeks are getting pinched together now--between the downtrend line from Wednesday and the uptrend line from Dec 18th, currently near SPX 1473, price is getting squeezed. I think the market will keep us guessing over the weekend as to which one is going to break. The two key levels are currently 1464 to the downside and 1488 to the upside although a break of either trend line should be good for at least a short term trade in that direction. Link

Jeff Bailey : 12/28/2007 3:37:13 PM

Companhia Vale Do Rio Doce (RIO) $33.53 -0.23% ...

Jeff Bailey : 12/28/2007 3:36:36 PM

Brazil Stocks Close Slightly Higher Friday On Fund Buying

Linda Piazza : 12/28/2007 3:34:17 PM

Time to begin thinking about your end-of-day decisions, as the market-on-close orders will be coming in, in a few minutes. Are you planning on holding your option position over the weekend? If not, when will you close it? If it's a bearish position you entered Wednesday near the close, make sure you lock in some of the profit you had, not letting a bounce get too big. If it's a bearish position you entered this morning near the high, you need to be even more careful about protecting your profit, as you probably have less cushion. If you've entered a bullish position sometime today, you're going to have to decide if you want to keep it, even if you'd intended to do so originally, if the SPX can't maintain values above that descending trendline off Wednesday's high.

Linda Piazza : 12/28/2007 3:29:30 PM

As Keene is probably noting, too, the SPX is not giving up its test of that descending trendline off Wednesday's late-day high. The USDJPY is still weak, still near a recently reached day's low. The VIX is still maintaining its breakout status on its 15-minute chart, with only a minimal sideways to sideways-down consolidation. There's no prediction of great strength coming from either of these predictors--in fact, there's the opposite--but the SPX keeps on challenging that resistance.

Keene Little : 12/28/2007 3:14:42 PM

As near as I can tell, the gnat's butt is flat.

Keene Little : 12/28/2007 3:06:18 PM

LOL, you're so right Linda. Studying the moves in today's market is a bit like studying a gnat's butt--you need at least a magnifying glass to see anything.

Linda Piazza : 12/28/2007 3:03:40 PM

Yes, Keene: you, me, and the 14 other market participants who are still left watching charts this Friday afternoon. (See Keene's 2:47:34 post.)

Linda Piazza : 12/28/2007 3:02:28 PM

This has been a long day, with uncertainty about the trustworthiness of any signals from the first moment trading opened. The SPX tests the descending trendline off the late Wednesday high. It's below the benchmark central basis line for the 15-minute Keltner channels, too, but, so far, it hasn't rolled back down.

Keene Little : 12/28/2007 2:54:22 PM

Techs just got hit with some stronger selling.

Keene Little : 12/28/2007 2:51:47 PM

The RUT's pattern off today's low looks more like a bear flag than something more bullish but beware of the buy programs to save the day today.

Keene Little : 12/28/2007 2:47:34 PM

I see Linda and I are looking at the same thing on SPX.

Keene Little : 12/28/2007 2:46:25 PM

SPX has almost made it up to its downtrend line from Wednesday at 1480 (the DOW is slightly above its line) so it could struggle right here.

Keene Little : 12/28/2007 2:44:34 PM

It's been a steady push higher since the today's lows and it's certainly looking a little more bullish than it did at the lows. The market is not following my plan to have the DOW settle near 13262 by the close. I hate it when that happens.

Linda Piazza : 12/28/2007 2:44:27 PM

The bounce on the SPX is getting bigger than bears would like. Next resistance is important resistance, at 1480.21 on 15-minute closes. If the SPX were to sustain values above about 1481.15, it would be breaking above the trendline off the Wednesday high. This trendline describes the top of a descending price channel, so bulls need to be careful here, too. The SPX tested this channel this morning and couldn't break above it.

Jeff Bailey : 12/28/2007 2:37:02 PM

Netflix (NFLX) $26.71 -2.69% ...

Jeff Bailey : 12/28/2007 2:36:30 PM


DJ- Retailer closes online movie download service it launched less than a year ago after Hewlett-Packard discontinued software that was running the service. Wal-Mart will continue to operate a music download service.

Jeff Bailey : 12/28/2007 2:35:29 PM

Monster Worldwide (MNST) $32.99 -1.02% ...

Jeff Bailey : 12/28/2007 2:35:01 PM

Manpower (MAN) $57.19 -0.76% ...

Jeff Bailey : 12/28/2007 2:34:31 PM


DJ- The Conference Board's help-wanted advertising index slips one point to 21 in November. Group notes that in the last three months, help-wanted advertising fell in all nine areas of the economy, led by a 12.8% decline in the Pacific region.

Jeff Bailey : 12/28/2007 2:33:52 PM


DJ- President Bush intends to veto a broad defense policy bill, saying the measure contains a provision that would expose Iraq to liability lawsuits related to misdeeds perpetrated under Saddam Hussein.

Jeff Bailey : 12/28/2007 2:32:43 PM


DJ- MBIA shares lose 15% and Ambac Financial slides 13% on report that billionaire investor Warren Buffett's Berkshire Hathaway is starting a bond insurance company.

MBI $19.47 -12.57% ...

Linda Piazza : 12/28/2007 2:30:44 PM

I'm not seeing anything too encouraging to equity bulls yet on the VIX's action. It's been pulling back over the last hour, but with small-bodied candles that are forming a bull-flag looking shape. It's maintaining its breakout levels above 20.57 on 15-minute closes. It's at 20.80 as I type. Keep watching for any big change.

Linda Piazza : 12/28/2007 2:25:57 PM

The USDJPY has invalidated its potential inverse H&S. About 45 minutes ago, the USDJPY hit 112.80, testing the overnight low of 112.65. No new low was produced, but that was low enough to invalidate the formation.

The USDJPY tends to consolidate in rectangular formations. Unless something happens to break it out one direction or the other, it looks as if it's setting up another from about 113.26 down to 112.65. It's at 112.79 as I type.

Jeff Bailey : 12/28/2007 2:25:33 PM

Venezuela Lowers Official Dollar Limit For Online Purchases

DJ- Venezuela's government lowered the amount of official exchange-rate dollars it allocates per year to Venezuelans for international online purchases to $400 from $3,000, according to a press release sent Friday by the Ministry of Finance.

The Cadivi currency commission "will authorize a maximum amount of $400 or its equivalent in other foreign currencies per year" said Manuel Barroso, Cadivi's president, in the statement.

The measure becomes effective immediately, the press release said.

The government left unchanged the $5,000 it allows Venezuelans to buy at the official exchange rate of 2,150 bolivars to the dollar for travel abroad.

The government has recently started cracking down on alleged misuse of the dollars it allows Venezuelans to buy at the official exchange rate.

Government officials had recently complained that many people were using their $3,000 online purchase limit to buy goods that were not considered essential.

Others are using their official exchange rate dollars to turn a quick profit from the difference between the VEB2,150 peg and the parallel exchange market, where the dollar trades at around 2.5 times that value.

Barroso said some weeks ago that Cadivi was investigating some 30,000 users to make sure they were using their dollars correctly.

The oil-rich nation imposed capital controls in 2003 to stem massive capital flight. President Hugo Chavez has vowed to keep those controls in place indefinitely.

Keene Little : 12/28/2007 2:08:11 PM

If the DOW manages to drop a little lower and get down to the 13262 level by today's close, it would be a good spot to keep everyone guessing over the weekend. Then gap it up and get the shorts screaming for cover? It could provide a good start to get the DOW back up to at least its downtrend line from October, maybe around 13600 by next Friday. OK, all planned out and now it just needs to follow my plan :-) Link

Linda Piazza : 12/28/2007 1:52:06 PM

During the lunchtime lull period, the SPX's 9-ema often flattens and the SPX sometimes moves across it to the other side of the channel described by the 9-ema. Today, with all the events so iffy, bears would rather that not have happened, but it appears that the SPX is attempting to move across to the other side of that channel. That's currently at 1478.37, with the SPX currently at 1475.96. Bears really do not want to see the SPX above about 1481.30, as that looks like the approximate location of a descending trendline off Wednesday's late-day high.

Keene Little : 12/28/2007 1:46:11 PM

Back to QCharts, this from Al (thanks):

Here is a link to be able to download the latest version of Qcharts 5.1:


You can't find this on their website. Even if you don't want to update a current version of 5.1 that you are running, you may want to download this file to your desktop for later execution if desired.

Jane Fox : 12/28/2007 1:42:12 PM

The link to my Wilshire chart is now working.

Keene Little : 12/28/2007 1:41:00 PM

How willing would the big guys be willing to dump all of their stocks at the end of the year? Taxes, Bonuses, etc??? or...would they do everything to hold us up until after the first of the year. Have you got an opinion?

Marie, I always have an opinion (wink). The problem is that it's sometimes not the correct one (double wink). Really, it's been known to happen. I think any position squaring for taxes, bonuses, etc. has already been taken care of. I would not expect big players to wait for the last week of the month, between holidays when it's notoriously slow trading, to take care of that kind of business. This week tends to be run by the retailers (and why I generally avoid trading this week).

If anything I expected to see an effort to hold the market up. Or will they let it drop to suck in some bear fuel for the next rally? That's all speculation and it's hard to get a sense of market direction from a week like this one. After the first week of January completes we will hopefully have a better sense of what the market is up to.

Jane Fox : 12/28/2007 1:41:45 PM

Here is an updated chart of the daily SPX and it looks like the head and shoulders pattern is playing out quite nicely. I really like charts that are so clear to follow and when it is a chart of a major index like the SPX it is even better because you can use it as a proxy for the whole market. Link

With that said here is a chart of the entire market, the Wilshire 5000. Link Almost identical aren't they?

Jeff Bailey : 12/28/2007 1:39:56 PM

SPG $86.08 -2.43%

SPG-MQ are $2.75 x $3.00

SPG-MP are $1.20 x $1.40.

Jeff Bailey : 12/28/2007 1:38:30 PM

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

Keene Little : 12/28/2007 1:36:11 PM

In addition to a downside target for the DOW at 13262 (two equal legs down from Wednesday) that's also where the uptrend line from Nov 26th is located. If it looks like the DOW might find support in that area (assuming it drops to there), I'd look to buy it. It's possible we'll get a decent rally from there. Link

Keene Little : 12/28/2007 1:24:20 PM

"If Santa Claus should fail to call, bears may come to Broad & Wall." The Santa Claus rally is typically between Christmas and a couple of days following New Year's. So the bulls have until the end of next week to get their reindeer to pull this sled back up the hill. It might not be that hard to do if SPX 1469 holds (two equal legs down from Wednesday).

SPX closed on the 24th at 1496.97 so they need about a 23-point rally from here. A lot of people give this saying a lot of credence. Combine this with some longer term sell signals like 50-dmas crossing down through 200-dmas and it's hard to feel bullish about the market right now. But with the mixed signals all over the charts I certainly don't hear the fat lady singing yet.

Linda Piazza : 12/28/2007 1:19:01 PM

The VIX has now moved into upside breakout mode on its 15-minute Keltner chart. On the daily chart, it's broken above yesterday's high and the gap lower from last week. Bears want to see it remain above about 20.50-20.60 on any pullbacks. Bulls want it to roll lower again. It's at 20.87 as I type.

Linda Piazza : 12/28/2007 1:10:49 PM

The SPX's 15-minute 9-ema is now at about 1476.30. If you're bearish and you hope to see the SPX more closely approach that potential downside target (now risen to 1465.89), you want to see sustained 15-minute closes beneath that 9-ema. You don't want this bounce to carry on long enough to flatten that 9-ema, either. The SPX is at 1474.19 as I type. Keep on your toes. On a light-volume day, we're always just one buy program away from an undoing of all these nice setups.

Keene Little : 12/28/2007 1:08:13 PM

I forgot to include the chart of gold in my previous post. Here it is, and I changed the HUI chart to show the H&S neckline drawn a little differently and that's where price is currently stalled (as well as at its 50-dma).
Gold daily: Link
Gold bugs index: Link

Keene Little : 12/28/2007 1:01:47 PM

Gold has had a bullish breakout from its sideways triangle built since the November high. The triangle pattern gives us an upside target of $900 for the shiny metal:

It has stalled at the Nov 26th high of 844.20 (today's high so far is 843.80) and there's still the chance that the current rally is finishing a correction and will turn back down (dark red). I've been watching the gold bugs index (HUI.X) for clues for the move in gold and so far, with the break above its downtrend line from November and the potential H&S neckline, it's supporting the gold rally. But HUI needs to now get above its 50-dma (412.16) and hold: Link

Linda Piazza : 12/28/2007 12:51:59 PM

Well, if it makes you feel any better, Keene, (Keene's 12:48:19 post) my charting service was bought a few months ago by TD Ameritrade, and I'm just waiting to see what changes there will be for me, too.

Linda Piazza : 12/28/2007 12:48:52 PM

Despite the generally weak behavior of the SPX today, predicted and then corroborated by the VIX action since early this morning, the SPX has not been acting as it "should" after the confirmation of a downside target and a head-and-shoulders formation. Both "should" see sharp, fast declines. Perhaps that's beginning now, but the SPX's until-now reluctance to decline has me still feeling a bit cautious about what I'm seeing.

With that said, the downside target is now at 1465.71, with potential support there on 15-minute closes. That target will remain set as long as 15-minute closes remain below the 15-minute 9-ema, now at 1477.09.

Keene Little : 12/28/2007 12:48:19 PM

Linda, the SOX (and other Philly Exchange indices) still can't be clicked on to get data and a chart. You have to constantly reenter PHLX: in front of the symbol to get it. Very frustrating. It's why I went to SMH for the semis. I'll have a hard time giving up the user interface of QCharts but I'm reaching my limit again (Miami server farm must have been shut down since selecting it now only locks up my QCharts so I have no ECBOT data today).

NDX is probably only the first of many symbol changes they'll make and I'll lose more work. If I'm going to be forced to redo all my charts I'll just go to another charting service. Until eSignal bought QCharts it had become a reliable service and great charting program. Grr...

Jane Fox : 12/28/2007 12:47:07 PM

Here is McMillan's weekly offering. The 6-day rally that began in mid-December has apparently run its course, as the broad market took a tumble today. Nevertheless, there are some positive aspects in the technical indicators.

The chart of $SPX is the picture of a trading range. The wide trading range is between the extreme low closes at 1410 and the highs at 1560. But within that range, there are some trend lines that have developed (see Figure 1). These two trendlines define a range that is dampening down. That is, the oscillations in $SPX are getting smaller and smaller as it first bounces off the declining trend line and then the rising one. Technicians call this a triangle, although that is irrelevant. What is important is that a break of either trendline will likely be a catalyst for $SPX to make a substantial move from that point. So, roughly, a move above 1500 would be bullish and a move below 1450 would be bearish. We shouldn't have to wait long for that breakout to occur.

The equity-only put-call ratios are bullish. From Figures 2 & 3 you can see that buy signals are in place, although it wouldn't take a huge move to negate the standard signal.

Market breadth has generated a new sell signal, which is the only confirmed sell signal that we have right now.

Finally, the volatility indices ($VIX and $VXO) have been declining, thus imparting a bullish interpretation for the stock market. However, the decline reached the lower, gently upward-sloping trend line and that might be the end of the decline in $VIX.

In summary, the technical indicators are somewhat bullish right now (the only true sell signal being breadths). However, there are some nagging, negative factors out there, and we'd want to see some resolution of those before going outright long.

Linda Piazza : 12/28/2007 12:41:00 PM

Keene, you have more patience than I do. (Keene's 12:32:59 post.) I abandoned QCharts more than a year ago, when they suddenly dumped feed for the SOX, at a time when I happened to have a bunch of condor contracts on the SOX. They were in no hurry to get those quotes up again, although other charting services and brokers were able to start providing them within a day of the time the PBOT suddenly started charging fees for the feed. I still wistfully wish I had those regression channels back again as well as some other very user-friendly abilities, but I have not opened my charting service to find blank charts once since changing, and that used to be a too-frequent occurrence.

Linda Piazza : 12/28/2007 12:35:48 PM

Keltner targets are also places where potential support can be found. If you're in a short-term bearish play, you need to know, now, how you'll treat an SPX test of the 1465-1466 zone if it should be tested. First, though, you need to know that you're on shaky ground in any play on a low-volume day anyway because all it will take to turn this around is a little buy program. Keep your stops at account-appropriate levels. Be vigilant.

Keene Little : 12/28/2007 12:32:59 PM

For QCharts users (since more changes are coming, including the shutdown of the Miami server farm which at the moment is the only one giving us ECBOT quotes, like YM), this from Marc:

You might want to warn readers that if they dump their 5.1 application, it cannot be downloaded again from quote.com. Just a heads up. The real problem with QC 6.0 is stuck CPU at 100%. Refer readers to my postings at e-signal forum (under eckel). Link

In case the link doesn't work to reach the QCharts forum, here's the problem and then the response from QCharts:
Problem: Originally posted by iii222, eckel and bobscott: For awhile, I thought I am the only one with the CPU problem (Please see my post). So I installed the maximum 4GB RAM on my computer. This solution will only give me an extra hour (roughly 4 hours in total) before the program uses 100% of CPU and QCharts process occupy between 1 to 2GB of RAM and crash.
Solution: If you are hitting 1-2 GB of memory usage with QCharts it sounds like you are changing charts often and QCharts is saving all that data in memory. You may want to try to limit the size of Cache used by QCharts 6.0 to 500-750Mb to prevent it from getting overloaded. To change this setting, go to View --> Preferences, then click on the Caching tab, and then change the setting at the bottom. [a graphic of the setup is then shown]

As for me, I'm waiting until they tell me version 5.1 will no longer work. I have no interest in the new version. And I'm not real happy with the way they're switching us over to their own servers. If they keep this up it will finally force me to change to TradeStation or someone else (after sticking with them through all their previous problems over the past 8 years).

Linda Piazza : 12/28/2007 12:32:36 PM

The SPX's 15-minute 9-ema is now at about 1478. SPX bears want to see 15-minute closes remain below that average and for prices to drop enough and bounces to be brief enough to keep that average turning lower. It tends to flatten during the lunchtime lull period, and equity bears don't want that to happen.

Linda Piazza : 12/28/2007 12:31:12 PM

Here we go. Bulls need to bounce the SPX quickly or else it could get ugly. The 15-minute chart's 1465.17 potential target remains in place. Please remember the word "potential."

Jeff Bailey : 12/28/2007 12:30:28 PM

Unusual Option Activity at 12:24:45 PM EST Link

Linda Piazza : 12/28/2007 12:26:02 PM

I've been mentioning since yesterday that other charts (other than the 15-minute Keltner charts) showed potential SPX support in the 1474-1476 zone. That Keltner support has cycled up to the current level. The potential support is showing up on the 30-minute Keltner chart. It's been tested as I type, with the SPX at 1476.90. I think we need to see a 30-minute close beneath yesterday's low to confirm that the support has been lost.

Jeff Bailey : 12/28/2007 12:24:39 PM

Bush Plans To Veto Defense Authorization Bill

Linda Piazza : 12/28/2007 12:19:05 PM

The VIX is now pushing up toward yesterday's high. It's got resistance at that high of 20.51 through 20.58, the top of the gap down from 12/20. It's at 20.36 as I type.

If you haven't read my earlier posts or yesterday's, the VIX has been testing the daily 200-sma over the last several days, as it did 10/09-10/11. That time, it finally cleared the overhead resistance (200-ema) and bounced hard as equities rolled over and dove. Equity bears want that to happen again while equity bulls want the VIX to roll down below the 200-sma again, now at 18.83. So far, the last two days have done a better job of meeting the equity bears' favored scenario.

Linda Piazza : 12/28/2007 12:11:35 PM

The SPX has reset that downside target again, now at 1465.10. Are you going to believe it? Obviously, you better not bet the bank on it being met because the SPX has set and erased a downside target several times today. Also, there's that intervening 1474-1476 potential support zone to worry about, even if there's a drop. However, bulls need to factor in a vulnerability to that zone and not hold onto losing trades too long. A sustained move below yesterday's low and especially a move through the 1474-1476 potential support zone would begin to make bears feel a little better about that target eventually being met.

Jeff Bailey : 12/28/2007 12:02:38 PM

Simon Property Group (SPG) $86.63 -1.81% ... juuuuuuust undercutting upward bar chart trend from 08/01/07 low to recent 11/21/07 low.

Keene Little : 12/28/2007 12:02:16 PM

Starting to head lower again. There's just not a lot of strength in the market right now.

Jeff Bailey : 12/28/2007 11:59:41 AM

VIX.X 20.06

VXN.X 22.53

TRIN 1.06

TRINQ 1.04

Jeff Bailey : 12/28/2007 11:58:04 AM

However, the Santa Claus Rally, or failure to show gets great following as it can hint of what the MARKET sees for the economy in the coming year as market participants set portfolio strategies.

Jeff Bailey : 12/28/2007 11:51:30 AM

One reason, or explanation of yesterday's build in new lows is probably "tax loss selling."

Fewer new highs probably "tax gain selling."

Jeff Bailey : 12/28/2007 11:49:46 AM

Last week of the year is first week of New Year is usually full of position squaring.

Jeff Bailey : 12/28/2007 11:48:53 AM

Chile Peso Ends Weaker As Investors Square Positions At Year End

Jane Fox : 12/28/2007 11:46:47 AM

That is not to say you should not trade the Gold or Crude stock index ETF's. You can trade them on their own merits just not as a proxy for the commodity.

Jane Fox : 12/28/2007 11:45:06 AM

The same scenario for Crude. You should use the ETF, USO to trade Crude and not a Oil stock index.

Linda Piazza : 12/28/2007 11:37:35 AM

Target set. Target erased. Target set. Target erased. And so it goes. It's one of those frustrating days when it's really better to study a new trading technique, listen to a webinar, track a virtual trade or maybe even start thinking about next year's trading goals than to trade.

Jane Fox : 12/28/2007 11:43:47 AM

Here is a chart of the Gold futures Link and here is a chart of the ETF the Gold Miners stocks, GDX. Link

Do you see how different these two charts are to one another. GDX is NOT a good proxy to trade Gold as are any other indexs that trade in Gold stocks.

Now here is a chart of GLD, the ETF that trades in Gold futures. Link
This is the vehicle you should use to trade (invest) in Gold if you do not want to trade the futures directly.

Keene Little : 12/28/2007 11:31:30 AM

Stepping away for 30 minutes.

Jeff Bailey : 12/28/2007 11:21:15 AM

PetroChina (PTR) $175.40 -1.95% ... stock certainly not participating in the commodity's rally and PTR looks as if it wants to backfill its 12/20-12/21 gap.

Hang Seng was down 1.7% on Friday, but I would have thought that more reflective of yesterday's US action.

May have a slight "valuation" issue with PTR as it trades roughly 16-times earnings, while XOM $94.35 +0.72% roughly 13.6-times.

Regardless, a PTR trade at $170 further negative. First sign of meaningful strength is $186.

Linda Piazza : 12/28/2007 11:16:17 AM

Before I forget it, Japan's financial markets will be closed now until January 3 (so the night of January 2 for us). Movements of the USDJPY might have less relevance than usual early next week, until those markets reopen.

Linda Piazza : 12/28/2007 11:14:31 AM

I mentioned earlier that I was seeing a potential inverse H&S set up on the USDJPY's chart. The USDJPY dropped down into a right-shoulder zone and is rising now, but while right shoulders are being chopped out, it's always difficult to predict next direction. We'll have to wait for a drop low enough to invalidate the formation (below about 112.80) or confirm it (above about 113.30, although there's further potentially strong resistance at 113.40). The USDJPY is at 113.09 as I type.

Keene Little : 12/28/2007 11:14:13 AM

The same pattern for SPX gives us a donwside projection to 1469. If the decline continues today that's where I'll be looking for potential support.

Keene Little : 12/28/2007 11:10:25 AM

One possibility that played out on the DOW since yesterday's mid-day low is an expanded flat correction (an a-b-c correction where each leg is longer than the previous) that finished correcting yesterday's decline on this morning's spike up. If this is correct then we'll head lower from here with a downside projection at 13262 (for two equal legs down from Wednesday's high): Link

Linda Piazza : 12/28/2007 11:08:59 AM

The SPX is resetting its downside target, now at 1463.86, where potential support also exists. I must warn, as I did last night in the Wrap, that other charts show potential support in the 1474-1476 region. Today, I add the warning that we haven't even seen the first confirmation yet in a drop below yesterday's low, much less through that potential 1474-1476 support region. Big money people are mostly gone with instructions to the juniors to hold the fort, so put less credence than usual in what you're seeing on the charts.

Jane Fox : 12/28/2007 11:04:34 AM

I expected the US$ to retrace but I truly thought it was strong enough to stay within its upward channel.

Jeff Bailey : 12/28/2007 11:03:53 AM

Citigroup (C) $29.32 -0.81% ... that's a new 52-weeker.

Jane Fox : 12/28/2007 10:57:09 AM

My consolation for the long GLD position I sold because the US$ was so strong is that I am long USO, the ETF for Crude. Link

Jane Fox : 12/28/2007 10:55:57 AM

US$ is now testing the 50% fib level. I would like my long GLD position back. Thank you very much. Link

Jane Fox : 12/28/2007 10:54:49 AM

Here is the daily chart of Gold. Can you guess where the US$ is trading today? I have not looked at the $ chart but I would guess it is down past the 38.20% fib level. Link

Jeff Bailey : 12/28/2007 10:47:08 AM

A "stock only" trader could short SWC outright, but I'd place a stop at $11.25.

Figure it worth $1.45 to have April exposure.

March Palladium generated a "bearish triangle" in late November at $364 and has bounce back up into that pattern from $348.

Keene Little : 12/28/2007 10:45:54 AM

QQQQ is finding support at its 50-dma (51.78) and broken downtrend line from October (~51.90). Keep it simple here--long above, short below. Link

Linda Piazza : 12/28/2007 10:45:40 AM

I was thinking about something last night, about those of you who might have been trading condors or just credit spreads or maybe some other type of combination option trade last three or four months and doing pretty good. There's a temptation when the trades have been going well to begin scaling up the number of contracts in your trades. After all, you've been tested by fire. This market has been crazy.

Uh,uh. You haven't been tested just because the market has been crazy. For most people I know, including me, the big swings in the market have allowed us to swing our credit spreads way away from the action, and they've never been in serious trouble.

You've only been tested by fire if you've had credit spreads that are going wrong and you have to make decisions about when and how to exit. Unless you've had 3, 10, 20 or 60 contracts of 10-point credit spreads going wrong and have made decisions that will impact whether you lose $3,000, $10,000, $20,000 or $60,000, you haven't been tested by fire. You're not ready to scale up the number of contracts.

Keene Little : 12/28/2007 10:39:49 AM

Interactive Brokers is currently down. I'm starting to get the message here--Friday before a long weekend for many (do you think a half day of trading on Monday will be worth trading?) and the charts and brokers are dropping like flies.

Jeff Bailey : 12/28/2007 10:38:25 AM

VIX.X 20.01 -1.23% ...

Jeff Bailey : 12/28/2007 10:37:40 AM

Disclosure: I currently hold bearish position in SWC.

Jeff Bailey : 12/28/2007 10:37:06 AM

Swing trade put alert! for two (2) of the Stillwater Mining SWC April $10 Puts (SWC-PB) at the offer of $1.45 ($1.20 x $1.45).

No stop for now, target $7.50 in the underlying.

SWC $9.99 +1.93% ...

Jane Fox : 12/28/2007 10:34:09 AM

Here is the daily chart of the SPX and as you can see the head and shoulders is still in play and will be until the swing high made on December 26th is breached. A close above 1500 would officially negate the bearish head and shoulders. Link

Keene Little : 12/28/2007 10:31:00 AM

Both Linda and I saw today as having the potential to be a choppy day and so far it's been true. The day is still young so anything goes but I'm hoping the market will now be able to rally back up to a minor new high to accomplish the 3-wave correction to yesterday's decline.

Linda Piazza : 12/28/2007 10:27:49 AM

The USDJPY has dropped to 112.99, not the direction that equity bulls want to see it going today. However, there's a potential inverse H&S on that 15-minute chart, with the head at this morning's early low of 112.65. So, we're now in limbo on that chart, too. A drop too much lower than 112.80 would invalidate the potentially bullish inverse H&S: a sustained climb above 113.30 would confirm the formation, although the currency pair would then slam right into significant Keltner resistance at about 113.50.

Linda Piazza : 12/28/2007 10:21:20 AM

It's not going to be one of those easy days, is it? I said earlier that between 1480-1486, the SPX was in a chop zone and no predictions were being made by Keltners, and, therefore, by me. The SPX just closed the last 15-minute period juusst above 1480, at 1480.73. That close was at the neckline for its H&S formed since last Friday and just below the central channel line at about 1481.10. It was not a confirmation of either strength or weakness. I'd say there's still no strong confirmation of next direction, either, although we certainly have to say it hasn't been strength to see the early pop reversed so soundly.

So, equity bears, what you want to see now is continued 15-minute closes beneath a turning lower (not flattening) 9-ema, followed shortly by a low below yesterday's low. The 9-ema is now at about 1481.50. Furthermore, you want to see the VIX maintain values above about 19.95 on 15-minute closes and shortly climb above yesterday's late-day high.

Jeff Bailey : 12/28/2007 10:20:20 AM

Just saw somebody sell at the bid 40 of the SPG-MP for $0.90. $80 + $0.90 = $80.90.

Keene Little : 12/28/2007 10:19:33 AM

Some QCharts input to pass along (thanks Al):

I'm still running 5.1 and I am getting YM quotes this am on a mia server. I believe today is the last day for the miami server farm. I have 6.0 setup on a different system and will put it into backup service this weekend to see how it runs. Different format on futures: ES H8 for example and the ER2 is AB on esignal. If you want ADVDEC for example, you have a choice between Qcharts and esignal. To get the comparable info in 6.0 you enter ADVDEC-QC for example for all markets or a .NY in front of the - for NYSE. Some symbols such as ADVDECV are not offered on esignals servers at this point so you have to specify QC. I haven't actually tried this yet so will see if that info is correct this weekend.

Also, when you download 6.0 it installs in a separate directory and does not change you current 5.1 setup according to their support. Again, I have yet to try that. That will be next after I see how it runs on my system otherwise dedicated to Tradestation.

There's also a forum you can join to see what other users are dealing with. I know a big complaint about 6.0 (I'm still on 5.1 so that I can get more than 120 days of intraday data) is how slow it is. My overall impression of eSignal's taking over QCharts is not a favorable one. They're going to be changing more and more symbols and that means we will lose all text, trend lines, etc. that we've place on the charts whose symbols are changed, like the recent change to NDX. I'm not a happy customer right now.

Jane Fox : 12/28/2007 10:15:41 AM

Overnight lows have been broken. Link

Jeff Bailey : 12/28/2007 10:15:13 AM

Sep-Nov New Homes Sales From Commerce Table at this Link

Jane Fox : 12/28/2007 10:13:01 AM

WASHINGTON (MarketWatch) -- Sales of new U.S. homes fell by a more-than-expected 9% in November to a seasonally adjusted annual rate of 647,000, the Commerce Department reported Friday.

On average, economists surveyed by MarketWatch were expecting new-home sales to drop to a seasonally adjusted annual rate of 710,000 in November.

At the same time, October's sales rate was revised downward, the data show. Sales in October were revised to rise by 711,000, or 1.7%. They were previously estimated to have risen to a seasonally adjusted annual rate of 728,000.

The monthly report is very volatile, and the government says it can take up to five months to establish a new trend in sales.

Jeff Bailey : 12/28/2007 10:10:31 AM

US Nov. New Home Sales -9.0% To 647,000; Consensus 715,000

US Oct. New Home Sales Revised Down to 711,000 From 728,000

Linda Piazza : 12/28/2007 10:09:16 AM

After retesting the 200-ema on the daily chart, the VIX has bounced again, and is currently at 19.98. This is not what equity bulls wanted to see, as I've been mentioning all day. I see potential resistance here in the currently being tested 20.00-ish zone, however. The VIX just hasn't been making equity bulls feel all cozy this morning, at least according to the benchmarks I was watching, but it's still got some resistance that could thwart its advance, too, namely at this 20-ish zone, at yesterday's 20.51 high, and at Keltner resistance at 20.78. Keep an eye on it.

Keene Little : 12/28/2007 10:08:57 AM

Well this is a little more than a pullback.

Jeff Bailey : 12/28/2007 10:07:24 AM

Chicago PMI July-December Table at this Link

Linda Piazza : 12/28/2007 10:04:55 AM

The SPX just closed the last 15-minute period at/slightly below the Keltner line that would have set a new upside target. See my 9:51:59 post for more information. I've been seeing warning signs that the early pop might not hold all morning, but the SPX is now in a chop zone mentioned in last night's Wrap and this morning's posts. No prediction yet from the Keltners nor from me, but they certainly did offer a warning this morning that all might not be as jolly yet as it appeared. Have I mentioned lately how much I love using nested Keltner channels?

Jeff Bailey : 12/28/2007 10:02:36 AM

Rather high Order Backlogs in the Chicago PMI of 60.7.

Keene Little : 12/28/2007 10:01:47 AM

The initial pop up in equities has stalled and hopefully we'll get a pullback followed by another rally leg later, giving us a 3-wave bounce against yesterday's decline. It could end up being a very slow trading day so don't force trades.

Linda Piazza : 12/28/2007 9:58:05 AM

VIX at 19.52. Its direction is still down for the day, but it's still just retesting the 200-ema, not truly violating that moving average. Be forewarned, equity bulls, that its behavior is not quite what you want to see yet, and there's some reason to be particularly careful of equity rollover potential.

Jeff Bailey : 12/28/2007 9:57:05 AM

Fed Accepts $2.5 Billion in 3-day RPs

ACO= $1.35 Billion
TCO= $1.15 Billion
MBCO= $0.00

Jeff Bailey : 12/28/2007 9:54:59 AM

December Chicago PMI 56.6 Vs. Nov. 52.9
December Prices Paid Index 63.8 Vs. Nov. 76.2
Supplier Deliveries 47.9 Vs. Nov. 46.0
Employment Index 49.0 Vs. Nov. 54.4
New Orders Index 58.4 Vs. Nov. 53.9

Linda Piazza : 12/28/2007 9:51:59 AM

The SPX closed below the 45-ema on its first 15-minute close, so it hasn't yet set a new upside target. Currently, it's punched above that 45-sma right about at 1486, but it unfortunately needs to close this 15-minute period above it before the Keltner setup shows a new upside target. No prediction from the channels or from me, yet. If bullish, you just don't want to see the SPX drop below about 1486.02 into the close of this 15-minute period.

Jane Fox : 12/28/2007 9:50:03 AM

And the VIX is confirming the bullishness making new daily lows.

Jane Fox : 12/28/2007 9:49:36 AM

AD line is a bullish +1489.

Linda Piazza : 12/28/2007 9:49:20 AM

Be warned that the VIX is not yet backing off as much as you'd like if you're an equity bull. Short-term, it's direction is in your favor, but more needs to be done and you need to stay aware. It's dropped back into a retest of the 200-ema after pushing above it and the lower 200-sma yesterday. If you remember yesterday's posts, the VIX tested the 200-sma from 10/09-10/11, finding resistance at the slightly higher 200-ema, and then pushing up through both while equities rolled over. Equity bulls don't want to see a repeat of that. So, you want more than a retest of the 200-ema, at about 19.55. You want a drop below the 200-sma at 18.83 and then the 12/21 low of 18.28. Equity bears, you want to see a steadying here and a pushing up from this level. The VIX is at 19.46 as I type.

Keene Little : 12/28/2007 9:41:42 AM

The initial pop up in SPX almost hit the 50% retracement of yesterday's decline. Assuming for the moment that we're going to get a bounce today and then another leg down (as per the COMP 60-min chart I posted last night--below), I'd like to see a setup where we get a pullback and then another leg up in the bounce, perhaps tagging he 62% retracement (1490, again) to set up a shorting opportunity.

Linda Piazza : 12/28/2007 9:39:15 AM

The USDJPY is now at 113.12, still not managing a sustained move back above the resistance trendline that held from 12/14 to 12/21.

Linda Piazza : 12/28/2007 9:38:02 AM

As I warned in my "What About Tomorrow?" section in the Wrap last night, breakdowns and targets set in the last few minutes of trading are suspect. I said last night that if there were an SPX sustained move above 1481, the downside target would be erased, but it takes sustained 15-minute closes above about 1486.12 (currently) to set a new upside one. Between the 1480-1486 levels, it's just a chop zone with little to be determined about next direction. Beware of the pop-and-drop possibility with the Chicago PMI coming out in a few minutes.

Jane Fox : 12/28/2007 9:35:18 AM

Please be aware we have Chicago PMI at 9:45 and the New home sales at 10:00

Keene Little : 12/28/2007 9:24:26 AM

Even though equity futures have backed off considerably from their early morning highs we're going to have a bullish start to the trading day. It could be a choppy day so trade carefully.

I don't know if it's just my QCharts or whether eSignal (who owns QCharts) has done something again but I'm not getting ECBOT quotes (or charts). I noticed the data server has now changed to esignal.com and I can't find a server to give me the quotes. So if you're experiencing the same thing it's an eSignal problem.

Linda Piazza : 12/28/2007 9:09:56 AM

As you're making early trading decisions today, remember that right after the market opens this morning, at 9:45 am ET, we'll be seeing December's Chicago PMI. This is an important economic number and it has the capacity to move the markets. It an early predictor of what the ISM (Institute for Supply Management) number might be, and if it's bad troubling, we could see a pop-and-drop morning. I have no idea what the number will be, so that's not a prediction. Soon after that, at 10:00, November's New Home Sales will be released.

Linda Piazza : 12/28/2007 9:05:15 AM

Remember when our FOMC members were expressing confusion over the unresponsiveness of the yield curve to their efforts? Lately, the MPC, the U.K.'s Monetary Policy Committee, has similarly found a disconnect between their actions and the Libor rate, the London Interbank Offered Rate. This is the interest rate determined by the British Bankers' Association, the rate at which banks borrow from other banks in the London markets. Some important banks across the globe belong to the British Bankers' Association, and that Libor rate is important to all of us. It's a benchmark rate for short-term interest rates in many countries across the globe, with corporations' loans based on Libor plus a certain number of points.

Libor has been persistently too far above the MPC's benchmark rate, but an article today in The London Times notes that it dipped again yesterday. Some are taking this as a sign that the credit crunch is over and done. It's certainly a step in the right direction, but it's a little too soon to make that judgment. However, although mom and pop investor probably don't know much about Libor, big money certainly does, and this result may be at least partly responsible for the bullish early tenor.

However, on a somewhat more negative note, the same article pointed out that the London Stock Exchange reports that companies raised 16 percent less in 2007 than they did the previous year.

Linda Piazza : 12/28/2007 8:50:17 AM

Here's a brief summary of economic developments in Japan last night: November CPI rose at the fastest pace in a decade, but November's industrial output declined for the first time in two months. The CPI rise may have played a part in the overnight drop in the USDJPY, although the EURJPY went the other direction. Japan's government, sometimes at odds with the Bank of Japan's policy plans, has already come out this morning and said that it's impossible yet to say that there's an end to deflation there. The government, in the past, has cautioned the Bank of Japan against raising rates too soon, and it appears that's a government concern again.

Linda Piazza : 12/28/2007 8:45:24 AM

The USDJPY dropped overnight to a low of 112.65 at about 5:45 am ET this morning. This is a huge drop from its 114.62 high just about 24 hours earlier. (Lots happened in Japan last night, including a big jump in CPI.) In less than 24 hours, the USDJPY retraced about 23.6 percent of the climb off the 11/27 high, and it threatened to violate the 112.70-ish support level that has been holding on multiple tests since 12/14. Actually, of course, it did violate that area, but bounced quickly, so I consider it a test more than a true violation.

Since then, the USDJPY has bounced. As I type, it's at 113.22, doing battle from the underside with a trend line that had marked resistance from 12/14 through 12/21. Will it be resistance again? That remains to be seen. Bears want the USDJPY to roll over here and bulls want the USDJPY to power through it.

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