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Keene Little : 1/9/2008 12:17:58 AM

Wednesday's pivot tables: Link and Link

If the current decline continues for another day or so (it could first consolidate the first part of Wednesday) I've got a couple of good downside targets. The daily SPX chart shows two A-B-C declines from October (bearish dark red wave count)--the first one to the November low and the 2nd one from the December high to the current drop. Link

The two A-B-C declines would achieve equality at 1353.58. For the 2nd A-B-C drop, the 2nd leg down would achieve 162% of the 1st leg down (the Dec 11-18 drop) near 1358. Both of those are below potential support at the August low near 1370 and a break below the August low would negate any further bullish alternate wave counts. We would officially be in a bear market.

The 60-min chart shows a closeup of the c-wave move down from Dec 26th and my best guess on the wave count for that leg down. Ideally we'll see a small consolidation on Wednesday, another drop, then a longer consolidation and then a final low perhaps on Thursday or Friday: Link . Wednesday, Jan 9th we're in the potential turn window of Jan 9-11 so we need to stay aware of the possibility of a bottom at any time. Keep in mind that the Thursday/Friday prior to opex week has been the head fake day so I'm hoping we'll see it mark a good time to get long for next week.

Jeff Bailey : 1/8/2008 11:50:16 PM

Ask The Analyst: (6/20/2004) ... Position size is up to you (size of your trading/investment account) ...

Q:When reviewing your "open position profiles" it appears you and I invest the same on your "stock Profiles", $10K/position. I am curious, if you don't mind sharing, how you decide your investment in the option positions. I see no pattern in your updates.

Response: Great question, and this is how I was taught to think about options.

I'm using $10,000.00 as a base number so that any size account can trade with my profiles. Some investors that may be managing their own money may feel comfortable with 10 positions at $1,000.00 per STOCK position. Some investors may feel comfortable with 10 positions at $50,000.00 per STOCK position.

OK... now think of this.

What does 1 option contract represent? 100 shares right? Right!

OK... now... REGARDLESS of what security we are looking to trade BULLISH or BEARISH this is where OPTIONS mitigate RISK and how I was taught to treat an option.

How many shares of a $100 stock could you buy with $10,000 (if this is what you would invest in the UNDERLYING STOCK?) 100 shares right? Right! OK.... how many contracts do I buy to represent 100 shares? 1 contract right? RIGHT!

How many shares of a $20 stock could you buy with $10,000? 500 shares right? How many contracts? Five.

OK....

For YOU Frank, it sounds like a "full position" is $10,000.00 per UNDERLYING STOCK trade.

But what about Sue Subscriber and her $50,000.00 per UNDERLYING STOCK investment, or John Subscriber and his $1,000.00 per UNDERLYING STOCK trade?

Now do you see the pattern?

If Full Position = $10,000 in underlying stock/security

then

3/4 position = $10,000 x 0.75 = $7,500 (underlying stock); If stock $25/share, then 300 shares = 3 option contracts.

1/2 position = $10,000 x 0.50 = $5,000 (underlying stock); If stock $25/share, then 200 shares = 2 option contracts.

1/3 position = $10,000 * 0.333 = $3,333.33 (underlying stock); If stock $25/share, then 133 shares = 1 option contract, 2 at MOST.

1/4 position = $10,000 * 0.25 = $2,500 (underlying stock); If stock $25/share, then 100 shares = 1 option contract.

Jeff Bailey : 1/8/2008 10:42:02 PM

Bailey's Basics: (09/14/2001) ... The BULLISH vertical count ...

Many subscribers want to know how to calculate the BULLISH vertical count using a point and figure chart. Once you get the hang of it, it becomes very easy and helps the trader begin ascertaining a potential bullish price objective longer term. The thought here is that "if you don't know where or how much to potentially expect, how can you make a decision on how attractive this investment might be."

Why has this technique been given attention by individual and institutional traders and investors? It is the belief of many that the market is "all knowing." The market buys and sells stocks based on a belief of what is to unfold over time. Many traders/investors that use the point and figure charting system believe that the first buy signal off the bottom is a sign that "smart money" has started buying (demand X) and is now outstripping sellers (supply O). This first column of X's that generates the buy signal is thought to perhaps be indication of a longer-term price objective that "smart money" has for the stock, based on events that have yet to unfold (earnings, new product announcements, industry trends, etc.)

Lets take a look at a chart of International Business Machines (NYSE:IBM). We will identify the "first buy signal of the bottom and the column of X's used to calculate the bullish price objective. The bullish price objective stays intact until the first sell signal is generated (column of O's below a previous column of O's generates a sell signal).

IBM Chart Link late March of this year, shares of IBM reversed sharply on its point and figure chart from the $89 level and made a run straight up in a column of X's to $100. Eventually the point and figure chart reversed the needed 3-boxes (3-box reversal method for charting) to $97. The column of X's was perhaps caused by powerful buying where DEMAND (X's) was outstripping SUPPLY (O's).

One strategy that many traders like to use is to initiate 1/2 bullish position during or after the first buy signal off the bottom is created (depending on market and sector analysis). Then when the second buy signal is generated (in IBM's case, the quadruple top at $102) the trader or investor can round up to a full position (buying another 1/2 position).

While shares of IBM did NOT achieve its bullish price objective of $125, there was still impressive bullish performance from the stock once the bullish price objective was in place. The eventual "sell signal" and break of a quadruple bottom at $110 invalidated the bullish vertical count of $125. At that point, the trader/investor began working on the BEARISH vertical count. (See Bailey's Basics "BEARISH Vertical Count")

Notes on scales used: The point and figure charting system plots its chart on various scales. It does this to only record MEANINGFUL moves and attempts to remove market noise. As such, increments are as follows.

0 - $5 = 0.25 point increments
$5.5 - $20 = 0.50 point increments
$21 - $100 = 1 point increments
$102 and up = 2 point increments

Notes on price objectives: Price objectives are not etched in stone. Market/sector/stock conditions can change from bullish to MORE bullish and bullish price objectives can be exceeded. At the same time, market/sector/stock conditions can change adversely and bullish price objectives may NOT me achieved. However, this technique of projecting price is often times used to help assess potential risk/reward for traders and longer-term investors.

Why am I multiplying by "3" for the bullish count? This is a question asked by many, but I have yet to get a good explanation. There are those that believe it is based off the 3-box reversal method of charting that is most widely used. There are those that believe the multiplying by a factor of 3 reflects the longer-term bullish nature of market participants. You will note in the BEARISH vertical count, this scale factor drops to "2."

Jeff Bailey
Senior Market Technician

Jeff Bailey : 1/8/2008 10:35:40 PM

Bailey's Basics: (09/14/2001) ... The BEARISH vertical count ...

Many subscribers want to know how to calculate the BEARISH vertical count using a point and figure chart. Once you get the hang of it, it becomes very easy and helps the trader begin ascertaining a potential bearish price objective longer term. The thought here is that "if you don't know where or how much to potentially expect, how can you make a decision on how attractive/unattractive this investment might be." The bearish vertical count can be an excellent tool for traders/investors to incorporate into their investment strategy as it relates to potentially hedging a position.

Why has this technique been given attention by individual and institutional traders and investors? It is the belief of many that the market is "all knowing." The market buys and sells stocks based on a belief of what is to unfold over time. Many traders/investors that use the point and figure charting system believe that the first sell signal off the top may be a sign that "smart money" has started selling (supply O) and is now outstripping buyers (demand X). This first column of O's that generates the sell signal is thought to perhaps be indication of a longer-term price objective that "smart money" has for the stock, based on events that have yet to unfold (earnings, new product announcements, industry trends, etc.)

Lets take a look at a chart of International Business Machines (NYSE:IBM). We will identify the "first sell signal of the top and the column of O's used to calculate the bearish price objective. The bearish price objective stays intact until the first buy signal is generated (column of X's above a previous column of X's generates a buy signal).

IBM Chart (2001) Link

I have marked two "bearish count columns" on the above chart, but for now, lets concentrate on the "current" vertical count column that a trader would be working with (September 14, 2001. Markets still halted after terrorist attacks on U.S.).

The current bearish price objective using the vertical count technique for IBM is $84. As you can see, there appeared to be some bearishness BEFORE the terrorist attacks and a trader may have began taking action in this stock on the first sell signal off the top and breaking of a quadruple bottom at $110. I've marked that "sell signal" (first sell signal off the top) in pink.

Once that column of O's was reversed into X's, the column of O's from $116 to $102 became the vertical count column for the BEARISH vertical count (8 O's).

To calculate the bearish price objective, we count the number of O's in the column (8), multiply by a factor of "2", then multiply by the scale on the chart ($2) that the O's were charted ($2 scale from chart). We then take the sum and subtract it from the top of the O column that was counted ($116). The result is $84.

As you can see, the BEARISH vertical count is very similar to that technique used for calculating the bullish vertical count with ONE EXCEPTION. For the BEARISH vertical count, we use a factor of "2" (the bullish vertical count uses a scale factor of 3). Again... I have never seen a good explanation for why factors of 2 and 3 are used, but these are the guiding principles for how to calculate price objectives using the 3-box reversal method of point and figure charting.

Previous bearish count: The reason I indicated a "previous" bearish vertical count is to show traders/investors how to calculate a bearish count from a stock where the column of O's crosses a $2 and $1 box increment like it did for IBM from $116 to $98. You will note the chart scale for this O column changes from $2 to $1 increments. In order to calculate this type of chart column, one must calculate the column in 2 parts.

It's quite easy, all you have to do is this.... Since we chart the interval from $100 and higher on a $2 box scale, we must first calculated that portion of the O column (red arrow). When we're done, we will then calculate the rest of the O's (blue arrow) using the bearish vertical count equation.

Let's start with the "red arrow" portion. Again, the red portion resided on a $2 box scale. There are 9 O's from $116 to $100. Therefore.... ((9*2)*$2 box scale)=$36.

Now we calculate the rest of the O's that reside in the $1 box portion of the chart. We count 2 O's (from $99-$98). Therefore... ((2*2)*$1 box scale)=$4.

We now take the two results ($36 and $4) add them together to get the result of $40, then subtract that from the top column of O's of $116. The result for that bearish vertical count would have been $116-$40 = $76.

While IBM did not achieve its bearish price objective from that vertical count, a bullish trader may have wished to take some preventative action before or after the stock had rallied back into a column of X's to the $108 level. Eventually the stock fell to a low near $88. A trader that may have put together some type of trading plan with a bearish price objective of $76, may still have benefited from this technique of calculating a bearish price objective.

Eventually, the stock gave a "buy signal", the bearish vertical count was invalidated, and the trader or investor began assessing upside potential using the BULLISH vertical count (see Bailey's Basics "BULLISH vertical count").

Things to notice in vertical counts: Some stocks have a unique ability to meet their bullish and bearish vertical counts. Other times I've noticed that stocks get close to a consistent percentage of meeting their price objectives. I suggest that every trader look historically at a couple of bullish and bearish vertical counts on the stocks they're trading and see what the results of these counts were.

This "historic" ability to test the vertical count was one of the things that had me interested in point and figure charting. What really amazed me was that, I had actually bought a stock near its bullish price objective, perhaps just when the stock had achieved what the MARKET had felt was it full potential and then experience a precipitous decline.

The bullish and bearish vertical count is a great tool and easy to understand trading tool that you can incorporate into your trading and investment strategy.

Jeff Bailey
Senior Market Technician

Jeff Bailey : 1/8/2008 10:22:58 PM

Bailey's Basics: ... Hedging a stock position ...

Investors have heard the phrase "hedging a position," but may not know how to implement a hedge. Recent events have perhaps heightened the level of market uncertainty and now may be an appropriate time to discuss one way to hedge a position.

Let us imagine that we own 100 shares of ABCD at $35 and want to hedge this position should the stock decline further. Recent events may have us feeling the stock is vulnerable to the $23 level, which has been a level in past trading where the stock has rebounded. Let's imagine that shares of ABCD finished trading at $30. In essence, the stock has declined $5 per share since purchase, and now we want to hedge that position.

When shares of ABCD open for trading we may not want to sell the stock and REALIZE a loss. Instead of selling ABCD for a loss we may want to hedge this position for a period of time using a put option. A hedge like this gives the investor the opportunity to "buy some insurance" on the stock held in their account for a period of time.

Let us assume that we want to hedge into January of 2002. Since our example is that a trader owns 100 shares of stock, then a hedge would be to buy 1 put contract (1 contract equals 100 shares).

Lets now assume that the ABCD January 2002 $30 put (ABCMF) was offered at $2.30. Let's assume that the stock opens for trading at $30.

Should a trader buy 1 contract, his/her outlay of cash would be $230 plus commission paid. Once the option is bought, our hedge would be as follows.

We would still hold long 100 shares of ABCD with a cost basis of $35 ($3,500). Once the put option is bought, the trader has established the RIGHT, but not the OBLIGATION to sell his/her stock at $30 between now and January 2002 option expiration (Friday before the 3rd Saturday of January 2002). This transaction cost the trader $230. Note: A hedge position is considered a "neutral" position.

Should the stock eventually fall to the $23 level (before option expiration), our 100 shares would be worth $23 ($2,300), but our January 2002 $30 put would be worth approximately $7 ($30 strike of option - $23 market price). As you can see, the put option has increased in value, thus we've hedged against the downward move.

If shares of ABCD do fall to $23 and we did not hedge our position, then our original investment of $3,500 would be worth $2,300 (paper loss of $1,200). The hedged position under outlined assumptions would have required a total cash outlay of $3,500 (underlying stock) plus the $230 (cost of option excluding commissions) for a total cash exposure of $3,730. At a market price of $23, the HEDGED POSITION would be worth $3,000 ($2,300 in stock + the now $700 value of put option).

The above example demonstrated a hedge position on a stock where we were already at a loss. Many institutions and investors will hedge positions that are currently in the position of profit. I would argue that the options market was originally created to allow investors the opportunity to hedge and help mitigate risk, not speculate on stock price direction.

Jeff Bailey
Senior Market Technician

OI Technical Staff : 1/8/2008 9:59:59 PM

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

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

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

Jeff Bailey : 1/8/2008 9:54:00 PM

Theodore! Thanks for those links!

Jeff Bailey : 1/8/2008 9:41:02 PM

Closing U.S. Market Watch at this Link

Keene Little : 1/8/2008 7:35:47 PM

My gold short got stopped out after hours with the move back above 884. The new high makes it look like the 5th wave is extending higher (common in commodities) so now I'm eyeing 894-908 as the next Fib resistance zone. If it gets there in overnight trading and pulls back sharply then I may miss the entry. But I prefer to watch the move up rather than simply enter an order that could get triggered in overnight action so we'll see how it looks on Wednesday.

Jeff Bailey : 1/8/2008 5:25:12 PM

Closing Internals found at this Link

Jeff Bailey : 1/8/2008 5:20:02 PM

Wow ... that has the look of short covering; stopped. Check out the NL indications.

Jeff Bailey : 1/8/2008 5:12:30 PM

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

Jeff Bailey : 1/8/2008 4:39:05 PM

AT&T CEO Sees Slowdown In Consumer Side ... AP Story Link

Jeff Bailey : 1/8/2008 4:35:48 PM

Housing Woes, AT&T News Sink Stocks ... AP Story Link

Jeff Bailey : 1/8/2008 4:28:40 PM

THAT was a bearish close.

Keene Little : 1/8/2008 4:03:49 PM

SPX is still on track for hitting 1370 and now the question is whether it will do it tomorrow (and stop there) or consolidate like today first before dropping again. The updated daily chart shows how price could "rally" (very choppy) into March before setting up a potentially serious decline into the summer. Link

Jeff Bailey : 1/8/2008 4:01:07 PM

Swing trade put alert! ... for one (1) of the Sohu.com SOHU Feb $45 Puts (UZK-NI) at the offer of $3.20. No stop for now, target $42.

SOHU $47.74 -2.43% ...

Keene Little : 1/8/2008 3:57:38 PM

I had mentioned yesterday that CFC (Countrywide Financial) could be a good long play as it tagged its Fib projection at 7.51 (but also cautioned about catching very sharp falling knives in the mortgage/banking sector). After a "small" drop of another -33% and tagging 5.05 one wonders if that's all the bad news now priced in. It could be. I see the possibility in the leg down from Jan 2nd (which should be the final 5th wave of its decline) for one more new low and then maybe, just maybe CFC will put in a tradeable bottom. Either that or it's heading right for bankruptcy from here but if you've got some play money I'd watch this for a bounce back up to 20 (apex of its Aug-Oct sideways triangle. Some July 5 call options could work nicely (or not). Link

Linda Piazza : 1/8/2008 3:57:36 PM

A strong thrust through the Keltner support breaks it unless there's an equally strong bounce back above about 1398.20 by the end of this 15-minute period. I have to tell you, though: I don't completely trust breakouts or breakdowns that occur on either the first 15-minute or the last 15-minute periods of the day. So, note the breakdown. Factor in the end-of-day weakness in your decision making, but also keep an open mind about what might happen next.

Jeff Bailey : 1/8/2008 3:44:28 PM

Good gravy! ... AT&T (T) $39.08 -4.72% ...

Jane Fox : 1/8/2008 3:43:44 PM

Keene - Ya I guess that would have been much more politically correct. :)

Keene Little : 1/8/2008 3:42:27 PM

Jane, re: your 3:28 post, did you mean to say "like a horizontally blessed man through thin ice."

Jeff Bailey : 1/8/2008 3:38:40 PM

Companhia Vale Do Rio Doce (RIO) $31.41 -0.38% ...

Jeff Bailey : 1/8/2008 3:38:11 PM

Brazil Stocks Rebound To Close Higher On Commodities

Linda Piazza : 1/8/2008 3:34:41 PM

The SPX pushed the lower Keltner support line a little below 1400, currently to 1399.18 on 15-minute closes, but it didn't violate that support on 15-minute closes. Any sharp decline from here that isn't quickly reversed would, however, break through that Keltner support.

Jeff Bailey : 1/8/2008 3:29:14 PM

US Oil Fund (USO) $76.19 +0.91% ...

Jane Fox : 1/8/2008 3:28:57 PM

SPX is falling through 1400 like a fat man through thin ice.

Jeff Bailey : 1/8/2008 3:28:49 PM

Fog Shuts Houston Ship Channel At 12:18 PM EST, No Tanker Queue

Keene Little : 1/8/2008 3:27:09 PM

SPX dropped to 1396 a little quicker than I thought it would. The 2nd leg down for the drop from this morning's high would achieve 162% of the 1st leg down at 1393.42 and is a typical target for the 3rd wave.

Jane Fox : 1/8/2008 3:23:52 PM

SPX is now breaking 1400 printing 1399.07.

Keene Little : 1/8/2008 3:23:14 PM

An update to the move down, using the SPX 30-min chart, shows some Fib projections for the move down that would be fitting for the remaining 5th waves that need to play out: Link . Watch for potential support near 1396 for another choppy sideways/up rally tomorrow (like today's) and then one more leg down after that, hopefully getting down to 1370 by Thursday.

Jane Fox : 1/8/2008 3:20:44 PM

Here is a monthly jtHMA chart of the SPX and one I have used as the basis for my bullishness (along with Bob Brinker that is). This is the first time the jtHMA has turned red since May 2003. Now this is not conclusive until the month finishes but if this closes red I am on the side of the bears. Link

Linda Piazza : 1/8/2008 3:19:56 PM

The potential SPX Keltner support on 15-minute closes is now being tested. That support extends down to 1400.19 now on 15-minute closes. The support held on the just-completed 15-minute close. It looks about as strong as did the resistance near 1431 when it was tested earlier. As I said earlier today when the Keltner channels all flattened and lined up, it would take a strong push to break either the resistance or the support, so we'll have to see if this downside push is strong enough. Fear can be a strong emotion, but if it doesn't provide a strong enough impetus, then the neutral setup will remain. Just don't make assumptions as yet, but know where your get-out points are if you are on the wrong side of either a push through this or a bounce up from it.

Jeff Bailey : 1/8/2008 3:15:41 PM

Sell Program Premium DIA $126.92 , SPY $140.19

Jeff Bailey : 1/8/2008 3:14:15 PM

Taking them out behind the wood shed.

Jeff Bailey : 1/8/2008 3:11:22 PM

03:00 Internals at this Link

Jane Fox : 1/8/2008 3:10:37 PM

There is just no way the bulls are able to win today. I was expecting at least a bounce to 1440 but not even that. Link

Linda Piazza : 1/8/2008 3:08:00 PM

Strongest nearby Keltner support on the 15-minute chart is now at 1402.56 and then at 1400.46. It looks almost as strong as the resistance near 1431 appeared to be.

Keene Little : 1/8/2008 3:00:55 PM

An interesting thing about the Jan 10th turn date (which could see a very tradeable bottom being put in) is that it is the Thursday prior to opex week, the typical head fake day. It would be a great setup for a long play with cheap Jan calls into next week.

Keene Little : 1/8/2008 2:57:56 PM

Tying in with Linda's observation about another consolidation day, I see the possibility for the current leg down from this afternoon's high being followed by another bounce into the close (to another lower high). If it plays out that way then tomorrow morning would be set up for a decline out of the gates. That's an early call here but it would make for a good short play setup.

Jeff Bailey : 1/8/2008 2:57:26 PM

6.24

Jeff Bailey : 1/8/2008 2:57:06 PM

Still stuck at 5.00

Jeff Bailey : 1/8/2008 2:56:33 PM

Sell Program Premium DIA $127.57, SPY $141.02

Jeff Bailey : 1/8/2008 2:54:02 PM

Buy Program Premium DIA $127.58 , SPY $141.09

Linda Piazza : 1/8/2008 2:52:43 PM

Remember late yesterday when I was saying that you had to factor in the possibility that the SPX was going to reinvent its old daily chart pattern from its rally days? Then it would rally strong, consolidate sideways until the 10-sma caught up, punch down to that average and then rally again. This time, in its reinvention, it could fall steeply, consolidate sideways for a few days while the 10-sma catches up, punch up to it, and then roll back down into a steep decline.

We don't know what's going to happen by the end of the day, but another discussed possibility--the completion of a morning-star reversal signal--is looking less and less likely and another day of consolidation more likely. Be thinking over this last hour of trading about the possibility of that pattern being reinvented. How will you position your trades if there's a possibility of sideways consolidation for a few days, then a punch up to the steeply descending 10-sma, and a rollover?

That's not guaranteed, but what's guaranteed is that if you don't consider all possibilities, including that of a stronger relief rally or an immediate rollover at any moment, you're going to be caught flat-footed sometimes, still breathing that hope-ium. Or would one smoke hope-ium? I might have been a teen in the flower child years, but I didn't even smoke much less inhale, and I don't have a clue!

Jeff Bailey : 1/8/2008 2:50:10 PM

Buy Program Premium ... DIA $127.63 , SPY $141.22

Keene Little : 1/8/2008 2:49:39 PM

Nice drop back down now (if you're short). If you're short from this morning's high then now's a good time to lower your stop to just above this afternoon's high. We should see the market head for new lows from here (if we're on the bearish price path that I showed on the SPX 60-min chart this morning-- Link )

Jeff Bailey : 1/8/2008 2:49:09 PM

Day trade long stopped alert! on the 1/2 position in Starbucks (SBUX) $20.27.

Jeff Bailey : 1/8/2008 2:36:28 PM

Day trade long raise stop alert! ... for the 1/2 position in Starbux (SBUX) $20.43 +11.15% ... to $20.27

Linda Piazza : 1/8/2008 2:36:03 PM

The USDJPY isn't telling me much of anything yet, either. It's still in that chop zone. The action since last Friday has now formed a rising flag-like formation with resistance currently near 110.50 and support currently near 109.30.

Jeff Bailey : 1/8/2008 2:34:33 PM

NASDAQ NH/NL 63:276 ... added about 48.

Linda Piazza : 1/8/2008 2:34:02 PM

The SPX continues climbing, but slowly enough to just shove the Keltner resistance up with it. Resistance near 1431 looks much stronger, however, if the SPX should get that far. As I mentioned earlier, the Keltner channels have all flattened now, so that support and resistance look about equally matched. The SPX didn't meet its downside target, and then this drive higher did get beyond the first expected barrier, so I suppose that you could look at this as bullish, but the Keltner lineup gives no such outlook yet. It's neutral on next direction.

Jeff Bailey : 1/8/2008 2:33:57 PM

NYSE NH/NL 54:293 ... added about 32

Jeff Bailey : 1/8/2008 2:33:04 PM

How are those NL doing? Steadying?

Jeff Bailey : 1/8/2008 2:32:37 PM

SBUX $20.40 ... sticks its head above dynamic 38.2%

Jeff Bailey : 1/8/2008 2:30:50 PM

DIA $128.62 +0.43% ... could be an interesting last hour of trade. Pretty quiet so far.

Jeff Bailey : 1/8/2008 2:30:04 PM

TRIN 1.23

Jeff Bailey : 1/8/2008 2:29:56 PM

NYSE A/D 1,857/1,269

Jeff Bailey : 1/8/2008 2:29:25 PM

SBUX $20.31 +10.5% ...

Jeff Bailey : 1/8/2008 2:28:23 PM

TRINQ 0.55

Jeff Bailey : 1/8/2008 2:28:12 PM

NASDAQ A/D 1,522/1,431

Keene Little : 1/8/2008 2:23:12 PM

It's choppy and not exactly bullish looking but bless their little hearts, the bulls are pushing this higher. Be very careful if long as it could suddenly give way to the downside.

Jeff Bailey : 1/8/2008 2:22:59 PM

Stepping away for about 10 minutes.

Jeff Bailey : 1/8/2008 2:13:48 PM

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

Jeff Bailey : 1/8/2008 2:07:51 PM

Swing trade call lower target alert! ... for the two (2) Kohls Corp. KSS Feb $50 Calls (KSS-BJ) to $1.70 in the options (from $2.60).

KSS $40.79 -1.06% ... KSS-BJ $0.20 x $0.25

Keene Little : 1/8/2008 1:59:34 PM

The 2-day consolidation in the market gives it the appearance of bear flags on the 30 and 60-min charts. Play the breakdown if you're waiting on the sidelines (pretty good place to be for now) for a signal.

Keene Little : 1/8/2008 1:55:26 PM

DOW and SPX are at the flat line and right in between today's high and low. So far it's just another doji kind of day. So be careful of the chop.

Jane Fox : 1/8/2008 1:54:57 PM

I am certainly not as bullish as I was last week. I have not grown claws yet but I do feel the tingling at the end of my fingers.

Jane Fox : 1/8/2008 1:54:17 PM

Yesterday the AD line started out quite bullish but within an hour fell to below 0 Today the AD line started out very bullish and within two hours fell to 0. This is very odd and I think it just means the bears are very strong and are able to overpower the bulls. Link

Keene Little : 1/8/2008 1:47:40 PM

It's a bit of a guess as to what AAPL is up to and it's the reason I'm holding back from jumping in on a play right now. My best guess is that it's in need of some more downside work before it's ready for a larger bounce. Shorting against this morning's high, like the broader market, would be the recommended play right here. If price plays out as depicted on this daily chart then we should have a good long play at the low around 160 and then a short with a bounce perhaps back up to about 185: Link

Jeff Bailey : 1/8/2008 1:41:58 PM

NASDAQ A/D 1,307/1,628 ... TRINQ 0.66

Jeff Bailey : 1/8/2008 1:41:02 PM

SBUX ... Day trader's 5-minute interval chart Link

Linda Piazza : 1/8/2008 1:38:27 PM

The opposite side of the SPX's smallest Keltner channel is now at 1421.92. The channels have flattened, with support and resistance lines arrayed in ways that show that support and resistance are about equal. When this happens, there's often some chopping around between barriers, maybe between 1410 and 1422, until there's enough bearish or bullish strength to push through those barriers.

The downside target from this morning has not yet been met, and the lunchtime lull action at least temporarily erased that downside target.

Keene Little : 1/8/2008 1:38:19 PM

GOOG could be close to giving us a stronger sell signal if it drops below the November low near 616. But in the meantime I see the possibility for it to continue consolidating in a sideways triangle 4th wave (green wave count) before pressing higher in a final rally into Feb/Mar. It takes a break above 716 to tell us the bulls are back on this one. Link

Jeff Bailey : 1/8/2008 1:32:42 PM

Buy Program Premium ... DIA $128.26, SPY $141.64

Jane Fox : 1/8/2008 1:31:25 PM

YM may punch through 12900 but this has been a bearish day and this trade was against the trend.

Jane Fox : 1/8/2008 1:30:38 PM

YM tags 12898 and comes to a dead stop. Seriously think about taking profits here or as close to "here" as possible.

Jeff Bailey : 1/8/2008 1:27:23 PM

Day trade long alert! for 1/2 position in shares of Starbucks (SBUX) at the offer of $20.32. Stop goes $20.15. Target $20.75.

Jane Fox : 1/8/2008 1:25:54 PM

Still alive if you put your stop at breakeven 12861.

Jane Fox : 1/8/2008 1:22:41 PM

The market may make the decision for you and get to 12861, breakeven before it reaches full target.

Jeff Bailey : 1/8/2008 1:22:27 PM

Countrywide (CFC) $6.60 -13.74% ... released for trade.

Keene Little : 1/8/2008 1:19:23 PM

SPX stalled at 1420. It's a short against that level. Keep your stop tight for now. A 62% retracement of today's decline is at 1422.65 (ES 1430).

Jane Fox : 1/8/2008 1:21:55 PM

That decision is do I lower my target to a tad under 12900 or hold on and go for it.

Jane Fox : 1/8/2008 1:18:22 PM

Remember YM may have a hard time getting through the 12900 level and since your target is 12861 + 52 = 12913, 13 ticks above 12900, you have a decision to make.

Jeff Bailey : 1/8/2008 1:16:07 PM

Countrywide: "No Subtance" To Bankruptcy Rumors

Keene Little : 1/8/2008 1:15:59 PM

Gold tagged 884 (YG) and has since dropped back below the mid-day pullback so if you shorted today's high I'm lowering my stop to a new daily high now. The short has to work from here as the EW count is complete and any rally back to another high would suggest the 5th wave is extending. I'll step aside in that case and wait for it to complete. In the meantime gold is a short.

Jane Fox : 1/8/2008 1:15:57 PM

We are well enough into profit that it is not only OK to raise your stop but prudent. Stop to at least breakeven.

Jeff Bailey : 1/8/2008 1:13:09 PM

Countrywide: See No Basis To Rumor Of Rating Agency Action

Jeff Bailey : 1/8/2008 1:11:54 PM

Countrywide (CFC) $6.31 -17.4% ... halted for trade.

Jane Fox : 1/8/2008 1:10:40 PM

Well at least this trade started out in the right direction. The first long we took didn't get into profit at all.

Jeff Bailey : 1/8/2008 1:09:45 PM

Buy Program Premium ... DIA $128.17 , SPY $141.63

Jeff Bailey : 1/8/2008 1:08:33 PM

Sell Program Premium ... DIA $127.97 , SPY $141.46

Jane Fox : 1/8/2008 1:08:24 PM

Well lets try this again. Long at 12861. STop is 12809 and target is the same 1:1 ratio to the risk.

Jeff Bailey : 1/8/2008 1:08:02 PM

01:00 Internals at this Link

Linda Piazza : 1/8/2008 1:04:02 PM

I just corrected the value of the SPX's 15-minute 9-ema in my 1:03 post (originally made at 1:02:19).

Keene Little : 1/8/2008 1:03:14 PM

Approximate futures premium over cash (March futures):

YM -- +50
ES -- +7.50
NQ -- +16.20
ER -- +2.00

Linda Piazza : 1/8/2008 1:03:01 PM

Over the last hour and a half, the SPX's 15-minute 9-ema has held as resistance on 15-minute closes. That's characteristic of the pattern when we're seeing a decline, either short-term or long-term. The tests are just further apart when there's a sharp, longer-term downturn. That average is now at 1415.22. The lunchtime lull is upon us now, though. During that time, the 9-ema sometimes flattens and prices sometimes move across it to the other side of the smallest Keltner channel. That's now at 1421.53. This is a ticklish time for those in short-term trades. Is such a movement a sign that the downtrend since early this morning is now over? Not necessarily.

Jane Fox : 1/8/2008 12:54:24 PM

Stop will be 12809 so if this is too much risk for you then you may want to stand aside.

Jane Fox : 1/8/2008 12:53:37 PM

I will be trying a long YM at 12861.

Keene Little : 1/8/2008 12:52:29 PM

SPX 1418-1420 should be resistance if there's to be another leg down today.

Jeff Bailey : 1/8/2008 12:49:23 PM

Buy Program Premium ... DIA $127.78 , SPY $141.24

Jeff Bailey : 1/8/2008 12:43:31 PM

Wating on $0.90?

Jeff Bailey : 1/8/2008 12:43:19 PM

DAW-AY $1.16 x $1.17 ... DIA $127.66 -0.34% ...

Jeff Bailey : 1/8/2008 12:42:39 PM

Not much action so far today in the DAW-AY ... just 859 traded. Low/High $1.29/$1.80

Jeff Bailey : 1/8/2008 12:33:30 PM

Sell Program Premium DIA $127.80, SPY 141.30

Jeff Bailey : 1/8/2008 12:30:22 PM

ETrade (ETFC) $2.33 -17.66% ... atop active list now.

Jane Fox : 1/8/2008 12:12:08 PM

Same story on the DOW. Link

Jane Fox : 1/8/2008 12:11:29 PM

Well I certainly have been pulling in my bullish horns lately. I thought for sure we would at least see a reactionary bounce off this support but it looks like the bulls cannot even pull that off. Link

Jeff Bailey : 1/8/2008 12:10:57 PM

How we stood at last night's close Link

Jeff Bailey : 1/8/2008 12:09:49 PM

Simon Property Group (SPG) $79.04 -2.68% ...

Jeff Bailey : 1/8/2008 12:09:26 PM

Dynamic Materials (BOOM) $52.92 -3.51% ...

Jeff Bailey : 1/8/2008 12:08:26 PM

Wachovia (WB) $34.55 -1.87% ... that's another 52-weeker.

Linda Piazza : 1/8/2008 12:07:10 PM

To erase the downside target mentioned in my 11:50:57 post, the SPX needs to start closing 15-minute periods above the 9-ema, with that average now at 1417.35. The potential downside target is now at 1406.41. That's potential support, too.

Jeff Bailey : 1/8/2008 12:05:31 PM

Banks have turned very defensive

Jeff Bailey : 1/8/2008 12:04:20 PM

TRIN 1.16

Jeff Bailey : 1/8/2008 12:03:55 PM

NYSE A/D 1540/1509

Jeff Bailey : 1/8/2008 12:02:55 PM

DIA 30-minute interval chart with my MONTHLY Pivot Retracement and QCharts' WEEKLY Pivot Levels Link

Linda Piazza : 1/8/2008 11:51:18 AM

New potential target of 657.85 is set for the OEX.

Linda Piazza : 1/8/2008 11:50:57 AM

New potential target of 1406.97 is set for the SPX.

Keene Little : 1/8/2008 11:52:26 AM

After consolidating in a small sideways triangle since the overnight high it's now looking like we're getting the final leg up in gold now. Upside Fib projections line up from YG 881 to 884 so watch this area to set up the short play. Silver also looks like it could be topping (YI just tagged 15.74).

Linda Piazza : 1/8/2008 11:45:23 AM

After bouncing back up to 109.75, the USDJPY dropped back again and is now at 109.31, back in that same chop zone. Clearly, the 109.71-109.75 zone is an important short-term resistance level. The 108.90-109.00 level was previously important short-term resistance, and U.S. equity bulls hope it now holds as support on any tests. Between that, it's chop and the USDJPY isn't telling us a whole lot.

Linda Piazza : 1/8/2008 11:42:17 AM

The advdec line is doing what equity bulls didn't want it to do. Instead of consolidating sideways, it's falling steeply. It's at potential support now at about 260 with more important support at about -100. The advdec line is at 283 as I type. U.S. equity bulls want one of those support levels to hold and for the advdec line to bounce hard.

Jeff Bailey : 1/8/2008 11:40:09 AM

DJX Jan'08 Options Montage Link

Linda Piazza : 1/8/2008 11:39:34 AM

The OEX is testing potential 663.35 support on 15-minute closes. OEX bulls want that to hold. The OEX is at 663.21 as I type.

Linda Piazza : 1/8/2008 11:38:26 AM

The SPX is testing potential support at 1416.88 on 15-minute closes. U.S. equity bulls want that to hold. The SPX is at 1416.21 as I type.

Keene Little : 1/8/2008 11:35:28 AM

The decline off this morning's high is now impulsive (5-wave move down). We should get a bounce to correct the decline and that will set up the next shorting opportunity (and an opportunity to lower your stop if already short). If you want to take some profits off the table (if you're short from this morning's high), be looking at this leg down (watch DOW 12775) as a time to peel some money off the table.

Jeff Bailey : 1/8/2008 11:31:08 AM

Don't forget! January Op-Ex is next Friday.

Jeff Bailey : 1/8/2008 11:28:59 AM

DIA's Jan'08 Options Montage at this Link

Linda Piazza : 1/8/2008 11:24:01 AM

The current action is the reason why I was posting potentially strong SPX and OEX resistance in my 9:47 and 9:49 posts, saying in that 9:49 post that you should know how you were going to treat that test if in a short-term bullish trade. Are you going to exit automatically or watch the test? that post asked. That's part of having a plan, too, and there was no right or wrong answer. If your intention was to just scalp a couple of points, an automatic exit would have been a good idea. (That's what I did with my once-every-six-months-succumbing-to-temptation OEX directional option trade.) If your intention instead was to go bottom fishing and try to catch a day or two move, perhaps you let it test and have a stop that will get you out if the pullback turns into more than a pullback. You just have to know what your plan is before you enter and then adhere to it, because once the emotions of the trade get to you, it's harder to make logical decisions.

Keene Little : 1/8/2008 11:23:44 AM

One of the reasons I'm saying DOW needs to hold above 12800 (and could be decent support to try a long play) is because that's the uptrend line from August and the bottom of a potential bullish sideways triangle. After breaking below it and then back above it this morning, a drop back down below it would look bearish.

Jeff Bailey : 1/8/2008 11:22:05 AM

VIX.X 23.28 -2.14% ...

Jeff Bailey : 1/8/2008 11:21:52 AM

VXO.X 24.85 -1.15% ...

Jeff Bailey : 1/8/2008 11:20:41 AM

Swing trade call alert! ... for one (1) of the Dow Diamonds DIA Jan $129 Calls (DAW-AY) at the offer of $1.38. No stop for now, Target $131.50.

DIA $128.09 +0.02%

Linda Piazza : 1/8/2008 11:18:04 AM

The SPX just completed a 15-minute close that was lower than bulls wanted to see. There's now a potential 1416.26 short-term downside target.

Keene Little : 1/8/2008 11:17:15 AM

Dropping harder now gives it the appearance of something more bearish happening. Stops on shorts still belong at new daily highs for now if you want to avoid the corrective bounce. Don't be bashful about taking small profits though in this whippy market.

Jeff Bailey : 1/8/2008 11:14:13 AM

DIA's DAILY Pivot at $128.04.

Keene Little : 1/8/2008 11:12:29 AM

Likewise for SPX, if this is to be just a corrective pullback watch for Fib support around 1420.50 (ES 1427.50).

Keene Little : 1/8/2008 11:09:17 AM

If this is to be a corrective pullback keep an eye on DOW 12825 since I've got some Fibs lining up in that area for potential support (YM 12880).

Jeff Bailey : 1/8/2008 11:09:08 AM

11:00 Internals at this Link

Yesterday's Internals at this Link

Linda Piazza : 1/8/2008 11:07:40 AM

I agree, Jane, with your 11:04 post. Risk management means that you have money to trade another time.

Linda Piazza : 1/8/2008 11:06:09 AM

We're seeing the expected consolidation beneath presumed strong resistance on the SPX and OEX. See my 10:13:21 post. So far, it's just consolidation, with the SPX maintaining support above the 1420.99 support level on 15-minute closes. The 9-ema has now risen to 1422.70, and it looks as if we're about to see the typical 9-ema test. Equity bulls want to see the SPX continue 15-minute closes above the 9-ema and certainly above that 1422.70 level, and then a bounce back up to retest that resistance.

Jane Fox : 1/8/2008 11:04:59 AM

If you entered a long at 12956 because all the evidence was that the market was going higher and put your stop at 12898 because sometimes the market does not do what you think it will do and you were stopped out that was a successful trade! Now reach around and pat yourself on the back. You had a plan and you stuck to it and that is what trading is all about.

Jane Fox : 1/8/2008 11:08:17 AM

WE have made a low of 12900 and the stop on this long from 12956 is sitting at 12898. I don't have much hope we will get to full profit on this trade but 12898 was the plan and it would be really bad to bail on it early. It would be bad psychologically that is.

Bailing early when taking profits is one thing but bailing early on the stops is a whole different ball game.

Keene Little : 1/8/2008 10:57:11 AM

Any pullback below DOW 12800 would look bearish. In the meantime keep an eye on the 38%-62% retracement levels of the rally off yesterday afternoon's low for potential support. So far it's just shy of a 38% retracement. If you're short then your stop should be at a new daily high. With just a 3-wave bounce off yesterday morning's low it's still a bearish setup but any rally now back up to a new high would look bullish.

Jeff Bailey : 1/8/2008 10:51:48 AM

Dow Diamonds (DIA) $128.47 +0.32% ... morning high has been $129.00. On 11/27/07, that 5-minute close from 10:55 to 11:00 was $128.98.

Jane Fox : 1/8/2008 10:48:16 AM

Even if I had moved my long entry to 12957, which I did consider doing, I would still be long and still thinking this one is not going in the direction I want it to.

Jane Fox : 1/8/2008 10:38:42 AM

This is not looking good for my long or for the bulls in general. When you have strong internals and the bulls are not able too overpower the bears one has to start thinking we are entering a new phase and into a "bear market." Did I just say that??

In any case you cannot make that kind of determination on one day.

Jeff Bailey : 1/8/2008 10:35:40 AM

NORTHROP TO COMPETE TO BUILD HUMVEE SUCCESSOR

DJ- Defense contractor teams up with Oshkosh Truck to bid for a contract potentially valued at billions of dollars to build vehicles to replace the Humvees, which now provide basic transportation for the Army and Marine Corps.

NOC $77.74 -0.44% ...

OSK $44.17 +2.31% ...

Jeff Bailey : 1/8/2008 10:33:07 AM

DRUG BENEFIT FUELS MEDICARE SPENDING

DJ- Growth in U.S. health-care spending picks up slightly in 2006, but Medicare spending increases at its fastest rate in 25 years, fueled by the drug benefit added to the federal health-insurance program for the elderly.

Jeff Bailey : 1/8/2008 10:32:25 AM

MOODY'S SEES CORPORATE DEFAULTS RISING

DJ- Moody's Investors Service warns that a much anticipated rise in corporate default rates may be closer, after several companies missed interest payments in December and the number of issues trading at distressed levels jumped.

Jeff Bailey : 1/8/2008 10:31:11 AM

US Oil Fund (USO) $76.36 +1.13% Link ... $0.50 box to match futures.

Jeff Bailey : 1/8/2008 10:29:04 AM

OPEC DECEMBER OIL OUTPUT UP 1.0% ON MONTH

DJ- The Organization of Petroleum Exporting Countries boosted crude oil output in December as the United Arab Emirates returned to near-full production and both Nigeria and Iraq added more barrels.

Jeff Bailey : 1/8/2008 10:28:04 AM

REDBOOK US RETAIL SALES FALL 0.7%

DJ- National chain store sales fall 0.7% in first five weeks of December versus previous month, Redbook Research says. ICSC-UBS Retail Chain Store Sales Index rises by 0.4% in week to Jan. 5, spurred by gift-card redemptions and post-holiday sales.

Keene Little : 1/8/2008 10:25:59 AM

Updating the SPX 60-min chart after this morning's bounce, it takes a rally above 1442 to negate the bearish wave count: Link

Jane Fox : 1/8/2008 10:24:39 AM

YM is pushing up against daily highs and I think it will break it soon.

Keene Little : 1/8/2008 10:22:07 AM

SPX has stalled at the level where it initially dropped Friday morning. It needs to keep pushing higher to hold this morning's momentum. The next upside resistance level is near 1437.50 which is where the 2nd leg up in the bounce off yesterday morning's low would equal 162% of the 1st leg up.

Jeff Bailey : 1/8/2008 10:21:50 AM

PetroChina (PTR) $180.15 +1.69% ... PTR-AV $1.50 x $1.75.

Jeff Bailey : 1/8/2008 10:21:14 AM

China Plans Checks To Contain Rising LPG Prices ... Reuters Story Link

Jane Fox : 1/8/2008 10:19:45 AM

It would not be good for the bulls if they cannot rally with the internals as bullish as they are.

Jane Fox : 1/8/2008 10:18:29 AM

YM's (DOW futures) overnight highs are 12953 and this market is having a hard time breaking those highs however it did break it enough to get me long.

Jeff Bailey : 1/8/2008 10:17:14 AM

Companhia Vale Do Rio Doce (RIO) $32.55 +3.23% ... RIO-MG $2.65 x $2.75.

Jeff Bailey : 1/8/2008 10:16:16 AM

Companhia Vale Suspends Ore Shipments At Small Port ... Reuters Story (late Monday) Link

Jane Fox : 1/8/2008 10:13:10 AM

I am now long YM at 12956 and have a stop at 12898. My target is 12956 - 12898 = 58. 12956 + 58 = 13014.

Linda Piazza : 1/8/2008 10:13:21 AM

The SPX approaches resistance at 1431.17 on 15-minute closes, with more significant resistance at 1436.06. For the OEX, those levels are 670.15 and 671.68. It will take a strong thrust to move up through this level without at least some consolidation. So far, the advdec line's Keltner outlook supports the action in U.S. equities, but I certainly would like a stronger corroboration from the USDJPY.

Jeff Bailey : 1/8/2008 10:12:23 AM

Apex Silver Mines (SIL) $15.74 +3.68% ... SIL-BC are $1.40 x $1.60

Jeff Bailey : 1/8/2008 10:10:21 AM

iShares Silver (SLV) $154.30 +2.50% ... (~15.43 spot)

Jane Fox : 1/8/2008 10:10:16 AM

My stop on the long (if I should get triggered) will be 12898. Target will be a 1:1 ratio to the risk.

Jeff Bailey : 1/8/2008 10:09:45 AM

StreetTracks Gold (GLD) $86.31 +1.81% ... (~863.10 spot)

Keene Little : 1/8/2008 10:09:36 AM

Equities pushing back up so this could be the follow through the bulls need. You don't want to be short now with a push back up.

Jeff Bailey : 1/8/2008 10:09:01 AM

Feb. Mini Gold (yg08g) $876.10 +1.58%

Jane Fox : 1/8/2008 10:08:42 AM

All internals are on the side of the bulls this morning and I will be taking YM long at 12956. Link

Jeff Bailey : 1/8/2008 10:07:30 AM

GOLD HITS RECORD HIGH AMID FUND BUYING

DJ- Comex gold prices jump as fund buying continues. The lightly traded Jan futures hit an $875 peak overnight that matches the spot-month contract high from 1980. The most-active Feb futures are up $12.20 to $874.20 an ounce.

Jane Fox : 1/8/2008 10:07:03 AM

VIX agrees with the AD line and is bullish as well. Link

Jeff Bailey : 1/8/2008 10:06:56 AM

STARBUCKS UP, FOUNDER SCHULTZ TO RETAKE HELM

DJ- Shares gain 10% as Chairman Howard Schultz will reassume CEO duties, with plans to slow the number of new stores built in the U.S., close struggling locations, streamline management and accelerate overseas growth.

SBUX $20.19 +9.90% ...

Linda Piazza : 1/8/2008 10:06:02 AM

The USDJPY punched down toward 109 again, reaching 109.08 a few minutes ago. It's bounced back to 109.32 as I type. U.S. equity bulls should be grateful that it's holding support, but it's sure not doing much else that's particularly encouraging to bullish hopes right now. Bulls need 15-minute closes maintained above 109.38 as a start to a better outlook.

Jeff Bailey : 1/8/2008 10:05:58 AM

KB HOME 4Q LOSS WIDENS ON TAX CHARGE

DJ- KB Home's fiscal 4Q loss balloons to $772.7 million, or $9.99 a share, as the home builder takes a big tax charge, hinting it doesn't expect to be profitable any time soon. Revenue declines 31% to $2.07 billion.

KBH $18.29 -1.02% ...

Jane Fox : 1/8/2008 10:05:28 AM

AD line opened at +1524 then fell to +1296 and is now at +1470 so this internal is telling me the bulls have the ball.

Jeff Bailey : 1/8/2008 10:04:56 AM

BEAR'S CAYNE SEEN HANDING CEO BATON TO SCHWARTZ

DJ- James Cayne, under fire from shareholders since the Wall Street firm was badly burned by the downturn in the mortgage market, is stepping down as CEO but will retain his post as chairman, say people familiar with the matter. Cayne is expected to be succeeded by the firm's president, 57-year-old Alan Schwartz, an investment banker known for his deal-making savvy.

BSC $76.52 +0.48% ...

Jane Fox : 1/8/2008 10:04:37 AM

WASHINGTON (MarketWatch) - At least one member of the Federal Open Market Committee believes further cuts in interest rates probably won't be required to heal the economy.

In a speech in suburban Philadelphia on Tuesday, Philadelphia Fed President Charles Plosser said he believes the weak U.S. economy will "improve appreciably" by the second half of the year, before the effect of any additional rate cuts would be felt.

At the same time, Plosser said he saw "worrisome signs of underlying price pressures." He said "we should not rely on slow growth to reduce inflation."

Plosser did hold out some chance that he could support further rate cuts if the economic outlook becomes "substantially weaker" than he now expects. His forecast is for the economy to be "quite weak" for another few months, with the unemployment rate rising "somewhat above 5%." He doesn't expect any "significant improvement" in the housing market until next year.

Jane Fox : 1/8/2008 10:03:40 AM

WASHINGTON (MarketWatch) - Sales contracts on previously owned U.S. homes fell by 2.6% in November, a sign that home sales will continue to decline. The pending home sales index, based on contracts signed but not closed in November, fell 2.6% in November and was down 19.2% in the past year, the National Association of Realtors reported Tuesday. The index, which is considered a leading indicator of existing home sales, had risen in September and October. Existing-home sales for December (representing closings on contracts signed in October and November) will be reported on Jan. 24. Exiting-home sales have dropped 20% in the past year.

Jeff Bailey : 1/8/2008 10:03:30 AM

Bank of Portugal Lowers 2008 GDP Forecast To 2% From 2.2%

Linda Piazza : 1/8/2008 10:03:24 AM

We now have a potential reversal signal composed of the first two 15-minute SPX candles today, with a third needed to complete it. That third would be a long red candle that reverses at least half of the first 15-minute gain. That's a potential signal only and not a confirmed one. What bulls want instead of that confirmation is a sideways consolidation that holds support on 15-minute closes above 1419.88 or a bounce, of course.

Jeff Bailey : 1/8/2008 10:02:31 AM

US Pending Home Sales Index -2.6% In November

Pending Home Sales -19.2% From November 2006.

Keene Little : 1/8/2008 10:00:12 AM

Oil looks ready for one last rally leg to finish its longer term rally. A push back up to 100-105 looks like a possibility from here. A break below yesterday's 94.47 low would suggest we've already seen the high. Link

Jane Fox : 1/8/2008 9:58:56 AM

Remember the Pending House Sales at 10:00.

Linda Piazza : 1/8/2008 9:54:30 AM

Keltner outlook on the advdec line: The advdec line is in breakout mode now on the 15-minute chart. Now bulls would prefer that any pullback stop in the 1200 zone with the advdec line perhaps consolidating sideways there while support catches up. However, the advdec line doesn't tend to stay in breakout mode long on the 15-minute chart, so it may be too much to ask that the 1200 support is maintained. Basically what you want is that it not start dropping heavily, as it did yesterday. It's at 1512 as I type.

Keene Little : 1/8/2008 9:53:51 AM

Same for the DOW--two equal legs up from yesterday morning's low is at 12884 which got tagged this morning. It's a short until the bulls can show some follow through.

Keene Little : 1/8/2008 9:52:20 AM

SPX has pushed marginally above resistance at 1426 although it's right at the downtrend line from the Dec 31st and Jan 3rd highs. Bulls need to hold it here and keep on going. In the meantime, look at it as a shorting opportunity.

Linda Piazza : 1/8/2008 9:51:59 AM

The USDJPY still isn't giving us much feedback. It's at 109.30 as I type, still in yesterday's chop zone.

Linda Piazza : 1/8/2008 9:49:32 AM

The OEX's 15-minute chart shows next Keltner resistance, congruent with a descending trendline off the 12/26 high, at 669.94, so I would know how I was going to treat that test if I were in a short-term bullish trade. Are you going to let it test or exit automatically? Further and more significant from a Keltner standpoint resistance is at 671.74 on 15-minute closes.

Linda Piazza : 1/8/2008 9:47:14 AM

Switching back to the 15-minute chart to give a little longer-range view, if a 15-minute chart can be deemed to do that, the SPX should have support now in the 1420 zone and then again at 1417. Resistance is at 1430.71 and then again at 1436.20.

Linda Piazza : 1/8/2008 9:45:36 AM

Looking back at the 7-minute chart that was a good guide for us for several days, I see that the SPX is currently testing resistance at 1424.50 on 7-minute closes. I don't know that there will be a pullback now, but it wouldn't be a big thing for the SPX to pull back from this test, perhaps as low as 1417.50, although bulls would prefer that any pullback stop near 1423.75 or 1420.30.

Linda Piazza : 1/8/2008 9:38:58 AM

Keltner outlook on the advdec line: The advdec line is climbing toward potential resistance in the 1175-1200 region. That's a dynamic line, and because the advdec line's numbers are so big, the level of the line will change big as it climbs. If it pulls back from that test, equity bulls want the pullback to find support at +650 or above. The advdec line is at 998 as I type, just pulling back from a 1114 high that occurred as I was typing.

Linda Piazza : 1/8/2008 9:35:53 AM

Similarly, the OEX is testing Keltner resistance that stopped it about midday yesterday. That resistance is now at about 664.32, so OEX bulls want the OEX to close this first 15-minute period above that resistance and then to maintain levels above it. You don't want to see a first 15-minute pop that is quickly reversed. The OEX is at 665.42 as It ype.

Jane Fox : 1/8/2008 9:34:42 AM

Over the last few months I have shown charts comparing Crude and Gold and the two charts are almost identical. However, Gold is now making new multiyear highs so you would expect Crude to be as well. Since it is not I believe this move in Gold will be its also hurrah and it will not see $900/oz on this try.

Let's look at the MACDs of each now. Crude's MACD is making a lower high when it made its triple top at $100 so the chance it will break $100/bl anytime soon is remote - at least according to the charts and with Crude you have understand there are a lot of factors that come into play here that cannot be "read" in the charts.

Gold's MACD is not quite as conclusive because it has not yet formed a high but I suspect it will make a lower high as well. Link

Linda Piazza : 1/8/2008 9:34:14 AM

The SPX tests Keltner resistance that stopped it about noon yesterday. That resistance is now at about 1418.60 on 15-minute closes, so bulls want the SPX to close this first 15-minute period above that resistance and then to stay above it. Be careful about a first 15-minute pop that is quickly reversed.

Linda Piazza : 1/8/2008 9:32:35 AM

The USDJPY isn't giving us a lot of clues this morning. As it did night before last, it bumped up to a new recent high last night, reaching 109.78, a test of the previous day's overnight high. Since then it turned down sharply, almost hitting 109.00 again. It's at 109.27 as I type. It's a bit bearish (for the currency pair and, by implication, for our equities) that it got knocked back so soundly from its equal-high test, but then it maintained that 108.90-109.00 benchmark level as support, so that tempered the bearishness.

Keene Little : 1/8/2008 9:28:25 AM

Even after pulling back from their pre-market highs this morning we'll have a bullish start to the day. As shown on the SPX 60-min chart, potential resistance by the trend lines is just under 1426 and we should see it get close to that level shortly after the open. It's resistance (and therefore a short) until it's not so short below and long above is the recommendation.

As for gold, I posted yesterday that it looks like one more leg up should complete its rally. We've got that this morning and the upside target at 880 was missed by 40 cents on YG. It's looking like it could get one more push higher and 884 is looking like a potential target for its high. I'll watch it closely this morning for clues as to whether it has topped or not.

Jane Fox : 1/8/2008 9:23:16 AM

According to Fibonacci, Gold could reach 900, the 127.20% level, before it finds resistance. The longer this market goes up without a retracement the more violent that retracement will be; Gold can make some pretty horrendous moves when it decides to. Link

Jane Fox : 1/8/2008 9:19:42 AM

NEW YORK (MarketWatch) -- Gold futures surged to a new all-time high early Tuesday, soaring as high as $879.40, as dollar weakness, rallying crude-oil prices and tensions between the United States and Iran boosted demand for the precious metal.

Gold for February delivery hit $879.40 an ounce in electronic trading on the New York Mercantile Exchange, surpassing the previous record of $875 set on Jan. 21, 1980. Still, the new record high was considerably lower than the inflation adjusted high of about $2,200 per ounce. Spot gold also reached a record.

Gold futures recently were up $15.20 to $877.20 an ounce in regular trading on Nymex.

"Gold's strength is likely due to buying on inflation hedging, credit crisis risk and general macroeconomic and geopolitical risk," said Mark O'Byrne, director of Gold and Silver Investments Ltd., in a research note.

Jane Fox : 1/8/2008 9:18:24 AM

All markets have tested their respective previous day highs and the S&P futures (ES) were even able to breach those highs for a short while. Link

I think the AD line will open above +500 and it has a good chance of opening above +1000. Yesterday, the AD line threw me a curve ball. I had expected it to open below 0 but it opened at +1200 and then within an hour it was well below 0 so will have to see how correct I am this morning.

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