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OI Technical Staff : 1/11/2008 9:59:59 PM

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Keene Little : 1/11/2008 5:53:07 PM

Monday's pivot tables: Link and Link

Have a great weekend.

Keene Little : 1/11/2008 5:14:06 PM

AAPL continues to have me guessing a bit more than I'd like about its current decline. It dropped hard out of a corrective pullback from its December high and that has me thinking (wondering) if we're not in a larger choppy wave count to the upside that calls for price to work its way higher into February (green). Link

But the bearish wave count up into the December high suggests shorting the next bounce and that's the first play I'll be looking for if we get the bounce to a Fib resistance zone in the 185-190 area (dark red).

Keene Little : 1/11/2008 4:58:20 PM

CME bounced off its 200-dma this week, which is also approximately where its 50-week moving average (at 580). This moving average has held every weekly close since 2003 so it would be a big deal to see this stock close below it. Link

The bearish price pattern calls for another leg down to finish a 5-wave decline from the December high. Then a bigger bounce into February followed by a strong decline. If price plays out this way it will look like a bounce off the 50-week MA and then failure and that would have a lot of sell stops getting hit.

The bullish wave count calls for a continuation of the choppy price action with a push to new highs. A break above 673.50 is needed to confirm the bulls are back in control.

Jeff Bailey : 1/11/2008 4:53:34 PM

Venezuela Oil Minister: Currently ships 250,000 B/D Crude Oil To China

Jeff Bailey : 1/11/2008 4:46:46 PM

Petrobras Dec Brazilian Oil Output Rises To 1.855M B/D

Jeff Bailey : 1/11/2008 4:42:44 PM

Dow Jones Corp. Bond Index 207.65; Yield 5.43%

Jeff Bailey : 1/11/2008 4:42:06 PM

Petrobras Dec Overall Oil, Gas Output Rises To 2.367M BOE/D

Keene Little : 1/11/2008 4:38:50 PM

GOOG has been consolidating just above it 100-dma and if it breaks lower then it will support the bearish wave count which calls for a little more choppy price action into the end of the month before letting go to the downside. If it can instead bounce from here back up to towards the December highs then it will have a much better chance of following one of the bullish wave counts. Link

Jeff Bailey : 1/11/2008 4:31:14 PM

CBOE Most Active Call/Put Option Series at this Link

Jeff Bailey : 1/11/2008 4:28:17 PM

Wow ... heave deep in the money call action in PBR $111.21 -2.51% Jan'08 options today.

Jeff Bailey : 1/11/2008 4:22:47 PM

Venezuela Minister: Defending Oil Price In OPEC Is Priority

Jeff Bailey : 1/11/2008 4:21:22 PM

US Bank Business Loans Up $3.6 Billion In Latest Week
National Jumbo CDs Up $12.6 Billion
Home Equity Up $400 Million

DJ- U.S. banks' commercial and industrial loans rose $3.6 billion to about $1.449 trillion in the week ended Jan. 2, the latest week for which data are available, the Federal Reserve said Friday.

That followed a $11.8 billion increase the previous week.

Jumbo certificates of deposit grew $12.6 billion to about $2.023 trillion in the latest weekly data, after shrinking $9.1 billion the previous week. Revolving home equity loans rose $400 million to $488 billion after growing $1.3 billion the previous week.

More weekly Fed statistics on the banks' assets and liabilities will be available on the Internet at: Link

Keene Little : 1/11/2008 4:17:02 PM

One of the things that gives me a little bit of heartburn about thinking long next week are the Trannies. Again, an update to the daily chart from Wednesday's Market Wrap shows we got the little bounce I was looking for and that could be setting up a down week next week for the Transports. That may put pressure on the broader market. Link

Jeff Bailey : 1/11/2008 4:16:54 PM

NYSE: SEC Application Will Be Made To Delist NovaStar Financial

NFI $2.92 -10.97% ... If short NFI, or holding put options, be aware stock may be placed on BB.

Keene Little : 1/11/2008 4:00:31 PM

I think Monday will be a good opportunity for a lottery play on the long side--we'll pick up some cheap Jan calls and let 'er rip.

Linda Piazza : 1/11/2008 3:57:47 PM

Make your decision soon as to whether you're going to hold your position over the weekend. That's a particularly tough decision this week with markets susceptible to sudden weakness, ready for a relief rally that goes on for more than a few minutes or hours, susceptible to further hits from financials or reporting companies or to a sudden spark from an inter-meeting Fed rate cut, if that should happen. Don't take home so much risk that you can't relax.

This market has done all it can to confound us today, hasn't it? It's been a tough week all the way around for many. Have a great weekend and we'll see what next week delivers.

Keene Little : 1/11/2008 3:56:24 PM

Looking a little closer at the move down from yesterday's high, a bounce above SPX 1410 would be a heads up that we've probably seen the end of the pullback. A break above 1416.73 would confirm it. Otherwise there's still the possibility we're going to see one more new low on Monday to finish the decline. Link

Jeff Bailey : 1/11/2008 3:46:17 PM

MBIA $1 Billion Surplus Notes Sold At 14% Coupon - DJ Source

Jane Fox : 1/11/2008 3:45:41 PM

I am looking forward to see what McMillan has to say today but so far I have not gotten his weekly update. On occasion he sends it out after the market closes.

Jeff Bailey : 1/11/2008 3:45:16 PM

Crude Oil Settles At Lows Of Year On U.S. Demand Concern

Jane Fox : 1/11/2008 3:43:54 PM

If you are a DISCIPLINED trader you could take Gold short here although I'm not sure I would use the futures and I really do not know of any other way to short this commodity. You could short the ETF, GLD but you would have to have an account that allows shorting and since I trade this market in my IRA that is not an option. GLD unfortunately does not have options so I cannot buy a put, which to me would be the best way to go. Link

Keene Little : 1/11/2008 3:30:54 PM

Getting a stronger bounce--watch for a strong final 30-min reversal. Anything can happen in the last 30 minutes here.

Keene Little : 1/11/2008 3:28:56 PM

A break of the downtrend line from yesterday's high would be the heads up that a bottom is in.

Jeff Bailey : 1/11/2008 3:28:22 PM

03:00 Internals found at this Link

Keene Little : 1/11/2008 3:26:57 PM

Into the last hour and the market remains bearish looking. I'm now watching for where today's move down will have two equal legs down--DOW 12841 and SPX 1391 for examples. It's possible the rally from Wednesday up to yesterday's high was wave A. A 3-wave decline today (with the two equal legs down) could then be wave B. That would set up a very strong rally into next week as wave C (green wave count here): Link

If today's move down is going to be a 5-wave move to finish the decline from Dec 26th (dark red count) then we could see a small consolidation on Monday followed by another new low to finish the decline. Regardless, I think the risk is shifting over to the side of the bears as we should be getting very close to a stronger move back up.

The turn date of Jan 9-11 looks to be in play and that also points to a strong reversal of the selloff into this turn window. Maybe a surprise rate cut pre-market Monday morning? That would be Bernanke's MO to fry the shorts. Or we could miss the turn date by a day and get the final low on Monday.

Jeff Bailey : 1/11/2008 3:20:40 PM

DIA $125.64 -1.71% ... slips back below QUARTERLY S1.

Linda Piazza : 1/11/2008 3:19:08 PM

The SPX target is now at 1392.04 and is maintained as long as the SPX continues producing 15-minute closes beneath the 9-ema, now at 1402.65. The drop has seemed reluctant all day, if we can qualify an entity with a word denoting emotion. I just haven't been sure all day that it would really dip down to touch that target.

Jeff Bailey : 1/11/2008 3:02:36 PM

Valero Energy (VLO) $59.80 -4.12% ... would certainly take $55.00 if we get it for one of by "Top 5" bull picks.

Crack spread continues to narrow.

Will set an alert on VLO ABOVE $63.00.

Linda Piazza : 1/11/2008 3:01:15 PM

The SPX's still forms 15-minute closes beneath the 9-ema, now at 1405.34. It's still finding temporary support on 15-minute closes at a line now at about 1399.30. It's still got a potential downside target set, with that now at 1392.34. I'm still not so sure at all that it will hit it.

Jeff Bailey : 1/11/2008 3:00:42 PM

July Crude (cl08n) ... -0.30% last 20DyNet%.

July Unleaded (rb08n) ... -1.96% last 20DyNet%.

Keene Little : 1/11/2008 2:51:32 PM

The little bounces we're seeing continue to look corrective (overlapping highs and lows) and therefore there's nothing bullish about them yet. Keep looking lower for now.

Keene Little : 1/11/2008 2:47:20 PM

In Wednesday's Market Wrap I pointed out that the home builders index could get a little bounce and then a final low which would be another setup for a larger bounce. If price follows the dark red path I think it would be a good time to think about nibbling long on some home builders but not yet. Link

Jeff Bailey : 1/11/2008 2:42:26 PM

Maybe C didn't get such a bad deal.

Jeff Bailey : 1/11/2008 2:42:11 PM

MBIA's $1 Billion Deal to Price Later Friday, 14% Coupon - DJ Source

MBI $16.40 +16.22% ...

Jeff Bailey : 1/11/2008 2:40:37 PM

FedEx (FDX) $84.51 -0.59% ...

Keene Little : 1/11/2008 2:38:25 PM

The bulls are keeping alive the rumor that the Fed is going to do an intermeeting rate cut. That could be causing these little buying spikes.

Jeff Bailey : 1/11/2008 2:38:07 PM

UPS Freight Rate To Climb Average of 5.4% (update)

DJ- UPS Inc.'s (UPS) over-the-road heavy freight division will raise its general rate an average of 5.4% on noncontractual shipments in the U.S. and Canada. The increase goes into effect Feb. 4 and applies to minimum-charge less-than-truckload and truckload rates. UPS Freight is the nation's fourth-largest less-than-truckload carrier. Less-than-truckload carriers consolidate freight for more than one customer in a single truck. Last month, FedEx Corp. (FDX) said its freight segment will implement a 5.5% general rate increase, effective Jan. 14, and its long-haul less-than-truckload business will impose a similar increase for its general rates. The rate increases for the Memphis, Tenn., transportation company's FedExFreight and FedEx National LTL businesses will apply to interstate and intrastate traffic and certain shipments between the U.S. and Mexico and Canada. Previously, both UPS and FedEx announced rate increases for air and ground shipments of small parcels. UPS hiked rates for 2008 by an average of 4.9% for ground shipments, air express and international parcels from the U.S. FedEx air rates climbed 4.9%, with a 6.9% increase being partially offset by a 2-percentage-point cut in the fuel surcharge. FedEx Ground rates rose 4.9%. Increasing competition for delivery of goods has meant that Atlanta-based UPS, the world's largest shipping carrier, has had to broaden its global reach and expand its business beyond small-package delivery to shipping heavy freight and providing logistics services for companies.

UPS $69.97 +0.44% ...

Keene Little : 1/11/2008 2:36:47 PM

I thought that last little push might break higher but still no go. Stay short against that last high just past 2:15 PM.

Linda Piazza : 1/11/2008 2:34:55 PM

Still no real progress toward the downside target on the SPX, and that target has been rising all day. It's now at 1392.50, well above its 1384-ish level from this morning. If the SPX rises much further, it's going to erase the target anyway.

Jeff Bailey : 1/11/2008 2:25:00 PM

Fed's Rosengren: FHA Modernization Bill Would Be Helpful

DJ- Boston Federal Reserve President Eric Rosengren urged Congress Friday to pass a bill of proposals for the Federal Housing Administration in order to help homeowners caught in the collapse of the subprime mortgage market.

The FHA Modernization Bill, designed to give the body flexibility to provide more affordable financing for mortgage holders, is still under debate among lawmakers.

In a question-and-answer session following his speech to the Vermont Economic Outlook Conference in South Burlington, Vt., Rosengren said the bill would be "very useful...it would be nice if that political logjam could be rectified."

Asked about how badly regional banks were hit by losses tied to the devaluation of securities linked to the mortgage market, the central banker said their exposure was minimal, the trouble is focused in the larger financial institutions. "A lot of the problems that are most severe are concentrated in the larger banks," Rosengren said.

Rosengren, who isn't currently a voter on the Fed's rate-setting committee, made no further reference to the economy or monetary policy in the question-and-answer session.

Keene Little : 1/11/2008 2:23:31 PM

Last week the SPX closed at 1411.68 so there could be a strong effort to keep it from closing below that today, in an effort not to have another down week. It looks bearish enough today with a price failure at the broken uptrend line from March 2003 (which it gave a kiss goodbye today). The DOW has more work to do in that regard--it needs to close above 12800 today. The PPT needs to ride to the rescue this afternoon.

Keene Little : 1/11/2008 2:18:43 PM

Some bullish divergences are appearing and I'm feeling less bearish here.

Linda Piazza : 1/11/2008 2:07:31 PM

Another SPX 15-minute close beneath the descending 15-minute 9-ema. Something still doesn't feel quite right, including those red candles that keep springing up from descending support, but we have to give at least some credence to the downside target. It's now at 1391.59, but I wouldn't be surprised to see the SPX pop higher any moment, either, back up toward 1408 or maybe even 1413. The shape of the candles, the lack of immediate follow through this morning, a bunch of little things just keep signaling me not to trust the downside target too much. Meanwhile, the SPX keeps creeping lower.

Keene Little : 1/11/2008 2:06:13 PM

Shorts may want to consider a downtrend line along the highs since the mid-day bounce. The trend lines are getting steeper (hence the waterfall decline look to it) and the steeper downtrend line should hold if we're going to let go to the downside so trail your stop.

From the bullish side, it's possible the 2nd leg down today is going to truncate--be smaller than the 1st leg down. That would create an a-b-c pullback for today and lead to another strong rally. That's why the downtrend lines are important right now.

Keene Little : 1/11/2008 2:00:50 PM

If you're short this market always keep in mind that there is going to be a strong effort by government-bank intervention to prop the market up. A massive buy program in the futures, a surprise announcement by Bernanke and who knows what else--keep the exit door propped open in case you need to make a quick exit.

Keene Little : 1/11/2008 1:57:33 PM

The indices keep getting spiked back up and then more selling. Someone (gee, I wonder who) is trying very hard to hold this up. The risk is that selling could overwhelm the effort to shoo the bears back into their caves and that's what could give us the waterfall decline this afternoon. But any rally back above the highs around 12:00 could take off to the upside.

Jane Fox : 1/11/2008 1:53:32 PM

The two internals I watch the most are the VIX and AD volume and they are decidedly bearish. But then I like to consider how the AD ratio is doing as well and as you can see it is not making new daily lows like the AD volume. Then we have the DAX and the USDJPY both in downtrends but not to new daily lows. All in all this has been a difficult day for trading, which is too bad because the rest of the week has been great. Link

Linda Piazza : 1/11/2008 1:51:54 PM

There's beginning now, finally, to be a pattern of 15-minute closes beneath the 15-minute 9-ema on the SPX. Before, prices were just criss-crossing that moving average. It's now at 1407.47. The SPX still tests Keltner support at about 1402.10 on 15-minute closes, but if it can't bounce back above that and the 9-ema, then we're going to have to give stronger credence to the downside Keltner target. That's now risen to 1391.41. This 15-minute period has not ended, and we must remember that it's coming during the typical stop-running time of day. So, there's a little more evidence in favor of the downside target, but still retain a bit of skepticism.

Jeff Bailey : 1/11/2008 1:44:01 PM

01:00 Internals found at this Link

Linda Piazza : 1/11/2008 1:37:20 PM

We're approaching a typical stop-running time of day, from 1:35-1:55 pm ET. This is a time when big money returns from lunch and does a little testing to see whether a punch down is going to find support or renewed selling or a bump up is going to be pushed back or be joined by more buyers. It's a time to be aware of what's happening.

Keene Little : 1/11/2008 1:31:57 PM

This is the chart of the banks that I've been posting each week in my Market Wrap: Link . I was showing on Wednesday night an expectation for a bounce and then another low before setting up a much larger upside correction. The bounce has gone a little higher than I thought it would but keep an eye on the key level at 267.26, the Dec 20th low--as long as price stays below that I expect to see a move lower.

Jeff Bailey : 1/11/2008 1:26:06 PM

WB's WEEKLY Pivot $36.51 ... WB $36.38 +1.25% ...

Linda Piazza : 1/11/2008 1:25:00 PM

Don't get the tenor of my previous posts wrong: this is not bullish action. I'm just not certain about the amount of follow through that will occur to the downside on the SPX, so I'm urging those who might be in bearish positions to stay attentive, to manage their risks.

Jeff Bailey : 1/11/2008 1:24:29 PM

BIX.X 257.65 +1.30% ... slips back below WEEKLY Pivot.

Jeff Bailey : 1/11/2008 1:23:49 PM

Wachovia (WB) ... reports earnings on January 22 , not February 22 as I originally thought.

Consensus is $0.33 on Revenue of $7.02B.

Linda Piazza : 1/11/2008 1:19:39 PM

The SPX is violating what I deem to be the neckline of that H&S, but it's just now dropping to test 1404.50-ish potential Keltner support on 15-minute closes. It's also testing the previous low of the day, with that previous low of the day at 1403.61. So, although the SPX is below that slightly rising neckline, I don't consider the formation confirmed, and I'm still not so sure that the SPX is going to drop deeply. If it does, the next Keltner support has now risen to 1390.82.

Jeff Bailey : 1/11/2008 1:17:59 PM

Swing trade covered put exit alert! ... Let's buy back/close out the one (1) Wachovia Bank WB Feb $32.50 Put (WB-NZ) at the offer of $0.90.

WB $36.50 +1.55% ...

Jeff Bailey : 1/11/2008 1:14:05 PM

S&P COE Ratings Cut (update)

DJ- Standard & Poor's lowered its ratings on 149 tranches from 31 U.S. cash flow and hybrid collateralized debt obligation transactions worth a total of $8.74 billion.

S&P placed its ratings on four other tranches on watch for possible downgrades. The ratings agency affirmed its ratings on another 46 tranches.

All of the downgraded tranches come from mezzanine structured finance CDOs of asset-backed securities, high-grade structured finance CDOs of asset-backed securities, or CDO of CDO transactions collateralized by U.S. residential mortgage-backed securities.

The ratings on 54 of the downgraded tranches remain on CreditWatch with negative implications, indicating a significant likelihood of further downgrades.

CDOs, which use sliced-and-diced assets such as subprime-mortgage bonds to create customized products offering various levels of risk, have been at the heart of steep write-downs at big banks and brokerage firms.

So far, S&P has lowered its ratings on 1,290 tranches from 402 U.S. cash flow, hybrid and synthetic CDO transactions as a result of problems in the U.S. residential mortgage market and credit deterioration of residential mortgage-backed securities. In addition, 726 ratings from 181 transactions are on watch for possible downgrades. The affected tranches are worth a total of $83.48 billion.

S&P said it will continue to monitor the CDO transactions it rates and take actions when appropriate. It also plans to review its criteria assumptions in light of the recent performance of U.S. residential mortgage-backed securities assets and CDOs.

Keene Little : 1/11/2008 1:05:09 PM

The way today's pattern is setting up, if the low around 12:30 breaks now we could see some accelerated selling.

Jeff Bailey : 1/11/2008 1:01:38 PM

Fed's Mishkin:
Repeats Bernanke Call For Timely, Decisive Action
Providing "Insurance" Against Severe Econ Outcomes
May Ease By More When Econ Risks Severe
Fed Easing Unlikely To Have Adverse Inflation Effect
Inflation Expectations "Reasonably" Anchored
Must Be Ready To Hike If Price Expectations Rise
Should Take Back Some Cuts If Market Conditions Improve

Linda Piazza : 1/11/2008 12:54:56 PM

The advdec line has been testing resistance, too, with that resistance at about -142 on 15-minute closes. If it were to move above that, it's going to be reaching a new high of the day, too. Watching the advdec line's direction now might give you a heads-up as to next market direction.

Jane Fox : 1/11/2008 12:42:23 PM

Comment from a MM subscriber and one time commentator Mark. Jane you're so right about social security. The politicians are so afraid of the subject that they won't even attack each other on it. They just don't want to talk about it, period, but it's a ticking time bomb and will have to be dealt with at some point. I think they all realize the only solutions are either raise taxes on the young or punish the elderly with reduced benefits, or a combination of the two. Either way they will make a large block of voters really angry.

Maybe you should take over the administration of these issues. Mark. Those two scenarios are exactly what Greenspan says needs to happen; raise taxes and reduce benfits.

Linda Piazza : 1/11/2008 12:39:01 PM

The SPX has been chopping around long enough that it's chopped out a credible potential H&S formation. Potential Keltner support at 1404.98 is joined by historical, neckline support at about 1401.75-1403.65, depending on where one draws the neckline. I wouldn't consider that formation confirmed until and unless there's a 15-minute close beneath the Keltner support. I'd be very careful about protecting bearish profits if I were trading this on the bearish side, however, as the effort to prop up the markets despite disturbing news is evident. I'm not sure whether you should count on any downside targets being met. Many across the globe are expressing the belief that our Fed is going to definitely ease and may do it any moment. Shorts may be nervous going into the weekend, I'm thinking.

Jane Fox : 1/11/2008 12:33:27 PM

The pattern on the SPX chart is starting to get muddy and not as clear as it was earlier this year but how ever you read it is bearish. In the past when the bulls fell they were able to jump up, grab the ball and start running very easily. They are not doing that this time and this is why I mentioned the "tenor" of the market has changed. Link

Keene Little : 1/11/2008 12:27:24 PM

The banks (+2.4% here) are doing a good job holding SPX up relative to the DOW.

Jeff Bailey : 1/11/2008 12:25:38 PM

VXO.X 26.46

Jeff Bailey : 1/11/2008 12:25:23 PM

VIX.X 23.71

Keene Little : 1/11/2008 12:25:09 PM

DOW is making new lows now. The risk for bulls is another leg down equal to the first move down from yesterday's high. That would project to 12481 and just below Wednesday's low. But that kind of move may not happen in a straight shot down if we're in the last leg of the decline from Dec 26th. Instead it could be a little choppier than that.

Jeff Bailey : 1/11/2008 12:24:51 PM

Swing trade call exit alert! ... for the one (1) Dow Diamonds DIA Jan $129 Call (DAW-AY) at the bid of $0.51.

DIA $126.66 -0.90% ...

Keene Little : 1/11/2008 12:21:57 PM

The banks (BIX) have been due an oversold bounce and if this index can get back above 267.26 then the bulls have a shot at a larger correction. It just closed its gap from Jan 3rd at 261.96. With the announcement of more major write downs I suspect many are buying the banks in hopes that this time, really really, it's the bottom and there's no more bad news. Yea, right.

Keene Little : 1/11/2008 12:01:06 PM

The bounce off this morning's low continues to have overlapping highs and lows and therefore is a corrective move. That suggests lower lows but of course is no guarantee.

Linda Piazza : 1/11/2008 11:50:58 AM

Just chopping around. This is pretty much as I expected. We might get more definitive action later today, but for now, the SPX is chopping around in that right-shoulder zone.

Keene Little : 1/11/2008 11:49:06 AM

SPX bounced up to its downtrend line from Dec 26th (which it had broken above yesterday but then dropped back below this morning) and almost back up to its broken uptrend line from Wednesday. It needs to rally back up now in order to give us at least a short term bullish pattern. Otherwise the risk is for a continuation lower. SPX 30-min chart update: Link

Jeff Bailey : 1/11/2008 11:47:27 AM

VIX.X 23.42

Jeff Bailey : 1/11/2008 11:47:15 AM

Swing trade put alert! ... for one (1) of the Wachovia Bank WB April $35 Puts (WB-PG) at the offer of $2.65. No stop for now. Target $30.00 in the underlying.

WB $36.76 +2.28%.

Jeff Bailey : 1/11/2008 11:37:59 AM

Wachovia Banks (WB) $37.00 +2.94% ... today's trade at $37.00 does have a 3-box reversal on PnF chart. This now established a bearish vertical count column to $22.00.

Keene Little : 1/11/2008 11:35:55 AM

Jane, as you know, I'm not a Greenspan fan. I read an interesting statement yesterday. Basically it said the next bubble to pop will be Greenspan's reputation. He is one of many who are responsible for the credit crunch and mortgage fiasco we now find ourselves in. As the Captain of the ship (the Federal Reserve) at the time these problems were created, he has to take responsibility for this mess. Instead he's now trying to blame others.

Jane Fox : 1/11/2008 11:34:02 AM

I know there are not a lot of Greenspan fans but I certainly am. I think he will go down in history as one of the truly great Americans. With that said I would love to see Greenspan come back out of retirement to help us deal with these issues because if we deal with them the same way we dealt with the subprime issue then we are in deep dodo.

Keene Little : 1/11/2008 11:28:24 AM

I use the term "corrective" and "impulsive" quite a bit and I received a question about what I mean when I use these terms. They're Elliott Wave terms and basically tells us the trend. An impulsive rally is a 5-wave move up that doesn't have overlap between the top of the 1st wave and the bottom of the 4th wave pullback. So I generally say there's no overlap in the rally.

A corrective move is one where the pullback overlaps the high of the previous move up. When you look at the move you'll see choppy price action. Think of how price action looks inside a bear flag.

One of the reasons I'm calling the rally off Wednesday's low as corrective is because of the overlap between the highs and lows. An example of an impulsive move is the decline from Dec 26th--there's no overlap between the highs of the bounces and the previous lows (until this week's rally).

Jeff Bailey : 1/11/2008 11:25:17 AM

AXP $44.26 -9.52% ... today's "troubled child" among DIA components. WKLY S2 up at $46.29.

Jeff Bailey : 1/11/2008 11:24:15 AM

DIA $127.036 -0.59% ... needs some buyers at MONTHLY S2 ($127.02).

BIX.X +1.69%, BKX +1.19%, XBD.X +1.03%

Jane Fox : 1/11/2008 11:23:00 AM

Greenspan's Book, "Age of Turbulence" talks a lot about Medicare and Social Security and says the future of American world dominance is based on how we deal with them. The solutions will be hard for everyone and we currently do not have (nor have we had) a leader who is strong enough to deal these issues.

It feels like we are taking the Ostrich head in the sand approach. If we think the subprime issue was a problem for our country just wait until the SS issue becomes a problem.

Jeff Bailey : 1/11/2008 11:19:04 AM

11:00 Internals found at this Link

Yesterday's Closing Internals Link

Linda Piazza : 1/11/2008 11:16:31 AM

The SPX is rising up into the right-shoulder area which extends up to about 1417 or maybe 1420. Too much above that and the potential formation will be invalidated. If the right shoulder has any similarity to the left, we could now see consolidation or choppy movement in a tight range for a number of hours. RSI is near 50 on the 15-minute chart, so gives no clues.

Linda Piazza : 1/11/2008 11:13:17 AM

I found the Financial Times article. Steven Hess, termed Moody's lead analyst for the U.S., issued the warning after the release of its annual report on the U.S. Other comments in the article noted that "[m]ost analysts expect future governments to deal with" the concerns that were listed and "there is no reflection of any long-term concern about the US financial health in the value of its debt."

Jane Fox : 1/11/2008 11:11:36 AM

NDX is now testing its daily lows but so far the only market to do so. Link

Linda Piazza : 1/11/2008 11:05:54 AM

I couldn't sleep last night, so I spent a lot of the night listening in on CNBC Europe, which I find much more enlightening than our version. When I turned on the television in the middle of the night, I happened upon a discussion of a rumor that Moody's was considering downgrading U.S. treasuries from their current triple-A credit rating. The gist of the discussion was, "It will never happen," and "It would be devastating if it happened," and "Why would they say it if they weren't considering it?" Who was "they"? I went looking for an article this morning. I found a blurb in The London Times's online version.

Apparently, the Financial Times reported that Moody's had said that the U.S. could lose its top-notch triple-A credit rating for its treasuries if it didn't do something about healthcare and social security costs. That rating change could come within a decade, the article said.

I'm not a subscriber to Moody's, so I couldn't find any reference on their site and I wouldn't have been able to pull up an article if I had been. I don't have any idea how likely this is or whether the whole thing was bogus or just part of a rambling speculation at a holiday cocktail party that was then picked up and reported as a credible possibility. The conclusion of the commentators last night was that it was just not likely, but one was stunned with the implications if it happened. He kept talking about U.S. treasuries as "the" safe haven.

Keene Little : 1/11/2008 10:57:29 AM

Gold (YG) tagged $900 so it has achieved its price target out of the Nov-Dec triangle pattern. The short term pattern would look best with one more minor push higher but with bearish divergences showing up at these new highs I'd say a tradeable top is close if that touch of 900 wasn't it. I've got a short term Fib projection for the move up from yesterday morning at 901.50 so watch that level for a short play. The usual caveats here--you're trying to catch some sharp rising knives on this one.

Linda Piazza : 1/11/2008 10:51:07 AM

The SPX has been going sideways since the first drop. It's now testing that former Keltner support, now turned resistance, at about 1408. The 9-ema is above, at 1411.16. If you read my 10:16:40 post, you know that the SPX had set a tentative downside target of 1384, but that I had some hesitancy in believing that it would be met right away. While I can see the possibility that it could be met later, after the SPX spent some time rising up into a right-shoulder formation for a potential H&S on its 15-minute chart, I just couldn't believe that the SPX was likely to drop too far right away. But subscribers need to know that the SPX remains vulnerable to a drop to that level, particularly if a H&S is hammered out and then confirmed.

My impression wasn't just a gut feeling, whatever that might be. I'm long winded anyway, and I can't always squeeze in everything, but that impression was compounded of where I was seeing historical support, what I was seeing happen on the advdec line, etc.

Jeff Bailey : 1/11/2008 10:47:29 AM

DIA has not yet traded its WEEKLY S1 ($126.26) or DAILY S1 $126.31. No trade at DAILY Pivot either ($127.81).

On Monday, its DAILY S1 held support. On Tuesday, when DAILY S1 failed to hold support, gave way to both DAILY S2 and WKLY S1.

Keene Little : 1/11/2008 10:47:13 AM

The little bounce in the past 30 minutes looks corrective and therefore points to new lows.

Jeff Bailey : 1/11/2008 10:41:03 AM

Found a server that's working ...


Jane Fox : 1/11/2008 10:47:02 AM

Markets are all testing overnight lows now. Link

Jeff Bailey : 1/11/2008 10:33:48 AM

Dow Diamonds (DIA) $1.10 at $126.72.

Jeff Bailey : 1/11/2008 10:33:05 AM

Apex Silver (SIL) $0.12 at $15.97.

Jeff Bailey : 1/11/2008 10:32:14 AM

Yahoo! (YHOO) $-0.58 at $23.51.

Jeff Bailey : 1/11/2008 10:31:19 AM

Stillwater Mining (SWC) $-0.20 at $9.05.

Jeff Bailey : 1/11/2008 10:30:06 AM

Kohls (KSS) $-1.77 at $38.56.

Jeff Bailey : 1/11/2008 10:29:16 AM

Wachovia Bank (WB) up $0.13 at $36.07.

Jeff Bailey : 1/11/2008 10:28:33 AM

Moody's Reviews Countrywide For Upgrade

Jeff Bailey : 1/11/2008 10:25:55 AM

HEARD ON THE STREET Bank Of America Bets On Recovery ... Kenneth Lewis's move to buy hobbled mortgage lender Countrywide Financial Corp., risky to be sure, is a bullish bet on Bank of America Corp.'s own future and that of the battered financial system.

Jeff Bailey : 1/11/2008 10:24:20 AM


DJ- The Turkish army pounds areas across the border in northern Iraq with artillery fire, continuing its assaults on suspected rebel positions, a Kurdish border guard official says, AFP reports.

Jeff Bailey : 1/11/2008 10:23:53 AM


DJ- Nigerian militant group, MEND, detonates a remote explosive device that causes a fire on a tanker and says it got help carrying out the attack from people in the energy industry and Nigeria's intelligence services.

Jeff Bailey : 1/11/2008 10:23:19 AM


DJ- China's trade surplus is lower than expected in December, at $22.69 billion, continuing its fall from October's record and suggesting financial-sector problems in the developed world could weigh on the Chinese economy.

Jeff Bailey : 1/11/2008 10:22:18 AM


DJ- Goldman Sachs expects U.S. crude oil growth to contract by 50,000 barrels a day in 2008, a result of slowing U.S. economic growth. The bank had previously forecast U.S. oil demand growth would expand by 100,000 barrels.

Jeff Bailey : 1/11/2008 10:21:00 AM


DJ- Epicenter of the home foreclosure crisis sues 21 banks, claiming subprime mortgage lending in inner-city neighborhoods has created a public nuisance that hurt property values and tax collections. Move follows Baltimore's suit against Wells Fargo.

Jeff Bailey : 1/11/2008 10:20:03 AM


DJ- Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost double its original estimate, The New York Times reports, citing people who have been briefed on its plans.

Jeff Bailey : 1/11/2008 10:19:24 AM


DJ- U.S. trade deficit swells by 9.3% to $63.12 billion in November on record oil prices, widening to the biggest gap in 14 months even though exports rise and the volume of crude imports shrinks. Economists expected a gap of $59.75 billion.

Jeff Bailey : 1/11/2008 10:18:52 AM


DJ- Import prices are unchanged on a monthly basis in December after rising a revised 3.3% in November. Economists expected a 0.3% increase. But for 2007 as a whole, import prices soar 10.9%, the highest calendar-year gain on record.

Jeff Bailey : 1/11/2008 10:18:07 AM


DJ- Bank of America says it will buy struggling mortgage lender for slightly more than $4 billion in stock, valuing the firm at $7.16 a share, which is 7.6% less than its closing price yesterday, when shares spiked on reports of a possible deal. Combined firm will no longer originate subprime loans. Countrywide shares drop 14%.

Linda Piazza : 1/11/2008 10:16:40 AM

The SPX looks likely to set a new downside target near 1384. You know what, though? Although I see vulnerability to 1370-1375 on the daily charts, I'm just not convinced that even the 1384 level is going to be tested this morning. Maybe this afternoon, maybe after the SPX rises into a right-shoulder formation to go with the rest of the potential H&S being formed, but I just am not convinced yet that it's going to happen this morning despite the signal that's just been produced as I finish this post. I could be very wrong, but what I'm suggesting is that you keep your mind open to all possibilities.

Keene Little : 1/11/2008 10:15:32 AM

Jeff, try one of the Santa Clara servers. I had trouble this morning with their hwd.esignal.com servers. Ever since eSignal has taken over QCharts I've not been happy with what I'm seeing from them.

Jeff Bailey : 1/11/2008 10:13:32 AM

My QCharts are "down" as they are having problems with their servers. Hopefully they'll be back up and running at some point.

Keene Little : 1/11/2008 10:13:08 AM

As I mentioned last night, it's a question (for me) whether we've got one more new low (or test of the low) before setting up a larger rally. As shown on the DOW 60-min chart, regardless of whether or not we get the new low I think we're very close to seeing a larger bounce into February. Interestingly, a new low would set up a larger bounce but a pullback here that is followed by another push higher could lead to shallower bounces as the market works its way lower (pink wave count). Link

Linda Piazza : 1/11/2008 10:09:12 AM

That last 15-minute SPX close was at the Keltner support, barely clinging to it, but the SPX is dropping to a new day's low as I type. It needs to pull up soon or it's in danger of creating a potential downside target near 1384. I wouldn't be too quick to draw conclusions today, though, just because markets have so much to sort through. Whatever side of a trade you're on, just don't let the movement get away from you and your losses mount, as that's more than possible, either direction, in this market climate.

Linda Piazza : 1/11/2008 9:50:09 AM

The SPX's Keltner support near 1408 held on the first 15-minute close. A failure at that Keltner line and consistent 15-minute closes beneath it would have set up a first downside target near 1384. We don't have an upside target just because it held, however. The SPX faces important Keltner resistance at 1414.19 and 1415.73 on 15-minute closes. It must hold continue to hold at that Keltner support on 15-minute closes, too, before there's hope of any testing of resistance.

Keene Little : 1/11/2008 9:49:16 AM

If we see a bounce back up keep an eye on gap closure (ES 1420.50) for potential resistance.

Jane Fox : 1/11/2008 9:49:16 AM

VIX is bullish and AD line bearish - just like it has been first thing in the morning all week. DRives me crazy.

Keene Little : 1/11/2008 9:44:25 AM

Yesterday afternoon's low for the DOW coincides with the broken downtrend line from Dec 26th so it's one more reason why this should be support.

Linda Piazza : 1/11/2008 9:44:08 AM

If you read my Wrap last night, you know that I believe that what we've been seeing has been an expected relief rally. I believe the SPX is still vulnerable to the 1370-1375 zone, and that vulnerability must be factored into your trading decisions, but that doesn't mean that we can necessarily expect a rollover to that zone right now. I also believe that today is a decisive day and this week a decisive week for telling us how weak the markets are right now.

Keene Little : 1/11/2008 9:41:13 AM

The DOW is getting close to testing yesterday afternoon's low. There's nothing magic about that level but it should act as support if the bulls have more work to do. For SPX, a retest of its broken downtrend line from Dec 31st would have it testing 1400, just below yesterday afternoon's low.

Linda Piazza : 1/11/2008 9:39:48 AM

Here's where we get our first glimpse of whether markets can continue that steadying process begun late this week. The SPX has violated that first potential Keltner support but there's still quite a bit of time left in this first 15-minute period. Those hoping for a steadying want the SPX to bounce back above about 1408.20 before the close of this 15-minute period.

If some of you are in bearish positions, be aware that this support is still being tested without a 15-minute close yet confirming that it's been violated. Both bulls and bears need to do all they can in this climate to protect profits.

Jane Fox : 1/11/2008 9:37:55 AM

AD line is a very bearish -1529.

Linda Piazza : 1/11/2008 9:33:29 AM

SPX potential support at about 1408.50 on 15-minute closes is being approaches.

Keene Little : 1/11/2008 9:24:26 AM

Equity futures are off their pre-market lows but we could see a retest of the lows after the market opens. If yesterday afternoon's lows hold then there's a decent chance we'll see another rally leg. The price action continues to be choppy in both directions so don't hold trades too long if you've got a profit.

Jane Fox : 1/11/2008 9:05:15 AM

It has become very obvious that Crude and Gold are no longer trading in sync with one another so something has got to give and I think it will be Gold.

Crude's MACD told me the triple top made on January 3rd would hold and this market would need to retrace before it could muster enough power to break the venerable $100/bl Link

Jane Fox : 1/11/2008 8:58:39 AM

I put this fib retracement tool on the Gold chart last week and have been using it to see if I can get a sense of where Gold is heading (if I were only using this chart to make that determination). I suspected Gold would at least reach the 127.20% the August/November rally, which very nicely matched the $900/oz area,find resistance and retrace. It is now looking like that retracement may not get much further than $850.00. The Cyan colored Fib brackets the market from the November lows to current highs and also suggests 850 will be support. Link

Jane Fox : 1/11/2008 8:51:21 AM

Overnight the markets pretty much tracked the same pattern, lower lows and highs. I have no sense of bullishness returning to the market and the rally we have seen the last two days have only been reactionary oversold bounces. They may turn into more but lately I have become much more bearish and I'm not sure the bulls can pull the rabbit out of the hat this time. Link

Jane Fox : 1/11/2008 8:45:42 AM

WASHINGTON (MarketWatch) -- Prices of goods imported into the United States were unchanged in December after rising by an upwardly revised 3.3% in November, the Labor Department reported Friday.

November's import prices were previously estimated to have risen 2.7%. The November gain was the most in 17 years.

In the past year, import prices have now risen by 10.9%.

In December, the price of imported petroleum took its first decline since August, falling by 0.6%. Still, year-over-year, imported petroleum prices are up 50.1%. Prices rose a revised 12.7% in November.

The overall import price number matched expectations of economists surveyed by MarketWatch.

Meanwhile, export prices rose by 0.4% in December following a 0.9% gain in November. Export prices are up 6% in the last year.

Jane Fox : 1/11/2008 8:44:28 AM

WASHINGTON (MarketWatch) - A record increase in imported oil prices in November sent the U.S. trade deficit to the highest level in more than a year, the Commerce Department reported Friday. The seasonally adjusted trade gap widened 9.3% to $63.1 billion in November, the largest deficit since September 2006.

Economists surveyed by MarketWatch expected the trade deficit to widen in November to $59.5 billion. October's gap of $57.8 billion was unrevised.

Imports rose 3% to a record $205.4 billion, while exports increased 0.4% to a record $142.3 billion. Most of the increase was simply a matter of higher prices, however.

In inflation-adjusted terms, the real trade gap widened by 4.2%, as real imports rose 1.3% and real exports fell 0.3%. It was the second straight decline in real exports, a troubling sign for an economy that's relying on export growth to offset weakness in housing, capital spending and consumer spending.

The unexpected increase in the real trade gap will likely lead economists to lower their projections for fourth-quarter gross domestic product. Currently, economists are predicting that GDP growth slowed to 1.2% annualized in the quarter.

Jane Fox : 1/11/2008 8:43:16 AM

NEW YORK (MarketWatch) -- Bank of America Corp. said on Friday it's buying Countrywide Financial Corp. for $4 billion, confirming rumors that first emerged Thursday, in a move that will make it the top mortgage lender and loan servicer in the U.S.

The stock-swap deal will put an end to the independence of the troubled California lender headed by Angelo Mozilo, and represents an increase from the Charlotte bank's first investment into Countrywide

"We believe this is the right decision for our shareholders, customers and employees," Mozilo, Calabasas, Calif.-based Countrywide's chairman and chief executive, said in a statement.

Terms call for shareholders of Countrywide to receive 0.1822 of a share of Bank of America stock in exchange for each share they own.

At Thursday's close, that values Countrywide at $7.16 per share -- lower than the $7.75 closing price after news leaked of a possible deal.

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