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Keene Little : 1/18/2008 12:02:19 AM

Re-posted from the end of the day Thursday:

Friday's pivot tables: Link and Link

I had mentioned Thursday that it's possible we're going to see a repeat of the pattern that played out in October 1987. While it's a low-odds probability, it's a possibility that needs to be respected (especially if you're positioned the wrong way). I also mentioned on Thursday the day's steep decline makes it possible the wave count for the move down from December is a 1-2, 1-2 wave count rather than a 5-wave count as I've been showing (meaning an end to the decline any moment now).

I've placed on the SPX daily chart what the wave count would look like (in pink) if we're into the 3rd of a 3rd wave down in the decline from December. This leg would be the one that started from the Jan 10th high. The waterfall decline appearance of the drop from December, and dropping out the bottom of the parallel down-channel, gives this wave count some merit. The depiction of the decline follows Fib time and price projections so it's not just something I'm pulling out of thin air: Link

This projects the SPX down to the 1100 area by opex week in February, so one month to lose another 233 points (it could happen much faster). From yesterday's closing price of 1373, a drop to 1100 would be a 20% drop and that's a crash in anyone's book. Will it happen? I have no idea. We could rally strong tomorrow and prove that the dark red wave count is the correct one (back up to maybe 1450 in February). But stay aware of the risk here, both from an EW and a historical perspective.

The selling on Thursday was stronger than I had expected to see. The support levels I was looking to do some buying got slapped aside by the bears today. I think the selling was exacerbated by those needing to hedge some option plays as we head into the end of opex week and if that's true then the selling should abate quickly.

But if the selling continues on Friday then the very bearish wave count will start to look more plausible (pink wave count on the SPX daily chart). If the market can rally instead on Friday then I think the dark red wave count (calling for a rally into at least the early part of February and perhaps up to the 1440-1450 area) is more likely. So Friday's direction could quite literally tell us where this market will head over the next few weeks.

The DOW closed on its uptrend line from March 2003 and like the SPX, if it starts rallying back up from here (it could tolerate an intraday minor low on Friday) then it will look good for a rally into February, perhaps up to the 13K area. Daily chart: Link

The COMP 60-min chart shows price came down almost to the bottom of a descending wedge and is showing bullish divergences at the lows. This continues to look like a good setup for a long play. If it breaks much below 2325 early Friday morning I would get more bearish for a quick ride down to about 2200. Link

OI Technical Staff : 1/17/2008 9:59:59 PM

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Jeff Bailey : 1/17/2008 9:01:10 PM

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

Today's Activities

CLOSED OUT (bought back) the one (1) NAKED VLO Mar $50 Puts (VLO-OJ) for $2.70. My approach to RISK management based on current observations is that REGARDLESS of crack spreads, etc., this position may cause more harm than good. While I don't think VLO would trade $40 tomorrow, if it does, that's too big of a hit. I'd rather BUY A CALL and have KNOWN RISK (the most we could lose is the price of the call).

CLOSED OUT the one (1) WB Apr $35 Put (WB-PG) at the bid of $5.00.

Now AGAIN we "roll" to a lower strike and I'm shortening up the time frame to encompass earnings and purchase one (1) of the WB Feb $32.5 Puts (WB-NZ) for $2.30. Do you see how I'm trying to REDUCE the RISK as the stock gets beaten into the ground, but still keep BEARISH exposure to the stock. Now if the banks find their bottom, the MOST we can lose is $230.00. I'll still want to target $29.00 (as for WB-PG). If AFTER earnings WB gaps down BELOW $29, we can always say "ah heck, let it ride with target to BEARISH VERTICAL COUNT of $22."

The BIGGEST RISK to the account (MM profiles) as it is weighted is some type of BIBLICAL rally.

Not counting on the KSS-BJ to help out much, SIL-BC just "sits here" for the most part and DAW-AV further out the money, expires tomorrow's close.

VYH-AE some bull exposure, but NOT intended for intermediate-term (4-6 months) unless $30 is traded.

If things go to heck in a handbasket, SWC-PB, UTX-QN and WB-NZ will take care of us.

VLO long calls are on my watch list. Almost profiled VLO-FK today. If "crack spread" were rebounding more, I would have. It improved modestly though.

We don't harvest corn, wheat, beans with horse and plow like we did in the 30's.

Jeff Bailey : 1/17/2008 6:26:37 PM

Closing Internals at this Link

Notable lack of new lows at both exchanges. However, over the year's I've seen this type of A/D line and would not discount the possibility that tomorrow's Op-Ex might actually have "bullish" impact on the lack of NL measures. A gap low tomorrow not out of the realm of possibility.

Rather unusual to see CRB Index in the green, when Oil in the red. Oil is by far heaviest weighted commodity.

Keene Little : 1/17/2008 6:21:15 PM

Friday's pivot tables: Link and Link

The selling on Thursday was stronger than I had expected to see. The support levels I was looking to do some buying got slapped aside by the bears today. I think the selling was exacerbated by those needing to hedge some option plays as we head into the end of opex week and if that's true then the selling should abate quickly.

If the selling continues on Friday then a very bearish wave count will start to look more plausible (pink wave count on the SPX daily chart): Link

But if the market rallies on Friday then I think the dark red wave count (calling for a rally into at least the early part of February and perhaps up to the 1440-1450 area) is more likely. So Friday's direction could quite literally tell us where this market will head over the next few weeks.

The DOW closed on its uptrend line from March 2003 and like the SPX, if it starts rallying back up from here (it could tolerate an intraday minor low on Friday) then it will look good for a rally into February, perhaps up to the 13K area. Daily chart: Link

The COMP 60-min chart shows price came down near the bottom of a descending wedge and is showing bullish divergences at the lows. This continues to look like a good setup for a long play. If it breaks much below 2325 early Friday morning I would get more bearish this index for a quick ride down to about 2200. Link

Jeff Bailey : 1/17/2008 5:51:37 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 1/17/2008 5:53:08 PM

Email observation: ... I find it interesting that some traders have no problem shorting 52-week highs, but when it come to buying 52-week lows, they want no part.

Jeff's Response: ... Great observation. One reason to NOT attempt to buy a new 52-week low is that there's so much overhead supply above you. One reason to NOT attempt to short a new 52-week, let alone an all-time high is that overhead supply is LIMITED.

Tab Gilles : 1/17/2008 5:02:09 PM

SPY Link

QQQQ Link

DIA Link

IWM Link

Jeff Bailey : 1/17/2008 4:57:39 PM

I don't know if Jane has mentioned anything about supply/demand as it relates to the YM futures. But for the March contract, these are really equivalent to 52-week lows.

In essence, there are FEW bulls/long that are winners.

Just the opposite of new highs, where there are no bear winners.

Each eager to get squared up when given the opportunity.

Jeff Bailey : 1/17/2008 4:52:10 PM

Another "surprise" to me is the NH/NL , mostly at the tail, or the NL.

NYSE 26:479 and NASDAQ 52:369.

Remember the most recent 01/09/08 were 44:725 and 53:659.

Jeff Bailey : 1/17/2008 4:44:42 PM

UTX $68.09 -4.15% ... not much action extended. Do see some $69.10.

NASDAQ extended is $66.67 x $69.78

Jeff Bailey : 1/17/2008 4:42:07 PM

DIA $121.77 -2.31% ... $122.14 extended.

Jeff Bailey : 1/17/2008 4:39:41 PM

I've got IBM's extended session high as $106.59 ... preeeeetty close to that $106.38 commonality.

Jeff Bailey : 1/17/2008 4:38:31 PM

Son of a gun ... guess where IBM's extended session high has been? Link and Link

Look for the OVERLAP

Keene Little : 1/17/2008 4:33:49 PM

I had mentioned today that it's possible we're going to see a repeat of the pattern that played out in October 1987. While it's a low-odds probability, it's a possibility that needs to be respected (especially if you're positioned the wrong way). I also mentioned today that a steep decline like today makes it possible the wave count for the move down from December is a 1-2, 1-2 wave count rather than a 5-wave count as I've been showing (the dark red count on the DOW daily chart that I posted).

I've placed on the SPX daily chart what the wave count would look like (in pink) if we're into the 3rd of a 3rd wave down in the decline from December. This leg would be the one that started from the Jan 10th high. The waterfall decline appearance of the drop from December, and dropping out the bottom of the parallel down-channel, gives this wave count some merit. The depiction of the decline follows Fib time and price projections so it's not just something I'm pulling out of thin air: Link

This projects the SPX down to the 1100 area by opex week in February, so one month to lose another 233 points (it could happen much faster). From yesterday's closing price of 1373, a drop to 1100 would be a 20% drop and that's a crash in anyone's book. Will it happen? I have no idea. We could rally strong tomorrow and prove that the dark red wave count is the correct one (back up to maybe 1450 in February). But stay aware of the risk here, both from an EW and a historical perspective.

Jeff Bailey : 1/17/2008 4:33:01 PM

IBM ... $104 ... Note Monday's pre-earnings announcement high was $105.56.

Jeff Bailey : 1/17/2008 4:30:59 PM

Us bears will want to make hay while the sun isn't shining though. ;)

Jeff Bailey : 1/17/2008 4:27:08 PM

I'll say this ... there's the POTENTIAL for some very good year-over-year comparables later this year.

Jeff Bailey : 1/17/2008 4:26:35 PM

Washington Mutual's Earnings Press Release Link

Jeff Bailey : 1/17/2008 4:21:36 PM

There's 2 markets. The NYSE and the NASDAQ.

Jeff Bailey : 1/17/2008 4:21:09 PM

Good gravy ... NYSE Up/Down vol 535M/388 million.

NASDAQ 561K/2.16M

Jeff Bailey : 1/17/2008 4:18:22 PM

Reminder! Nymex Crude Oil futures expire on Tuesday too.

Jane Fox : 1/17/2008 4:18:05 PM

A couple of biggies on the docket for tomorrow.

10:00a.m. Mid-Jan Reuters/U Of Mich Sentiment Index. Previous: 75.6.

10:00a.m. Dec Conference Board Leading Indicators. Expected: -0.1%. Previous: -0.4%.

Jeff Bailey : 1/17/2008 4:17:35 PM

Wachovia Bank (WB) $32.35 -7.01% ... $32.60 extended. Earnings on Tuesday of next week.

Jeff Bailey : 1/17/2008 4:16:39 PM

Washington Mutual (WM) $12.46 -6.94% .... $12.44 extended on headline numbers.

Jeff Bailey : 1/17/2008 4:09:41 PM

IBM $101.10 -0.52% ... marked flat on headline numbers ... See Monday's Wrap.

Tab Gilles : 1/17/2008 4:03:59 PM

$BPNDX & NDX weekly chart

2005 to present Link

2002 to 2005 Link

$BPNDX/$NDX/$NAHILO/$VXN Link

Keene Little : 1/17/2008 4:03:24 PM

Today's decline dropped lower than I expected to see but this is what happens during opex week, especially when a move goes against a lot of traders positioned the other way. The wave count still supports the idea that it's the end of the decline but today was just bear ugly. The DOW daily chart shows it closing on its uptrend line from March 2003 so we're left guessing what happens tomorrow: Link

It's certainly a good place from which to launch a rally. Let's see if UB gets here with his helicopters by the early morning hours. The decline from January 10th has taken on a waterfall decline appearance and suggests much lower lows before finding support. Stay nimble in both directions for now.

Linda Piazza : 1/17/2008 4:01:56 PM

Unfortunately, I know some of you in January credit spreads must be hurting today. Been there and done that, too, in other opex periods. I can't do anything to ameliorate your losses today or make it feel better, but I can say I wish it weren't happening to you, FWIW! What I've done in the past when I experienced such losses was to go to the CBOT and search through their archives for webinars on controlling emotions in trading. Then I researched through CBOT, the CBOE, archived articles on many trading-related publications and other such sources, looking for different ideas on controlling risk in the types of trades I was trading. Then, I decided what worked best for me. Along the way, I actually suffered a big loss about the middle of the year last year when "what worked best for me" didn't work at all, but I knew it was due to a real search for a method and I didn't castigate myself too much. Since then, I've found a method that I'm happy with, one that has me cutting out sooner if markets are going the wrong way and cutting out sooner, too, if they're going the right way, so I cut down risk. Today, for example, I closed out 40 contracts of the sold 1620's in February 1620/1630 bear call spreads for $0.15. If the markets bounce, maybe I can get rid of the 1630's for a nickel, closing out those spreads for a dime. Is the SPX likely to get to 1620 before the February's opex? Doesn't look likely now, but who thought the SPX would be here today, either? Taking out the risk as soon as possible works for me; maybe something different will work for you. The most successful female trader I know personally doesn't exit the way I do, so there are many ways to do this. I'm not saying that mine is the best. What I'm saying is that you can learn from negative experiences and you can move forward from them.

Jeff Bailey : 1/17/2008 3:56:58 PM

Much tougher short isn't it?

Jeff Bailey : 1/17/2008 3:56:32 PM

GLD $86.52 -0.20% ...

Jeff Bailey : 1/17/2008 3:55:48 PM

VIX 28.26 +15.91% ...

Jeff Bailey : 1/17/2008 3:54:53 PM

Swing trade put EXIT Alert! ... for the one (1) Wachovia Bank WB April $35 Put (WB-PG) at the bid of $5.00

WB $32.30 -7.15%

Keene Little : 1/17/2008 3:51:46 PM

Time to call in air support on top of our position. The bears are overruning us.

Jeff Bailey : 1/17/2008 3:51:00 PM

NYSE Comp ($NYA.X) Alert! 8811.55 -2.93% ... 08/16/07 relative low (see yesterday's MM)

Linda Piazza : 1/17/2008 3:50:03 PM

The May 2006 high was just under 1327. I throw that out there as a possibility although 1315 is another possible Keltner target.

Jeff Bailey : 1/17/2008 3:47:43 PM

Remembering what FOMC did prior to expiration a couple of months ago.

Jeff Bailey : 1/17/2008 3:46:53 PM

Be ready on the WB-PG ... Might see Red #5 near the close at $31.82 if $32.25 breaks.

WB $32.27 with WB-PG $5.00 x $5.20.

Linda Piazza : 1/17/2008 3:34:31 PM

Whether you believe that Keltner channels are some kind of hocus pocus or the greatest thing ever invented, they do provide us with a benchmark to watch. If you don't have Keltner channels, you can watch how prices are reacting to some moving average or trendline you find valuable. You might believe that something should happen, but if the underlying can't close above the benchmark you're watching (when you want a reversal from a decline) or below it (when you want a reversal from a rally), then the tenor hasn't changed. If it's been knocked back every time it tests a five-minute 50-sma, for example, and it's still getting knocked back every time it tests it, it's not in a rally mode, is it? It's almost as simple as that.

Of course, you don't get the targets that way, but today, targets don't seem to matter, do they?

So, for now, the SPX has still not been able to sustain 15-minute closes above the benchmark for its breakdown status, with that level at 1352.04 as I type.

Keene Little : 1/17/2008 3:31:50 PM

For the DOW, its uptrend line from March 2003 through the July 2006 low is currently near 12150. Could be where we're headed. And then is that the sound of Uncle Ben's choppers I hear inbound?

Keene Little : 1/17/2008 3:26:37 PM

Mother MER making new lows--down 5.82 here (-10.5%).

Jeff Bailey : 1/17/2008 3:25:21 PM

Will look to close out the WB-PG near the close.

Continue to roll to lower strike. Taking profit along the way.

Jeff Bailey : 1/17/2008 3:24:19 PM

Swing trade put alert! ... for one (1) of the Wachovia Bank WB Feb $32.50 Puts (WB-NZ) at the offer of $2.30.

WB $32.62 -6%..

Keene Little : 1/17/2008 3:23:50 PM

That would leave a 3-wave bounce and suggest lower lows still.

Keene Little : 1/17/2008 3:23:11 PM

Not looking so good for the bulls if the last dip just past 3:00 is taken out.

Jeff Bailey : 1/17/2008 3:19:18 PM

SLV +0.68%, GLD +0.11%

Jeff Bailey : 1/17/2008 3:18:53 PM

BTK.X +0.50%, RLX.X +0.04%, DJUSHB +1.12%, PHF +0.61%

Jeff Bailey : 1/17/2008 3:18:00 PM

Not seeing "capitulation" type NL readings.

Keene Little : 1/17/2008 3:17:45 PM

I'm still wondering if we're going to see SPX pinned to 1350 for expiration.

Jeff Bailey : 1/17/2008 3:17:38 PM

03:00 Internals found at this Link

Keene Little : 1/17/2008 3:09:14 PM

Now we're talking.

Keene Little : 1/17/2008 3:07:15 PM

I'm ready for a reversal back to the flatline for the day (for a big hammer at support). Come on bulls, show us your stuff.

Linda Piazza : 1/17/2008 3:06:35 PM

So far, the SPX still can't maintain 15-minute closes above the 9-ema, much less the benchmark breakdown level, with that channel line now at 1353.90. Unfortunately, the tenor hasn't changed yet.

Keene Little : 1/17/2008 3:03:44 PM

Sharp pullback to shake the trees. It needs to hold above the last low or else pull the plug.

Keene Little : 1/17/2008 2:57:42 PM

That was about as perfect a tag of SPX 1341 as we could get and now a nice little v-bottom. But it could turn into just a little short covering flare-up so that's why I want to keep the stop just underneath the low--get out of the way if it continues lower since that could mean a more bearish wave count is in play.

Keene Little : 1/17/2008 2:52:07 PM

Nice little bounce. This has to work from here now so suck your stop up right underneath the low.

Jeff Bailey : 1/17/2008 2:51:57 PM

I wouldn't try to buy it here ... no underlyings anyway (especially if holding overnight). CALL Options only. LIMIT RISK.

Jeff Bailey : 1/17/2008 2:48:09 PM

Could come with an equal 100 share SHORT on VLO, but for $1.40 concede loss near-term, see what shakes out, rather be done with it.

Jeff Bailey : 1/17/2008 2:45:48 PM

Swing trade NAKED PUT close out alert! ... due to current market conditions, RISK MANAGEMENT has me closing out, buying back the one (1) Valero Energy VLO Mar $50 Put (VLO-OJ) at the offer of $2.70.

VLO $52.34 -2.45% ...

Keene Little : 1/17/2008 2:45:23 PM

Do we dare buy it here? You first :-)

Jeff Bailey : 1/17/2008 2:41:03 PM

VXN.X 30.37 +5.19% ...

Jeff Bailey : 1/17/2008 2:40:42 PM

At this point in time, I (Jeff Bailey) can not validate, or invalidate that QQQQ observation.

If so, then UNDERWATER with QQQQ $45.61

Jeff Bailey : 1/17/2008 2:39:38 PM

Email from subscriber ... Thought this was interesting and didn't know if you might want to pass this along. Source OptionMonster

Daytraders are selling puts at the Jan 46 strike (QQQMT) in the QQQQ, where over 145,000 trading and over 80 percent have been the traders selling puts to the crowd and the crowd buying futures against it. This is skewing the volatility as the institutional traders are selling puts and buying calls. The trades have crushed them, but these sales of puts are why the volatility has not exploded on this downturn.

Jeff Bailey : 1/17/2008 2:37:24 PM

Hammered with downside alerts!

Linda Piazza : 1/17/2008 2:36:56 PM

The bond traders got it right: the new low on the ten-year yields led the equities lower, too. The SPX again tests the 30-minute potential support, dropping just a little below that 1344-ish potential support early this 30-minute period.

Jeff Bailey : 1/17/2008 2:36:49 PM

StreetTracks Gold (GLD) ... with "bull fit 38.2%" retracement Link

Keene Little : 1/17/2008 2:35:24 PM

We're now close to do or die for the bulls. The wave count can now be called complete to the downside and the Fib target at SPX 1341 has nearly been tagged. There's not much more this can drop without saying we've got a very bearish alternate playing out (3rd of a 3rd wave down in the decline from December). I think SPX 1340 is about the limit the bulls can tolerate, from an EW perspective.

Linda Piazza : 1/17/2008 2:33:41 PM

The USDJPY just isn't changing much. It's at 107.20. The dollar also isn't moving that much in relationship to the euro since Fed Chairman Bernanke began speaking, either. The dollar had been sinking in reference to the euro but then steadied. Something--Fisher's remarks coupled with the prices-paid indices on the Philly Fed, perhaps?--stalled movement in these currency pairs, as if currency traders haven't yet figured out whether the Fed is going to be as aggressive as it says it's going to be, but can't yet assume that it will be raising rates, either. I'm not quite sure what to make of it. What's clear is that they're stalled.

Jane Fox : 1/17/2008 2:32:38 PM

I have some Oil and Gas investments in Canada and every time I get a dividend check lately I have thought, "This time I will get more than my brother and sister" because the Canadian $ was so strong against the US$. I am getting another check next week and dang it all looks like my check will be less again. Link

Linda Piazza : 1/17/2008 2:29:44 PM

The TNX dropped to a new day's low.

Linda Piazza : 1/17/2008 2:29:14 PM

Now we have two benchmarks to watch: the VIX's breakout status benchmark and the SPX's breakdown status benchmark. Before you can have any confidence that the short-term trend (down for equities) has begun to change, you need to see the VIX maintaining 15-minute closes beneath about 25.60 and the SPX maintaining 15-minute closes above about 1355.63. Those Keltner channel lines are dynamic and will move a little as the values of the VIX and SPX change.

Jane Fox : 1/17/2008 2:28:05 PM

This kind of divergence is about the best setup there is, not 100% but it is a good one.

Jane Fox : 1/17/2008 2:27:28 PM

Linda you are right the VIX is making new daily highs and the S&P futures have yet to catch up. This could be a very good time to get short the S&P futures because it will not me moving higher from here.

Linda Piazza : 1/17/2008 2:25:58 PM

The VIX has just shot higher.

At the same time, we're seeing a retest of the day's low, to state the obvious, as well as new and tentative SPX 15-minute Keltner support now at about 1346.60 on 15-minute closes. Remember that the 30-minute chart also shows support nearby, although that support has now turned lower, weakening as it sinks to 1344.19.

Jeff Bailey : 1/17/2008 2:25:14 PM

UTX alert! 38.2% of our "h/s top" retracement. (see yesterday's MM)

Keene Little : 1/17/2008 2:24:52 PM

Like the banks, I see another leg down in the Transports to complete a 5-wave move down from the December high. The broader market doesn't always stay in synch with the banks and transports but the bearish pattern in both (for at least another leg down) continues to caution about upside expectations: Link

However, if SPX finds support at or above 1341 I think it makes for a good opportunity to test the long side. More conservatively, wait for a break of downtrend lines and then hopefully a pullback that successfully retests the broken downtrend line. You don't need to be a hero and catch the bottom of a move.

Jeff Bailey : 1/17/2008 2:21:45 PM

There! Use my "bull fit 38.2%"

Jeff Bailey : 1/17/2008 2:20:12 PM

Now let's see if we can't "explain" that unexpicable ....

Keene Little : 1/17/2008 2:17:36 PM

GLD's bounce today stopped at the 38% retracement of this week's decline. Lower lows coming in gold.

Jeff Bailey : 1/17/2008 2:18:53 PM

StreetTracks Gold (GLD) $86.73 +0.03% ... Link

One way I've tried to teach traders/investors how to trade is with POSITION size.

With GLD now BELOW $87.50, would NOT be LONG more than 1/2 position (say mid-point = 1/2). If $10k= full, then should only be $5K long.

See risk/reward "if this is a top?"

BIG VOLUME last two days may have "last bull in and last short out."

Huh? Last short out? Yep, remember the shorts at $82.50. $85.22?

Linda Piazza : 1/17/2008 2:06:52 PM

Careful with your expectations. There's no change in tenor yet on the SPX, although there are some tentative signs of improvement. The SPX is still finding resistance at the line that's the benchmark for its breakdown status on the 15-minute chart. That's at 1356.31. There's now light potential support, at just under 1347 on 15-minute closes. As I said earlier, you must factor in short-term vulnerability to another downturn into your decisions as long as the SPX remains in breakdown status.

The shape of the climb still looks like a bear flag despite the slight improvement in Keltner setup. But I'm looking at a VIX that's testing resistance and thinking about a FOMC and a president who want to stimulate the economy, and wondering what they might have up their sleeves. A crashing stock market is certainly not what they want.

Jeff Bailey : 1/17/2008 2:02:08 PM

email question Are you still bullish on the SLV trade? Gold looks toppy to me.. In your opinion can the silver trade have legs if gold collapses or is it likely to get sucked down in sympathy with Gold?

Jeff's Reply I would think BOTH move in unison. Gold looking "toppy" near-term . Noting morning high juuuuust under mid-point of Andrew's Pitchfork (modified schiff) I'll show in MM.

Jeff Bailey : 1/17/2008 1:57:13 PM

Remember! Tracker options like DIA, SPY and QQQQ expire Friday. (email question)

Jeff Bailey : 1/17/2008 1:52:40 PM

Once you have a "long term" hypothesis, then you can work inward. Year, quarter, month, week, day, hour, 30-minutes, 15-minutes, 5-minutes.

Once you have a hypothesis, that's what you CONSTANTLY TEST against.

Keene Little : 1/17/2008 1:48:32 PM

Getting another push higher but it's not exactly taking off to the upside as it should if we have a bullish wave count kicking off. Price action still looks corrective in the bounce--a slightly larger bear flag at this point.

Jeff Bailey : 1/17/2008 1:47:41 PM

Turned bullish "palladium" stocks back in early 2003. ECONOMIC GROWTH FROM RECESSION = MORE AUTO SALES = MORE CATALYTIC CONVERTERS.

Linda Piazza : 1/17/2008 1:47:14 PM

The SPX pushes above the 1357.25 zone that currently marks its breakdown status on the 15-minute chart. The SPX needs to sustain values above this level to begin to change even the shortest of short-term tenors. The SPX is at 1358.05.

Then, the SPX needs to continue climbing quickly enough to turn the 9-ema upward, and then begin bouncing from it whenever there's a pullback. Right now, that average is as flat as a pancake.

Jeff Bailey : 1/17/2008 1:45:32 PM

BIGGEST suprise of day ... SWC $8.72 -0.11% ...

Linda Piazza : 1/17/2008 1:44:17 PM

Another "not since" moment today: not since March 2004 have ten-year yields dropped this low. That March, they dropped to an intraday low of 3.650 percent before rebounding. Today's low has been 3.649 percent. Currently yields are 3.667 percent.

Jeff Bailey : 1/17/2008 1:43:19 PM

Or is this July 2002 all over again?

Jeff Bailey : 1/17/2008 1:42:49 PM

QQQQ $46.10 ... "held up by OP-EX?"

I haven't been following NDX/QQQQ open interest. No idea where it is at.

Jeff Bailey : 1/17/2008 1:38:28 PM

I've got an alert set at DXY 76.75 with a note of (see 01/17/08 Fed Notes)

DXY 76.75 is QUARTERLY Pivot.

Hey! Chech out an Andrew's Pitchfork (modified schiff) with anchor 11/23/07, then UP to 12/17/07, then back DOWN to an assumption higher low 01/15/08.

Mid-point looks to be 76.71.

Linda Piazza : 1/17/2008 1:34:50 PM

The SPX is closing this 15-minute period at the 9-ema. It needs to sustain values above that as well as above 1357.25 before it's done anything to change even the shortest of short-term tenors. The shape of its climb off the low is so far of the type that's often reversed, so I'm not seeing anything yet that says that this is "the" relief bounce. That means that you must continue to factor in vulnerability to further declines in your trading plan for the day and week, even if they aren't necessarily promised.

We've had some Fed actions near settlement day in the past that blew shorts out of the water, so remain protective of your profits if you're in bearish positions, in case something happens that turns this corrective-looking bounce into "the" one.

Jeff Bailey : 1/17/2008 1:32:24 PM

As I monitor the NH/NL ratios, one LEVEL I really begin to see as a near-term "waterline" is DIA $129.00. Remember that trade. That level. And action since.

The "prarie dog" action (stick head above, then right back below into the hole"

Has ACTUALLY taken place at QUARTERLY S1 and $126-ish on Tuesday and then late yesterday. DETERMINED SELLING.

Yesterda, NYSE 5-day NH/NL ratio finished 15.6%. As close as 15.6% is to 16.00, it wasn't 16.00.

Keene Little : 1/17/2008 1:29:01 PM

The flip side of the pattern off the low is a more bullish 1-2, 1-2 wave count and antoher push higher could see an acceleration of buying (and short covering).

Keene Little : 1/17/2008 1:26:54 PM

The bounce off today's low continues to look corrective and suggests lower lows. The wave count also would look best with one more new low. SPX 1341 is beckoning price with that seductive look.

Jeff Bailey : 1/17/2008 1:26:48 PM

01:00 Internals found at this Link

Jeff Bailey : 1/17/2008 1:19:03 PM

VIX.X 25.51 +4.63% ... WEEKLY R1 ... holding near highs, and has been "gradual" climb. Note intra-day action at DAILY Pivot.

Rising VIX equates to more put buyers/call sellers than put sellers/call buyers.

Jeff Bailey : 1/17/2008 1:16:45 PM

Excellent comments from CNBC's Bob Passani (or at least I agree with him) ... discussing implications of PUT OPTION open interest going into expiration and today's PRICE action.

See my 11:02:37

Linda Piazza : 1/17/2008 1:01:27 PM

The SPX needs 15-minute closes above 1355.52 at least, and preferably above 1357.93, before anything at all has changed in the short-term tenor.

Jeff Bailey : 1/17/2008 1:01:29 PM

12:47 PM EST Market Watch at this Link

Probably because I'm more of a market technician than anything, I'll grab today's "key points" from the Fed as DOLLAR, DOLLAR, DOLLAR.

Long-time subscriber will know I'm not too bad on economics. What various parts of the MARKET (not just equities) say about the economy.

Junk Bonds are KEY!

Jane Fox : 1/17/2008 12:58:23 PM

It seems very unlikely that the SPX will recover enough to get the jtHMA back to close green this month. If it does that means I am moving all my stock based investments to cash in my IRAs.

I will continue to hold my bond portfolio. Link

Keene Little : 1/17/2008 12:48:32 PM

If we get one more new low then that could have SPX tagging its downside Fib projection at 1341.17. Then a bounce into the end of the day and pin SPX at 1350 for opex. That would set up a rally for tomorrow. Now we'll see if it plays out that way.

Jeff Bailey : 1/17/2008 12:47:40 PM

One area I DON'T get into trouble on is being on the WRONG side of a MARKET. Only way to do it is to FORGET what we believe (perma bull, or perma bear) and do what the market dictates we do.

Jeff Bailey : 1/17/2008 12:45:58 PM

Current OPEN MM Profiles that I've made at this Link ... Want to grab screen capture. Assess balance. Make sure we're not "too bullish," or "too bearish" relative to MARKET RESPONSES.

Keene Little : 1/17/2008 12:42:50 PM

There's one very bearish scenario that needs to be mentioned even if the probability for it is very low--a market crash. If you look at the price pattern in October 1987 the market crashed after a double top and then price took out the low between the double top--that was followed by the bottom falling out days later. By taking out the August low both the DOW and SPX have confirmed the double top.

Did the crash that was expected in 2007 (the year ending in '7') get pushed into the beginning of 2008? Again, the odds of a market crash are slim but if you're exposed to the downside (in a bullish spread position for example), know your puke point and don't try decide where that point is during the event.

On the flip side, any acclerated selling event would surely bring the Fed in with their emergency, and probably large, rate cut. Want to see a v-bottom with a 500-point rally in the DOW? Let's hope the market finds a low soon and we start a "normal" correction of the decline. It would be a lot easier for us to trade.

Jeff Bailey : 1/17/2008 12:42:20 PM

Initial analysis ... MARKET participants not overly BULLISH to Dr. Bernanke's observations.

Linda Piazza : 1/17/2008 12:40:49 PM

For those of you at work and not listening to CNBC or Bloomberg, the Q&A session with Fed Chairman Bernanke has just concluded. The market tenor sometimes changes once market participants have had an opportunity to digest what is said, so remain watchful.

Jeff Bailey : 1/17/2008 12:40:22 PM

Bernanke Tesitmony Ends ... SPY $135.22, DIA $123.31, QQQQ $45.81

Jeff Bailey : 1/17/2008 12:39:43 PM

Oh ... sounds like it might be ending .... (listening to CNBC)

Jeff Bailey : 1/17/2008 12:39:19 PM

Thanks Linda! He's still talking.

Linda Piazza : 1/17/2008 12:38:15 PM

Jeff, that Q&A session was originally slated to end at 12:30 ET, a supposed "hard leave" time for Chairman Bernanke. He must have been cajoled into staying longer. If he stays much longer, I'll be writing a book instead of an article for tonight's Wrap, though!

Linda Piazza : 1/17/2008 12:36:41 PM

The VIX just hit its 15-minute target and potential resistance on 15-minute closes, with that level at about 25.50. The VIX sometimes overruns these levels by a little, and of course can overrun them by a lot if it moves into a breakout mode, but watch now for the possibility potential resistance will confirm. Equity bulls would need to see the VIX drop below and sustain values below the 9-ema, now at 25.00, before even the shortest of short-term tenor changes. The VIX is at 25.54 as I type.

Jeff Bailey : 1/17/2008 12:38:38 PM

Fed's Fisher:

Is Ready To Take "Substantive Action" On Rates
Action Contingent on Contained Price Expectations
Must not allow inflation to take root
Global growth driving up inflation pressure
Globalization drives need for tighter rate policy
Won't do anything to shake faith in dollar
Won't bail out Wall Street's bad bets.

Jeff Bailey : 1/17/2008 12:34:18 PM

Not sure when Bernanke Q&A slated to end.

Keene Little : 1/17/2008 12:34:15 PM

Looking at the decline from December for SPX, it's a 5-wave move down. The 5th wave would equal the 1st wave at 1341.17 so that's the downside target for now. At this point, if SPX were to drop below 1340 then the wave pattern would turn Much more bearish (we'd likely be in a 3rd of a 3rd wave down and it will have much further to go on the downside). Today's move down has tagged the level where the move down from October has two equal legs down at 1353.58 (for the pink A-B-C count). Link

Jane Fox : 1/17/2008 12:29:45 PM

So does the DOW and then some. Link

Jane Fox : 1/17/2008 12:28:12 PM

And the SPX hits its Head and Shoulders projection. Link

Jane Fox : 1/17/2008 12:24:47 PM

No doubt here as to who has control. The other indicator that I use is the long reversal I took earlier did not pan out. Those reversal trades have a high percentage win/loss ratio and when they don't work out you know the bears are not done. Link

Jeff Bailey : 1/17/2008 12:23:35 PM

DIA Daily Interval bar chart Link

Jane Fox : 1/17/2008 12:17:49 PM

The VIX and S&P futures are in sync today. Link

Jane Fox : 1/17/2008 12:17:18 PM

AD line is now -2096

Jeff Bailey : 1/17/2008 12:16:15 PM

DIA $122.90 -1.40% ... sits just above WEEKLY S2. If that DOES NOT HOLD, then QUARTERLY S2 at $119.21.

Linda Piazza : 1/17/2008 12:15:01 PM

I know some of you are suffering out there, worried about your January bull put positions. I wish I had definitive "this is going to stop here and you'll be safe" assurances to offer. I don't. I don't know what's going to happen. The SPX and other indices are blowing through one support level after another.

However, with that said, it's time to note that the SPX has now hit its target on its 30-minute chart, potential support on 30-minute closes. That's now just under 1347, pushed lower by the last steep drop.

Jeff Bailey : 1/17/2008 12:13:03 PM

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

Keene Little : 1/17/2008 12:09:53 PM

The market keeps pushing lower. Perhaps there are too many thinking the market is ready to bounce and that's helping drive it lower (as they cover their attempts to buy the bottom). It's risky to chase this lower at this point but clearly too early to step in front of the train. Opex will tend to exacerbate these moves as well; e.g., traders will hedge their short put positions by shorting stock and that adds to selling pressure.

Jeff Bailey : 1/17/2008 12:08:38 PM

SLV +0.49% and GLD +0.11%

Jeff Bailey : 1/17/2008 12:07:55 PM

Treasuries find buying with benchmark 10-year Yield ($TNX.X) down 5.4 bp at 3.658%.

Jeff Bailey : 1/17/2008 12:07:10 PM

Only green on the screen BTK.X +0.05%, DJUSHB +0.74% and PHF +0.74%

Jeff Bailey : 1/17/2008 12:06:08 PM

DIA $122.888 -1.41% ...

Jeff Bailey : 1/17/2008 12:05:47 PM

VXO.X alert! 28.50 ...

Jeff Bailey : 1/17/2008 12:03:45 PM

DXY 76.10 -0.20% ...

Jeff Bailey : 1/17/2008 12:02:49 PM

What happened "badly" to the "perma bears" during the greatest bull market in history that began in late 2002 was they forgot what the Fed had said about policy, indicators they would monitor to guide future policy.

Linda Piazza : 1/17/2008 12:02:37 PM

The SPX is dropping now into the target/potential-support level detailed in my 10:24:21 post. This shows up on a three-day chart, so it's potential support on a three-day close. Unfortunately, this is the first day of the three-day period, so we have to wait until Monday to see if this support has held on a three-day close. We've had a lot of "not since" developments lately, but not since 2002 has the SPX violated this particular support on a three-day close.

On a shorter-term basis, the 30-minute chart shows potential support at 1347.61 on 30-minute closes, but that's also a potential target.

One of these days, we're going to get that relief rally, and it could explode out of nowhere. I've been scared it would happen this week and damage the accounts of those who are too heavily short, but that doesn't mean that I know it's going to happen this week. Will it happen before tomorrow's SPX settlement, for those of you whose positions might be in trouble? There is no way of knowing. You just have to adhere to your own stops, wherever you placed them in saner times.

Until and unless the SPX begins sustaining 15-minute closes above about 1359.62, it hasn't changed even its short-term bearish tenor, much less promised anything more sustained.

Jeff Bailey : 1/17/2008 11:57:32 AM

Remember THAT statement for the future! Something outside of major equity indexes to TEST against.

Jeff Bailey : 1/17/2008 11:56:43 AM

Bernanke: If Fed Does Its Job, Dollar Will Reflect Economic Strength.

Jeff Bailey : 1/17/2008 11:54:36 AM

Take an Andrews Pitchfork (modified schiff) from 07/10/07 ... DOWN to 08/06/07 low, then UP to 10/11/07.

Jeff Bailey : 1/17/2008 11:53:11 AM

Valero (VLO) $53.44 -0.40% ...

Jeff Bailey : 1/17/2008 11:52:31 AM

DUG with two possible "wave counts?" Link

Both look to be in play.

Jeff Bailey : 1/17/2008 11:46:08 AM

DUG Alert! 44.77 +3.39% ... 200-day SMA up at $46.26. Testing upper-channel of Andrews Pitchfork (modified schiff) if taken 10/17/07 low, 11/27/07 high, then 01/03/08 low.

Keene Little : 1/17/2008 11:45:30 AM

DOW and SPX pushing to a new low and now I'm watching to see if they're met with bullish divergences. I haven't checked max pain but I'm wondering if SPX 1350 is the target for the day.

Jeff Bailey : 1/17/2008 11:42:58 AM

Pressure Builds On Bond Insurers (update) DJ (partial) - Pressure built sharply on U.S. bond insurers Thursday, after Moody's Investors Service and Standard & Poor's signaled fresh consideration of companies' all-important AAA ratings and markets soured further on the sector amid deepening losses. The negative tone from the ratings companies sent shares of the nation's two biggest bond insurers plunging for a second-straight day. Market leader MBIA Inc. (MBI) was recently down 23% at $10.26, while Ambac Financial Group Inc. (ABK) sank 47% to $6.90. Since Tuesday's close, Ambac has shed nearly $1.5 billion in market capitalization, almost three-quarters of its total. Trouble at those companies has wider reverberations. A cut to the firms' top-notch credit ratings would cause a broad repricing of the $3 trillion in outstanding debt such as municipal bonds guaranteed by the seven AAA-rated bond insurers. Moody's said late Wednesday that it has placed its ratings on Ambac on review for a downgrade, after the country's second-largest bond insurer significantly stepped up its expected losses from insuring complicated securities backed in some cases by subprime mortgages. Moody's also said it will be evaluating "in the near term" the extent to which its ratings of other firms in the industry will be affected by the sector-wide pressures that produced the losses at Ambac. Less than a month after completing a review of the highest-rated U.S. bond insurers, Standard & Poor's also is beginning to re-evaluate the sector's ratings to take into account its new, more dire view of the U.S. housing market downturn. The review should be completed by the end of next week, a spokeswoman said.

Jeff Bailey : 1/17/2008 11:40:19 AM

That might be the "news" that has financials so weak today. Didn't have my news feeds turned on this morning.

Jeff Bailey : 1/17/2008 11:39:47 AM

MBIA Expects To Meet S&P Standards ... AP Story Link

Jeff Bailey : 1/17/2008 11:38:30 AM

MBIA Inc. (MBI) $9.56 -28.65% ... company saying its capital exceeds revised S&P loss assumptions.

Linda Piazza : 1/17/2008 11:27:56 AM

SPX threatening to break down again. A 15-minute close beneath 1360.30 will create a new breakdown situation. However, here is where the SPX is, so do you count on big further declines? Link Be careful.

Jane Fox : 1/17/2008 11:25:39 AM

Well that one didn't turn out very good but we did have the opportunity to raise our stop. Out at 12398.

Jeff Bailey : 1/17/2008 11:25:29 AM

11:00 Internals at this Link

Jeff Bailey : 1/17/2008 11:21:33 AM

Bernanke says "longer-term" in his opinion is more than 1 year.

Jeff Bailey : 1/17/2008 11:21:14 AM

Great question ...

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

Here we go Dancing with the Market!

Jane Fox : 1/17/2008 11:10:35 AM

Raise stop to 12398.

Jeff Bailey : 1/17/2008 11:06:54 AM

TRIN 1.00

Keene Little : 1/17/2008 11:06:35 AM

Getting a bounce which is starting off a little corrective looking but if it acclerates higher then it will be a good sign for a potential bottom. But we might see one more minor new low. The last low wasn't accompanied by any bullish divergences and the short term wave count supports the idea of another low to finish the move down from yesterday afternoon's high.

Jeff Bailey : 1/17/2008 11:05:27 AM

VXO.X 27.68 +1.91% ...

Jeff Bailey : 1/17/2008 11:02:37 AM

DIA/YM short will be calm at this point. Yesterday's high, today's DAILY R1 is now the near-term importance. NAKED $126 and $125 puts could be in trouble.

Jane Fox : 1/17/2008 11:00:28 AM

Target is not a 1:1 risk to reward so will be at 12468. You can raise that stop to 12389.

Jane Fox : 1/17/2008 10:59:20 AM

YM long at 12431. STop is under daily lows. And here we go.

Jeff Bailey : 1/17/2008 10:59:12 AM

Dow Diamonds (DIA) $123.85 -0.64% ... has slipped below $124.00 strike. Downside resolution to yesterday's "doji"

Jeff Bailey : 1/17/2008 10:55:58 AM

EIA: Weekly Nat. Gas Storage Table Link ... Draw of 59 Bcf

Jane Fox : 1/17/2008 10:52:02 AM

Got to a high of 12430 so we are not triggered long yet. The YM long is at 12431.

Jeff Bailey : 1/17/2008 10:51:51 AM

US Dollar Index (DXY) 76.06 -0.26% (30-minute delayed quote)

Jeff Bailey : 1/17/2008 10:51:16 AM

Bernanke: Econ Effect of $100B Stimulus Would Be "Significant"

Linda Piazza : 1/17/2008 10:50:20 AM

With the just-concluded 15-minute period, the SPX created a breakdown situation on its 15-minute Keltner charts, but I would urge some skepticism in considering the markets in a short-term breakdown status. The candle that formed that breakdown status showed a long lower shadow springing up from support. Nevertheless, until and unless the SPX can begin forming 15-minute closes above about 1362.50, it maintains a breakdown status. Some day and some time, we are going to see a massive relief rally--and that's all I currently believe it's going to be--blow through the markets, and I've been nervous on the behalf of subscribers who might be leaning heavily to the short side all week. Just keep updating your profit-protecting plans.

Jeff Bailey : 1/17/2008 10:49:31 AM

Apex Silver Mines (SIL) $16.00 -0.62% ... coiling on its daily interval bar chart like a rattle snake that's been stepped on. Based on observation, I feel great pressure building here.

Jeff Bailey : 1/17/2008 10:47:33 AM

iShares Silver (SLV) $159.00 +1.57% ... ~$15.90 spot.

Jeff Bailey : 1/17/2008 10:46:53 AM

StreetTracks Gold (GLD) $87.56 +0.99% ... ~$875.60 spot

Jeff Bailey : 1/17/2008 10:46:08 AM

Bernanke: "Takes Comfort" From Steady Inflation Expectations.

Jane Fox : 1/17/2008 10:45:37 AM

WASHINGTON (MarketWatch) -- Manufacturing in the Philadelphia region contracted sharply in January, the Federal Reserve Bank of Philadelphia reported Thursday.

The Philly Fed diffusion index fell to -20.9 in January -- the lowest level since October 2001 -- from -1.6 in December. Readings below zero indicate most manufacturing firms surveyed in the eastern Pennsylvania, New Jersey and Delaware region are reporting worsening business conditions.

The decline was much larger than expected. Economists were expecting the index to fall to -1.0.

The report showed sharp drops in new orders and the average employee workweek. In another sign of weakness, firms' expectations for future activity "have deteriorated sharply" over the past three months, according to the report. However, more firms expect growth over the next six months than expect declines.

Keene Little : 1/17/2008 10:44:38 AM

As mentioned in last night's Market Wrap, the chart of the banks is one of reasons I want to stay cautious about the long side. It looks like the banks have some more selling ahead and I'm not sure how the broader averages can rally without the banks. They have remained disconnected for periods of time but not for long. Link

Jane Fox : 1/17/2008 10:44:35 AM

WASHINGTON (MarketWatch) -- Congress could help steer the economy away from recession if it adopted a quick, efficient and temporary fiscal stimulus plan, Federal Reserve Chairman Ben Bernanke told Congress on Thursday.

"Fiscal action could be helpful in principle, as fiscal and monetary stimulus together may provide broader support for the economy than monetary policies alone," he said.

In a speech that closely resembled one he gave last week that suggested the Fed stood ready to cut rates aggressively, the Fed chairman advised Congress to think carefully before cutting taxes or boosting spending to stimulate economic growth.

"A fiscal initiative at this juncture could prove quite counterproductive, if (for example) it provided stimulus at the wrong time or compromised fiscal discipline in the longer term," he said in prepared testimony to the House Budget Committee.

Jane Fox : 1/17/2008 10:43:19 AM

WE will get a reactionary bounce and I want to take advantage of it.

Jeff Bailey : 1/17/2008 10:43:19 AM

United Tech (UTX) $69.95 -1.53% ... has slipped under $70 strike.

Jane Fox : 1/17/2008 10:43:00 AM

Ok long YM entry is now at 12431 and stop just below daily lows.

Jeff Bailey : 1/17/2008 10:40:20 AM

White House: ... President Bush Has Concluded Econ Stimulus Necessary.

Jeff Bailey : 1/17/2008 10:39:23 AM

Bernanke: Moral Hazard Not Major Concern For Fed

Jeff Bailey : 1/17/2008 10:38:42 AM

Bernanke: Subprime Losses About $100B, Could Climb Higher

Jeff Bailey : 1/17/2008 10:36:40 AM

Bernanke: Europe, Asia Econs Not Slowing As Much As US

Tab Gilles : 1/17/2008 10:36:40 AM

In the last paragraph of Bernanke's testimony he states:

To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next twelve months or so. Stimulus that comes too late will not help support economic activity in the near term, and it could be actively destabilizing if it comes at a time when growth is already improving.

Hmmmm....? Comes too late? Some say that the Fed should have cut rates by 50 basis points sooner and they are now "behind the curve" and will have to play catch-up. It will be interesting if he cuts 50 basis points now.

"...when growth is already improving"

Does Ben see this slowdown [Fed is not calling for a recession at the moment] ending soon?

Jeff Bailey : 1/17/2008 10:35:45 AM

Bernanke: ECB Faces "Rather Different" Curcumstances Than Fed.

Keene Little : 1/17/2008 10:34:17 AM

SPX has now dropped into the 1358-1360 potential support area. If it drops much lower than 1358 then it could get ugly.

Jane Fox : 1/17/2008 10:33:45 AM

YM long now at 12456 and stop still below daily lows.

Jeff Bailey : 1/17/2008 10:29:01 AM

Wachovia Bank (WB) $33.02 -5.03% ... that's a new 52-weeker.

Jane Fox : 1/17/2008 10:28:41 AM

I see a YM long at 12471. Stop on this trade will be below daily lows so be careful if this is too much risk. I may be able to raise it later but for now that is where we are.

Jeff Bailey : 1/17/2008 10:28:24 AM

SPY $136.28 -0.51% ...

DIA $124.10 -0.44%

QQQQ $45.98 -0.15%

BIX.X 248.12 -2.74%

TNX.X down 4.5 bp at 3.667%

Jeff Bailey : 1/17/2008 10:26:33 AM

Bernanke (Q&A): ... Saying Fed currently not forecasting recession, but slow growth.

Keene Little : 1/17/2008 10:26:31 AM

The DOW has dropped to the bottom of its descending wedge (12380) and is just shy of the bottom of its parallel down-channel (12370). The wave pattern can now be called complete at potential support. It's common to see price do a throw-under below the wedge but we're now close to seeing a potential reversal and the start of a rally. It's possible we'll get a bounce and then a final low this afternoon but I think it's now risky to press the downside.

Linda Piazza : 1/17/2008 10:24:21 AM

And the SPX hits the potential Keltner support now at 1361.70 on 15-minute closes and is pushing through it as I type. I mentioned yesterday that I had other Keltner charts that showed lower Keltner targets and potential support. One of those shows a target near 1352, but the SPX is also testing a descending channel's supporting line, with that channel put into place beginning last October. Be watchful for bounce potential in this area, without necessarily expecting it.

Tab Gilles : 1/17/2008 10:20:48 AM

Bernanke Testimony Link

Linda Piazza : 1/17/2008 10:19:33 AM

Not only was the Philly Fed's diffusion index of current activity weaker than anticipated, but the prices-paid index jumped and the six-month outlook index weakened. Just about everything went the wrong direction. However, with talk of a rescue or stimulus strategy circulating, the Philly Fed may not prove as shocking to markets as it might have been otherwise. We'll see. Just know that the markets are digesting a lot of information right now.

Jane Fox : 1/17/2008 10:18:50 AM

VIX heading for new daily highs so it is supporting the bearish AD line.

Jane Fox : 1/17/2008 10:18:14 AM

AD line is a bearish -1270. The bears are relentless lately.

Jeff Bailey : 1/17/2008 10:16:14 AM

Philadelphia Fed Mfg. Index -20.9 vs. forecast of -1.0. Previous -1.6.

Jeff Bailey : 1/17/2008 10:13:50 AM

Today's Global Economic Calendar Link

Jeff Bailey : 1/17/2008 10:12:43 AM

Merrill Lynch Posts Steep 4Q Loss ... AP Story Link

MER $52.45 -4.79% ...

Jeff Bailey : 1/17/2008 10:11:16 AM

Home Construction Drops 25% ... AP Story Link

Keene Little : 1/17/2008 10:11:10 AM

It's a little volatile around Bernanke's talk but so far the market is not making headway in either direction. If anything though I'd say there appears to be a generally bearish reaction so far.

Linda Piazza : 1/17/2008 10:05:22 AM

Keltner support joins historical support (from yesterday's low) at 1365.40 and 1361.75 on 15-minute closes.

Jeff Bailey : 1/17/2008 10:04:54 AM

Biiig sell program hitting ...

Jeff Bailey : 1/17/2008 10:03:45 AM

DIA Option Montage ... OI as of last night's close Link

Linda Piazza : 1/17/2008 9:54:21 AM

Market participants should be getting a glimpse of Chairman Bernanke's prepared statement any moment now, so be prepared. I've forgotten to mention that the Philly Fed is released at 10:00, and that can be market moving as well.

Jane Fox : 1/17/2008 9:48:21 AM

Looks like 880 is all Gold will give us for a retracement. Link

Keene Little : 1/17/2008 9:48:19 AM

It's been a very quiet morning so far. It's looking like the market might be waiting to see if Bernanke will have some good news (or hopefully no bad news).

Linda Piazza : 1/17/2008 9:43:16 AM

First Keltner support being tested, as the Keltner setup seemed to suggest. That setup did not give a strong prediction as to whether the support would hold on 15-minute closes, however. If it doesn't, next support is at 1365.47 and then 1361.57 on 15-minute closes. I'd like to give you a prediction of what might happen next, but it's just not there on the setup, and I'd be feeling some skepticism about trusting short-term chart setups anyway just ahead of the release of Chairman Bernanke's prepared statements.

Linda Piazza : 1/17/2008 9:36:10 AM

Nearest support for the SPX is now at 1372.12 on 15-minute closes; nearest resistance, at the 15-minute 9-ema, at 1379.16. No strong prediction on next direction can be gained from this chart, although resistance may be juuust a bit stronger than support, just enough to suggest support may be retested and not to suggest the outcome of such a test.

Linda Piazza : 1/17/2008 9:33:56 AM

Remember Chairman Bernanke's testimony at 10:00 ET this morning before the House Budget Committee. This morning, news has circulated that he might be open to a stimulus or rescue plan by the White House and Congress, providing it meet certain parameters, but he's not going to endorse anything in particular. I'm not sure there's a Q&A session, although I believe there might be, but you can be sure some questions will address such a plan, if there is a Q&A session.

Jane Fox : 1/17/2008 9:32:44 AM

Both the S&P futures (ES) and DOW futures (YM) tagged their respective previous day lows.

Notice the NDX futures (NQ) was the only market to make a higher overnight high. Link

Linda Piazza : 1/17/2008 9:30:56 AM

The USDJPY is at 107.47 as I type, narrowly averting confirmation of a H&S about midnight last night with a surge higher. It's been squiggling back and forth since, reacting to news, but is currently bouncing back up into a congestion zone built over the last 24 hours or so. There's not much evidence from this currency pair as to how equities might behave.

Keene Little : 1/17/2008 9:21:10 AM

Equity futures are green and it looks like we'll have a big gap up to start the trading day. It's gotten to the point when we'll wonder why the overnight action was so quiet if we start the day with less than a 50-point gap. The direction of the gaps have proven to be of no help in determining whether the initial direction will hold and that's true for today.

Jane Fox : 1/17/2008 9:17:47 AM

In the week ending Jan. 12, the advance figure for seasonally adjusted initial claims was 301,000, a decrease of 21,000 from the previous week's unrevised figure of 322,000. The 4-week moving average was 328,500, a decrease of 11,750 from the previous week's revised average of 340,250.

The advance seasonally adjusted insured unemployment rate was 2.1 percent for the week ending Jan. 5, an increase of 0.1 percentage point from the prior week's unrevised rate of 2.0 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Jan. 5 was 2,751,000, an increase of 66,000 from the preceding week's revised level of 2,685,000. The 4-week moving average was 2,725,750, an increase of 28,250 from the preceding week's revised average of 2,697,500.

Jane Fox : 1/17/2008 9:15:56 AM

Dateline WSJ - WASHINGTON -- Federal Reserve Chairman Ben Bernanke is expected to offer his support for an economic-stimulus package in his testimony today before Congress.

In discussions with lawmakers in recent days, Mr. Bernanke has outlined his position that a stimulus plan could be useful if properly structured, according to people he has briefed. His key message to policy makers: A stimulus package would need to help the economy this year; avoid boosting the federal deficit in the long term; and support economic growth through increased consumer and business spending.

Sen. Charles Schumer (D., N.Y.) said Mr. Bernanke in a Monday phone call was "generally supportive" of Congress and President Bush enacting stimulus legislation. "He said that while he wasn't going to endorse a specific plan, if an economic-stimulus package was properly designed and enacted so that it enters the economy quickly, it could have a very positive effect on the economy," Mr. Schumer said. He described the conversation yesterday during a hearing on stimulus plans by the Joint Economic Committee, which he chairs.

Mr. Bernanke is scheduled to testify today before the House Budget Committee. Since he became Fed Chairman two years ago, he has generally declined to comment on particular tax or spending proposals and is expected to maintain that stance.

Jane Fox : 1/17/2008 9:07:30 AM

Dateline WSJ - Merrill Lynch & Co. swung to a fourth-quarter net loss, as the company recorded $11.5 billion more in mortgage-related write-downs in addition to a $3.1 billion write-down on hedges with financial guarantors, capping a bloody second half at the investment banking giant.

The company recorded a net loss of $9.83 billion, or $12.01 a share, compared with net income of $2.3 billion, or $2.41 a share, a year earlier. Revenue was negative $8.19 billion, compared with a gain of $8.39 billion, hurt by the write-downs. Analysts had expected write-downs as high as $15 billion. The company recorded $7.9 billion in mortgage-related write-downs in the third quarter.

Analysts polled by Thomson Financial, on average, expected a loss of $4.93 a share on revenue of $399 million.

Jane Fox : 1/17/2008 9:02:36 AM

Dateline WSJ - WASHINGTON -- Home construction plunged in December, tumbling to its lowest point in 16 years, while a sign of future groundbreakings also dropped sharply.

Housing starts decreased 14% to a seasonally adjusted 1.006 million annual rate, after falling 7.9% in November to 1.173 million, the Commerce Department said Thursday. Originally, Commerce reported November starts 3.7% lower at 1.187 million.

The big decline surprised Wall Street. The median forecast of economists surveyed by Dow Jones Newswires was a 5.0% drop to a 1.130 million annual rate. The level of 1.006 million was the lowest since 996,000 in May 1991.

Year over year, housing starts during December were 38.2% below the level of construction in December 2006.

The level of starts for all of 2007, in numbers not seasonally adjusted, was 1.354 million, 24.8% below 2006's 1.801 million. The annual drop was the largest since a 26.0% fall in 1980.

Builders have been pulling back because sales for new homes have plunged while the supply of unsold homes hovers high. The latest government report on new-home sales in the U.S., covering November, showed a 9.0% decline to an annual rate of 647,000, down 34.4% from November 2006.

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