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Keene Little : 2/6/2008 1:46:30 AM

Wednesday's pivot tables: Link and Link

I had mentioned Tuesday afternoon, after the relentless decline, that it almost seemed too easy for the bears. The rally to Monday's high failed right at some key resistance levels and the bears jumped all over Tuesday's decline with glee. Those who bought the rally, and the idea we were heading higher, got spooked out of their trades. And now that the bears have piled in I'm wondering if it's time to spit them out.

There is enough uncertainty in the wave pattern for the rally from the January low that suggests we might not have finished the correction of the Oct-Jan decline and that Tuesday's pullback was just a pullback and not the start of the next leg down. I've added to the charts what the wave count would be for a larger A-B-C rally off the January low and how the 2nd leg up (wave C) might look for SPX and NDX with the upside Fib projections for targets into next week (opex):
SPX 60-min: Link . Long above 1396, short below 1334 and watch the chop and whipsaws in between.
NDX 60-min: Link . Long above 1852, short below 1716 and watch the chop and whipsaws in between.
DOW 60-min: Link . Long above 12766, short below 12200 and watch the chop and whipsaws in between.

The daily charts of the SPX: Link and DOW: Link show we'd have to have a strong rally back up to finish by the end of next week but with this crazy market anything is possible. Each side is getting whipped.

So I wanted to highlight the risk if you're short and hanging on for a big ride down. In the meantime we're obviously in established down-channels, clearly evident on the daily charts, and it takes a break above Monday's highs to break that downtrend. If we get a bounce to correct the decline since Monday that is then followed by another push lower you'll want to be short this market and we'll see how it handles the January lows and/or the bottom of the down-channels.

Jeff Bailey : 2/6/2008 12:18:30 AM

Closing Internals found at this Link

OI Technical Staff : 2/5/2008 9:59:59 PM

The Market Monitor has been archived.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

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Jim Brown : 2/5/2008 9:14:21 PM

Important Reader Survey - As we head into 2008, we wanted to take a moment and invite you to participate in a short subscriber survey to help us better meet your needs.

As I'm sure you can appreciate, we have a wide range of traders and investors that trade a variety of stocks, options and futures across various time horizons. What's more, the market has introduced and expanded the use of ETFs and emini futures contracts. We felt it was time to take a quick snap shot of your investment and trading styles and get your thoughts and ideas in order to help us better tailor the content and focus of the Market Monitor.

Please click here: Link

Thank you in advance for your quick response to the attached survey. Your feedback is important to us.

Jeff Bailey : 2/5/2008 5:32:18 PM

PHF goes out at $8.33. So, based on this close and assuming PHF continues to pay an annual dividend of $0.90, its SEC YIELD would be 10.80%.

Is there ANY THING OUT THERE that offers the potential GROWTH return of 10.80% over the next 12-months?

Jeff Bailey : 2/5/2008 5:25:48 PM

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

Correction to TOL's "B"enchmark entry. TOL was trading $23.66 (not $23.28 as shown) when the TEP-FE was profiled.

I had to "rebuild" the MM Profiles and re-typed it wrong.

One notable observation is the selling of WEAKNESS. As gold/silver surged higher in January, shares of SIL never really showed much sponsorship/favor from buyers. When they got "sold," weakness got taken out behind the shed.

On 2/01/08 I was looking to short either 100, or 200 shares of SIL on anything above $15.25. Couldn't get above $15.00.

Jane Fox : 2/5/2008 4:35:19 PM

Economic Reports for tomorrow:

7:00a.m. MBA Mortgage Refinancing Index. Previous: +22.1%.

8:30a.m. 4Q Productivity, Prelim. Expected: +0.7%. Previous: +6.3%.

8:30a.m. 4Q Unit Labor Costs, Prelim. Expected: +3.6%. Previous: -2%.

Keene Little : 2/5/2008 4:27:19 PM

I haven't given up on the idea that gold could give us another leg higher to finish an ending diagonal 5th wave (rising wedge) with an upside target at YG 966 (April), possibly by next week. It takes a break below 855 to negate that potential and a break below 884, the uptrend line from December, would be a bearish heads up. Link

However, the pattern of the decline is impulsive enough to suggest a top is in if we get a bounce that retraces 38%-62% of the decline from the high and then a drop lower again. So it's a little dicey here for new entries and it's time to pull stops down a little tighter if you're still short--903 makes for a good place for now. If you want to avoid a bounce but stay short for a longer term trade then you need to have your stop up around 930.

Jeff Bailey : 2/5/2008 4:15:28 PM

StreetTracks Gold (GLD) $87.68 -1.59% ...

GoldCorp (GG) $34.60 -4.44% ...

Jeff Bailey : 2/5/2008 4:07:50 PM

If traders did day trade short gold/silver futures on dollar action, would still suggest no holds overnight.

Jeff Bailey : 2/5/2008 4:06:36 PM

VIX.X 28.38 ... juuuust above MONTHLY Pivot.

Linda Piazza : 2/5/2008 4:03:31 PM

Almost all the SPX gains since 1/31 have been erased and if this trading day had lasted another few minutes, they might have all been erased. Such are our markets these days. They can as easily head the other way tomorrow. The SPX's 15-minute Keltner target is now at 1333.67 on the 15-minute chart, but we're going to have to wait until the open approaches tomorrow to see if futures are way down or way up. It could be either way. Until and unless the SPX produces 15-minute closes above that 9-ema, now at 1342.20, though, not even the shortest term of short-term tenors has changed.

Jeff Bailey : 2/5/2008 4:02:57 PM

Buy Program Premium ... SPY $133.97

Jeff Bailey : 2/5/2008 4:02:22 PM


DJ- GMAC Financial Services swung to a net loss of $724 million in 4Q, as the red ink swells at troubled mortgage unit Residential Capital and credit concerns hurt profits in its auto loan business.

Keene Little : 2/5/2008 4:01:42 PM

No fear from the shorts right into the close. That's confidence for you. We'll know tomorrow whether or not it was justified.

Jane Fox : 2/5/2008 3:55:10 PM

When the AD volume speaks as it did this morning you have to listen. The trajectory of the AD volume today (middle chart) is not to be fooled with. Notice how even the extremely predictive VIX "followed" the AD volume. Link

Linda Piazza : 2/5/2008 3:48:59 PM

As a reminder, the SPX 1/31 low was 1334.08.

Jeff Bailey : 2/5/2008 3:48:52 PM

TRIN 3.05 ... new session highs.

Jeff Bailey : 2/5/2008 3:48:20 PM

SPY $133.79 -2.92% ... new session lows.

Linda Piazza : 2/5/2008 3:45:08 PM

Potential SPX downside target now at 1333.86. Light support at 1336.50. The 9-ema is at 1344.87.

Keene Little : 2/5/2008 3:44:49 PM

The bears just aren't going to let up today.

Keene Little : 2/5/2008 3:41:10 PM

This market has been described by some very well respected long time traders as the toughest they've seen in a generation. (Gee, might that be because we're in a bear market, not seen since the 1970s?) Just when each side thinks we've got a trend started the other side takes the ball away them. After selling off hard today, following a tag of resistance (top of parallel down-channels, Fib retracements, November lows, etc.), it almost seems too easy for bears here.

Might the bulls be getting ready to take the ball away again? The trend is your friend of course, and we're in a confirmed down-channel (e.g., SPX daily chart: Link ) but I can't help but feel the rally off the January lows is not finished (having to do with too many corrective wave counts in both directions). The wave counts on the charts are a work in progress--they have to be since we're in a corrective wave structure and you have to be willing to constantly update the potential count instead of letting your bias influence your count.

The pink wave count on the daily chart shows another leg up to the downtrend line from October near SPX 1461 (which is also the 62% retracement) and it's a count that can't be ruled out yet. In fact two equal legs up from the January low would be at 1461 if we've seen the low for this pullback. Hmm... The 60-min chart shows how another rally leg into opex might look (in pink): Link

Could be a very good buying opportunity here. Any bets that we'll see a big gap up tomorrow to get everyone chasing it? That's pure speculation of course. But it has been the way of this market.

Jim Brown : 2/5/2008 3:38:38 PM

Dow -354 at 12,289 is now looking like the low of the day unless there is another sudden sell program at the close. The ticks are turning positive and the VIX falling. That suggests buyers are nibbling at the dip or at least the shorts are covering.

Linda Piazza : 2/5/2008 3:37:38 PM

Market on close orders come in a few minutes. While these can change the tenor of trading, the impact is sometimes just momentary. Be prepared in case the tenor improves, though, just in case.

Jeff Bailey : 2/5/2008 3:19:05 PM

For those that may have missed my posting from 01:19:00 AM Link

Linda Piazza : 2/5/2008 3:17:24 PM

I mentioned on Friday that the SPX hadn't put together more than two days of gains in a row since the beginning of the year. Realize also that, if the SPX is just chopping out a bear flag climb, it could be doing nothing more than broadening that flag today. The volatility has been going both ways for the last couple of weeks. It's nearly impossible to gauge what will happen next while a bear flag is being chopped out, but do consider whether you're taking on too much risk if you carry a bearish trade overnight. This is the week before option-expiration week, and it's not uncommon to see increased volatility this week in the best of times, much less in this type of climate.

Linda Piazza : 2/5/2008 3:14:15 PM

The SPX did pop above the 9-ema, as it seemed time for it to do, but it didn't maintain values above that 9-ema, the first necessary step to improving its tenor. The potential downside target is now 1334.69, but it's time to consider whether you're going to hold your bearish trades overnight. If you're not, now that the SPX has already popped above the 9-ema and gotten that out of the way, you may want to begin tightening your stop ahead of the 3:40 time period when we get the market-on-close orders. You can follow the 15-minute 9-ema lower, putting your stop an account-appropriate amount above that moving average, you can preset a target and automatically exit, or you can do as Keene suggested, draw a trendline and follow it lower.

Keene Little : 2/5/2008 3:13:48 PM

We're getting a new low so it now can count satisfactorily complete for the ending diagonal pattern I showed on the SPX 10-min chart. Watch for a potential reversal from 1338-1340.

Jeff Bailey : 2/5/2008 3:13:37 PM

03:00 Internals found at this Link

Jeff Bailey : 2/5/2008 3:01:43 PM

Sell Program Premium ... SPY $134.41

Keene Little : 2/5/2008 2:41:35 PM

The size of the bounce now suggests we have probably seen the low for the day. But it needs to take out the mid-day highs to confirm that so stay aware of a possible reversal and selling into the close.

Jane Fox : 2/5/2008 2:39:46 PM

Crude also is contributing to Gold's weakness. Link

Jeff Bailey : 2/5/2008 2:42:29 PM

PHF ... recent NAV was from 1/31/08 at $8.55. PHF was trading $8.08 and was -5.50% discount to NAV. History Link

Remember, a "close-end" fund can trade at PREMIUMIUMS and/or DISCOUNTS to Net Asset Value.

What I've tried to teach traders and investors about PHF is to understand the pricing-in mechanism of discount/premium. The recent "narrowing" of discount would suggest some firming in the junk-end credit markets. Note the Premium to NAV back when "things are great!"

Then look at IWM and understand my bearishness in October.

Jane Fox : 2/5/2008 2:38:52 PM

Of course the US$ has a lot to do with the weakness in Gold today. Link

Jane Fox : 2/5/2008 2:38:12 PM

Gold is reacting to the MACD divergence or should I say the MACD was warning us this market was weak. Ya gotta love those MACD divergences. Link

Jeff Bailey : 2/5/2008 2:37:14 PM

PHF note ... went ex-dividend on 01/29. Link ... so probably not a "dividend run"

Jeff Bailey : 2/5/2008 2:35:35 PM

Sell Program Premium ... SPY $134.80

Jeff Bailey : 2/5/2008 2:35:13 PM

Excellent thoughts from CNBC's Rick Santelli ... Dollar strength could well be coming from "global economic weakness," and rotation to US. While growth slowing, not from excessive rates.

Keene Little : 2/5/2008 2:32:48 PM

Today's decline looks like an ending diagonal 5th wave for its decline from Monday morning (descending wedge). I'm not sure if it's done or if it needs one more new low to finish it. If we do get one more new low (could take us into the close) then I think it will set up a long play (with all the usual caveats about not stepping in front of fast moving trains, playing in traffic, eating yellow snow, etc.). Bullish divergence supports the bullish descending wedge but where's the bottom? Link

Linda Piazza : 2/5/2008 2:30:06 PM

Here's another 15-minute 9-ema test for the SPX, with that moving average now at about 1348.50. Light but descending support is at 1342.12, with a potential downside target of 1335.35. As I said earlier, it's about time for the SPX to press above the 9-ema and retest higher potential resistance, now at 1354.20. If it does, don't get too excited about bullish hopes, even for the short-term, unless the SPX can maintain values above the 9-ema. For now, it's just being tested with no conclusion.

Jane Fox : 2/5/2008 2:29:29 PM

I saw a long setup but then I looked at the internals and the AD volume is still headed straight down so I am going to pass on the long. Link

Jeff Bailey : 2/5/2008 2:28:14 PM

Buy program premium ... SPY $134.79

Jim Brown : 2/5/2008 2:27:59 PM

Important Reader Survey - As we head into 2008, we wanted to take a moment and invite you to participate in a short subscriber survey to help us better meet your needs.

As I'm sure you can appreciate, we have a wide range of traders and investors that trade a variety of stocks, options and futures across various time horizons. What's more, the market has introduced and expanded the use of ETFs and emini futures contracts. We felt it was time to take a quick snap shot of your investment and trading styles and get your thoughts and ideas in order to help us better tailor the content and focus of the Market Monitor.

Please click here: Link

Thank you in advance for your quick response to the attached survey. Your feedback is important to us.

Jeff Bailey : 2/5/2008 2:26:52 PM

Tesoro (TSO) $36.59 -2.60% ...

Jeff Bailey : 2/5/2008 2:26:26 PM

Valero (VLO) $57.44 -4.39% ...

Jeff Bailey : 2/5/2008 2:25:57 PM

Traffic Resumes On Houston Ship Channel - Coast Guard

DJ- The Houston Ship Channel is reporting normal traffic, after closing for fog for most of the time between Sunday evening and Tuesday morning, according to the U.S. Coast Guard.

The Houston Ship Channel, serving five refineries, now has 41 ships waiting to enter and 27 queued to depart.

Galveston and the Sabine-Neches Waterway, serving the Beaumont-Port Arthur, Texas, area, remain closed by fog. At Galveston, nine ships are waiting to enter, four to depart, while 21 ships are waiting to enter at Sabine Pass, Texas, with 10 queued to leave.

Jeff Bailey : 2/5/2008 2:21:54 PM

Buy Program Premium ... SPY $134.70

Jeff Bailey : 2/5/2008 2:19:28 PM

What I think the PHF tells us is this ... at 50% conventional, market participants are willing to take some RISK in the most RISKIEST sub-category of debt.

As such, no more than a bond trader/investor go "all in" on the long side for junk bonds, an equity trader/investor will not go "all in" but be looking to take some RISK at 19.1%.

You've perhaps observed where the rallies went to in your conventional. Those that went to, or above 61.8% are likely your relative strength winners and can be purchased on the pullback.

Jeff Bailey : 2/5/2008 2:06:31 PM

US Market Watch benchmark to PHF at $8.35 Link

Linda Piazza : 2/5/2008 2:06:15 PM

There's no change in tenor in the SPX until and unless it scrambles above that 15-minute 9-ema now at 1348.47 and stays there. It's going to be about time some time or another for the SPX to bounce high enough to test the other side of its smallest Keltner channel, with that resistance now at 1354.25. However, if that happens and if you're hoping that the tenor improves, you would then need to see the SPX sustain values above that 9-ema. A one-shot test that's soon reversed back below the 9-ema would be nothing more than a bounce high enough to recharge the bears.

The SPX is now sinking closer and closer to the downside Keltner target now at about 1335.60. Although I've been warning all day that bears need to have their profit-protecting plans in place, none have been needed so far. That doesn't mean that you don't need to keep updating those plans, however. The SPX is at 1343.21 as I type.

Keene Little : 2/5/2008 2:05:19 PM

I'm back. No bounce yet and it's not looking pretty here. While the short term bullish divergences are holding on the 10-min chart it's like all it means is that the selling isn't getting stronger. It's just that the buyers aren't doing anything. Keep chasing it lower with the downtrend line. Sooner or later some short covering should start.

Jeff Bailey : 2/5/2008 2:01:19 PM

Pacholder High Yield (PHF) Alert! $8.35 +0.60% ...

Jeff Bailey : 2/5/2008 1:59:22 PM

Fed's Lacker: Risks Of Recession Have Risen Lately
Plenty of liquidity in bank market
January jobs report was "weak"
Risks to inflation are "substantial"
Fed TAF auctions should not be permanent.

Linda Piazza : 2/5/2008 1:55:59 PM

SPX 15-minute 9-ema now at 1349.55. Potential downside target now 1335.69.

Jeff Bailey : 2/5/2008 1:50:52 PM

VIX and SPY pretty much squared up in the WEEKLY.

SPY $134.35 -2.50% ...

Jeff Bailey : 2/5/2008 1:47:26 PM

VIX.X 28.16 +8.34% ... perhaps today's biggest "surprise." Session high 28.24 has NOT seen a trade at MONTHLY Pivot.

Jeff Bailey : 2/5/2008 1:42:43 PM

Software HOLDRs (SWH) Alert! $38.92 -3.30% ... sees trade at conventional 19.1%.

Jeff Bailey : 2/5/2008 1:40:03 PM

OEX Alert! 622.20 -2.54% ... just saw trade at conventional 19.1%.

Linda Piazza : 2/5/2008 1:39:23 PM

The SPX's 15-minute 9-ema is now at 1350.55. Light Keltner support is near 1344.50-1345. The potential downside target is now near 1335.75.

Jeff Bailey : 2/5/2008 1:38:55 PM

Fitch To Discuss Changes In CDO Ratings Thursday (updated)

DJ- Fitch Ratings Inc. said it is weighing changes in how it rates corporate collateralized debt obligations, a day after Moody's Corp. (MCO) said it is considering a new way of rating mortgage-related securities and other sometimes-volatile structured finance vehicles.

Fitch has published a draft of its methodology revisions along with a beta model and is seeking market feedback regarding the changes. Its staff will discuss the issue in a conference call open to the public Thursday morning. Final criteria is likely to be issued by the end of March.

CDOs are securities backed by bundles of assets, such as mortgages, offering various levels of risk and maturity.

On Monday, Moody's said it is considering an overhaul of its rating procedures that could include new labels to help investors distinguish CDOs and other structured-finance investments from corporate bonds and Treasury securities.

One of the most significant changes being considered by the parent of Moody's Investors Service: a new, 21-point numerical scale to rate structured securities. Moody's familiar letter grades - from triple-A to single-C - would continue to be used for corporate and government bonds, including tax-exempt municipal debt.

More broadly, the ratings firm is trying to decide whether to add warning labels that essentially acknowledge the limitations of its ratings.

Moody's statement Monday was the first time since the credit-rating firms' methodologies came under attack this past summer that any of the firms has suggested it might change how it issues its hugely important ratings. The move also is an indirect admission that Moody's ratings didn't work right, even though the firm insists some investors relied on them too much.

Standard & Poor's, a unit of McGraw-Hill Cos. (MHP), said it is working on similar moves to shore up confidence in its ratings, though a spokesman declined to discuss details.

Moody's Investors Services cut the ratings on $75.9 billion in CDOs last year and said last month that $185.3 billion in deals remain on review for downgrade.

Jeff Bailey : 2/5/2008 1:35:58 PM

Fitch To Discuss Changes in CDO Ratings Thursday

Jeff Bailey : 2/5/2008 1:35:37 PM

No sooner do I mention that ...

Jeff Bailey : 2/5/2008 1:34:14 PM

Premiums still holding in on the MBI-QU $1.75 x $2.00 with MBI $15.77 +2.46% ...

Jeff Bailey : 2/5/2008 1:29:07 PM

Not surprising in my opinion.

Jeff Bailey : 2/5/2008 1:28:45 PM

Apex Silver (APEX) 13.68 -5.32% ...

iShares Silver Trust (SLV) $161.69 -2.09% ...

Keene Little : 2/5/2008 1:27:07 PM

Stepping away for about 30 minutes.

Jeff Bailey : 2/5/2008 1:27:07 PM

GoldCorp (GG) $35.09 -3.03% ...

StreetTracks Gold (GG) $87.64 -1.63%

Keene Little : 2/5/2008 1:26:22 PM

Draw a trend line down along the highs of today's bounces--if price breaks above it then that will be the signal that the bottom is probably in for the day. It's a good way to trail this lower with your stop if you're short and to look for a long play (especially if the downtrend line is broken and then retested).

Jeff Bailey : 2/5/2008 1:21:45 PM

OPEC: To Rollover Quotas March 5 If Fundamentals Unchanged

Jeff Bailey : 2/5/2008 1:19:14 PM

On 01/30/2008 at 12:25:59 ... VIX.X was 27.98

Jeff Bailey : 2/5/2008 1:15:31 PM

PBR $107.67 -5.46% ... PMJ-OS $2.90 x $3.10 ... VIX.X 27.94 +7.50%

Keene Little : 2/5/2008 1:13:41 PM

The overlapping highs and lows as the DOW and SPX drop lower, after this morning's spike down, is either very bearish (another sharp spike lower coming) or it's an ending pattern. The bullish divergences suggest an ending pattern so be careful chasing it lower. By the same token of course, be careful about stepping in front of this southbound train. Ever lay a penny on the track and let a train run over it? (If my mother only knew what I was doing as a little boy). Pretty cool looking penny after getting run over but not so good for you.

Jeff Bailey : 2/5/2008 1:12:06 PM

01:00 Internals found at this Link

Linda Piazza : 2/5/2008 1:10:08 PM

Another test of the SPX's 15-minute 9-ema, now at 1353.88. The SPX again was not able to press above it, at least not so far. Now light tentative support exists at about 1347.73, but the potential downside target near 1336 is still maintained. I'm not sure too much trust should be put in that target, but bears should certainly know how they'll treat it if it's tested, as targets can be potential support, too.

As the lunchtime lull progresses, the 15-minute 9-ema sometimes flattens and the SPX sometimes moves across it to next S/R. That's now at 1358.21. The 9-ema doesn't look quite flat enough yet for that to happen, but if it does, bears will want to watch carefully to see if the 9-ema then begins serving as support.

Jeff Bailey : 2/5/2008 1:00:58 PM

US Oil Fund (USO) $70.23 -1.59% ...

Jeff Bailey : 2/5/2008 1:00:35 PM

OPEC-12: Quota 29.65M B/D; Groups Jan Output 30M B/D

Keene Little : 2/5/2008 12:55:47 PM

The other interesting thing about the NDX chart I showed (with the bullish resolution) is that it would rally right into the end of opex week. That would set up the next large decline post-opex but for now there's definitely some short term bullish potential here (with some chop and whipsaw thrown in to keep everyone off balance).

Linda Piazza : 2/5/2008 12:43:55 PM

The SPX's 15-minute 9-ema is now at 1355.28. The potential downside target is now at 1336.21. Until and unless the SPX begins sustaining 15-minute closes above that 9-ema, that 1336 area remains a potential downside target. Don't put complete trust in this downside target.

Jeff Bailey : 2/5/2008 12:39:18 PM

Toll Brothers (TOL) $22.79 +1.96% ... weekly interval bar chart Link

Keene Little : 2/5/2008 12:40:48 PM

To give the bulls "equal time" I'm seeng a potentially bullish pattern for the techs if today's pullback finds support at the uptrend line from the Jan 28th low, currently near 1794. If the sharp rise off the Jan 23rd low is followed by a large sideways consolidation, as shown on this NDX 60-min chart, then we could eventually see an upside resolution: Link

I say eventually because the pattern needs another up-down sequence to set up the c-wave rally leg out of it. As shown, the upside Fib projection would be near 1969 (two equal legs up) which is also where it would achieve a 62% retracement of the decline from December (1972). This makes for an interesting possibility.

Jeff Bailey : 2/5/2008 12:33:54 PM

Another crazy thing is if you take a conventional bar chart trend on TOL from its Sep'01 low to its Mar'03 higher low, extenstion of that trend was tested a couple of weeks ago.

Jeff Bailey : 2/5/2008 12:23:53 PM

Also crazy is that if you look at each Friday's close with a Weekly interval chart of TOL, it has NOT been able to see a FRIDAY close above $23.73.

Jeff Bailey : 2/5/2008 12:17:01 PM

As crazy as it may seem, if you take a conventional retracement on TOL from its all-time record high of $58.67 to its recent lows of $15.49, you get a resulting 19.1% of $23.74.

Just as crazy is a "Bailey Wave" from July'06 low, then up to Jan'07 high, then down to Jan'08 low.

Jeff Bailey : 2/5/2008 12:12:37 PM

DJ Home Construction (DJUSHB) 389.37 +0.92% ... "sector winner" and tries to hold its 150-day SMA (381.54). 50-day SMA starting to curl higher at 317.08.

Jeff Bailey : 2/5/2008 12:09:45 PM

Halliburton VP: Timing Right For Oil Service Acquisitions

Jeff Bailey : 2/5/2008 12:03:30 PM

SPY $135.58 -1.62% ... 30-minutes ago it was trading $135.09.

Jeff Bailey : 2/5/2008 12:02:24 PM

US Dollar Index (DXY) Alert! 76.16 +0.98% (30-minute delayed) ... conventional 38.2% here.

Keene Little : 2/5/2008 12:02:05 PM

The uptrend line from Jan 28th and 31st is where the DOW is finding some support for now: Link . Slightly lower is the 38% retracement of the rally off the January low 12338. A break of the Jan 31st low of 12250 would say we've seen the high for the corrective bounce.

But until the DOW breaks below 12250 there is still the possibility we'll see another push higher (pink) and two equal legs up from Jan 31st gives us an upside Fib target at 12887 (if it can get above the top of its parallel down-channel near 12700). There are lots of possibilities here and the bottom line is you should stay cautious about potential whipsaw price action.

Linda Piazza : 2/5/2008 11:59:41 AM

The TRAN is punching above its 15-minute 9-ema, with that average now at about 4715-4716, and with the TRAN now at 4731.35. It needs to maintain values above that 9-ema to improve the tenor.

Linda Piazza : 2/5/2008 11:58:25 AM

The advdec line continues to maintain values above the breakdown benchmark, now at about -1800. As I type, the advdec line is testing its 15-minute 9-ema, now at about -1540. The advdec line is not yet maintaining values above it, but if it does, that's another bullish divergence and another warning to bears not to completely trust downside targets.

Linda Piazza : 2/5/2008 11:56:23 AM

The SPX rose right up to its descending 15-minute 9-ema (now at 1358.41) and has since fallen back. The SPX is at 1356.19 as I type. I still don't trust that potential downside target, now at 1336.50, but so far, it's still a potential target.

Jeff Bailey : 2/5/2008 11:41:57 AM

Petroleo Brasileiro (PBR) $108.76 -4.50% Link ... Today's trade at $108.00 would be a 3-box reversal lower as long as PBR does NOT trade $116.

Linda Piazza : 2/5/2008 11:38:56 AM

So far, the SPX has been holding 30-minute support on 30-minute closes. Because of that and, somewhat, those bullish divergences, I've been hesitant to mention a potential downside target now set on the 15-minute chart. However, at this point, it's probably only fair to mention a current potential downside target of 1336.71. That will remain a potential target set by this chart until and unless the SPX sustains values above the descending 9-ema, now at 1359.07. I think it's possible, if not yet probable, that the SPX could maintain values above that 9-ema and erase the downside target. I'm not sure that it's a target that will be met, but it should now be mentioned, with the SPX spending so much time below the 9-ema. I would not count on this target being met if in bearish positions, but in addition to profit-protection plans for an immediate bounce, I'd certainly be factoring in potential support at that level if the SPX should drop there. We may soon get our 9-ema test and we'll have more insight on whether that's still a viable target or not.

Jeff Bailey : 2/5/2008 11:30:54 AM

OEX.X 625.36 -2.04% ... has traded its WEEKLY S1. Conventional 19.1% at 621.91.

Keene Little : 2/5/2008 11:27:27 AM

Another mixed signal is what I'm seeing between the NYSE (down -2.5% this morning) and the strength in AAPL and GOOG (both in the green this morning).

Linda Piazza : 2/5/2008 11:25:07 AM

Yes, Keene(see Keene's 11:20:29 post), we're all seeing and warning bears to remain aware of those divergences. I'm just doing it in a more long-winded way! I'm always afraid that new subscribers or newbie traders will misunderstand how to use divergences.

Jane Fox : 2/5/2008 11:24:25 AM

You all know that I give the VIX a great deal of respect but when the AD volume is on this kind of trajectory I will give it a little more emphasis than the VIX. Link

Jeff Bailey : 2/5/2008 11:22:23 AM

11:00 Internals found at this Link

Keene Little : 2/5/2008 11:20:29 AM

Just noticed Linda are looking at the same things and matches Jane's earlier comment.

Keene Little : 2/5/2008 11:18:59 AM

As the DOW pushes to new lows there are some bullish divergences associated with the new lows and that urges some caution if you're still short. Pull your stop down a little closer and follow it lower (or not).

Linda Piazza : 2/5/2008 11:14:17 AM

As is sometimes true, and as all of those of us who follow technical analysis warn, divergences teach us to prepare a plan. They don't promise that price action will follow by bouncing when there are bullish divergences and falling when there are bearish ones. I can point to lots of varieties of bullish divergences this morning--price/RSI, new prices lows not matched by new advdec line lows, Keltner-style divergences--but we've been busy preparing if-it-bounces-plans that haven't been needed so far. Just keep those divergences in mind if you're in bearish trades, so that you know how you want to protect your profits in case a bounce ever begins. In this volatile market environment, that's of course always a good idea.

Keene Little : 2/5/2008 11:12:28 AM

SPX is about to hit the 38% retracement of the rally off the January low (1349.61). Just below that is potential support at the uptrend line from Jan 31st just above 1345. A break below that level would start to sound some bearish alarms.

Jeff Bailey : 2/5/2008 11:06:10 AM

QQQQ $44.32 -1.40% ... holding together above 19.1% conventionl and lower channel of "Bailey Wave" Andrew's Pitchfork (modified schiff). WEEKLY Pivot ($45.01) has an al_rt set on it for a reversal.

Linda Piazza : 2/5/2008 11:03:14 AM

Another divergence: the TRAN also did not hit a new day's low when the SPX did. The TRAN is clinging to its flattened 9-ema, at about 4719, with the TRAN just below that but basically printing candles ranging along that for the last 45 minutes. I use the TRAN as a sort of leading or indicator index, not as a trading vehicle. This is not proof that the SPX will rise but it certainly is a sign that if you've got bearish profits, you need to make sure that you have a plan in place in case there's a bounce. Sorry, bulls, but this isn't enough evidence to bet on a bounce yet.

Keene Little : 2/5/2008 11:02:29 AM

The DOW is still pressing a little lower while techs hold above this morning's low. The small caps are showing relative strength as well this morning. Stair-stepping lower looks like the more likely path for now.

Linda Piazza : 2/5/2008 10:59:05 AM

The SPX's 15-minute 9-ema has now dropped to 1363.98, near that 1364 level that I've been mentioning as a benchmark for even a minor improvement in tenor in the SPX. There's still divergence here, in that the advdec line did not reach a new day's low as the SPX did, so I'm still being watchful, but that divergence is certainly not resulting in improvement in price action.

Jane Fox : 2/5/2008 11:25:48 AM

Take a look at the AD volume (middle chart). This is one of those days when you have to respect this trajectory. But the AD ratio (upper left chart) is not supporting the bearishness AND the VIX is not making new daily highs so neither is supporting the bearishness. The conclusion, unfortunately once again, is that we are going to live with choppy charts. Link

Jeff Bailey : 2/5/2008 10:55:41 AM

10-year Yield ($TNX.X) down 10.1 bp at 3.542% ... has slipped under its 19.1% conventional (from 10/15/07 relative high to recent low yields)

Linda Piazza : 2/5/2008 10:55:22 AM

The advdec line is coming back down now to retest the breakdown benchmark, now at about -1720, to see if it holds as support. The advdec line is at -1663 as I type. As long as it sustains values above about -1720 (advdec lines are big and the lines are dynamic, so the numbers can change quickly) on 15-minute closes, then there's still an improvement in tenor. It needs to get back above that 9-ema and sustain values above that before there's anything but that minor improvement, though. That 9-ema has dropped further since my last post about it and is now at about -1360.

Jane Fox : 2/5/2008 10:52:50 AM

And there it goes.

Jeff Bailey : 2/5/2008 10:52:15 AM

Treasury's Pauson: Extending Jobless Benefits Would Be Unprecedented

Jane Fox : 2/5/2008 10:51:39 AM

So far YM's daily lows are 12401.

Jane Fox : 2/5/2008 10:51:17 AM

The Dow futures (YM) is trying its darnest to break below 12400.

Jane Fox : 2/5/2008 10:50:31 AM

The VIX is not revealing anything about direction today and is certainly not supporting the bearish AD line and volume. Link

Linda Piazza : 2/5/2008 10:48:25 AM

The SPX's 15-minute 9-ema has now dropped to 1364.71. Stronger potential resistance is at 1370-1371.

Linda Piazza : 2/5/2008 10:46:09 AM

The advdec line has to maintain values above about -1200 to -1290 before there's the next improvement in tenor. It's at -1458 as I type, drawing back a little from its earlier approach to next resistance.

Linda Piazza : 2/5/2008 10:41:21 AM

The advdec line is not behaving the same as the equities when viewed on short-term charts such as 7-minute or 15-minute charts. It's just strengthened its climb and is no longer in breakdown mode. Be forewarned if in bearish positions that this is an improvement in tenor in the advdec line and volume movements sometimes precede price movements. It's no proof but it's certainly something to keep in mind.

Linda Piazza : 2/5/2008 10:34:57 AM

The SPX bounce is looking a little better, although its stamina is far from determined. As I said earlier, I'd need to see the SPX maintaining values above about 1364.10 before I even believed in any improvement in tenor at all. Until then, this is just a bounce into that resistance. Above that, the SPX will then encounter the 15-minute 9-ema, now at 1367.08 but still descending.

Keene Little : 2/5/2008 10:30:56 AM

Since the early drop this morning we've got the DOW chopping a little lower and NDX chopping a little higher. Looks like a recipe for chop--neither bullish nor bearish here. We could bounce a little more but it doesn't look like we've seen the bottom for this move down yet.

Jeff Bailey : 2/5/2008 10:30:26 AM

Toll Brothers (TOL $23.31 +4.29% ... Upgraded to "neutral" from "sell" at Banc of America Securities.

Linda Piazza : 2/5/2008 10:16:11 AM

Not much has changed yet, with 30-minute SPX Keltner support holding so far, but without much improvement in tenor, either. If a bounce is going to occur, it's certainly requiring more effort to get it going than last Thursday's effort required. I'd have to see the SPX sustaining values above about 1364.10 or so before I believed that there was even a short-term change in tenor. So, for now, the will-support-hold-or-crater jury is out for me. The SPX is at 1357.03. I think an effort is being made to stabilize and bounce the equities and I'd certainly plan for that possibility if I had bearish profits, but whether a bounce attempt will be successful or not, I don't know.

Jane Fox : 2/5/2008 10:04:40 AM

AD line started the day at -2060 and "improved" to -1779 and is not heading back down again.

Keene Little : 2/5/2008 10:03:25 AM

With the uptrend lines from Jan 23rd now broken, if prices bounce up to those broken trend lines and find them to be resistance (kiss goodbye), it'll be time to get short. In the meantime I'm watching to see if we stair-step a little lower after this morning's steep drop

Linda Piazza : 2/5/2008 10:01:37 AM

Keltner outlook on the advdec line: The advdec line is now at -1769, just about to test the potential resistance that now's up near -1600 to -1640. It needs to climb above that resistance and sustain values above it before there's even a minor change in tenor and those hoping for an equity bounce certainly need to see more than a minor change in tenor for the advdec line. So, despite the bounce attempt in the equities, a bounce that came from SPX support that held last Thursday, there's still reason to exercise caution.

Linda Piazza : 2/5/2008 9:56:45 AM

The USDJPY is bouncing. It's at 106.84 as I type. It needs to sustain values above 106.77 as a first step in recovering from this morning's drop and then it needs to sustain values above 106.92 and preferably 107 before the 15-minute RSI climbs back to 70. It's at 31.87 as I type.

Linda Piazza : 2/5/2008 9:54:02 AM

Here's the SPX's 30-minute Keltner chart, showing the key level the SPX is testing right now: Link

Keene Little : 2/5/2008 9:51:55 AM

SPX is relatively weak this morning and has already retraced more than 62% of the leg up from Jan 31st. A 38% retracement of the rally off the January low is at 1349.61. One other possibility is a drop down to a trend line along the two lows on Jan 28th and 31st, currently near 1345.40. I'm not ruling out the possibility for another run back up until 1334 is taken out. Link

Linda Piazza : 2/5/2008 9:48:36 AM

Keltner outlook on the advdec line: The advdec line is in breakdown mode on the 15-minute chart, the chart on which I usually watch the advdec line. RSI indicates that a bounce attempt might be near--RSI sometimes trends below 30, but not frequently--but the advdec line would need to sustain values back above about -1600 to -1550 to erase that breakdown mode and even begin to suggest the slightest change in tenor. It's at -2003 as I type.

Linda Piazza : 2/5/2008 9:44:13 AM

The SPX's 15-minute Keltner chart is not pretty, of course. I'm going straight to a 30-minute chart for a longer-term view. The 30-minute chart shows the SPX approaching the basis lines for its widest channel, with that support at about 1355.40 and ranging down to 1352.14 on 15-minute closes. This is the same support approached the morning of Thursday, 1/31, with a bounce occurring the rest of the day. So, traders should be aware of bounce potential from this level without any proof being offered just yet that a bounce will occur. The SPX did begin a bounce attempt from that Keltner support as I typed, but we're far from knowing if it will hold.

I also want to note that post-ISM, the USDJPY dropped heavily off its overnight high of 107.70. It's at 106.71 as I type, testing potential Keltner support at 106.78 on 15-minute closes. In addition, RSI has dropped below 30, to 23.45. RSI can trend on the USDJPY, but it doesn't tend to do so for long on this 15-minute chart. So, be watchful for either a further dropping while RSI trends or a bounce. If the USDJPY bounces, it may be signaling that equities will do so, too. Use it as a sort of indicator that it's time to make plans in case a bounce occurs rather than as proof that it will.

Linda Piazza : 2/5/2008 9:37:36 AM

My trendline mentioned in my earlier post wasn't drawn correctly. The SPX is hitting it now, at about 1360.53 as I type, rathr than lower, at the next Keltner level on daily closes. That Keltner support has been pushed to about 1367.80 and 1348.40 on daily closes. I'll look at intraday charts next.

Jane Fox : 2/5/2008 9:31:32 AM

ISM was scheduled to be released at 10:00 but some reason it was released early today. From the WSJ - The data were released early Tuesday, at 8:55 a.m. EST compared to the usual 10 a.m. EST, due to a possible breach of information, ISM said.

Keene Little : 2/5/2008 9:26:05 AM

With equity futures down hard this morning we're going to see a much deeper decline than I had expected to see. That means looking for a long play is out the window until I see how it plays out early this morning. As for the downside, I will want to see the Jan 31st lows taken out (SPX 1334, DOW 12250) before getting too bearish. We continue to be in a very choppy environment with lots of whipsaws.

Linda Piazza : 2/5/2008 9:22:25 AM

If the cash indices move down in accordance with current futures' action, what might happen with the SPX? If the SPX does drop hard--doesn't always happen after futures are down--I see potential support on daily closes at about 1369.50 and then again at about 1351. These are Keltner support levels, with the lower one coinciding with a rising trendline off the 1/23 low. That trendline has only two touchpoints so far, though, so it's not a well-tested or well-developed trendline as yet. Many technicians require at least three touchpoints to establish a trustworthy trendline.

As we well know from recent experience, anything can and does happen once prices start avalanching, but we now must factor in the very real knowledge that the Fed will do everything within its power to stop any such avalanche. Can the Fed stop an avalanche in its tracks? Maybe and maybe not. Eventually, I think we're going to have to have a retest, but will this be the time? I'm not so sure.

I would not be surprised to have this morning's downturn be a downturn within the bear flag that's been forming, and so it's possible that support will hold and that the SPX will again attempt to chop higher into the 1395-1405 zone. However, the tricky thing about bear flags is that they can fall apart at any time. Honor your stops, wherever they were set, because the truth is that no one knows what's going on underneath these markets these days, and everyone is trying to sort it out: hence, the volatility and the overreaction to each and every bit of news.

Jane Fox : 2/5/2008 9:10:55 AM

Needless to say the markets did not like the ISM data out at 8:30.

Jane Fox : 2/5/2008 9:10:29 AM

WASHINGTON (MarketWatch) -- Growth in the nonmanufacturing side of the U.S. economy contracted sharply, the Institute for Supply Management reported Friday. The ISM nonmanufacturing index fell to 41.9% in January from 54.4% in December. The reading was well below the 53.0% expected by economists. Readings below 50% indicate most firms are contracting. The ISM services index was released early. ISM gave no explanation for the early release.

Jane Fox : 2/5/2008 9:02:34 AM

Here are the updated overnight charts. Link

Jane Fox : 2/5/2008 9:01:37 AM

These overnight charts are totally different from Monday's overnight session. Yesterday there was a bullish consolidation at overnight highs but prices were hovering at overnight lows so it was unclear as to which side had control. This session it is very obvious the bears have had control all night.

I think the AD line will open below -1000. Link

Jeff Bailey : 2/5/2008 5:43:48 AM

See you in a couple of hours.

Jeff Bailey : 2/5/2008 5:42:16 AM

YM 12,619 ... takes a look at DAILY 38.2%.

Jeff Bailey : 2/5/2008 5:39:05 AM

Apex Silver (SIL) went out $14.45 ... it did NOTHING when silver rocketed higher.

March Silver (yi08h) is down $0.24, or -1.42% at $16.55.

Jeff Bailey : 2/5/2008 5:37:34 AM

GoldCorp (GG) went out at $36.21. WKLY S1 $35.75 with WKLY S2 $34.71.

Also have a conventional retracement from the recent highs $39.94 to the 12/18/07 relative low of $30.15.

11/26/07 close was $33.48.

Jeff Bailey : 2/5/2008 5:34:33 AM

Mini-April Gold (yg08j) ... down $16.20, or -1.78% at $893.10.

WKLY S2 at $885.50

Jeff Bailey : 2/5/2008 5:32:00 AM

S&P 500 (SPX.X) 1,380.82 Link

Jeff Bailey : 2/5/2008 5:31:02 AM

Shanghai ($SSEC) Link ... closed down 72, or -1.55% at 4,599.

Jeff Bailey : 2/5/2008 5:29:44 AM

Hang Seng ($HSI) Link ... was off 223, or -0.89% at 24,808.

Jeff Bailey : 2/5/2008 5:28:36 AM

Nikkei-255 ($NIKK) Link ... finished down 114, or -0.82% at 13,745.

Jeff Bailey : 2/5/2008 5:27:00 AM

CAC-40 (CAC) Link ... down 27, or -0.54% at 4,946.

Jeff Bailey : 2/5/2008 5:25:55 AM

DAX Link ... down 40, or -0.59% at 6,959.

Jeff Bailey : 2/5/2008 5:25:04 AM

FTSE-100 ($FTSE) Link ... off 23 points, or -0.40% at 6,002.

Jeff Bailey : 2/5/2008 5:19:35 AM

Overnight chart of DXY found some strength at about 03:00 AM.

May tie with GBP's Halifax House Price Index m/m at unchanged. Forecast was -0.4%.

ForexFactory Economic Calendar Link

Jeff Bailey : 2/5/2008 5:15:39 AM

YM 12,604 ... matched earlier overning lows of 12,582.

Jeff Bailey : 2/5/2008 5:14:35 AM

DXY 75.87 +0.58% (30-minute delayed) ... MONTHLY Pivot traded (75.83).

Jeff Bailey : 2/5/2008 4:56:13 AM

DXY 75.84 +0.55% ... 30-minute delayed

Jeff Bailey : 2/5/2008 4:35:24 AM

YM evening session with WEEKLY pivot retracement and Tuesday's Daily Pivot retracement Link

Jeff Bailey : 2/5/2008 4:32:00 AM

YM 12,587 ... not responding.

Jeff Bailey : 2/5/2008 4:31:41 AM

DXY 75.70 +0.35% ... (30-minute delayed)

Jeff Bailey : 2/5/2008 4:20:04 AM

YM overnight stopped alert! 12,594.

Jeff Bailey : 2/5/2008 4:08:42 AM

YM overnight long alert! ... here at 12,606. Stop goes 12,594. Target 12,648.

Jeff Bailey : 2/5/2008 3:46:30 AM

US Dollar Index (DXY) 75.55 +0.16% (30-minued delayed) ... making a move higher. Would be DAILY R2 here.

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