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OI Technical Staff : 3/8/2008 9:59:59 PM

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Jeff Bailey : 3/8/2008 5:02:28 AM

SPY ... With what I've posted since 10:32:06, here's a full chart of the SPY Link

With a 5, 10 and 30-year yield chart, you can do some of the same things I've done with the 13-week chart. Use some of the "key dates" I've noted.

If you want, you can find all the Fed Statements/Minutes going WAY BACK in time at this Link to benchmark FF targets with the Treasury YIELDS.

This week's CLOSE below some "overlapping" retracement (I colored the one we've been using PURPLE with RED 38.2% and 61.8%) and this is the FIRST week we've seen a CLOSE below the current conventional 19.1% of $132.02.

The rather lopsided h/s top. If we took the current 50%, that is pretty close to what we'd use as a fibonacci tool for determining its downside price objective. Heck, the BLUE 80.9% is actually the mid-point of the 61.8% to 100% range as it is.

Now, for MOMENTUM bears (and I can be accused of this) that like to short/put further weakness, IF we're at a "bottom," we'll simply want to use some trade management to make sure we don't go "all in" like the week of 10/06/02 and undercutting of a low.

After you look at some charts, and I review my trade profiles, we'll also want to have a mindset (in my opinion) that if we get a bounce with a nice gain, it is probably best to book it when we can. Mix in some CALLS with some PUTS, but position sizes don't need to be large.

As GOOD examples. Today's close out in BOOM puts. We actually made a PROFIT after taking some major heat! The VLO June call we sold at VLO $60.00 wasn't a bad idea after-all. Market turned sour as did the crack spread. Things can change for the crack spread and it is right back down at historically low levels where we would look for some improvement. I looked at VLO calls three (3) times today and thought I should keep some powder dry as we're still long the TSO August calls.

I'm not sure that 2-months expiration is all that good to buy (put or call) at this point. Heck, the SPY's WEEKLY interval chart has done little when you look at it.

I do say 2-months might not be the best only due to my actions. For the SWC March puts I closed out for a small loss, that bugger hit my target today, but as the dollar weakened further and we didn't have the news of some power restoration in S. Africa to keep me in the trade, I was looking at expiration and the BOOM March puts in the account as possible LOSSES I didn't want to take.

Anyhow ... some thoughts based on observations.

Jeff Bailey : 3/8/2008 4:34:17 AM

13-week Treasury Yield ($IRX.X) ... Now here is the very short-term 13-week Yield chart Link

Again, I tend to think of it as a Certificate of Deposit.

I've benchmarked some dates that we took from the SPY chart. Note that the IRX.X is a "lagging" indicator as to what the SPY has done.

Now, I purposely "cut off" some of the SPY chart (to the right), but show all of the IRX.X.

If anything, the IRX.X simply tells me (my interpretation of what this chart says) a couple of things. MARKET participants are still running for cover and seeking safety. Another is that the MARKET still wants more rate cuts. Think about it from an investment point of view. Is there any investment opportunity out there that offers the potential for a 1.4% APR, or 0.35% gain over the next 13-weeks?

The IRX.X may also tell us that the "Greenspan Fed" was perhaps a lagging Fed.

We don't have a lot of history with "Bernanke Fed" at this point, but let's assume that like all central bankers, they look at the ECONOMIC data (snapshot in time), but perhaps the SPY, or the EQUITY MARKET is still a better depictor of what the Fed will be doing.

So, the 13-week Yield (IRX.X) not much good.

What if we look at a HIGHER RISK security. We can go 5-years out, then 10-years, then 30-years! Each increase in duration takes on a MUCH HIGHER DEGREE of expertise in RISK/REWARD management. The MARKET is excellent at that!

Let's step WAY out in time with a 30-year Yield ($TYX.X).

After I get some sleep!

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