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OI Technical Staff : 3/14/2008 9:59:59 PM

The Market Monitor has been archived.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

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Jeff Bailey : 3/14/2008 6:23:39 PM

SEC: Bear Stearns's Liqudity Eroded Rapidly Since Tuesday

DJ- The Securities and Exchange Commission's division of trading and markets said late Friday that the decision to supply temporary funding to Bear Stearns Cos. (BSC) followed a "significant deterioration" in the bank's liquidity on Thursday.

SEC officials said in a statement that they had been monitoring Bear Stearns's financial situation on a daily basis in recent weeks, and had no cause for alarm earlier in the week. Bear's holding company capital exceeded regulatory standards at the end of February, and information supplied by Bear Stearns to the SEC on Tuesday showed the holding company had a "substantial capital cushion," according to the SEC. As of that date, the firm had more than $17 billion in cash and unencumbered liquid assets, the SEC said.

"Beginning on that day, however, and increasingly throughout the week, lenders and customers of Bear Stearns began to remove funds from the firm, despite its stable capital position. As a result, Bear Stearns's excess liquidity rapidly eroded," the statement says.

On Friday, federal officials announced a deal to provide a 28-day loan to Bear Stearns through Federal Reserve borrowing by JPMorgan Chase & Co. (JPM). The SEC division that oversees U.S. markets said it is continuing to monitor Bear Stearns's condition and believes its registered broker-dealers "remain in compliance with commission capital rules."

The SEC reiterated that it is working closely with the Treasury Department, the Federal Reserve and the Federal Reserve Bank of New York to ensure that its regulation contributes to "orderly and liquid markets."

Bear shares fell $27, or 47%, to $30. About 186 million shares of the broker traded, the most ever in a single session.

Jeff Bailey : 3/14/2008 6:14:03 PM

Closing Internals at this Link

Keene Little : 3/14/2008 4:43:15 PM

A thought occurred to me as I looked at the various indices and how we could be very close to putting in a significant low. I've changed the SPX daily and 60-min charts to reflect what I'm thinking is a better wave count. I've kept the pink wave count showing a big sideways consolidation into April but my preferred count is the dark red one: Link

The red count now shows the 4th wave correction ended on Feb 1st, not the end of February, and the choppy decline since that time has been a descending wedge for the 5th wave. Inside this descending wedge we might need only one more leg down to finish it and bottom around 1260 (staying above the mid line of the parallel down-channel and maintaining the bullish divergence at the new low). By this count we could see a bottom on Monday or Tuesday and then start a rally into the end of opex (and well beyond).

The 60-min chart is updated to show this possibility: Link . We might see a little more bounce first on Monday and then a choppy decline into early Tuesday to finish the descending wedges. This definitely has some very interesting possibilities and one I'm strongly considering at the moment.

Hope everyone has a great weekend.

Tab Gilles : 3/14/2008 4:28:22 PM

WOW!!! For all the big moves both up & down for the week....the major indexes did as follows... DJIA -57, SPX -5 & Nasdaq flat.

Next week should be fun!

Enjoy the weekend everyone.

Jeff Bailey : 3/14/2008 4:15:37 PM

USD/JPY 99.23

Jeff Bailey : 3/14/2008 4:15:23 PM

EWJ $11.53 -6.63% ... with T&S observation Link

Another side to the USD/JPY trade.

Jeff Bailey : 3/14/2008 4:02:14 PM

Penalty Bid Alert! ... iShares Japan (EWJ) $11.53 -6.63% ...

Keene Little : 3/14/2008 3:58:09 PM

Price action is still too choppy to get a sense of direction, something I've been saying for way too long. And guess what? Price has gone nowhere for way too long. Price has been chopping its way lower since Wednesday's high and has not been giving us any impulsive moves to the downside, including today after that spike back up this afternoon. This leaves the door open to a rally next week but possibly only after another up-down sequence on Monday as shown in pink on the SPX 60-min chart: Link

That could lead to a rally leg next week before the next decline kicks into gear (or not). The daily chart hasn't changed much from yesterday and I continue to show the possbility that we'll see a continuation of the large sideways consolidation into April (shown in pink): Link

I've moved the key level for the bearish scenario down to 1260 since a break below that level would make it very unlikely that we'll see another rally leg. In that case, as depicted in dark red, we could see a choppy move lower in a descending wedge pattern (which would be explained by all the 3-wave choppy price action here).

The descending wedge would be the 5th wave for the move down from October and set up a rally into May/June. This actually ties in nicely with the price patterns I showed earlier today for the semiconductors ( Link ) and banks ( Link ). It would be a very good opportunity to get long the market for a ride back up to correct the Oct-Mar decline.

Linda Piazza : 3/14/2008 3:54:05 PM

Here's our "if the SPX ends the day here" exercise. Barring a huge move at the end of the day, it looks as if the SPX's weekly candle will be a small-bodied, long-upper shadowed one at the bottom of a three-week decline. This candle is being produced within a three-month long consolidation zone, however, so that it perhaps doesn't have as much credence as a potential reversal signal as it would if it were being produced after a months-long decline rather than a three-week one. However, it is being produced at the support, if somewhat tentative support, and it did pierce the weekly 200-sma and -ema's, even if it couldn't maintain values above them.

I honestly don't know what to conclude, but I do believe that those bears who have risked more than they could afford to risk should take into consideration the potential for reversal. Based on the shape of the candle alone, I would suggest that next week could result in a bounce attempt (by the conclusion of the week), but cast this within the context of a possible bearish right triangle forming on the daily and weekly chart and truly troubling information we've been getting. Most times, prices don't break down or up through such triangles until the triangles are about 2/3 of the way through, which would give the SPX time to bounce up through that triangle at least one more time, but there's just no guarantee.

Jeff Bailey : 3/14/2008 3:48:00 PM

TNX.X ... WEEKLY Pivot levels for next week are ... 31.99, 33.10, Piv= 34.69, 35.80, 37.39.

Linda Piazza : 3/14/2008 3:44:36 PM

The SPX's 15-minute 9-ema is now at 1287.40, and it's being tested.

Jeff Bailey : 3/14/2008 3:43:32 PM

SMH $28.69 -2.11% ... battle to stay above WEEKLY Pivot.

Jeff Bailey : 3/14/2008 3:29:23 PM

The "lack" of new lows at the RUT.X quite impressive this week.

Jeff Bailey : 3/14/2008 3:28:46 PM

Check out your DIA/SPY/IWM/QQQQ montage on 5-minute intervals. IWM only one to be above its 200-pd SMA.

Jeff Bailey : 3/14/2008 3:27:05 PM

Should note that traders lost the bond market pulse on its close at 03:00

Jeff Bailey : 3/14/2008 3:26:13 PM

USD/JPY 99.43 ... now FOLLOWING the YM, not even or leading.

Jeff Bailey : 3/14/2008 3:25:45 PM

Biggest surprise was that DIA didn't backfill the gap when it had the chance.

VIX and VXO WKLY R2's may have been the key.

Jeff Bailey : 3/14/2008 3:24:30 PM

VXO.X 34.98

Jeff Bailey : 3/14/2008 3:24:17 PM

VIX.X 30.93

Jeff Bailey : 3/14/2008 3:24:02 PM

Now they want the DIA-OM ... $1.51 x $1.53 with DIA $120.04

Linda Piazza : 3/14/2008 3:23:25 PM

Remember that VIX chart from earlier, showing how it was reaching potential resistance? Here it is again, with the original annotations but with updated price action: Link

Keene Little : 3/14/2008 3:21:57 PM

Getting a sharp reversal back to the upside and I'm now flat. If the reversal higher continues then we're simply stuck in some kind of larger consolidation pattern and I have no interest in trading it.

Jeff Bailey : 3/14/2008 3:21:32 PM

YM 11,985 ... nice pop of the low.

Linda Piazza : 3/14/2008 3:21:05 PM

It looks as if there could be another 15-minute close above the 15-minute 9-ema, now at 1285.62. If you were one of those brave buyers stepping in early, then you want to see sustained 15-minute closes above that 9-ema. For those in bearish positions, you hopefully made your decisions about whether to take partial profits and adjusted your stops. Although we could have this whole rally just fall apart, honor your stops, wherever they were.

Jeff Bailey : 3/14/2008 3:18:47 PM

03:00 Internals found at this Link

Linda Piazza : 3/14/2008 3:07:07 PM

The bond market close sometimes triggers a change in the trading pattern, either an acceleration of the previous one or a reversal. Be aware of this possibility and begin making your end-of-day and end-of-week decisions.

Linda Piazza : 3/14/2008 3:05:28 PM

No change in tenor yet. The SPX's 15-minute 9-ema is now at 1283.57. The potential support is flattening and perhaps strengthening a bit, but it won't be enough to stop a cascade lower, if that should begin.

Jane Fox : 3/14/2008 3:02:37 PM

As Keene has stated, the AD line is very bearish as is the VIX and the TRIN and ratios, etc, etc.... Bulls really lost it today and I'm afraid the 2008 lows are in Jeopardy!!

Keene Little : 3/14/2008 2:51:22 PM

The a-d line and volume keep heading south so more downside looks to be in the cards still.

Jeff Bailey : 3/14/2008 2:50:59 PM

USD/JPY 99.16

Jeff Bailey : 3/14/2008 2:50:47 PM

VXO.X 36.00 +21.29% ... sitting on WKLY R2.

Jeff Bailey : 3/14/2008 2:50:15 PM

VIX.X 32.23 +18.10% ... has kissed WKLY R2.

Jeff Bailey : 3/14/2008 2:49:48 PM

Swing trade puts close out alert! ... Let's close out the two (2) Dow Diamonds DIA March $117 Puts (DIA-OM) at the bid of $1.80.

DIA $118.87 -2.17% ...

Linda Piazza : 3/14/2008 2:46:37 PM

The SPX's 15-minute 9-ema is now at 1284.91. The OEX's is at 597.22.

Linda Piazza : 3/14/2008 2:45:47 PM

The SPX has potential support on 15-minute closes at about 1276.18. We know of course that it's also approaching more important support levels: Monday's 1272.66 as well as January's lows. We might expect that some brave bulls will soon try to step in ahead of those lows unless sellers just overwhelm them, but we don't know if those few brave bulls will be joined by institutional buyers and then those gains further fueled by shorts. If you've had big gains today, think about whether you want to lock in some of those gains and then follow the SPX lower (if it goes lower) with your stops on the rest. There's no right or wrong here and no way to predict with any certainty what will happen next.

Keene Little : 3/14/2008 2:35:04 PM

In fact 1272 would be where the 2nd leg down today will equal 62% of the 1st leg down. So I'll tighten up my stop a little if and when that level is tagged.

Keene Little : 3/14/2008 2:33:09 PM

I was beginning to wonder if the decline would get started. Now it's beginning to take on a bit of waterfall decline appearance (good if you're short). The downside potential is for another leg down to match this morning's quick drop. That gives us SPX 1256 but obviously there's the 1270/1272 level to get through first.

Linda Piazza : 3/14/2008 2:32:21 PM

At -2331 as I type, the A/D line is also at potential Keltner support as well as historical support.

Linda Piazza : 3/14/2008 2:30:48 PM

This is the kind of day when prices can just break through some unknown breakdown point and cascade lower or else break up through the resistance level that's been stopping it and catch shorts unaware, driving them to help fuel a rally. I'm watching the VIX to see if it pulls back at its current test of resistance or breaks out instead, or any number of signs. It's not looking great at the moment on the markets, but we know how little that matters at times, and the SPX currently tests possible support as the VIX tests possible resistance. If in bearish positions, be aware of all possibilities and keep following the SPX lower with your stops. Don't let a bearish gain turn into a loss if the SPX should pop higher.

Jeff Bailey : 3/14/2008 2:26:14 PM

DIA $118.97

Jeff Bailey : 3/14/2008 2:25:58 PM

YM 11,884

Jeff Bailey : 3/14/2008 2:25:44 PM

USD/JPY 99.35

Jeff Bailey : 3/14/2008 2:20:58 PM

DIA $119.17

Jeff Bailey : 3/14/2008 2:20:48 PM

YM 11,908 ...

Keene Little : 3/14/2008 2:19:37 PM

It's time to remove a little risk from the short play. It needs to continue lower from here otherwise I'll step out of the way. I'm lowering my stop to just above the last bounce high at 1:48 PM (ES 1292.50) so my stop is at 1293. I could get whipsawed out of my trade but that's OK. I will just go flat and let this market flail around without me.

Jeff Bailey : 3/14/2008 2:18:36 PM

USD/JPY 99.56

Jeff Bailey : 3/14/2008 2:17:48 PM

Sector Winner Gold Bugs +0.25% and Treasuries.

Jeff Bailey : 3/14/2008 2:15:53 PM

PBR $107.26 -4.12% ... slips to 50% conventional.

Linda Piazza : 3/14/2008 2:15:24 PM

The OEX's 15-minute 9-ema is now at 595.38. Potential support on 15-minute closes is now at 590.81.

Linda Piazza : 3/14/2008 2:14:19 PM

The SPX's 15-minute 9-ema is now at 1287.68, with potential resistance there on 15-minute closes. Potential support is now at 1276.41 on 15-minute closes.

Jane Fox : 3/14/2008 2:13:35 PM

Here are your overnight charts ? can you say, ?All over the map?? Link

Jane Fox : 3/14/2008 2:12:30 PM

Even though the VIX is jittery the AD line and AD ratio are quite clear as to who has control today ? the bears. Link

Jeff Bailey : 3/14/2008 2:06:09 PM

DIA $119.35 -1.77% ... taps along its 1/22/08 low close.

Jeff Bailey : 3/14/2008 2:04:23 PM

Apple (AAPL) $125.72 -1.71% ... either side of its 0% conventional last 4 days.

Jeff Bailey : 3/14/2008 1:59:34 PM

USD/JPY 99.76 ... afternoon low has been 99.58.

YM 11,940 ... afternoon low has been 11,895

Keene Little : 3/14/2008 1:51:54 PM

Stepping away for a few. Watching paint dry is making me hungry. Stop remains above the high at 12:50 PM on a short play and waiting for it to either work or not.

Linda Piazza : 3/14/2008 1:43:24 PM

For those in bearish positions: The VIX is approaching potential Keltner resistance on 15-minute closes at 33.42-33.25. Here's a chart: Link This post should not be taken by bulls as a sign that markets are going to turn around any moment, but it should be taken as a warning by bears to keep updating your profit-protecting plan just in case VIX rolls over and equities bounce.

Jeff Bailey : 3/14/2008 1:42:41 PM

SCA WEIGHS RESTRUCTURING, MAY GET OUT OF CDOS

DJ- Security Capital Assurance CEO Paul Giordano says the bond insurer is weighing a restructuring, and that it may no longer back collateralized debt obligations when it resumes writing new business.

SCA $0.79 +19.69% ...

Jeff Bailey : 3/14/2008 1:41:15 PM

MONTREAL EXCHANGE DEVELOPING OIL SANDS FUTURES CONTRACT

DJ- Montreal Exchange is developing the first futures contract based on the output from Canada's fast-growing oil sands region, challenging the industry's established WTI and Brent crude benchmarks.

Jeff Bailey : 3/14/2008 1:40:41 PM

CITIGROUP CEO SAYS BIG ASSET SALES COMING

DJ- Citigroup Chief Executive Vikram Pandit says the bank plans to shed assets to reorganize its business. Analysts say the giant bank will shed hundreds of billions of dollars worth of assets to support a turnaround.

C $19.84 -5.83% ...

Jeff Bailey : 3/14/2008 1:39:41 PM

AMBAC SECURE, 'NEVER CONSIDERED BAILOUT'

DJ- Ambac Financial Group's chairman says the company has been able to achieve its immediate objectives of enhancing capital position and improving its position with the rating agencies.

ABK $6.39 -3.61% ...

Jeff Bailey : 3/14/2008 1:38:36 PM

MOODY'S CUTS WAMU TO ONE STEP ABOVE JUNK

DJ- Moody's Investor Service cuts Washington Mutual's debt rating to one step above junk status due to the 'the rapid deterioration of the residential housing sector in the first quarter.'

WMU $10.96 -9.64% ...

Jeff Bailey : 3/14/2008 1:36:43 PM

They might want to check into ULS while they're at it.

Jeff Bailey : 3/14/2008 1:36:25 PM

REGULATOR SAID TO BE PROBING JET FUEL MARKET

DJ- U.S. regulators are investigating whether jet fuel prices were manipulated during two separate periods in 2006 and 2007. Several traders and brokers say they received subpoenas from CFTC seeking information about trades.

Linda Piazza : 3/14/2008 1:34:41 PM

USDJPY is now 99.82. The day's low was 99.55.

Linda Piazza : 3/14/2008 1:33:34 PM

I'm back. The SPX continues to find resistance on 15-minute closes at its 15-minute 9-ema, which has been serving as a fair benchmark today. That's now at 1290.61. The SPX has potential support now down to 1278.06 on 15-minute closes, but it keeps weakening, so I'm even less certain than I would otherwise be that it will hold. The SPX has to sustain 15-minute closes above that descending 9-ema before the tenor even begins to change, even for the short term.

The OEX's 15-minute 9-ema is now at 596.05, with potential but possibly weakening support at 591.43 on 15-minute closes.

Jane Fox : 3/14/2008 1:20:44 PM

I think it is an understatement to say the market is just a little jittery today. My goodness gracious look at the VIX, I have never seen the VIX like this ever before. I have seen it spike but never almost every bar. Link

Jeff Bailey : 3/14/2008 1:19:30 PM

01:00 Internals found at this Link

Keene Little : 3/14/2008 1:11:15 PM

And of course being a Friday we could see the market take a snooze and head sideways into the end of the day. Now that I've got all the bases covered we'll just have to let price tell us what's in store. Short against the 12:50 PM high for now and we'll see if it works.

Keene Little : 3/14/2008 1:09:11 PM

Or if it reverses to the upside and catches the bears asleep then a rally back up to this morning's high is the upside potential.

Keene Little : 3/14/2008 1:08:02 PM

Today has the potential to be an extremely negative day.

Keene Little : 3/14/2008 1:04:10 PM

If instead of breaking down it continues to chop lower it's going to start looking like a bull flag. The selling needs to kick into gear now otherwise the bullish alternative will start to look better. The stop on a short play should stay right above that last bounce and if stopped out I'll be watching to see how a bounce Might develop.

Keene Little : 3/14/2008 12:54:29 PM

Head fake break to the downside or just a stop run back to the upside? They don't make it easy do they.

Keene Little : 3/14/2008 12:45:59 PM

Here's our heads up for the breakdown. Short is the place to be. The stop for now needs to be above the last bounce high near 12:30 PM.

Linda Piazza : 3/14/2008 12:44:01 PM

I'll be away from the Market Monitor for about an hour. The SPX is being squeezed between the 15-minute 9-ema's resistance on 15-minute closes and the support of the rising trendline off Monday's low. It's getting squeezed so tightly that one or the other has to break soon, but because the tiny triangle is nearly at its apex and the SPX hasn't broken out either direction yet, I don't know that we should consider a seeming breakout any big deal now. The SPX has further potential resistance at 1302-1305, and further potential support at 1280.90 on 15-minute closes.

Linda Piazza : 3/14/2008 12:37:03 PM

The SPX's 15-minute 9-ema is now at 1295.01. Potential Keltner support on 15-minute closes is now at 1281.03-1284.39. If the SPX should momentarily lose the support of that rising trendline off Monday's low, be aware of the possibility that it will hit that potential Kelner support and hold up there on 15-minute closes. It's a possibility and not necessarily a probability. In normal times, that support would be strong enough to support the SPX or at least stall any decline, but these are not normal times.

Keene Little : 3/14/2008 12:29:39 PM

A break below the low just before 11:30 AM (SPX 1288.58, ES 1290) would be a heads up that we're breaking down.

Jeff Bailey : 3/14/2008 12:28:47 PM

DIA $119.94 -1.29% ...

Jeff Bailey : 3/14/2008 12:28:29 PM

Swing trade put alert! for two (2) of the Dow Diamonds DIA March $117 puts (DIA-OM) at the offer of $1.18

Keene Little : 3/14/2008 12:18:36 PM

This morning's sharp thrust down followed by the sideways triangle pattern looks like a continuation pattern. This looks like a setup for another sharp move down and it should be ready to break down now. If it rallies above this morning's 10:18 AM high then it could blast higher instead.

Jeff Bailey : 3/14/2008 12:15:47 PM

Very light volume trade

Linda Piazza : 3/14/2008 12:15:14 PM

Just a thought: if I had any March bull put credit spreads (I don't--closed them long ago) and I could get out of them for a nickel or a dime, or even for $0.15-0.20, depending on what I'd paid for them, I'd be considering doing so. That's me and not all agree. I'm probably more risk adverse than many, but I absolutely know I'd be closing them today if I could for a nickel or a dime, and I probably would be if I could for $0.15-0.20. I don't like this market. You know what you're risking if you close them out and make less profit than you could: the SPX could just blow through all resistance levels next week and never look back.

However, have you truly thought about what you're risking if you don't take that opportunity? If you've got 10 contracts of a 10-point spread on the SPX, for example, and you took in $0.60 for that spread, and you can get out for $0.10 today, you're keeping $9400 at risk ($10,000 margin - $600 credit) in these crazy markets just to hopefully keep that last $100 out of the $600 credit you took in. Those figures don't include commission costs, of course, but if you were making a bet on the SPX today, would you put $9400 at risk to make $100 by the end of next week?

Jeff Bailey : 3/14/2008 12:14:58 PM

YM 11,991

Jeff Bailey : 3/14/2008 12:14:34 PM

YM 12,008

Jeff Bailey : 3/14/2008 12:14:26 PM

USD/JPY 100.20

Jane Fox : 3/14/2008 12:15:12 PM

Here is McMillan's Weekly commentary. This has certainly been an interesting market, to say the least. With wide swings and plenty of volatility, it trades -- as the old saying goes "at everyone's price." Of course, to have the fortitude to stick it out until it trades at your price can be quite the challenge.

The $SPX chart is always important. At this point, it appears that the test of the 1265 level was successful (at least so far), and a bounce is underway. However, the rally had trouble at the $SPX resistance near 1320-1330 over each of the last three days. The longer that resistance builds up, the more significant it is. Even if $SPX should overcome that level, there is still plenty more resistance, all the way up to 1390- 1400. In other words, the $SPX chart is currently bearish.

The Equity-only put-call ratios continue to rise and thus remain on sell signals. While they are high on their charts, that merely means they're in an "oversold" state. They must roll over and begin to trend downward in order for buy signals to be confirmed. At this point, they haven't done that.

Breadth (advances minus declines) remains negative. Despite this rally, which has persisted for parts of three days, breadth remains oversold. Apparently, it's going to take another day or two of positive breadth to generate a buy signal. The fact that breadth has been rather poor on this rally is not a good sign. At this time, breadth remains negative.

Volatility indices ($VIX and $VXO) have advanced during the decline over the past few weeks, but almost reluctantly. They haven't spiked up in a capitulation panic where traders just buy puts at any price. Rather, $VIX has advanced calmly and rather slowly. This, too, is not particularly good. Usually an intermediate-term bottom is only forthcoming when $VIX makes a true spike peak.

In summary, this is not a positive set of technical indicators. $SPX hasn't been able to penetrate resistance, the put-call ratios are still on sell signals, breadth has been poor and thus the breadth oscillators remain negative, and $VIX hasn't spiked. It is possible that these could improve: $SPX isn't that far from breaking through the first resistance at 1320-1330, the put-call ratios have rolled over from these levels in the past, and a few days of advances could give us breadth buy signals.

However, unless those things actually occur, we will remain bearish, expecting another challenge of support near 1275, and perhaps a challenge of the "true" (January overnight) lows near 1250, basis $SPX. If those downside levels fail, then the next support is at the Summer of 2006 lows near 1225.

Jeff Bailey : 3/14/2008 12:14:12 PM

YM short stop alert! 12,011

Jeff Bailey : 3/14/2008 12:09:57 PM

5-year -14.6 bp

Jeff Bailey : 3/14/2008 12:09:37 PM

30-year -9.5 bp at 4.359%

Jeff Bailey : 3/14/2008 12:09:14 PM

USD/HPY 100.14

Jeff Bailey : 3/14/2008 12:08:49 PM

YM short alert! here at 11,990. Stop goes 12,011. Target 11,800

Linda Piazza : 3/14/2008 12:06:59 PM

The SPX's 15-minute 9-ema held as resistance on the last 15-minute close. That's now at 1295.71. Potential Keltner support sinks. It's now at about 1282 on 15-minute closes. For the OEX, the 15-minute 9-ema is now at 599.28. The potential support is now at 592.78-592.65 on 15-minute closes.

Jeff Bailey : 3/14/2008 11:53:45 AM

Incredible that the BVD-CL traded as high as $3.32 today.

Keene Little : 3/14/2008 11:52:33 AM

I showed a chart of the semiconductors (SMH) in Wednesday's newsletter ( Link ) and mentioned my expectation for a breakdown from its sideways triangle pattern. It looks like it might be getting closer to giving us a sell signal: Link

A break below the 27.83 low on Mar 4th would be a heads up that it could be breaking down. It takes a break below the January low of 26.54 to confirm the 5th wave down is in progress. The downside projection for the 5th wave is at 23.19 where it would achieve equality with the 1st wave (assuming the end of the 4th wave correction was yesterday's high). From there we should get a good rally into May/June.

Linda Piazza : 3/14/2008 11:52:20 AM

The USDJPY is now 100.29. It's still in the congestion zone formed since the wee hours Thursday morning. No prediction is provided here as to next equity direction.

Jeff Bailey : 3/14/2008 11:47:16 AM

$/yen 100.45 ... YM 12,025

Jeff Bailey : 3/14/2008 11:46:20 AM

Today I'd equate USD/JPY 99.56 with YM 11,851 and 100.40 with 12,086

Linda Piazza : 3/14/2008 11:39:16 AM

The SPX's 15-minute 9-ema is now at 1297.20; the OEX's, 599.93.

Keene Little : 3/14/2008 11:38:46 AM

On the daily chart of the banks (BIX) I've been showing an expectation for another leg down in order to complete a 5-wave move down from Feb 1st, as shown with the dark red line down to perhaps the 200 area for a tradeable bottom (for the banks): Link

The brokers (XBD) have already broken back below Monday's low and are leading the way. Interestingly though, MER is holding up a little better in that respect and looks more like SPX this morning (so no divergence there to warn us of an SPX direction).

Jeff Bailey : 3/14/2008 11:35:47 AM

USD/JPY 100.20

Linda Piazza : 3/14/2008 11:24:27 AM

So far, the SPX's 15-minute 9-ema is holding as resistance on 15-minute closes. That's currently at 1298.23. In fact, the SPX hasn't even touched it since falling through it during the first 15-minute period as the SPX coils near the day's low. Signals are mixed. I could point to this coiling near the low as a sign of weakness. I could point to the price/RSI bullish divergence at today's low when compared to yesterday's as a sign that prices will pop. I could point to the narrowing trading pattern as an indication that those big inverse or reverse H&S's will indeed narrow into triangles that carry us into next week, as I speculated might happen yesterday.

We are not in control of what happens with the markets. I know that I've spent my time trying to mentally move the markets one direction or another, without any success! You're only in control of what you do about it.

Potential Keltner support has now sunk to 1282.34-1284.35.

Jeff Bailey : 3/14/2008 11:17:03 AM

11:00 Internals found at this Link

Keene Little : 3/14/2008 11:15:29 AM

The pre-market spike up followed by the post-open spike down followed by the smaller spike up followed by the smaller spike back down looks to have price stabilizing a bit. As long as price contiunues to consolidate it will look bearish but we could see another leg up to match the bounce off the 10:00 AM low which would give us a little more than SPX 1310 (near ES 1314). A continuation lower from here, back below the dip near 10:40 AM, would be more immediately bearish.

Linda Piazza : 3/14/2008 11:12:49 AM

The SPX's 15-minute 9-ema is now at 1300.49; the OEX's, at 601.37.

Linda Piazza : 3/14/2008 11:11:39 AM

USDJPY 100.29, climbing up through its congestion zone, as oscillators and the Keltner setup suggested it might do. Right now, that's all that's happening. U.S. equity bulls desperately need to see strengthening in this equity pair, but I'm not sure it's going to happen ahead of next week's FOMC meeting and the choice of a new BoJ governor. I do believe that the currency pair has probably priced in a Fed easing, but the uncertainty in Japan creates the possibility of a next move going any direction.

Linda Piazza : 3/14/2008 10:59:30 AM

The USDJPY dropped below yesterday's low this morning, to 99.55. It's at 100.07 as I type. One currency pundit said in the wee hours yesterday morning, when appearing either on Bloomberg or CNBC Europe, that he anticipated mid 90's for the USDJPY. Getting closer, isn't it?

Although the USDJPY did drop lower this morning, however, it quickly pushed back up again. Strangely enough, although it dropped lower, it's producing Keltner-style bullish divergence. In addition, it's producing more standard value/RSI bullish divergence. This is not a signal that it won't go lower, but is perhaps a signal that it's at least ready to bounce up through its consolidation zone. Oscillators such as RSI are sometimes more predictive in a "channeling" or consolidating entity than in a trending one, and the USDJPY has been consolidating on that 15-minute chart for more than 24 hours. That is, it has been if you ignore than candle shadow piercing the support before this latest bounce attempt.

Jane Fox : 3/14/2008 10:56:59 AM

WASHINGTON (MarketWatch) -- U.S. consumer sentiment slipped again in March, but not as much as expected, according to media reports Friday.

The University of Michigan/Reuters index tracking consumer sentiment dipped to 70.5 in March from 70.8 in February. The March reading came in above the 69.0 expected by economists.

Still, it was the lowest in 16 years. The expectations index fell to 61.4 from 62.4, also the lowest since early 1992.

However, the current conditions index for March improved to 84.6 from 83.8 in February.

Consumers' expectations for inflation over the next year jumped to 4.5% from 3.7% in February, an increase that "cannot be interpreted as anything other than troubling," wrote Joseph Brusuelas, chief U.S. economist for IDEAglobal.

It's the highest expected level of inflation since October 2005, just after Hurricane Katrina hit the Gulf Coast and sent gasoline prices soaring.

Jeff Bailey : 3/14/2008 10:56:27 AM

Paulson: Treasury Working Closely With Fed, SEC
Appreciate Fed's Leadership On Market Stability
Confident Efforts Will Minimize Disruption

Linda Piazza : 3/14/2008 10:52:48 AM

Potential SPX support near 1286.90 on 15-minute closes has been firming up, but what appears to be firm has been proven not to be earlier today. There is, however, a chance that the SPX will attempt a bounce from this level. If it instead sustains values (not briefly blips below them) below tht level, then a potential downside target now at 1259.27 is set.

Linda Piazza : 3/14/2008 10:41:18 AM

Jeff, I've sent an email your direction. I know that you receive many subscriber emails each day, so I thought I'd give you a heads-up that it was on the way.

Jeff Bailey : 3/14/2008 10:40:51 AM

Disclosure: I currently hold bearish position in HSBC.

Jeff Bailey : 3/14/2008 10:40:32 AM

Swing trade put alert! ... for an additional HSBC Holdings HBC June $70 Put (HBC-RN) at the offer of $3.10.

HBC $78.15 -1.82% ...

Keene Little : 3/14/2008 10:24:30 AM

After breaking yesterday's low SPX has now bounced more than 25 points off this morning's low. A little PPT help perhaps? Who knows but I sure wouldn't trust the bounce, regardless of its strength. What it does tell you though is to step aside and wait for the dust to settle. We've got some extraordinarily high emotions running in the market right now.

Jeff Bailey : 3/14/2008 10:24:25 AM

BSC $33.17 -41.87% ... BVD-OC $0.55 x $1.05

Jeff Bailey : 3/14/2008 10:23:56 AM

Swing trade naked put cancel order alert! ... for the BVD-OC

Linda Piazza : 3/14/2008 10:23:27 AM

The SPX's potential support near 1286-1290 did hold on that 15-minute close, and now it's climbing back toward the 1306-1309 area. The Keltner support grouped near there had looked like strong enough support to prompt at least a bounce attempt earlier; now it looks strong enough to halt this current advance attempt. I don't know if that apparent strength will be any more meaningful now than it was earlier, when the SPX cut right through it. There's danger now of a rollover back through the day's low, with a possible target near 1260 if that should happen. Take all these potential targets these days for what they're worth: not much. Just realize that there's vulnerability to that level if the trendline support off Monday's low is lost.

Jeff Bailey : 3/14/2008 10:12:23 AM

BSC $35

Jeff Bailey : 3/14/2008 10:11:46 AM

Swing trade NAKED Put alert! ... Place an order to sell NAKED one (1) of the Bear Stearns BSC March $15 Puts (BVD-OC) for $1.50.

Linda Piazza : 3/14/2008 10:10:06 AM

We have the battle of the formations going on this morning. A regular SPX H&S formation forms since Tuesday, within a larger reverse or inverse H&S setting up over the last 10 trading days. Neither has been confirmed; neither, invalidated. When such conditions exist, you understand that there's a bear versus bull battle going on, and you remain wary and cautious in the amount of risk you take on.

Jane Fox : 3/14/2008 10:10:05 AM

SPX bulls are very weak. They better get their act together real quick or they will let us slip into a bear market. Link

Keene Little : 3/14/2008 10:09:29 AM

The Fed-sponsered bailout for Bear Stearns hasn't helped their stock price--nearly cut in half this morning.

Jane Fox : 3/14/2008 10:08:14 AM

Here are your charts of the TRIN and VIX. I find it quite fascinating that these two are so in sync since they are both "built" from two totally different sources, the TRIN from AD line and volume and the VIX from SPX options. By the way they are both very bearish although you can look at the TRIN as way overdone and from a contrarian point of view is bullish. Link

Linda Piazza : 3/14/2008 10:04:18 AM

Not good. The SPX is just plowing through every "support" level, before I can even upload my posts. Here goes, though: potential support is now at 1286-1290 on 15-minute closes. We're far from a close on this 15-minute period, so it might yet hold.

Linda Piazza : 3/14/2008 10:02:05 AM

That support looked strong and the SPX and OEX just plowed right through it. Not good. However, I noted this morning that when looking at symmetry for the big inverse or reverse H&S forming over the last 10 trading days or so, it looked as if there still needed to be some more right-shoulder-building time, and this could be it. The SPX approaches 1291.60 potential support on 15-minute closes, with the rising trendline off Monday's low now crossing at about 1286. That's potential support, too.

You absolutely cannot count on anything in this market. A while ago, I wrote about how one trend is often separated from another by a period of disorganization and traders absolutely get killed in that period of disorganization. None of the usual tools works well.

Jane Fox : 3/14/2008 9:56:40 AM

AD line is a bearish -1324.

Jeff Bailey : 3/14/2008 9:56:05 AM

Bear Stearns (BSC) $42.79 -25% ... plunging.

Linda Piazza : 3/14/2008 9:55:01 AM

USDJPY drops to 100.11. I was puzzled by the initial jump after the CPI. A lower-than-anticipated CPI should equate to giving the FOMC carte blanch to do whatever it is they want to do next week. If they lower rates again, as widely expected to do, that should again weaken the dollar, which should have the effect of driving the USDJPY lower, not higher. As I mentioned in last night's Wrap, equity bulls are in a quandary now with the dollar weakness. Should they hope for more easing or less? Easing further weakens the dollar against other currencies from areas where there has been no easing, and that hasn't been good for equities, either.

Keene Little : 3/14/2008 9:53:49 AM

SPX was not able to push above yesterday's high and instead has now dropped below 1312, yesterday afternoon's pullback low. That makes me think we've seen the high (gap n crap variety). The corrective price action continues in both directions so take nothing for granted but the potential here is very bearish. First order of business for the bears is to get SPX back below 1296 now that it has dropped below 1307.

Linda Piazza : 3/14/2008 9:51:10 AM

OEX: Potential support near 604.83-606 on 15-minute closes looked strong enough, barring a strong downdraft, to provide at least a bounce attempt. This move down is strong enough that the possibility of that downdraft should be considered, but I would still look for bounce potential even though support has been breached by a little as I type with the OEX at 603.28. If the OEX should bounce, resistance near 612.50-614.30 looks strong enough to provide to at least stall the OEX for a while.

Linda Piazza : 3/14/2008 9:45:16 AM

The SPX's potential resistance up to about 1329.50 (Keltner and trendline) looks about as strong as that gathered support I mentioned in my 9:38:58 post. In normal times, when the setup looks like this, it predicts that prices will chop around a bit longer until either support or resistance weakens, barring some sort of surge that pushes through them. So, despite all the cheer earlier, we may get what the setup looked as if it would produce: chop for a while.

Linda Piazza : 3/14/2008 9:38:58 AM

Next support for the SPX, detailed in last night's Wrap, is from about 1307.40-1310 if the 9-ema's support, now being tested, fails. It hasn't failed yet. As noted in last night's Wrap, that lower support currently looks strong enough to prompt at least a bounce attempt, if not more, if tested. There could be enough disappointment in the cash market performance to cause some of those "skittish and suicidal shorts" Art Cashin mentioned this morning to bail and create a strong enough downdraft to push through it, but that's not currently the highest probability setup. That setup will change as the morning progresses, however.

Linda Piazza : 3/14/2008 9:35:52 AM

Keltner outlook on the A/D line: The A/D line tests potential resistance this morning up to about +800, with the A/D line at 535 as I type. In fact, the behavior is a bit strange, as I've become accustomed to gaps on the A/D line each day and there was none this morning. If the A/D line can maintaining values above about 800, it sets a potential upside target just under 2000. If it instead falls beneath about 350, then it sets a potential downside target near -150.

Jim Brown : 3/14/2008 9:38:02 AM

Article in Fortune this morning

JPMorgan rescues Bear Stearns
Bear Stearns (BSC) got a shot in the arm Friday morning when JPMorgan Chase (JPM) agreed to provide the struggling broker with secured funding for 28 days. The financing will be backstopped by the Federal Reserve Bank of New York - the latest signal that federal officials are deeply concerned about the health of the financial sector and are trying to show investors that they will prevent big institutions from faltering. Bear admitted in its statement Friday morning that it was on the ropes before the deal came through.

"Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity," CEO Alan Schwartz said in Bear's statement. "We have tried to confront and dispel these rumors and parse fact from fiction. Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."

The announcement comes a day after Bear Stearns shares fell as much as 17% amid worries the firm could collapse under the weight of declining values in the mortgage securities market. JPMorgan made a nod to those concerns in its announcement Friday morning. "Through its discount window, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase," the bank said. "Accordingly, JPMorgan Chase does not believe this transaction exposes its shareholders to any material risk."

JPMorgan also noted the possibility that mere financing may not be enough for Bear Stearns, whose shares have lost more than 60% of their value amid the ballooning mortgage problems of the past year. "JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company," JPMorgan said.

Linda Piazza : 3/14/2008 9:33:10 AM

USDJPY at 100.77, still in its congestion zone.

Linda Piazza : 3/14/2008 9:32:33 AM

For OEX traders, the OEX has potential resistance on 15-minute closes at 612.50-614.30, with Fib resistance also at 613.54.

Jim Brown : 3/14/2008 9:31:41 AM

Last week the Bear Stearns CEO and CFO called rumors of a liquidity crisis at the firm "nonsense, we have no liquidity crisis."

Today the following news headlines appeared.

JPMorgan Chase, With Federal Reserve Bank of NY, to Provide Funding to Bear Stearns

NEW YORK (AP) -- JPMorgan Chase says that in conjunction with the Federal Reserve Bank of New York it will provide temporary funding for Bear Stearns.

The funding will be provided as necessary for up to 28 days. During that time, JPMorgan Chase will also help Bear Stearns find permanent financing.

There has been speculation this week that Bear Stearns was struggling with liquidity problems. Its chief executive earlier denied those reports.

Looks like the nonsense was in the BS that the CEO and CFO were spreading.

Linda Piazza : 3/14/2008 9:24:14 AM

SPX futures are currently a little more than 10 points above fair value. If the SPX should make early gains in accordance with those values, it will be driven right up into potential resistance on 15-minute closes near 1324.50 and again at 1327.50. Here's a chart: Link As the annotations cautioned, decide right now, before the open, how you'll treat a test of this zone if you're in bullish positions. All seems wonderful now, and this could very well be the bounce that finally keeps going for a while, keeping in mind that these are considered bullish formations, but there's the potential for this formation to resolve into a triangle that keeps narrowing into next week's FOMC decision, too. In this climate, you really have to be prepared for anything. Don't be one of those "just out of Pampers" people Art Cashin referenced earlier today. Make plans. Adhere to them.

Jane Fox : 3/14/2008 9:23:42 AM

I have done the same Fibonacci analysis on the Gold chart. As you can see it hit the 161.80% level at $1000 and of course Gold is not going to break this level easily. I expect to see a healthy decline from here and will be buying more when/if it gets back to $950.00. Link

Keene Little : 3/14/2008 9:21:08 AM

Nothing like a small 200-point rally in the DOW futures off the CPI data, turning a strongly negative start to the day to a strongly positive. It looks like we'll now get the push up that I was hoping we'd see and that could set up an early morning high (maybe spike up, consolidate, push a little higher and then start a pullback/decline). To say that any move in this market should not be trusted is an understatement.

Jane Fox : 3/14/2008 9:16:34 AM

I have put a Fibonacci bracket on the Crude chart with 100% at $100/bl and 0% at the spike down on January 22nd at 85.42. Once Crude broke $100/bl conventional Fib theory is 127.20% (~$104/bl) would be the next resistance and as you can see when it reached $104, it did retrace back to $100. So far so good. Then once the 127.20% resistance breaks the next resistance should be 161.80% (~$109). Crude has broken through the 161.80% resistance and has even closed above it but I do believe this is it. A retracement at least back to $104 is the most probable next move. Would I short Crude here based on this analysis ? no way ? but I would use it position myself to get back on board this market or add to my pure play positions.

Pure play positions are ones that are not based on the stock market but in the commodity itself. Link

Linda Piazza : 3/14/2008 9:06:46 AM

Articles this morning note the efforts that the globe's central bankers have made to "talk down" the yen and "talk up" the dollar. Most continue to view this talk, especially in Japan, as indications that the central banks plan no intervention. Many doubt such intervention would be successful anyway. Confusion continues about the successor to the Bank of Japan's Governor Fukui, with some mutterings that the choice might be settled "after the weekend." That sets up the possibility of the worst-case scenario coming about: the ending of Governor Fukui's term next week without a successor yet being named. Imagine how our financial markets would react if we did not have any leader at the helm of our central bank. Japanese markets are reacting similarly. There's still much potential for upheaval in the currency markets, particularly in the USDJPY, going into next week. Such upheaval can and often does impact behavior of our equities. Lately, it's seemed that the USDJPY has been somewhat more reactive to and less predictive of the behavior of our equity markets, but a USDJPY that's diving beneath 100.00 again could certainly weigh down our equity markets. Equity bulls don't want to see that happen. For now, the USDJPY is 100.80, still chopping around in a range from 99.76 up to 101.21, the 38.2% retracement of the decline off Tuesday's high.

Jane Fox : 3/14/2008 9:04:46 AM

The markets really liked the CPI data out at 8:30EDTand all but the DOW futures (YM) were able to break above their respective previous day highs. Well Ok the S&P futures (ES) didn?t go a great job of breaking above its PDH but heh it still did. Link

Jim Brown : 3/14/2008 8:59:12 AM

Crude prices are dropping on the better than expected CPI. Why is anybody's guess. Since 2002 the number of futures contracts in force has grown from 400,000 to more than 1.4 million today. The April contract currently has more than 350,000 contracts outstanding representing 350 million barrels of crude. Each contract calls for 1,000 barrels of oil to be delivered to the Cushing Oklahoma delivery point. Unfortunately Cushing can only store 18.8 million barrels. The entire U.S. inventory of crude is only 311 million barrels. Speculators have accumulated some huge positions. Obviously there are going to be a lot of contracts settled before they terminate trading next Wednesday. Given the recent price action it would probably be safe to assume most speculators were long. A rational assumption would be those currently long would need to close those positions (sell) by next Wednesday. Rational thinking has not worked in the oil markets lately so it will be interesting to watch.

Jane Fox : 3/14/2008 8:58:44 AM

Dateline WSJ - WASHINGTON -- U.S. consumer prices were unexpectedly flat last month, a government report showed, paving the way for a large interest rate reduction by the Federal Reserve next week to shore up the economy.

The inflation relief, triggered in part by a drop in energy prices last month, will most likely prove temporary as record-high oil and gasoline prices -- which weren't reflected in February data -- filter through the economy this month and next.

Still, prices in a variety of sectors including health care, clothing and housing were under wraps as well, giving policymakers breathing room to address the housing and credit crunch without worrying about a significant resurgence in inflation pressures.

The consumer price index was unchanged in February both overall and when volatile food and energy prices were excluded, the Labor Department said Friday. Core inflation hadn't flattened on a monthly basis since November 2006.

Wall Street economists had expected a sharper 0.2% rise in both the headline and core indexes last month, according to a Dow Jones Newswires survey. Unrounded, the CPI rose 0.026% last month. The core CPI advanced 0.040% unrounded

Jim Brown : 3/14/2008 8:46:23 AM

YHOO shares up +2% in the pre-market on news that Microsoft executives met for the first time with Yahoo executives to talk about the offer.

Jim Brown : 3/14/2008 8:43:37 AM

The next report due out today is the Consumer Sentiment at 10:AM. Sentiment is expected to have fallen to 69.5 in early March. That would be down from a reading of 70.8 in late February.

Jim Brown : 3/14/2008 8:44:08 AM

S&P futures have jumped +17 points to 1324 since the CPI was released.

Jim Brown : 3/14/2008 8:40:11 AM

Consumer Price Index was unchanged for February compared to estimates for a jump of +0.3%. Futures are spiking sharply on the lack of inflation on hopes the Fed will now feel better about cutting rates next Tuesday.

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