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Keene Little : 3/18/2008 11:14:14 PM

Wednesday's pivot tables: Link and Link

At the end of the day I had posted a daily chart of the DOW ( Link ) showing the key levels and potential price paths from here. The pattern of the rally off Monday's low supports the idea that the rally is finished and now down we go again. Or we could get just a pullback before proceeding higher. But before any decline we could see a little more rally to finish the leg up from Monday. This daily SPX chart shows the same possibilities: Link

There's a slight difference between the SPX and DOW daily charts (the pink wave count on the DOW chart doesn't fit well on the SPX pattern) but that's not important until and if we get a rally higher up to the downtrend line from October which is currently near 1430. In the meantime I'm expecting to see either a pullback before proceeding higher (dark green) or a drop to a new low for the month (dark red or light green).

The light green path would be a choppy decline to finish the 5th wave down from the Feb 1st high and then launch a rally into May from there. The dark red path says we're about to get some nasty selling that takes the market hard down into April.

The SPX 60-min chart shows the potential to rally up to about 1350 where the downtrend line from December is located, or just a tad higher to the Fib projection near 1354 (162% of the 1st leg up from Mar 10th): Link . Higher than 1354 would be bullish. A drop below 1270 would be a heads up that we're probably going to see new lows.

OI Technical Staff : 3/18/2008 9:59:59 PM

The Market Monitor has been archived.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

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Keene Little : 3/18/2008 5:24:11 PM

The updated DOW daily chart shows a few possibilities (now there's a surprise), due to the continued choppy price action. Only slightly higher than today's close, near 12450, is the downtrend line from December. The short term pattern of the bounce off the low on Mar 10th looks complete so it's not necessary for any further rally but if it gets a little higher tomorrow then watch that 12450 area: Link

The dark red wave count, showing the completion of yet another smaller 2nd wave correction, calls for some very serious selling into the end of the month. This wave count says we have another shoe that's about to drop on the market. Otherwise a weaker choppy decline into the end of the month could set up the larger rally into May (light green).

The more bullish possibility is that we'll see the rally continue above 12757, the Feb 27th high, that calls for a rally at least up to 13K (pink). Anything above about 13200 would mean a potential retest of the December high (13780).

Jeff Bailey : 3/18/2008 5:08:26 PM

GBP/USD 2.0071

Jeff Bailey : 3/18/2008 5:08:12 PM

EUR/USD 1.5626

Jeff Bailey : 3/18/2008 5:07:49 PM

USD/JPY 99.79

Jeff Bailey : 3/18/2008 4:54:36 PM

Closing Internals found at this Link

Jeff Bailey : 3/18/2008 4:01:14 PM

Swing trade put exit alert! ... for the remaining one (1) HSBC Inc. HBC June $70 Put (HBC-RN) at the bid of $2.45.

HBC $$81.01 +6.42% ...

Keene Little : 3/18/2008 4:01:08 PM

Shorts are throwing in the towel in the last few minutes. We've seen this kind of move many times--the rally is mostly short covering (don't know that for sure but the sharp spike up off yesterday's low, like last Tuesday's, makes it look like one) and then there's no more buying follow through the next day (or only briefly in the morning).

That's the risk if you carry a long overnight--these strong rallies, and declines, have been getting strongly reversed the very next day. It seems as if that's been especially true when the market closes at its high or low.

Jane Fox : 3/18/2008 4:00:16 PM

Here is the chart of the SPX. It has broken resistance at 1320 and seems to be in a major rally mode. Link

Jane Fox : 3/18/2008 3:56:11 PM

Economic Reports for tomorrow include: 7:00a.m. MBA Mortgage Refinancing Index. Previous: -4.7%.

Keene Little : 3/18/2008 3:50:35 PM

The DOW is now in the resistance zone of 12330-12365. The most obvious resistance for anyone watching charts is the 50-dma at 12352. Maybe it'll get parked there for the close so as to keep both sides guessing. At this point I could argue equally strongly for a continuation higher tomorrow and for a new leg down to get started.

Jeff Bailey : 3/18/2008 3:47:59 PM

Disclosure: I currently hold bearish position in SWC.

Jeff Bailey : 3/18/2008 3:47:13 PM

Swing trade put alert! ... for one (1) of the Stillwater Mining SWC April $20 Puts (SWC-PD) at the offer of $2.90 ($2.80 x $2.95). No stop, target $12.50 in the underlying.

SWC $18.19 +5.69% ...

Jeff Bailey : 3/18/2008 3:31:58 PM

M, m, mmmmm

Jeff Bailey : 3/18/2008 3:26:32 PM

YM 12,307

Jeff Bailey : 3/18/2008 3:26:15 PM

USD/JPY 99.41 ... did I say "pop" or "surge?"

Keene Little : 3/18/2008 3:25:41 PM

We've got some short term bearish divergences starting to show up at the new highs so be careful if you're in a long position--pull your stop up a little tighter now. Carrying positions home with you is still risky.

Jeff Bailey : 3/18/2008 3:18:43 PM

03:00 Internals found at this Link

Keene Little : 3/18/2008 3:05:17 PM

The DOW is nearing the Fib projection for two equal legs up off the Mar 10th low (at 12330) which again is near the 62% retracement of the decline from Feb 27th (12365) and the 50-dma (12350). This area could be a tough wall of resistance if they manage to rally it into the close (or with an early rally tomorrow morning).

Jeff Bailey : 3/18/2008 3:03:32 PM

Fixed income with some growth possibilities can be buyers of "junk" with PHF $7.37, limt $7.40.

Keene Little : 3/18/2008 3:01:29 PM

Equities pushed back to the day's highs but will it hold? Bullishly, the quick pullback post FOMC could have been all the correction of the rally leg from yesterday that we'll see, which means a strong rally tomorrow. The current leg up will need to continue higher into the close in order to support that bullish view.

Jeff Bailey : 3/18/2008 2:53:56 PM

5-year up 18.3 and session high

Jeff Bailey : 3/18/2008 2:53:29 PM

USD/JPY 98.86 ... session high

Jeff Bailey : 3/18/2008 2:53:15 PM

YM 12,251

Jeff Bailey : 3/18/2008 2:48:02 PM

FOMC Statement Link

Jeff Bailey : 3/18/2008 2:45:35 PM

YM could get a pop to 12,250

Jeff Bailey : 3/18/2008 2:42:00 PM

5-year up 1.26 bp at 2.328% ...

Jeff Bailey : 3/18/2008 2:41:32 PM

USD/JPY 98.07

Jeff Bailey : 3/18/2008 2:41:13 PM

YM 12,131

Jeff Bailey : 3/18/2008 2:40:59 PM

30-year Yield ($TYX.X) unch

Jeff Bailey : 3/18/2008 2:39:15 PM

Wells Fargo Lowers Prime Rate to 5.25%

Jeff Bailey : 3/18/2008 2:34:42 PM

TSO $28.92 +6.48%
PBR $104.70 +1.09%
TOL $20.41 +6.08%
GG $42.88 -3.03%
MO $70.04 +0.04%
MBI $11.51 +6.57%
WHR $83.84 +3.60%
USO $86.55 +3.90%
HBC $79.63 +4.61%

Jane Fox : 3/18/2008 2:27:44 PM

Dateline WSj - WASHINGTON -- The Federal Reserve on Tuesday slashed its key interest rate to a three-year low and signaled more reductions are likely, unloading heavy artillery in its effort to keep the credit crunch from triggering a prolonged recession.

The three-quarter-percentage-point rate cut, though extremely aggressive by any historical measure, will disappoint many on Wall Street who thought a full percentage point was needed -- a sign of the severity of the crisis that already claimed Bear Stearns and forced Fed officials to use Depression-era tools to create new lending facilities for brokers.

The Federal Open Market Committee voted 8-2 to cut the fed funds rate at which banks lend to each other from 3% to 2.25%, its lowest level since December 2004. The Fed also eased by that amount in a rare intermeeting move two months ago, which was the largest reduction since officials started targeting fed funds in the early 1980s.

Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher dissented, preferring "less aggressive action."

The Fed also on Tuesday lowered the discount rate it charges banks and brokers that borrow directly from the Fed by 0.75 percentage point to 2.5%, leaving the spread over fed funds at a quarter percentage point.

Jeff Bailey : 3/18/2008 2:27:22 PM

If you didn't know any better, you could look at the USD/JPY 5-minute chart and think you were looking at a YM chart.

Jane Fox : 3/18/2008 2:24:28 PM

Inital reaction was down but the market has now recovered.

Jane Fox : 3/18/2008 2:23:33 PM

Came out early and caught me.

Jane Fox : 3/18/2008 2:23:12 PM

FOMC 0.75 basis points FED Funds rate cut

Jeff Bailey : 3/18/2008 2:21:46 PM

02:18 Market Watch at this Link

Keene Little : 3/18/2008 2:20:06 PM

Increasing concern by the Fed about the inflation problem has many wondering if the Fed is getting closer to stopping rate cuts (since they're not effective in battling the credit crisis anyway).

Jeff Bailey : 3/18/2008 2:19:21 PM

NASDAQ A/D 2,146/772

Jeff Bailey : 3/18/2008 2:19:11 PM

NYSE A/D 2,607/570

Keene Little : 3/18/2008 2:18:16 PM

Anything less than a full point is a disappointment to the equity market and the initial reaction is down. Now we watch to see if we get another cha in the cha-cha-cha around FOMC.

Jeff Bailey : 3/18/2008 2:16:37 PM

USD/JPY 98.44

Jeff Bailey : 3/18/2008 2:16:21 PM

Fed Cuts 75 bp

Jeff Bailey : 3/18/2008 2:08:26 PM

GBP/USD 2.0251

Jeff Bailey : 3/18/2008 2:08:10 PM

EUR/USD 1.58

Jeff Bailey : 3/18/2008 2:07:53 PM

USD/JPY 98.70

Jeff Bailey : 3/18/2008 2:07:01 PM

TSO $29.27 +7.76%

PBR $105.86 +2.21%

TOL $21.10 +9.66%

GG $43.71 -1.15%

MO $70.78 +1.15%

MBI $11.88 +10.00%

WHR $85.19 +5.27%

USO $$85.52 +2.66%

HBC $81.07 +6.48%

Jane Fox : 3/18/2008 2:06:59 PM

The trajectory of the AD volume should have kept your trading on the long side today. Link

Jeff Bailey : 3/18/2008 2:04:09 PM

02:00 Market Watch Link

Jeff Bailey : 3/18/2008 2:02:08 PM

USD/JPY 98.60

Jeff Bailey : 3/18/2008 2:01:53 PM

NYSE A/D 2,793/382

NASDAQ A/D 2,151/746

Jeff Bailey : 3/18/2008 1:59:22 PM

Interesting index ... Network Global Nuclear Index (NIUY) 3,460.35 +0.97% ... DJ- The WNA Nuclear Energy Index (TICKER: WNAI) will delete two components, effective 6:00 PM (EDT) Sunday, March 23. The deletion of Indian construction firm, Larsen and Toubro Ltd., was caused by restrictions on investment in the firm's GDRs applicable to US citizens. The deletion of KSB AG resulted from its inability to meet certain eligibility hurdles related to liquidity. The two deleted stocks accounted for 2% of the index, and will have little material impact on the overall composition of the index. Said Joseph LaCorte, head of the S-Network Global Gaming Index Committee, "The WNA Index is a very stable index, comprising mainly large capitalization stocks. Accordingly, future index turnover is expected to be minimal." The geographic and sector breakdowns of the index remain materially unchanged. A complete list of constituents and weights for the reconstituted index will be posted on the WNA Nuclear Energy Index web site on Monday, March 24. () The WNA Nuclear Energy Index applies a hybrid weighting methodology to 64 companies worldwide that are materially engaged in the global nuclear energy industry. To be included in the WNAI index stocks must pass multiple screens, including for capitalization, float, exchange listing, share price and turnover. Detailed information, including constituent data, rules and price information, on the WNA Nuclear Energy Index is available at . Data is also available through most vendors of financial data.

Jeff Bailey : 3/18/2008 1:50:45 PM

MBI $12.02 +11.29% ...

Jeff Bailey : 3/18/2008 1:50:30 PM

ABK $6.47 +19.59% ...

Jeff Bailey : 3/18/2008 1:50:13 PM

S&P: AMBAC's GIC/Investment Agreement-Backed Issues Off Watch Negative

Jane Fox : 3/18/2008 1:38:14 PM

Ok I had to share this with you all. These kinds of emails make the effort we put into the Monitor each and every day worthwhile.

Tks for the thoughts on your circuit breakers. I have done something similar, too. I am still paper-trading, but my confidence (and thus profitability -- potentially) has increased and my trading plan/procedures have improved as a result.

But just wanted to say thanks for sharing your thinking. Another item that you have taught me.

Keene Little : 3/18/2008 1:38:36 PM

Gold continues to look ready for a pullback, if not something more bearish. It has pulled back from the top of a slight rising wedge/up-channel and looks ready for a pullback to at least the uptrend line from December, currently near 96 (GLD). Link

If gold drops back down from here that could mean we'll see a bounce in the US dollar. A bounce in the dollar could mean the Fed does not cut as much as the market expects (which of course the stock market would not appreciate). The bond market, looking at the 10-year yield (TNX) looks ready to rally. Notice the bullish divergence as TNX tests its January low: Link

A rally in TNX means selling in the bonds and it could be forecasting a Fed that doesn't cut quite as much as the market is expecting (1 full point). But this raises the question about whether selling in the bond market would be good for stocks (from rotation).

There's no clear answer here but I'm getting the feeling both stocks and bonds, and gold, are going to sell off post FOMC. That's my guess as we get closer to the FOMC announcement now. Just remember the final post-FOMC direction may not be apparent until tomorrow.

Jeff Bailey : 3/18/2008 1:25:44 PM

YM 12,277 ... 30-year "says" 12,170. USD/JPY says 12,277

Jeff Bailey : 3/18/2008 1:24:45 PM

30-year up 2.6 bp at 4.308% ... something's got to give.

Jeff Bailey : 3/18/2008 1:24:10 PM

USD/JPY 98.48 ... highs of session here.

Jeff Bailey : 3/18/2008 1:22:43 PM

13-week really looking for 100 bp cut. 0.80% ... down 19 bp.

Jeff Bailey : 3/18/2008 1:21:51 PM

YM 12,269 ... session high 12,274.

Jeff Bailey : 3/18/2008 1:21:19 PM

QCharts' YM DAILY R2 at 12,280 and WKLY R1 12,284.

Jeff Bailey : 3/18/2008 1:19:53 PM

Still anybody's ballgame.

Jeff Bailey : 3/18/2008 1:19:24 PM

USD/JPY 98.36

Jeff Bailey : 3/18/2008 1:19:14 PM

TYX 4.317% ... still a bit "defensive"

Jeff Bailey : 3/18/2008 1:18:38 PM

YM short stop alert! 12,271

Jeff Bailey : 3/18/2008 1:10:43 PM

01:00 Internals found at this Link

Jeff Bailey : 3/18/2008 12:56:14 PM

USD/JPY 98.37 ... comes to afternoon high.

Jeff Bailey : 3/18/2008 12:55:45 PM

YM short back off the stop alert! ... to 12,271

Jeff Bailey : 3/18/2008 12:53:49 PM

TYX.X 43.08 now ... its 80.9% dynamic.

Jeff Bailey : 3/18/2008 12:52:58 PM

The term "dynamic" is ... take a conventional fib retracement from the REGULAR session high and low.

Jeff Bailey : 3/18/2008 12:51:21 PM

USD/JPY steady at 98.34 ... so tight stop on YM short.

Jeff Bailey : 3/18/2008 12:50:56 PM

TYX 43.20 now ... 61.8% dynamic.

Jeff Bailey : 3/18/2008 12:50:35 PM

YM short alert! ... here at 12,254. Stop 12,269. Target 12.105

Jeff Bailey : 3/18/2008 12:49:54 PM

30-year slips below 38.2% "dynamic"

Keene Little : 3/18/2008 12:49:10 PM

The wave pattern for the move up from yesterday's low will count complete (5 waves) with a new high from here. The count had a 1-2, (i)-(ii) off the low, spike up 3rd of a 3rd this morning and it looks like it will finish with a (iv)-(v), 4-5 (the stair-stepping higher that I was looking for). If this is correct then we could see a top to the rally before FOMC. SPX 10-min chart: Link

I show a Fib projection to just just of 1326 where the 5th wave would equal the 1st wave. The lower Fib projection at 1319 is where wave-5 = 62% of wave-1. I had mentioned earlier that a Fib projection for two equal legs up in the A-B-C bounce off the Feb 10th low (if that's what it's going to be) is at 1317.42.

So we've got some levels to watch this afternoon. But regardless of the larger wave count, the leg up from yesterday looks close to completing and at a minimum I think we'll get a pullback to correct the rally.

Linda Piazza : 3/18/2008 12:42:48 PM

I'm stepping away to go to my appointment. You still have time to re-evaluate your plan, to decide if you want to lock in partial or all bullish profits ahead of the FOMC decision. Those bid/ask spreads could start widening soon.

If there's a big gain after the decision, be aware of the SPX's 30-sma overhead at 1333.55 as I type. That hasn't been as good a barometer in recent times with the volatility as it was once, but it could still be potential resistance. It roughly coincides with an old trendline that had been in place for a couple of months before being broken in early March. Good luck, everyone.

Jeff Bailey : 3/18/2008 12:39:18 PM

somebody chunked 1.5 million shares in Altria (MO) $70.83 +1.21% ... at 12:10 PM EST. $70.75.

Jane Fox : 3/18/2008 12:34:44 PM

Why oh why didn't I do this earlier in my career?

Jane Fox : 3/18/2008 12:33:29 PM

If I hit my daily circuit breaker I quit trading for the day. If hit my weekly circuit I put my trading mouse away until the next week. If I hit my max loss breaker I will stop trading and reevaluate my trading; the market I trade, timeframe I use and strategy I have been using. Once I have identified my problem and made the necessary changes I will make 20 trades with a simulator (now that Tradestation has a simulator) and see if I am profitable.

Jeff Bailey : 3/18/2008 12:30:57 PM

I should note ... ANY YM futures trades I profile will be in the YM08m going forward.

Jane Fox : 3/18/2008 12:26:28 PM

The next step was to put all this on a spreadsheet but when I did I ran into some issues. What account balance do I use? Do I use the running total? Do I use the opening account balance? I need the circuit breaker to expand and contract with the account balance but yet still keep me safe.

Here is what I came up with. I will use the closing balance of the previous day for my daily circuit breaker, the close of the previous week for the weekly circuit breaker and the opening balance for my max loss breaker. Every 6 months or so I will reevaluate the balance to use for my max loss breaker.

Jeff Bailey : 3/18/2008 12:19:39 PM

What would take away the "negative" of the yen carry trade is a ROBUST U.S. and global economic backdrop.

Jane Fox : 3/18/2008 12:20:02 PM

I have been redoing my trading plan and trying to nail down my "circuit breakers," the spot where I quit trading and do a reassessment. I have a daily circuit breaker and a plan as to what I do when I hit it and what I do to get back into the game.

Then someone asked me happened if I hit 2 circuit breakers in a row? What was my circuit breaker for the week? HMMM never thought of that. Ok so now I have a daily circuit breaker, a weekly circuit breaker and then the maximum I will lose in my account and plans as to what I do if/when these levels are hit. You have no idea how good this feels to have these safety nets under my trading. Every day I trade is like walking on a tightrope and these circuit breakers are my safety net so I can climb back up the ladder and walk that tightrope again the next day.

Jeff Bailey : 3/18/2008 12:18:10 PM

See my 11:18:02 post below to grasp -23.0% YTD for the Nikkei and USD/Yen -12.9%

Jeff Bailey : 3/18/2008 12:15:48 PM

Some talking about a Fed 100 bp cut today. BOJ can only do 50 at this point and the strengthening Yen/dollar hasn't been a help.

Jeff Bailey : 3/18/2008 12:13:29 PM

I'm pretty sure the yen carry trade will be a driving force for equities.

All you have to do is look at the Nikkei-225 and understand their rates are at 0.50%.

Linda Piazza : 3/18/2008 12:11:45 PM

That reminds me to mention that last night the main political party in Japan rejected another nominee to replace Bank of Japan Governor Fukui, who leaves tomorrow. The government had nominated the governor of the Japan Bank for International Cooperation. So, it's possible that there will be a leaderless Bank of Japan by tomorrow.

Jane Fox : 3/18/2008 12:10:06 PM

Here are the charts of $mid.x (midcap 400). Notice the daily jtHMA did not flip back a forth like a fish that has just landed on a deck of a boat. This makes me wonder if this market is the one I should use for my short positions. Link

Linda Piazza : 3/18/2008 12:08:32 PM

I do have to repeat, though, that I'm not that sure that the yen carry trade will continue to be a driving force in equity trades. The yen have to be cheaper to borrow, of course, but another necessary component is that those borrowing yen feel that they can make greater gains in the equities than they're paying in carrying costs for those borrowed yen. I'm not sure that certainty is present right now. Once all yen carry trades are unwound, will they be rewound? I'm not sure.

Jane Fox : 3/18/2008 12:06:48 PM

When the monthy jtHMA SPX chart went red I exited all my long positions (not my 401(k) positions though) and stepped aside. In hindsight that was a good move.

I am now looking for the daily to turn green then the 120/60 minute to turn back red to take a short position but the gyrations the daily jtHMA went through in February have me wondering if I need to use a different market. Link

Jeff Bailey : 3/18/2008 12:05:39 PM

TOL $21.08 +9.56% ... session high has been, been, been $21.51.

Jeff Bailey : 3/18/2008 12:04:56 PM

MBI $11.80 ... session high was, was, was $12.50.

Linda Piazza : 3/18/2008 12:03:31 PM

Jeff, I agree with your 11:51:23 assessment that it's the USDJPY that's most important. That's the one that would be involved in the yen carry trade, although the EURJPY is, too, of course.

Jane Fox : 3/18/2008 12:03:14 PM

Same setup for Crude. Just waiting. Link

Jane Fox : 3/18/2008 12:02:42 PM

Here are the jtHMA charts of Gold. I am waiting for the daily to turn red then the 120/60 minute charts to turn back green and that will be my signal to ?buy the dip.? Seems a long ways off doesn?t it? Link

Jeff Bailey : 3/18/2008 12:02:26 PM

YM 12,234 ... +234 now ... see what I think traders are "keying" on?

30-year up 6.2 bp at 4.344%, but easing a bit from high of 4.362%.

Linda Piazza : 3/18/2008 12:01:13 PM

The SPX's 15-minute 9-ema has now risen to 1304.60. The OEX's is about 606.30.

Jeff Bailey : 3/18/2008 12:00:46 PM

YM 12,240 ... its 21-pd SMA (regular session only) is down at 12,024.

Now "zoom in" with 5-minute interval chart. But note the "doji" last hour on the USD/JPY 60-minute interval chart.

Jeff Bailey : 3/18/2008 11:58:42 AM

USD/JPY 98.22 ... 60-minute interval chart has its 21-pd SMA lower at about 97.50.

Jane Fox : 3/18/2008 11:58:28 AM

Here is the daily SPX charts with the support/resistance marked along with a 50 exponential MA (magenta) and a simple 50 MA (black). Notice the simple is smoother but the exponential reacts to the market better. It is a tossup as to which one you use and technicians are mostly divided as to which one they use. If you like the smoothness of the simple then that is the one you should use but if you like all the little squiggles then pick the exponential.

For me I prefer the simple. Just call me Plain Jane. Link

Jeff Bailey : 3/18/2008 11:54:16 AM

I haven't looked at more than the past 7 sessions. What I started doing was looking to see if there was a "tie" with the 5-30 year spread being above 2.00. There wasn't. What I did see was 30-year YIELD up, SPX net positive for the day.

Jeff Bailey : 3/18/2008 11:51:23 AM

OK, pound is UP/strong against the dollar. Let's say "negative" for equities, but equities are POSITIVE right now.

USD is UP against the Yen. That's a "positive" for equities, and equities are POSITIVE right not.

Euro is UP against the dollar. That's a NEGATIVE for equities, but EQUITIES are POSITIVE.

So, with the YM +261, the currency relationship we I think a day trader wants to monitor (along with the 30-year YIELD) is the USD/JPY.

Jeff Bailey : 3/18/2008 11:48:23 AM

Here's what a stock futures day trader might want to do ... You see your 30-year yield. Some quick notes are that out of the last 7 sessions, when the 30-year Yield is up, the SPX has been up.

Now ... take a look at your currencies Link

Linda Piazza : 3/18/2008 11:44:29 AM

I'm going to have to leave in a little less than an hour, and I'm not certain that I'll be back before the FOMC decision. Sometimes on FOMC days, we see a movement that front-runs the actual movement post-FOMC, so there's the possibility that if the decision doesn't disappoint too much (or drive down the dollar too much), shorts who have been holding on too long will help fuel a rally afterwards. It's possible that if the number disappoints, the gains since about 1:15 yesterday can be wiped out in short order. Gains made over a 24-hour period can be wiped out in less than that. It's difficult for anyone to feel safe in this market climate when moves are so swift.

A more typical pattern post-FOMC is a big swing one direction and a big swing another that establish the outside parameters of what will eventually become a narrowing triangle that breaks either late the same afternoon of the FOMC decision or early the next morning.

Exiting all or partial bullish positions pre-decision and then waiting out the formation of such a triangle allows a bit more control, but of course there's the risk that this current gain is a front-running of a post-FOMC climb. You're taking a risk if you enter, too, however. Unfortunately, even if I had my ear to the door of that conference room where the FOMC is meeting, I wouldn't be able to predict how the markets will react. Will a 100-basis point easing scare participants and will those worried about the dollar worry more? Will the dollar even decline on such an easing or have currency traders been front-running that easing so that it's already built in? It's just impossible to predict. Know your limits as a trader and most of us do not include psychic abilities in our repertoire.

Keene Little : 3/18/2008 11:40:15 AM

As the market works its way higher I just can't help muttering to myself, "bulls, you really don't want to do this". Could it continue rallying post FOMC? Absolutely. But it does raise the specter of a buy the rumor, sell the news event. Putting on my conspiracy theorist hat I'm also left with the feeling that "someone" is pushing the market higher in preparation for what they know will be disappointment from the FOMC decision. Even a 50 bp cut at this point would be very disappointing.

Jeff Bailey : 3/18/2008 11:34:43 AM

MBIA, Inc. (MBI) $12.40 +14.72% ... let's be alert here.

Keene Little : 3/18/2008 11:31:42 AM

Not surprisingly, the most oversold sector is getting the biggest bounce today. The brokers (XBD) are up a little more than 10% today (just like the banks were up that much last Tuesday, Feb 11th). The banks' rally lasted one day so now we'll see if the brokers can do them at least one better.

Jeff Bailey : 3/18/2008 11:31:17 AM

CNBC guest makes a good point, and something I need to correct ... BSC didn't go "bankrupt," they were illiquid.

Linda Piazza : 3/18/2008 11:30:09 AM

I honestly don't particularly like this trailing-sideways-up stuff with small-bodied candles drifting up like whiffs of smoke from a smokestack. (Can you tell I grew up in a refinery town?) I'd rather the SPX had consolidated sideways, dipped down to test the 9-ema and sprang higher immediately, then repeated the process. However, so far, the SPX still gains. I continue to advise that you evaluate and re-evaluate your plan ahead of the FOMC decision. Remember that the SPX can go any direction afterwards and can even go lots of directions in a very short time period. If you've ever tried to exit an SPX trade during a fast market, you know that it's not always pretty or easy.

Jeff Bailey : 3/18/2008 11:17:12 AM

11:00 Internals found at this Link

Keene Little : 3/18/2008 11:13:41 AM

On the DOW 60-min chart posted earlier I showed a possible move up to 12330 for two equal legs up from the Feb 10th low. For SPX, since it made a new low yesterday (whereas the DOW did not), an equal 2nd leg up would be at 1317.42.

Jeff Bailey : 3/18/2008 11:11:52 AM

Unless the TYX.X takes out that 5-minute bar "doji" high from this morning, watch for YM resistance at 12,283-87

Keene Little : 3/18/2008 11:09:03 AM

SPX is about to tag its downtrend line from Feb 27th at 1310.

Linda Piazza : 3/18/2008 10:56:16 AM

The OEX has potential support at 602.30-603.50 on 15-minute closes.

Linda Piazza : 3/18/2008 10:55:39 AM

The SPX has potential support now at 1301.55 on 15-minute closes and then at the 15-minute 9-ema, now at 1297.37. So far, so good for bulls, but keep on your toes.

Jane Fox : 3/18/2008 10:47:53 AM

SAN FRANCISCO (MarketWatch) -- During a conference call held by J.P. Morgan Chase & Co. Sunday to discuss its offer to buy Bear Stearns Cos., an individual investor in the beleaguered brokerage firm announced that he would vote against the fire-sale deal.

The comment by a person identifying himself as Brian Firestone was followed by a brief silence. Then J.P. Morgan executives moved on to the next question.

But the prospect that Bear Stearns investors may reject the bank's offer of $2 a share -- at least for a few months -- is now being priced into the market, analysts said Monday.

J.P. Morgan's offer is worth more than $2 a share because the bank's stock (the currency it's using to try to purchase Bear) climbed 10% on Monday. Bear shares closed at $4.81 -- roughly double the value of the bid.

Indeed, Joseph Lewis, one of Bear Stearns' largest shareholders told CNBC on Monday that J.P. Morgan's offer was "derisory." The currency-trading billionaire owns almost 10% of the brokerage firm, having built a stake since September when the shares were trading at more than $100.

Jeff Bailey : 3/18/2008 10:45:26 AM

GS $165.74 +9.74% ... probes WKLY R1

Jeff Bailey : 3/18/2008 10:44:49 AM

Trying to get their earnings reports Press Release ...

Jeff Bailey : 3/18/2008 10:44:22 AM

Lehman and Goldman Raise Hopes ... FT.com Story Link

Jane Fox : 3/18/2008 10:44:08 AM

When you look at the daily NDX charts with the 10,20 and 50MAs you realize how weak this market is compared to the others, even the Russell. Link

Jeff Bailey : 3/18/2008 10:40:55 AM

Lehman CFO: Liquidity Pool At $30 Billion, Down From $34 Billion

Jeff Bailey : 3/18/2008 10:40:16 AM

Lehman CFO: Hasn't Used Fed Facility But Rates Attractive

Jane Fox : 3/18/2008 10:39:53 AM

Interestingly the Russell 2000 is respecting its 50MA as well. Link

Jane Fox : 3/18/2008 10:38:28 AM

The DOW is respecting its 50MA as well although not quite a cleanly as the SPX. Link

Jeff Bailey : 3/18/2008 10:38:12 AM

Earnings call going "well" so far. Or so it looks.

Jeff Bailey : 3/18/2008 10:37:29 AM

Lehman Bros. (LEH) $39.32 +23.62% ... incredible. Traded $20.25 yesterday afternoon.

Jane Fox : 3/18/2008 10:37:17 AM

Here is a daily chart of the SPX with a 50, 20 and 10 simple MA. As you can see the magenta 50MA has been a good marker to determine who has control. Above the 50 the bulls have control and below the bears. Link

Linda Piazza : 3/18/2008 10:36:33 AM

So far, the SPX consolidates sideways above the Keltner resistance-turned-support at 1301.23. Equity bulls would prefer that hold on 15-minute closes. The 15-minute 9-ema has now risen to 1294.12. At some point, the SPX will likely either trade sideways into this rising moving average or it will finally dip down to test it. For now, it's taking the sideways route. I'm not getting any clues from the A/D line or the other under-the-hood looks that prices are about to implode, but I still would pay close attention as it's not impossible.

Jeff Bailey : 3/18/2008 10:35:13 AM

Telefonos De Mexico (TMX) $34.51 +1.17% ... downgraded to "sell" at Goldman.

Jeff Bailey : 3/18/2008 10:32:23 AM

20 Largest US Market Cap Link

Jeff Bailey : 3/18/2008 10:29:17 AM

Colombia's Peso Gains To Strongest Level In 8 1/2 Years

Jane Fox : 3/18/2008 10:28:53 AM

The VIX is hovering at daily lows as the S&P futures hover at daily highs. AD volume is talking this morning as well and it is saying the bulls have the ball. I would be very careful if short in this market.

Jeff Bailey : 3/18/2008 10:28:36 AM

BHP Billiton: S. Africa Rains Causing Coal Hangling Blockages

BHP $68.09 +1.90% ...

Keene Little : 3/18/2008 10:28:29 AM

A price pattern for the DOW that makes some sense is an A-B-C bounce off the Feb 10th low. The corrective looking decline from Feb 12th (last Wednesday's high) fits this A-B-C pattern nicely and it indicates that we'll get another leg down once it completes. Two equal legs up for it is at 12330 which is near the 62% retracement of the decline from Feb 27th (12365) and its 50-dma at 12350. DOW 60-min chart: Link

As the daily chart shows, the next leg down could drop to around 11400 before setting up a stronger bounce into April/May (depicted in green). The more bearish scenario (dark red) shows a steepening decline to well below 11K: Link

So the interesting setup here is that we could see the DOW make it to the 12330 Fib projection either before or just after the FOMC announcement and then drop sharply lower from there. This scenario suggests a disappointing reaction to the Fed's move, even if there is first a post-FOMC rally. The volatility post FOMC could get even more severe than it's been.

Jeff Bailey : 3/18/2008 10:22:12 AM

NASDAQ A/D 2,014/572

Jeff Bailey : 3/18/2008 10:21:59 AM

NYSE A/D 2,652/318

Jane Fox : 3/18/2008 10:21:44 AM

The MACD and RSI divergence on the Gold chart has been giving me heartburn since the end of January. I see Gold over extended and keep hoping for a pullback so I can get long again but it has not cooperated with me at all. Link

Linda Piazza : 3/18/2008 10:19:15 AM

The SPX's 15-minute 9-ema is now 1291.60; the OEX's, 601.44.

Jeff Bailey : 3/18/2008 10:16:40 AM

One severe hurricane in the Gulf of Mexico can change things quickly. Have some time with the TSO-HI $0.70 x $0.85.

Still, if I were to be looking to put on a new call, it would be VLO.

Jeff Bailey : 3/18/2008 10:10:09 AM

Continuous Unleaded vs. Continuous Crude ... 0.50-box at this Link

We traded long the VLO-FK on 1/23/2008 at $3.50 and exited on 2/26/08 at $9.70.

Should have exited the TSO-HI too.

Will look for a turn, but higher oil the "problem."

SUN is a bit more of a "heating oil" refiner and it holds a better crack spread.

Linda Piazza : 3/18/2008 10:10:06 AM

So far, so good for equity bulls, but I would not go to sleep at the wheel here. Know where your trade-appropriate and account-appropriate stop should be to protect your gains from becoming losses. If you have multiple contracts and your option is twice what it was when you bought it, you might consider selling half and moving up the stop on the other half.

Jeff Bailey : 3/18/2008 10:04:58 AM

Light Sweet, Unleaded, Heating Oil futures at this Link

Jeff Bailey : 3/18/2008 9:57:59 AM

BMO Capital Markets Downgrades Refiners To Market Perform ... MarketWatch Story Link

Linda Piazza : 3/18/2008 9:58:24 AM

I don't see anything definitive, just the stalling where you'd expect to see stalling. Bulls need to remain watchful for pullbacks deeper than they want to see. For the SPX, bulls would like to see 1201.50 support maintained on 15-minute closes or at least 1295 support, if that doesn't hold. For the OEX, bulls would like to see the OEX remain above that trendline off the 3/12 low now that it's climbed above it.

Linda Piazza : 3/18/2008 9:48:31 AM

As expected (my 9:34:46 post), the SPX had reached a level at which it stalled for a time. It's having difficulty maintaining values above the Keltner resistance, so that resistance is holding into this 15-minute close. It's now at about 1301. The SPX's descending trenldine off the 3/12 high is at about 1307.50, if I'm estimating its location correctly, and the SPX, unlike the OEX, has not yet challenged it.

What's next? This is opex week and an FOMC decision day, so absolutely anything could be next. Equity bulls don't want to see signs of a pop-and-drop day develop. They would rather that prices either gain right away, as the SPX is attempting to do, or do what Keene has suggested (stair-step higher), consolidating sideway now to digest the gains before making more.

Linda Piazza : 3/18/2008 9:43:40 AM

Again, the OEX is outperforming the SPX with regard to its performance on the 15-minute Keltner chart. It's pushed well beyond potential resistance at 599.80-600.34. Of course, it's been stopped, as expected, near the declining trendine off the Wednesday 3/12 high. It pushed just beyond that trendline, so equity bulls would prefer that it now not pull back below it. That trendline crosses at about 603.70, if I'm eyeballing it correctly. Equity bulls especially do not want that Keltner support lost on 15-minute closes.

Keene Little : 3/18/2008 9:41:07 AM

Assuming this morning's punch higher holds, we should see the rally stair-step higher with small consolidations and then additional legs up. First tough resistance for SPX looks like it could be its downtrend line from Feb 27th near 1310 if it does stair-step higher from here.

Linda Piazza : 3/18/2008 9:39:13 AM

The USDJPY is 98.27, approaching potentially significant resistance at 98.57.

Linda Piazza : 3/18/2008 9:38:01 AM

Equity bulls now do not want to see the A/D line drop back below about 1430, as that erases the breakout mode consideration and also reverses a hefty proportion of the first few minutes of gains. It's now at 2001.

Linda Piazza : 3/18/2008 9:36:38 AM

Keltner outlook on the A/D line: The A/D line has pushed through significant Keltner resistance on 15-minute closes, now at about 1425, with the A/D line at 1829 as I type. Unless the A/D line is going to move into breakout mode, certainly a possibility, it should be soon time for it to stall or pull back, too.

Jane Fox : 3/18/2008 9:36:14 AM

AD line is very bullish at +1731 and sets the tone for this FED day.

Linda Piazza : 3/18/2008 9:34:46 AM

Barring something even stranger than we've seen lately, the SPX is approaching/testing levels that should be enough to cause consolidating if not a pullback to test support. Stay on your toes.

Linda Piazza : 3/18/2008 9:33:59 AM

There's that first Keltner resistance being tested on 15-minute closes with the SPX pushing up through it to the next. Both potential resistance levels are being pushed higher by the price action and are currently at 1291.43 and 1300.77. Be aware that an early push higher can pull back by the close of the first 15-minute period, so that the Keltner resistance still holds on the close.

Jane Fox : 3/18/2008 9:32:07 AM

Here are the overnight charts The DOW is trading above its previous day highs but the only market to do so. Link

Linda Piazza : 3/18/2008 9:31:39 AM

There's a nasty habit of parking indices at either strong resistance or strong support into the FOMC meeting, so that you don't know if prices are going to be pushed through that support or resistance or if they're going to be rejected there. My 15-minute Keltner charts show me that 1286 and about 1290.50 are potentials for parking the SPX, with 1299 the next possibility for resistance on 15-minute closes.

So, if you're in bullish positions, and we see an early move up to 1290 or even 1299, you need to consider two possibilities. One is a pop-and-drop day. I'll be watching the A/D line and other charts for indications of that. The other is that prices will pop up and sit there the rest of the day, into the FOMC decision, and you just won't have any idea what will happen after that. So, make your plans now, thinking about whether you want to exit part or all of your position ahead of the FOMC meeting, if you want to hedge it some way, or just keep stops tight. Be aware that in the post-decision volatility, it's hard to move in and out of positions quickly.

Keene Little : 3/18/2008 9:28:18 AM

Looks like we're going to get more than a "little" pop higher this morning. Many are thinking all the bad news is out and the Fed will save us regardless. At a minimum we should see SPX test Friday afternoon's high near 1298 (DOW exceeded that level yesterday) and the DOW could be the first one to challenge Thursday's high near 12215 (SPX 1322) if this pre-market rally can develop some legs. The only thing that worries me is a rally into the FOMC announcement--buy the rumor, sell the news?

Jane Fox : 3/18/2008 8:56:44 AM

NEW YORK (MarketWatch) -- Wall Street titans Lehman Bros. and Goldman Sachs, both at the center of a credit storm swirling through the global financial markets, said Tuesday that their fiscal first quarter profits fell more than 50%, as investment banking business slowed and trading revenues declined.

However, both firm's results were ahead of analyst expectations.

Goldman Sachs said Tuesday its fiscal first-quarter profit was just about halved from year-ago levels as the firm lost $1 billion on mortgage and other securities investments as its proprietary trading business struggled and market conditions remained "clearly very weak." Lehman Brothers Holdings Inc.'s fiscal first-quarter net income dropped 57% as results were hurt by net mark-to-market adjustments of $1.8 billion.

Goldman shares rose 6%, to $160.06 in pre-open trade, while Lehman's shares climbed 12.8%, to $35.80.

Jane Fox : 3/18/2008 8:55:02 AM

WASHINGTON (MarketWatch) -- U.S. producer prices rose 0.3% in February, the Labor Department reported Tuesday, as core producer prices outpaced analysts' expectations.

Excluding food and energy, producer prices rose by 0.5% in February, the most since November 2006.

Analysts surveyed by MarketWatch were expecting the core PPI to rise by just 0.2%. Overall, they were expecting the PPI to climb by 0.3%.

The stronger-than-expected core data comes just hours before the Federal Reserve is scheduled to announce its latest move on interest rates. Investors and Fed watchers are centering their expectations on a one-percentage-point rate cut, to 2%.

The Fed is expected to act to help ease the credit crisis and head off a U.S. recession. On Sunday, the Fed took the extraordinary step of allowing securities dealers to borrow directly from the central bank. It also announced it was cutting the discount rate.

Over the last 12 months, producer prices have risen 6.4%. Minus food and energy, those prices have climbed 2.4%. That's the biggest year-over-year gain since October 2007.

Jane Fox : 3/18/2008 8:53:58 AM

WASHINGTON (MarketWatch) -- With no end in sight to the housing bust, new construction on single-family homes dropped by 6.7% in February to a seasonally adjusted annual rate of 707,000, the lowest in 17 years, the Commerce Department reported Tuesday.

Total housing starts, including multifamily units, dropped 0.6% to a seasonally adjusted annual rate of 1.065 million, better than the 990,000 pace expected by economists surveyed by MarketWatch.

January's starts were revised higher to a 1.071 million pace from 1.012 million reported initially.

Building permits, a leading indicator of construction, fell 7.8% in February to a seasonally adjusted annual rate of 978,000, the lowest since the autumn of 1991. It was the biggest monthly decline in 13 years

Jeff Bailey : 3/18/2008 4:09:46 AM

April Crude (cl08j) up $0.34 at $106.02.

May Crude (cl08k) tracking ... up $0.37 at $104.60.

Jeff Bailey : 3/18/2008 4:08:08 AM

YM +72 at 12,072.

Jeff Bailey : 3/18/2008 4:07:54 AM

US Dollar Index (DXY) 71.33 -0.17% ... of 0.13 points.

Tuesday's session low/high so far has been 71.188/71.371

Jeff Bailey : 3/18/2008 4:05:56 AM

A rather "simple" equation for HIGHER equity prices would be ...

Strengthening dollar + treasury selling.

We've got a pretty good feel for what Weakening dollar + treasury buying has equated to so far this year.

Jeff Bailey : 3/18/2008 4:02:51 AM

30-year Yield ($TYX.X) ... Daily interval bar chart Link . With a potential h/s bottom pattern. As soon as the money stopped flowing out of the "riskier" 30-year treasury bond, stocks (INDU/DIA, SPX/SPY, NDX/QQQQ and RUT/IWM) suffered and have retreated to their lows.

A 30-year yield break much below 42.50, or 4.25% would suck more cash that could instead find its way to "junk bonds" or equities.

Jeff Bailey : 3/18/2008 3:48:42 AM

Russell 2000 Index (RUT.X) Daily interval bar chart with some of the NH and NL measures at this Link

I set my cursor box to the 2/26/08 interval. The day we would have observed 30 NH and 26 NL. But like an "inchworm" that might have some trouble inching its way UP a tree, the next session saw the "head" slip back a bit to 22 NH and the "tail" slip back to 31 NL.

Sunday evening we might have braced for a "Crash of 87" or worse. But even as we might be prepared, recent action in the RUT.X may have had bears "giving up" on 3/11/08 having seen 240 NL on 3/07/08, then a fewer 219 on 03/10/08. After seeing the rally from the 1/22/08 low with even more NL of 544.

Concerning to a BULL is the latest "rally" last week that didn't achieve 19.1% PRICE action.

For the most part, "small cap" companies are more relient on DOMESTIC growth, so not as sensitive to dollar strength/weakness. RUT.X tends to feed off of money coming OUT of treasury bonds (flight from "safety"), but money flowing INTO treasury bonds, just "sucks the life," or the cash out of them.

Jeff Bailey : 3/18/2008 3:11:45 AM

Russell 2000 NH/NL measures (since 1/16/08) at this Link

Last week I had mentioned that the number of new lows (NL) were "lacking" as the RUT.X had probed its 1/22/08 relative PRICE low on 3/10/08.

Today's 209 NL are still well off the 352 from 1/18/08 and the 544 from 1/22, but there's still enough day-to-day build from Friday that I sense/observe things are still rather soft at the bottom. Kind'a like a wet cardboard box full of books.

One wouldn't expect to see a big build in new 52-week highs with the RUT.X -16.5% from a year ago. So I'm still monitoring the "tail" or the NLs.

Compared to the large caps, I tend to view the RUT.X as a group of stocks that would be "less likely" to show as much Op-Ex sensitivity. Not that some of them don't trade with options, but not like the INDU, OEX, NDX or SPX components.

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