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Keene Little : 4/4/2008 1:02:08 AM

One point I should add to my previous post--in order for the bullish scenario to play out the market needs to rally immediately. I didn't make that point clear enough. If the market drops from the opening I believe we will have a down day.

Keene Little : 4/3/2008 10:47:57 PM

Friday's pivot tables: Link and Link

How the market reacts to the jobs number before Friday's open could set the tone for the day. I see the possibility for a quick pop higher and the sell off so that will be the first thing to watch for. DOW 12700-12720 would be the likely upside target in that case (shown in pink on the 120-min chart: Link

An immediate selloff (dark red) could indicate the high is in for now although I'd watch for support at the uptrend line from March 17th, currently near 12350, for at least a bounce. If we instead get a strong rally in reaction to the jobs number (relief?) and the DOW punches up through 12750 then I think we'll see the DOW make it to 13K. Who knows, maybe even by the end of the day Friday (it's "only" 373 points above Thursday's close).

As you can see on the chart above, there is confluence of trend lines and Fib levels in the 13000-13043 area by the end of the day Friday. Looking a little closer at the leg up from Monday, this 30-min chart shows a couple of levels I'll be watching if we get a Friday rally: Link

The first one at 12677 is where Thursday's rally stalled. Then a higher one at 12770, then 12845 and finally 13043. The interesting thing about the highest Fib projection for the leg up from Monday (for two equal legs up) is that it falls right on top of the Fib projections for the larger move up from the March lows, shown on the 120-min chart. But first we'll need to see if the market rallies first thing in the morning.

OI Technical Staff : 4/3/2008 9:59:59 PM

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Jeff Bailey : 4/3/2008 5:04:54 PM

Closing Internals found at this Link

Jeff Bailey : 4/3/2008 4:31:11 PM

Today's notable weakness in the $ vs. Cad$ on a 5-minute interval doesn't necessarily look to tie timewise with today's U.S. economic news. Not monitoring their bonds so perhaps some capital flow back to Canada.

Keene Little : 4/3/2008 4:12:41 PM

An uptrend line from Monday afternoon through this morning's low was broken this afternoon by SPX. It started a bounce back up at the end of the day and almost made it back up to the broken line. That sets up the possibility for a kiss goodbye and an immediate decline tomorrow morning, perhaps as a result of a disappointing jobs number.

The updated 60-min chart shows the possibility for at least a drop back down to the 1340-1345 area (23 points lower than today's close): Link . But this afternoon's pullback looks like a smaller version of yesterday's pullback (a fractal of it) and that looks like a smaller version of the pullback from March 24th to March 28th. This could indicate we'll get a rally tomorrow.

There are too many mixed signals here and my best recommendation is to be flat in front of the jobs number. Good luck if you're in a position.

Jane Fox : 4/3/2008 4:12:01 PM

Economic Reports on the docket for tomorrow include:

8:30a.m. Mar Nonfarm Payrolls. Expected: -60K. Previous: -63K.

8:30a.m. Mar Unemployment Rate. Expected: 5%. Previous: 4.8%.

Jeff Bailey : 4/3/2008 4:11:57 PM

I priced out some USO puts last night and was looking for a move down today. More of a move than the EUR/USD trade today would allow.

For the MM portfolio, holding bullish position(s) in refiner is not to far from being "short oil" and "long unleaded," so not overly eager to put on an oil commodity short/put.

Yesterday's EIA data suggests to me that refiners are perhaps going to a "just in time" type of production at this point. That is, they may be buying crude only when they need it at these levels, unable to do much about the EUR/USD impact on price.

Jeff Bailey : 4/3/2008 4:03:16 PM

04:00 tick on the EUR/USD 1.5663

Jeff Bailey : 4/3/2008 4:02:50 PM

04:00 tick on the USD/JPY 102.36 ... we don't get the official close untin 05:00 PM EDT.

Jeff Bailey : 4/3/2008 4:00:51 PM

Linda Piazza : 4/3/2008 4:00:37 PM

Boring market days have a way of being tense market days. Try to do something tonight that erases some of the tension. You may need all the energy you can get tomorrow, to either deal with another day of this sideways stuff or else attend to prices that are moving quickly as a result of the non-farm payrolls or some other development.

Jeff Bailey : 4/3/2008 4:00:29 PM

PBR $110.00 +1.41% ...

Jeff Bailey : 4/3/2008 4:00:10 PM

TSO $31.50 -3.93% ...

VLO $51.56 -0.78% ...

Jeff Bailey : 4/3/2008 3:59:24 PM

May Crude (cl08k) settled down $1.00, or -0.95% at $103.83.

May Unleaded (rb08k) settled down $0.0496, or -1.79% at $2.724.

Current month "crack spead" slips to 26.23 from yesterday's 26.45.

Linda Piazza : 4/3/2008 3:46:51 PM

Remember that one of the most important numbers of the week and perhaps month will be released tomorrow morning. That's the non-farm payrolls. Estimates have swung everywhere from a decrease of 25,000 to an increase of 50,000. The ADP earlier in the week conflicted with the picture painted by this morning's initial claims. If experts don't know what that number is going to be, you're just guessing if you think you know, unless you're one of those experts and you're certain of your calculations.

Keene Little : 4/3/2008 3:53:18 PM

Here's what I like, a reader who gets right to the point in his/her question (the email in its entirety):
Comments on AMZN please

Only kidding of course. I like a reader who saves electrons--all in an effort to help our world save resources (wink). OK, AMZN has a bit of a funky looking pattern (from an EW perspective) but there are a couple of things I'd watch. First, the 50-dma crossed below both the 100-dma in January and then the 200-dma in late February, and now the 100-dma has crossed below the 200-dma in late March. This sets a bearish tone for the stock: Link

Currently the bounce is finding the 100 and 200-dma's to be resistance, which coincides with the 50% retracement of the January-March decline, all right in the $79-80 area. At the same time it's showing slight bearish divergence against its March high. This tells me to be very careful if long the stock. Certainly a stop now just below its March 28th low at 69.26 would be appropriate.

If AMZN is able to rally a little further I'd watch for resistance at the top of its parallel down-channel which coincides with the 62% retracement at 83.59 mid month (seems a lot of stocks/sectors/indices are pointing to the possibility for a mid-month high for the rally off the March lows). Anyway, that's my quick 10-min take on the chart (I do not follow this stock).

Jane Fox : 4/3/2008 3:37:32 PM

The US$ has now made a higher low but it needs to break the swing high from March 24th before the higher low is confirmed. Link

Jane Fox : 4/3/2008 3:35:03 PM

So far the bulls still have the upper hand on the daily SPX chart. Link

Jane Fox : 4/3/2008 3:35:52 PM

Internals remain bullish. Link

Keene Little : 4/3/2008 3:24:17 PM

Dropping back down here doesn't make it look good for the setup for shorting SPX 1377. Without that setup I don't like the price pattern as far as recommending any play here. Just waiting for my bus...

Linda Piazza : 4/3/2008 3:16:49 PM

It's not too early to begin thinking about your end-of-day decisions. Yesterday, I cautioned(3:54:47 post) that while yesterday's candle could be part of a three-day reversal signal known as an evening-star pattern, there was a catch. That catch was that "it's not a confirmed reversal signal yet and it could be signaling that a consolidation period is needed before the SPX can push above the next resistance zone." You just didn't know which it was going to be and had to "make hold-overnight-or-not decisions with that uncertainty." I warned that if in April positions particularly, you might consider taking at least partial profits because there was just "too much chance of several days of sideways movement at the best and a sharp pullback at the worst."

Barring any big movement into the close today, that's pretty much my impression now. A second day of sideways consolidation improves the chances that this is just sideways consolidation, perhaps coupled with an eventual test of the rising 10-sma before a bounce, but tomorrow's jobs number could undo that slightly improved chance in a heartbeat. It could also propel the SPX up above that triangle's top trendline. I'll show you in a chart this evening in the Wrap, but barring that big move into the close, the SPX has pierced the highest version of its upper triangle trendline on its daily chart, but it hasn't maintained values above it.

So, how much risk are you willing to take home with you tonight?

Jeff Bailey : 4/3/2008 3:12:00 PM

03:00 Internals at this Link

Keene Little : 4/3/2008 3:10:59 PM

Here's the SPX 10-min chart showing the potential wave count for a 5-wave move up today to finish the larger degree 5th wave for the rally off Monday's low: Link . We're overbought on most time frames now and bearish divergences are showing up on the charts so I consider this a good setup for a short play. Just be prepared to jump out of the way if this rallies above 1380.

Keene Little : 4/3/2008 3:04:46 PM

I've got an upside projection for a new high now at SPX 1377.15 which would obviously be only a minor new high (and still within the resistance range of the 1376-1377 Fib projection zone I showed earlier on the 60-min chart. So be careful about a potential reversal after tagging a new high for the day. Watch for bearish divergences to confirm a likely top otherwise it could just keep on truckin' north.

Jeff Bailey : 4/3/2008 3:00:29 PM

Meritage Homes ... Earnings Press Release Link

Keene Little : 4/3/2008 3:00:22 PM

This afternoon's pullback looks corrective enough to indicate another leg up is coming (which would give us a new daily high). If we get it then it's likely to be the leg to finish the rally from Monday and I would expect a pullback tomorrow.

Jeff Bailey : 4/3/2008 2:58:28 PM

A backlog?

Jeff Bailey : 4/3/2008 2:58:15 PM

Meritage Sees Backlog of $720M As Of March 31

Jeff Bailey : 4/3/2008 2:55:47 PM

Meritage Sees Full-Year Impairments To Be "Significantly Lower"

Jeff Bailey : 4/3/2008 2:54:05 PM

TOL $25.03 +3.21% ... just under its 61.8%.

Jeff Bailey : 4/3/2008 2:53:33 PM

Slapped a retracement on MTH from the same 5/23/08 highs to recent lows. MTH busts a move above its 50%.

Jeff Bailey : 4/3/2008 2:51:31 PM


Jeff Bailey : 4/3/2008 2:51:03 PM

Meritage Homes Sees Q1 Closing Rev $370M On 1,320 Homes

MTH $22.87 +4.14% ...

Keene Little : 4/3/2008 2:50:48 PM

Oops, sorry, that 100-dma I was looking at was on another daily chart I have but that one is an exponential moving average. The simple moving average is higher at 1903.

Jeff Bailey : 4/3/2008 2:49:47 PM

Nokia's N-Gage Gaming Service Now Active

DJ- Nokia Corp. (NOK), the world's largest maker of mobile devices, launched its N-Gage mobile gaming community Thursday, a key step for its push into the lucrative service market with its Web-based Internet portal Ovi.

N-Gage is available to users with high-end phone models including the flagship N95 8 gigabyte, the N82, and the N81 devices.

Games can be downloaded from the N-Gage site for between EUR7 and EUR10 in developed markets and EUR5 and EUR6 in developing countries.

Research firm Gartner Inc. expects the mobile gaming industry to reach $9.6 billion in sales by the end of 2011 from $2.9 billion in 2006.

"Last year there were some 40 million Nseries devices sold," said Jaako Kaidesoja, head of Nokia's mobile gaming business. "We are talking about tens of millions of downloads. The potential is huge."

Nokia's Kaidesoja said the platform will allow users to connect with one another, letting them post high scores and also to play head-to-head and in tournaments.

Keene Little : 4/3/2008 2:48:56 PM

NDX has also run into resistance at its 100-dma at 1868. Note also that the 100-dma crossed below the 200-dma in early March, the first time it has done this since it crossed back up in December 2006.

Keene Little : 4/3/2008 2:45:10 PM

If the semis can continue to rally then we should see the same out of the tech index. I have upside potential for NDX at 1945 where a Fib projection (wave-c = 162% of wave-a in the a-b-c bounce off the January low) crosses the downtrend line from October by mid April. Daily chart: Link

But so far NDX is struggling at the top of its trading range since the Jan 25th high and oscillators are now into overbought. It's questionable as to whether the rally can continue from here or at least needs a pullback first. A drop below 1762, Monday's low, would be bearish. A bearish heads up would be a drop below its uptrend line from March 17th, currently near 1812.

Keene Little : 4/3/2008 2:20:46 PM

Looking at the move up from this morning's low I see the potential to push a little higher to a Fib projection just under SPX 1379. Higher potential exists to a trend line along the highs from March 12th, near 1393. I already mentioned the 38% retracement of the Oct-Jan decline at 1387. That's a wide range which isn't terribly helpful to short term traders. Sorry, we gets what the market gives.

The 60-min chart shows price continuing to struggle at the top of the big sideways triangle shown on the daily chart which is also where there's confluence of some Fib projections for the move up from the March lows, just under 1377: Link . For now I'm thinking 1377-1379 is the upside potential for any additional rally today before turning back down for at least a correction of the leg up from Monday's low (and we might have already topped out for the day).

Jeff Bailey : 4/3/2008 2:19:58 PM

I see the OEX did see a trade at MONTHLY R1 today.

Jeff Bailey : 4/3/2008 2:14:01 PM

Here's somewhat of an "oil and currency" pivot table Link

Oil seems to be tied with EUR/USD.

So far today, USO not trade at DPivot or DR1.

Here's your currencies Link

Linda Piazza : 4/3/2008 2:02:59 PM

The TRAN closely approached yesterday's high, although it didn't quite touch it. Yesterday's high was 5021.31 and today's has been 5016.85. That's close enough that we should start watching for a roll down through today's low of 4919.16 as a confirmation of a double-top formation or for continued gains on a breakout to new highs and possible invalidation of the potential double-top formation. The TRAN is now 5000.33, approaching potentially strong support at 4990.06 on 15-minute closes.

Keene Little : 4/3/2008 1:59:58 PM

With the potential breakout for the semis (still only potential since SMH is struggling with the 30.70 level) it becomes a bigger question as to whether or not the broader market will be able to do the same. The SPX daily chart shows it's still struggling with the top of its big sideways triangle pattern: Link

If it's able to rally above its 38% retracement level near 1387 then I'd consider the SPX to be on the more bullish (green) path. But until then I'm not convinced of the bullish potential for this index. This leaves me in a bit of a quandary as to which way to lean for now. I guess I'd have to say I'm neutral at the moment until we get some more price action.

While I've got the key downside level at 1312, any break of the uptrend line from March 17th, currently near 1340 would be a strong indication we've started back down to at least the bottom of the trading range.

Jeff Bailey : 4/3/2008 1:56:12 PM

June Palladium (pa08m) $447.40 +0.82% ... $4-box chart Link

I've "edited" Dorsey's chart with PINK "O" and "X" to reflect what I'm seeing in my QCharts.

SWC $16.45 +5.44% Link ...

Keene Little : 4/3/2008 1:33:47 PM

SMH update: A bullish signal today is what's happening in the semiconductors and this could have bullish ramifications for the broader market. I've been showing the SMH chart for a little while now and suggested the sideways triangle pattern since January points to another leg down. The key level to the upside for that pattern was 30.28 which would negate it. That has now happened. Here's the last update I had shown yesterday: Link

With today's rally above 30.28 we now know the green wave count is the correct one and you should be out of any bearish plays that I had recommended for this. Now it's a question how high SMH could go. I've got three Fib levels of interest for the a-b-c rally off the January low, shown on this updated chart (sorry for the messier appearance): Link

The three levels are at 30.70, 32.11 and then 34.40 which are the levels where the c-wave equals 62%, 100% and 162% of the a-wave (which is the 1st leg up from the January low to the Feb 1st high). We're currently hitting the first level but the price pattern has me thinking it will probably head higher. Regardless, understand the risk of potentially turning back down from here.

The more likely upside potential is either 32.11, which coincides with the 38% retracement of the October-January decline, or near 34 which coincides with the 50% retracement, the broken uptrend line from October 2002, slightly above the 200-dma and the previous 4th wave of the Oct-Jan decline, a common resistance level.

At this point I think a rally all the way up to the 34 area would be a more ideal setup for a longer term short play and I consider SMH now bullish (as long as it can get through the 30.70 level).

Linda Piazza : 4/3/2008 1:28:03 PM

This is one of those days when it's just silly to talk about support or resistance, at least for me, because the setups just aren't proving reliable. Downside targets are set and not met, upside resistance is tested and holds and tested and breaks. I could search around and find some chart, some moving average, some something that appears to work, but that would be fitting the chart to the action, not the other way around. What my charts are telling me is that normal S/R lines aren't being too predictive and so that it's best to be careful to avoid being chopped out of positions.

Jeff Bailey : 4/3/2008 1:17:55 PM

01:00 Internals found at this Link

Jeff Bailey : 4/3/2008 1:13:21 PM

USO $84.00 +0.26% ... has been either side of its QRTRLY 61.8% pivot retracement of $83.77. Morning low found buyers just above MONTHLY Pivot ($82.55).

Linda Piazza : 4/3/2008 1:12:49 PM

The SPX is attempting to break through the Keltner resistance at 1370.88 on 15-minute closes. It closed the last 15-minute period above that resistance, but now again the shapes of the candles themselves are showing less confidence than the price action would seem to indicate. The last two 15-minute candles have had upper shadows, with the last completed one a doji and a potential reversal signal. We know not to assume that potential reversal signals will become confirmed ones, don't we, but this should still warn bulls to be a bit defensive of their profits, just in case. I should also note that the potential Keltner resistance also nearly coincides with the slightly higher descending trendline off yesterday's two swing highs.

Jane Fox : 4/3/2008 1:07:01 PM

Markets have barely traded above overnight highs and all but the Russell 2000 futures (ER2) has retreated back to the ON range. Link

Jane Fox : 4/3/2008 1:05:28 PM

NEW YORK (MarketWatch) - Besieged mortgage lender Countrywide Financial was ordered by a federal judge Thursday to submit to a wide-ranging investigation into its mortgage processing systems, the Associated Press reported. The report said Judge Thomas P. Agresti of Pittsburgh's Federal Bankruptcy Court asked the Office of the United States Trustee to investigate "the impact of Countrywide's bankruptcy procedures on the integrity of the bankruptcy process." Countrywide has long been dogged by allegations that it systematically mistreats borrowers through intimidation, losing or mishandling mortgage payments and illegally inflating fees throughout the bankruptcy process. Agresti is overseeing almost 300 bankruptcy cases involving Countrywide and said the trustee's office had proven a "a common thread of potential wrongdoing" in several of those cases, the report said.

Linda Piazza : 4/3/2008 1:00:58 PM

Some other indices might be just fooling around, but the SOX isn't! Keene may already have noted this, but the SOX followed up on its puny little breakout above its triangle's upper boundary by a strong candle so far today that moved above the late February swing high. Bulls want to see the SOX maintain values above that late February high of 369.33 into the close. The SOX can be a great trickster, morphing from one formation to another, so that a triangle breakout could be transformed into a rectangular consolidation pattern or something similar. Maintain a little skepticism, but for now this is good news for equity bulls in the techs.

Jeff Bailey : 4/3/2008 12:57:49 PM

CME $513.33 +1.02% ... $500 strike and mid-point of "Bailey Wave" held some buyers. 0% at $527.68.

Jeff Bailey : 4/3/2008 12:56:22 PM

XLF's volume very "anemic" at 9.1 million. 50-day average volume about 142.

Jeff Bailey : 4/3/2008 12:54:47 PM

Financial Select SPDR (XLF) $26.79 +0.55% ... 19.1% conventional again. Has NOT been able to hold a close above since closing below on 02/28/08.

Keene Little : 4/3/2008 12:52:24 PM

Definitely looking stronger than just a 2nd leg of an a-b-c bounce off this morning's low. This is a whippy market so anything goes but right now it's looking like we're into the leg up that should take us above yesterday's highs.

Keene Little : 4/3/2008 12:48:45 PM

We've got a 5-wave move for the 2nd leg up now so be careful about chasing this to the upside since it could turn right back around and head lower. But if it doesn't fail here and now then we could be into the 5th wave up for the rally off Monday's low and I'd look for new highs (whether they hold or not is the bigger question).

Jeff Bailey : 4/3/2008 12:47:05 PM

Today's Global Econ Calendar Link

Might be some Canadian bond action at work Link

Jeff Bailey : 4/3/2008 12:44:38 PM

USD/CAD 1.0090 -0.72% ... looks to be the driver.

Jeff Bailey : 4/3/2008 12:42:59 PM

DXY 72.21 -0.06% (30-minute delayed) ... edged up to WKLY R1 at 08:00 AM, but has seen distrubition.

Linda Piazza : 4/3/2008 12:40:47 PM

Although the VIX is off its low of the day, its pattern continues to be a choppy decline off the the high reached in the first 30 minutes of the day. Its decline is choppy, however, and if this were an equity, I'd be eyeing that shape and wondering if this were a bull flag. Keep it on your radar screen, as equity bulls don't want to see it rise sharply from this pullback.

Jeff Bailey : 4/3/2008 12:38:22 PM

MEMC Electronics (WFR) $71.54 -6.34% Link ... off opening lows of $67.85.

WFR-PN $2.40 x $2.45 (has been $2.30-$4.50)

WFR-DQ $0.20 x $0.25 (has been $0.15-$0.30).

Jeff Bailey : 4/3/2008 12:27:58 PM


DJ- The American Bankers Association says consumer-credit delinquencies in the 4Q were at their highest levels in nearly 16 years as borrowers continue to fall behind on auto loans, and the group predicts that delinquencies will continue to rise.

Jeff Bailey : 4/3/2008 12:26:47 PM


DJ- The Institute for Supply Management's March non-manufacturing composite index moves to a reading of 49.6 from 49.3 in February and 44.6 in January. The expectation for the March composite index was 48.7.

Jeff Bailey : 4/3/2008 12:26:09 PM


DJ- New unemployment claims break the 400,000 mark and surge to the highest since 2005 -- not a promising sign for the job market. Initial claims for jobless benefits jump by 38,000. Economists were expecting claims to rise by 4,000.

Jeff Bailey : 4/3/2008 12:24:56 PM

Some "pivotal" action yesterday at SNDK's 0%, or 1/23/08 relative low.

Jeff Bailey : 4/3/2008 12:23:33 PM

SanDisk (SNDK) $26.80 +8.89% ... on the move.

Jeff Bailey : 4/3/2008 12:23:08 PM

Disk Drive Index (DDX.X) 118.53 +1.07% ... probes 19.1% conventional.

Jeff Bailey : 4/3/2008 12:13:07 PM

Major US Market Bullish % Table I track using Dorsey's bullish % since 2/5/08 Link

The progression has been the very narrow (just 30 stocks, each stock's chart worth 3.33%) achieved "bull confirmed" at 30% on 02/20/08. On 03/24/08, it gave a second "buy signal" in the bull confirmed status. That would suggest a major bottom was found for the Dow Industrials in early March.

From there, the broader (500 stocks) BPSPX achieved "bull confirmed" status on 02/26/08, then reversed back lower to "bull correction" status on 3/4/08, then fell back to "bear confirmed" on 3/07/08, then reversed back up to "bull alert" on 3/19/08, and has now achieved "bull confirmed" status again, but at a higher measure of internal strength. This suggests a major bottom was found in mid-March.

The narrow (100 stocks) of the NASDAQ-100 achieved "bull confirmed" status on 2/28/08 and has given a second "buy signal" on 3/24/08. That would suggest a major bottom was found in mid-march. Likely on 3/17/08.

BPOEX follows on 3/24. And begins to broaden out with BPNYSE and BPOTC.

Keene Little : 4/3/2008 12:01:03 PM

The DOW needs to push a little higher for two equal legs up at 12620.

Linda Piazza : 4/3/2008 12:00:31 PM

As is obvious, the SPX's 15-minute 9-ema is no longer holding as resistance on 15-minute closes. As I suspected, the Keltner setup might have been showing that lower was more likely than higher, but the small-bodied candles that clung just below supposed support were showing that something was wrong with that theory. I think we just don't know yet what's going to happen, but for now there's potential Keltner resistance up to 1370.22, resistance that should, in normal times, be strong. Something weird is at work, though, and the "weird" thing at work could still result in another day of consolidation rather than a confirmation of the potential reversal signal.

Keene Little : 4/3/2008 12:00:19 PM

SPX is hitting two equal legs up from this morning's low (1368.33) so watch for the possibility this will turn back down from here.

Keene Little : 4/3/2008 11:52:08 AM

I've been watching the bullish percent charts and we've got a test coming for the NYSE. The 200-dma for the $BPNYA has regularly been support and resistance over the past couple of years. The current rally off the January low has the index coming up to its 200-dma, currently at 46.76. The index is currently at 45.29: Link

This is happening at the same time we've got an important long term moving average signaling that we're in a bear market and could be tested soon. The updated SPX monthly chart and its 18-month moving average, currently near 1400, will likely be resistance to any further rally (not precise of course). I showed this chart in last night's newsletter and you can see how effective it is as support and resistance during the cyclical bull and bear markets: Link

Jeff Bailey : 4/3/2008 11:50:23 AM

Swing trade put raise target alert! ... for the one (1) Whirlpool WHR April $80 Put (WHR-PP) ... to $85.00 in the underlying.

WHR $90.45 -0.95% ...

Jane Fox : 4/3/2008 11:44:15 AM

Gold is now testing the head and shoulders neckline and it "should" retrace from here but please remember this is Gold and I never short Gold. Link

Jeff Bailey : 4/3/2008 11:43:09 AM

Bull Confirmed! ... Yesterday's action has Dorsey/Wright's very broad OTC Bullish % (BPOTC) seeing a net gain of 0.91% to 30.47%. 30.00% was needed for this market to achieve a "bull confirmed" measure.

Offensive team on the field.

Here's StockCharts.com's $BPCOMPQ Link

Jane Fox : 4/3/2008 11:42:01 AM

My USO trade is doing well and I have moved my stop up now. Link

Jeff Bailey : 4/3/2008 11:38:55 AM

Bull Confirmed! ... Yesterday's action has Dorsey/Wright's very broad NYSE Bullish % (BPNYSE) seeing a net gain of 3.28% to 42.40%. 42.00% was needed for this market to achieve a "bull confirmed" measure.

Offensive team on the field.

Here's StockCharts.com's $BPNYA Link

Jeff Bailey : 4/3/2008 11:33:49 AM

NYSE NH/NL Ratio Chart ... 2% box Link

"f"ive day

O and X are 10-day ratios. At yesterday's close, NYSE 10-day NH/NL ratio gives first "buy" signal since reversing lower "sell" signal since Mar'07.

Jeff Bailey : 4/3/2008 11:19:38 AM

11:00 Internals found at this Link

Linda Piazza : 4/3/2008 11:17:36 AM

One potential scenario laid out in my 9:17:51 post this morning, a drop into the 10:00 ISM release and then an attempt to steady, is playing out so far. Evidence is mixed as to what happens next, but bears can't count on the potential reversal signal being completed on the daily chart.

Jane Fox : 4/3/2008 11:16:43 AM

I'm telling you my monitor was hot after I read this report. LOL

Jane Fox : 4/3/2008 11:16:05 AM


Jane Fox : 4/3/2008 11:15:50 AM

Short Selling: Short selling is an absolutely legitimate way to invest or hedge a portfolio. The SEC made a major error when it repealed the downtick rule last year. The repeal of this rule increased downside volatility exponentially and contributed to the ability of quantitative and other computer-driven selling to push the market lower based on technical rather than fundamental investment considerations. The SEC should reinstitute the downtick rule immediately.

Linda Piazza : 4/3/2008 11:14:02 AM

Keltner outlook on the VIX: The VIX has potentially strong resistance at 24.14 on 15-minute closes. The VIX hit the then-slightly-higher resistance earlier this morning and then pulled back to consolidate. Equity bulls want to see the VIX drop down now, losing the support of its rising 15-minute 9-ema (23.78 currently) while equity bears want to see it pop above and stay above 24.14. It's 23.88 as I type.

Jane Fox : 4/3/2008 11:13:48 AM

5. Hedge Fund Leverage: Allowing unregulated entities such as hedge funds to be leveraged 10 to 1 or 15 to 1 would be laughable if it wasn't so dangerous. Prime brokers continue to be suckers for big names and big clients (and especially for big name clients). An absolute leverage limitation should be placed on hedge funds immediately. Since the prime brokers don't seem to want to impose such a limitation, the Federal Reserve should do so with its new powers. If investors can't generate decent returns without employing grotesque amounts of leverage, they should find another profession.

Jane Fox : 4/3/2008 11:12:32 AM

Off balance sheet entities should be outlawed immediately, plain and simple. If first Enron and now the SIVs haven't taught us the necessary lessons about hidden liabilities, the system probably doesn't deserve to survive. Speaking as someone with extensive knowledge of these off-balance sheet entities, it would not be difficult to render them extinct relatively easily. It would be doing the world a favor.

Jane Fox : 4/3/2008 11:11:55 AM

I would like to add the emphasis is the newsletters and not mine and HCM is firm that wrote this report.

Keene Little : 4/3/2008 11:11:40 AM

Price continues to chop around inside the down-channel I showed earlier for the DOW (10:30) so we can certainly say the trend is down at the moment. But the drop back down since this morning's spike up is not exactly bearish looking. I'm getting the feeling we're going to get another leg up in which case I'll be watching for what happens at the level where the bounce off this morning's low has two equal legs up (DOW 12620/SPX 1368.33), assuming we'll get the 2nd leg up.

Jane Fox : 4/3/2008 11:09:25 AM

4. Financial Institution Leverage: Allowing investment banks to be leveraged to the tune of 30 to 1 is the equivalent of playing Russian roulette with 5 of the 6 chambers of the gun loaded. If one adds the off-balance sheet liabilities to this leverage, you might as well fill the 6th chamber with a bullet and pull the trigger. If this continues, the odds of a systemic crisis more severe than the one we are experiencing are near 100%. An absolute leverage limit should be imposed on investment banks and other financial institutions. Some will argue that limiting financial institution leverage will render these businesses less profitable and less competitive with non-U.S. companies. HCM's response is - "so what?" Perhaps less profitable investment banks will result in more of America's talented students becoming scientists, engineers, doctors and teachers instead of investment bankers and mortgage traders. What would be so terrible about that?

Linda Piazza : 4/3/2008 11:06:59 AM

The SPX's 15-minute 9-ema continues to serve as resistance on 15-minute closes, with that now just over 1363. However, something still just isn't right with the way the SPX is acting, and it's puzzling me. It should be dropping toward 1355-1356 with the current Keltner setup and it may eventually do so, but it's sure going to do it reluctantly, if at all.

Jane Fox : 4/3/2008 11:07:39 AM

3. Private Equity: The private equity business has resulted in the overleveraging of American business. One result is that many businesses are short-changing capital expenditures and research and development in order to service debt. Despite the statistics promulgated by self-serving, private equity-financed industry groups, it is irrefutable that companies would have more money to contribute to the productive stock of the economy if they were devoting less money to servicing their enormous debts. We will look back at the private equity boom as a phenomenon that damaged the American economy and impaired America's competitive position in the world.

Private equity managers' (and hedge fund managers') "carried interests" should be taxed at ordinary tax rates, not at the capital gains rate. Such earnings are nothing other than compensation, not earnings on risk capital.5 The arguments that private equity firms have tried to promote on Capitol Hill that such a taxation regime would reduce risk-taking are completely unsupportable from a factual standpoint. Henry Kravis and Stephen Schwarzman are not going to stop doing deals because they have to pay taxes at the same rate as their chauffeurs. These arguments are also the most cynical kind of politicking that insults the intelligence of every American. If politicians want to be held in even lower regard than they already are, supporting these arguments is a good way to go.

Jane Fox : 4/3/2008 11:04:35 AM

2. Wall Street Compensation: The financial incentive system that governs Wall Street - and by "Wall Street," we mean the investment and commercial banks, private equity firms and hedge funds - requires dramatic rethinking. As compensation is meted out today on Wall Street, too much is paid to too few for doing too little of value for society. Too much capital is allowed to exit investment banks in the form of annual cash compensation. Executive compensation should be calculated based on multiple years of performance and subject to high water marks and claw backs in the event one year's profits from a transaction or a specific activity are lost in later years when that activity turns out to have been fraudulent or flawed.

The subprime mortgage business is a case in point. Why should bankers be permitted to retain bonuses earned with respect to the closing of subprime mortgage CDOs that subsequently led to losses for their firms and investors? Compensation should be based on a longer-term view of value-added. Furthermore, regulators should permit firms to maintain reserve accounts and make other arrangements to facilitate a more nuanced compensation structure with adequate disclosure to keep investors fully informed.

Jane Fox : 4/3/2008 11:01:53 AM

Here are some thoughts from Maudlin's newsletter as to how to "fix" the system.

1. Financial Industry Regulation: There is too little, not too much, financial industry regulation. The problem with our current regulatory regime is that too many of our current regulations serve little or no purpose (for example, the pages of meaningless disclosure in Wall Street research reports that nobody reads and are often longer than the research reports themselves) or are enforced in a capricious and arbitrary manner by unqualified regulators and overzealous prosecutors. This breeds disrespect for the law and resentment among the regulated. As a result, we have a system of laws, not values, a system that privileges form over substance, process over justice. We are never going to have a sound regulatory system until we raise the compensation levels for those who are charged with insuring that millionaires are following the rules.

Jane Fox : 4/3/2008 10:59:35 AM

The comments I am posting may sound a little off the wall but I think they will make you start thinking. "If the current crisis, and the recurring crises of the last twenty years, tell us anything, it is that market solutions are insufficient to protect the system from the greed and fear that drive markets. If the deep structural cracks in the system are not addressed and corrected, the markets may not survive the next near-death experience. "

Jane Fox : 4/3/2008 10:57:34 AM

"Even when we skirt complete systemic collapse - and make no mistake about it, we have come as close to such an event as anyone should dare imagine - those with a stake in the game continuing are working behind the scenes to protect their interests. "

Jeff Bailey : 4/3/2008 10:57:13 AM

RS chart of TOL vs. HXM Link

Linda Piazza : 4/3/2008 10:54:02 AM

If I study the 15-minute and 30-minute charts on the SPX, a test of 1355-1356 certainly looks possible. In fact the setup makes them look not only possible, but probable. However, if I study the way that the 15-minute candles are hanging on just below that 15-minute 9-ema and not falling sharply, I'm warned that something is going on beneath the markets and I shouldn't be too sure those downside targets will be hit. So, factor in vulnerability to those levels, but remain aware that something isn't quite right, either. Not yet. Bulls are still fighting.

Jeff Bailey : 4/3/2008 10:55:34 AM

UBS Starts Homebuilder Homex At Neutral, Valuation "Fair"

DJ- UBS Investment Research on Thursday started coverage of Mexico's Homex (HXM) at neutral, saying while the homebuilder is "impressive," valuations are fair at the moment.

Homex's core focus on the low-income segment "remains one of its main strengths as it increases its exposure to (Mexico's mortgage lender) Infonavit and enables it to truly benefit from scale," UBS said.

Middle- and high-end exposure is growing, and the low-income focus "partially shields (Homex) from any possible contagion of credit woes to Mexico," the investment bank added.

Homex is the largest homebuilder in Mexico, with an estimated 7% market share, UBS said. It has been the fastest grower among Mexico's homebuilders while improving working capital management and being highly profitable, it added.

But there's "limited room" for share multiple expansion, warranting a neutral rating, UBS said. Risks for the company include risk that Mexico President Felipe Calderon's administration won't be as supportive of mortgages as the Vicente Fox administration; obtaining permits has become difficult in certain parts of the country and industry growth is increasingly dependent on government mortgage flows.

HXM $60.44 +0.91% ...

Jane Fox : 4/3/2008 10:50:37 AM

YOu may not want to read this if you think the BSC bailout was just that - a bailout. More from the Maudlin newsletter (BTW this is a free newsletter). "Nano-scopic interest rates are a sign of just how corrupted our financial system has grown from the twin diseases of leverage and greed. The collapse of Bear Stearns was an all-too predictable byproduct of a system that refuses to look itself in the mirror. The bailout of Bear was an obnoxious necessity in view of the fact that the firm was too interconnected as a Wall Street counterparty and prime broker to be permitted to fail."

Jeff Bailey : 4/3/2008 10:48:20 AM

BASE METALS:LME Metals Could Fall Further But Eye Strike News

DJ- Base metals on the London Metal Exchange traded lower Thursday as copper weighed on the complex after another rise in LME warehouse inventories.

Jeff Bailey : 4/3/2008 10:47:21 AM

Mexico '08 Mining Investment To Total $3.1 Bln, Up 48% - Min

DJ- Foreign investment in Mexico's mining sector will total US$20 billion for the 2007-2012 period, with investment in the country's gold, silver and copper sector expected to total US$3.1 billion this year, said Mexico's General Mining Coordinator Norberto Roque.

Jeff Bailey : 4/3/2008 10:45:58 AM

Chile Energy Crunch Won't Disrupt Copper Mining

DJ- Chile's energy supply is facing two tough years because of scarce gas supplies and low dam levels for hydroelectric plants, but the electricity crunch is unlikely to cause disruptions for its vast copper mines, an official from the Chilean copper commission Cochilco said Thursday.

Jeff Bailey : 4/3/2008 10:43:39 AM

EIA: Weekly Nat. Gas Storage Link ... draw of 29 Bcf

Jane Fox : 4/3/2008 10:43:33 AM

This comment from John Maudlin's last newsletter. "One way of measuring how perilously close the U.S. financial system came to melting down in mid-March 2008 is to look at how low the rate on one-month Treasury bills fell at the depths of the crisis. That number is 12 basis points. 0.12%. The three-month Treasury bill rate, which our friend Jim Bianco of the highly respected Bianco Research points out is the "risk-free" rate for many models such as the capital asset pricing model, the arbitrage risk pricing model and the Black-Scholes pricing model, fell to a 50-year low of 56 basis points on Tuesday, March 25. 0.56%. As Mr. Bianco pointed out, these bills were yielding less than Japanese 3-month financial bills for the first time since July 14, 1993. "

Linda Piazza : 4/3/2008 10:36:46 AM

Potential SPX Keltner support on 15-minute closes now joins the low-of-the-day. It's at 1358.68, with further potential support now layered down to 1356.15. The action right now doesn't encourage a strong it-will-do-this-or-that prediction, but so far, the 15-minute 9-ema still holds as resistance.

Jane Fox : 4/3/2008 10:31:51 AM

The S&P futures made a new daily high but the VIX did not make a new daily low the perfect setup for a short.

Keene Little : 4/3/2008 10:30:55 AM

We've got some short term parallel down-channels holding, as showin on this DOW 10-min chart: Link . I had mentioned a key level for the downside at 12450 but a better level is 12470, the 50% retracement of the leg up from Monday afternoon. A 4th wave correction rarely exceeds that level (it's more typical to see 38% which is at 12523 so watch to see if this morning's low holds now).

Jane Fox : 4/3/2008 10:24:03 AM

SAN FRANCISCO (MarketWatch) -- Economic activity in the services sector improved in March but remained at a level that indicates a contraction, said the Institute for Supply Management Thursday. Its non-manufacturing index rose to 49.6%, under the level that indicates an industry is expanding, but slightly higher than February's 49.3% reading. Economists were anticipating a further contraction, to 48.5%. The survey respondents said business activity improved for the second straight month and new orders also advanced; both categories are in expansion. Employment, however, remained in contraction and was flat with February's reading.

Jane Fox : 4/3/2008 10:22:16 AM

It is refreshing to see there are some who understand the Bear Sterns bailout was necessary.

Jane Fox : 4/3/2008 10:20:45 AM

WASHINGTON (MarketWatch) -- The risks of rescuing Bear Stearns Cos., while real, were much less than the risks to the overall economy from doing nothing, said Timothy Geithner, the president of the New York Fed bank on Thursday. "Under the circumstances prevailing in the markets, the issues raised in this specific instance extended well beyond the fate of one company," Geithner said in testimony to the Senate Banking Committee. The sudden failure of Bear Stearns would have brought with it unpredictable but severe consequences for the market and the broader economy, he said. Stocks would have fallen, more pressure would have been put on home prices and businesses and households would not have been able to get credit, he said.

Linda Piazza : 4/3/2008 10:20:28 AM

The SPX's 15-minute 9-ema has held as resistance on the last 15-minute closes, leaving traders in a state of limbo as markets decide how they'll react to the ISM non-manufacturing number and the talk about Bear Stearns. Currently, a rise up toward 1369.11-1370.44 looks about as likely as a decline toward 1359. It all depends on whether that 1363-ish level continues to hold as support.

Jane Fox : 4/3/2008 10:14:46 AM

WASHINGTON (MarketWatch) -- Sen. Chris Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee, said Thursday he doesn't intend to "second guess" the Federal Reserve and Treasury Department's decision to rescue Bear Stearns Cos. Dodd is chairing a hearing later this morning to examine the events surrounding the Bear Stearns bailout. "I think they made the right decision," Dodd said in a television interview. "You could have had not only a national but a global meltdown" if Bear Stearns had been allowed to declare bankruptcy, Dodd said. But there are key questions surrounding the deal, including how much the Securities and Exchange Commission understood about the dangerous position Bear Stearns was in, he said. In a statement to be presented to the hearing, Robert Steel, Treasury undersecretary for domestic finance, who was involved in the 96 hours of behind-the-scenes talks that led to the Bear Stearns rescue, said the bailout was "necessary and appropriate" because the turmoil at Bear Stearns could have caused harm to the American economy.

Jane Fox : 4/3/2008 10:10:56 AM

ISM non-manufacturing index rises to 49.6% in March

Economists expected 48.5% reading on ISM services

ISM services' new orders increases to 50.2%

ISM services employment flat in March, says survey

Keene Little : 4/3/2008 10:10:41 AM

The rally off Monday's low continues to leave me wondering if it's finished. As shown on this DOW 30-min chart, the current pullback continues to fit as a 4th wave correction with an expected 5th wave up to come (pink): Link . But it's also possible we already had a small 4th wave correction on Tuesday and yesterday's high was the end of the rally.

The levels are somewhat arbitrary but I've got key levels at 12675 to the upside and 12450 to the downside--a break above 12675 would suggest a new high is coming (but will then lead to a reversal so don't chase it). A break below 12450 (closing the gap) would suggest the rally has in fact finished and a drop to at least 12300 is probably next.

Jane Fox : 4/3/2008 10:08:39 AM

AD line as "improved" to -341 now.

Linda Piazza : 4/3/2008 10:03:41 AM

Here's the potential problem I mentioned earlier: the SPX is ending the first 30-minute period near the potential "support" now at about 1362.97, so support is essentially holding on a 30-minute close, and the 1355.55 downside target produced on the 15-minute chart is now not valid.

This is also in accordance with my before-the-market worry, that an initial downturn could be reversed as the 10:00 numbers were released. We really don't know the eventual outcome yet. For now, let's watch whether this burst higher is quickly reversed and whether the 15-minute 9-ema now at 1365.35 holds as resistance on this 15-minute close.

Linda Piazza : 4/3/2008 9:47:42 AM

I was about to type that the OEX now had vulnerability to 628.47, but it's almost there as I type. Watch for potential support to kick in any time. If that support is violated on a 15-minute close, the next potential target is 626.24.

Jane Fox : 4/3/2008 9:46:23 AM

VIX making new daily highs so it is supporting the bears and all the more reason to not try long trades.

Linda Piazza : 4/3/2008 9:46:14 AM

It looks as if the SPX will close the first 15-minute period below potential Keltner support now at 1363.17. That sets up a potential downside target of 1355.55. My concern is that the first 30-minute period has not been completed, and there's still a chance to pop back above 1362.87 before the end of that period, erasing downside targets. For now, factor in vulnerability to 1355.55.

Jane Fox : 4/3/2008 9:45:43 AM

AD line is a bearish -1095 so I would not be considering any long positions.

Linda Piazza : 4/3/2008 9:41:09 AM

Keltner outlook on the A/D line: The A/D line dropped sharply this morning, but dropped right to potential Keltner support at about -950. The A/D line is now -1036, threatening to create a breakdown situation. However, you have to give the A/D line a little leeway as it sometimes overruns potential support or resistance a little.

Equity bulls do not want a breakdown situation on the A/D line. It doesn't have to keep dropping dramatically now to be bearish: it would only need a sideways/down movement to maintain the bearishness.

Linda Piazza : 4/3/2008 9:38:29 AM

The SPX is struggling to hold onto that potential support on 15-minute closes, now pushed down to about 1363.20.

Keene Little : 4/3/2008 9:29:44 AM

As Linda has already mentioned, this morning's gap down following yesterday's doji day (or even more bearish shooting stars on some indices) is very likely bearish confirmation of the reversal pattern. If this turns into a drop n pop kind of morning then I will instead be looking for a minor new high above yesterday's. Price action in the first hour or so will answer the question which way we're going to go.

Linda Piazza : 4/3/2008 9:17:51 AM

As those of you who tuned in to the Market Monitor late yesterday know from my commentary then, the SPX produced a small-bodied candle at the top of a climb, the day after a tall green candle. That's the second of a potential three-day candle reversal signal, an evening star. I cautioned bulls to make their end-of-day decisions knowing that it wouldn't be until today's close that we would know if the signal would be completed. Not all potential reversal signals turn into actual reversals. Some small-bodied candles or doji after gains can merely be signaling the need to pause and digest gains before rising again. However, I cautioned that bulls needed to factor in the possibility that evening-star reversal signal could happen.

A gap lower this morning is about the worst open that could be anticipated for bulls, as that would be in concert with that evening-star pattern, but even if there's a gap lower, that signal is not completed yet. There's possibility that the former descending trendline off the 1/10, 2/26 and 2/27 highs could now serve as support and bounce the SPX back into some version of a consolidation candle, perhaps a long-legged doji. The trendline version that takes in all candle shadows is at about 1358. The version that touches the most closing highs, cutting off some candle shadows, is much lower, at about 1351-1353, if I'm eyeballing it correctly.

So, the possibility of a reversal signal being completed today exists, and traders must factor in that possibility. One potential scenario, however, is a decline into the ISM services number and then an attempt to steady if it's not too bad. Keltner evidence suggests that if the SPX loses support at 1363 on 15-minute closes, it sets a potential downside target near 1356 and perhaps even as low as 1350-1351, so that's in keeping with a drop to test one or the other version of that former trendline, to see if it now holds as support. Other evidence--namely, head-and-shoulder targets--suggests a potential drop toward 1356. So, without promising that it can happen, this evidence certainly corroborates the possibility of a retest of that former trendline, at least, and then we'll see what happens next.

Jane Fox : 4/3/2008 9:13:27 AM

I am long Crude and the fact that Gold is bearish now worries me because these two markets usually trade hand in hand. I will remain long Crude until I get a close below $100/bl and or my stop is hit. Link

Jane Fox : 4/3/2008 9:11:22 AM

Gold has been playing by the rule book and has been respecting all the lines have drawn on the chart for at least the last week.

I would not be long Gold here. Link

Jane Fox : 4/3/2008 9:09:20 AM

Although the S&P and Dow futures have broken their previous day lows by just a hair I am going to make the bold statement that previous day lows have held up as support overnight. Link

Linda Piazza : 4/3/2008 9:03:45 AM

As you're making your early trading decisions today, remember that the ISM Services number is due at 10:00 am ET. With the non-farms payrolls looming tomorrow, the weakness proven by surprising rise in initial claims this morning might take precedence, but it still pays to be wary of potentially market-moving news at 10:00.

Jane Fox : 4/3/2008 8:57:08 AM

WASHINGTON (MarketWatch) -- First-time applications for state unemployment benefits rose last week, the Labor Department reported Thursday -- the eve of the release of pivotal data on the state of the nation's job market. Claims for the week ended March 29 rose by 38,000 to reach 407,000, marking the highest level seen for this economic indicator since mid-September 2005.

The four-week average of initial claims also rose, increasing by 15,750 to 374,500, and thus hit the highest since the beginning of October 2005.

Economists see readings consistently higher than 350,000 as signaling significant weakening in the labor market. Initial claims ranging from about 300,000 to 325,000 are consistent with a healthy rate of U.S. employment growth.

Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs.

Linda Piazza : 4/3/2008 7:40:18 AM

The uncertainty over who will lead the Bank of Japan may end soon. With a G-7 meeting scheduled for the end of next week, Japan's ruling party is feeling some pressure to name or at least nominate a new head by that meeting. Some pundits still believe that the general trend, giving our Fed's current penchant for easing, is for a lower or range-bound USDJPY, with values ranging down again to the mid 90's. This week's jobs number in the U.S. and the nomination of a new head of the Bank of Japan, as well as economic developments in Japan, could change that. Moody's has made some sort of rating downgrade for corporate issues for Japan and has said the "rating momentum" may slow for Japan.

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