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Keene Little : 4/23/2008 12:30:03 AM

Wednesday's pivot tables: Link and Link

The RUT was the most negative on Tuesday and came closest to its uptrend line from March 17th so I thought I'd review its chart. The daily chart shows the sideways/down parallel channel for price action since January. Friday's high was at both its downtrend line from October and the top of its channel: Link

At this point I'd play the direction of the break of either Friday's high near 724 or the April 15th low near 685, which would be confirmation of the break of the uptrend line from March 17th. The 120-min chart shows these levels and trend lines a little closer: Link

OI Technical Staff : 4/22/2008 9:59:59 PM

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Jim Brown : 4/22/2008 6:35:24 PM

Earnings statistics - So far this quarter 62% of S&P reporters have beaten the street. 15% have reported inline and 24% have missed estimates. The consolidated S&P earnings are now just over a -15% decline. 38 of the 54 banks in the S&P have reported with a combined earnings drop of -68%. Energy is still the biggest winner with a gain of +28%.

Jim Brown : 4/22/2008 6:35:03 PM

Earnings on the calendar for tomorrow include AFL, BA, AMZN, AAPL, CLB, EMC, WLP, GD, TSCO, QCOM, SGP and UPS.

Jim Brown : 4/22/2008 6:34:31 PM

BRCM earnings - Broadcom (BRCM) reported earnings that rose +22% on strong broadband chip sales. The CEO said the quarter was much stronger than expected and allowed Broadcom to achieve record revenues and strong cash flow. BRCM was up over $2 in after hours.

Jim Brown : 4/22/2008 6:34:43 PM

YHOO Earnings - After the close Yahoo (YHOO) reported earnings of 11 cents, only a penny above the comparison quarter. The earnings were 2-cents over analyst's reduced estimates. After subtracting commissions to advertising partners the total revenue was only $30 million over analyst projections. This lackluster performance did not do them any good in the Microsoft battle. YHOO stock fell -20 cents in after hours to $28.35. This should help in the Microsoft bid as investors become frustrated with Yahoo's performance.

James Brown : 4/22/2008 4:09:41 PM

Ron Insana on CNBC saying that foreclosures in California are up 327% for the first three months of this year.

Linda Piazza : 4/22/2008 3:56:44 PM

I'm here with you, watching, but there's really nothing more to be said that hasn't been said.

Keene Little : 4/22/2008 3:31:36 PM

I've got to leave before the close today. I still think another new low before a bigger bounce but in this choppy environment it's always tough to tell. Have a great day.

Jane Fox : 4/22/2008 3:20:30 PM

Dateline WSJ - Ebay has filed a lawsuit against Craigslist's directors, claiming dilution of eBay's stake in the site. Full article coming shortly.

Linda Piazza : 4/22/2008 3:20:12 PM

Just chopping around, unfortunately. My usual benchmarks have lost their relevance as the SPX chops back and forth across them. On the 30-minute chart, resistance up to about 1375.52 looks about equally weighted with support down to about 1366.17, so until the SPX breaks free of one or the other, the setup, unfortunately, is for more chop.

Keene Little : 4/22/2008 3:08:50 PM

The DOW bounced off the 38% retracement of the leg up from April 15th, at 12656, and could head lower to the 50% retracement at 12582 before getting a bigger bounce. At this point I'm expecting to see a choppy 3-wave move down to the uptrend line from March 17th, near 12500 by Friday. Obviously a move from here back above yesterday's high near 12894 would be more bullish. 120-min chart: Link

Linda Piazza : 4/22/2008 3:07:45 PM

If the SPX ends the day today at its current level, what does that mean? It won't surprise you that it presents us with a conundrum: three days in which the last two day's ranges stayed entirely within the previous day's, last Friday's. That means the SPX is coiling within Friday's range. While it looks possible that the SPX could then fall further, into the 1359-1365 zone, it's also entirely possible that it could just keep coiling at least another day.

What if the SPX drops down toward 1365-1367 this afternoon? Actually, that might give us more indication of what happens next, although you might not like what that indication is. Barring a strong whoosh lower (perhaps provided by the BoE minutes, the World Bank speaker or Germany's numbers or some company reporting earnings here), I would think that there would likely be a day of consolidation tomorrow and maybe even a bounce attempt, although I don't know how strong it might be.

It doesn't sound like a fun trading day either way, does it? What about if the SPX bounces? Unless it bounces strongly enough to break out of the coil it's been creating the last three trading days, the likely scenario doesn't change over the first one--chopping around within that building triangle or perhaps a decline toward 1359-1365.

These are of course just possibilities to consider, not promised action.

Linda Piazza : 4/22/2008 2:59:57 PM

It's not too early to start thinking about your end-of-day decisions. Before you do, you might want to know what's going to happen overnight and early tomorrow morning. Tonight, Japan will take a look at March's Trade Balance. Tomorrow morning, about midnight ET, I believe, Germany gets inflation numbers for April and then about 3:30 am it gets April manufacturing and services PMI. Those can and do often change European markets, with Germany's economy the biggest in the EU and one of the biggest in the world. The World Bank's Zoellick will be speaking in Brussells about 4:30 am ET. Of primary importance might be the BoE minutes at about 4:30 am ET.

Whew! Our own economic calendar is light, and good thing! However, we have a number of important companies reporting earnings tomorrow, including BA, AMZN, AAPL and UPS, among others.

James Brown : 4/22/2008 2:57:07 PM

Interesting... on CNBC... 48% of the Jumbo loans in America are in California.

James Brown : 4/22/2008 2:49:59 PM

Nimble traders might want to keep an eye on Intuitive Surgical (ISRG). The stock continues to sell-off following its recent earnings report. Shares might find support at its rising 200-dma or the $250 level.

Shares are trading around $276, down from its recent highs of $355. That's a 22% decline.

Linda Piazza : 4/22/2008 2:49:21 PM

Rolling out to the OEX's 30-minute chart for the same reasons as I did the SPX's, I see that until and unless the OEX can maintain 30-minute closes above about 634.95, it has vulnerability to 629.83-630.84 (current target). Don't count on that downside target being achieved, but do have profit-protecting plans in place in case it is.

Keene Little : 4/22/2008 2:48:16 PM

We should get another new low today but that might set up a larger bounce to correct at least today's move down (which will have a 5-wave move down with a new low). SPX 1365-ish looks like decent support and maybe DOW 12600.

Linda Piazza : 4/22/2008 2:48:07 PM

Right now, the SPX is just chopping back and forth across its 15-minute 120-ema. This is usually an important benchmark, but once the SPX chops back and forth across it like this, it loses its predictive qualities. For that reason, I'm rolling out to the 30-minute chart to take a look. That chart suggests that until the SPX can manage 30-minute closes above about 1375.64, it's vulnerable to a drop to 1366.05-1367.99. As I've warned with other potential targets today, don't count on them being achieved if you're in bearish trades, holding out for the last cent, but do have what-if, profit-protecting plans in place in case they are.

Linda Piazza : 4/22/2008 2:44:47 PM

At -1549 as I type, the A/D line has not managed closes above its 15-minute 9-ema, as it also hadn't managed any kind of impressive climb off the day's -1665 low of the day.

James Brown : 4/22/2008 2:41:44 PM

Thank you, Linda.
The last few days has seen a lot of action.
CNX hit our target.
USO exceeded our initial target.
BHI exceeded our target on Friday.
ESS hit our target on Friday.
GOOG exceeded our target on Friday
BG exceeded our target on Wednesday.
MT hit our target on Wednesday.

Jane Fox : 4/22/2008 2:40:03 PM

DATeline WSJ - Auto makers would have to increase the fuel economy of their vehicles by 25% over five years, according to new rules announced by the Transportation Department today.

Current federal standards dictate industrywide fuel economy of 27.5 miles per gallon for cars and 22.5 miles per gallon for light trucks, producing a combined average of roughly 25 miles per gallon.

Under the new proposed rules, standards would rise to 35.7 miles per gallon for cars and 28.6 miles per gallon for trucks by 2015, resulting in a combined fleetwide mark of roughly 31.6 miles per gallon. That would get manufacturers more than halfway toward the goal Congress mandated in last year's energy legislation: An industrywide average of 35 miles per gallon for cars and trucks by 2025.

Tuesday's proposed rules likely leave to a subsequent administration the job of setting standards for the period 2016 to 2020.

Transportation Secretary Mary Peters called the rules, mandated by Congress in last year's energy legislation, "ambitious, yet achievable."

"Auto makers are prepared to meet that challenge," said Dave McCurdy, president of the Alliance of Automobile Manufacturers, in a statement.

Linda Piazza : 4/22/2008 2:30:15 PM

Congratulations on those DRYS and XOM trades, James.

Linda Piazza : 4/22/2008 2:29:34 PM

On the SPX's chart, the possibility of a pop up toward 1378.86 is now about as likely as the possibility of a drop down toward 1370.11. Remember that earlier post when I suggested that I wouldn't be surprised to see the SPX close the day above about 1378.78 and I also wouldn't be surprised to see it close the near 1365-1367 or by having tested that? That impression was based on the daily chart. Now the intraday charts are showing the same possibilities and giving them about the same equal weighting.

James Brown : 4/22/2008 2:25:18 PM

Exit alert.
OI call play Exxon Mobil (XOM) hit an intraday high of $94.93. Our target was the $94.85-95.00 zone.

James Brown : 4/22/2008 2:23:18 PM

Exit alert.
OI call play DryShips, Inc. (DRYS) is up more than $5 (+7%) to over $80.00 a share. Our target was the $79.00-80.00 zone.

Linda Piazza : 4/22/2008 2:18:38 PM

The Keltner setup shows a slight strengthening in the SPX's and OEX's support, but it's just a suggestion of strengthening and nothing yet for bulls to hang their hats or the health of their trading accounts on.

Keene Little : 4/22/2008 2:09:54 PM

CME tried (again) to break north of a key level near 528 yesterday but wasn't able to make it and has now dropped hard today (-2.8%). As long as that level holds I continue to remain bearish CME for a drop to a new low. As mentioned yesterday, the downside target is 340. Link

Linda Piazza : 4/22/2008 2:06:42 PM

The SPX managed a 15-minute close juuust above the 15-minute 9-ema, but it hasn't been able to maintain it so far. Same story for the OEX.

James Brown : 4/22/2008 1:49:26 PM

There is no slow down in the rally for First Solar (FSLR). The stock is up 3.8% to $303.22, breaking out over the $300 level. Shares look extremely overbought from its March lows under $200.

This morning one analyst firm cut their rating on FSLR to a "hold" while a different firm raised their price target on FSLR from $300 to $450.

Shorts have been getting killed. The most recent data listed short interest at 3.8% of the 60.8 million-share float.

Linda Piazza : 4/22/2008 1:47:49 PM

The SPX's 15-minute 9-ema is now about 1374; the OEX's, 634.50.

Keene Little : 4/22/2008 1:46:04 PM

We're still getting nothing but 3-wave moves in both directions, including the leg up from the April 15th low. So far this signifies that we remain trapped in a consolidating pattern and that we probably haven't seen the high for the bounce off the March 17th low yet. A pullback to the uptrend line from March 17th, currently just below SPX 1350, followed by another rally leg (shown in dark red) into the end of the month (target SPX 1400) would be a good finish. 120-min chart: Link

If SPX breaks the uptrend line from March 17th (pink) then I'd say we'll probably head back to the Jan/Mar lows (around 1270). But assuming we'll get the down-up sequence to finish the bounce off the March 17th low, it will then be a question whether we'll start a brand new leg down to new lows (dark red) or just a pullback before heading higher into the summer (green). Way too eary to tell. Daily chart: Link

James Brown : 4/22/2008 1:45:27 PM

A few minutes ago CNBC was discussing the issue of rice and flour rationing. Costco (COST) reported that there has been a surge of customers buying rice and flour and they have instituted limits on how much customers can purchase in the San Francisco area.

The concern is that the perception of a shortage could lead to a run on these commodities and actually cause a shortage. Costco management believes they have the situation "under control" whatever that is supposed to mean.

Linda Piazza : 4/22/2008 1:37:43 PM

Watching to see if the SPX and OEX can break above and maintain values above their 15-minute 9-ema's or if they'll roll down again. If they roll down again, the SPX has a potential downside target near 1365.78-1367.40, and the OEX, near 629.66-630.50. The SPX has been hitting its downside targets earlier than the OEX today, with the OEX stronger by this measure.

James Brown : 4/22/2008 1:25:53 PM

Airlines are the worst performers with the XAL index down more than 10.4% to 20.96. This appears to be an record new low for the group.

James Brown : 4/22/2008 1:24:22 PM

Retail stocks continue to sink. Dillards (DDS) is now down more than 10% and nearing support at the $20.00 level.

Coach (COH) is down about 5% after this morning's eanrings report.

Sears (SHLD) is down 2%

Target (TGT) is down 2.7%
but Wal-Mart (WMT) is only down fractionally.

Linda Piazza : 4/22/2008 1:19:33 PM

The SPX's 15-minute 9-ema, consistent resistance on 15-minute closes today, is now at 1374.44; the OEX's, 634.62. These indices need to maintain consistent 15-minute closes above these to even begin to change the tenor.

Linda Piazza : 4/22/2008 12:51:33 PM

The SPX now has a potential downside target near 1365.60-1366.50. As I said previously with the 1372-ish target, don't count on that target being reached, but do prepare what-if profit-protecting plans if it is. The SPX needs to bounce back above about 1375.50 and maintain values above that to question that downside target.

James Brown : 4/22/2008 12:41:15 PM

The XLB is looking bearish. This ETF looked like it was breaking out over resistance near the $44 level but has now produced a bearish engulfing candlestick pattern. FYI: The P&F chart is still bullish and points to a $57 target.

Linda Piazza : 4/22/2008 12:41:48 PM

For a while, the A/D line had held above its previous low of the day, offering potential bullish divergence from the equity action. Now, however,it's finally dropping into a new low, so that potential bullish divergence is erased. The A/D line has to maintain 15-minute closes above about -1250 before it changes anything about its current tenor, and then it should be watched for potential resistance from -700 to -600 and then again near -340. It's -1490 as I type.

Jim Brown : 4/22/2008 12:40:38 PM

Crude expiration today - Despite oil trading as high as $119.69 today I still believe this is expiration related. The May contract expires at the close of trading today. If you look at this table showing the open interest on Friday and the open interest at Monday's close you will see a significant reduction in OI in just one day. Also note that the volume for the day was larger than the open interest. The volume in the June contract was more than 50% of the OI. These are huge numbers and are directly related to the expiring May contract. Traders are long the June contract to profit from the May short squeeze. Once May expires there is no reason to be long June at $119. Link

Jane Fox : 4/22/2008 12:39:34 PM

With a lot of leverage you can put on multiple trades in a small account but if you have identified before hand the $ you are willing to risk (total risk in all trades that is) leverage is not an issue. Please tell me where I am going wrong here.

James Brown : 4/22/2008 12:35:50 PM

A few more details on the existing home sales numbers...

The number of homes for sale rose 40K to 4.06 million. This pushes the number of homes for sale to a 9.9 month supply (up from 9.6 months).

Existing home sales account for up to 85% of the U.S. housing market.

The median price for existing home sales fell from $217,400 to $200,700. (source: Bloomberg)

Homebuilding stocks are trading lower. The DJUSHB index is down 2.2% to 372 and slipping under its 200-dma. The DJUSHB index has formed a mini head-and-shoulders pattern over the last five days and this would suggest a decline to the 353 area or the recent April lows.

Linda Piazza : 4/22/2008 12:31:07 PM

Potentially strong support approaches on the SPX and OEX, so bears should have their profit-protecting plans in place, just in case.

The TRAN led the way this morning, dropping to its 120-ema early this morning and showing the potential for the SPX, OEX and Dow to do so, too. So, if the TRAN is leading, where is it leading now? It's dropping lower still, well below its 120-ema.

Linda Piazza : 4/22/2008 12:27:26 PM

I would not be surprised to see the SPX back above about 1378.80 by the close. Nor would I be surprised to see it near 1365-1367 at the close or at least having tested that zone by the clsoe. And that's the problem for most market participants: figuring out which it's most likely to be.

Jane Fox : 4/22/2008 12:23:25 PM

I also would like to reiterate I trade the daily chart and have my orders placed with OSO so I do not need to stay up all night watching the charts like you would do if you were daytrading.

Also like I stated before my comments were swing trading and NOT daytrading.

Keene Little : 4/22/2008 12:19:14 PM

The strength in the euro today is helping commodities, including gold and oil. If the euro does in fact top out soon then we can expect the same for commodities.

Jane Fox : 4/22/2008 12:18:49 PM

Commenting on Al's comments. I have what I call a circuit breaker which is a percentage of my account that I will risk. If a trade exceeds that circuit breaker then I do not take the trade. The leverage although very important should not be an issue as long as you know what your risk is on each trade and that it does not exceed your circuit breaker.

As I have stated in earlier posts, I have a circuit for my daytrading as well. I have a daily circuit breaker, a weekly circuit breaker and a monthly. Also in my trading plan I have what I do when I reach that circuit breaker and how I reenter the market.

So, like I said before, I always know my risk before I put on a trade and if it exceeds my PRESET plan then I do not put on the trade.

Anyone who trades without this kind of plan is asking for trouble.

So I trade the minis to put the trade within my trading plan.

Keene Little : 4/22/2008 12:18:10 PM

I mentioned I like the setup for a position trade for a short play on the euro. The daily chart shows a bearish rising wedge since the March 24th low. The choppy rise inside the wedge is confirmation of an ending pattern, along with the bearish divergence on MACD: Link . Watch for a little throw-over finish, maybe just above 1.60, and then a collapse back down. It should retrace quickly to its March 24th low (1.5273) before bouncing and continuing lower.

Linda Piazza : 4/22/2008 12:17:56 PM

Speaking of currencies, I see the USDJPY dropping today but approaching potential support on the daily chart from 102.14-102.49. The trouble with assessing that possible support is that the USDJPY's climb off its March low looks choppy and so perhaps destined to fail. That's not a given, and I wouldn't be surprised to see this currency pair climb, after hitting support, at least into another test of 104-105, but we have to remain watchful for a failure of the USDJPY, an event that would not be good for U.S. equities.

James Brown : 4/22/2008 12:14:00 PM

The FXE Euro is getting stronger with a real breakout over the $160 level.

Jane Fox : 4/22/2008 12:10:31 PM

Crude is powering to $118/bl now at $117.77. This market will just not stop and why I never short it.

James Brown : 4/22/2008 12:09:35 PM

Apple Inc. (AAPL -4.5%) is also seeing the same sell-off. Shares are pulling back to the $160 level again.

Keene Little : 4/22/2008 12:13:13 PM

Some input from a reader regarding our commentary on forex trading. Thanks Al.

Referencing the talk about trading the mini Fx contracts in order to lower risk I'd like someone to talk about the added risk in forex trading. Perhaps risk is lowered in actual dollars, so long as you don't get a huge move against your position, but not in terms of percentages of capital where the risk is higher because the mini's offer extreme leverage. Some that I have seen are 400:1 as compared to the more typical 100:1 leverage associated with the normal 100k size contract. Perhaps you could caution traders to pay attention to this "small" matter.

Like most of you, I tried trading FX and found myself too sleep deprived to function during the daylight hours!

James Brown : 4/22/2008 12:08:02 PM

Research In Motion (RIMM -4.1%) is really under performing the NASDAQ today. I don't see anything specific to account for the weakness.

Linda Piazza : 4/22/2008 12:01:32 PM

The SPX's potential downside target and potentially strong support on 15-minute closes has moved up to 1373.13. The OEX's has moved up to 632.94. Don't count on these targets being hit, but if in bearish positions, do know how you'll handle that potential support if they are hit.

Keene Little : 4/22/2008 12:00:03 PM

GOOG has now rallied up to the Fib projection at 559.65 where the 2nd leg up in the bounce off the March low achieved 162% of the 1st leg up. It has also tagged its 100-dma just under 554 and is just under its 200-dma at 565.47. Link

There's a lot of resistance here for bulls to get through and with oversold oscillators on the daily chart and bearish divergences at today's high compared to Friday's, I'm thinking short GOOG here. But be aware that it could get one more minor push higher to complete a little 5-wave move up from yesterday morning. That might mean 565-566 to tag its 200-dma. Regardless, if you're long GOOG, pull your stop up tighter now.

James Brown : 4/22/2008 11:44:29 AM

On the topic of currencies... it appears that the strength in the Euro today is partially fueled by new talk of an interest rate hike by the European Central Bank (ECB). The governing council is talking tough about reigning in inflation again. One analyst suspects the Euro could break above $1.65.

Jane Fox : 4/22/2008 11:42:13 AM

Interactive Brokers has what they call a Universal account where you can trade futures, stock, forex and options all in one account but very few brokers are quite this progressive. With my TS broker my futures account is with RJ O'Brien whereas my Forex account is with Gain and in order to trade futures and forex with TS I need two totally separate accounts.

Linda Piazza : 4/22/2008 11:32:00 AM

Next potential support on 15-minute closes for the SPX lies at 1377.67; for the OEX, 635.40. Both are vulnerable to lower levels: 1372.97 for the SPX and 632.84 for the OEX.

Jane Fox : 4/22/2008 11:31:53 AM

All of the issues Linda and Keene have brought up are very very valid. I have not and will not even think of day trading forex and is why I switched to the daily chart. Using the mini accounts gives me a profile that is acceptable. I also use OSO orders so as soon as I am triggered (even in the middle of the night) my stop and limit are placed so I am covered. The only thing I need to do intraday is adjust my stops, limits or entries.

Jane Fox : 4/22/2008 11:28:33 AM

Here is an example of a trade I have setup. I want to buy the Euro/British pound pair, the symbol is EURGBP at 0.81003 with a target at 0.82730 and a stop at 0.79170. My TS converter tells me each pip (each tick in futures language) is $0.1996 US/pip, almost $2.00/pip. So I have 0.81003 - 0.79170 = 183 pips * 1.996 = 365.00 at risk with a potential of $339. This is not an exact 1:1 ratio because I put my entry above the all time high at .80995.

Linda Piazza : 4/22/2008 11:26:28 AM

The SPX has not been able to maintain 15-minute closes above either its 9-ema nor its 45-ema. Those are 1381.09 and 1382.36, respectively.

Linda Piazza : 4/22/2008 11:25:37 AM

The TRIN is bouncing again, as suggested as a possibility in my 11:08:20 post. See the chart linked to that post for a reason why. It's at 0.87 as I type, but it's still within the day's choppy range, and it's proven several times that it can change courses rather quickly.

Linda Piazza : 4/22/2008 11:22:30 AM

I sound as if I'm trying to be a know-it-all about trading the forex markets, so let me convince you I'm not. I tried trading currencies at a time when other conditions prevented me from trading equities during the day, including my work schedule at the time and a fragile family member that required much time during the day. I opened a small test account, but found that I wasn't making a go of it and that I literally never slept a whole night. What would happen with me was that I'd catch the big moves and then have my profits sliced and diced while the currencies chopped around for a while before finding next direction. Action like that is not good for a small trading account--all I was willing to risk on the forex markets at the time--and requires that you have a big enough account and the nerve to endure the slicing and dicing, keeping losses small, and still have money to trade when the next big move comes along. The currency platform I was using allowed traders to rachet down the stake they were taking in each trade, and I should have ratcheted it down even more than I did to test it if I wasn't willing to risk more than I was. So, I'm not trying to present myself as an expert.

Keene Little : 4/22/2008 11:20:18 AM

I traded forex a couple of years ago but finally gave it up (except for some really crisp setups and then I'll look for a position trade, like what is setting up for a short on the euro). After finding serious bags under my eyes from lack of sleep and worrying constantly about what was happening in overnight currency markets (getting up to check the screens in the middle of the night) I realized life is too short and forex trading was not worth it. That's obviously a personal decision but understand it's truly a 24-hour a day market.

Jane Fox : 4/22/2008 11:17:17 AM

If you decide to trade the Forex you will need to check with your broker and see if they allow it. Then you have to find out what kind of contract they allow, there is the big contract like in the futures arena, then a mini contract and even a micro. If you use the micro you can really reduce your risk but of course your reward as well.

Tradestation broker only allows a mini and not the micro but each broker is a little different. Also TS has a currency converter so you can calculate the amount of US$ you have at risk for each tick. Of course this will change with the pair you decide to trade.

Linda Piazza : 4/22/2008 11:14:35 AM

However, the currency markets do adhere better to Fibonacci levels than do equity markets, as long as the Japanese government isn't making some move to intervene in the currency markets or their finance minister, the governor of the Bank of Japan or the ECB's Trichet isn't making some pronouncement that suddenly changes the whole tenor of a trade that was working marvelously.

Linda Piazza : 4/22/2008 11:12:51 AM

Currency trading is interesting . . . and also exhausting. Some of the best moves occur while Japan's Nikkei is trading and about the time of the European open. Try bathing with the computer set up so you can see the monitor, sleeping with the computer on your bedside table so you can monitor the action during the night. LOL.

Keene Little : 4/22/2008 11:14:45 AM

In last night's newsletter I was showing the difference between using log and arithmetic price scales on the charts. When we use longer term trend lines, especially where there's been a large price change, it is worth changing the scale back and forth to see where resistance and support might be found. Using the chart of the oil stocks (OIX) as an example, here's the daily chart using the "standard" arithmetic scale: Link

The uptrend line from August 2007 was exceeded slightly in February and clearly broken this month with the move above 904. This looks bullish. Also, the March 2003 uptrend line was never even tested during the pullbacks this year. Now switch to a log scale and you can see the uptrend line from August 2007 is clearly telling us something different: Link

Price had rallied up near the broken uptrend line in late February and is now approaching the line again, currently near 930. Now the chart looks like a bearish setup. You can also see the uptrend line from March 2003 was actually tested and acted as support for each of the pullbacks since January.

Linda Piazza : 4/22/2008 11:08:20 AM

SPX and OEX bulls, as these indices rise to test their 15-minute 9- and 45-ema's, up to 1382.53 on the SPX and 637.54 on the OEX, the TRIN is dropping into support that has held once already today. That means there's the possibility that the TRIN will bounce and the equities will drop. It's not a given--nothing is today with the indicators changing as they have been--but it's a possibility. As I said earlier, unless the SPX and OEX can maintain 15-minute closes above those averages, the danger remains that they'll just slip lower toward those targets, sliding down along descending support.

James Brown : 4/22/2008 11:07:49 AM

Currency trading sounds interesting, Jane. Sign me up.

OI added a call play on the FXE Euro a few days ago. The FXE is up today and flirting with a breakout over $160.

Jane Fox : 4/22/2008 11:02:21 AM

I am starting to trade the Forex on the daily chart with a contract called the minis - sort of like the futures e-minis. If anyone is interested in my trades please send an email to support@optioninvestor.com and if there is enough interest I will post the trades here.

I do not concentrate on any currency pair but will take shorts or longs as they setup.

James Brown : 4/22/2008 11:02:14 AM

The agriculture-fertilizer industry has been soaring higher and the group got a new stock today with the Intrepid Potash IPO. The symbol is IPI. Intrepid Potash is owned by Intrepid Mining LLC.

The stock's IPO was priced at $32.00 a share. The stock is currently up $15.70 or 49% to $47.50.

Company description:
Intrepid Mining LLC, the parent company of Intrepid Potash, is the largest producer of potash in the U.S. and is dedicated to the production and marketing of potash and langbeinite, another mineral containing potassium. Intrepid Mining owns five active potash production facilities -- three in New Mexico and two in Utah.

Linda Piazza : 4/22/2008 10:57:41 AM

Here's a Keltner chart of the TRIN, showing that it may be pressured down toward 0.62-0.64 again but that, if so, that may be a bounce point for it. Link

Jane Fox : 4/22/2008 10:55:42 AM

Internals are flip flopping like a fish out of water today so I have turned to the MACD and it is telling me a bottom is in. Each one of the cash markets have a bullish divergence, price is making new daily lows but the MACD is making a higher low. Link

Linda Piazza : 4/22/2008 10:51:52 AM

Crazy day. Once again, the SPX is attempting to undo its downside target, now at 1372.71. It would need to maintain 15-minute closes above about 1382.53 to do so. The SPX is at 1379.69 as I type.

James Brown : 4/22/2008 10:50:10 AM

Hmm... interesting... CNBC noting that drug giant Pfizer (PFE) just traded under $20.00 for the first time in 10 years.

James Brown : 4/22/2008 10:45:28 AM

Boeing (BA) is showing some relative strength in the last few minutes. The stock is nearing a potential breakout over a significant trendline of resistance and round-number resistance near $80.00. A breakout over $80.00 could be used as a bullish entry point. However, BA reports earnings tomorrow morning before the opening bell. Estimates are for a profit of $1.35 a share.

James Brown : 4/22/2008 10:40:49 AM

A lot of the oil service stocks have been screaming higher in recent weeks. That trend could be about to change if BJS is a sign of things to come.

BJ Services (BJS) reported earnings this morning. The company missed by 12 cents and guided lower. The stock is down 14.4% to $28.05.

There are a lot of analysts who have been very bullish on the oil services sector. These companies should be somewhat insulated from the day-to-day fluctuations in crude but the generally high price for oil is naturally a positive for the industry. I suspect that BJS' miss is company specific but the entire group could suffer a sell-the-news reaction on the individual earnings reports because they all look overbought.

Jane Fox : 4/22/2008 10:34:02 AM

AD volume is making new daily lows as the VIX is making those new daily highs and this combination is very bearish. So the statement I made about not been short is off the table and short is the trade of day or the trade of the hour or the trade of the minute. STick around it will probably change.

Linda Piazza : 4/22/2008 10:33:29 AM

The SPX's potential target is now reestablished and now has moved out of the "possible" realm and into the "probable" one. That target and potentially strong support, too, is now 1372.57. "Probable" doesn't mean 100%, of course, so bears should not count on that target being hit. They should consider what profit-protecting steps they'll take if it is hit, and bulls should consider vulnerability to that level in any of their decisions.

Jane Fox : 4/22/2008 10:32:05 AM

Geesh, VIX is making new daily highs so the enviroment is changing again. Not easy days to trade.

James Brown : 4/22/2008 10:32:01 AM

Keene mentioned the USO play. Last night I was very specific that the USO would trade higher today but we wanted to buy puts on this strength as it should be a top.

Linda Piazza : 4/22/2008 10:30:28 AM

As subscriber Denise has pointed out, TRIN is now rising. It's 0.84 as I type.

James Brown : 4/22/2008 10:30:10 AM

Ah... I found what is driving up the casino stocks. The Associated Press has an article out today stating that the Macau government has decided to stop issuing any new casino licenses.

Macau, about 37 miles west of Hong Kong, is the only place in China where gambling is legal. According to the article Macau casinos garnered more than $10.3 billion in gambling revenues last year.

WYNN is up 8% to $103.31
MGM is up 4.3% to $51.20
LVS is up 11.1% to $72.25.

Linda Piazza : 4/22/2008 10:26:46 AM

The OEX needs to maintain 15-minute closes above about 636.01 or it resets a downside target, now at 632.59.

Even if the SPX (10:24:28 post) and OEX do maintain those requisite 15-minute closes, there's still danger of them sinking down toward those targets until and unless they start maintaining 15-minute closes above their 9-ema's, now at about 1383 for the SPX and 638.07 for the OEX.

Keene Little : 4/22/2008 10:26:09 AM

James mentioned earlier (and Jim yesterday) that a put play is being recommended on oil (USO). USO is up this morning but as shown on this 60-min chart it's within a rising wedge with bearish divergences confirming the bearish setup here: Link . These wedges get retraced quickly so a return to 88 (and likely lower) over the next week is the probable move.

Jane Fox : 4/22/2008 10:25:11 AM

The Russell 2000 futures are well below their overnight lows and previous day lows. Certainly the weaker market today. Link

Linda Piazza : 4/22/2008 10:24:28 AM

The SPX needs to maintain 15-minute closes above 1379.15 or it resets that downside target, now at 1372.50.

James Brown : 4/22/2008 10:22:43 AM

The BKX and BIX banking indices have turned positive in just the last few minutes. They're fractional gains but after the negative RBS and STI news today it's a sign of strength.

Jane Fox : 4/22/2008 10:20:26 AM

Like Linda has mentioned, the TRIN is a bullish 0.69 and making new daily lows.

Jane Fox : 4/22/2008 10:19:26 AM

Here you have the VIX and the AD volume ratio in sync and that would be enough for me to exit stage left on any short position I may have. Link

Linda Piazza : 4/22/2008 10:13:08 AM

The TRIN is now 0.67. Definitely not bearish. Other indicators are bearish, but improving slightly, so it's hard to know which to trust. Not at the ducks are in a row this morning.

Linda Piazza : 4/22/2008 10:11:39 AM

The VIX is turning back from the Keltner resistance shown on the chart linked to my 9:56:53 post. At 20.92 currently, it's between that resistance at 21.00 on 15-minute closes and potential support at 20.72-20.81 on 15-minute closes.

James Brown : 4/22/2008 10:10:06 AM

United Airlines (UAL corp, symbol: UAUA) reported earnings this morning and missed. Wall Street was looking for a loss of $3.41 a share. UAUA missed with a loss of $4.45 a share ($537 million).

UAUA said it's cutting flights and over 1,000 jobs to help stem the bleeding.

Shares are down 6% to $20.11

Linda Piazza : 4/22/2008 10:07:18 AM

The SPX closed that last 15-minute period below Keltner support that was then near 1380. It officially set a downside target of 1372.36, but it violated that support by only a little, the violation came during the first 30 minutes of the trading day, and the SPX is bouncing immediately. If the SPX can bounce above and maintain 15-minute closes above about 1383.10, it will erase that potential downside target, so some skepticism must be maintained about that downside target. For now, though, traders must consider it a possibility. As I mentioned in an earlier post, the TRAN has already hit its analogous target.

James Brown : 4/22/2008 10:05:33 AM

The negative earnings from United Health (UNH) is pushing the HMO index to a 2.69% loss. Shares of Humana (HUM), a current OI put play, is sliding 2.9% and about to breakdown under short-term support near $42.00.

James Brown : 4/22/2008 10:04:13 AM

Existing Home Sales

Existing homes sales down 2% and inventories rose to a 9-month supply. Median home sale prices down 7%. Prices in the West fell 14% from a year ago.

18% of homes listed for sale have "negative equity"... most of these are short sales.

Linda Piazza : 4/22/2008 10:02:21 AM

TRIN still drops, but so does the A/D line. The VIX climbs but tests that resistance that I showed earlier. Mixed evidence.

Linda Piazza : 4/22/2008 10:00:43 AM

Scary story, James, about the rice shortages here in America (9:56:26 post). Maybe I ought to move back to my hometown during my growing up years and become a rice farmer.

Linda Piazza : 4/22/2008 9:56:53 AM

VIX is higher but is currently testing its 15-minute 120-ema, an average that knocked it back yesterday. Here's a chart: Link

James Brown : 4/22/2008 9:56:26 AM

Last night I read an article discussing food shortages in Japan and how parts of the U.S. are quietly facing food rationing. Supply and demand issues are definitely squeezing most of the world and we're starting to see its affect here.

One would think this doesn't bode well for the restaurant industry.

Japan's shortage: Link

Food rationing in America? Link

Linda Piazza : 4/22/2008 9:55:32 AM

TRIN is dropping well of its early high, as Jane may have already mentioned since she's so good at keeping up with what's happening with the under-the-hood stuff about the markets. This is not bearish action. Yesterday, we saw a lot of conflicting, mixed-up underpinnings, and this is, too. The TRIN, at 0.79, is currently at its low of the day.

Keene Little : 4/22/2008 9:53:17 AM

Semiconductors are getting hurt today after TXN's disappointing guidance. SMH had run back up to the top of its bear flag pattern and is now dropping back down this morning, down -3% currently: Link . It could find support at its 100-dma here at $30 and continue its rally but this price pattern since the January low is about as bearish as it can get. Once this choppy consolidation is finished we'll see another leg down to new lows, potentially much lower.

Linda Piazza : 4/22/2008 9:51:48 AM

The OEX needs to steady at about 636.10 on 15-minute closes or it risks setting a potential downside target of 632.42. While not yet a probability, this is a possibility.

Linda Piazza : 4/22/2008 9:50:23 AM

If the SPX can't steady here, near 1380-1380.10 on 15-minute closes, then it risks falling to 1372.24. The TRAN has already fallen to its analogous Keltner level, at about 5006.90 for the TRAN, with the TRAN at 5002.92 as I type. The TRAN sometimes leads the SPX, OEX and Dow. So, the possibility that the SPX could drop to that 1372.24 level must be considered although the SPX hasn't yet set that as a potential target. I wouldn't consider it a probability yet but just a possibility.

James Brown : 4/22/2008 9:50:35 AM

Interesting... CNBC right now talking about Linens 'N Things could declare bankruptcy as banks refuse to offer credit to several specialty retailers.

Yesterday Sears Holding (SHLD) dropped sharply after Bank of American decline to renew a $1 billion line of credit. I'm not suggesting SHLD is facing bankruptcy but it's a sign of how banks are pulling back and it's hitting retailers.

Linda Piazza : 4/22/2008 9:46:59 AM

Keltner outlook on the A/D line: The A/D line is lower than yesterday's lowest values but is currently testing Thursday's low, possible support. It remains in breakdown mode on the 15-minute chart, but watch now for the possibility that it might steady and then climb back toward about -550. That's a possibility but not yet a probability. It's at -1188 as I type. If it does steady and climb toward -500 to -340, I would then be careful of the potential for it to pull back again.

Jane Fox : 4/22/2008 9:46:39 AM

AD line is a bearish -1196 now so the ducks are starting to line up. Another duck is the VIX hovering at daily highs.

James Brown : 4/22/2008 9:46:02 AM

Financials are under water thanks to the Royal Bank of Scotland (RBS), Britain's second-largest bank by market cap. The company announced an $11.7 billion write down in losses due to its mortgage portfolio and said they expected more write downs to come on its mortgage and CDO exposure. RBS also said they raised $23.9 billion in new capital

James Brown : 4/22/2008 9:39:17 AM

Casino operator Wynn Resorts (WYNN) is showing a lot of relative strength today. Shares spiked to an intraday high of $104.91 and are currently up 6.5% near $101.75.

I don't see any news or catalyst (yet) that might explain this sudden surge. The stock is down sharply over the last two weeks.

James Brown : 4/22/2008 9:36:15 AM

Google (GOOG) is trading higher, currently up more than $3 to $541.00 a share.

I'm shocked to see that there has not been any profit taking on last week's $89 pop!

Linda Piazza : 4/22/2008 9:34:29 AM

The SPX now tests the trendline off yesterday's two swing lows. I don't consider trendlines completely valid with only two touchpoints, so this trendline might not be valid. As I type, the SPX slips a little below it. Keep lower potential support on 15-minute closes now near 1380.19 in mind.

Jane Fox : 4/22/2008 9:34:11 AM

AD line opens at -785 and is heading down.

James Brown : 4/22/2008 9:32:59 AM

Luxury goods retailer Coach (COH) reported earnings today. Considering the consumer-led recession facing the U.S. I am surprised to see COH actually beat earnings estimates by 1 cent. Wall Street was looking for a profit of $0.45 a share.

Furthermore the company surprisingly guided higher for its fourth quarter, granted they only raised guidance by a penny. Still that's a lot better than expected given all the hype and concern about the slow down for the consumer.

COH closed at $32.50 last night. It just opened at $31.60.

Linda Piazza : 4/22/2008 9:31:32 AM

Futures are lower this morning, as most have noticed by now. If the SPX drops in accordance with futures' relationship to fair value, we should see a drop into the 1382-1383 region. We don't always see that relationship carried forward into the cash markets, but if we do, a new rising trendline off yesterday's two swing lows coincides with potential Keltner support on 15-minute closes at about 1383.60, so no harm, no foul if that holds as support. If there's not a quick bounce from that zone, however, the SPX will have erased its breakout mode on both the 15-minute and 30-minute charts. The climb off yesterday's low has look labored, so if there is a bounce, bulls should guard profits and be ready to jump out if necessary as Friday's high is approached. If that trendline and Keltner support don't hold, next potential support is near 1380.67 on 15-minute closes and bulls definitely want that to hold.

James Brown : 4/22/2008 9:27:58 AM

DuPont (DD) announced earnings this morning. Consensus estimates were for a profit of $1.28 a share. DD beat those estimates by 3 cents and guided inline.

It looks like investors are selling the news. DD closed at $52.25 and is currently slipping lower.

Keene Little : 4/22/2008 9:25:15 AM

After rallying off the low near 2:40 AM to a 6:00 AM high, equity futures have sold off most of the gain. With oversold conditions on the daily charts at resistance I'm looking for shorting opportunities now. For swing players I recommend short against Friday's highs. Then if it manages to press higher I'll be watching SPX 1410-ish and DOW 13K-ish for resistance.

James Brown : 4/22/2008 9:22:30 AM

Yesterday in the monitor I suggested that readers could use a strangle over the Netflix (NFLX) earnings last night.

Shares closed at $39.32. They're now trading around $33.96 in pre-market.

The company announced earnings that were inline with estimates but then guided lower for 2008. The price drop today is going to be a huge break of the three-month up trend.

Coincidentally a 38.2% Fibonacci retracement of the three-month run would be around $33.00. A 50% retracement would be near the $30.00 support level.

James Brown : 4/22/2008 9:18:22 AM

It does seem like the path of least resistance has changed to "up" but I'm surprised we haven't seen more of a dip following last week's big gains in the market.

James Brown : 4/22/2008 9:17:06 AM

The CME Group (NYSE: CME), who operates the Chicago Mercantile Exchange and the Chicago Board of Trade (CBOT), reported earnings this morning.

Analyst estimates were for a profit of $4.80 a share. CMD delivered a 13-cent miss ($4.67). The company saw trading volumes grow 32% in the first quarter.

CME closed at $523.50 last night. The stock is trading lower in pre-market, down around $503.00.

Jane Fox : 4/22/2008 9:16:54 AM

Sometimes it literally amazes me as to how clear charts can be, even novice chartist can see the resistance here. I think this resistance will eventually break and, like I have said before, the bulls will take over and rule until at least summer and probably into the election.

I am short term bullish the stock market. Link

Jane Fox : 4/22/2008 9:13:55 AM

The double bottom Gold made at $900 support seems to be holding. I think this market is just taking a rest and refilling its musket for another attack at 940-960 resistance. I am very bullish on Gold. Link

James Brown : 4/22/2008 9:12:19 AM

OptionInvestor did close our call play on the USO (oil ETF) yesterday and we're now suggesting a put play to capture any post-futures expiration sell-off.

Jane Fox : 4/22/2008 9:10:38 AM

I think Crude will retrace from here but $108 may be as far as it will go. The rally from $87 to $112 retraced 50% back to $100 and a 50% retracement of the rally from $100 to $117 is $108. Link

James Brown : 4/22/2008 9:10:05 AM

Crude oil is trading near its highs at $117.65 a barrel (+17 cents).

James Brown : 4/22/2008 9:08:34 AM

Dow-component McDonalds (MCD) should be a positive influence today.

The company reported earnings and beat estimates by 11 cents. Wall Street was looking for 70 cents and MCD delivered 81 cents per share. Revenues were also better than expected.

With more than 31,300 locations in 118 countries McDonald's is seeing a lot of strength overseas.

The stock closed at $58.67 last night. Shares are actually trading all over the board this morning between $60.30 and $56.80. Maybe they won't be such a positive influence after all?

Jane Fox : 4/22/2008 9:07:36 AM

The overnight session is not telling much and, like yesterday's intraday session, has no clear direction. The markets may be waiting for the :

10:00a.m. Mar Existing Home Sales. Expected: -2.0%. Previous: +2.9%. and the

10:00a.m. Apr Richmond Fed Manufacturing Index. Previous: 6. Link

James Brown : 4/22/2008 9:02:40 AM

Texas Instruments (TXN) reported earnings last night and also guided lower.

TXN sees Q2 earnings in the 42-48 cents range versus estimates at 48 cents.

The stock closed at $30.59 last night and is currently trading down near $29.50. This is going to put pressure on semiconductor stocks and tech in general.

James Brown : 4/22/2008 9:00:00 AM

United Health (UNH) reported earnings before the opening bell today. Wall Street was looking for a profit of 80 cents a share.

UNH missed by 2 cents and issued an earning warning for the rest of the year. UNH now sees earnings in the $3.55-3.60 range versus previous guidance of $3.95-4.00.

UNH closed at $37.81 on Monday and is currently trading down around $33.85 in pre-market.

Jane Fox : 4/22/2008 8:58:37 AM

WASHINGTON (MarketWatch) -- AT&T Inc. on Tuesday reported first-quarter earnings jumped 22%, as the giant phone company added 1.3 million net wireless customers and was largely unaffected by a slowing U.S. economy.

Net income rose to $3.46 billion, or 57 cents a share, from $2.85 billion, or 45 cents a share, in the 2006 first quarter.

Revenue increased 6.1% to $30.74 billion from $28.97 billion.

Wireless sales were up 18% to $11.8 billion. AT&T, the exclusive provider of the Apple iPhone, ended the first quarter with a nation-leading 71.4 million mobile customers.

James Brown : 4/22/2008 8:57:24 AM

It would appear that the market is poised to open lower as investors react to earnings and another rise in crude oil.

This could be a rocky day for crude as futures expire after the closing bell. Those short crude will probably get squeezed again but we suspect that the commodity will start to sell-off tomorrow.

James Brown : 4/22/2008 8:53:07 AM

Good morning and happy "earth day".

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