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Keene Little : 6/3/2008 1:09:05 AM

Tuesday's pivot tables: Link and Link

I showed the DOW 60-min chart at the end of the day to point out what I'll be watching for on Tuesday morning: Link . If we see a quick move down Tuesday morning to a minor new low watch for a reversal back up that corrects the decline from last Thursday's high. If it drops much below 12400 and doesn't reverse quickly I would not be looking to buy it. But if we instead see a continuation of the rally off Monday's low then I'll be watching for evidence of how high it might get.

The pink wave count is looking for a larger 3-wave bounce off the low on Monday, May 27th. That calls for another rally leg up and the first upside target is where equality in the two legs up is at 12708 (which is also the 38% retracement level of the decline from May 19th). Then where the 2nd leg up equals 162% of the 1st leg up at 12880 would be the next upside target, which is near the 62% retracement.

The daily chart shows how the DOW found support at the lower uptrend line from October 2002: Link . Those two trend lines (the upper one is from March 2003) have been influencing price for a number of months now (when used both in the arithmetic and log scale). Another break below 12400 would likely mean a quick trip down to 12K.

OI Technical Staff : 6/2/2008 9:59:59 PM

The Market Monitor has been archived.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

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Jeff Bailey : 6/2/2008 6:36:29 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 6/2/2008 5:14:48 PM

Closing Internals found at this Link

Jeff Bailey : 6/2/2008 5:05:52 PM

Global Currencies seconds prior to 05:00 PM EDT close at this Link

Keene Little : 6/2/2008 4:48:16 PM

Looking at the SPX in the same way as the DOW which I posted at 4:01 PM, a bounce with two equal legs up from last Monday's low would be at 1411 and in between the 50% and 62% retracements of the decline from May 19th (pink wave count). The Fibs do not align as well on SPX as they do on the DOW and the only other resistance level above 1411 that I see the 1424 area which is also where the 200-dma is located. Link

A turn right back down tomorrow would give us a 5-wave decline from last Thursday's high (dark red) and I'd look for support near the broken downtrend line from October near 1375. A bounce from there back up to around 1390 would be a good setup for the short side again, maybe on Wednesday.

Jeff Bailey : 6/2/2008 4:35:54 PM

Brit Pound CurrencyShares (FXB) finished $196.72 -1.10% ...

Jeff Bailey : 6/2/2008 4:35:08 PM

Yen CurrencyShares (FXY) finished $95.40 +0.79% ...

Jeff Bailey : 6/2/2008 4:34:37 PM

Euro CurrencyShares (FXE) finished $155.44 -0.40% ...

Jeff Bailey : 6/2/2008 4:33:21 PM

DXY's 04:00 tick was 72.948

Jeff Bailey : 6/2/2008 4:20:47 PM

Financial Select SPDRs (XLF) $24.39 -1.49% ... Friday's June "Max Pain" Theory was $26.00 ... $1 inc.

Keene Little : 6/2/2008 4:07:18 PM

If tomorrow we consolidate between today's low and this afternoon's high (or slightly higher first thing tomorrow morning) then we'll have a pretty good idea that prices will continue lower. Therefore tomorrow we should get a better idea about what's next for the stock market.

Jeff Bailey : 6/2/2008 4:05:06 PM

EIA saying that it will review process of weekly oil and gasoline releases. Agency saying it has the right to deny access to certain users.

Until further notice, EIA will report Crude and Gasoline data at 10:35 AM EDT on Wednesdays. Natural Gas data to be released at 10:35 AM EDT on Thursdays.

Linda Piazza : 6/2/2008 4:04:10 PM

The OEX has a little bit more of a spring underneath it as I type than in my 3:46:28 post, but not much of one and it seems to be having some difficulty with maintaining values above 632. Everything I said in that earlier post remains true, then. Although the formation in which it climbed off today's low is not quite as bear flaggish, the daily chart setup remains the same. As I said earlier, some days with candles like this are followed by either consolidation or a gain, usually within the range of the previous day's candle, but sometimes they're just followed by a downturn, so there's that risk tomorrow.

Keene Little : 6/2/2008 4:01:45 PM

If the correction off of last Monday's low is to become a larger A-B-C bounce, then another rally leg would complete wave C. Looking at the DOW, equality for the two legs up from last Monday's low would be at 12708 which is right on top of the 38% retracement of the decline from May 19th. But the kind of correction this larger A-B-C bounce would be (expanded flat) would more likely point to the level where the 2nd leg up would be 162% of the 1st leg up and that's at 12880. This is right on top of the 62% retracement at 12872.

Therefore if we do get another rally leg that's where I would set my sights for a high--the 12872-12880 area. In the meantime, if this afternoon's bounce turns back down to a new low it will give us a 5-wave move down from last Thursday. That would set up another bounce but would be the bearish sign that the market is going to work its way lower sooner rather than later (dark red on the 60-min chart): Link

Jeff Bailey : 6/2/2008 4:00:16 PM

Swing trade long round back up to 1/2 position alert! ... with 1/4 bullish in shares of Six Flags (SIX) at the offer of $2.10 +2.43% ...

Keene Little : 6/2/2008 3:51:00 PM

Pushing higher so now is when I'm watching the 38% retracement of today's decline (SPX 1388, DOW 12522) as anything more than that would start to have me worried if I was holding onto a short with the expectation of it heading lower. The risk remains for another rally leg above last week's high.

Linda Piazza : 6/2/2008 3:46:28 PM

Time to make end-of-day decisions. If the OEX ends the day anywhere near its current 631.22 level, it will complicate decisions about what happens next. Overall, the day's candle casts a bearish tenor over the trading, of course, but there's currently a small spring off support and support that held two days last week when tested. Sometimes when the daily candle looks like this, the SPX consolidates or even produces something like a green-bodied inside-day candle the next day, but sometimes it just falls. My charts tell me that the SPX has a potential downside target near 624-626 and maybe even much lower, depending on what happens there, so I'm worried about the potential for that to happen, too, since I have a lower potential Keltner target on the daily chart. It's not a given that will be reached, but it's a possibility until and unless the OEX can sustain daily closes above at least 637.26 and maybe 643.20.

Linda Piazza : 6/2/2008 3:42:57 PM

The OEX has made it all the way up to the 30-minute 9-ema, more significant resistance, perhaps, than the 15-minute version. That's at 631.45 for the OEX.

I'm not sure what to think, as the shape of the climb is still a bit bear flaggish. Complicating this, though, is the fact that the VIX chugged right up to that Keltner resistance that I'd been mentioning and immediately dropped. However, if the OEX climbs above 632 and sustains values above that into 15-minute closes, I'd have to say that the bear flag conclusion is perhaps wrong.

Jeff Bailey : 6/2/2008 3:41:31 PM

June "Max Pain" Theory tabulations as of Friday's close.

DIA $125.00 ... $1 increments.
SPY $134.00 ... $1 inc.
QQQQ $49.00 ... $1 inc.
IWM $72.00 ... $1 inc.
SMH $33.00 ... $1 inc.

Keene Little : 6/2/2008 3:34:27 PM

The equivalent level for the DOW is at 12495.

Keene Little : 6/2/2008 3:32:29 PM

If the bounce off today's low is to only get to the level where there will be two equal legs up, watch SPX 1385 for resistance.

Linda Piazza : 6/2/2008 3:29:56 PM

Now the VIX is dipping beneath the 15-minute 9-ema as the VXO did earlier.

Jeff Bailey : 6/2/2008 3:11:24 PM

Wachovia (WB) $23.32 -2.01% ... shuffled to #2 most active.

Jeff Bailey : 6/2/2008 3:10:38 PM

6-month bid-to-cover was 2.69 with high rate of 1.950%.

Jeff Bailey : 6/2/2008 3:09:36 PM

3-month bid-to-cover was 3.08 with high rate of 1.820%.

Jeff Bailey : 6/2/2008 3:07:56 PM

Bond market closed with buying focused on shorter-dated maturities after today's 3 and 6-month auctions.

The 13-week Treasury Yield ($IRX.X) fell 6.0 bp to finish at 1.790%, while the 5-year bond's yield ($FVX.X) fell a hefty 12.6 bp to 3.281%. Stepping out, the benchmark 10-year bond's yield ($TNX.X) fell 7.5 bp to 3.971%, while the longer-dated 30-year Treasury yield ($TYX.X) slid 2.8 bp to 4.679%.

Linda Piazza : 6/2/2008 2:56:39 PM

The OEX keeps testing and retesting that 15-minute 9-ema's resistance, and the fact that it has the strength to keep testing is good as far as it goes, but if it can't break through in a pronounced way soon, then bulls are going to back away. The 30-minute chart is showing a number of small-bodied candles right under the 630.88-631.30 resistance on 30-minute closes, so it's not showing particular strength yet, either. The OEX remains vulnerable to 628-628.50 and maybe even 626.40.

Linda Piazza : 6/2/2008 2:54:14 PM

Some bullish divergences are showing up on the USDJPY's 30-minute chart as it tests possible Keltner support again. The support extends from 104.12-104.26, with the USDJPY at 104.35. This isn't a sure-thing sign that the USDJPY will bounce and bring equities higher, too, but it's a sign that it's time to adjust your what-if profit-protecting plans if in short-term bearish positions.

Keene Little : 6/2/2008 2:55:01 PM

Another high-flying stock that I haven't updated in a while is BIDU. Back in April I had mentioned that it would likely rally into the 380-385 area (78.6% retracement of the Nov-Mar decline and two equal legs up from March) and find resistance. It hit 382.90 on May 7th and then did a retest by hitting 382.35 on May 19th, leaving a BIG bearish divergence at that double top. It then broke below the "valley" between the tops so it confirmed the double-top reversal pattern.

For an initial downside projection, two equal legs down is near 290. The interesting thing about that level is that it's also the 38% retracement of the Nov-Mar decline and the 50% retracement of the Mar-May rally. So it makes for a good projection from here and a good support level to look for a bounce (assuming it gets there). Daily chart: Link

Linda Piazza : 6/2/2008 2:51:25 PM

The OEX's 15-minute 9-ema again holds as resistance, but the OEX hasn't given up testing it yet. That's now at 630.20 with the OEX at 629.96 as I type. The OEX has more significant resistance on the 30-minute chart at 630.87-631.30.

Jeff Bailey : 6/2/2008 2:47:56 PM

IWM's Monthly Pivot Levels ... $69.53, $71.99, Piv= $73.51, $75.97, $77.49.

Linda Piazza : 6/2/2008 2:46:56 PM

The VIX has potential resistance on 15-minute closes at 20.40 and again at 20.50. The VIX is 20.27 as I type.

Linda Piazza : 6/2/2008 2:43:15 PM

Those hoping for a steadying of the OEX don't want to see a new low of the day, of course. More specifically, they don't want to see potential support now at 628.78 lost on 30-minute closes. The OEX remains vulnerable to a downside target now at 626.40, although it's not a given it will reach it.

Linda Piazza : 6/2/2008 2:35:57 PM

The OEX's 15-minute 9-ema is still holding as resistance. If this is broken, next potential resistance is now at 631.35.

Next potential support is 628.16 on 15-minute closes, and it's possible that could get tested. The OEX remains vulnerable to that and possibly also to 626.43.

Jeff Bailey : 6/2/2008 2:34:08 PM

We have not observed a VIX.X trade at MONTHLY R1 since March.

Jeff Bailey : 6/2/2008 2:32:55 PM

VIX.X 20.24 +13.51% .... session high has been 20.45. Juuuuuust shy of MNTHLY R1.

Jeff Bailey : 6/2/2008 2:31:22 PM

Sector Losers ... Networking -4.12%, Airlines -3.55%, HMOs -3.11%, Broker/Dealers -2.58%, Software -2.21%

Linda Piazza : 6/2/2008 2:30:52 PM

The VIX just tested its 15-minute 9-ema, now at 20.17. The earlier test today resulted in a bounce into a new high. Let's see what happens. So far, the support is holding just as the resistance is holding on equity charts. That means that so far, there has not been an overall change in tenor, but remain watchful just in case. The VXO, the old VIX based on OEX options is just now, as I type, violating its 15-minute 9-ema.

Jeff Bailey : 6/2/2008 2:30:00 PM

Sector Winners ... Gold Bugs +0.62% and AMEX Nat. Gas +0.58%

Jeff Bailey : 6/2/2008 2:28:42 PM

Daimler (DAI) $75.20 -1.09% ...

General Motors (GM) $17.53 +2.51% ...

Jeff Bailey : 6/2/2008 2:27:47 PM

Cerberus denies selling stakes in Chrysler, GMAC to other investors ...

Linda Piazza : 6/2/2008 2:26:26 PM

Although there was a 15-minute close a few cents above the 15-minute 9-ema, it wasn't a convincing break of resistance. So far, that resistance, now at about 630.36 still holds as resistance on 15-minute closes.

Jeff Bailey : 6/2/2008 2:22:26 PM

02:00 Internals found at this Link

Keene Little : 6/2/2008 2:20:28 PM

We've got a little bounce going now so this is the one that could be the start of a day-long consolidation before pressing lower (if it's to press lower). The caution still stands about the potential for the pullback to be finished and now we'll start another rally leg. I won't have a better feel for which scenario will play out until we get more of a consolidation, or rally.

Jeff Bailey : 6/2/2008 2:18:03 PM

Corn/wheat getting long-due oversold bounce today.

Linda Piazza : 6/2/2008 2:13:29 PM

The OEX test of its 15-minute 9-ema is going on as I type. So far, the OEX maintains a potential downside target at 626.37, but a sustained 15-minute close above that 9-ema would question that target. That 9-ema is now at about 630.48.

Jeff Bailey : 6/2/2008 2:13:15 PM

Tesoro (TSO) $26.60 +7.08% ...

Jeff Bailey : 6/2/2008 2:12:54 PM

Permian Basin Trust (PBT) $23.18 +1.22% ...

Jeff Bailey : 6/2/2008 2:12:11 PM

Euro CurrencyShares (FXE) $155.51 -0.35% ...

Jeff Bailey : 6/2/2008 2:10:44 PM

US Nat. Gas Fund (UNG) $56.63 +1.61% ...

Jeff Bailey : 6/2/2008 2:10:20 PM

US Gasoline Fund (UGA) $62.85 +0.78% ...

Jeff Bailey : 6/2/2008 2:09:45 PM

US Oil Fund (USO) $102.88 -0.17% .... slips back into the red.

Linda Piazza : 6/2/2008 2:02:02 PM

The OEX's 15-minute 9-ema is now 630.39; the SPX's, 1382.31. These are potential resistance on 15-minute closes.

Jeff Bailey : 6/2/2008 1:47:32 PM

Most Actives ... QQQQ $49.10 -1.81%, MSFT $27.60 -2.54%, CSCO $26.39 -1.23%, SPY $138.39 -1.39%, DELL $22.82 -1.04%, ORCL $22.42 -1.83%, INTC $22.92 -1.12%, YHOO $26.26 -1.86%, GM $17.44 +1.98%, AAPL $184.91 -2.03%

Jeff Bailey : 6/2/2008 1:44:25 PM

Standard & Poors Places Wachovia on CreditWatch Negative ... Citing today's resignation of Wachovia's (WB) $23.09 -2.94% CEO Ken Thompson, the ratings firm placed it 'AA-/A-1+' counterparty credit rating on the bank and its counterparty credit rating on rated subsidiaris on CreditWatch Negative.

Linda Piazza : 6/2/2008 1:44:28 PM

The OEX's 15-minute 9-ema is now 630.66. That has been resistance on 15-minute closes since late Friday afternoon.

Linda Piazza : 6/2/2008 1:39:55 PM

We're about to move into a typical stop-running time of day, so I've been looking at charts, trying to determine whether the OEX is likely to fall into its 626.26 potential downside target this afternoon or even a possible lower target now at 623.88. I see that the A/D line is currently sinking toward its low of the day again, although there's potential bullish value/RSI divergence there. I see the VIX consolidating just beneath next potential resistance on 15-minute closes at 20.54. There's not a lot to go on there, except that the A/D line could attempt to follow through on that tentative bullish divergence and bounce or the VIX could attempt to reach for that next upside target. One would be positive for indices such as the OEX and the other, negative.

Jeff Bailey : 6/2/2008 1:29:41 PM

Standard & Poors Removes Citigroup from CreditWatch ... Just after 12:30 PM EDT, the ratings firm affirmed its 'AA-/A-1' credit rating on Citigroup (C) $21.30 -2.69% and the company's units. The ratings firm also said it has removed all these ratings from CreditWatch, where they were placed on April 15, 2008, with negative implications. The outlook on all Citigroup companies is negative. The ratings firm said, "Despite the challenges facing Citigroup over the next two (2) years because of deteriorating consumer credit, its fundamental earnings power is unimpaired."

Jane Fox : 6/2/2008 1:25:50 PM

SPX's swing low at 1370 needs to hold or the trend will change to down, a trend that has been in place since March 17th's bottom at 1250. Link

Jeff Bailey : 6/2/2008 1:24:42 PM

Bank of America (BAC) $33.32 -2.02% ... S&P refising it outlook on the banking giant and various units to "negative" from "stable." The ratings firm said that it is affirming its 'AA/A-1+' credit rating on the bank and its units. S&P said, "The rating action reflects our concern regarding the weak U.S. economy and its impact on consumer lending."

Jeff Bailey : 6/2/2008 1:20:00 PM

Standard & Poors Revises Outlook to Negative for Bank of America (BAC) $33.35 -1.94%.

Jeff Bailey : 6/2/2008 1:18:30 PM

Lehman Bros. (LEH) ... S&P lowering its rating to 'A' from 'A+'; Outlook Negative. Affirmed 'A-1' short-term rating. Rating action is in conjunction with review of global securities industry. S&P saying today's downgrade primarily reflects concern that the pace and extent of earnings improvement could be considerably more muted than previously assumed. The ratings firm expects a relatively MEANINGFUL deterioration in the company's Q2 performance owing to slower business trends, additional write-downs on certain troubled exposures, and the negative effects of hedges due to basis risk and de-leveraging of the balance sheet.

Jeff Bailey : 6/2/2008 1:12:05 PM

Standard & Poors Cuts Ratings on Lehman Bros. (LEH) $33.95 -7.76%, Merrill Lynch (MER) $41.68 -5.10% and Morgan Stanley (MS) $42.48 -3.95% saying, "The outlooks on the large financial institutions sector in the U.S. are now predominantly negative."

Keene Little : 6/2/2008 1:04:45 PM

SPX is dropping back down towards its downtrend line from October, which it tested on the pullback in early May and again last week. That line is currently near 1376. The 50-dma is at 1379.90 so it's trying to find support at it right now. We haven't yet seen a consolidation (in time) that matches Friday's so perhaps around the downtrend line we'll see it (dark red on this 60-min chart): Link

The bears will want to see that downtrend line break once and for all and of course the bulls want to see price find support here (50-dma) or slightly lower and then rally back up. The pink wave count calls for another rally leg above last week's high and the 1415 area would be a good target if it does rally. With today's hard decline that bullish possibility is looking less and less likely.

Linda Piazza : 6/2/2008 12:55:37 PM

The VIX has potential next resistance on 15-minute closes at about 20.60. It's now 20.39, finally achieving that new high of the day. Think Keltner resistance and/or support is ridiculous to consider for the VIX? It's not foolproof, of course, but take a look at how it behaved near support and how it behaved when it tested the thin red 9-ema earlier: Link

Linda Piazza : 6/2/2008 12:47:16 PM

The VIX did bounce from its 15-minute 9-ema test (although not yet into a new high for the day) and the OEX did turn down from its 15-minute 9-ema test, as I had worried it might do when I posted my 12:28:30 comments about watching for VIX support and equity resistance to kick in. Next potential Keltner support on the OEX is 626.10 and for the SPX, 1371.62. However, remain cautious about your expectations since we haven't yet had a new VIX high of the day to match this new equity low of the day.

Keene Little : 6/2/2008 12:42:14 PM

The DOW has now broken below last Monday's low. But the short term charts are hinting of bullish divergence so be careful chasing it lower at this point.

Keene Little : 6/2/2008 12:40:39 PM

It doesn't look like the market is ready to consolidate the decline yet as it drops to new lows across the board.

Jane Fox : 6/2/2008 12:40:28 PM

This from 247WallSt.com

Hedge Funds Dump Oil, OPEC Gets Tested If the smart money is right, the price of oil is going down. According to Bloomberg "Hedge-fund managers and speculators reduced bets on higher oil prices by 80 percent since July as crude futures rose to records and U.S. regulators started investigating trading."

If the movement out of crude continues, firms with long bets in oil may start to lose money. As they sell out of their positions, prices should start to move lower.

The falling interest in betting that oil will go higher should expose the extent to which real global supply and demand are supporting crude. OPEC continues to insist that prices are unnaturally high because of speculation. Their theory is about to be tested.

Those who support the "fundamental" theory of oil price movement believe that crude is at $130 or so because supply is dwindling in places like Mexico and Russia. Oiler fields pump less. More oil is kept "in country" for cars, trucks, and infrastructure building.

On the other side of the coin, the demand for oil is not dropping much in the US and it is still rising in big countries like China and India.

As financial players move out of the market, OPECs theory gets tested. It may be found wanting.

Jane Fox : 6/2/2008 12:37:04 PM

SAN FRANCISCO (MarketWatch) -- August gold climbed $9, or 1%, to trade at $900.50 an ounce Monday afternoon, after trading as low as $890 earlier in the session. Gold climbed with the U.S. dollar finding renewed pressure as stocks slumped and oil futures strengthened.

Jeff Bailey : 6/2/2008 12:36:46 PM

NASDAQ Launches Free, Real-Time Quotes : In an effort to bring down the wall separating investors and exchange data, NASDAQ now providing free real-time stock quotes through its Web site and other outlets.

Jane Fox : 6/2/2008 12:36:16 PM

Gold is making a bold move here and looks to be in the process of building a higher low so the trend is still up. Link

Jeff Bailey : 6/2/2008 12:32:20 PM

Bolivia's President ... Announces country's nationalization of Transredes Pipeline Co.

Linda Piazza : 6/2/2008 12:32:44 PM

The OEX did, during the previous 30-minute period, hit its potential support on 30-minute closes, at 630.94 now. It might test it again, although that's not a given. If values below that support are sustained on 30-minute closes, the OEX sets a potential downside target at 626.33, but it's not set yet.

Jeff Bailey : 6/2/2008 12:29:39 PM

Fed's Lockhart: ... While not discussing Fed interest rate policy, some of the headlines have Mr. Lockhart (president of the Federal Reserve Bank of Atlanta) saying it is to soon to breath easy on U.S. economy and that inflation remains a worry for central bankers worldwide.

US jobless rate is weak, and softening US economy has kept many companies from raising prices.

On the housing front, Mr. Lockhart thinks the pace of housing declines could slow, but weakness in the housing sector combined with the surge in oil prices creates financial istability near-term.

Linda Piazza : 6/2/2008 12:28:30 PM

It's taken a long time since my 11:36:48 post, but the VIX is now sitting right above its flattening 9-ema. That 9-ema is now 19.70 and is potential support on 15-minute closes. However, since it's flattened, its support might not be quite as strong and I wouldn't be surprised to see the VIX dip to 19.58 or so. Whatever happens, it's time now to watch for potential VIX support and potential equity resistance to kick in . . . or not. That's hopefully going to tell us something about next direction.

The OEX's 15-minute 9-ema is now 633.04; the SPX's, 1388.24. Both indices have stronger resistance layered above, too.

Linda Piazza : 6/2/2008 12:22:34 PM

My Trader's Corner article for this weekend has already been roughed out, but I wanted to bring up its topic today: the TED spread. I won't go into a lot of detail now, except to say that it's a measure of risk that compares what's happening with our Treasury bills and the LIBOR. A widening of the TED spread is not a good thing for equities, usually.

I can't get the quotes on my quoting service, so I'm including a Bloomberg chart. I can't annotate that chart, so let me explain what worries me. When you look at the chart, imagine drawing a wide descending channel from last August's high. Imagine the bottom supporting line. The TED spread hasn't quite hit it, but it's approached it, and it's turning back up again. From a contrarian standpoint, we might be seeing too cavalier an attitude toward risk, an attitude that might be in danger of resulting in some pain again. It might be (emphasis on "might" because this is anecdotal evidence only) a bit dangerous if the TED spread should spike above 1.00 again. Link

Jeff Bailey : 6/2/2008 12:21:40 PM

USO $104.25 +1.15% ... 5DyNet% -1.65%; 20DyNet% +2.41%

UGA $63.15 +1.26% ... 5DyNet% +0.65%; 20DyNet% +6.36%

Jeff Bailey : 6/2/2008 12:20:00 PM

Refiners notably strong today ... HOC $47.35 +11.54%, FTO $32.88 +9.19%, TSO $26.94 +9.41%, VLO $52.42 +3.10%

Jeff Bailey : 6/2/2008 12:17:51 PM

12:00 Internals found at this Link

Jane Fox : 6/2/2008 12:14:42 PM

The S&P futures made a double bottom but the VIX did not make a double top telling you the double bottom would hold. Link

Jeff Bailey : 6/2/2008 12:11:56 PM

Euro CurrencyShares (FXE) $155.51 -0.35% ...

Jeff Bailey : 6/2/2008 12:08:39 PM

US Oil Fund (USO) $104.50 +1.39% ... sticks its head back above the June Crude Oil futures final settlement benchmark of 05/20/08 @ USO $104.30.

Keene Little : 6/2/2008 12:05:59 PM

An equivalent 38% retracement for SPX is at 1392 so the bulls want to see a bounce get above that level and the bears want to see more of a sideways consolidation stay below 1392 and then drop lower. Again, the consolidation, if the 3rd wave down is finished, should last the rest of the day.

Keene Little : 6/2/2008 12:01:09 PM

In order for the decline from last Thursday to turn into an impulsive decline we'll need to see a consolidation near today's lows (which could last a full day) followed by another move lower. Right now the move down from Thursday is a 3-wave move and as such could be considered simply a pullback correction (even if it drops to a marginal new low below last Monday's). A 3-wave pullback could then lead to another rally leg back up above last Thursday's highs.

The DOW is essentially testing last Monday's low now and trying to bounce. Considering the fact that it could rally back above 12700, decide how much you're willing to give back if you're short. As a guide, I would not expect to see a retracement of more than 38% of today's drop if it's to continue lower and give us the impulsive decline. For the DOW that means the bounce should stay below 12550 and I would have my stop not mucher higher than that.

Jeff Bailey : 6/2/2008 11:59:35 AM

ImClone Systems (IMCL) $40.99 -5.94% Link ... Shares have tested critical near-term support above the $40.00 level. This weekend's presentation at the world's top cancer meeting in Chicago for its Erbitux did not amount to a knockout blow for the rival treatment Avastin from Roche Holding and Genentech (DNA) $73.08 +3.11% Link

Jeff Bailey : 6/2/2008 11:45:50 AM

China Unicom (CHU) $22.79 ... Announced today that it will acquire fixed-line operator China Netcom (CN) $61.97 Link , which has also been halted for trade since 5/22/08, in a share swap.

Jeff Bailey : 6/2/2008 11:41:55 AM

China Telecom (CHA) $71.16 Link ... and China Unicom (CHU) $22.79 Link ... shares remain halted. Today, China Tel confirms that it and its parent will buy China Unicom and its parent company's Code Division Multiple Access network and business in a share swap valued at $56.3 billion.

Trading in CHA is expected to resume Tuesday, if not later today.

Linda Piazza : 6/2/2008 11:36:48 AM

It looks to me as if the VIX is likely to approach and maybe test its 15-minute 9-ema, now at 19.60. That's not a given, but it's certainly a possibility. If it happens, equities may rise up to test their 15-minute 9-ema's, too, and then we see what happens as a result. I would watch for possible VIX support and SPX and OEX resistance to kick in if that should happen.

Keene Little : 6/2/2008 11:33:52 AM

GOOG still has me a little baffled as to what it's up to. The pullback from the May 2nd high looks like a correction which says we should get another rally leg above that May 2nd high (602.45). GOOG has broken above its downtrend line from December and looks like it's testing it today (which is just above its 200-dma at 572.14): Link

If GOOG can hold support then another jump up to what I see as resistance near 610 should be the next move. It takes a break below 550 to negate that slightly bullish expectation and point GOOG lower. I say slightly bullish because even if it manages to rally up to the 610 area it should then be set for another larger pullback at a minimum.

Jeff Bailey : 6/2/2008 11:30:39 AM

Royal Bank of Scotland's (RBS) $4.53 -4.83% Link and Barclays PLC (BCS) $28.95 -3.27% Link offices were raided by the U.K. Office of Fair Traiding according to Sky News television reports. The raid was connected with a probe into price-fixing in the companies' commercial banking units.

Linda Piazza : 6/2/2008 11:30:03 AM

Here's something to watch on the VIX's daily chart: Link

Jeff Bailey : 6/2/2008 11:21:13 AM

Wachovia (WB) $23.03 -3.23% Link ... Nation's 4th largest bank said that Ken Thompson is retiring as CEO after being asked to leave by company's board of directors. The company named current chairman, Lanty Smith, as interim CEO.

Linda Piazza : 6/2/2008 11:20:15 AM

I'm watching the TRAN carefully because it ended last week jammed up against potential Keltner resistance on daily closes. I'm also watching because, since 4/30, it's been setting up in a widening formation at the top of its climb. Such broadening formations are typically bearish, although you haven't been able to tell that over the last 7-8 years because a lot of them have broken to the upside. So, I'm not making any assumptions, but I wanted to see if the TRAN did turn down today and whether it looks as if it might head back down sometime this week to test support from that broadening formation and how it would behave if it did so. So far, it's turning lower, but it's still well above potential support at the daily 9-ema, now at 5341.

Jeff Bailey : 6/2/2008 11:16:31 AM

Acorda Therapeutics (ACOR) $28.06 +30.00% Link ... Shares soar after the biotechnology company said its multiple sclerosis drug candidate Fampridine-SR met its goal in a late-stage trial. The company said it now plans on submitting an application to the FDA in the first quarter of 2009 and is requesting priority review, meaning the agency will take six months to review the application, instead of the standard 10 months.

Keene Little : 6/2/2008 11:13:05 AM

CME is breaking down today and it has dropped below the bottom of a potential bull flag pattern that it's been in since the April high. It has also now broken below its May and August 2006 lows. It has not yet broken below its quick spike down to 399.01 in March (currently trading near 412). As shown in pink on the daily chart it's still possible the pullback from April is part of a larger correction pattern that will see another rally leg into the latter part of this month.

But that short-term bullish possibility means it can't drop much lower than here (with just a throw-under below the bottom of its flag pattern). If CME continues lower we should see a minimum downside move to 338. That would be about a -53% haircut from its December high. Link

Jeff Bailey : 6/2/2008 11:11:11 AM

Sector Losers ... Networking -4.01%, Airlines -3.50%, HMOs -2.00%, Broker/Dealer -1.89%, Money Center Banks -1.72%, Home Construction -1.70%, Regional Banks -1.61%

Jeff Bailey : 6/2/2008 11:08:33 AM

Sector Winners ... AMEX Nat. Gas +1.08%, CBOE Oil +0.53%, Oil Service +0.48%, Gold Bugs +0.48%

Jeff Bailey : 6/2/2008 11:06:44 AM

Most Actives ... QQQQ $49.46 -1.09%, MSFT $27.93 -1.41%, INTC $23.12 -0.25%, DELL $23.08 +0.08%, QID $38.33 +2.73%, SPY $138.90 -1.03%, CSCO $26.68 -0.14%, ACOR $28.39 +31.67%, MRVL $17.10 -1.49%, WB $22.94 -3.61%

Jeff Bailey : 6/2/2008 11:03:49 AM

13-week Treasury notes currently yielding 1.830%.

Linda Piazza : 6/2/2008 11:03:27 AM

The 15-minute 9-ema for the A/D line is now about -850 with the A/D line currently -1087.

For the OEX, the 15-minute 9-ema is currently 634.44; for the SPX, 1390.64. Bears want those all to hold as resistance on 15-minute closes.

Jeff Bailey : 6/2/2008 11:03:20 AM

US Treasury announcing it plans to auction $23 billion in reopened 4-week bills tomorrow.

Linda Piazza : 6/2/2008 10:44:40 AM

A/D line trying to steady as are indices such as the OEX. The A/D line now has potential resistance on 15-minute closes at about -1145, but a typical thing to have happen now would be for it to either trend sideways until the descending 9-ema catches up or else to rise up to test that moving average, bringing indices up into a bounce attempt as it does. That 9-ema is now at -713 and the A/D line is now -1193. I caution, though, that it's not until we see whether the A/D line bounces and how it behaves after it does that we have any idea if the low has been hit.

Jeff Bailey : 6/2/2008 10:42:13 AM

Euro CurrencyShares (FXE) $155.30 -0.49% ...

Jeff Bailey : 6/2/2008 10:41:31 AM

US Oil Fund (USO) $103.34 +0.27% ... inches green.

Keene Little : 6/2/2008 10:35:55 AM

The DOW is back down onto its uptrend line from March 2003 (near 12495), where it found support last Monday (poked slightly below it). As shown in pink on the daily chart it's possible we could get another rally leg to create a larger bounce off last Monday's low but it would still be bearish. But from a short-term trading perspective stay aware of the possibility (although it's looking less and less likely as this morning's decline continues). Link

Linda Piazza : 6/2/2008 10:33:32 AM

Potential Keltner support on 30-minute closes for the OEX is now 630.81; for the SPX, it's 1381.90. As I noted earlier, however, the OEX is testing a rising trendline off Tuesday's low, now about 632.58, and that could provide some support, too. Consider the OEX vulnerable to 630-631, but don't consider it a done deal that the OEX will hit that.

Jeff Bailey : 6/2/2008 10:31:39 AM

Permian Basin Trust (PBT) $22.94 +0.17% ... inches green.

Jeff Bailey : 6/2/2008 10:30:52 AM

July Nat. Gas (ng08n) $12.040 +2.87% ... sticks its head above June's futures expiration settlement.

Linda Piazza : 6/2/2008 10:30:37 AM

Last week, a financial writer on another source was writing with some concern about a blowout the week before in credit default swaps. This is a potential signal of another unraveling of credit conditions. If the rest of you are as hazy as I am on what exactly a credit default swap might be, I thought you might be interested in a NYT article published yesterday, using on ongoing battle between UBS and Paramax Capital as a skeleton on which to hang definitions and information about credit default swaps. Here's the link: Link

Jeff Bailey : 6/2/2008 10:28:44 AM

NASDAQ a/d 725:1,915

Jeff Bailey : 6/2/2008 10:28:32 AM

NYSE a/d 778:2,086

Jeff Bailey : 6/2/2008 10:27:54 AM

Inside the May Mfg. Business Index ...

Prices Paid Index rose to 87.0 from April's 84.5
Employment Index 45.5 vs. April's 45.4
New Orders Index 49.7 Vs. April's 46.5
Production Index 51.2 Vs. April's 49.1
Inventories Index 48.0 Vs. April's 48.1.

Jeff Bailey : 6/2/2008 10:25:03 AM

At 10:00 AM EDT additional economic data had the US ISM May Mfg. Business Index at 49.6, which was slightly better than the 48.5 consensus. Readings below 50.00 signal contraction. April's ISM Mfg. Business Index was 48.6.

Jeff Bailey : 6/2/2008 10:22:06 AM

At 10:00 AM EDT economic data released had US Construction Spending falling 0.4% in April; Consensus was for a decline of 0.5%. March's construction spending was revised to -0.6% from -1.1%.

Linda Piazza : 6/2/2008 10:22:01 AM

The OEX now has significant potential resistance on 15-minute closes from 636-638.35, with the locus of that resistance at about 636.57-637.38. If the OEX does bounce that high, it's likely to stall at that level.

The analogous level for the SPX stretches from 1393.64-1397.76, with the strongest locus at about 1393.6-1394.10.

Linda Piazza : 6/2/2008 10:19:31 AM

The OEX now has a potential downside target of 630.86, according to the 30-minute chart. However, it's currently testing a rising trendline off Tuesday's low, so that trendline support could trump the Keltner setup. Factor in possible vulnerability to 630-631, but do be aware of that trendline support perhaps kicking in as the A/D line is testing potential support, too. Just keep your bearish profit-plan updated.

Jeff Bailey : 6/2/2008 10:17:28 AM

10:00 Internals found at this Link

Note: It would take a closing session measure of 40.00% or higher for the NASDAQ 5-day NH/NL ratio to see a 3-box reversal back higher.

Linda Piazza : 6/2/2008 10:17:14 AM

No support yet in the A/D line. Just be aware that it's reaching into levels where support could begin to kick in at any time. The A/D line doesn't have to do much to stay very bearish at this point--just mostly consolidate sideways--but you don't want to let that support kick in, a bounce and then a retest with bullish divergence occurring and you not be aware of it and able to plan accordingly, either. The A/D line is currently -1287.

Keene Little : 6/2/2008 10:11:38 AM

So much for a little consolidation--just heading lower. SPX has now firmly broken below its key downside level at 1389.71 (last Wednesday's high) so it too has left a 3-wave bounce off last Monday's low.

Keene Little : 6/2/2008 10:08:57 AM

We could get a little whippy consolidation near this morning's lows for about a half hour and then another leg down. That would complete a 5-wave move down from Friday afternoon and set up a larger bounce at a minimum.

Linda Piazza : 6/2/2008 10:07:51 AM

Here's a chart showing where the A/D line is currently and why I'm watching for potential support. Link

Linda Piazza : 6/2/2008 10:04:55 AM

The A/D line is hitting potential support. This is often significant support for the A/D line, particularly when it occurs with the RSI below 30, as it is now. However, that doesn't mean that the indices will now mount a bounce that lasts the rest of the day. In my old daytrading days when I used the A/D line as a guide to entries and exits, I began noting that the A/D line often bounce a little and then came down and tested support again, this time creating bullish value/RSI divergence, before it could maintain any bounces. That's not always necessary, of course. The truth is that all the A/D line has to do now is maintain a sideways movement and it's still bearish. Do, however, watch for bounce potential now and guard your bearish profits just in case.

Jeff Bailey : 6/2/2008 9:54:37 AM

Weekly, Monthly, Quarterly Index Pivot Matrix found at this Link

Linda Piazza : 6/2/2008 10:05:12 AM

The OEX has broken below the potential Keltner support on 15-minute closes as well as the trendline support from the flag-like formation in which it has pulled back since Thursday's high. If it closes this first 30-minute period below 637.40-637.70, then it's set a potential downside target of 631 or so. Be aware that the downside target would be set at about the same time that the market-moving ISM is released, and that could undo everything.

As I type, the A/D line is -1025 and fast approaching potential support now at about -1160.

Keene Little : 6/2/2008 9:53:15 AM

Uptrend lines from last Monday's lows have now been broken. Watch for a bounce to retest those lines (might not get it) for another short play setup.

Keene Little : 6/2/2008 9:41:27 AM

The DOW has overlapped the 12600 high on Wednesday and that leaves last week's bounce as a correction to the decline. But, and this is a big but, it's still possible we're going to see a larger upward correction. It does not negate the probability that we're going to see a continuation of the decline from the May 19th high but we just don't know if it will happen from here or after another bounce back up. Therefore manage your stops appropriately if short.

Linda Piazza : 6/2/2008 9:39:39 AM

Please keep in mind that the monthly chart for the OEX and SPX showed doji for May on both charts. These were doji at the top of a climb, albeit a short one as monthly charts go, so it's a potential reversal signal. Bulls really don't want to see a bearish start to this week.

Linda Piazza : 6/2/2008 9:37:54 AM

Keltner outlook on the A/D line: The A/D line gapped below potential support at +11 on the 15-minute chart. If it doesn't bounce by the end of this 15-minute period and regain that level, then it's lost that support. The Keltner chart then shows a vulnerability to a drop to about -1150. If it closely approaches that level, I would begin watching for bounce potential in the A/D line and, therefore, in the equities. Then we see how far it gets. The A/D line is -663 as I type and still dropping.

Linda Piazza : 6/2/2008 9:33:10 AM

The SPX has potential support near 1395-1396 on the 15-minute and 30-minute charts with the flag's trendline support at about 1393.50-1394.

Keene Little : 6/2/2008 9:23:29 AM

Even with equity futures off their overnight lows the bulls are not going to get the positive open that they needed in order to keep the bullish price pattern alive. Important levels look like they'll get broken and that will set a bearish tone. Shorting the rallies should be the right way to play it today.

Linda Piazza : 6/2/2008 9:15:50 AM

Once again we find ourselves trying to estimate where the OEX might go this morning, based on what's happening with the futures' action, and that's proving particularly difficult. The difficulty arises from the presence of presumed strong support on 15- and 30-minute closes down to 637.27. As well, there's potential channel (from the flag-like retreat from Thursday's high) now at about 636.50.

So, if the OEX behaves in accordance with the action of the futures, we would likely see a test of the 636.50-636.25 level, a level of potential support and within the OEX's choppy consolidation pattern over the last week. Where does it go next?

One scenario would be that the OEX drops down to test that level during the early trading period--still not a given--and then either reacts positively or negatively to the ISM. The daily chart suggests almost equal chances of the OEX retreating eventually to 609-611 as it does of the OEX climbing toward 665-666. Well, in actuality, it looks as if the OEX is going to retreat toward 609-611 without that precluding a punch up to 665-666 before doing so.

Linda Piazza : 6/2/2008 9:08:39 AM

We have a Fed speaker on tap today, too. I believe at 12:20 ET, Atlanta Federal Reserve President and CEO Dennis Lockhart will be speaking on the economy. I can't find it listed anywhere on any schedules for the day, including on the Atlanta Federal Reserve's page, but I heard it mentioned in the wee hours last night while watching CNBC Europe. There are some benefits to insomnia, it seems.

Linda Piazza : 6/2/2008 9:04:31 AM

Jane has just mentioned the ISM number. I would like to add a caution that traders factor that 10:00 release and the concurrent release of the construction spending, into their trading plans. the ISM, in particular, might be a market mover. Decide before the open whether you want to open or hold trades before that release.

Jane Fox : 6/2/2008 9:03:30 AM

Here are your overnight charts. As you can see both the S&P (ES) and Dow (YM) futures broke their respective previous day lows but the NDX (NQ) and Russell 2000 (ER2) did not.

ES and YM are both finding their previous day lows resistance now. Link

Jane Fox : 6/2/2008 9:00:58 AM

On the data front, the Institute of Supply Management will release its manufacturing index for May, which is still expected to show a reading below 50%, indicating economic contraction.

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