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OI Technical Staff : 6/27/2008 9:59:59 PM

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Jeff Bailey : 6/27/2008 5:34:02 PM

Companhia Vale do Rio Doce (RIO) $35.42 -0.30% ... Did edge back to flattening 150-day SMA. RIO-HK $1.53 x $1.58.

Jeff Bailey : 6/27/2008 5:30:36 PM

Yen CurrencyShares (FXY) $93.98 +0.42% ... tapped its 150-day SMA today. First since closing below on 6/09. FXY-HO $2.15 x $2.30.

Jeff Bailey : 6/27/2008 5:27:27 PM

AMR Corp. (AMR) $5.35 -2.72% ... AMR-GA $0.85 x $0.90

Jeff Bailey : 6/27/2008 5:26:03 PM

NVIDIA (NVDA) $19.28 +1.10% ... did retrace 80.9% of its 3/17 to 6/05 advance this morning. UVA-IX $0.85 x $0.95.

Jeff Bailey : 6/27/2008 5:22:41 PM

HSBC Holdings (HBC) $76.55 -1.78% ... has retraced just less than 61.8% of its 02/11/08 to 05/02/08 advance.

HB-CUP $6.80 x $7.20.

Jeff Bailey : 6/27/2008 4:59:44 PM

UltraShort Russell 2000 (TWM) $78.86 -0.50% ... Next Week's WEEKLY Pivot Levels are ... $67.77, $72.31, Piv= $75.42, $79.96, $83.07.

Did see trade today's at MONTHLY R2.

H/S bottom pattern (60-minute interval) still in play to $81.50.

Linda Piazza : 6/27/2008 4:10:48 PM

It's been a tough week. You survived it in some shape or another. If you did badly, consider it a learning experience. Learn from it and maybe you'll find, a year from now, that the lessons you learned this week will result in better trading practices that allow you to live on what you earn from your trading. It's natural to feel shame when you've had a bad week, so let yourself wallow in a little, but shame really doesn't do you or your trading much good. It's much more productive to learn from it. One of my biggest losses ever resulted in a whole new way of dealing with credit spreads that has enabled me to keep trading and earning money.

So, spend time this weekend with those who mean something to you or doing something that's meaningful to you. Schedule some worry time if you must, but keep your worrying to that period of time. You can't change anything that's going to happen Monday morning by worrying all weekend.

Jeff Bailey : 6/27/2008 4:04:46 PM

USO and RUT.X threatend "doji" closes.

Jeff Bailey : 6/27/2008 4:03:12 PM

VIX.X 23.60 -1.37% ...

Jeff Bailey : 6/27/2008 4:02:27 PM

Swing trade call alert! ... for two (2) of the Companhia Vale do Rio Doce RIO Aug $37 Calls (RIO-HK) at the offer of $1.58.

RIO $35.42 -0.30% ...

Linda Piazza : 6/27/2008 4:00:43 PM

Barring a big move into the last few minutes of trading, it looks as if we'll get the indecision-version of the small-bodied (relative to the candle that preceded it) candle for today on the OEX. That, unfortunately, means you have to prepare for almost anything Monday morning, including a reversal, another 1-4 days of consolidation around the 580 level or a big drop that continues this week's. Make sure that you aren't carrying too much risk on either the bullish or bearish side this weekend.

Linda Piazza : 6/27/2008 3:50:20 PM

The OEX's breakdown benchmark is now 582.03. The OEX is 581.11 as I type. It's still possible for almost anyting to happen into the close, depending on whether bulls or bears are most anxious to exit.

Keene Little : 6/27/2008 3:41:25 PM

We got the quick dip down to near 1276 so as long as that holds and we start back up into the close it continues to look good for a bounce to 1295 on Monday. Consider that possibility for your planning for what you want to hold over the weekend.

Linda Piazza : 6/27/2008 3:35:27 PM

The OEX has dropped down to potential support on 15-minute closes at 579.32. This is part of the right-shoulder building on its newest potential inverse H&S as long as the OEX holds near this level and doesn't drop too much further than 579. However, all this week, we've seen these formations start to set up and then get invalidated, so the presence of this formation is no sign that it will be confirmed or that a bounce will result if it is. The OEX still needs to push above the breakdown benchmark now at 582.25 and stay there before there's a change in tenor.

Linda Piazza : 6/27/2008 3:32:57 PM

So far today on the OEX's daily chart, we have the potential for that small-bodied candle with upper and lower shadows that is a typical result after such a big-range such as yesterday's. If the OEX gains, it will become more bullish, a stronger potential reversal signal, particularly if the OEX should close above its open. Even then, it's only a potential reversal signal. On 6/23 and the succeeding days, I kept pointing out how many previous times during the downturn from May's highs the OEX had produced such potential reversal signals without any reversal. Still, one of these days, one of these potential reversal signals is going to result in a reversal, even if it's only for a climb lasting a few days.

If the OEX should decline further and close near the low of the day, the body of that candle will not be particularly small. In fact, if it doesn't bounce just a bit from its current 579.6 level, it won't be particularly small, either. If it closes near its low of the day, it will have left behind an upper shadow, but not enough to quantify that as a potential reversal signal. That would need a relatively long upper shadow in proportion to the candle size and that wouldn't happen if the OEX closed near the low of the day. A reversal could result from any candle, but it just wouldn't be predicted by the candle's shape.

So, these candle shapes should be used the way you'd use any other warning, such as a too-high put/call ratio or bullish divergences on charts or that sort of thing. Let them warn you and encourage you to make plans for what you'll do if price reacts. So, we wait to see what kind of candle is produced today, a small-bodied one that's either a stronger hint of potential reversal or else just a sign of indecision, or else just another red candle in a long decline.

Keene Little : 6/27/2008 3:25:01 PM

It's possible we'll see a return trip to the lows (or at least a greater retracement of the bounce off the lows) but so far it's looking like we'll get more of a sideways consolidation heading into the close which would set up another leg on Monday morning. I'll see how it looks just before the close as far as what's the greater likelihood for Monday morning. For some Fib relationships to work out in the bounce off this afternoon's low, and to achieve 1295 for the high of the bounce on Monday, I'd like to see 1276 hold on any pullback in the last hour.

Linda Piazza : 6/27/2008 3:16:09 PM

On a Keltner basis, the Nasdaq is outperforming the OEX and SPX. The Nasdaq is above that breakdown benchmark on its 15-minute chart and has been for a couple of 15-minute periods. That's at 2313.77.

Linda Piazza : 6/27/2008 3:12:17 PM

The breakdown benchmark on the OEX's 15-minute chart is still serving as resistance on 15-minute closes, so this bounce is still very tentative and can be easily and quickly reversed. We've seen some small signs of improvement, but the OEX is still in breakdown mode. We have yet another little inverse H&S setting up and its neckline is right along that benchmark.

So far, the 15-minute 9-ema, is still holding as support on 15-minute closes, as it has for about the last hour, with further support down at 579.88, and bulls want that to continue. Sooner or later, though, either this support or that resistance is going to be broken, but there's no guarantee which it will be as yet.

Linda Piazza : 6/27/2008 2:59:54 PM

The SPX maintained 15-minute closes above the 9-ema, with that at 1279.04 currently. It also is clinging to its 30-minute version at about 1281.15. Those hoping for gains want to see both maintained as support into the close of this 15- and 30-minute period. Bulls would like to see the SPX above the breakdown benchmark on its 15-minute chart, with that at 1283.23.

Bears, as mentioned in the post related to the OEX, you still have an easy job. Just put into effect your profit-protecting plan, whatever that plan was. As I've cautioned all week, do not let a profit turn into a loss.

Linda Piazza : 6/27/2008 2:57:17 PM

The 15-minute 9-ema held as support on that last 15-minute close and the OEX is clinging to the 30-minute 9-ema, with that now at about 581.68. Those hoping for further bounces want both to hold as support into the end of this 15- and 30-minute period.

Bears, you have an easy task, still. You just put into effect the profit-protecting plan you decided upon earlier today. That plan would depend on whether you've been in puts since early in May or since early this morning.

Linda Piazza : 6/27/2008 2:48:46 PM

The OEX is now testing its 15-minute 9-ema, with that at about 580.35. The OEX is 580.45. Those who hope for a steadying this afternoon want the OEX to bounce and bounce hard, preferably above 582.80 at least.

Tab Gilles : 6/27/2008 2:42:13 PM

Apple (AAPL) has rallied here in the last hour. After hitting an intraday low of $164.15 at 1:42, wouldn't be surprised if it retested its high of the day around $169.

Linda Piazza : 6/27/2008 2:38:11 PM

The signs of improvement? The OEX has broken well above the 15-minute 9-ema and the descending trendline off the day's highs. It closed the last 30-minute period at the 30-minute 9-ema, although not above it, but is now above it.

What does it still need to do to maintain the improvement? It needs, first of all to break above and maintain values above the breakdown benchmark on the 15-minute chart, with that now at 582.95. It needs a new high of the day, and, in the course of testing that new high of the day, it needs to maintain 30-minute closes above the breakdown benchmark on that chart, now at 584.75. That may be a tall order for the OEX. It may in fact need to pull back from its current test of the 15-minute breakdown benchmark and may need to pull back to retest the 15-minute 9-ema to see if it now holds as support on 15-minute closes. That's at 580.40.

Keene Little : 6/27/2008 2:36:05 PM

The SPX 60-min chart shows the setup going into Monday--a bounce back up to the bottom of its larger down-channel near 1295 to set up the next short play. Now we'll see if price follows through (in an a-b-c bounce). Link

Keene Little : 6/27/2008 2:32:23 PM

If SPX gets back above 1285 I'll exit most of my short positions (I covered a bunch at 1273) and go home mostly flat and relax. Bear market rallies can be killers of profit if you're short and I'm tired of giving money back to Ms. Market.

Keene Little : 6/27/2008 2:27:24 PM

So far SPX found support in the 1273 area (slight break lower) so as long as that holds we could see the market work its way higher into the close and I would not be interested in holding short over the weekend. But if the bounce looks corrective I will probably hold a few of my puts over the weekend just in case Monday turns out to be of the Black variety. Betting on that is low odds but it's possible. Crashes come out of oversold and we're oversold but there's been no sign of capitulation--just orderly, almost leisurely, selling. The bottom line is that SPX is holding support and that could set us up for a corrective bounce at least on Monday.

Linda Piazza : 6/27/2008 2:22:37 PM

The OEX is now above (although it hasn't closed above) the 15-minute 9-ema and is now testing the upper trendline of the little shape in which it's been descending today. There's a slight hint of a wedge shape to it, but it hasn't narrowed enough to be sure. Sustained 15-minute closes above 580.90 would signal a slight change in tenor and should put bears into a watchful mode, but it wouldn't prove anything as yet. Sustained 15-minute closes above 583.10 would be another sign that they need to be watchful, as would 30-minute closes above 581.50. If there's a pullback,as is starting as I type, those hoping for a steadying want to see the OEX find support on 15-minute closes at about 579.80.

Linda Piazza : 6/27/2008 2:16:55 PM

The SPX's 15-minute 9-ema is now at 1277.74 and its breakdown benchmark is 1284.46, so those hoping for a steadying want to see the SPX maintain 15-minute closes above that.

Tab Gilles : 6/27/2008 2:11:15 PM

Russell Rebalance Today Link

Linda Piazza : 6/27/2008 2:10:15 PM

The A/D line is bouncing a little but will begin facing potential resistance at -1000 and then, stronger from about -875 up to -740. Those who want markets to steady today really need to see it break above that -740 level and stay there.

Linda Piazza : 6/27/2008 2:07:21 PM

The OEX's 15-minute 9-ema is now at about 579.70 (jumping around a bit). The OEX is at 578.88 as I type, having closely approached that moving average and fallen back a bit, but with lots of time still left in this 15-minute period. Bears want to be careful if the OEX sustains 15-minute closes above the next potential resistance level at 580.90, as that's the trendline that marks the top of the little descending pattern from today, but the breakdown benchmark is higher, at 583.29.

Linda Piazza : 6/27/2008 1:57:48 PM

There's just the slightest look of a narrowing wedge on the OEX's price pattern today. It's not definitive, but be careful if you see a break above a trendline drawn across the day's highs, as such wedges are sometimes indicative of ending patterns.

So far, though, the OEX is spending time testing the lower trendline of that possible wedge, not the top. We keep seeing these little potentially bullish formations set up on the short-term charts, though, so some effort at steadying is definitely going on, and I want our mega-profitable bearish subscribers to keep those mega profits.

Linda Piazza : 6/27/2008 1:55:16 PM

Teeny green candle on the OEX, with the OEX now at 578.05. The OEX's 15-minute 9-ema is now 579.71. The breakdown benchmark is at 583.42. The more reliable 30-minute 9-ema is now 581.51 and there hasn't been a 30-minute close above that since shortly after the FOMC decision. So, those hoping for a steadying want to see the OEX first produce 30-minute closes above 581.51 and 15-minute closes above 583.42. Until then, nothing has changed.

Jane Fox : 6/27/2008 1:51:20 PM

Crude's high for the day is 142.93.

Linda Piazza : 6/27/2008 1:49:31 PM

A/D line is still headed down after breaking through the day's support near -1000. It's at -1320 now. Those hoping for a steadying aren't going to see it as long as the A/D line drops. A few times in the past, I've seen the A/D line follow price action rather than lead it, but most times, it's either leading or at least just corroborating the action.

Linda Piazza : 6/27/2008 1:46:01 PM

We are entering a typical stop-running time of day. It's really better termed a testing or probing time of day. Stops get run but that's only because those with the most money at risk test and see whether dips will be bought or bounces will be sold. So, we're having a test right now, and we should be cognizant that it's a test. I show potential descending trendline support for the OEX at about 577.35, but that's short-term only and not to be trusted for any planning. However, do watch to see what happens now that we've had this dip and this test as this might give us some clues about direction this afternoon. I can honestly see a just-get-me-out reaction by bulls that results in a steeper descent or a I-want-to-protect-my-profits short-covering wave that gets started by bears. So can a lot of people see either possibility. Hence the test. For now, there is no change in short-term tenor, but do just keep updating your profit-protecting plans.

Tab Gilles : 6/27/2008 1:44:49 PM

Google (GOOG) $517.50

As I posted Monday...Google now looks like it will see $485!

Tab Gilles : 6/23/2008 10:38:39 AM Google (GOOG) looks like it wants to head lower? Link

Daily; Link PnF; Link

Linda Piazza : 6/27/2008 1:32:10 PM

TRIN 1.03. It's above the 15-minute 9-ema, but approaching potential resistance from 1.05-1.22. Its actual number is neutral. It's in the bearish (bullish for equities) half of its Keltner channels, although you wouldn't know that from price action, would you? It's been climbing, though, from that support I charted earlier, and I'm a firm believer that you have to watch the trend of the TRIN as well as its actual number. Now, those hoping for a steadying in the equity markets want to see it turn over at this resistance. Bears want to see it continue to climb.

Linda Piazza : 6/27/2008 1:17:54 PM

I've been giving short-term benchmarks for the OEX, but the more reliable of the intraday ones is the 30-minute 9-ema, with that now at 582.49. It's been tested many times over the last two days, and all 30-minute closes have been below it. It's now at 582.52.

Linda Piazza : 6/27/2008 1:15:20 PM

There has to be a very quick bounce now, or I'll consider that potential little inverse H&S on the OEX's five-minute chart invalidated, as all the little such formations have been over the last few days. As I said, I wouldn't count on these formations to tell me much about ultimate direction any longer, but they do show some things that are useful. Right now, a quick bounce would show that this last dip could have been a test or even a trap, but without that quick (and sustained) bounce, it's just part and parcel of the weakness.

Keene Little : 6/27/2008 1:13:12 PM

The market appears to be doing a combination of consolidating and working its way lower. I continue to like the SPX 1273-1274 area for potential support if it gets there. As we approach the close it will be decision time for what, if anything, to carry over the weekend. I usually like going home flat which allows me to relax more. Either pat yourself on the back for a good week or just say "next week will be better", and go enjoy the family.

Linda Piazza : 6/27/2008 1:06:57 PM

We keep having these little inverse H&S's set up on the indices at the bottoms of their declines, on the 3- and 5-minute charts. As you know if you've read my commentary, I don't trust these to confirm or to give targets if they do any longer, but I do like to watch them to show us what the psychology might be beneath the markets. So far, with one visible on the OEX's five-minute chart now, complete again with bullish price/RSI divergence as the head was formed, this is telling us that there is, in fact, an attempt to steady the OEX. The neckline is now at about 582.63 but steeply descending, so the right shoulder level might in fact be equal about to the head level, with this current punch lower needing to be reversed immediately. Now we need to watch to see if the bulls have the strength to produce any follow through or if the bears swamp them once again. The OEX of course should not drop much deeper or else the formation is invalidated and bears win. The OEX should also probably start pulling up toward the neckline within the next 15 minutes if not sooner. Otherwise, bears will probably win, too. For now, though, let's see if this last punch lower gets reversed at or before about 579.90.

Linda Piazza : 6/27/2008 12:54:05 PM

As is obvious, the OEX could not sustain its values above its 15-minute 9-ema after rising up to test it and approaching the descending breakdown benchmark, now at 584.01 on 15-minute closes. It has instead dropped to retest the day's low, so there's been no change in tenor yet. That day's low was 580.24, with the OEX having dropped to 580.33 during the current 15-minute period. It's at 580.79 as I type, with some effort seen to steady it here, but whether buyers will be swamped by sellers or shorts surprised by a climb above and the maintaining of values above 584.01, I don't know. Either is possible.

Linda Piazza : 6/27/2008 12:40:47 PM

TRIN is 0.92. Its actual number is in the neutral range. It's sort of zigzagging its way higher from its test of support this morning, so that's a bit bearish for equities. It's facing the potential resistance of the 15-minute 9-ema, now at 0.94, so equity bears would like sustained values above that while bulls would like a pullback below it. I show the bullish/bearish benchmark for the TRIN currently in the 1.07-1.25 range, where potential resistance gathers. Potential support that's held on tests today is at 0.67 on 15-minute closes.

Linda Piazza : 6/27/2008 12:34:29 PM

And, speaking of the TED spread, here's Bloomberg's chart for the week, excluding today's values (don't know why they don't include them, too), with the TED spread of course climbing further today: Link

Linda Piazza : 6/27/2008 12:31:39 PM

Keene, thanks for the information in the 12:16:34 post. I'm still learning. I've been reading that OIS spreads are more reliable, but haven't been able to find out any information on them.

Linda Piazza : 6/27/2008 12:29:52 PM

We've had a first 15-minute period when the OEX perched on the 15-minute 9-ema into the close and it's attempting to perch there this period, too, but it isn't so far making any great gains based on scaling up to that 15-minute 9-ema. It's more as if it's so far hanging on by the fingernails, not yet even able to swing a leg up to gain a foothold. Smile. If it does continue to gain, though, watch the potential resistance now at 584.26. If the OEX is knocked back, those who want to see gains today want the OEX to continue finding support at that 15-minute 9-ema, now at 582.85.

Keene Little : 6/27/2008 12:16:34 PM

Linda, thanks for keeping an eye on the TED spread and letting us know what it's doing. This is an important factor in what the stock market will do. It's a measure of perceived risk in the credit market--the wider the spread the more risk averse traders are becoming (and demanding a higher return on riskier bonds). The more risk averse they are the more they are afraid to own stock.

This is a chart from Elliott Wave International as of last Friday and it shows the spread between the Moody's Corp. Bond Indicess BAA and the US 30-year T-Bond. The spread is charted inversely so that it can be matched up with the stock market (as the spread widens the line on the chart drops): Link . It has warned us of impending stock market drops each time the spread starts to widen again. So as Linda has been reporting the widening of the TED spread this is not a good sign for the stock market.

Linda Piazza : 6/27/2008 12:04:37 PM

The OEX still has problems with the 15-minute 9-ema, now at 582.52, and it's so far still resistance on 15-minute closes. It's beginning to flatten a bit, so this would be a good time soon to see an attempt to push above it again, perhaps up to test that 584.35-ish breakdown benchmark. That would of course be potentially strong resistance on 15-minute closes, but a first baby step in improvement would be a push up to it and for the pullback to then start finding support on the 15-minute 9-ema. So far, we haven't seen that happen and there's no guarantee that it will, but it's what you want to see if you want a steadying.

Keene Little : 6/27/2008 12:02:49 PM

Looking at the 10-min chart of the 10-year yield (TNX), does it remind you of something? Link Looks just like the SPX 10-min chart I showed before. Bonds are currently trading counter to stocks (flight to safety in bonds jacks their prices up and drops the yield). TNX may soon find support at its 50-dma and 200-dma, which are approaching each other and currently at 3.94% and 3.97%, respectively: Link

TNX is currently at 4.00% so it will be worth watching this closely for some clues. It should be good for a bounce in TNX and the selling in bonds could be good for the stock market (next week). If no bounce in TNX then no bounce in stocks.

Linda Piazza : 6/27/2008 11:52:07 AM

The OEX's 15-minute 9-ema is now at 582.72 and the breakdown benchmark 584.46 with further potential resistance just above that.

Bears, I've been warning you for a week with little need for those warnings to keep your profit-protecting plans updated, but the OEX is now sitting at a perfect place for a bounce attempt, so keep updating those plans. Do not think you "know" where the markets are going because that broadening formation proves that even those with more funds and experience than we have don't know. Don't hold on for the last push that never comes, meanwhile letting your profits evaporate as other shorts rush to cover. I don't know that there will be a bounce, but keep those what-if plans updated in case there is one.

Linda Piazza : 6/27/2008 11:48:56 AM

TED spread still 1.13. As I've been noting, I'm a relative newbie at interpreting the TED spread, but here's my take on it. It's a measure of default risk or at least of perceived default risk. A rising default risk is of course not a happy thing for equity markets. In my Trader's Corner article from three weeks ago, I noted that the TED spread had sprung above its long traditional 0.10-0.50 range last year when the credit problems became known and since then it's been trading in a broad descending channel well above the previous range. A few weeks ago, it dipped toward but not quite to the support from that broad channel and then began rising. At the time I wrote the article, I thought that a rise toward and through 1.00 was perhaps ominous. However, I have since read that some people more knowledgeable than I am say it's touchy to interpret the TED spread in the current climate, as financials report or are due to report. Here's the Trader's Corner article giving some background and charts, as well as a source to find TED spread quotes for yourself: Link

Linda Piazza : 6/27/2008 11:33:09 AM

TED spread now 1.13.

Linda Piazza : 6/27/2008 11:32:38 AM

The OEX's breakdown benchmark is now 584.62, and the OEX needs to maintain 15-minute closes above that before even the short-term tenor begins to change. Be aware that there's potential resistance all the way up to 585.47, so the OEX could break above that benchmark and then get knocked right back down.

Linda Piazza : 6/27/2008 11:19:32 AM

I wanted to mention something from my look at the OEX's weekly Keltner chart. If the OEX should mount some kind of significant bounce today--far from a given--it will be producing a weekly candle with a spring up from support (581.30 on weekly closes). That candle will be being produced at the approximate same support level as the spring up from support on the candle produced the week of 3/17/08. That 3/17/08 candle was produced on extreme volume, with the spring up suggesting to those who study volume/price-spread analysis that there was some big-money accumulation. (Extreme volume can be produced only if there was big-money involvement and the spring up can occur only if they're absorbing some of the selling. If it were the other way around, big money selling would swamp the retail dip buyers.) This week, volume has been less, so if there's again any kind of significant bounce by the end of the week, which means by today's close, that would be a sort of confirmation of prior accumulation.

Does that mean that the bottom is in? No, you can't count on that, although it might mean that a bounce would be attempted next week. Although I thought the big consolidation zone forming all this year on the weekly charts might carry on through the summer, with the OEX perhaps steadying higher, at about 608, I have always factored in the possibility that eventually that consolidation zone would break to the downside. It's one reason that, other than my trading accounts, almost all our money is still sitting in cash, ready to invest when I think at least "a" bottom might be in. Such consolidations sometimes occur about halfway through a move. If that's what's happening now, and I have no proof that it is, then we have an eventual (that "eventual" is important) downside target somewhere near 500-515. So, I'm not being Pollyanna-ish, factoring in that dire possibility, but neither am I ignoring what might show up on a weekly chart, either, if there's a spring up by today's close. Just thought I'd mention it.

Keene Little : 6/27/2008 11:10:01 AM

The trend line along yesterday's lows for SPX crosses the bottom of its steeper parallel down-channel shown on the 60-min chart and is close to where it crosses the 1273-1274 level (the March 10th closing low). If that doesn't hold for at least a bounce then the market is in more serious trouble. Link

Linda Piazza : 6/27/2008 11:09:00 AM

I had the wrong value for the breakdown benchmark in my previous post. It's now been corrected to read the correct 584.82, with the OEX needing sustained 15-minute closes above it before even the slightest change in short-term tenor.

Linda Piazza : 6/27/2008 11:08:15 AM

New low of the day for the OEX and of course there's the potential bullish price/RSI divergence on the 15-minute chart. However, until and unless the OEX springs above and maintains values above that breakdown benchmark, now at 584.82, nothing has changed. The 15-minute 9-ema is now 583.27 and that's potential resistance on 15-minute closes, too.

Keene Little : 6/27/2008 11:05:35 AM

The pattern of the decline, especially from mid day yesterday, is a bit odd in that it's a relatively shallow down-channel (looking at it on a 10-min chart) with lots of overlap between the highs and lows of the bounces and declines. This is normally indicative of an ending pattern and it could very well be. The bullish divergences at the new lows certainly supports that view. Link

The flip side is extremely bearish as MACD rises back up to the zero line and "resets" itself for another drop back down. Stick with the downtrend for now and just trail your stop above the downtrend line along the highs since yesterday afternoon. SPX 10-min chart:

Linda Piazza : 6/27/2008 10:59:19 AM

Keltner outlook on the A/D line: The A/D line is now -788, testing potentially strong support from -780 to -1060. Bears should be wary here, as this support could bounce the A/D line. I feel silly always warning of potential bounce spots, but the name of the game is protecting profits.

Linda Piazza : 6/27/2008 10:57:53 AM

TRIN is 0.96, having just reached a new high of the day of 1.02. It has potential historical resistance near 1.00, of course, but my Keltner charts show the strongest resistance now from 1.13-1.20. Those who want markets to steady don't really want that tested, of course, but the test is a definite possibility now that the TRIN has bounced again from the support I showed early on the TRIN's 15-minute Keltner chart.

Linda Piazza : 6/27/2008 10:55:34 AM

The BIX also drops back, breaking juuust below its former low of the day. The BIX has not broken through its breakdown benchmark, but it has a lower potential downside target of 174.13, a target which will remain a potential target until and unless it manages sustained 15-minute closes above 178.20. The BIX is 176.70. Don't count on that potential target being reached, but do watch for support there if it is touched. I see other potential support at about 176-176.25.

Linda Piazza : 6/27/2008 10:52:35 AM

Still no 15-minute closes above that breakdown benchmark for the OEX. That's now at 585.09 with the 15-minute 9-ema just below that at 584.10. The OEX is snaking back toward its day's low of 581.51, and those who want a steadying would of course like to see that hold.

Keene Little : 6/27/2008 10:51:09 AM

The euro made it up to 1.5723 last night, just shy of its Fib projection for two equal legs up from its June 13th low, and is currently trading back below 1.57 and inside its triangle pattern: . If it were still rallying I would not be interested in trying a short on gold but so far the euro's pattern supports a top in gold's bounce as well. So we'll see what happens. Link

I was just stopped out of my gold short with the quick pop above 928. If it now drops back below 921.50, the 10:00 AM low, I'll pull the trigger again.

Keene Little : 6/27/2008 10:44:38 AM

Gold has been making a series of higher lows and higher highs this morning so I might get stopped out of my short play if it pushes back above 928. But the pattern looks like an ending pattern with the overlapping highs and lows in this morning's bounce. Therefore if stopped out I will look to get back in short with the first drop to a lower low (looking at the 5-min chart). I'm trying to catch a top and control my risk at the same time (in case it's not a top).

Keene Little : 6/27/2008 10:33:21 AM

I showed a chart of the semiconductor holders (SMH) in last night's newsletter and pointed out the fact that it closed right on its uptrend line from January. Today's price action has so far produced a doji but it's obviously very early in the day to predict how it will finish. Link

If it closes below the line (in the red) it will be bearish but if it manages to close on the line with a doji then it's possible we'll get a reversal pattern at support if it can rally on Monday. It might be good for only a bounce but it will definitely be worth watching since as go the semis so go the techs. And as go the techs so goes the market.

Linda Piazza : 6/27/2008 10:28:23 AM

TED spread 1.11. It's been as high at 1.12.

Linda Piazza : 6/27/2008 10:25:25 AM

The OEX has not been able to sustain 15-minute closes above the breakdown benchmark on that chart, with that now at 585.32. That needs to change before there's even the slightest change in short-term tenor. The OEX is 583.66.

I still think it possible that we could see a steadying and maybe even bounce attempt underway, but how it turns out, I can't be sure.

Linda Piazza : 6/27/2008 10:12:01 AM

The TRIN is still clinging to that potential Keltner support on 15-minute closes: Link

Keene Little : 6/27/2008 10:11:29 AM

Oil stocks (OIX) are up nicely this morning as well, +1.6%, and that's helping SPX outperform the DOW which is struggling at the flat line. But it's all in the noise area.

Keene Little : 6/27/2008 10:07:42 AM

This morning's bounce in the banks is helping SPX which is doing better than the DOW. But keep an eye on ES 1291.75, the pre-market high. This is often resistance if the bounce is just a bounce and not the start of something bigger to the upside. It's possible we're just going to see a day of consolidation today, a summer Friday following a big move. Don't try to force trades today.

Linda Piazza : 6/27/2008 10:07:36 AM

The OEX is currently dealing with potentially strong resistance on 15-minute closes, now at 585.52. The OEX is 585.37.

Linda Piazza : 6/27/2008 9:57:39 AM

For reference again, the BIX's 30-minute 9-ema is now 179.90 and the BIX needs to maintain 30-minute closes above it to even begin to change its short-term tenor. Why am I harping on the BIX? I'm using it and BKX as ways of watching some parts of the financials, at least. I'm concerned because of the rising TED spread and because financials so strongly impact the SPX and OEX. The BIX is 178.50 as I type.

Linda Piazza : 6/27/2008 9:55:53 AM

TRIN 0.66.

Linda Piazza : 6/27/2008 9:54:49 AM

TRIN 0.75.

Linda Piazza : 6/27/2008 9:53:34 AM

TRIN 0.87, still bullish (for equities) by the number, still in the half of the Keltner channels that's bearish for the TRIN (and bullish for equities) but still near potential support that might bounce it. Equity bulls want a rollover toward that potential support at 0.74 on 15-minute closes and then for TRIN to stay near that or even push lower.

Linda Piazza : 6/27/2008 9:51:07 AM

The BIX did dip below Tuesday's low but has bounced. Not far enough yet to show any change in tenor, and now potential resistance at 178.71 on 15-minute closes should be watched closely, now that the BIX dropped below yesterday's consolidation zone support. BIX at 177.97 as I type.

Linda Piazza : 6/27/2008 9:49:23 AM

The OEX is now dropping below the potential support of the broadening formation, so it needs to bounce quickly, presenting the possibility that this was just a throw-under or else a small broadening of the formation. Within the context of some small follow-through on yesterday's action before either a consolidation-type day or a bounce attempt, this isn't too bad yet, but bulls should be aware that that it's continuing below the March low and threatening to fall further. There's no change in tenor, nothing to encourage bulls to attempt dip-buying yet, other than the possible exception of the SPX's (not OEX, but SPX) close approach to significant support. That is, however, reason enough to again warn bears that they need to spiff up their profit-protecting plans.

Linda Piazza : 6/27/2008 9:44:39 AM

The TRIN opened in bullish territory but right at potential support, now at 0.75 on 15-minute closes, and began bouncing from that support. It's now 0.92, moving into historical S/R and there's also potential resistance at 1.24 on 15-minute closes. So, far, it's in the part of the channel that's typically considered bullish for equities, it's actual number is rather neutral, and it's climb is bearish for equities, so take your pick.

Linda Piazza : 6/27/2008 9:42:34 AM

The BIX just dropped within one cent of Tuesday's low. It's now attempting to bounce, but again, it has to sustain 30-minute closes above 179.60 before it even begins to change its tenor, even on a short-term basis.

Linda Piazza : 6/27/2008 9:40:28 AM

Keltner outlook on the A/D line: The A/D line printed its first numbers above the bullish/bearish benchmark on its Keltner chart. It ran up immediately to test resistance, currently at 479, and is being knocked back from that test. It looks as if it may likely test potential support on 15-minute closes near -210, and those who want markets to stabilize would like to see that hold and prompt a bounce. A/D line now at -101. Further potential support, at the bullish/bearish benchmark is about -800.

Linda Piazza : 6/27/2008 9:38:34 AM

The BIX is rising this morning, too, but as I said late yesterday, when commenting on the BIX's relatively stronger performance by some measures, it needs to maintain 30-minute closes above the 30-minute 9-ema, now at 179.90, before it even begins to change its tenor. We see the efforts to stabilize it above Tuesday's low, but we don't know if those efforts are going to be successful yet. BIX at 178.77 as I type.

Jane Fox : 6/27/2008 9:34:05 AM

Dateline WSJ - Sadad al-Husseini and Nansen Saleri raced up the ranks at Saudi Aramco, the world's most powerful oil company, working together for years to squeeze more crude from Saudi Arabia's massive fields. Today, the two men have staked out opposite sides of a momentous industry debate.

Mr. Husseini, Aramco's second-in-command until 2004, says the world faces a brute reality of depleting resources and ever rising prices. Mr. Saleri, until recently the company's oil-reservoir manager, insists that with enough ingenuity and investment, plenty more oil can be found.

Linda Piazza : 6/27/2008 9:33:35 AM

The OEX is bouncing first thing, but let's see if it holds. As mentioned earlier, the first barrier will be the potential resistance on 15-minute closes at 587.13.

Keene Little : 6/27/2008 9:29:31 AM

Gold hit my short play setup early this morning when it tagged 926.50 (the high was 927.60) where the move up from the June 12th low has two equal legs up and has done a little throw-over above the top of its triangle pattern. For the bearish setup gold now needs to start selling off, and right away (drop back down inside the triangle). A good place for a stop is just above the May 22nd high at 940.1 although that's too wide for my tastes if playing futures. For now I've got my stop at 928 (new daily high). If stopped out I will watch to see what develops next since it could turn very bullish. Link

Keene Little : 6/27/2008 9:19:14 AM

I mentioned with last night's charts that I thought SPX 1273 could be good support if the market drops a little further this morning and the pre-market low for ES is 1278, -6.50 points below yesterday's close. Since that low (at 7:30 AM) futures have rallied back up and it's one of those suspicious looking ramp jobs so I'm not sure it will hold after the open.

If you're still short from yesterday but in profit protecting mode (vs. holding for a position trade where you'll let the market bounce back up against you), use yesterday afternoon's bounce high near 3:30 PM as your stop. Any push back above that level will likely mean a bottom is in for now.

Linda Piazza : 6/27/2008 9:18:09 AM

TED spread 1.11 this morning. It's still going up.

Linda Piazza : 6/27/2008 9:17:28 AM

Yesterday, there was some debate on the monitor about what the VIX's failure to produce a new high as SPX prices dropped to a new relative low meant. Was that bullish divergence, I wondered, or a sign of too much complacency, suggesting that we still had to wait for that expansion of the VIX before we even thought there was a short-term bottom in? Some others had their own thoughts about it. Late last night on CNBC Europe, commentators and guests were arguing those points, too, some believing that it was a bad sign that the VIX hadn't reached a new relative high while prices reached a new relative low while others thought it was a good sign. So, we know it's being watched and debated across the globe.

Linda Piazza : 6/27/2008 9:10:51 AM

As I type, S&P e-minis are showing levels just under fair values, but they've been above and below fair values during the overnight session, so it's hard to judge where they might go this morning based on overnight action. It's sort of akin to the way everyone always says of their region's weather that all you have to do is wait a few minutes and it changes.

So, it's dangerous to make any guesses about where the OEX might go based on the e-mini's current distance from fair values. We know that after a big-range day like yesterday's, a typical pattern is to have a day with a smaller range between the open and the close, producing a small-range candle body, but sometimes that body sports long upper and lower shadows as bulls and bears battle it out. We also know these aren't normal times. We know that the SPX had a 3/10 closing low of 1273.37 and a 3/17 closing low of 1276.60 and 1/22 and 1/23 intraday lows of 1274.29 and 1270.05. So, for the SPX, we know that we're seeing a close approach to potential support, but will bulls be too burned to buy it?

The OEX is already well below those 1/22 and 1/23 intraday lows. It's well below the 3/10 closing low of 589.15. It's even slightly below the 3/17 intraday low of 583.64, although still within testing range. So, obviously, the OEX needs to pull up quickly this morning, perhaps allowing for a quick punch lower.

Here's the intraday look, though: Since 6/20, the OEX looks as if it's been forming a broadening formation. As I noted yesterday, these are indicative of emotion-based trading, and they make it nearly impossible to judge when support or resistance has been breached, because both are broadening. Both bulls and bears get trapped because they jump on the breakouts only to see a reversal at the broadening trendlines. The OEX ended yesterday at the bottom trendline. Since it's descending, the OEX could drop lower this morning and then bounce (hopefully within the first 30-minute period) and essentially maintain the support of that broadening formation. That would also maintain the possibility that the OEX could bounce up through the formation again. Some consider these potential reversal signals at the bottom of a decline, while others discount that possibility and say that only topping ones are valid.

The OEX ended the day in breakdown status on both the 15- and 30-minute charts. To see any improvement at all, the OEX needs to maintain 15-minute closes above 586.17 and 30-minute ones above 587.83, although those lines will move a little as trading begins. So, those are also the first places to look for rollover potential in the early action.

Will prices just crater, stabilize in some sort of consolidation pattern or bounce and reverse yesterday's gains? I don't know and the emotion-based broadening formation proves that no one else does. It's clear that we're standing on a precipice and this pattern proves that there's some uncertainty. If the powers that be can't predict what happens next, as evidenced by this pattern, then we unfortunately can't, either. We can't control what happens next, but we can control our reaction to it. Have a plan and act on the plan. If you're relatively new to trading, you might not know this, but it's such a relief to act on that plan, take a needed loss (keeping it small) or else lock in profit where your plan said you should, even if the markets go on and would have delivered you more profit. That way, you know that you can trust yourself to preserve your trading account.

So, for now, the bottom line is that the markets could go either way in the early trading. Watch for the possibility of a small move lower that's quickly reversed, something that almost all people hope will happen if there is any move lower. However, then watch for rollover potential at 586-588 on the OEX. Nothing has really changed in the tenor until the OEX can maintain values above those. If in bearish positions, be careful after these steep drops of the possibility that some might want to cover ahead of the weekend, producing a sharp rally. I'm not predicting it, but we've seen them come out of nowhere. Never let a profit turn into a loss.

Jane Fox : 6/27/2008 9:05:24 AM

Overnight Crude (CL) hit a high of 142.28. It is now at 139.53. Link

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