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Keene Little : 8/5/2008 11:34:13 PM

Wednesday's pivot table: Link

After Tuesday's strong rally we'll have to see if there's some follow through to the upside on Wednesday. If it was a lot of short covering and some capitulation into the close then we could see the typical reversal back down tomorrow. SPX also stopped at its downtrend line from May 19th so it could be resistance until proven otherwise. Assuming for the moment that we'll see at least a pullback tomorrow morning I'll then be watching to see if it looks like just a correction (indicating higher prices are coming) or something more bearish to the downside. As of tonight I could argue either side comfortably.

The daily chart shows the more bullish potential in pink with an upside target between 1320 and 1350 by mid August (perhaps by opex Friday) while the more immediately bearish dark red depiction will become the higher probability scenario if SPX drops below 1234 (with a heads up if it breaks Monday's low near 1247): Link

It's possible the correction that's been playing out since the July 15th low will form an ascending triangle with the flat top at 1291 so watch for that potential if we see a little more rally early Wednesday. An ascending triangle in this position would be a bearish continuation pattern (as shown in dark red on the charts). But the pink wave count on the 120-min chart shows a move above 1291 would be short term bullish with the first upside target at 1325 (two equal legs up from July 15th) and then 1349 (62% retracement of the May-July decline and it's at the top of a parallel up-channel from the July 15th low): Link

So if we get a pullback on Wednesday and it looks corrective I'll be looking for an opportunity to get long for a continuation higher (pink wave count). In that case watch for a Fib retracement of Tuesday's rally for support. For SPX we have the 38%-62% retracement zone at 1261-1270. The uptrend line from July 15th is currently near 1256. If the market drops sharply and shows some impulsive (5-wave) price action to the downside, especially with a drop below 1255, I'll be again suggesting short plays. These two setups are shown on the 30-min chart: Link

OI Technical Staff : 8/5/2008 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The Market Monitor has been archived.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 : 8/5/2008 8:54:57 PM

Treasury Hires Morgan Stanley ... U.S. Treasury saying it has hired Morgan Stanley (NYSE:MS) to provide market analysis and financial expertise in connection with Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE)

Morgan Stanley will receive $95,000 for services through 01/17/09, three (3) days before U.S. inaugurates its next President.

Morgan will not have access to FNM, or FRE's books.

Jeff Bailey : 8/5/2008 7:30:40 PM

Ball Corp. (BLL) ... Disclosing to investors that a major steel supplier has failed to honor certain contractual commitments to supply tinplate steel for production of aerosol containers.

Ball has notified the supplier that it intends to take action to recover from them any losses, liabilities and expenses which may be incurred.

Jeff Bailey : 8/5/2008 7:09:50 PM

SPX Heavyweight NL at close ... none.

Jeff Bailey : 8/5/2008 7:07:49 PM

SPX Heavyweight NH at close ... JNJ $70.45 +3.26%, WMT $60.34 +3.26%, PM** $55.20 +2.75% (spinoff from MO), BUD $68.24 +0.27% (bought by InBev), BAX $69.97 +1.53%

Jeff Bailey : 8/5/2008 6:59:30 PM

SPX's NH/NL finished 17:9

Most NH since 6/06/08's 16:38

Jeff Bailey : 8/5/2008 6:55:36 PM

Closing Internals at this Link

Jeff Bailey : 8/5/2008 6:48:22 PM

Jack In The Box (JBX) $23.04 +5.10% ... Earnings Press Release Link

Jeff Bailey : 8/5/2008 6:45:56 PM

Closing U.S. Market Watch at this Link

Jeff Bailey : 8/5/2008 5:16:33 PM

DXY's 04:00 tick was 73.899

Jeff Bailey : 8/5/2008 4:38:22 PM

Alaska Air (ALK) $19.36 +2.43% ... July load factor 79.7%

Jeff Bailey : 8/5/2008 4:29:22 PM

Wachovia (WB) $19.06 +11.39% ... saying they will stop writing private undergrad student loans.

Jeff Bailey : 8/5/2008 4:12:49 PM

Boston Beer Co. (SAM) $43.83 +0.29% ... Halted for trade.

Jeff Bailey : 8/5/2008 4:11:55 PM

Caribou Coffee (CBOU) $1.73 +4.21% ... quiet on headline numbers.

Jeff Bailey : 8/5/2008 4:09:08 PM

Cisco Systems (CSCO0 $22.57 +2.63% ... active at $22.20 on headline numbers.

Jeff Bailey : 8/5/2008 4:08:35 PM

Priceline.com (PCLN) $117.34 +5.03% ... darts lower on headline numbers. $102 extended.

Linda Piazza : 8/5/2008 4:05:25 PM

No pullback into the finish this afternoon and the OEX is jammed up rather close underneath that rising trendline (best-fit version, cutting off small upper candle shadows) for the rising wedge. My daily Keltner channels tell me that it's possible that the OEX gains may be capped on a daily close at that rising trendline or perhaps even lower, near 597.10. The 15-minute chart gives a potential upside target of 597.22 and the 30-minute, 599.82.

Let's see what CSCO does and what the reaction might be.

Keene Little : 8/5/2008 3:54:45 PM

Not looking good for a short play with the strong rally today. The only question for tomorrow is whether the strong buying right into the close is as much a result of short covering as wannabe buyers scrambling to get in before the close. That could result in another situation where we see capitulation buying right into the close and tomorrow could be a reversal. We've seen it happen time and again so be careful if taking a long position home tonight.

Jeff Bailey : 8/5/2008 3:44:49 PM

SSO $61.25 +4.89% ...

Jeff Bailey : 8/5/2008 3:44:02 PM

Jimmy C ... where are you?

Jeff Bailey : 8/5/2008 3:43:30 PM

S&P 500 Index (SPX.X) 1,280 +2.52% ... X's get square(s).

Linda Piazza : 8/5/2008 3:44:53 PM

I've been mentioning the possible rising wedge in which the OEX has been climbing. These have bearish connotations but don't tell that to anyone pointing them out in the spring of 2003, because they were routinely broken to the upside during that period. That doesn't change their usual connotation or the need for bulls to exercise good trade management skills when trading while an entity is climbing within such a formation. You're being warned that prices could break down not promised that they will. You're being given an invitation to update your what-if plans. Here's the OEX's version: Link For example, what if today's big-range day sees a small-range candle body with or without upper and lower shadows tomorrow? What if the OEX punches up to the top of that channel but then retreats, closing rather near the open? What if we see a result instead like those we've seen so many other times when one day's big range is reversed the next day? Perhaps you can look at that chart and tell me that a big-range gain such as today's guarantees further gains, but I certainly can't tell anyone that.

For bears, remember that when such a wedge is broken to the downside, you must always entertain the idea that the price action might just be just transforming that formation into a regular old rising price channel, so don't assume huge drops until you see whether that occurs.

Tab Gilles : 8/5/2008 3:42:34 PM

Chesapeake Energy (CHK) $44.30 -$0.96 (2.08%)

Watch the 300-ema next support $40 then $36 the PnF Price Objective. Link

Jeff Bailey : 8/5/2008 3:36:45 PM

Pretty good volume in the ProShares Ultra Health Care (RXL) $61.29 +3.96% today.

Linda Piazza : 8/5/2008 3:34:59 PM

The OEX may have broken above former resistance on its 30-minute chart that's now at 591.25 and sustained 30-minute closes above it, but the broader SPX has not. The analogous resistance for the SPX is just under 1280 and the SPX has not been able to produce much less sustain 30-minute closes above it.

Jeff Bailey : 8/5/2008 3:34:29 PM

Drugs and healthcare acting better since recent polls released. Neck and neck now.

Linda Piazza : 8/5/2008 3:26:32 PM

I mentioned it a while ago but buried in a post about various earnings. Please remember the CSCO earnings this afternoon as you're making your end-of-day decisions and deciding how much risk you want to take home with you.

Linda Piazza : 8/5/2008 3:25:54 PM

The RUT is peeking above the resistance that had been holding it back, with that resistance now at 715.50 on 15-minute closes. The RUT is 716.05 as I type. It's not making much headway after breaking above that resistance, but I remember typing something similar about the OEX several hours ago. In any case, the RUT is not leading markets higher.

Linda Piazza : 8/5/2008 3:23:02 PM

The OEX's 15-minute 9-ema is now 591.91. The more important 30-minute version is 590.37 with higher potential support on 30minute closes now at 591.24. Bulls want these to hold.

Linda Piazza : 8/5/2008 3:20:59 PM

Looks as if Jeff and I were looking at the same things. JNJ, which he mentioned before I did the DRG, is a DRG component stock.

Linda Piazza : 8/5/2008 3:21:32 PM

Wow, look at the DRG, the AMEX Pharmaceutical Index! All components with the exception of AMGN appear to be higher, many of them more than 2 or even 3 percent higher. However, at 314.60 as I type, the DRG is fast approaching the 200-sma, now at 315.74, having zoomed through the 200-ema at 31.24. The 38.2% retracement of the slide from last spring's high into this summer's low is near 316.75. A long-term H&S neckline from a confirmed H&S descends and is currently located at about 320-322. So, although it actually looks to me as if the weekly version of the 200-sma and -ema's are more important on the DRG's, with those converging just beneath 329, those who are bullish in these stocks and in indices that depend on them need to at least be aware of the approaching resistance.

Linda Piazza : 8/5/2008 3:12:50 PM

We'll see important earnings before the open tomorrow, too, especially FRE's. Companies reporting earnings before the open tomorrow include RIG, LAMR and TWC. DVN, FWLT, KLIC, MMC, MYL and S all report before the open, too.

Jeff Bailey : 8/5/2008 3:10:57 PM

Oh my! ... Johnson & Johnson (JNJ) $70.36 +2.00% ... Just what an OEX/SPX bull needed with energy softening up.

Linda Piazza : 8/5/2008 3:08:47 PM

The A/D line still finds resistance on its 15-minute 9-ema, rather than support. The A/D line is at least moving sideways now and not down.

Linda Piazza : 8/5/2008 3:08:03 PM

Market participants should remember that CSCO reports after the close tonight. We've seen CSCO-inspired bounces and CSCO-inspired declines. Some of the other earnings releases for after the market this afternoon include CELL, UPL, NWS and PCLN. I'm sure there are others I've overlooked.

Linda Piazza : 8/5/2008 3:01:51 PM

With the bond market close in a couple of minutes, the trading tenor can change, either with an acceleration of the previous trend or a reversal of it. Before we get too involved in what's happening, I wanted to address what might be happening overnight in the markets, at least with respect to scheduled releases. Tonight at 7:01 pm ET, the U.K. gets a couple of release taht might be important, including the Nationwide Consumer Confidence and the NIESR GDP estimate.

At 1:00 am ET, Japan's Leading Economic Index is released. At 6:00 am ET tomorrow morning, Germany's Factory Orders are released.

Keene Little : 8/5/2008 2:54:44 PM

If the bulls can keep up their buying this afternoon they could get SPX up to its downtrend line from the May and June highs, currently near 1283, close to the 1285 high on last Thursday.

Jeff Bailey : 8/5/2008 2:52:36 PM

YRC Worldwide (YRCW) $18.21 +13.59% ... "ditto"

Linda Piazza : 8/5/2008 2:52:12 PM

Here's where we are again with the $RVX (Stockchart's symbol), the RUT's volatility measure as seen on the daily chart: Link

Jeff Bailey : 8/5/2008 2:51:51 PM

Dow Jones U.S. Trucking Index (DJUST) 355.69 +5.58% ... retraces 38.2% of recent decline.

Linda Piazza : 8/5/2008 2:48:45 PM

At 1322, the A/D line is certainly positive enough, but it's nearer the afternoon low than the afternoon high and it's continuing its pattern this last hour of finding resistance on 15-minute closes at the 9-ema. Usually once the A/D line gets this high, it doesn't have to climb when the equities climb, but it shouldn't diverge too much. Now it's diverging in trend and diverging in its reaction to the 15-minute 9-ema. So, I'm not suggesting that all is over, but you just don't want to see the A/D line keel over here. The 15-minute 9-ema is currently about 1350. If the OEX keeps being strong, perhaps the A/D line will pick up, too, but just be watchful here because I don't like this pattern.

Jeff Bailey : 8/5/2008 2:48:33 PM

VXN.X 25.90 -6.02% ...

Jeff Bailey : 8/5/2008 2:48:20 PM

VIX.X 21.71 -7.57% ...

Jeff Bailey : 8/5/2008 2:48:02 PM

Swing trade put exit alert! ... for the last Starbucks Corp. SBUX Oct $15 Put (SQX-VC) at the bid of $1.36.

SBUX $14.55 +3.48% ...

Linda Piazza : 8/5/2008 2:40:11 PM

The OEX is above the descending trendline off the 7/23 high. It punched down and tested the 30-minute 9-ema and bounced from it, closing that last 30-minute period above it. It's not looking so hot at maintaining values above potential Keltner resistance now at about 591, however, so be careful if in bullish positions. Keep updating your profit-protecting plans. The OEX is currently 591.06 and, depending on the close of this 30-minute period, may be vulnerable to another 30-minute 9-ema test, with that average now at 589.25.

Jeff Bailey : 8/5/2008 2:37:56 PM

UNG $40.58 +0.12% ... was trading $48.50 on 03/31/08. So would be -16.32% since end of Q1.

Linda Piazza : 8/5/2008 2:37:34 PM

For RUT traders, the potential 15-minute resistance now at 714.93 has been holding all day. So has the potential support now at 712.09. Until one or the other breaks and values outside that range have been sustained, nothing has really changed. RUT at 714.57.

Linda Piazza : 8/5/2008 2:36:01 PM

In a not unexpected development, Richard W. Fisher "preferred an increase in the target for the federal funds rate at this meeting." That's been pretty standard for a while.

Jane Fox : 8/5/2008 2:35:20 PM

THat was under $119, not under $118

Jeff Bailey : 8/5/2008 2:35:06 PM

GSG +6.64% ... inflation has been high.

Jane Fox : 8/5/2008 2:35:03 PM

Crude trades under $119.00 for the first time since May.

Linda Piazza : 8/5/2008 2:34:52 PM

In the June 25 statement, the FOMC says about downside risks: "Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased."

This time, the FOMC says the following: "Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee."

Hey, where's our assurance that those downside risks "appear to have diminished somewhat"?

Not good. I'm thinking the market won't like that.

Jeff Bailey : 8/5/2008 2:34:18 PM

RUT.X +4.44% - SPY 3.49% = +0.95% ... maybe modest growth.

Jeff Bailey : 8/5/2008 2:31:43 PM

Beetle's Balanced Benchmark (from 03/31/08) at this Link

Prices of various assets are current to today's intraday trade. Can check against FOMC statement.

Linda Piazza : 8/5/2008 2:30:32 PM

The FOMC reworded its inflation outlook, but "the inflation outlook remains highly uncertain" might not be all that different from the prior "uncertainty about the inflation outlook remains high." In both, the FOMC stated its belief that inflation would moderate "later this year and next year."

Jane Fox : 8/5/2008 2:30:21 PM

Dateline WSJ - WASHINGTON -- A mostly united Federal Reserve on Tuesday held interest rates steady but suggested inflation worries remain a top concern.

Still, with growth risks lingering officials are unlikely to raise rates until the end of the year at the earliest.

The Federal Open Market Committee voted 10-1 to hold the target federal funds rate for interbank lending unchanged at 2% for a second-straight meeting. It had lowered the rate 3.25 percentage points between September and April to limit the fallout from the housing and credit crunch.

Linda Piazza : 8/5/2008 2:31:30 PM

From the second paragraph, the FOMC added the following statement, culled essentially from a later paragraph in the previous release: "Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth."

Keene Little : 8/5/2008 2:27:41 PM

So far I'm impressed that the market is holding today's gains. The longer it holds the braver the bulls will get about stepping in to do some more buying. But we may not be finished with the cha-cha-cha dance around FOMC.

Linda Piazza : 8/5/2008 2:26:12 PM

If you want to read the FOMC's statement, it can be found here: Link I haven't yet had time to compare it to the last meeting's.

Jane Fox : 8/5/2008 2:26:10 PM

Crude remains under pressure today and the doji that was forming earlier has mostly gone by the wayside. A doji denotes a reversal - usually.

Jeff Bailey : 8/5/2008 2:26:07 PM

FOMC Statement Link

Linda Piazza : 8/5/2008 2:24:36 PM

The A/D line did not pop up much when equities did. In fact, the A/D line has been trending down since the 10:00 am ET 15-minute candle. It's now slightly below the 15-minute 9-ema, having been below it now for about 30 minutes. Be careful here, bulls, as it is vulnerable to 500-600 if it starts to topple over. It hasn't really done so yet, but if it continues this pattern of finding resistance at the 15-minute 9-ema and then drops enough to start rolling it down, it could happen. A/D line at 1244 as I type.

Jeff Bailey : 8/5/2008 2:24:00 PM

FXE 154.75 -0.77%
FXY $92.15 (unch)
FXB $195.48 -0.46% ...

Jeff Bailey : 8/5/2008 2:21:03 PM

02:00 Internals found at this Link

Linda Piazza : 8/5/2008 2:19:30 PM

Remember people still have to digest the statement and all its implications.

Jeff Bailey : 8/5/2008 2:19:03 PM

Wal-Mart (WMT) $60.00 +2.68% ... notable 52-weeker at the big board.

Linda Piazza : 8/5/2008 2:18:57 PM

I had mentioned earlier that the OEX was likely to pull back to its 30-minute 9-ema either pre- or post-decision. That 9-ema is now 588.60 and the OEX just punched down to 588.77. So far, then, that moving average has held, but let's see what happens now. OEX at 589.50. If it fails and 15-minute support now at 587.97 does, too, the OEX might retest 584-585. If it holds and the OEX can sustain moves above 591-592, then 597-600 might be tested. Keep updating those stops, however, preparing for what can sometimes be a wild ride post decision.

Jeff Bailey : 8/5/2008 2:16:06 PM

Fed Leaves Rates Unchanged ...

Keene Little : 8/5/2008 2:12:34 PM

The US dollar has also rallied into the FOMC announcement. Interesting setup we have here.

Keene Little : 8/5/2008 2:10:42 PM

The stock market has drifted higher for most of the day so the bulls have to be hoping it's not going to be a sell-the-news event.

Jane Fox : 8/5/2008 2:07:10 PM

I think it quite instructive to take a peek at the overnight charts intraday. Link

Jeff Bailey : 8/5/2008 1:59:57 PM

I could "strangle" myself for closing out the put side.

Jeff Bailey : 8/5/2008 1:59:03 PM

Good gravy! ... sellers continue to "lower the boom" on Dynamic Materials (BOOM) $26.25 -4.09% ...

Jeff Bailey : 8/5/2008 1:52:55 PM

SPY $127.36 +1.89% ... 60-minute interval chart Link

Linda Piazza : 8/5/2008 1:52:12 PM

As I type, the OEX is testing the descending trendline off the 7/23 high, having peeked just above it and dropped back to it, if I've drawn it correctly. The OEX is 590.73 as I type, with that trendline crossing at about 590.70-590.80. Potential resistance on 30-minute closes is just a hair beneath 591.

Jeff Bailey : 8/5/2008 1:48:50 PM

SPY $127.40 +1.92% ... after kiss of MONTHLY 38.2%, and August 1 intra-day high.

Jane Fox : 8/5/2008 1:34:26 PM

If you ignore the big spike down on the VIX chart you can see just how flat the VIX has been today. Link

Jane Fox : 8/5/2008 1:33:14 PM

These charts are bullish. The VIX is flatlined at daily lows as the AD volume climbs. Link

Linda Piazza : 8/5/2008 1:31:39 PM

The storm came ashore near Port Arthur, where our relatives live and where many refineries are located. Their take on it? "It's raining and the wind is blowing." No biggee. Houston was warned to expect massive flooding but I think that's been changed, too.

Jeff Bailey : 8/5/2008 1:29:56 PM

Wendys Intl. (WEN) $23.39 +1.65% ...

Jeff Bailey : 8/5/2008 1:29:21 PM

Yum Brands (YUM) $37.10 +3.51% ... probes its 150-day SMA.

Linda Piazza : 8/5/2008 1:22:03 PM

The OEX's 30-minute 9-ema is now at 587.75. Other than the first 30-minute period, it hasn't been tested today. Even on days in which the OEX is zooming up or down (7/28 when zooming down and 7/29 when zooming up, for example), it's usually tested at least once during the day. That moving average is still climbing, but remember the possibility that it will get tested at least once either pre or post-FOMC decision. Equity bulls want to see it hold on 30-minute closes and for 587.50 to hold on 15-minute ones. Otherwise, the OEX risks falling all the way back to the 584-585 zone.

Linda Piazza : 8/5/2008 1:05:31 PM

The OEX is currently parked just under the descending trendline off the 7/23 high with the potential upside target and resistance on 30-minute closes now having descended to 591.02. Although yesterday, it looked as if the OEX might be parked at black-channel support on this chart into the FOMC meeting, instead, it's approaching black-channel resistance. The black channel contains most movements when the markets are in normal market conditions, being nudged a little up or a little down, but lately, there have been breakouts all over. Still, consider that the OEX is being parked at a place where it's either ready to break out and create a new upside target or whether it will adhere to the usual rules and either nudge it only slightly higher before pulling back or else turn down again.

Jeff Bailey : 8/5/2008 1:06:13 PM

YRCW $17.44 +8.79% ... YUX-JC 3.90 x 4.10 ... from 7/29/08

Jeff Bailey : 8/5/2008 1:05:34 PM

FFIV $29.66 +2.34% ... FLK-JF 2.80 x 2.95 ... from 7/25/08

Jeff Bailey : 8/5/2008 1:05:00 PM

YUM $36.99 +3.20% ... YUM-IX 2.80 x 2.95 (from 7/23/08)

Jeff Bailey : 8/5/2008 1:02:34 PM

SPX 1,271.72 +1.81% ...

Jeff Bailey : 8/5/2008 1:02:17 PM

SPY $127.25 +1.80% ...

Jeff Bailey : 8/5/2008 12:58:58 PM

Swing trade long exit partial alert! ... for 1/8 position in the ProShares Ultra S&P500 (SSO) at the bid of $60.29 +3.25% ...

Tab Gilles : 8/5/2008 12:58:13 PM

Venezuelan President Hugo Chavez is calling for $100 for crude oil ($WTIC). Link

Last week I posted the following:

Tab Gilles : 7/30/2008 8:48:36 AM

USO The $100 level /100-ma doesn't look as it will hold this pivotal level. Next retracement levels are $94 and $88. Link As oil continues to decline the dollar should rally. Link

If Europe's economy is weakening...will the Euro finally break its trend or is this just a pause? Link

A $100 price ($WTIC) for crude would be a 50% retracement. Link

Keene Little : 8/5/2008 12:48:43 PM

For those of us thinking about playing the short side of the market (already have my puts cocked and loaded) we need to stay aware of the possibility that we'll get another rally leg up to the 1320 area, possibly as high as 1350, by the middle of August before the market tips back over. While I like the setup for a short play I will not let it get much above SPX 1270 on a closing basis today. Certainly any higher than 1285 should have bears abandoning thoughts about the short side for at least a week or two. SPX 120-min chart update: Link

Jeff Bailey : 8/5/2008 12:43:23 PM

Speaking of "wedges" ... $SPX.X Link ... conventional 10-point box.

Jeff Bailey : 8/5/2008 12:39:55 PM

"Bad tick" in RVX.X to 20.35.

RVX.X 26.58 -4.00% ..

Linda Piazza : 8/5/2008 12:38:55 PM

Rising wedge (daily chart) resistance for the OEX ranges from 600 to about 603.50, depending on whether upper candle shadows are included. This is just to give you some what-if places to look for resistance if the OEX should break up through the 591-592 resistance level and continue a climb post-FOMC, none of which is yet guaranteed. I know what I'd be doing if I had short-term bullish profits in pure directional trades (as opposed to my trades that involve calls but aren't directional, such as my condors), particularly in AUG calls. I'd be locking at least some of those profits in before the FOMC announcement, just in case. Depending on chart setups, I might even be going flat. Every choice you make in trading has its pros and cons. The pros of this choice are obvious: profits are safe. The cons? If the OEX zooms up post-FOMC decision, bulls might not have a chance to reenter and they'd be locked out of further profits.

Although I'm far from predicting it, I wouldn't be surprised to see the OEX zoom up toward the top of its wedge shape, but then I wouldn't be surprised for it to zoom right back down. At the same time, I wouldn't be surprised for that 591-592 zone to cap gains and for the post-FOMC reaction to be a negative one. I just don't know and I don't think short-term charts are good predictors in this environment. Longer-term ones, such as the daily one, show the OEX climbing within a potential bearish formation, with recent market action telling us that prices can reverse quite quickly and when least expected.

Jeff Bailey : 8/5/2008 12:32:56 PM

S&P 500 Heavyweights Link

Jeff Bailey : 8/5/2008 12:25:06 PM

12:00 Internals found at this Link

Keene Little : 8/5/2008 12:24:33 PM

The bulls keep driving it higher which should make bulls a little nervous in front of FOMC. Unless word has leaked out about what the decision will likely be (and assuming that means a positive reaction out of the market), a rally into FOMC runs the risk of buy the rumor, sell the news.

Linda Piazza : 8/5/2008 12:20:54 PM

The OEX's descending trendline off the 7/23, 7/30 and 7/31 highs is currently about 590.80-591.10.

Linda Piazza : 8/5/2008 12:11:09 PM

Potential support for the A/D line has cycled up to 1230-1320, close below the current 1462 A/D line level. It may soon be time for the A/D line to dip down to test the potential support with the potential resistance now at 1735 and possibly pressuring it. Equity bulls would prefer a move straight up to and through resistance or at least a sideways movement but as long as support holds on 15-minute closes, equity gains are still being supported. A sustained drop below that, however, and the outcome becomes more questionable.

Jeff Bailey : 8/5/2008 12:04:08 PM

US Dollar Index (DXY) 73.90 +0.60% (30-min delayed) ... Gapped WKLR1. MNTHLY R1 and correlative MNTHLY 61.8% above at 74.05

Jeff Bailey : 8/5/2008 12:00:48 PM

Global Industries (GLBL) $8.37 -26.70% ... Earnings Press Release Link

Jeff Bailey : 8/5/2008 11:58:49 AM

Bronco Drilling (BRNC) $16.73 -0.29% ... Earnings Press Release Link

Linda Piazza : 8/5/2008 11:54:44 AM

The OEX's potential upside target and potential resistance on 30-minute closes has drifted down to 591.59. Remember to retain some skepticism about reaching targets today. Also remember to go ahead and update your just-in-case profit-protecting plan if in bullish trades as the OEX moves closer to this potential target and upside resistance.

Sometimes pre-FOMC, I've seen prices front run the after-the-announcement move, and, if you weren't in ahead of time, there was never a pullback to allow you an entry. Other times, I've seen the pre-FOMC move completed reversed. In minutes. I've seen post-FOMC reactions that whip one way and then the other, carving out the initial parameters for a formation that gradually narrows into a recognizable pattern, typically a triangle pattern, that's broken either late the afternoon of the FOMC day or, often, the next morning.

In other words, I've seen enough varied reactions that I'm not betting on any particular outcome, particularly since the FOMC forgot to call me today and tell me what they were going to do and say. So, particularly if you planned only a short-term trade, and particularly if you've already collected big profits, you might consider locking in some of those profits this morning and early afternoon, before the FOMC decision is released.

Keene Little : 8/5/2008 11:46:06 AM

While SPX has rallied to the high that it could find as tough resistance gold has declined to potential support near 882 (low for the day so far is 883.80 for the December contract). If I were to hazard a guess about the reaction to the FOMC announcement it would be for a stock market selloff, a drop in the US dollar and a climb in commodities, oil and gold included.

Linda Piazza : 8/5/2008 11:43:56 AM

TED spread 1.07.

Keene Little : 8/5/2008 11:42:58 AM

This is about the time the market goes into a holding pattern to wait for the weather to clear. SPX 1268 is holding so if it rolls back over from here it's a good setup for a short play. But obviously it's a little more dangerous playing in front of the FOMC announcement. Play it with options and keep your risk under control.

Jeff Bailey : 8/5/2008 11:37:21 AM

Procter & Gamble (PG) $67.59 +2.68% ... Earnings Press Release Link

Linda Piazza : 8/5/2008 11:22:52 AM

The A/D line has not been climbing as the equities have over the last hour. Its pullback has been a sideway/down one at levels that are still supportive of equity gains and that still look like a bull flag that could resolve to the upside. However, this pullback shouldn't go on too long while equities are continuing to gain or it will begin to look like divergence, particularly troubling since RSI has been trending above 70 all day today on the A/D line's 15-minute chart. The 15-minute 9-ema is now about 1020, near historic S/R near 1000.

Jane Fox : 8/5/2008 11:19:14 AM

The daily chart of the SPX reminds one of the little engine that could. It is trying to make a higher low but has just not had the energy to do it ? yet. Link

Linda Piazza : 8/5/2008 11:13:14 AM

As of yesterday, the Cleveland Fed's site predicted a more than 90% chance that the outcome of this AUG FOMC meeting would be no change. This morning, the 30-day Federal Funds with AUG expiration (after the meeting, obviously) were last at 97.9825, right where they were yesterday, showing a prediction of a 2.0175% rate, which is far closer to 2.00% than to either a 1.75% or 2.25% rate, suggesting no change as the result of this meeting. Both sites and both types of calculations have been suggesting no change for some time now, so markets won't be surprised by that, if that's the outcome, but would be surprised by anything else. However, they could be impacted by something said in the concurrent release.

Linda Piazza : 8/5/2008 11:08:27 AM

I forgot to mention in my 11:05:34 post that the potential OEX upside target does not preclude a pullback to the 30-minute 9-ema, now at 584.61. However, sustained 30-minute closes beneath that would question the upside target and sustained closes beneath 583.92 would erase it. The 15-minute chart, however, shows that support is likely to be found between 585.81-586.41 on pullbacks and that something might be wrong if it's not.

Linda Piazza : 8/5/2008 11:05:34 AM

The next potential upside target for the OEX, showing up on the 30-minute chart, is now 591.73. Retain a bit of skepticism about upside targets today, at least enough to keep updating your just-in-case profit-protecting plans. We already know from action in past weeks that the 587-589 region can be one of potential S/R for the OEX. This potential upside target is also potential resistance on 15-minute closes, so I would know ahead of time what I was going to do if it was hit and I was in bullish positions.

Linda Piazza : 8/5/2008 10:58:00 AM

Over the last hour, the OEX has found support on 15-minute closes at a Keltner line currently at 586.30. So far, it hasn't been able to build much on the fact that it popped above that former resistance, but the 15-minute 9-ema is now about 585.20, cycling closely underneath that former resistance line and presumably adding to its strength as support. If the OEX should pull back now, equity bulls want the 586.30 level to hold as support on 15-minute closes but they certainly want to see the 15-minute 9-ema's support hold on those closes. OEX at 587.82 as I type.

Linda Piazza : 8/5/2008 10:53:20 AM

So far, the A/D line is mostly going sideways. It's 1406 as I type. Potential Keltner support is cycling up quickly and is now at 815-930, getting close to historic support at about 1000. Bulls want the A/D line to hold up here while support gets even closer, at which time there will likely be a dip to test it. Then they want that support to hold. Keep in mind that if the A/D line stays up here or climbs up toward the next upside target and potential resistance on 15-minute closes near 1750, we will be a bit overstretched to the upside going into that result. That does not mean a post-FOMC drop is guaranteed as upside momentum is obviously strong right now, but it does mean that, if something startles markets, it's vulnerable to a pullback.

Jeff Bailey : 8/5/2008 10:41:59 AM

EchoStar Comm. (DISH) $30.17 +8.09% ... Earnings Press Release Link

Keene Little : 8/5/2008 10:40:33 AM

Adding a wave count update to the SPX 15-min chart I showed late yesterday (calling for another leg up to finish an a-b-c upward correction of the decline from last Thursday), here's how it looks: Link . The bearish wave count is set up for a resumption of the selling in a 3rd of a 3rd wave down which if true will see some very strong selling over the next couple of days and then continue lower in stair-step fashion. This is a MOAP setup (Mother of All Puts) so it's worth a try, especially if we get a minor push higher to the Fib projection at SPX 1267.75 and a reversal.

Jeff Bailey : 8/5/2008 10:39:42 AM

Boots & Coots (WEL) $2.59 +6.58% ... Earnings Press Release Link

Jane Fox : 8/5/2008 10:39:38 AM

Certainly looks like Crude is going to try and get back into the consolidation zone from $120 - $130. Link

Linda Piazza : 8/5/2008 10:34:24 AM

Here would be my game plan for today if I were in bullish OEX trades: I'd keep updating my profit-protecting plan with some frequency. I'd decide rather soon if I intended to hold over the FOMC announcement. If not, I'd start cinching up those stops tighter, the closer the approach to the FOMC decision. If I believed that the bottom was in and all was go for a weeks-long rally (always a possibility but I'm certainly not confident of that), then you'd probably need to start widening your stop as the FOMC meeting approached.

Jeff Bailey : 8/5/2008 10:32:54 AM

Archer Daniels Midland (ADM) $25.55 -6.75% ... Earnings Press Release Link

Linda Piazza : 8/5/2008 10:31:29 AM

VXO is still weak, still good news so far for OEX bulls. So far.

Jeff Bailey : 8/5/2008 10:31:05 AM

DR Horton (DHI) $11.18 -0.35% ... Earnings Press Release Link

Keene Little : 8/5/2008 10:30:11 AM

SPX made it quickly to the 1266-1268 area and the reason I'm thinking that might be it is because of the type of corrective wave pattern that has played out since Monday morning's low which calls for the 2nd leg up (this morning's rally) to be equal to 162% of the 1st leg up (Monday's 3-wave bounce into the afternoon high). This could be completing the correction of the decline from last Thursday in which case the market should reverse and start heading south again.

Linda Piazza : 8/5/2008 10:27:37 AM

If you've got some AUG bull put spreads, this morning's pop might be a good time to examine them and see if you can exit them for a pittance, locking in your profit and removing risk. Different traders have different ideas about this, but Sheridan, who does a lot of CBOE webinars, says that a pit trader would never leave that risk on the table into opex if it could be removed for a small amount. I don't know about you, but going into AUG's opex, I would prefer to remove as much risk from the table as I can. I actually don't like to go into opex week with any open front-month credit spreads if I can help it.

Jeff Bailey : 8/5/2008 10:25:08 AM

10:00 Internals found at this Link

Linda Piazza : 8/5/2008 10:23:55 AM

A/D line is 1489, moving sideways so far.

Linda Piazza : 8/5/2008 10:17:22 AM

Watch the A/D line carefully now as I'm not showing any Keltner support at least that's nearby. Equity bulls want to see the A/D line continue to climb or else move sideways, either action of which will be enough to support equity gains. They don't, however, want to see a sharp pullback to next support. There's some historical support near 1000, but the nearest Keltner support on the 15-minute chart is way down at about 145-245. RSI has moved above 70, and although it can and does trend there, such moves often signal that it will soon be time for a pullback (early morning 7/23 and 7/25, for example).

Jeff Bailey : 8/5/2008 10:16:44 AM

S&P Retail Index (RLX.X) 360.00 +3.02% ...

Jeff Bailey : 8/5/2008 10:16:00 AM

ISM Non-Manufacturing Index 49.5

Jane Fox : 8/5/2008 10:11:00 AM

Internals are bullish and so is the TRIN at 0.69 Link

Linda Piazza : 8/5/2008 10:08:53 AM

The OEX obviously ended that 30-minute period above resistance. It also ended the 15-minute period at resistance that's now at 585.87 and is currently above that, too. So far, so good for bulls, but keep updating those profit-protecting plans as we go along as a pullback to 583.77 or so is not out of the question yet. The A/D line continues to climb, still moving up toward the next upside target and potential resistance rather than dropping toward support, but as it approaches that upside resistance, be particularly careful. RSI says it's already vulnerable to a pullback, although that doesn't promise that one will come. The A/D line is currently 1516 with the next potential target and resistance level on that 15-minute chart near 1750.

Keene Little : 8/5/2008 10:01:34 AM

SPX has broken its downtrend line from lat Thursday, which is currently near 1257, so any pullback that retests that area and holds should be bullish for a continuation higher this morning. From a Fib perspective I see upside potential to 1266-1268 so if price stalls there I'd look for a shorting opportunity. The larger price pattern is still not very clear at the moment so trade light and take profits early, especially as we head into this afternoon's FOMC.

Linda Piazza : 8/5/2008 9:49:10 AM

OEX potential resistance on the 30-minute chart is now at 583.70. OEX as 583.89 with plenty of time left in this first 30-minute period for this resistance to be shown as having held or having been breached.

Linda Piazza : 8/5/2008 9:46:01 AM

Many equity bulls will have noticed a rather ragged inverse H&S that's been forming on intraday OEX charts since late Thursday or early Friday. They will be encouraged by this morning's pop above the neckline, located at about 584.46-584.50, depending on how it's drawn. As I type, however, the OEX is drawing back to that neckline. As I cautioned earlier this morning, try to maintain some skepticism about the early morning pop. It may or may not be maintained. That's what we're watching to see. FOMC days are notorious for producing chart setups that are seemingly confirmed but with targets that are never met.

Linda Piazza : 8/5/2008 9:43:17 AM

Next OEX potential resistance on 15-minute closes is currently 585.70. This is one of the two Keltner levels I mentioned previously as being potentially important resistance on 15-minute closes, but these lines are dynamic and will move a little based on what happens with prices. This is an update of the current level. The other is now at 582.64, with several minutes still left in the 15-minute period. It doesn't look as if the OEX will retreat that far by the close of this period and equity bulls don't want that to happen, but stranger things have happened, so I mention it.

Jane Fox : 8/5/2008 9:40:46 AM

And the VIX is falling supporting the bullish AD line.

Jane Fox : 8/5/2008 9:40:00 AM

Oh my goodness the AD line opens at +1157.

Linda Piazza : 8/5/2008 9:38:14 AM

Keltner outlook on the A/D line: The A/D line made its first prints squarely in the middle of strong support and strong resistance, and it has neither nearby. When this happens, the A/D line sometimes carves out a wide range in the early minutes and then settles into a triangle or other shape until a breakout. For now, traders should understand that it could as easily climb to +1714 as drop to +88 and vice versa. Neither may be touched if that range is to be established, as often happens with similar setups in the early morning. The A/D line is at +1088 as I type. Equity bulls do not want that drop to support. They want continued climbs or else sideways consolidation while support cycles up and catches up.

Linda Piazza : 8/5/2008 9:34:51 AM

The OEX has leaped up right to what might be important resistance, detailed earlier. On the OEX's 15-minute chart, the most important resistance levels on 15-minute closes are about 582.60, with the OEX currently above that but with many minutes to go, and about 585.55. On the 30-minute chart, it's 583.71 on 30-minute closes. That means that bulls should maintain some level of skepticism about this early rise, certainly updating their just-in-case profit-protecting plans.

Linda Piazza : 8/5/2008 9:31:44 AM

I'm back. The TED spread is 1.07 this morning. We're not seeing the same effect (rising TED spread) that we saw into the last FOMC meeting. At the time, I had questioned whether speculation over the Fed's decision might be contributing to that rise and had first located information at that time that the then-impending earnings from financials could be making it difficult to interpret the acitions on the TED spread. Of course, it wasn't long until we learned about IndyMac, so I don't think that the TED spread's actions were compromised by the impending earnings season at all: it was showing rising default risk and the news certainly verified that the risk had been rising.

Since then, the TED spread has retreated off its 1.45 level, falling away from resistance up to 1.70. With my delayed feed, it's now 1.07.

Jane Fox : 8/5/2008 9:28:39 AM

WASHINGTON (MarketWatch) - Federal Reserve policymakers are not going to give a clear signal of where rates are headed after their meeting on Tuesday, economists said.

Economists expect a "neutral" statement that won't prepare markets for a rate hike in the near term.

"The next policy statement is unlikely to include a signal to financial markets that the FOMC is prepared to raise interest rates at the next meeting [on September 16]," wrote Brian Fabbri, chief U.S. economist at BNP Paribas.

Jane Fox : 8/5/2008 9:27:41 AM

I guess what I am saying is that I do not believe a trader should be shorting the commodities and if you believe they were in a bubble and that bubble has burst then you may get caught shorting them. I think that is a mistake. If you shorted Oil you may be sitting pretty now but how many times before have you had to short that darn thing to finally get a trade that worked. I don't like to trade like that unless it is daytrading.

Jane Fox : 8/5/2008 9:26:41 AM

Commodities got creamed yesterday and now I am seeing a lot of comments about the end to the commodity bubble. Sorry I don't buy it. I guess because I don't think the commodities as a whole were in a bubble. Oil may have experienced a buying frenzy and it has sold off but Gold was not in a bubble and it sold off yesterday as well.

Jane Fox : 8/5/2008 9:16:59 AM

As I have stated before Crude does not have a lot of affect on the stock market day to day, overall it may, but not day to day. This morning I see headlines saying the markets are up overnight because Crude is pulling back Geesh. Yesterday Crude fell from a high of 126.65 to a low of 119.50 and what did the S&P and DOW do? They fell as well. Didn't see a lot of headlines about that one. Link

Linda Piazza : 8/5/2008 8:32:09 AM

I may not be online for the first few minutes of the open this morning. With the OEX ending the day with a small-bodied candle that formed just above the rising trendline off the 7/15 low, the candle spoke of the possibility of either more hesitation or an attempt to rise up through the rising wedge shape forming on the daily chart. A couple of problems exist: such rising wedge shapes have bearish connotations, whether those connotations are ever played out or not. Also, we have the FOMC decision pending, and action tends not to be particularly amenable to technical analysis on FOMC days, either before or after the announcement.

If the OEX rises right away this morning, it's soon going to be enmeshed in a thicket of potential resistance levels on everything from the 15-minute up through the daily chart. For example, the 10-sma is 582.93 as I type, with the 15-minute chart showing potentially strong resistance on 15-minute closes that ranges from 580.15-582.30. So, barring a first strong surge that is not quickly reversed, it looks as if an early rise could bring the OEX right back up to that resistance level, churning it within the range roughly from 577-584.50 in which it's been churning for several days. Although a short-covering surprise is always possible, I'd be careful about assuming that the OEX was going to break out of that range to the upside prior to the FOMC decision and announcement.

Keene Little : 8/5/2008 8:14:31 AM

For followers of gold's ETF, GLD, here's an updated daily chart from last week's newsletter that shows the same potential sideways triangle playing out into the fall before a strong rally leg out of it. A break below the bottom of the triangle near 86.35, confirmed with a break below the May 1st low at 83.57, would be bearish for gold. Link

Keene Little : 8/5/2008 8:06:49 AM

Gold update: Gold has been steadily dropping lower since its July 15th high and has broken its uptrend line from August 2007 through the June low. That could be a potentially important break. But there remains the possibility we'll see gold consolidate for a few more months in a big sideways triangle, the bottom of which is near 882 (gold is trading 892 this morning). I think that's the key level for gold bulls to hold: YG (December contract) daily chart: Link

The pattern of the decline from July 15th, as steep as it is, has me thinking the sideways triangle pattern has a good chance of occurring (pink wave count). Therefore if you like the idea of trading gold on the long side (with GLD as well), we could have a setup for it soon. But if it breaks below 882 then it should be on its way down to 800.

Keene Little : 8/5/2008 7:58:28 AM

Equity futures got a big jump higher following the overnight low near 3:00 AM and are nicely positive this morning. The downtrend line from last Thursday's high through yesterday afternoon's high is just under 1258 this morning and that's right where futures are currently trading so we could find out quickly if at least the short-term downtrend gets broken. Using all-hours for ES this downtrend line was broken during the overnight session so watch for the same for SPX after the cash market opens. SPX 30-min chart: Link If the downtrend line holds and the market tips back over again, the bottom of a potential parallel down-channel will be near 1228 by early afternoon and that's the level I mentioned last night with the daily chart when talking about two equal legs down from last Thursday.

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