Option Investor
Printer friendly version
Keene Little : 8/12/2008 10:44:05 PM

Wednesday's pivot table: Link

I'll be watching to see if the market stair-steps a little lower Wednesday morning, perhaps down to the SPX 1280-1283 area. If the pullback is to be just a correction of the rally then we should see support near 1292.89 where the decline from Monday will have two equal legs down. While 1280 is not a key level, a drop below it would be a heads up that something more immediately bearish could be playing out. Otherwise ideally we'll see another rally leg into Friday to set up what should be an outstanding short play (a MOAP).

Jeff Bailey : 8/12/2008 10:30:45 PM

DXY's 04:00 PM EDT tick on Tuesday was 76.130

OI Technical Staff : 8/12/2008 9:59:59 PM

The Market Monitor has been archived.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

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Jeff Bailey : 8/12/2008 9:17:06 PM

Major Global Indexes, Currencies, USO, GLD, HUI.X, OIX.X and XLF at this Link

Jeff Bailey : 8/12/2008 8:38:52 PM

Oh ... at Friday's close, JPM's weighting in the INDU was 2.85%.

JPM's weighting in the SPX was 1.25%.

I'm also a believer in trying to "know more than the next guy."

I should also note that I (Jeff Bailey) only trade the YM futures (not the ES, or MR, or NQ). I trade it long, and I trade it short.

Only 30 stocks to keep track of. Mini= $5/point.

Jeff Bailey : 8/12/2008 8:18:59 PM

"Head" RUT.X Link

NDX.X (very near the head) Link

SPX (very near the tail) Link

"Tail" $INDU Link

Jeff Bailey : 8/12/2008 8:12:57 PM

Quick Review:

Based on some recent comments here in the MM, I should probably clarify my 08/12/08 04:46:27 PM.

I'm a believer in picking up on things that isn't necessarily obvious to the everyday person.

One of those has been the dollar/commodity/oil trade.

The other is that even here in the U.S., a MAJOR index (i.e. INDU, OEX, SPX, RUT, NDX, COMPX, NYSE) may not always trade "in sincronization" with each other.

One reason I must mention this, and the PRIMARY reason I've been posting the SPX Heavyweights and INDU components is for this very reason.

The INDU is the "weakest" of the major indices currently. That doesn't mean this can't change.

In fact, over the years, those that have followed my trades and observations, will know this to be true.

As you look, study the major averages (INDU, OEX, SPX, NDX/QQQQ and RUT) you will see what I see.

Since I am BULLISH the SPX, and you KNOW the makeup of the SPX and the INDU, I think an SPX/SPY/SSO BULL needs to monitor, study and comprehend the INDU, its components.

Then think of my teachings regarding how an inchworm moves.

Right now the "head" is the RUT.X, the NDX/QQQQ is close behind, then the SPX, then the INDU is at the "tail."

Tab Gilles : 8/12/2008 5:42:56 PM

The financials play for now has lost its momentum....while technology as I noted last week has been in favor. Goldman upgraded AAPL to overweight based on iPhones sales with a $220 P/O.

I'd noted last night to Jim's Weekend Update on Apple...heres my take a few weeks ago on Apple. Apple (AAPL)$176.73 +$3.17 (1.83%)

Tab Gilles : 7/22/2008 5:21:51 PM

Apple (AAPL) $162.02 -$4.27 -2.57% Very impressive rebound from its intraday lows today, $146.53 coming very close the the March/May 61.8% retracement.

As usual the stock sells off on earnings report and Apple's sandbagging conservative guidance. In last night 5:56pm post I stated:

Management in their conference call said that margins for this fiscal year of 34% would be lower in the next fiscal year...somewhere around 30%. Mostly due to lower iPhone prices as the company moves more into phones than their traditional PC sales.

At first it spooked traders/investors, but a closer look indicates that Apple which has maintained a higher price halo on the Mac pc's is now making a move to go after market share lowering its product price points. The Mac growth is 3xs the average pc growth, you gotta look at the large pricture. For the next two quarters you're going to have the 3G revenue, back-to-school pc sales and end of year holiday sales!!! [Disclosure- I personally own AAPL shares and I'm long Jan '09 $230 calls APVAY]

JP MorganChase (JPM) $37.92 -$3.97 (9.48%)

Although I'm out of the JPM option calls, I'm keeping JPM on the radar, I continue to like this stock in the financial sector---"best of breed".

Tab Gilles : 7/28/2008 4:55:59 PM

JP MorganChase (JPM) $37.66 -$1.86 (4.71%) Tab Gilles : 7/23/2008 10:36:02 AM

JP Morgan/Chase (JPM) $42.10 +$1.24 (3.03%) Touching its 200-ma and the 61.8% Fibonacci Retracement from the May/July levels.

The suggested LEAP calls WJPAG $11.10; WJPAH $8.30; WJPAI $6, mostly have doubled. Taking 1/2 a position off the table would be prudent and letting the rest ride on the houses money.

The 200-ma provided stiff resistance and now the $37.50 Gap support level is being tested. Link Link

I'd suggested last week to take 1/2 of the money off the table. Depending on JPM bouncing or breaking the current support, one may want to consider pulling the sell trigger on the remaining positions.

Closing LEAP prices, WJPAG $8.65; WJPAH $6.35; WJPAI $4.85...these calls do expire January 2010.

At the moment...as I mentioned earlier today, I believe that oil may see a reversal here. I'm leaning more towards natural gas and I really like Cheaspeake Energy (CHK). Whoever gets elected will be pro-enviromental and natural gas in my opinion is the place to be in the energy sector, longterm.

Jeff Bailey : 8/12/2008 4:46:27 PM

Today's pullback in the INDU/DIA/YM just about what I expected, but it took some negative comments from "best in breed" JPM Link to get it done.

The INDU Link is the "weakest" in my opinion, and pulls back to the spread-triple.

IBM $125.22 -1.09% Link ... August "Max Pain" now up at $135, but that's probably a lot of covered call as stock has met its bullish vertical count.

Keene Little : 8/12/2008 4:31:47 PM

With today's pullback being a little sharper to the downside than I had expected, it's possible we'll see a quick move down tomorrow morning to finish the 3-wave pullback from Monday and then a resumption of the rally from there. Updated 60-min chart shows that scenario (in pink): Link

Jeff Bailey : 8/12/2008 4:15:13 PM

Swing trade put cancel order alert! ... to sell the two (2) Petroleo Brasiliero PBR Aug $45 Puts (PMJ-TI) ...

PBR $49.43 -0.02% ... PMJ-TI $0.05 x $0.15

VIX.X 21.17 +5.21% ... Three (3) days until expiration.

Jeff Bailey : 8/12/2008 4:12:37 PM

YM ... 11,634 ... again, short from 01:54:48 @ 11,669 should be closed out at target of 11,635

Linda Piazza : 8/12/2008 3:55:41 PM

The OEX's potential resistance on 15-minute closes now at 597.66-598 now looks as strong a possible resistance zone as it proved to be a support zone for much of the day. OEX at 596.30 as I type, just below the 50% retracement of the rally off Friday's low.

Jane Fox : 8/12/2008 3:53:35 PM

Tomorrow's economic reports include:

8:30a.m. Jul Import Prices: Expected: +1.0%. Previous: +2.6%.

8:30a.m. July Retail Sales: Expected: -0.3%. Previous: +0.1%.

8:30a.m. July Retail Sales, Ex-Autos: Expected: +0.5%. Previous: +0.8%.

3:00p.m. Jun Business Inventories: Expected: +0.5%. Previous: +0.3%.

Linda Piazza : 8/12/2008 3:53:02 PM

The RUT has now closed a 30-minute period beneath the breakout benchmark on the 30-minute chart, at 745.73. This is one more tentative sign of a change in tenor. The RUT has today produced a classic inside-day candle, a harami to candlestickers. This is a low-reliability potential reversal signal. You should keep in mind that "low reliability" of the signal when making decisions, but do factor in the possibility of a reversal signal being confirmed.

Linda Piazza : 8/12/2008 3:49:27 PM

If the OEX keeps bouncing, resistance might now be found where temporary support was found earlier, at 596.73. OEX at 596.04 as I type.

Linda Piazza : 8/12/2008 3:47:48 PM

It's a mistake in this environment to post a chart showing where the OEX is for end-of-day decisions too early, but I've got to post it in time for you to see the possibilities, so you can make decisions. Here's where the OEX is with my annotations: Link What happens if the OEX should fall to test the 10-sma or the wedge support? That's what we don't yet know.

Jeff Bailey : 8/12/2008 3:45:41 PM

Goldman Sachs (GS) $167.33 -6.00% ... after kiss of its no "naked short" rule 61.8% ($166.686).

Linda Piazza : 8/12/2008 3:40:42 PM

The OEX is fast approaching next potential support on 30-minute closes, now at 594.35. Below that is further potential support on 30-minute closes at 592.31, and the 61.8% retracement of the rally off Friday's high is at about 593.86, between the two. Bears need to update their profit-protecting plans in case there's a steadying and/or a bounce from this support.

I don't need to remind OEX traders, I'm sure, that this so far a confirmation of the ugliness of yesterday's OEX candle at the top of a climb, at the resistance of the rising wedge's upper trendline. I also don't have to remind you, I don't think, that anything and everything can happen in this market, including a drop all the way to the bottom of that wedge and a break through it or a zoom up that erases everything I just said and turns this into a doji day. I don't think the latter possibility will come to pass, but I wouldn't be surprised to see either a quick drop to 591-592 or else a pop back up to 597-599. Either are within the realm of possibility this afternoon in the last few minutes.

Keene Little : 8/12/2008 3:37:22 PM

If SPX drops to the level where it will have two equal legs down from yesterday's high then it will drop down to just below 1283. The 30-min 100/130 moving averages are at 1281-1284 so this should turn out to be a support level now that 1290 has given way.

Linda Piazza : 8/12/2008 3:35:24 PM

What scheduled economic events tonight could change your trade? Tonight at 7:50 pm ET, Japan's preliminary GDP will be released. Tomorrow morning at 5:00 am ET, the Eurozone's Industrial Production will be released. The Bank of England's Inflation report will be released at 5:30 am ET. That ends the foreign reports and moves into the time when U.S. reports appear on the screen, including the before-the-market retail sales and import price index, both at 8:30 am ET.

Jeff Bailey : 8/12/2008 3:35:23 PM

The ONLY order I currently have OPEN is a Day Order to close out the PMJ-TI should they trade $0.40. (see 12:20:02 post).

PBR $49.80 +0.72% ... PMJ-TI currently $0.05 x $0.15.

Jeff Bailey : 8/12/2008 3:28:58 PM

The YM short was on headline I saw regarding the lowering of numbers on JPM.

CNBC has reported

JPM $37.16 -11.26% ... trying to backfill 07/16 to 07/17 gap higher.

Linda Piazza : 8/12/2008 3:27:24 PM

The OEX's small-bodied 15-minute candle is just hanging there beneath support-turned-possible resistance, like a berry ready to fall from the vine. It hasn't fallen, however, and the 15-minute period hasn't concluded. That 50% retracement level at 596.73 is playing its part here, holding up prices for at least a little while. Keltners tell me that those buying the 50% retracement may not be taking the right tack, but Keltner's aren't infallible any more than any other charting system. A sustained move back above 597.95 and particularly back above 599 would prove them wrong. OEX at 596.87 as I type.

Jane Fox : 8/12/2008 3:22:00 PM

Here we have the VIX telegraphing its support of the S&P futures new daily lows. AD line below -1000 and a falling AD volume are also on board vut that dang TRIN is as neutral as it can be at 0.93. Link

Linda Piazza : 8/12/2008 3:20:09 PM

The OEX has now gone beyond vulnerability to a test of 594.33 and perhaps even 592.24; it has set a target there, but again that's not a guarantee that it will reach it. It has set an even lower target on the 15-minute chart, but let's see how that potentially strong support on the 30-minute one holds up before we start counting unhatched chickens yet. As I type, the OEX is bouncing right back up to immediately retest the support it just broke through, with that at 597.96 on 15-minute closes. Bears want that to hold and now be resistance. OEX at 596.91 as I type.

Jeff Bailey : 8/12/2008 3:19:41 PM

Wachovia (WB) $15.93 -12.57% .... 38.2% of its no "naked short" sale rule is $15.06. 50% at 13.675, 61.8% is $12.288.

Jeff Bailey : 8/12/2008 3:18:09 PM

Freddie Mac (FRE) $5.37 -4.10% ... retraces 80.9% of its no "naked short" sale rule.

Linda Piazza : 8/12/2008 3:17:45 PM

VXO is 23.13, at a new high for the day but about to test potential resistance now at 23.25 on 15-minute closes.

Linda Piazza : 8/12/2008 3:16:24 PM

OEX traders should factor in vulnerability to 594.34 and possibly 592.29, but I repeat that "vulnerability to" doesn't mean "it's gonna get there." The OEX's 50% retracement of its rally off Friday's low is at about 596.73, and that 50% level could prompt some buying and a rise up to test the just-broken support. OEX is now at 596.65.

Linda Piazza : 8/12/2008 3:11:33 PM

There's been another small change in tenor for the RUT, with it closing a 30-minute period below potential support now at 746.89, now converted to potential resistance. The RUT hasd closed above that potential support every 30-minute period since the first hour Friday morning. It's now just below the breakout benchmark on the 30-minute chart, with that at 745.45, and with the RUT only a little below that, at 744.55 as I type. It has closed a first 15-minute period below the 15-minute chart's breakout benchmarks. So, there are some first and tentative signs of a change in tenor based on Keltner evidence, but not even a new low for the day yet, as I type. The previous low was 743.65.

Linda Piazza : 8/12/2008 3:06:21 PM

The OEX just closed a 30-minute period below the support that's held it up all day, but only slightly below that support that's now at 599.06. It did, however, close the 10-minute period convincingly below support that had been tested many, many times today and, until now, held up on 10-minute closes, with that at 599.49 currently. Now it's perched right on potentially strong support on 15-minute closes now at 597.80. If this surge is strong enough, it could break through this support, but bears also need to consider the possibility that support could still kick in here. If not, or if the OEX bounces but can't climb above about 599.50 (especially on 10-minute closes), then the possibility of a drop to test first 596.73 and then, possibly, 592.35-594.35, must be factored into the day's trading plan. So far, the OEX still tests support on the 15-minute chart, only a little below it. The OEX is 597.67 as I type.

Keene Little : 8/12/2008 3:05:08 PM

The quicker drop now suggests we could see SPX drop down to test potential support around 1290-1291 within the final hour of the day here. It may be good for a bounce but I think the market will continue to work its way lower tomorrow.

Jeff Bailey : 8/12/2008 3:04:46 PM

YM short target alert! ... 11,635

Linda Piazza : 8/12/2008 2:57:45 PM

I expected 2-3 hours of consolidation but not this much. It's gone on about an hour longer than I anticipated. I thought either bulls or bears would have gained the day by now. Support beneath the OEX still looks strong, but the 30-minute chart shows a series of lower highs, too, as the OEX is mostly pressed down by closes beneath the declining 30-minute 9-ema now at 600.75. Although support seems stronger than resistance on the 15-minute chart, that's not true at all of the 30-minute one, where both seem equally weighted. The 10-minute chart shows an important test about to occur: another test of potential support on 10-minute closes now at 599.53. The OEX has tested this particular benchmark on this chart many, many times today and has so far closed each 10-minute period above it. Sustained 10-minute closes below it would signal that something had changed in this consolidation period, although it would be only a minor change. Keep in mind that not even that minor change has happened yet. Consolidation it is with the final outcome as yet unknown. The OEX is at 599.84 as I type.

Jane Fox : 8/12/2008 2:55:05 PM

Crude as bounced from a high to 115.95 to a low of 112.31 and some of the intraday moves have been pretty violent. There is a real battle going between the bulls and bears today but it sure feels like the bears are going to win.

Linda Piazza : 8/12/2008 2:31:02 PM

As I noted earlier, that potential OEX support now at 597.76-598.33 on 15-minute closes (599.09 on 30-minute) still looks strong enough that it was going to take either a strong plunge through it or else further choppy consolidation. The danger for bears now is that, now that the drive lower has failed to break through that support for a second time today, bulls might be encouraged and begin to buy. You should know where your stops should be, and watch out for a potential stop-running move since the set-up is far from clear right here. And, as I typed, the OEX began moving up to challenge 15- and 30-minute 9-ema's, with both versions rather near 601. The OEX is 601.11 as I type.

Keene Little : 8/12/2008 1:59:08 PM

The metals and the euro look very similar (and counter to the US dollar). Silver has a clean pattern and suggests we'll see a consolidation near the lows before heading lower again later this month. The downside Fib target is near 12.60 so about another $2 below the current price. That means gold will likely do the same (and the euro). Link

Keene Little : 8/12/2008 1:48:58 PM

With the techs continuing to look relatively stronger I'm getting impression we'll see more of a sideways consolidation for NDX before heading higher into the end of the week.

Keene Little : 8/12/2008 1:45:53 PM

Market is working its way lower and it's not an impulsive decline so no surprises yet. SPX 1290-1291 is a potential support area should it work its way down there this afternoon. Otherwise the 1285 area by the end of the day tomorrow continues to look plausible.

Linda Piazza : 8/12/2008 1:42:25 PM

The VXO again dropped back to test that gap higher this morning and the previous low of the day. It bounced from just above that low and is now at 22.98 with potential resistance on 15-minute closes now rising to 23.16. That is just a little above the previous high of the day of 23.10. Bears should again watch for the possibility that the VXO could get turned back from that resistance, and bulls, for the possibility that the VXO could burst above it or else keep climbing slowly and nudge it higher.

Linda Piazza : 8/12/2008 1:36:34 PM

If the OEX should break through potential support on 15-minute closes at 597.64 and maintain 15-minute closes below it, it sets a next potential downside target at 593.86-594.12. That's a big "if," though, as the support from 597.64-598.29 still looks strong. There's the possibility but not yet the probability that the support could be broken, however, and I wanted to give next potential downside targets. For now, don't count on it happening yet and do have profit-protecting plans in place for your bearish trades for the approaching test of support that extends up to 599.

Linda Piazza : 8/12/2008 1:27:30 PM

Potential support for the OEX is now at 599.01 on 30-minute closes with the 38.2% retracement of the rally off Friday's low at 599.61. The 15-minute chart shows support and a potential target a bit lower, at 597.61 and 598.27 on 15-minute closes. That support still looks strong, so it's still going to take either some chopping around or else a strong surge down through it to break it.

Linda Piazza : 8/12/2008 1:16:42 PM

The RUT dropped down to test the next step needed for a change in tenor, the potential support on 15-minute closes that's now at 745.50 (and on 30-minute closes at 744.81) but with further potential support extending down to 744.22. As I type, the RUT is bouncing from that support, although it hasn't gotten far yet. These levels mark the benchmarks for the RUT's breakout status, and the 30-minute version has prompted bounces since early last Friday morning. A sustained period of 30-minute closes beneath that benchmark would mark another change in tenor, then. Hasn't happened yet. The RUT is 747.13 as I type.

Jeff Bailey : 8/12/2008 1:16:23 PM

GLD $80.19 -1.15% ... ~$801.90 spot.

Jeff Bailey : 8/12/2008 1:15:38 PM

FXE $149.23 +0.02% ...

Jeff Bailey : 8/12/2008 1:15:15 PM

USO $91.78 -0.78% ...

Jane Fox : 8/12/2008 1:11:11 PM

NEW YORK (MarketWatch) - The International Energy Agency said Tuesday that tight global oil demand and supply balance, which had helped push up crude prices to record highs, is easing as higher prices and slower economic growth in developed countries curbs oil demand.

Global oil demand for this year is expected to stand at 86.9 million barrels a day, unchanged from the previous month's forecasts, the IEA said in an August monthly report. Oil supplies, on the other hand, are expected to remain strong. The world produced 87.8 million barrels of oil in July, up 890,000 barrels from the previous month, the IEA said.

"The slowdown in demand related to the general economic downturn and high oil prices is becoming increasingly evident," the IEA said in the report. "Consumers clearly are reacting by a change in [driving] behavior."

Easing fundamentals have pushed oil prices about $30 dollars a barrel, or 20%, lower than their record high above $147 hit in early July. Crude was trading around $114 a barrel on the New York Mercantile Exchange on Tuesday

Linda Piazza : 8/12/2008 1:09:20 PM

There's not too much cogent to say here about the OEX. As of my 10:39:54 post, I expected 2-3 hours of consolidation in a 4-5 point range, and we've been getting that. I expected that consolidation to render intraday chart setups less predictive than is typical--if anything is "typical" these days--and that's happened, too. About all I can say now is that the OEX needs to soon curve down away from its flattened 15-minute 9-ema and 30-minute 9-ema, with the 30-minute version at 601.63, or else bulls could gather courage and buy the component stocks again. OEX at 601.33 as I type.

Jane Fox : 8/12/2008 1:08:51 PM

Gold is back to its December 2007 levels. Never ever thought it would selloff this much but isn't that what the market is best at, surprising us all? I think even Keene, who thought Gold was on it way down, never thought it would go this far. By the way good call Keene. Link

Jane Fox : 8/12/2008 12:53:08 PM

Earlier today I stated that Crude was making a "tweezer bottom" and that could mean a retracement back to about $120.00 but I should have waited until the EOD before I made such a bold statement for my "tweezer bottom" is slowly but surely disappearing. Link

Linda Piazza : 8/12/2008 12:47:02 PM

In reference to Keene's 12:34 post, it was Hussman I was referencing when I noted in my first report this morning that a trusted commentator had begun fearing the possibility of a 1966, 1987 or 1990 type event. I think it may have been Jamil who first told me about Hussman--thanks, if it was--and I've found his comments valid. I've hesitated to mention too many in the MM, because he requires that anyone quoting him give a link to his website, and we're not allowed to provide webpage URL's in the MM. Also, since he runs two funds, I didn't want subscribers to feel that I'm pushing his funds. I'm not. Currently, I have no investments in his funds, although I'm certainly watching them closely. Anyway, if you'd like to read his entire weekly commentary, I can link you to that, with the caveat that I'm not pushing the investments and have no ulterior motive other than providing subscribers with someone's input that I find valuable. Here's the link: Link

Linda Piazza : 8/12/2008 12:42:58 PM

The OEX is again looking more vulnerable to a test of potential support on 30-minute closes, but that support has now risen to 598.91. Also, the OEX is continuing that pattern that I suggested earlier of consolidating along its 15-minute 9-ema, so the "vulnerability to" setups perhaps don't have as much predictive power. Just factor in that vulnerability but don't count on the OEX getting there if you're in bearish trades.

Keene Little : 8/12/2008 12:34:22 PM

Good comment from a reader (thanks Jamil):

I am sure you are familiar with John Hussman. I personally never skip his weekly column and have the utmost respect for him.

In last Sunday?s column he was short term un-characteristically bearish. Usually, when he is bearish he still says ?this is not a market forecast", etc. but this time he outright mentioned it is one of the rare cases where he DOES have a short term opinion and it is negative.

I never take what John Hussman says lightly.

Linda Piazza : 8/12/2008 12:21:21 PM

So far, the A/D line continues to find resistance on 15-minute closes at its 9-ema, with that descending moving average now at -576.61. However, it can't be said that the A/D line is trending lower over the last couple of hours. Instead, it's been forming a triangle with a rising lower trendline, at least since the 10:30 low. The A/D line is now -748, with potential resistance at that 9-ema and with potential support on 15-minute closes now at -934 and then at -1180.35. So far, there's a potential target down to that -1180.35 level, but the A/D line has resisted dropping there.

Jeff Bailey : 8/12/2008 12:20:02 PM

Swing trade put place order alert! ... to sell the two (2) Petroleo Brasileiro PBR Aug. $45 Puts (PMJ-TI) for $0.40 should they trade that price today. This is day order only.

PBR $50.35 +1.84% ...

Linda Piazza : 8/12/2008 12:13:15 PM

Jane's post reminded me to check the VXO. It no longer holds to the support of the Keltner line now at 23.00. It dropped to test this morning's gap and is now bouncing back to test that 23.00 level, but from below. It's at 23.97 as I type. OEX bears prefer to see it bounce back to a new high now that it's tested the gap. The previous high was 23.10. Bears need to watch out now, though, as that previous support is tested from the underside, in case the VXO is now knocked back.

Jane Fox : 8/12/2008 12:07:56 PM

Internals continue to give us no clue as to direction. TRIN under 0 yet both the AD volume and AD line are under 0 as well. And the worst part it all is the trusty old VIX is flatlined. Link

Linda Piazza : 8/12/2008 12:04:56 PM

The OEX did close that 15-minute period below the 15-minute 9-ema, but we can't yet read too much into it. With these tests, the OEX has reset a downside target now at 598.23-598.83, although we can't guarantee that it will be tested. That support zone looks strong down to 597.32 on 15-minute closes, so I'm not sure that our consolidation has been long enough to break it, if it will indeed be broken, which is still questionable. The OEX could prolong the agony and just consolidate another hour or so along 600-602.50 before it makes a decision either way.

Jeff Bailey : 8/12/2008 12:01:48 PM

$USD vs. $CRB Link

Jeff Bailey : 8/12/2008 12:00:57 PM

It looks like more and more are starting to make the tie between the dollar and commodities.

Jeff Bailey : 8/12/2008 12:00:06 PM

US Dollar Index ($USD) Link

Jeff Bailey : 8/12/2008 11:59:09 AM

CRB Index ($CRB) Link

Keene Little : 8/12/2008 11:55:34 AM

With the techs so strong recently it pays to keep an eye on the pattern for the semiconductors. Yesterday SMH rallied up to its broken uptrend line from January and at the same time tagged its 200-dma (30.53) and the 50% retracement of the May-July decline (30.73). That's a lot of resistance all in one area. The 100-dma (30.33) is also in the same area which is where it closed yesterday. As shown on the daily chart, it's a setup for a selloff from here: Link

Linda Piazza : 8/12/2008 11:54:21 AM

When I noted that we might see 2-3 hours of chop in a 4-5 point range earlier today, I noted then that such a move might scramble some of the intraday indicators and render them less useful than is typical. That's happening with the 30-minute chart presenting indecision about whether the OEX will bounce higher, with resistance so far holding into this 30-minute period. However, the 15-minute chart also presents indecision but with a slightly different slant. The OEX is so far holding onto the support near 601.29, presenting the possibility that the OEX might climb further. So, bears would like to see the OEX soundly beneath that 15-minute support again by the close of this 15-minute period. The OEX is 601.45 as I type, below the 30-minute resistance and above the 15-minute support.

Linda Piazza : 8/12/2008 11:49:08 AM

TED spread 0.92, near support that bounced it in early July as well as last October. A break through here could send it toward the next 0.86-0.88 (guesstimate) support and a break through that could even bring it near 0.60-0.70, just above the top of the previous 0.10-0.50 range. However, we don't know when support might kick in and so shouldn't suppose a drop all the way through the channel. This is used just as insight and not as a trading tool, but in general those hoping for good things for the market and signs of lessening default risks want this to fall, while bears would prefer it to climb, although I don't know if anyone really wants default risks to rise.

Keene Little : 8/12/2008 11:42:33 AM

One of the reasons for watching what the US dollar does next is the potential impact on commodities, gold included. The tight correlation may not hold for long (there have been many periods when they've traded in the same direction) but for a while now a move in the dollar has meant the opposite move for most commodities. The daily gold chart (emini, YG, December) shows price has dropped to the bottom of a parallel down-channel from March and the Fib projection at 814.50 for two equal legs down from March: Link

If the dollar starts on a path to new lows then gold is set up for a rally to new highs (pink). However, I see the distinct possibility, if not probability, for gold to continue heading lower. If it manages to bounce back up to its broken uptrend line from May, currently near 870, it would be a good place to look at shorting gold again. For now I think it's risky either direction for a gold trade.

Jeff Bailey : 8/12/2008 11:38:13 AM

US Oil Fund (USO) $91.29 -1.31% ...

Linda Piazza : 8/12/2008 11:36:52 AM

Although I listed a possible 4-5 point range for the chop I expected for a few hours when I made that 10:39:54 post, this chop is getting just a touch higher than I expected it to get Keltner-wise when I made that post, although only by a few cents so far. The OEX still tests potential resistance on 30-minute closes now near 601.95, with the OEX now at 601.72. Still, bears would have much preferred that the OEX find resistance at the lower 15-minute version, now at 601.30 so the eventual outcome is somewhat in question. Number-wise, the chop is within parameters that I expected, but the Keltner channel lines have since changed and the OEX is a bit stronger than bulls would prefer by that measure. Bears want to see the OEX back below 601.30.

Jeff Bailey : 8/12/2008 11:35:44 AM

Continuous Corn ... unconventional 8-point box in order to get wider time/price observation. Most will view 4-point box. Link

Linda Piazza : 8/12/2008 11:31:43 AM

If the OEX pushes past the potential resistance on 30-minute closes now at 601.95, as it appears to be doing as I type, watch for the possibility that next OEX resistance might kick in around 602.20-603.16.

Jeff Bailey : 8/12/2008 11:27:59 AM

Dec. Mini Corn (yc08z) -7 1/4 at 509 3/4

Jeff Bailey : 8/12/2008 11:25:56 AM

USDA Increases Corn Crop and Ethanol Use ... Domestic Fuel (Alternative Fuel News) Link

Linda Piazza : 8/12/2008 11:23:23 AM

At 748.14 as I type, the RUT tests a declining trendline off yesterday's high. It's got potentially strong resistance at 749.94, so watch for the possibility that it could appear to break above this potential bull flag, only to find resistance fairly quickly and turn back again. So far, it hasn't clearly broken above that resistance.

Linda Piazza : 8/12/2008 11:20:51 AM

The TRIN just managed a 15-minute close slightly above its 15-minute 9-ema, with that at 0.83. If it can hold above this on further 15-minute closes and convert it to support, the TRIN could be setting up for a climb toward next Keltner resistance at 0.926-0.98. So far, the TRIN has climbed from this morning's early test of potentially strong support now at 0.66 but then near 0.70, but the climb is a choppy one toward potentially strong resistance, so it's uncertain what happens next. TRIN at 0.82 as I type.

Jeff Bailey : 8/12/2008 11:17:54 AM

If memory serves me correctly, Western Refining (WNR) $8.73 +4.30% ... on one of, if not the, largest E85 refiners. Not certain.

Linda Piazza : 8/12/2008 11:16:37 AM

Oh, and about stops. When there's plenty of time before opex, I often prefer contingent stops, based on what the underlying does. However, this close to opex, options values are going to be leaking premium unless volatility measures plump up to offset the leaking theta-related decay. So, it might be a good idea if you're used to using orders contingent on the action of the underlying to consider whether you want stops set just based on the value of the option and not just contingent on the movement of the underlying. For example, if this were opex Friday afternoon and you were trading an AUG OEX put, that thing would be leaking premium if the OEX were to consolidate for several hours whether or not there was much of an adverse move against your position.

Jeff Bailey : 8/12/2008 11:16:23 AM

USDA raises corn harvest estimates ... AP Story Link

Linda Piazza : 8/12/2008 11:12:58 AM

The OEX's potential support on 30-minute closes is now 598.60 although the 15-minute chart suggests vulnerability to at least 597.92 and maybe even 597.04. If the OEX maintains 15-minute closes above 600.75, however, that vulnerability is questioned and, if above 601.24, it's qustioned even more. Remember, however, the possibility, first expressed in my 10:39:54 post this morning, that the OEX could chop around in a 4-5 point range for up to 2-3 hours. If we do get that kind of choppy consolidation, some short-term indicators are going to be rendered less helpful than usual. The OEX could break above or below some resistance or support only to turn around immediately.

So what can you do if you're in some trade and staring at the screen, wondering where your underlying is going next? Set OCO other stops to take you out if the move against your position gets too big or take you out if you hit your preferred profit, then let the stops take over and take emotion out of the decision.

Jeff Bailey : 8/12/2008 11:12:23 AM

So ... currently LONG the Sep. $20 put (WB-UD) and paid $4.40.

$20 - 4.40 = $15.60

IF we sell COVERED the $14.00 for $1.80, THEN $14.00 - $1.80 = $12.20 is OBLIGATION.

Keene Little : 8/12/2008 11:11:46 AM

Adding to Tab's comments on the US dollar, the daily chart that I show each week shows the dollar reached the top of its parallel down-channel from January 2002 and it also tagged the Fib projection at 76.49 this morning (the high so far is 76.616). This projection is where the 2nd leg up in its bounce off the March low achieved 162% of the 1st leg up (wave c = 162% of wave a, a very common projection). Daily chart: Link

What happens next for the dollar could be significant. If it pulls back in a corrective fashion and then presses to a new high (shown in green) it will clearly be bullish the dollar. This would likely indicate that foreign money is flowing into the US dollar as it will be perceived as a place of safety in a global economic slowdown. But if the dollar starts to drop sharply then new lows for the dollar can be expected, perhaps by year end.

Jeff Bailey : 8/12/2008 11:09:40 AM

WB $16.51 -9.33% ... Sep $14 put (WB-UP) are $1.10 x $1.15

VIX.X 20.89 +3.82% ...

Jane Fox : 8/12/2008 11:07:21 AM

I have had a lot of questions from subscribers asking when I think Crude will bottom. I have answered when the charts tell you it has and the fact that technicians will vary on how a bottoming process will look.

So here is my interpretation. Today's and yesterdays long wicks have built a formation called a tweezer bottom. Tweezer bottoms can denote a change in direction but are not as strong as a reverse head and shoulders which would take days to build. So from here I would expect a run back to support turned resistance at $120 but not much more to begin with. A break upwards to $130 would be much more bullish and at that point I would be watching for the ubiquitous reverse head and shoulders to form.

Before we have something more than a tweezer bottom I would not be hanging on to long position too long. Link

Jeff Bailey : 8/12/2008 11:05:19 AM

Wachovia (WB) $16.54 -9.17% ... starting pricing out an OUT-THE-MONEY September put.

Tomorrow tends to be a "bearish" day, then Thur, Fri and Monday tend to be "bullish" days according to StockTrader's Almanac.

I want to be looking COVERED put against our WB-UD.

Remember! No "naked short" rule scheduled to be lifted at Friday's close.

Some of today's action could be "front run" or cushion to that.

Keene Little : 8/12/2008 11:04:55 AM

I don't know how a choppy pullback will ultimately play out (again, assuming we'll get a larger pullback over the next day or two) but the updated SPX 60-min chart so far continues to support the pink wave count which is looking for the pullback and then another rally into the end of the week and up to the 1325 area. Link

Tab Gilles : 8/12/2008 10:58:31 AM

USO/Euro/Dollar A few weeks ago I posted this chart of the dollar and the USO. Link

The Dollar ($USD) is currently testing the upper end of the channel around 76. Link

Here's another chart of the Euro and the USO. I'm expecting a rebound in oil nearterm...$110 on the $WTIC or on the USO 88/90. Link

Jeff Bailey : 8/12/2008 10:58:27 AM

West Texas ($WTI) $1 box so we can look at the price of oil, tie it with the trade figures. Again, May=5, June=6 and July=7 mark price trade at/near first of each month. Link

Linda Piazza : 8/12/2008 10:55:59 AM

The VXO is so far been closing 15-minute periods above former resistance now at 22.88. It has not yet been able to build on this break above resistance and keeps testing it but is maintaining the support for now. Bears don't want to see a strong drop, particularly one that takes the VXO below 22.71 on 15-minute closes. The VXO is 22.92 as I type.

Linda Piazza : 8/12/2008 10:53:31 AM

The TRAN hit potential support now at 5047.80 on 15-minute closes. It's bouncing and is at 5079.17 as I type. Bears want it to be turned back from tests of the 5125 zone or at least from the 5150 zone.

Linda Piazza : 8/12/2008 10:52:18 AM

For the first time since Friday afternoon, the RUT has produced 15-minute closes beneath the Keltner line now at 748.93. This is a first but tentative sign of a change in tenor. It has not yet produced 15-minute closes and 30-minute closes beneath the potential support now at 743.44, which it needs to do in order to take another step toward a change in tenor. This is particularly important for bears because up to now the RUT's decline looks like a bull flag pulling back off the high. The next and final step in a change in tenor would be sustained 30-minute closes beneath a line now at 742.70. The RUT first pierced that line Friday morning, just before the close of the first hour. It has tested it many, many times since and always bounced from it. RUT at 745.53 as I type.

Jeff Bailey : 8/12/2008 10:52:02 AM

First glance of June's trade figures look stronger than I had forecasted/expected. Especially the exports side of things.

Jeff Bailey : 8/12/2008 10:48:10 AM

June Trade Deficit from U.S. Census Bureau Link (.pdf format)

Linda Piazza : 8/12/2008 10:42:42 AM

The A/D line is now -878, with potential support now at -1045. Bears just need it to keep moving sideways now, although they would prefer further dips that drive the support and target lower. They just don't want a strong bounce up toward the day's opening level or toward the steeply descending 9-ema, now at -227.28. If it's going to have a 9-ema test sometime today, as it likely will, they want that test to occur much lower, after the 9-ema has zoomed much lower.

Linda Piazza : 8/12/2008 10:39:53 AM

The OEX's chart setup now sets up the dread possibility that the OEX could chop around in a 4-5 point range for 2-3 hours. I hope not, but keep it in mind as a possibility.

Linda Piazza : 8/12/2008 10:38:29 AM

If the OEX bounces soon, bears would prefer that it find resistance on 15-minute closes at the 38.2% retracement of its rally off Friday's low, at 599.61, or barring that, at the 9-ema, now at 601.33 but still descending. OEX is 599.22 as I type.

Linda Piazza : 8/12/2008 10:35:18 AM

For reference, yesterday's OEX low was 598.76. As a reminder, I see the two likeliest possibilities for today as being either consolidation or a more pronounced downturn through that rising wedge shape. Consolidation for the day means that the OEX might at any point catch support and rise back toward one or the other versions of its rising wedge upper trendlines. It could even bounce above those and then retreat and still produce a consolidation-type candle. So bears need to keep that possibility in mind, too.

The OEX approaching potential support on 30-minute closes at 598.46. It's got potentially more significant support on 15-minute closes at 597.92 and then 596.93, and the 15-minute chart has set up vulnerability to that test. The 50% retracement of the climb off Friday's low is near there, too, at 596.73. Bears need to have profit-protecting plans in place here, as a test of this zone and even a near test could result in a bounce attempt . . . unless the OEX just plunges through it. What can be pierced easily on the way up can be pierced easily on the way down, but for now, I'd watch for potential support to kick in soon and then we see what happens next.

Keene Little : 8/12/2008 10:29:05 AM

Catching up on this morning's notes I saw Linda's 9:34 AM comment that a commentator said we have a similar setup as the market had in 1966, 1987 and 1990 as far as risk of a sudden and strong selloff. This fits the EW pattern that I've been pointing out for some time. The 3rd of a 3rd wave down that is coming will be a very strong decline and will cause most participants to recognize that the market truly is in trouble. It will become increasingly difficult for the pundits (Hank Paulson included) to gloss over the credit contraction issues still facing us.

Linda Piazza : 8/12/2008 10:25:50 AM

I expected to see the OEX pause at or above the Fib level at about 599.61, and it's done that, with today's low being 600.15, with round-number support coming in, too. The day's actions are tentative, still, with anything still possible, especially including a bounce up to test potential resistance near 602.16-602.80. However, currently, the OEX is holding beneath lower resistance on 15-minute closes, with that at 601.50 on 15-minute closes. It's a staring match now. If bulls can't soon break the OEX above that lower resistance and keep it there, then the OEX will likely soon be driven down to a test of that Fib support if not down to next Keltner support near 598.50 or possibly 597.90. If bears can't soon push the OEX below that 599.61 Fib level or at least 600, then the higher resistance test might come. Right now, the staring contest continues, with the OEX at 601.03 and the direction of the next test as yet unknown.

Jeff Bailey : 8/12/2008 10:23:58 AM

10:00 Internals at this Link

Keene Little : 8/12/2008 10:21:50 AM

I'm back. With the choppiness of this morning's pullback, and the continued divergence between the techs and all others, we should see a continuation of the pullback in more or less a sideways/down correction through today and into tomorrow. This could include a retest of yesterday's high in the blue chips (though not at all necessary). The point is it could be a whippy choppy ride over the next day or two so be careful.

I continue to think the pullback will be followed by another push higher into the end of the week but will be evaluating the pullback along the way to see if that expectation continues to look good or not. If the pullback (assuming we're going to get it) becomes steeper and more impulsive to the downside, and especially if the uptrend lines from July 15th start breaking, then I'll turn more immediately bearish.

Linda Piazza : 8/12/2008 10:21:09 AM

Until and unless the RUT produces and maintains 15-minute closes beneath the Keltner line now at 748.16, it hasn't even begun to change its tenor. Even that would be just a first tentative step toward a change in tenor, and the RUT would then need to close 15-minute periods below the Keltner line now at 742.68 to make a next step toward changing its tenor. The RUT is currently 749.74, trying to break back above its 15-minute 9-ema at 749.26, but there's still plenty of time in this 15-minute period for the RUT to do just about anything.

Linda Piazza : 8/12/2008 10:16:04 AM

The TRAN has broken below potential support that's analogous to the OEX's 596.85-597.76 zone and the SPX's 1288.49-1290.76 zone. While we can't presume that the OEX and SPX will follow exactly, this does at least show that "vulnerability to" targets are sometimes met and are being met today on an index that sometimes leads the OEX, SPX and Dow. So far, they're all outperforming the TRAN, and yesterday, they managed to pull the TRAN up by its bootstraps rather than the TRAN tug them down. Still, just keep the TRAN on your radar screen.

Jane Fox : 8/12/2008 10:15:03 AM

I see Linda has already mentioned the TRIN and the trouble we have getting a handle on it.

Linda Piazza : 8/12/2008 10:13:09 AM

Yesterday, I had noted that the VXO, the old VIX computed using OEX options, had run up to test potentially strong Keltner resistance. This morning, the VXO jumped above that resistance, now at 22.82. OEX bears would prefer that it find support there now on 15-minute closes, and that possible resistance-turned-support is being tested now. VXO is at 22.97 as I type, having pierced that support during this 15-minute period. The VXO also gapped above this same resistance Friday morning, but the second 15-minute period of that day saw a steep decline back below it. We're then seeing a slight divergence from Friday's pattern but one that can be undone at any time.

Jane Fox : 8/12/2008 10:08:31 AM

Internals are not telling you much at all but take a look at the TRIN number that is quite bullish. Link

Linda Piazza : 8/12/2008 10:07:20 AM

The OEX now has potential resistance on 15-minute closes at 601.45-602.57. Bears want to see that resistance hold on 15-minute closes. OEX at 601.27 as I type.

Jane Fox : 8/12/2008 10:06:32 AM

Crude tagged a high of $115.95 but has retraced back to $114.00. The crude sellers are still stronger than the buyers.

Linda Piazza : 8/12/2008 10:05:53 AM

The A/D line did closely approach the Keltner support that I mentioned earlier. That support is now at -970 but was higher earlier, with the A/D line hitting a low of -866. The A/D line has bounced but it's so far not able to maintain values above yesterday's -506 low. Bears want to see the A/D line drop back toward that potential support and generally trend either down or sideways once it's approached or at least consolidate right where it is now, at -636. Bulls want to see it bounce quickly and climb above its high of the day, its first value at -200.

Linda Piazza : 8/12/2008 10:03:28 AM

Hmm. TRIN is a low 0.77, not bearish at all. It is, however, just off a test of potentially strong support on 15-minute closes, now at 0.70. I tell you, TRIN has sometimes been hard to figure out lately. Bears want to see it keep bouncing off that support; bulls want to see it drop and stay down.

Linda Piazza : 8/12/2008 9:58:38 AM

The SPX has not so far been successful in its quest to break up through the 15-minute 9-ema and is again testing potential support on 15-minute closes at about 1298.45. The SPX is slightly below that as I type, but mostly holding onto it. If it's broken conclusively into this 15-minute close, the SPX's potential vulnerability to 1291.66 must be considered. Remember the 38.2% Fib level at about 1293.66, as that might provide support, too. SPX at 1297.97.

Linda Piazza : 8/12/2008 9:56:22 AM

Although there are still several minutes left in this 15-minute period, the OEX didn't get far in its attempt to bounce and test its 9-ema on that chart. It's instead finding resistance at the Keltner line now at 601.45, at least so far. If it continues to do so, it remains vulnerable to 598.45 and perhaps even lower, to 597.72. As I noted earlier, though, there's that important Fib level at 599.61, so it might provide at least interim support even if it's ultimately broken, which is not a given. OEX at 600.94 as I type.

Please keep in mind that in this market environment anything can and does in fact happen.

Jeff Bailey : 8/12/2008 9:52:29 AM

Most Actives ... SPY $130.27 -0.33%, QQQQ $47.80 +0.10%, IWM $74.68 -0.24%, SIRI $1.43 -2.72%, XLF $21.95 -1.61%, PFE $19.85 -0.15%, HK $26.75 +0.82%, ORCL $22.85 -0.99%, UAUA $13.42 +9.37%, MS $43.68 -3.76%

Linda Piazza : 8/12/2008 9:49:38 AM

The SPX is setting up a possible 9-ema test, so we have to assume that the OEX might, too, although it's weaker by Keltner comparisons than the SPX. The OEX's 15-minute 9-ema is now 603.19. Stronger resistance can be found at 603.68-604.47.

Linda Piazza : 8/12/2008 9:48:28 AM

For SPX traders: The SPX did not bounce quickly back to its 9-ema before the end of the first 15-minute period, with that 9-ema now at 1303.18. However, the SPX does appear to be holding support on 15-minute closes that's now at 1298.44, so it's at least setting up the possibility that it will try to bounce up to retest that 9-ema to see if it holds as resistance.

Linda Piazza : 8/12/2008 9:46:14 AM

It doesn't appear as if there will be a quick OEX bounce back above its 15-minute 9-ema and as if the OEX might close this 15-minute period below the potential support now at 601.53 and maybe even at or below yesterday's low. Vulnerability to 598.42 must be considered although I would expect some sort of pause near 599.61, the 38.2% retracement from Friday's low to yesterday's high. "Vulnerability to" doesn't mean it's 100% going to that zone, but especially if you're in a bullish trade, you need to know if you feel comfortable holding on for that test or want a different and higher stop.

Jeff Bailey : 8/12/2008 9:44:59 AM

Taking bullish profits on Western Refining (WNR) $8.67 +3.58% here this morning per my mentioning on Wednesday.

Linda Piazza : 8/12/2008 9:40:56 AM

Keltner outlook on the A/D line: The A/D line made its first prints in the bearish half of the Keltner channels and is headed currently toward potential support near -910. The A/D line is at -572 as I type. Equity bears should be watchful as that potential support is approached, if it is. They don't want a big A/D line bounce from that support but rather consolidation at or near it. What bears really don't want is a big bounce before it's even hit, with the A/D line now only a little below yesterday morning's early morning low of -506. They would prefer that any bounce attempt this morning find resistance at yesterday's low.

Jeff Bailey : 8/12/2008 9:38:58 AM

June trade deficit shrinks as exports climb ... AP Story Link

Linda Piazza : 8/12/2008 9:37:23 AM

For SPX traders, the SPX has potential support on 15-minute closes at about 1298.20. Bulls would prefer that this hold on 15-minute closes and that the SPX immediately bounce back above about 1303.20. If not, the Keltner setup suggests vulnerability to about 1291.70, where next support might be found. There are potential Fib support levels between here and there, however. SPX at 1298.79 as I type.

Jeff Bailey : 8/12/2008 9:36:43 AM

BP Shuts Georgia oil, gas pipelines as a precaution ... Reuters Story Link

Linda Piazza : 8/12/2008 9:35:02 AM

The OEX is indeed dropping toward potential support on 15-minute closes that's been pushed down toward 601.66. Bulls want this to hold and to see a quick bounce back above 603.67. If this support is lost on a 15-minute close or if the OEX drops below yesterday's 600.87 low and doesn't immediately bounce, then I would factor in vulnerability to 598.45 or maybe even 596.73-597.64.

Jeff Bailey : 8/12/2008 9:34:49 AM

JPMorgan loses $1.5 billion so far in Q3 ... Reuters Story Link

Linda Piazza : 8/12/2008 9:32:12 AM

Futures are below fair value this morning, but are a little off their overnight lows, reached almost three hours ago. If we were to extrapolate where the OEX might open from the ES contract's current distance from fair value, then the OEX might drop below 603. The 23.6% retracement of the OEX's rally off last Friday's early morning low into yesterday's high is at about 603.16, but Keltner's suggest the next support is at potential Keltner support on 30-minute closes that's now at about 602.26. That will drop some if the OEX does. So, it's possible that the OEX could drop again to test that potential support on 30-minute closes, too, before it tests support. If the OEX were to drop there, what happens next?

That depends. If the OEX couldn't pop back above about 604.15-604.25 and close the first 15-minute period back above it, then it might be setting up a retest of potential support now near 601.60. A loss of that support suggests a drop toward 598.50 although the Fib levels show 38.2% potential support at about 599.61 and I would expect at least a pause there.

However, given the tenor the last few days, we can't even assume that futures' weakness will follow through into the cash market this morning. The OEX could bounce right away, although that's not what I expect. If the OEX does bounce, I would watch for potential resistance to kick in at 605.64 and then 606.58.

Yesterday at this time, I was telling subscribers that anything at all could happen, but that there was a possibility that the OEX might at some time during the day pierce the upper resistance line of its rising wedge formation but then fall back to close within that formation. That's what happened, with the OEX piercing both a best-fit and regular (encompassing all intraday highs, too) version of that upper trendline. The OEX fell back to the regular version by the close, leaving a long upper shadow. The end-of-day move was enough to prevent the most malignant (to bulls) form of doji forming and to show possible new support near 601.30-601.60, but do keep in mind the possibility that today will see either further consolidation or an actual downturn through the rising wedge. It would not be surprising to see such a candle forming at the top of a climb and at known resistance be followed by a decline.

In this market environment, in which anything can and does happen, it wouldn't be surprising to see the OEX break above and stay above that resistance, either. We saw it happen often in the spring of 2003, when these forms of supposedly bearish setups were broken to the upside and prices sprinted higher while bears refused to believe what they were seeing. This is not the highest probability action, or wouldn't be in normal market setups, but traders must always prepare for all possibilities. So, stay nimble and don't risk more than you should be risking.

A commentator whose judgment I trust and who was warning last July about an impending negative move in the markets is again warning of the possibility of something really bad happening on the markets. This time, he doesn't warn of just a mere pullback, but a 1966, 1987 or 1990 type event. He's not saying it will happen but saying that the market setups are similar. I'm not saying it will happen, either, but this is one reason I keep watching the TED spread, to see if that is showing impending fear of defaults. Yesterday, it continued dropping and dropped into the 0.98-1.00 potential support zone, with the next and even more-important-to-break support zone at 0.92-0.94. This morning, it's at the top of that more important-to-break support zone, at 0.94 as I type. The traditional range is 0.10-0.50, but that was broken about this time last year.

Jane Fox : 8/12/2008 9:13:24 AM

LONDON (MarketWatch) -- The International Energy Agency on Tuesday nudged up its estimate for 2009 oil products demand while keeping its 2008 view unchanged. For this year, it estimates oil demand rising 0.9% to 86.9 million barrels of oil a day, rising 1.1% in 2009 to 87.8 million barrels. The increase in 2009 demand is 70,000 barrels of oil a day. The Paris-based energy agency said neither the recent shutdown of the Baku-Tblisi-Ceyhan pipeline nor military clashes in the Caucasus have materially affected prices. That said, the IEA warned against complacency on prices, saying it's too early to cite a sea change in the market when there a number of warning signs in the market.

Jane Fox : 8/12/2008 9:11:08 AM

Crude did not make any bold moves overnight and is currently running into $115.00. Nope broke $115 and is now $115.20. Link

Jane Fox : 8/12/2008 9:08:13 AM

LONDON (MarketWatch) -- Russian President Dmitry Medvedev has ordered an end to military operations in Georgia, claiming his country's actions have restored security for civilians and peacekeepers in South Ossetia.

Medvedev said the move would "oblige Georgia to restore peace," according to a statement from the Kremlin.

There was, however, no mention of Russia withdrawing troops from the region.

"Medvedev instructed the Defense Ministry and Armed Forces' General Staff to make a decision with regards to the destruction of pockets of resistance when such instances should arise," the statement said.

Jane Fox : 8/12/2008 9:04:53 AM

Here are your overnight charts. Markets reacted to the trade balance surprise with new overnight highs but those highs were not sustained.

The bulls have lead the pack for 2 days now and in this environment of uncertainty I do not expect they will today. But heck I didn't expect yesterday to be a bullish day either did i? Link

Jane Fox : 8/12/2008 8:54:21 AM

WASHINGTON (MarketWatch) - The U.S. trade gap narrowed by 4.1% to $56.8 billion in June on record exports and a decline in non-oil imports, the Commerce Department estimated Tuesday.

The non-petroleum trade deficit fell to the lowest level in five years, the government said. Exports jumped 4% in June to a record $164.4 billion, the biggest gain in four years. Exports to Mexico, the European Union and South America set records.

Meanwhile, imports rose 1.8% to a record $221.2 billion, largely because of the record $117 price for a barrel of crude oil.

The figures are seasonally adjusted but are not adjusted for price changes. After adjusting for inflation, the real trade deficit fell by 10.3% to the lowest level in 6 1/2 years, as exports rose 4% and imports fell 0.6%. Non-petroleum imports dropped 2.2% in real terms.

The nominal deficit was smaller than the $62.8 billion expected by economists surveyed by MarketWatch. The gap was $59.2 billion in May

Keene Little : 8/12/2008 7:20:15 AM

I will be away from the market for about the first hour this morning. See you about 10:30 AM.

Market Monitor Archives