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Jeff Bailey : 8/19/2008 2:27:44 AM

Weekly, Monthly, Quarterly Index Pivot Matrix at this Link

Keene Little : 8/18/2008 10:31:10 PM

Tuesday's pivot table: Link

I had mentioned on Monday that the RUT should find support just above 737 where it would test its uptrend line from July 15th and its broken downtrend line from October. If you're feeling bullish about this index Monday afternoon's low was an ideal setup for the long side. As shown in pink on its daily chart there is the possibility for another leg up before its bounce is finished. But a break below 737 would be bearish and would indicate the end of its bounce at last week's high. Link

SPX broke its uptrend line marginally and bounced back up to it at Monday's close. If it drops immediately lower on Tuesday then we'll know it's probably a real break and a sign that it's time to short the bounces. Daily chart: Link . As shown in pink, including on the 60-min chart, it's still possible we'll see another rally leg up to 1320 but the bulls need to start the buying immediately on Tuesday: Link

The DOW broke its uptrend line a little more than SPX and could tolerate a little bounce on Tuesday to test it, currently near 11520, so watch for that possibility if an early bounce fails to make it any higher--it would be a good short play setup. 60-min chart: Link

OI Technical Staff : 8/18/2008 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The Market Monitor has been archived.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 : 8/18/2008 8:53:14 PM

CME's Aug'07 (from 06/20/06 to 07/20/07) regional housing futures at this Link

Jeff Bailey : 8/18/2008 8:37:38 PM

CME's Feb'08, May'08, Aug'08 regional housing futures table from 06/01/07 Link

Jeff Bailey : 8/18/2008 8:24:04 PM

CME's Aug'08, Nov'08, Feb'09, May'09 regional housing futures table I track at this Link

Jeff Bailey : 8/18/2008 8:20:06 PM

Southern California home sales climb in July, prices fall ... AP Story Link

Jeff Bailey : 8/18/2008 4:51:28 PM

Closing U.S. Market Watch at this Link

Jeff Bailey : 8/18/2008 4:46:37 PM

Closing Internals at this Link

Jeff Bailey : 8/18/2008 4:13:23 PM

AU $26.67 (unch) ...

Keene Little : 8/18/2008 4:06:53 PM

So far the bounces look like only corrections to today's decline and after breaking its uptrend line from July 15th SPX is now back up for a test of it near 1280. Kiss goodbye?

Linda Piazza : 8/18/2008 3:42:29 PM

The VIX is dropping hard into the close, but may now have support on 15-minute closes (and daily) at 20.90, if not higher. VIX at 21.08 as I type.

Jane Fox : 8/18/2008 3:35:16 PM

The TRIN has made it all the way to 2.01 and as I have stated before this is interpreted by some traders as very oversold and good place to go long. I have tested this theory over and over again and have never found it to be profitable. May be just me though.

Linda Piazza : 8/18/2008 3:35:10 PM

Let's talk about what we're seeing on the daily chart, too. Today's candle is obviously a bearish one. What may not be quite as obvious is that the OEX formed a head-and-shoulders formation along the bottom supporting trendline of its rising wedge shape. Depending on whether one uses the rising bottom trendline as the neckline or else uses a differently drawn trendline, the neckline is already breached or at least will be if the OEX drops below 584.64. However, what should be obvious, even if that formation isn't, is that nothing means anything on this chart. Yes, the OEX has been climbing, but I don't know if anyone but the heartiest bulls with the deepest pocketbooks or the most foolhearty bulls with hopium in their lungs and who got lucky so far have benefited from the climb because almost everyone else would have long since been stopped. Several times over.

So, since one day's action often totally reverses the previous day's, I again caution bears to temper their excitement, especially if the OEX should manage a bounce back above about 593 by the end of the day. That would set up a test right away tomorrow morning of the rising wedge's support nearer 596-597, to see if it's going to hold as resistance. As I type, it looks about equally possible that the OEX could do that or else drop straight to its 30-sma, at 583.77, and that might set up a bounce attempt from there or at least a consolidation attempt.

So, big bounce into the close and the OEX might be set up to retest 596-597. Big drop into the close, all the way to the 30-sma, and the OEX might be set up to attempt consolidation or a bounce. Between there, the OEX still looks vulnerable to the 30-sma, but could do some chopping around before we see if that vulnerability is realized by a drop to that level.

Jeff Bailey : 8/18/2008 3:31:38 PM

SPX Heavyweights with Sep'08 "Max Pain" Theory Tabulations at this Link

Linda Piazza : 8/18/2008 3:24:02 PM

Let's talk early about what happens overnight in scheduled releases: Tonight, Japan the Bank of Japan announces the results of its meeting to set an overnight rate, but no specific time is mentioned. Just be aware that it's happening as that could definitely impact currencies and/or futures tonight. Germany's PPI will be released at 2:00 am ET tomorrow morning and the important German and Eurozone ZEW Economic Sentiment will be released at 5:00 am ET. These are also extremely important releases and could impact not only currencies and futures but global equity bourses. If it's true, as some believe, that equity markets have not yet truly priced in a recession, bad news on these could impact markets while good news could steady them.

Jeff Bailey : 8/18/2008 3:19:36 PM

INDU Components Weightings with Sep'08 "Max Pain" Theory Tabulations at this Link

Linda Piazza : 8/18/2008 3:11:13 PM

Barring 15-minute closes above 590.38, the OEX looks vulnerable to 585.61. Bears need to keep updating their profit-protecting plans, however. The daily 30-sma is at at 583.71. I began mentioning at least a week ago that if the OEX were to drop through the lower support of its rising wedge shape, bears should temper their excitement because it was possible that the OEX might find support on that 30-sma and that it was doing nothing more than broadening its rising wedge into a regular old rising price channel.

Keene Little : 8/18/2008 2:55:49 PM

The DOW has also broken its uptrend line from July 15th and a retest of it would be near 11510-11520 depending on how quick it bounces back up (if it does). The pattern of the decline from Friday now supports a stair-stepping lower before it will be ready for a bigger bounce (which might be the time it will retest its broken uptrend line). It's certainly looking more bearish today.

Linda Piazza : 8/18/2008 2:50:07 PM

The OEX's 15-minute 9-ema, potential resistance on 15-minute closes, is 590.85; the 30-minute version, 592.31. OEX at 589.83 as I type.

Keene Little : 8/18/2008 2:41:42 PM

SPX has broken its uptrend line and is nearing Wednesday's low. Right now it's looking like a test of that low might hold (the way the 2-min chart is looking like a small descending wedge is being put in. But the picture of today's decline has me clearly leaning into the bears' camp now.

Jeff Bailey : 8/18/2008 2:40:33 PM

Sep'08 Max Pain Theory Tabulations (DIA, SPY, QQQQ, IWM, SMH, XLF, USO and GLD) at this morning's open. Link

Linda Piazza : 8/18/2008 2:38:31 PM

The OEX's 8/13 low was 588.97, so the OEX just punched below that. Unless the OEX can scramble back above 589.51 and stay there into 30-minu7te closes, it looks more vulnerable to 585.80-586. For reference, the OEX's 8/08 low was 584.64. OEX at 589.19 as I type.

Linda Piazza : 8/18/2008 2:33:20 PM

The TED spread is back above 1.00 this morning, at 1.03 as I type and at its high of the day.

Jeff Bailey : 8/18/2008 2:23:18 PM

02:00 Internals found at this Link

Volume at the NASDAQ looks very light.

Linda Piazza : 8/18/2008 2:10:59 PM

The OEX has now hit that 589-590 potential target that I've been mentioning most of the day. Now what? Again, I think we watch for a potential bounce and we see if it goes any further than the one did about 45 minutes ago. Unless the OEX can produce consistent 15-minute closes above 591.77, it now looks vulnerable to 586, but I would take this support now being tested seriously enough that I spent some time spiffing up my just-in-case profit-protecting plans on bearish trades.

Keene Little : 8/18/2008 2:01:21 PM

The RUT has been one of the stronger indices and even the test of the June high did not leave any bearish divergences at Friday's high. That's not a necessary component of a failed retest but it helps confirm. The uptrend line from July 15th is currently near 735 so the bulls are still in good shape in that respect. A break of the uptrend line and last Wednesday's low near 737 is what the bears need to see. In the meantime a pullback to the 737 area would also retest the broken downtrend line from October. Link

Jeff Bailey : 8/18/2008 1:52:55 PM

OptionsXpress (OXPS) $22.96 -3.24% ... slips back below its 150-day SMA.

Linda Piazza : 8/18/2008 1:33:33 PM

The OEX is still vulnerable to 589-590 and will be until and unless it can produce 15-minute closes above 593 and then 30-minute ones above 594 and maybe even 595.25. OEX at 591.85 as I type. Watch out for that first potential resistance level at 593.

Jane Fox : 8/18/2008 1:33:21 PM

TRIN is now up to 1.63 and is quite bearish.

Linda Piazza : 8/18/2008 1:08:07 PM

The VIX has continued to climb and has now broken above resistance on the intraday charts and, at least for now, above the 20.80 level that was potential resistance on a daily close, too. The story isn't over yet, and we don't know the eventual outcome, but late last week, I and others started pointed out that the VIX had finally made a close approach to what could be either strong support or a breakdown level, and that it was important to watch. VIX at 20.93 as I type, and bears want to see it find support between 20.60-20.75 on 15-minute closes, the higher the better.

Jeff Bailey : 8/18/2008 12:57:29 PM

Amylin Pharma (AMLN) $30.90 -10% ...

Linda Piazza : 8/18/2008 12:43:49 PM

Unless the OEX can bounce back above about 593.60 and stay there, it's looking more and more vulnerable to 589-590. Specifically, to 589.63.

Keene Little : 8/18/2008 12:42:39 PM

One of the reasons I keep thinking we'll see another rally leg this week is because of all the choppy price action the past two days, which is typically bullish after a rally leg like the one we saw last Thursday morning. But I've seen enough steep declines start in a choppy fashion (it "winds up" for a hard fall) to keep reminding everyone that surprises will be to the downside. But until the uptrend line from July 15th breaks, and then confirmed with a break below last Wednesday's low (SPX 1274), I will continue to respect the potential for another rally leg.

The updated SPX 60-min chart shows what could be a deeper b-wave pullback in progress (as part of an a-b-c bounce off last Wednesday's low). If it were to pull back to the uptrend line, near 1278, the next leg up could still achieve the 1320 level (the 50% retracement of the May-July decline). That would have the 2nd leg up (wave c) achieving 162% of the 1st leg up (wave a), shown on the chart: Link

One other warning that I highlighted in yellow on the daily chart is what I see happening with RSI--it has broken and retested its uptrend line from July 15th:. Link . This does not preclude another price high but it does tell us the rally is either over or nearly over.

Jane Fox : 8/18/2008 12:33:21 PM

There are times when Crude will fall and the SPX rallies and vice versa but these charts tell me those times are just coincidental.

I know this makes no sense but heh the charts don't lie.

Jeff Bailey : 8/18/2008 12:30:56 PM

DJ- White House: Russia Must Leave Georgia "Without Delay"

Jane Fox : 8/18/2008 12:30:15 PM

One may then say well the inverse correlation is on a longer term chart. Here is the weekly chart of the SPX and Crude. Link

Jane Fox : 8/18/2008 12:26:42 PM

Here is the SPX and Crude line charts. Sort of belies the comments like "The markets are up today because Crude is down" or, "The markets are down today because Crude is rallying."

One would think you would see an inverse correlation but I not only do not see an inverse correlation, I actually see a direct correlation. HMMM Link

Jeff Bailey : 8/18/2008 12:23:51 PM

12:00 Internals at this Link

Jane Fox : 8/18/2008 12:15:27 PM

ES made new daily lows but the VIX did not make a new daily high telling me ES's lows will not have followthrough. Link

Keene Little : 8/18/2008 12:14:35 PM

Hmm, this last little dumper is not looking exactly bullish. An uptrend line from August 4th, currently being test near SPX 1286.50, needs to hold. The last line of defense for bulls is the uptrend line from July 15th, currently near 1278 and then of course last Wednesday's low just below 1275 (making 1274 the key level for the bears to break).

Linda Piazza : 8/18/2008 12:09:37 PM

The OEX is doing now what I thought it might do an hour ago: drop through to potential support on 15-minute closes then at 594 and now at 593.75. I thought it then might bounce up toward potential support on 30-minute closes now at 595.44. However, the OEX has since closed a 30-minute period below that support, converting it to potential resistance, so look for resistance there now and up to about 597 if the OEX should rise. The chart setup suggests it could and maybe even that it's likely to do so, but surprised bulls may decide to bail. If they do, then, as I said earlier, the possibility of a 589-590 test exists, so a retest of last Wednesday's low. Do be careful with expectations, though, as the OEX tests this support.

Linda Piazza : 8/18/2008 11:59:43 AM

The A/D line currently looks vulnerable to -500 or perhaps as low as a retest of this morning's -605 low. That's not a given, but it's a definite possibility. Bulls don't want to see the A/D line keep breaking to lower lows as it's been doing since Friday morning. A/D line now at -363.

Keene Little : 8/18/2008 11:50:48 AM

I'm back and I see SPX is still holding above 1290 which is good for the bulls. The sideways consolidation pattern from Thursday looks like it's continuing and I see the possibility for it to continue for another day. It would likely be bullish but it could remain choppy today. SPX 1289 still needs to hold though.

Jeff Bailey : 8/18/2008 11:50:44 AM

YM/INDU/DIA Components at this Link

PRICE weighted index: Weightings at today's open (reweighted each day).

Jeff Bailey : 8/18/2008 11:35:33 AM

Most Actives ... QQQQ $48.08 -0.16%, WB $15.45 -0.77%, UAUA $14.83 +4.58%, SPY $129.62 -0.42%, ABK $6.13 +7.92%, XLF $21.03 -1.54%, MSFT $27.94 +0.46%, INTC $24.22 -0.16%, FNM $6.81 -13.90%, CSCO $24.87 -0.16%

Jeff Bailey : 8/18/2008 11:32:26 AM

ABX $32.85 +2.23% ...

Jeff Bailey : 8/18/2008 11:32:06 AM

NEM $41.94 +1.03% ...

Jeff Bailey : 8/18/2008 11:31:44 AM

GG $30.63 +3.48% ...

Jeff Bailey : 8/18/2008 11:31:22 AM

GLD $78.25 +0.79% ...

Jeff Bailey : 8/18/2008 11:31:00 AM

$VIX.X 20.38 +4.08% ...

Jeff Bailey : 8/18/2008 11:30:42 AM

$HUI.X 322.14 +2.10% ...

Jeff Bailey : 8/18/2008 11:30:24 AM

Swing trade put exit alert! ... for the one (1) Anglogold Ashanti AU Oct. $30 Put (AU-VF) at the bid of $4.10.

AU $26.69 +0.07% ...

Linda Piazza : 8/18/2008 11:27:04 AM

If the RUT keeps climbing, it now appears to have relatively significant resistance on 30-minute closes at 757.41-758.20.

Jeff Bailey : 8/18/2008 11:21:11 AM

RUT.X 753.51 +0.01% ... inches green.

Linda Piazza : 8/18/2008 11:02:55 AM

The OEX has held support on 30-minute closes that's now near 595.40-595.50 for two consecutive 30-minute periods now. What's occurred now is that the OEX has effectively widened its consolidation pattern from a triangle into a rectangular pattern, with the support and resistance of those ranging broadly from 594.98 to 600.72. In between, we know nothing yet. Perhaps we won't know a whole lot if those parameters are broken, either, as potential support and resistance on 15-minute closes are outside those boundaries, near 594 and 601.80, respectively.

Jeff Bailey : 8/18/2008 10:48:35 AM


DJ- Cadence Design Systems withdraws its $1.49 billion proposal to acquire Mentor Graphics after being rebuffed by the rival semiconductor-design-software company's board and management.

CDNS $7.94 +3.92% Link ...

MENT $10.65 +3.09% Link ...

Jeff Bailey : 8/18/2008 10:43:08 AM


DJ- China's government has set up a special task force to coordinate its response to a domestic coal shortage that has sparked widespread power rationing, China's top energy official says.

Jeff Bailey : 8/18/2008 10:42:40 AM


DJ- Retail sales at airports around the world are expected to rise 11% to $30 billion in 2008, thanks to strong demand in the emerging markets of Asia-Pacific and the Middle East, according to a new Verdict Research report.

Jeff Bailey : 8/18/2008 10:41:29 AM

USO $92.03 +0.25% ...

Jeff Bailey : 8/18/2008 10:41:10 AM


DJ- Crude oil futures are trading slightly higher as a Tropical Storm Fay stays clear of the oil-producing portion of the U.S. Gulf as it heads for the west Florida coast and the dollar steadies against the euro.

Jeff Bailey : 8/18/2008 10:40:04 AM

Home Depot (HD) $27.28 -0.90% Link ...

Jeff Bailey : 8/18/2008 10:39:02 AM


DJ- Home-improvement chain's 2Q net falls to $938 million, or 64c a share, but beats estimates of 56c a share, as sales climb 2% to $14.51 billion. Company slightly increases year earnings view to $1.48-$1.56 a share but says 3Q profits will fall short of estimates.

LOW $24.59 +0.36% Link ...

Jeff Bailey : 8/18/2008 10:35:14 AM


DJ- Billionaire George Soros's hedge fund Soros Fund Management reports raising its stake in the financial firm to 9.47 million shares as of June 30 from 10,000 shares at March 31, raising his stake amount to 1.36%.

LEH $15.74 -2.65% Link ...

Linda Piazza : 8/18/2008 10:34:53 AM

I mentioned in my 8:33 post to watch the VIX this morning. On the intraday charts, it had ended Friday just a hair below the support line on a falling wedge shape, but I thought this morning that it was essentially just testing that support. I noted that bulls didn't want to see it bounce now. As Jane has been mentioning, bounce it did, and it broke right up through the falling wedge's resistance line. Just as rising wedges are supposedly bearish, so are falling ones supposedly bullish, and the VIX is confirming the bullishness of this one, at least. I do want to mention, however, that the VIX promptly zoomed up to significant Keltner resistance on 15-minute closes, now at 20.69. It's been pausing near that level ever since. The daily chart suggests that until and unless the VIX can sustain daily closes above about 20.80, it's still fairly vulnerable to a drop back toward 18.60 or perhaps even 17.40, so the resistance being tested now is significant not only on an intraday basis but on a daily one.

Jeff Bailey : 8/18/2008 10:33:37 AM


DJ- Falling commodities prices have pulled some hedge funds deep into negative territory in recent weeks, confounding veteran managers whose investors started the year looking for big returns from a bull market.

$CRB 4-point box chart Link

Jeff Bailey : 8/18/2008 10:32:19 AM


DJ- Ambak skyrockets 20% and MBIA gains 9% after ratings firm affirms their AA ratings on their bond-insurer units. S&P also removes the likelihood of further downgrades. The outlook on both companies is negative.

MBI $11.79 +5.08% Link ...

ABK $6.28 +10.73% Link ...

Keene Little : 8/18/2008 10:29:47 AM

I've got to step away for about an hour. The market has dropped about as far as it dares before turning more bearish. I continue to think this could be a bear trap this morning so stay cautious about chasing it lower. If it starts breaking support levels it will then be a signal to short the rallies but not yet.

Jeff Bailey : 8/18/2008 10:29:24 AM


DJ- Two Wachovia units will buy back billions of dollars in auction-rate securities they sold to retail clients, charities and small to medium-sized businesses as part of an agreement in principle with state and federal regulators probing how they marketed the complex securities.

WB $15.22 -2.24% ...

Jeff Bailey : 8/18/2008 10:27:53 AM


DJ- Morgan Stanley is implementing a system that uses the market's view of its own creditworthiness as a basis for lending decisions, the Financial Times reports, citing unnamed sources familiar with the matter.

Jeff Bailey : 8/18/2008 10:26:22 AM

DJ- Brazil Posts $1.66 Billion Weekly Foreign Trade Surplus

Jeff Bailey : 8/18/2008 10:25:33 AM

DJ- Fitch: U.S. CMBS Delinquincies Rose Slightly In July

Jeff Bailey : 8/18/2008 10:24:50 AM

DJ- US Official: Russia Moves SS-21 Milliles Into Georgia

Jane Fox : 8/18/2008 10:22:06 AM

VIX continues to hug its daily highs telling me it will break higher and the S&P futures (ES) will then break lower. Link

Jeff Bailey : 8/18/2008 10:21:02 AM

10:00 Internals found at this Link

Linda Piazza : 8/18/2008 10:20:02 AM

The OEX's 15-minute chart now says that traders should be factoring in vulnerability to 594. However, the 30-minute chart does suggest potential support on 30-minute closes still at 595.42, so if the OEX does drop toward 594, keep in mind that it could still bounce by the end of the 30-minute period back above 595.42. So, this tells us to watch out for a quick dip that might then see a bounce. If that 30-minute support is lost on 30-minute closes, however, the outlook is different and suggests downside potential to 589-590.

Jane Fox : 8/18/2008 10:19:46 AM

So much for all the bullishness overnight. All markets have not broken their respective overnight lows. Link

Jane Fox : 8/18/2008 10:14:27 AM

On further inspection of what is on the economic report docket I see we have the PPI out tomorrow and the July Leading indicators out on Thursday. Both of those reports are heavy hitters so my earlier comment about the economic docket fairly light this week was incorrect.

Linda Piazza : 8/18/2008 10:09:11 AM

The OEX is threatening a break of the potential support on 15-minute closes now at 597.10, but there are still many minutes left in this 15-minute period. The more important support to watch might be that on 30-minute closes, now at 595.45. For now, the OEX is just, but it is threatening to drop further into a test of the 30-minute support and perhaps lower, toward 594. That's not a given yet.

Jane Fox : 8/18/2008 10:08:22 AM

TRIN seems to be flat lining along with the VIX but the AD line and ratio are still falling. Link

Keene Little : 8/18/2008 10:03:20 AM

The sharp drop back down this morning may be finishing the 2-day consolidation pattern so be careful about a bear trap this morning. But if SPX drops below 1288 I'd start to turn a little more bearish especially if we see a reasonable bounce this morning to a lower high and then drop to new daily lows again.

Linda Piazza : 8/18/2008 9:53:11 AM

I don't know what's going to happen next, but I do want to say that I'm reading commentary from people I trust (i.e. John Hussman, etc.) and that commentary is growing more and more cautionary, not more and more bullish as is some other commentary. You can find Hussman's latest at Link in which he mentions "seeing a fresh blowout in credit spreads, now extending beyond financials and into a broader range of corporate debt." He mentions "the spike in the ratio of Moody's Baa/Aaa yields" as one confirming bit of evidence.

Whether any of those concerns are realized in lower equity prices immediately or not, do keep it in mind as you're deciding on the risk you'll take into the SEP and OCT option-expiration periods. For example, I know a lot of you will be looking for SEP bull put spreads soon. I've taken that commentary seriously enough that I'm already out of my SEP bull put spreads, using the rally this last week or two to close them and keep most of my profit, and won't reenter new ones unless we do get some kind of big blowout to lower levels that allows me to swing them well, well out of the way. So, I'm not saying don't trade and I'm not saying you should immediately go to your broker's page and buy all the puts you can afford, but I am saying, know how much risk you're willing to take and how you'll manage it if something does go bad.

Linda Piazza : 8/18/2008 9:46:27 AM

What bulls really don't want to see short-term is for the RUT to form 15-minute closes beneath 746.87. For now, though, RUT bears should factor that in as potentially strong support on 15-minute closes.

Linda Piazza : 8/18/2008 9:44:32 AM

This is not the opening that bulls had hoped to see, but it's not that atypical for the Monday morning after option expiration to see some hesitation as the opex business gets settled. For example, those assigned stock may be selling it.

Bulls don't want to see the OEX closing 15-minute periods below 597 or 30-minute ones below 595.43, but for now, bears should be watchful for the possibility that, if those are approached, they could be support.

Jane Fox : 8/18/2008 9:39:10 AM

As I have stated many times I usually do not put a lot of emphasis on the TRIN until it is at extremes. The TRIN is now at 1.37 and that is extreme enough to get my attention and confirms the bearish VIX.

Linda Piazza : 8/18/2008 9:39:00 AM

The TRAN is pulling back this morning, not gaining, although its pullback is within its consolidation pattern from Friday.

Linda Piazza : 8/18/2008 9:37:21 AM

Keltner outlook on the A/D line: Jane follows the A/D line, too, so look at her posts, too, when thinking about the background information about this indicator. The A/D line opened in the upper or bullish half of the Keltner channels, but squarely between next support and next resistance, with nerither particularly close by. It could as easily drop toward 50-100, the next support, as it could climb toward 900, the next resistance. As I type, it's pulling back and is at 348, but sometimes in cases like these, the A/D line spends the first 30 minutes establishing a big range and then chops around in that range for a while before deciding next direction.

Jane Fox : 8/18/2008 9:36:29 AM

VIX spiked up right off the bat and is continuing to climb telling me the bears are in control for now.

Jane Fox : 8/18/2008 9:34:06 AM

AD line opens at a neutral +403

Jane Fox : 8/18/2008 9:32:36 AM

I am looking for the SPX to reach 1320 this week and continue its bullish higher highs and lows scenario for the rest of the summer. Link

Jane Fox : 8/18/2008 9:24:42 AM

Volume in the Crude pit this morning is pathetic.

Jane Fox : 8/18/2008 9:23:02 AM

I suspect Crude will consolidate between $110 and $120 before it gives us any clues as to its next move. I am tempted to buy back my USO calls, just as I thought I would be on Friday. Link

Jane Fox : 8/18/2008 9:07:32 AM

Something spurred the bulls overnight at around 3:30 ET and all American Equity Index futures made new overnight highs.

I suspect the AD line to open quite strong this morning. Link

Jane Fox : 8/18/2008 9:04:16 AM

We have a fairly light economic report docket this week with the one event creating the most interest on Friday when Fed Chairman Bernanke speaks at a conference in Jackson Hole, Wyo on financial stability.

Jane Fox : 8/18/2008 8:53:26 AM

HONG KONG (MarketWatch) -- Faced with the growing threat of impeachment by the ruling coalition government, Pakistani President Pervez Musharraf said Monday he would step down as the nation's leader.

"After viewing the situation and consulting legal advisers and political allies, with their advice I have decided to resign," Musharraf said in a live television address.

Musharraf defended his record on economy and said his opponents had leveled false accusations at him, before announcing his intention to step down in the final 15 minutes of the hour-long address.

Musharraf, who came to power in 1999 in a non-violent coup, said he was stepping down in part to save the country from going through the confrontation and instability a parliamentary proceeding on his impeachment would bring

Keene Little : 8/18/2008 8:52:49 AM

Equity futures got a nice pop higher off the lows around 4:00 AM and went from negative to positive at a high near 6:00 AM. Since then it looks more like a corrective pullback so it's looking a little bullish as we head for the open. As long as the market doesn't sell off after the open I think it will press higher today.

Linda Piazza : 8/18/2008 8:34:26 AM

Let's start by discussing the weekly chart on the OEX. The candle produced there was a doji at the top of a climb, with the body between the 38.2% and 50% retracements of the drop off the May high and below the 200-sma now at 614.18. The candle is also still well beneath the descending trendline off the October high. The OEX is bouncing from its July low, but doing it so far in a pattern that zigzags violently from side to side of a rising wedge shape.

That's the background, with that background still pointing toward the possibility that this is just a regular bear market rally, rallies that can be sharp and sudden. Watching the OEX day in and day out, there seems a certain unstoppableness to it, doesn't there, a drive perhaps that seems intended to test that 200-sma, whether that intention is realized or not. The bounces have been brutal on bears, but so have the drops on bulls.

Now the daily chart. For the last three days, the OEX has mostly stayed fairly close to the bottom support of the rising wedge shape rather than springing back up immediately through that shape once its tested, as the OEX did in mid July, on 7/29, 8/05 and 8/08. That signals a slight change and it should turn traders even more skeptical about what happens next. However, that action doesn't prove that the OEX won't rise again through that wedge, a wedge with an upper boundary now near 608 or perhaps higher if the OEX is broadening it to the upside rather than the downside. This would happen if the OEX is breaking intraday through the top barrier, as it did once last week, and then pulling back, ultimately changing the angle of the top trendline to the same angle as the bottom. However, that clinging to the bottom support and the doji at the top of the climb on the weekly chart should remind traders of the possibility that this week's candle could be either another consolidation-type candle or could show a down week. Not all doji are followed by such candles, but their presence warns us that there's some indecision, at least. So, it's possible that, whatever the OEX does intraweek (establishing the upper and lower shadows), it could be either near its current value or even much lower by the end of the week. That's not a given, but all traders should keep that possibility on their radar screens due to the chart setups.

If the OEX should surprise us and drop this morning, watch for support on 15-minute closes to kick in first, at about 596.80, but with stronger potential support at 594.55.

What do intraday charts show? Not much. Due to the typical opex behavior at the end of the week, Keltner channels and other indicators have flattened. On late Thursday and early Friday, the OEX had settled into a pattern in which it mostly found resistance at a line currently at 601.88 and mostly found support at a line currently at 596.80. Because the patterns flattened out, the 30-minute chart's potential resistance and support levels on 30-minute closes are just a little wider, at 602.75 and 594.55. I think it's likely that if the OEX rises early this morning, as it looks likely that it will do at this writing, the potential resistance on 30-minute closes now at 601.88 will get shoved higher, toward that potential resistance on 30-minute closes. I would watch the 30-minute charts before I decided there had been either an upside breakout or a downside breakdown. So, for now, watch for potential resistance on 30-minute closes now at 602.75 but likely to be nearer 603 if the OEX rises first thing this morning. If the OEX can get past that, it may retest last Monday's high, but let's don't make that assumption yet in this environment.

Keep a close watch on the VIX and VXO this morning, too. A last minute push Friday dropped the VIX below 20.00 and also to and slightly below the lower trendline of a falling wedge shape on its 15-minute chart, but only slightly below that trendline. It's still just testing. Bulls don't want to see the volatility indices catch hold this morning and start rising. Remember that there will be some early opex-related action this morning that might distort both price action and volatility indicators.

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