Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
Keene Little : 8/25/2008 10:26:57 PM

I should have added in my previous post that Friday's highs are the key levels for bears to defend if the market manages to bounce back up to those levels. If the market rallies higher than Friday's highs we should see a continuation of the rally into early September and can expect at least SPX 1320 if not higher.

I will be away from the market tomorrow until about 2:00 PM. See you then.

Keene Little : 8/25/2008 10:21:59 PM

Tuesday's pivot table: Link

Monday's late-day drop to a new low satisfied the minimum requirements for a 5-wave move down from Friday and that sets up the possibility for a bounce to correct that decline. If the market drops a little lower Tuesday morning there's a Fib projection at SPX 1262.27 (where the 5th wave down will equal the 1st wave) that may get tagged before a bounce starts. Last Wednesday's low near 1261 is also a level for potential support.

If we get the bounce and it retraces 50% of the leg down from Friday we will see about SPX 1277 and it should take a little more than a day to play out so Wednesday could be the next good short play setup. It would look something like depicted on the SPX 60-min chart: Link

NDX and RUT give me a slightly different impression and could see a bounce right away on Tuesday as well. But their bounces could end sooner (such as late Tuesday morning or some time in the afternoon) and then start down to new lows ahead of the DOW and SPX. I'll be watching them a little more closely to see if they give us a heads up for what's coming in the broader market.

OI Technical Staff : 8/25/2008 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The Market Monitor has been archived.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 : 8/25/2008 5:05:46 PM

Valero Energy (VLO) $33.10 -1.66% ... Exited bullish trade on 08/20/08 (see MM 08/13 to 08/20) at $34.76. October crack spread that day finished 24.373.

Jeff Bailey : 8/25/2008 5:02:31 PM

Closing U.S. Market Watch at this Link

October Crude Oil settled up $0.52, or +0.45% at $115.11.

October Unleaded settled up $0.0143, or +0.51% at $2.8069.

My October Crack spread inches up to 24.385 from Friday's 24.370.

Jeff Bailey : 8/25/2008 4:44:27 PM

Closing Internals at this Link

Jeff Bailey : 8/25/2008 4:37:09 PM

DXY's 04:00 tick was 76.815 ... Call it "unchanged" from Friday's 04:00 tick.

Jeff Bailey : 8/25/2008 4:32:07 PM

NYSE's 3.4 billion shares is lowest since 2.69 billion on 6/17/08. Well below its 50-day average volume of 5.04 billion shares.

Jeff Bailey : 8/25/2008 4:08:04 PM

SSO $59.89 -3.68% ... Lower by $2.30/share.

SUC-IJ $1.40 x $1.50

SSO-IN $0.35 x $0.45

VIX.X 20.98 +11.53%

Linda Piazza : 8/25/2008 4:02:25 PM

Today's daily OEX candle was bearish, of course. Depending on what happens the last few minutes, the OEX may, for the first time since early August, close the day below the 30-sma. Early last week, the OEX broke through the rising wedge support and dropped to the 30-sma before rising into a retest of its former support. Today's drop begins a drop away after testing that former support, so suggests a kiss-goodbye test. However, barring a strong downturn in the last few minutes, the OEX won't have confirmed the kiss-goodbye test by dropping to a new low below last week's. The possibility remains then that the OEX could begin churning roughly between last week's low and last week's high, but traders must factor in a possible test of 575-578. The OEX's 30-minute chart suggests that this target will be set if the OEX should sustain 30-minute closes below about 583. The 15-minute chart suggests the target will be in doubt if the OEX can sustain 15-minute closes above about 587.50 and will be erased if it can sustain 15-minute closes above 590. We'll likely have to wait until tomorrow before we determine which is most likely to occur: the drop to the next target or an erasing of that target.

It would be likely to see consolidation tomorrow after such a big-range day, but we have several reports that could move the markets big so I'm not sure that consolidation will occur. If it does, it seems most likely to set up between about 583-588.

Linda Piazza : 8/25/2008 3:54:23 PM

I wouldn't be surprised to see an effort to again close the OEX today at or above its daily 30-sma, with that currently at 586.67.

Linda Piazza : 8/25/2008 3:48:42 PM

The OEX's potential downside target and potential support on 30-minute closes is now 583.17.

Keene Little : 8/25/2008 3:47:24 PM

The drop to a new low as we head into the close could be the completion of a 5-wave move down from Friday. If so then we'll see a bounce start tomorrow and possibly run into Wednesday. For now I'd look for SPX 1261 to hold as support. A selloff right into the close could once again set up a reversal tomorrow morning.

Tab Gilles : 8/25/2008 3:20:30 PM

$VIX:$SPX Link

$VXN:$NDX Link

$RVX:$RUT Link

Jeff Bailey : 8/25/2008 3:18:21 PM

2008 Summer Olympic Games End ... Hang Seng ($HSI) finished up 712 points, or +3.50% at 21,104.

Shanghai Composite ($SSEC) finished up 8, or +0.34% at 2,413.

Linda Piazza : 8/25/2008 2:59:04 PM

That middle-of-the-week consolidation zone from last week (see my 12:21 post) certainly did slow the OEX's decline. So far, the chart setups still show vulnerability toward 583 for the OEX but it's spent the last few hours testing resistance that may or may not hold. It's just above the 15-minute 9-ema as I type, but it's been trading either side of that flattening average while still finding resistance on 15-minute closes below resistance from 588-588.49. Its choppy pattern suggests it's a bear flag likely to break to the downside, but if markets have ever delivered a message that chart setups don't always see their targets met, it's these markets lately. Summertimes are always difficult. I can remember days and weeks when we groaned over markets that weren't moving at all, but this summer has been of the other summertime pattern--volatility exacerbated by weak volume and fear-based trading, making it easier to push markets one direction or the other.

Jeff Bailey : 8/25/2008 2:49:02 PM

Dow Transports (TRAN) 4,979 -1.53% ... WKLY Pivot above at 5,030.

Jeff Bailey : 8/25/2008 2:45:17 PM

Union Pacific Corp. (UNP) $79.63 +0.10% ... #62 weighted SPX component at 0.36% of total.

First SPX component I see to trade green.

Keene Little : 8/25/2008 2:43:36 PM

With the sharp drop back down today I've removed the short-term bullish possibilities from my 60-min and daily SPX charts, updated below. The 60-min chart shows how I think it will progress from here--another new low should set up a bounce possibly back up to about 1275-1277 by mid day Wednesday and then a continuation of the decline from there.
60-min: Link
daily: Link

Linda Piazza : 8/25/2008 2:38:58 PM

What scheduled economic numbers and events will occur tonight? At 7:50 pm ET, Japan's CSPI will be released, with this number considered a leading indicator of consumer inflation, according to Forex Factory. It's the events in the wee hours of the morning that may have the most impact, though. Those include Germany's Consumer Confidence and final GDP at 2:00 am ET and its important Ifo Business Climate Index at 4:00 am ET.

Jeff Bailey : 8/25/2008 2:36:46 PM

SPX Heavyweights at today's open Link

Breadth rather negative at 0:48

Linda Piazza : 8/25/2008 2:33:47 PM

Jane usually covers the economic news for the U.S., but as we move into the last hour and a half of the trading day, I wanted to remind traders that they should be thinking about their end-of-day decisions today with the thought that tomorrow includes important economic numbers at 10:00 am ET and then the FOMC minutes at 2:00 pm ET. These can all be market-moving events, so if this summer's volatility hasn't been enough to scare you into managing risk, let the knowledge of those events tomorrow do it, too. I'm about to detail some of the things going on in Asia and Europe tonight, and they, too, could impact currency and futures action, if not govern what happens after the cash market open.

Jeff Bailey : 8/25/2008 2:15:22 PM

02:00 Internals found at this Link

Note: It would currently take a closing measure of 36.00% or lower for the NASDAQ's 10-day NH/NL ratio to see a 3-box reversal back lower.

Linda Piazza : 8/25/2008 2:01:29 PM

Next resistance above that being currently tested by the OEX is found at 588.65, with this being potentially stronger resistance on 30-minute closes. The OEX is at 587.36, jumping a little above and a little below the potential resistance now at 587.38.

Jeff Bailey : 8/25/2008 1:52:52 PM

SPX Heavyweights (08/25/08 Open) and Sep Max Pain at this Link

CVX, JPM, C, WFC, GS and AIG "Max Pain" tabulations fell last week. CVX started out above 08/25 tabulation. JPM, C, WFC, GS, AIG started out >=2.00% below.

CSCO, INTC, QCOM, UPS and DELL's "Max Pain" tabulations rose last week.

Linda Piazza : 8/25/2008 1:51:16 PM

The OEX still tests its 15-minute 9-ema, now at 587.34, potential resistance on 15-minute closes. The OEX closed the last 15-minute period at that moving average (then a little higher) and is turning down now, but it needs to drop to a new low to confirm that the moving average has held as resistance. The previous low was 585.04. The OEX is 586.63. All this squiggling around is going on near the daily 30-sma, more important S/R than what we're seeing on a 15-minute chart. The outcome isn't determined yet, as far as I'm concerned, but the 30-minute chart tells us that we have to factor in vulnerability to the next potential support level on 30-minute closes, now at 583.

Jeff Bailey : 8/25/2008 1:26:37 PM

AIG $18.94 -4.68% ...

Jeff Bailey : 8/25/2008 1:25:44 PM

INDU Component Weighting and Sep Max Pain at this Link

CVX, JPM, AIG, C and GM "Max Pain" tabulations fell last week.

INTC's rose last week.

One reason the DIA's "Max Pain" theory tabulation is "high" relative to trade is skew from AIG, C and GM.

Keene Little : 8/25/2008 1:19:43 PM

If we now see the small bounce off the low lead to another drop to new lows it will create an impulsive decline from Friday. That would indicate that we'll then be due another bounce/consolidation before heading lower again. If you're short the market it's difficult to lower your stop yet since we could get another big bounce. But if you want to take some money off the table (always a good idea), use another low today as that opportunity (especially if the new low is showing bullish divergences).

Linda Piazza : 8/25/2008 1:12:45 PM

It looks as if indeed some bulls are attempting to buy the test of the 30-sma on the OEX. I would advise our readers, if attempting to do so, to do so only with lottery money as I'm not so sure this test will turn out like the others. I won't be testing it with a long position. The OEX's 15-minute 9-ema, potential resistance on 15-minute closes, is 587.66, and I would advise watching for potential resistance there or at 588.76-589. OEX at 586.87 as I type.

Linda Piazza : 8/25/2008 12:58:34 PM

The OEX is back below its daily 30-sma, with that average at 586.66 and the OEX at 585.06. Three days last week, the OEX pierced this moving average only to close back at or above it by the end of the day, so this serves as a warning to bears to be watchful for buying interest. If there are any would-be bulls out there thinking of buying this test, I don't know that I'd advise doing so. It's possible that the OEX is going to form a triangle now that's roughly bounded by last week's highs and lows, but it's possible that prices could just give way now that the former rising trendline of the rising wedge was so closely approached and now all those gains made have been reversed. Anything is possible in this market, but I wouldn't be gambling on a bounce with anything but lottery money right now.

Jeff Bailey : 8/25/2008 12:45:25 PM

FRE $3.47 +23.48% ... WKLY Pivot $3.59 not yet tested.

Jeff Bailey : 8/25/2008 12:44:50 PM

FNM $5.49 +9.80% ... sticks its head above WKLY Pivot.

Jeff Bailey : 8/25/2008 12:43:26 PM

Good test for McCain's ability to strategize this week.

DON'T name his VP until Friday.

Linda Piazza : 8/25/2008 12:40:13 PM

The OEX's 15-minute 9-ema, potential resistance on 15-minute closes, is now 588.35 but is still descending sharply. OEX at 586.01 as I type.

Jeff Bailey : 8/25/2008 12:39:42 PM

I'm not certain that today's MARKET reaction is to late Friday's news (market could have bid as VP slection Biden dropped from race early due to lack of support).

So holding the Wachovia Bank WB Sep $15 Put (WB-UC) $2.15 x $2.20.

WB $14.02 -2.36% ...

Linda Piazza : 8/25/2008 12:37:59 PM

The TED spread is 1.14 as I type, continuing its climb since testing the 0.92-0.94 support zone the week of 8/11. Equity bulls don't want daily closes above 1.16 to be sustained, as there's potential resistance there that they want to see hold. Equities don't tend to react well when default risks, the risks the TED spread measures, are rising. I use this as a barometer and not to trigger buy and sell signals.

Jeff Bailey : 8/25/2008 12:36:49 PM

VIX.X 21.15 +12.44% ...

Jeff Bailey : 8/25/2008 12:36:44 PM

Swing trade covered call place order to buy back alert! ... Please place an order GTC to buy back the ProShares Ultra S&P500 SSO Sep $66 Call (SSO-IN) for $0.15. Currently $0.30 x $0.35.

SSO $59.89 -3.68% ...

Sold COVERED on Friday in anticipation of negative reaction to Obama VP selection and this week's DNC, where I'd expect some rather "bearish" market-based policy news flows.

Keene Little : 8/25/2008 12:24:47 PM

SPX 1261 is THE key level for the market--break that and it will confirmation that we've seen the high for the bounce off the July low. We'll have some 3rd waves of several degrees of the pattern that will need to play out and it will say people will start to "get it". There will be recognition that we're in trouble, that the Fed and Treasury and SEC will not be able to stop the carnage and that the economy will continue to put the hurt on earnings. That's what 3rd waves are all about.

Jeff Bailey : 8/25/2008 12:23:57 PM

INDU/DIA, SPX/SPY, OEX, NDX/QQQQ and RUT.X have traded WKLY S1.

SMH and BIX.X have not yet seen trade at their WKLY S1.

Jeff Bailey : 8/25/2008 12:22:31 PM

VIX.X 21.08 +12.06% ... WKLY R1 right here at 21.09.

Jane Fox : 8/25/2008 12:25:55 PM

Internals are clearly bearish now. Ad volume making new daily lows with a very bearish trajectory. AD ratio is in agreement, which doesn't always happen. VIX making new daily highs and the TRIN at 1.70. Doesn't get much clearer than this. Link

Linda Piazza : 8/25/2008 12:21:35 PM

Next potential target for the OEX is 582.33, according to the 30-minute chart, where support might be found on 30-minute closes. The OEX has moved into a consolidation band from the middle of the week last week, though, and it's possible that it could again consolidation in that same zone while support rises closer. Bears should keep adjusting their stops appropriately while bulls should be aware of that potentially lower target.

Jeff Bailey : 8/25/2008 12:18:01 PM

SPX 1,269.92 -1.72% ... after kiss of MONTHLY 38.2% and overlapping WKLY S1.

Linda Piazza : 8/25/2008 12:16:13 PM

My 15-minute charts for the RUT still show a potential downside target near 717, now at 716.77, but the 30-minute charts are showing higher support, from 718.66-720.00. RUT bears need to be aware that a potential bounce point has been closely approached. We know from Jim Brown's Wraps, too, that many consider 720 an important level due to factors more important than these intraday charts. So, readjust your stops if you've been trading this bearish but would-be bulls should remain aware of a potential for a dip down a bit lower, too. In this climate, maybe more than a bit, as anything and all things seem to happen.

Jeff Bailey : 8/25/2008 12:13:04 PM

12:00 Internals found at this Link

Keene Little : 8/25/2008 12:03:32 PM

With this sharp drop lower there's very little question in my mind that we've started the next leg down. This is too sharp and impulsive a decline to consider it a pullback to be followed by more rally. We're in short the rallies mode now.

Linda Piazza : 8/25/2008 12:01:38 PM

The OEX is now hitting potential support on 15-minute closes near 589.20. There's also light potential historical support near 588.70-588.80 and Fib support I've been mentioning all day, with that being the potential support near 587.60, joined by a former trendline's possible support. If that support zone should fail, charts set up potential vulnerability to 582.50. The OEX is 587.42 as I type, with not much time left in this 15-minute period, but with those other potential support levels near here, too. Traders should begin factoring in that possible drop to 582.37, but shouldn't start counting it as a target yet. This is another place at which stops need to be adjusted in case support catches hold.

Linda Piazza : 8/25/2008 11:47:58 AM

The OEX's next potential support on 15-minute closes has risen to 589.20, so bears should watch for the possibility that support could begin kicking in there, if tested. Nearest potentail resistance on 15-minute clsoes is at 590.98-592.48 in a band that's converging. OEX at 589.97 as I type.

Jeff Bailey : 8/25/2008 11:45:05 AM

Sep "Max Pain" Theory Tabulations (DIA, SPY, QQQQ, IWM, SMH, XLF, USO, GLD) at this Link

DIA's rose to $122. USO fell to $100. GLD fell to $82.00.

Jeff Bailey : 8/25/2008 11:29:29 AM

iShares iBoxx High Yield (HYG) $92.50 +0.54% ... Monthly dividend varies here, but would take last 12-months to try and establish an SEC Yield.

Jeff Bailey : 8/25/2008 11:26:58 AM

Pacholder High Yield (PHF) $8.08 +1.00% ... at current price, SEC Yield would be 11.13%

Jeff Bailey : 8/25/2008 11:25:59 AM

5-year Yield ($FVX.X) down 9.2 bp at 3.040%

10-year Yield ($TNX.X) down 8.5 bp at 3.782%

30-year ($TYX.X) down 7.0 bp at 4.393%.

Jeff Bailey : 8/25/2008 11:24:11 AM

Today's $2 billion short-term debt sale by Freddie Mac (FRE) $3.13 +11.38% has put a strong bid into Treasuries with 5, 10 and 30-year maturies higher (price) across the board.

Freddie sold $1 billion of a 3-month note due 11/24/08 at a 2.58% rate, which is higher than a 2.475% rate for $2 billion sold on 08/18/08.

Freddie also sold $1 billion in 6-month notes due 2/23/09 at a rate of 2.858%, also higher than 2.780% for the same size last week.

Demand for today's 3-month auction was higher than last weeks with bid-to-cover ratio of 3.95 compared with 2.19.

Demand for the 6-month also stronger than last weeks at 3.42 compared with 2.42.

Linda Piazza : 8/25/2008 11:23:08 AM

The RUT has fallen deeply enough to invalidate that potential inverse H&S that had been showing up on its 15-minute and 30-minute charts. This morning, I had listed some time lines and price levels that would invalidate the formaiton, and the drop to test Thursday's low is an obvious and conclusive invalidation. The RUT moved $0.06 below Thursday's low and is currently slightly above it, at 722.62 as I type. Bears obviously need to watch for potential double-bottom type support here, but the 15-minute chart suggests vulnerability to 717, so would-be bulls should think twice about entering here, deciding if they want to risk a further drop down.

Keene Little : 8/25/2008 11:19:13 AM

SPX has now made it down to the next Fib projection at 1276.49. A little lower and it will violate the 1275 level (previous high on the 20th) and that would leave the bounce off the 20th as a corrective 3-wave move. It would tell us the trend is back to the downside.

Linda Piazza : 8/25/2008 11:07:15 AM

OEX traders now need to factor in vulnerability to 587.60-588.80, where the next potential support band might be found. Sustained 30-minute closes above 592.34 would undo that potential target, but for now, it's a target and also potential support. If that fails, a retest of last week's lows remains possible, but in this environment, don't count on anything . . . and don't count anything out. Bears should just keep adjusting their stops.

Jeff Bailey : 8/25/2008 11:01:55 AM

10:00 Internals at this Link

TRIN's WKLY Pivot is 1.17.

Jane Fox : 8/25/2008 11:01:29 AM

Here is the weekly chart of Crude. As you can see it is not as bearish as Natural Gas but almost 50% of the rally for August 2007 lows have been wiped out in 7 weeks. Link

Jane Fox : 8/25/2008 10:58:53 AM

Here is a weekly chart of Natural Gas. It has almost retraced 76.4% of the rally from August 2007 lows, almost an entire year's gain has been wiped out in 8 weeks. Link

Jane Fox : 8/25/2008 10:51:11 AM

AD line and volume are both making new daily lows as the TRIN is climbing. The VIX was climbing but has turned around and heading down now. This is telling me there is no clear direction.

Linda Piazza : 8/25/2008 10:48:42 AM

TRIN is 1.13. It's been doing a lot of zooming around but is so far mostly holding to potential support on 15-minute closes at 0.97.

Linda Piazza : 8/25/2008 10:47:06 AM

So far, the A/D line has kept dropping. It's doing so in small-bodied choppy moves now, but with the A/D line at -1314, it doesn't have to keep dropping now to be bearish. All it has to do is trail sideways while the resistance, specifically in the form of the 15-minute 9-ema, zooms down toward it. That 9-ema is now at -456. Bears do not want to see the A/D line instead bounce hard up to test that next resistance, although a bounce up to test -1200 to -1150 resistance shouldn't be too damaging if that resistance holds.

Linda Piazza : 8/25/2008 10:38:34 AM

The OEX is balancing on potential support on 30-minute closes at 592.30, but hasn't picked a next direction yet.

Jane Fox : 8/25/2008 10:08:37 AM

Well so much for the high impact report, the market took a great big yawn and remained virtually unchanged.

Linda Piazza : 8/25/2008 10:07:37 AM

The OEX closed the first 15-minute period below the potential support on 30-minute closes now at 592.37 and it's perhaps headed down toward the 15-minute version of this same potential support line, now at 590.96. As was true earlier this morning, potential support lines step down in close proximity but without converging in a way that allows a judgment of which are strong support and which aren't. However, the support that now extends down to 590.96 (from former 590.90) still looks like the strongest support potential. If this doesn't hold on 15-minute closes, the next would be 587.60-588.30. Bears need to keep updating their profit-protecting plans.

Jane Fox : 8/25/2008 10:06:51 AM

WASHINGTON (MarketWatch) - Resales of U.S. single-family homes and condos rose 3.1% in July to a seasonally adjusted annual rate of 5.0 million, the National Association of Realtors reported Monday. Resales have sunk 13.2% in the past year. The gain was stronger than expected. Economists surveyed by MarketWatch expected sales to rise to 4.91 million. Despite the increase in sales, the inventory of unsold homes on the market rose 3.9% to 4.67 million, an 11.2 month supply at the current sales pace. The median sales prices fell 7.1% in the past year to $212,400.

Jane Fox : 8/25/2008 10:06:23 AM

July existing home sales down 13.2% in past year

July existing home sales rise 3.1% to 5.0 million pace

July inventory of existing homes at record high

Keene Little : 8/25/2008 10:00:21 AM

If SPX drops further, the next potential support levels are near 1281 (the 30-min 100/130 moving averages) and then 1276.49 where the 2nd leg down from Friday morning will equal 162% of the 1st leg down. The pullback is still just a 3-wave pullback and that's why bears need to be cautious about the possibility that this could be setting up another rally.

Jane Fox : 8/25/2008 10:00:06 AM

We will be looking for confirmation that housing has found a bottom and the 10:00 report will give insight into if we are there or not.

Jane Fox : 8/25/2008 9:58:38 AM

Thanks for the reminder Linda because if you are trading equities the 10:00 report will impact the market. Forexfactory.com puts this report as a red, high impact.

Keene Little : 8/25/2008 9:57:33 AM

Two equal legs down for SPX from Friday morning's high is at 1282.56 which is where SPX is trying to hold. It's also where the downtrend line from August 11th is located. If this is to be just a pullback correction to the rally from last Wednesday, we should see SPX hold here and rally. So this is the first test for the bulls.

Linda Piazza : 8/25/2008 9:56:28 AM

Please be aware, as Jane may have already warned you, that the Existing Home Sales comes in a few minutes, at 10:00 am ET, and that can definitely impact the trading pattern.

Linda Piazza : 8/25/2008 9:54:16 AM

Many will have noticed that the RUT is forming a potential inverse or reverse head-and-shoulders on its 15- and 30-minute charts over the period from early Tuesday 8/19 through to the current time period. For symmetry reasons, the RUT probably needs to confirm that head-and-shoulders today or tomorrow. If not, the formation would be invalidated. Also, the RUT probably needs to hold support on 15-minute closes now at about 725.95 but likely just a little lower before tested, or the formation would be invalidated. Bears need to be aware that the formation is there, that it's likely encouraging to bulls, and that there may be some buying going on as bulls believe that the right shoulder is being formed. I don't believe these formations are as predictive as they once were, but I certainly still watch them to see what they're telling me about the underlying psychology of the markets and who is winning or losing. Right now, it's a draw, in my opinion.

Linda Piazza : 8/25/2008 9:45:07 AM

Keltner outlook on the A/D line: The A/D line opened in the lower or bearish half of its Keltner channels, between presumed support and resistance. So far, it's been diving, but still has far to go before hitting potential support on 15-minute closes now at -1927. It has instead been finding support near Thursday's -1190 low, with the A/D line at -1122 as I type. If that historical support holds, then the A/D line might do what it sometimes does: use the first 30-45 minutes setting up a wide range, then chopping around within that range before it decides next direction. Sustained values below Thursday's low or above +25 would change that outlook. For now, it's bearish both in its value and its direction this morning, but without a final direction perhaps being predictable.

Jane Fox : 8/25/2008 9:44:30 AM

Notice how the 38.2 fib level has been SPX's resistance on July 23rd, August 6th and Friday, August 22nd. Link

Jane Fox : 8/25/2008 9:40:34 AM

AD line is a bearish -1146.

Linda Piazza : 8/25/2008 9:38:33 AM

As espected, the OEX drives lower this morning. In fact, it's driven all the way down to test the potential support on 15-minute and 30-minute closes that had shown up near 590.90-592.60. As mentioned in my first post this morning, the Keltner setup was not giving strong guidance, but this zone looked like the best possibility for first support, at least, if the OEX didn't drive straight through it. The setup didn't allow strong judgments about strength relative to weakness and which support zones might be stronger than others, but this looked like the best bet for first support. Therefore, bears should be watchful for the possibility that this support could hold. If so, the 594.60-595.20 zone should be treated as potential resistance now.

Keene Little : 8/25/2008 9:24:36 AM

I had mentioned Friday that this market likes to chase one side or the other out before doing a reversal the next day and get traders chasing it. Friday's short-covering rally is being followed by a gap down Monday and that will get the bears chasing it lower again. Now we'll see if there will be follow through to the move down. The wave pattern is set up for a nasty decline to kick off so be careful looking for buying opportunities.

Jane Fox : 8/25/2008 9:06:57 AM

On Friday, Crude hit at high of 121.86 and a low of 114.18 that is a $7.86 swing for the day. That is a lot even for Crude. Link

Linda Piazza : 8/25/2008 9:02:20 AM

Last week was eventful on the OEX. The result was not. The OEX broke out of the rising wedge in which it had risen off the 7/15 low, moved down into a three-day test the 30-sma, and then charged back up toward the former supporting trendline of the wedge. The OEX didn't quite hit that trendline on Friday, but not for lack of trying on the part of the bulls. At the end of all that action, the OEX ended last week a mere 2.18 points away from where it had closed the previous week. Meanwhile a lot of traders lost a lot of money being stopped out of various trades.

The second small-bodied weekly candle was again accompanied by a long candle shadow, with such candles marking indecision. What happens next? We have either gotten or will soon get the kiss-goodbye test of that former supporting trendline to see if it's now resistance. We have to await the result of this test to know. We might think we can handicap the result, but like a horse race, each watcher has a bias that impacts the horse we favor, and horses themselves can out or underperform expectations. So, we wait and watch.

On a short-term basis, the OEX ended Friday below a descending trendline off the highs produced during the 11:00 am candle on 8/12, the 12:30 candle on 8/14 and several succeeding candles that same day, and even some produced on Friday. Futures are lower than fair values as I type. If that should continue into the open and the OEX should drop in accordance with futures value, it might drop to below potential support on 15-minute and 30-minute closes that held all day Friday: now at 594.94-595.77, but likely nearer 594.80-595.70 if the OEX moves down immediately. Until and unless the OEX produces sustained 15-minute and 30-minute closes beneath that zone, the short-term tenor has not changed and a possible short-term target of 598.27-598.76 would be maintained. As I type, it looks possible that the tenor could change, but we sometimes see strong downdrafts immediately after the open quickly reverse as prices pop back above the former support by the first 15-minute and 30-minute closes. If that event should occur this morning, too, traders should prepare for possibly strong resistance in that 598.27-598.76.

If the OEX loses that support as at least appears possible, that potential upside target is erased, and the support that held all day Friday may become resistance. It's difficult to tell where any downside move might end. Potential support lines are not converging in a way that gives preference to one or the other or allow any judgment of which might be strong and which not. Right now, the best bet is that support might be found from about 590.90-592.60.

So, there's not a lot of clarity on these charts, from the weekly down to the 15-minute. We know from experience since mid July that one day's (or week's) move can be quickly reversed or that a nice chart setup can be followed by zooming action that not only takes traders out of trades but takes them out at disadvantageous points if they're not careful about setting stops.

So, to sum up, it looks possible that support that held all day Friday will be pierced early this morning, with a possible first change in tenor if the first 15- and 30-minute closes take place beneath that zone. If so, stepped-lower potential support zones suggests choppy price action unless any move down is swift and powerful, cutting through the various support lines. At the current time, the 590.90-592.60 zone looks like the strongest candidate for first support on 15-minute and 30-minute closes, but a move down toward 587-588 looks possible, too. A surprise move higher could find resistance at 598.27-598.76.

Jane Fox : 8/25/2008 8:57:23 AM

Here are your overnight charts and as you can see they are all making new overnight lows as I type. Link

Keene Little : 8/25/2008 8:48:24 AM

It was a quiet overnight session for just about everyone. Bonds rallied a little but most others had a relatively flat session. Equities were down slightly even after a bit of a rally attempt off the lows near 4:00 AM but then dropped sharply since 8:30 AM. If there is not a recovery and the equity market starts down this morning I'll be watching to see if it looks corrective or impulsive to the downside. That will provide some clues as to whether Friday's resistance will hold.

Jane Fox : 8/25/2008 8:47:04 AM

Economic reports to take note of today:

10:00a.m. Jul Existing Home Sales: Expected: -1.2%. Previous: -2.6%.

10:30a.m. Aug Dallas Fed Mfg Production Index: Previous: 0.0.

Market Monitor Archives