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Keene Little : 8/28/2008 10:17:05 PM

I have been following OI for a year and a half and really enjoy following your opinion. Since CME is still falling as you said it would I was wondering where you thought it would fall to. I can't remember what you had said and if you still felt it would go that far. Thanks for all you have done as you have been a big help to my education.

Thanks for the comments Rick--education is the key and it's why we do what we do. It's been a while since I've looked at CME so it's a good time to update its chart. CME almost made it down to the downside target I had last mentioned back on July 1st (to the bottom of the channel near 280 at the time: Link ).

As noted on the updated daily chart, the sideways consolidation since the July 15th low near 282 looks like a fractal pattern of the same consolidation that played out from the March low to the May 19th high: Link . The only question now is whether the follow through to this fractal means another leg down (dark red) or if we'll instead first see another leg up in its bounce off the July low (pink). This is essentially the same question for the broader market as well.

In either case I think CME will work its way lower and I now have a downside target at 182 by October/November. The weekly chart shows the decline in relation to its 2003-2007 rally: Link

Keene Little : 8/28/2008 10:07:47 PM

Friday's pivot table: Link

The market broke some key levels to the upside and that puts us on a bullish price path for now. It might not be smooth sailing though. August has been anything but smooth. The 4 daily charts from tonight's newsletter show the potential price paths over the next couple of weeks. Friday should be a throw-away day and I don't intend to trade it. We'll see what price action brings us next week when most of the players return.
SPX: Link
DOW: Link
NDX: Link
RUT: Link

OI Technical Staff : 8/28/2008 9:59:59 PM

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Jeff Bailey : 8/28/2008 6:25:06 PM

NHC (update) - Gustav could be "major hurricane"; US striking point unknown @ 06:18 PM EDT.

Jeff Bailey : 8/28/2008 6:23:21 PM

Retail Unleaded Price Heat Map as of 08/28/08 @ 04:00 PM EDT Link

08/21/08 capture Link

Not much change in the Gulf Port counties.

Jeff Bailey : 8/28/2008 5:24:30 PM

Closing U.S. Market Watch at this Link

Jeff Bailey : 8/28/2008 5:12:31 PM

Most Actives ... SPY $130.19 +1.21%, QQQQ $47.11 +0.81%, FNM $7.95 +22.68%, FRE $5.28 +11.15%, SIRI $1.36 +2.25%, IWM $74.51 +2.02%, C $19.08 +5.29%, ABK $7.42 +41.60%, BAC $31.43 +6.00%, WB $15.99 +9.89%

Jeff Bailey : 8/28/2008 4:27:37 PM

S&P 500 Heavyweights at today's close Link

Jeff Bailey : 8/28/2008 4:11:28 PM

VIX.X 19.41 -1.77% ...

Jeff Bailey : 8/28/2008 4:11:10 PM

SSO $62.86 +2.69% ...

SUC-IJ $2.50 x 2.80
SSO-IN $0.60 x $0.85

Jeff Bailey : 8/28/2008 4:09:09 PM

S&P 500 (SPX.X) 1,300.65 +1.48% ... X's get the square on final print Link

Jeff Bailey : 8/28/2008 4:00:43 PM

RUT.X 745.81 +1.75% Link ... snugging up under its WEEKLY Interval 150-week SMA. Some "divergence" to the recent past. Tomorrow is Friday.

Keene Little : 8/28/2008 3:47:43 PM

Looks like a final jam into the close and get the rest of the bears scurrying to cover. I suspect there will be an effort to at least hold today's gains tomorrow in order to finish the week/month on a high note

Jeff Bailey : 8/28/2008 3:22:07 PM

China, Iraq reach $3 bln oil service deal ... AP Story Link

Jeff Bailey : 8/28/2008 3:20:47 PM

Energy Transfer (ETP) $45.07 +0.64% Link ...

Jeff Bailey : 8/28/2008 3:19:12 PM

Not sure when that headline printed. May be responsible for recovery in Nat. Gas.

Jeff Bailey : 8/28/2008 3:18:42 PM


DJ- A natural gas pipeline owned by Energy Transfer ruptures near Stairtown, Texas, sending flames up to 400 feet in the air, the Austin American-Statesman reports. Both ends of the ruptured segment were blocked off and no injuries are reported.

Jeff Bailey : 8/28/2008 3:16:20 PM


DJ- Energy Department is "closely monitoring" Tropical Storm Gustav, which is expected to become a major hurricane and threaten oil facilities in the gulf, and stands ready to open the emergency Strategic Petroleum Reserve, if needed.

Jeff Bailey : 8/28/2008 3:15:14 PM


DJ- The Federal Reserves says U.S. commercial paper market grew $7.1 billion in the week ended Wednesday, helped by gains in the asset-backed and non-financial parts of the market.

Jeff Bailey : 8/28/2008 3:14:17 PM

Monster Worldwide (MNST) $19.91 +2.62% ...

Jeff Bailey : 8/28/2008 3:14:10 PM

Manpower (MAN) $48.93 -2.83% ... possible "hurricane cleanup" catalyst.

Jeff Bailey : 8/28/2008 3:12:38 PM

US JOBLESS CLAIMS DOWN 10K IN AUGUST 23 WEEK DJ- The number of U.S. workers filing new claims for unemployment benefits fell by 10,000, in line with analysts' estimates, to 425,000 in the past week as the figure remains at elevated levels consistent with more declines in nonfarm employment.

Jeff Bailey : 8/28/2008 3:11:59 PM

FANNIE, FREDDIE CAN MAKE IT WITHOUT BAILOUT DJ- Fannie Mae capital "appears much stronger" than people believe, Lehman Brothers analyst Bruce Harting says, adding that Freddie Mac should be able to make it through the housing downturn without government intervention.

FNM $7.39 +14.04%

FRE $5.22 +9.89% ...

Jeff Bailey : 8/28/2008 3:05:22 PM


DJ- U.S. economy is much stronger than first thought, with gross domestic product up a seasonally adjusted 3.3% in the spring because of better exports and less inventory liquidation by businesses. White House says figures demonstrate the need to ratify pending free trade agreements.

Jeff Bailey : 8/28/2008 2:59:20 PM

Amex Nat. Gas (XNG.X) 606.16 -1.75% Link ...

Jeff Bailey : 8/28/2008 2:57:40 PM

VIX.X 19.42 -1.72% ...

Jeff Bailey : 8/28/2008 2:57:16 PM

UNE-AJ $5.20 x $5.60

Keene Little : 8/28/2008 2:55:06 PM

From yesterday afternoon's low SPX rallied about 13 points to this morning's initial high in less than 30 minutes. Since then it's taken 5 hours to rally another 7 points. It's a slow climb but the bulls remain in control. Looks like most bears are heeding the advice to never short a dull market.

Jeff Bailey : 8/28/2008 2:52:29 PM

US Nat. Gas Fund (UNG) $37.45 -5.28% ... take a look back above WKLY Pivot ($37.36).

Jeff Bailey : 8/28/2008 2:28:02 PM

NYSE NH / NL stocks at this Link

Jeff Bailey : 8/28/2008 2:22:11 PM

DJ- New Orleans Transit Halting Service Friday Night

Jeff Bailey : 8/28/2008 2:21:23 PM

DJ- Tropical Storm Gustav near E. Jamaica, bringing heavy rain

Keene Little : 8/28/2008 2:06:41 PM

NDX is pulling back to its broken downtrend line from August 15th, currently near 1913.60. Obviously the bulls do not want to see NDX close back below the line otherwise today's rally will look like just a head-fake break.

Keene Little : 8/28/2008 2:03:15 PM

Another possibility for the RUT is a slightly larger A-B-C bounce off the low on August 21st, last Thursday. For that kind of expanded flat correction the Fib projection for the current leg up is to 743. This matches the 50% retracement if measured against the decline from August 15th to August 21st. So that means caution if you're long the RUT as it could be topping at any time.

Keene Little : 8/28/2008 1:58:41 PM

The RUT continues to look rather bullish the way it's stair-stepping higher today. It's rally pattern off Tuesday's low looks a bit suspicious as far as how bullish it might be but right now I see upside potential to 748 where it would have two equal legs up. It's currently just above 743 and up 10 points on the day to give you an idea how much more we could see there.

Jeff Bailey : 8/28/2008 1:54:59 PM

Brazil Govt.: July Power Consumption Rises 6.1% On Year

Jeff Bailey : 8/28/2008 1:46:15 PM

Toll Brothers (TOL) $24.34 +3.97% Link

Jeff Bailey : 8/28/2008 1:44:57 PM

Pulte Home (PHM) $14.13 +7.69% Link ... sticks its head above $14.00 and recent congestion high.

Jane Fox : 8/28/2008 1:37:14 PM

I see the S&P futures pressing up against daily highs but I don't think it will break through or if it does it will not have follow through. The VIX is not supporting the move.

Jeff Bailey : 8/28/2008 1:41:57 PM

CME Aug'08 to May'09 Regional Housing Futures that I track every two weeks now at this Link

This "expiration" looks to me to be one of the first more bullish rolls of an expiration. As you can see, in late February, as the Feb'08 contract would have been expiring, you see more RED into the expiration. In late May, as the May'08 contract expired, you see more RED.

Several weeks ago I had noted that we were starting to see more BLUE (flat/stability) with some GREEN (trending higher).

Keene Little : 8/28/2008 12:42:39 PM

NDX is looking a little more bearish as it pulls back a little deeper. If it drops below its last low near 1913 it could signal we've seen the high for the day. The risk (as far as trading) is that we'll just enter a larger choppy consolidation.

Jeff Bailey : 8/28/2008 12:37:34 PM

VIX.X 19.47 -1.46% ...

Jeff Bailey : 8/28/2008 12:37:17 PM

SSO $62.57 +2.22% ...

SUC-IJ $2.30 x $2.50
SSO-IN $0.60 x $0.70

Jane Fox : 8/28/2008 12:36:13 PM

SPX has broken through 1292 and the next stop is 1320. Link

Jeff Bailey : 8/28/2008 12:33:55 PM

StockCharts.com's ($BPSPX) always 2% box Link

Jeff Bailey : 8/28/2008 12:33:07 PM

S&P 500 Index ($SPX.X) 1,295.29 +1.06% ... 5-point box chart and "Chart of the Week" (see Wednesday's Wrap) Link

Testing bearish resistance.

Conventional 10-point box Link

Keene Little : 8/28/2008 12:26:56 PM

SPX is consolidating again after that last little spurt higher which is still bullish. This could be the way the day will go--little spurts to the upside and then consolidate. It's a sign of lack of selling as much as any interest in buying. Big money throws in just enough money to keep the bears away.

Jeff Bailey : 8/28/2008 12:22:34 PM

CME Nov'08 Regional Housing Futures Link

Jeff Bailey : 8/28/2008 12:17:53 PM

CME Boston Nov'08 Alert! ... at the bid of $160.20 is highest price of my benchmarks. Offer is $167.80.

Keene Little : 8/28/2008 12:05:29 PM

That spurt higher hit some stops and got a little volume behind it. We enter the lunch hour now on an already low-volume day but so far the bulls remains firmly in control. MACD is showing bearish divergence against this morning's first high so that tells bulls to protect profits--keep raising your stop to just below the stair-step lows and let price dictate how you trade this. I would not try to short this now that 1293 has been broken. It's time to respect the upside potential into September.

Jeff Bailey : 8/28/2008 12:01:31 PM

US Nat Gas Fund (UNG) $36.16 -8.52% ... undercuts its 12/31/07 close ($36.25) again. Did so on 08/26/08.

Jeff Bailey : 8/28/2008 11:58:49 AM

Good reminder!

CME's August'08 regional housing futures have settled and roll(s) should be complete.

Composite finished 180.00, Boston 161.00, Chicago 150.80, Denver 130.40, Las Vegas 158.00, Los Angeles 195.00, Miami 189.80, New York Metro 193.40, San Diego 175.40, San Franciso 159.60, Wash D.C. 196.00.

Jane Fox : 8/28/2008 11:56:42 AM

THere has been a huge selloff in Crude. It hit a low of $114.08 but has now recovered to $115

Jeff Bailey : 8/28/2008 11:54:15 AM

Looks like Gustav's arrival has been delayed ... Lanfall update is 08:00 AM Tuesday. Link

Keene Little : 8/28/2008 11:41:43 AM

Volume is really tapering off now. I'm getting the feeling that traders may not be much interested in the market for the rest of the week and we could simply consolidate or even move up and down a bit and not mean a whole lot. Price is king and anyone trading must abide by their stops.

Volume is a technical indicator that tells you whether the move may have conviction or not but in a low-volume week it's hard to know whether any direction has much conviction behind it. It's why a lot of traders simply take this week off and wait for the A-team to get back from the Hamptons next week.

Speaking of the Hamptons, I understand the real estate values are starting to take a hit and foreclosures are happening out there as well. Without their mega-bonuses I guess the poor people out there can't afford their mortgages either.

Jeff Bailey : 8/28/2008 11:35:02 AM

That wasn't "the plan" for today.

Jeff Bailey : 8/28/2008 11:32:30 AM

US Nat. Gas Fund (UNG) $36.71 -7.03% ... backfills 08/25 to 08/26 gap higher.

Jeff Bailey : 8/28/2008 11:24:04 AM

EIA: Crude Oil, Total Gasoline, Conventional Gasoline, Reform. Gasoline, Total Distillate and Nat. Gas Stockpiles table I track at this Link

Keene Little : 8/28/2008 11:10:36 AM

An important level now for the bulls to hold is this morning's pullback low, so no lower than SPX 1288/NDX 1911.

Jane Fox : 8/28/2008 11:07:31 AM

The VIX is pressing up against daily highs so there is little chance the SPX will be breaking 1292 anytime soon.

Jeff Bailey : 8/28/2008 11:06:00 AM

That's a BIG build.

Jeff Bailey : 8/28/2008 11:05:45 AM

EIA Weekly Nat. Gas Storage Link ... Build of 102 Bcf.

Jeff Bailey : 8/28/2008 11:04:15 AM

Euro CurrencyShares (FXE) $147.59 -0.02% ... $1 box Link ... Testing its longer-term bullish support trend.

Jeff Bailey : 8/28/2008 11:02:16 AM

Pound CurrencyShares (FXB) $183.80 -0.17% ... $1 box Link

Jeff Bailey : 8/28/2008 11:00:56 AM

DJ- BOE's Blanchflower Calls For Big Rate Cuts

The Bank of England must cut its key interest rate by more than 25 basis points to head off a protracted slump, the most dovish member of the central bank's Monetary Policy Committee said in an interview Thursday.

Speaking to Reuters, U.S.-based academic David Blanchflower said without an immediate and substantial reduction in the BOE's key interest rate, 2 million people could be unemployed by the end of the year and house prices could fall by more than the 30% he had previously forecast.

The BOE last month forecast that the economy would stagnate over the coming year. But Blanchflower said that was "wishful thinking."

"We are going to see much more dramatic drops in output," he said. "The way to get out of it is to act, by interest rate cuts and fiscal stimulus and other things to try to help people who are hurt through this."

Blanchflower was alone among the MPC's nine members in voting to cut rates in August and at the three previous monthly meetings. The MPC last cut the Bank rate in April, to 5% from 5.25%.

Keene Little : 8/28/2008 10:56:19 AM

NDX is now pressing against its downtrend line from August 15th, here at 1917. If it can continue higher it should be able to close Monday's gap down at 1931. SPX is also fighting its 1293 level. Make or break here.

Tab Gilles : 8/28/2008 10:54:46 AM

EIA NATGAS Inventories UP; 102 BCF

Nat gas is now selling off around $8.08. I would use this dip to buy or add to positions, Gustav may cause huge damage in the coming days.

Why have I been bullish on Chesapeake Energy (CHK) and the natural gas sector recently? Link

Analysts use a ratio when comparing oil to nat gas. That ratio states: 6,000 cubic feet of gas is equal to 1 barrel of oil. One can use this ratio to compare different companies and hunt for cheap resources. We can also use this ratio to compare the actual price of oil to natural gas. Only lower the 6,000 number to 6 to account for the way each is priced in the market.

Looking at this chart, when natural gas is above 6 on this scale, its utility is very high. Meaning if your electrical generation plant can run off oil or natural gas, you'd select the cheapest source of fuel. At present, you would choose natural gas. I'd even favor natural gas over crude when the ratio is at 6, as natural gas is a cleaner source of energy. Link Link Link

Historically the average for the ratio has run 9.2, it is now around 14.5!

So at $120 oil taking the 9.2 average ratio would place NATGAS at $13....and at 6:1 $20. Even if oil goes to say $100 bbl at 9.2 NATGAS would trade at $10.86.

Currently $WTIC $118/ $NATGAS $8.15 = 14.48 Link

Keene Little : 8/28/2008 10:26:15 AM

The downtrend line for NDX from its August 15th high is currently near 1917 so that's the level to be short against on this index.

The caution here for bears is that consolidating near resistance for SPX is bullish. If it consolidates for a bit and then moves higher again it could be a quick move as stops get hit. A move back below 1285 would set a bearish tone although that's where it could find support at its broken downtrend line from May.

Jane Fox : 8/28/2008 10:11:53 AM

I knew the SPX would not be able to break 1292 easily. If it does not then we may have a head and shoulders building. The most potent head and shoulders formation is at the top of a very nice trend upwards and since that is not the case here it is not as powerful but it is still a huge warning to the bulls if it should confirm. Link

Jane Fox : 8/28/2008 10:07:37 AM

The next thing a intraday trader needs to watch is the AD line and that is moving in a straight line upwards, quite bullish.

Keene Little : 8/28/2008 10:07:17 AM

SPX has stalled at resistance and is a good short play based on resistance near 1292 (at least you can keep your stop tight).

Jane Fox : 8/28/2008 10:06:21 AM

We have a very bullish TRIN but the VIX is not in agreement. It is making new daily highs and that is quite bearish. The result is the market is moving sideways and until these two get together it will continue to do so. Link

Jane Fox : 8/28/2008 10:02:23 AM

Here is a very good example of why you need to look at not only the trajectory of the internals and if they are making new daily highs or lows but at their absolute value as well. The TRIN is making new daily highs, which is bearish, but when it is at 0.55 geesh that is NOT bearish. Link

Jane Fox : 8/28/2008 9:44:59 AM

Crude is testing its resistance at the $120 - $122 zone and it is struggling. Link

Keene Little : 8/28/2008 9:41:52 AM

Depending on how the uptrend line is drawn from July 15th, it's currently near SPX 1302 to as high as 1311. If it's able to rally above 1293 I would look for the potential to rally at least another 10 points higher than that. The previous high on August 15th is also at 1302. First order of business for the bulls is to break 1293.

Jane Fox : 8/28/2008 9:35:34 AM

AD line opens at a bullish +914.

Keene Little : 8/28/2008 9:35:08 AM

The downtrend line from May is currently near 1285.60 so watch to see if it holds on any pullback.

Linda Piazza : 8/28/2008 9:32:43 AM

I am taking a day off today. Happy trading! See my 9:11 post for my earliest observations.

Keene Little : 8/28/2008 9:27:52 AM

Equity futures jumped up off their 4:00 AM lows stalled and then got a big jump on the revised GDP number. I'm always mistrustful of a pre-market move like this--it's far too easy to get the shorts covering in a low-volume environment and then again at the open. It's what happens after the initial buying frenzy at the open that counts. Will we get a gap n crap? It's anyone's guess at the moment.

It's looking like SPX will gap above its downtrend line from May and that's clearly bullish. A pullback that retests the line and then rallies higher would be a strong signal that we're going to rally not just above the key level 1293 (which could happen quickly after the open) but likely much higher into September. So bears beware here. By the same token, bulls need to be cautious that we don't see a head-fake break of the downtrend line, nail a bunch of stops and then reverse back down.

We'll see how the first hour trades before making any determination for how the rest of the day might play out.

Linda Piazza : 8/28/2008 9:11:08 AM

Yesterday, the OEX gained. At the end of the day, it looked as if it might end the day at or near the daily 30-sma again, something that bulls did not want to see happen, but a strong bounce the last 15-minute period of the day provided the needed save.

The OEX has been settling into a triangle formation on its daily chart since dropping below the rising trendline that had carried it off the 7/15 low. That triangle is narrowing. If it has any validity, prices should break out of it soon. Which direction? That's the point of neutral triangles. It's best to avoid a bias about which direction they'll break. I know which direction I'm afraid this one will break, but not which direction I know it will. The boundaries of the triangle now appear to be about 584.20 and 593.50, but those are guesstimates since my charting system doesn't allow an easy assessment of the exact crossing of a trendline. I may be off by a bit on either side. If you have QCharts, draw the trendlines and assess the exact numbers for yourselves. Remember the possibility that prices could drop just below or above the triangle, broadening it into a rectangular consolidation pattern, before reversing again. Temper your assessments of where the OEX could go after violating the triangle's boundary either direction until you see evidence that any breakout or breakdown is sustained and greeted with a strong move.

What do intraday charts show? The 15-minute chart shows that if the OEX rises first thing, it will encounter first potential resistance on 15-minute closes at about 591.30-591.60 (depending on how fast the OEX rises). The chart setup suggests that, barring a strong rise that quickly pierces that resistance, there could be a few minutes' pause at that zone before we know next direction. The possibility of a move up toward 593.92 is set up by the 30-minute chart, but only if the OEX is successful in breaching that 591.60-ish area on 15-minute closes.

If the OEX should drop first thing, first potential support appears to be strongest at 588.48-588.55. A break of that support on 15- and 30-minute closes, and then a subsequent break of potential support near 587.70, suggests a drop toward 583.27-583.90.

Jane Fox : 8/28/2008 8:59:04 AM

Here are your overnight charts and as you can see the markets really like the GDP data out at 8:30. Funny but the S&P futures are banging up against 1292, the resistance I mentioned yesterday that would be hard to break. Of course I was talking about cash index and the charts you are looking at are the futures so you have to take into account the premium. Link

Jane Fox : 8/28/2008 8:53:42 AM

WASHINGTON (MarketWatch) -- U.S. economic growth in the second quarter was a whole lot stronger than previously believed, but may represent the high-water mark for the economy for at least the next year.

The U.S. economy grew at a 3.3% real annual pace in the April-June quarter, the fastest pace in since the third quarter of last year, the Commerce Department reported Thursday. This was almost double the initial 1.9% estimate reported last month

Final sales increased 4.8% annualized, much better than last month's estimate of 3.9%. Core consumer prices rose at a 2.1% annual pace in the quarter, unrevised from the initial estimate.

Economy-wide inflation jumped 4.2% in the quarter

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