Option Investor
Printer friendly version
Keene Little : 9/2/2008 10:07:32 PM

Wednesday's pivot table: Link

After Tuesday's bearish reversal off the morning high we're left wondering if a new leg down is starting. The indices dropped to potential support levels but the bulls will need to step up to the plate quickly on Wednesday to get the chart patterns looking at least short term bullish again.

The bullish sideways triangle pattern for the DOW (and SPX) is still alive and it can tolerate a little lower on Wednesday (11400) before reversing higher into opex. The upside potential is near 12250. Otherwise a drop below 11125 would negate the bullish pattern and be a sell signal. Daily chart: Link

SPX has the same setup as the DOW but support should be closer. The upside potential is 1350-1360 by opex. But any lower than about 1269 would have me thinking a little more bearishly about what's happening here. Below 1261 would negate the triangle pattern in which case I'll be watching 1251 (two equal legs down from August 11th) for potential support. Below 1220 and it would be lights out for the bulls. Daily chart: Link

NDX is either on the verge of breaking down hard or ready to spring back up out of a bull flag pattern. It needs to spring up on Wednesday otherwise its spring has sprung. Daily chart: Link

OI Technical Staff : 9/2/2008 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The Market Monitor has been archived.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.

Linda Piazza : 9/2/2008 4:01:30 PM

As the day ends, the OEX is trying to steady at its converging 10- and 30-sma's on the daily chart. Where it goes next is up for grabs as it's still just thrashing around in a congestion zone, but OEX traders should at least consider the possibility of a 583-585 test even if it's not a given. Some short-term charts suggest that the OEX could first attempt to rise up toward 591-593 while others suggest that it's dealing with fairly significant resistance right now, up to 590.20 or so. The long upper shadow on today's candle, indicating a rather strong reaction to a resistance test fights against the steadying on the converging 10- and 30-sma's on the daily chart, all of this occurring in a congestion zone, so I unfortunately have to say that OEX traders have to be ready for just about anything. I of course don't take it as a bullish thing that markets were knocked back so severely on the first trading day after the long holiday, but zooming around within a congestion zone just doesn't tell us anything.

Keene Little : 9/2/2008 3:46:02 PM

The little bounce off the low looks corrective still and that points to new lows yet to come. Maybe a test of SPX 1269 next.

Jane Fox : 9/2/2008 3:45:11 PM

Here is a good example as to why the TRIN, when it is neutral like today, is of little help. The TRIN and the VIX should be moving hand in hand when the bears take the reins but as you can see the TRIN has not moved in unison with the VIX today. Link

Jane Fox : 9/2/2008 3:41:22 PM

The Vix and the S&P futures have been mirror images of each other so far today and since about 12:30ET the VIX has supported each and every new low ES makes. Link

Linda Piazza : 9/2/2008 3:09:05 PM

What economic events and releases are scheduled for the overnight session? First, I wanted to mention political upheaval in Japan that of course is not a scheduled event or release, but that can continue to impact currency moves. Japan's prime minister has resigned. Other releases are services PMI numbers in the eurozone and the U.K., with the eurozone's at 4:00 am ET and the U.K.'s at 4:30. The eurozone's revised GDP will be released at 5:00 am, and a number from the British Retail Consortium at 5:30 am will give insight into the price of goods. That's about it for before-the-market releases until our Challenger Job cuts at 7:30 am ET and the Bank of Canada's rate decision at 9:00 am.

Keene Little : 9/2/2008 3:06:13 PM

The bullish divergences that you can see on the NDX 120-min chart is a warning that the new lows over the past two weeks could be an ending pattern for the pullback rather than the start of a more serious decline. Stay on your toes and take nothing for granted if you're short. Nothing wrong with taking a little money off the table.

Keene Little : 9/2/2008 3:04:33 PM

After being rejected at its downtrend line from August 15th NDX has now dropped down to the bottom of a parallel down-channel based on that downtrend line, hear at 1845. It's a good place for a bounce if we're to get one. 120-min chart: Link

Linda Piazza : 9/2/2008 3:03:26 PM

The OEX has now hit the potential target and support on 30-minute closes now at about 588.53. It has also set a potential downside target of 583.15, although the setting of that target is a bit iffy as yet. Still, I would factor in vulnerability to that level without yet counting on it being tested. Bears should keep updating their profit-protecting plans.

Keene Little : 9/2/2008 2:51:00 PM

This SPX 120-min chart shows a little closer view of the sideways triangle idea: Link . Price should not drop below 1269 if this bullish pattern is to hold (although a brief throw-under for the final leg of the triangle is common). The two key levels are shown--1303 to the upside and 1261 to the downside. Trade support and resistance for now but play the direction of the break of a key level.

Linda Piazza : 9/2/2008 2:50:46 PM

If you've got September bear call spreads still open, today would be a good day to check them and see if you could exit for a pittance, whatever you consider a pittance, and take away that risk for the next couple of weeks. As I've mentioned many times, not all condor or credit-spread traders believe in giving up any portion of their collected credits to remove risk. Others would never consider leaving themselves exposed to risk for two more weeks when they could exit a trade for a pittance. Each position has its proponents. I'm out of all my condors for September already, for example. Whatever your decision, get in the habit of checking these all the time and you might find it surprising to learn how often you could exit a credit spread or whole condor ahead of time and keep most of the profit.

Keene Little : 9/2/2008 2:41:13 PM

The updated SPX daily chart shows the sideways triangle (in red). It's a bit messy because I'm trying to show a couple of different trend lines that I think could guide price action: Link

For example, the trend line across the highs on July 23rd and August 11th hits the downtrend line from October near 1260 on September 19th, opex Friday. That's also where the bounce off the July low would have two equal legs up if it finds support at 1269, the bottom of the sideways triangle. However, a break below 1261 would be a heads up that the bears are running the show.

Tab Gilles : 9/2/2008 2:37:14 PM

As noted at 12:01:41 PM $VIX Link $VXN Link $RVX Link

Keene Little : 9/2/2008 2:31:14 PM

So much for a bounce. SPX is now back below its downtrend line from May, at 1280, which is not bullish at all. However, trend lines don't mean much in a sideways choppy pattern. The uptrend line from July 15th is now near 1272 and the uptrend line from July 28th (the bottom of the potential sideways triangle shown on the DOW chart) is near 1269. Those are the two potential support levels to watch if the decline continues.

Linda Piazza : 9/2/2008 2:20:23 PM

The next potential target for the OEX is now 588.70 and OEX traders should factor in vulnerability to that level while not counting it as a given just yet. There's possible vulnerability to 583.18, too, but that depends on what happens at the higher level, where support could exist.

Keene Little : 9/2/2008 2:09:25 PM

The decline today has now achieved 5 waves and therefore should be ready for a reversal back up at any time. SPX has now tested (again) its broken downtrend line from May. At a minimum we'll get a bounce to correct the decline. More bullishly the move down could have completed a larger 3-wave pullback from Friday's high. It now takes a rally back above SPX 1300 to prove the latter in which case we'll get a move at least up to 1320. Otherwise a continuation lower to SPX 1271-ish/DOW 11400 is the potential downside for now.

Linda Piazza : 9/2/2008 2:03:47 PM

A a reminder, Friday's OEX low was 590.87. The OEX currently tests potential support on 15- and 30-minute closes, with the 15-minute version at about 591.26 and 30-minute version at about 591.26. If the OEX can't maintain this support on 30-minute closes, a potential target near 588.74 will be set and a drop toward 583 can't be precluded. Neither of those has yet been set as a target, however. The OEX is now 591.27. Bears need to remain watchful for the possibility that support could kick in any time now, while following the OEX lower with their stops.

Tab Gilles : 9/2/2008 2:00:38 PM

Currency analysts are now calling for the Euro to decline into the 1.25/1.30 level. If so a stronger dollar will continue to pressure oil prices. Link

Linda Piazza : 9/2/2008 1:51:46 PM

We're in the midst of a prime big-money-is-testing time of day. I hate to call it a stop-running time of day, although stops do often get run, because that promotes the us-versus-them mindset that big money and/or market makers are out to pick off us little retail traders. In truth, big money and/or market makers have a duty to their own accounts if not those of others to see how weak or strong the market might be. If prices are run up a little, will sellers immediately come out in force? If markets are run down a little, will dip buyers step in or step away? If I had the money to move the markets, I'd do some testing, too. So, we could be seeing the beginning of a test, a dip to see whether buyers will step in or step away. Be aware that the action we're seeing might not be the ultimate result, but might just be the test that produces the ultimate result. There's a difference. As the OEX dips, it's testing potential support on 15-minute closes that now extends down to 591.35 but begins just under the OEX's current 594.05 level.

Keene Little : 9/2/2008 1:49:39 PM

SPX has tried to hold the 1285 level (two equal legs down for today's decline which kept open the possibility that the pullback is finished and up we go again. But the techs continue making new lows and I suspect the others will follow.

Tab Gilles : 9/2/2008 1:40:10 PM

Google (GOOG) $474.90 +$11.61 (2.51%)

Chrome browser Link

Linda Piazza : 9/2/2008 1:23:52 PM

Nearest OEX potential support on 15-minute closes is now at 593.53, with further potential support at 591.52.

Tab Gilles : 9/2/2008 1:23:06 PM

T. Boone Pickens was just commenting on CNBC about oil and Nat Gas. Basically sees $100 as major support, currently the decline is as he put it..."the attitude of the market". Believes as I do that Nat Gas is the cheaper alternative and the future if we are to become less oil dependent. He also stated $NATGAS could see a 6 handle...or under $7.00. As I've commented myself oil to $100 and a lower USO would put nat gas under $7. This chart illustrates that Nat gas is extremely attractive. Link

Linda Piazza : 9/2/2008 12:59:32 PM

If you entered a bearish OEX trade sometime this morning, be aware that the OEX approaches the strongest potential support that it's so far approached today. That support band begins at 593.47, with potential support there on 15-minute closes, and it extends down to Friday's 590.87 level. It's possible that disappointed bulls could drive prices through that support, of course, but it's time to spiff up your just-in-case bearish profit-protecting plans. Now that the OEX has dropped below the 15- and 30-minute 9-ema's, bears would like to see those averages provide resistance on 15- and 30-minute closes, with those averages now at 596.55 and 596.28, respectively.

From my earliest posts this morning, I warned to watch for a pop-and-drop day, and, although I felt a bit like the county officials who called the mandatory evacuations in the Beaumont/Port Arthur, TX area must have felt, I also counseled bulls to take at least partial profits as the OEX was hitting the top of today's range, too. The hesitation near the high gifted bulls with time enough to make their profit-protecting plans. Now it's time for short-term bears to consider theirs. A drop to 588.60-589.60 can't yet be precluded, but it's not a target set by short-term charts just yet.

Keene Little : 9/2/2008 12:45:49 PM

If SPX makes it back down for another test of its broken downtrend line from May, currently near 1280, it'll be worth noting whether that support level holds or not.

Jane Fox : 9/2/2008 12:43:31 PM

THe VIX is now making new daily highs as the S&P futures make new daily lows so these lows will hold. The bulls have fumbled the ball.

Linda Piazza : 9/2/2008 12:34:53 PM

Whatever else happens, OEX bulls do not want the OEX to fall below and sustain values below Friday's low, at 590.87. For now, though, I would watch for potential support to start kicking in at near 593.50 if the OEX doesn't hold near its current 595.68 level. If that 593.50-ish support doesn't hold, the next level is the potential support on 15-minute closes at 591.87 or on 30-minute ones at 591.23.

Keene Little : 9/2/2008 12:33:34 PM

We're getting the new daily lows and now watch for two equal legs down from today's high since a correction to the rally should hold there. For SPX that's at 1285.33.

Linda Piazza : 9/2/2008 12:31:25 PM

The OEX has not only tested the 30-minute 9-ema, the vulnerability I've been mentioning, but has fallen through it with only a few minutes left in this 30-minute period. There's now vulnerability to 594.20-594.90, although that's not yet a given.

Tab Gilles : 9/2/2008 12:01:41 PM

$VIX Link $VXN Link $RVX Link

Tab Gilles : 9/2/2008 11:59:20 AM

In this chart you can see that the $WTIC:$NATGAS ratio suggests that now maybe an opportune time to be long $NATGAS. Link

With the current price of natural gas at $7.25, taking the historical average of 9.2, would place oil at $66.70!

Linda Piazza : 9/2/2008 11:57:18 AM

The potential OEX resistance on 15-minute closes now at 599.86 and then 601.07 has again held on a second test this morning. The OEX is back to test the 15-minute 9-ema's support, with that average now at about 598.14. As noted earlier, OEX traders should begin factoring in potential vulnerability to the 30-minute version, now at 597.04, but that lower target is not yet a given. The OEX is 598.36 as I type.

Keene Little : 9/2/2008 11:43:37 AM

The bounce in equities off this morning's low looks corrective and I suspect we have not seen the lows for today yet. But obviously a move to a new high would be bullish and it would portend a strong rally leg to follow.

Tab Gilles : 9/2/2008 11:47:21 AM

$WTIC & $NATGAS are plunging after Gustav failed to live up to its destructive forecast. Looking back previous posts::

Tab Gilles : 8/20/2008 10:07:46 AM

Cheasapeake Energy (CHK) $48.25 +$1.33 (2.81%)

CHK crossed over its 200-ma this morning, next resistance will be $51 (August high). Link

PnF has a $59 Price Objective, with a Double-Top Breakout.

Well the PnF chart today reversed to a bearish PO of $40.... but it did reach my initial price target of $51.

CHK $46.05 -$2.35 (4.85%)

CHK Daily: Link PnF $40 PO= Double Bottom Breakdown: Link

$WTIC $109.25

13-days ago.... Tab Gilles : 8/20/2008 11:24:21 AM

Well...the EIA report showing a huge build in crude took the wind out of the sails for energy stocks....at least for now. I still see crude gravitating towards $110 and even possibly $100. This build in crude now more than ever has me believing that OPEC will cut production. Goldman Sachs reiterating its $149 price target for crude by year-end supports my longerterm view to be long energy.

As I stated this past Friday, I still see Nat Gas as cheap compared to crude oil, on a longterm basis.

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

USO $88.13; intraday low $86.78

EUR 1.45

I'd posted this chart about 3 weeks ago.... Link Currently---- Link ---PnF PO $76 Link

Keene Little : 9/2/2008 11:42:15 AM

The direction of interest rates for the past month have been a bit of a challenge (along with equities--the market is definitely confused at the moment). I've been eyeing a downside target of 3.619% for the 10-year (TNX) and I think that's still a good target based on the pattern from the July high. That's the level where the decline in rates from June would have two equal legs down, as shown on the daily chart: Link

Whether TNX gets down to that level, or stops there, we'll just have to wait and see. But a drop down to 3.6% would mean a selloff in bonds and that could mean a rally in equities into September opex. If TNX drops much lower than 3.6% I suspect we'll see it drop to the March low just below 3.3%. A rally back above 4.0% would likely mean a rally to new highs above June's.

Linda Piazza : 9/2/2008 11:32:06 AM

VIX is again approaching potential resistance on 15-minute closes at 21.11. Other than the first 30-minute period when it was tumbling from its high, the VIX has been climbing all day, bouncing from its test of the 15-minute 9-ema, now at 20.76. Now bulls would like for the VIX to pull back more strongly, losing the support of that 9-ema on 15-minute closes. Bears would like a VIX breakout above 21.11 and sustained values above that. VIX at 20.95 as I type.

Linda Piazza : 9/2/2008 11:20:08 AM

Potential resistance on 15-minute closes is at OEX 599.74 and then 600.80. OEX at 598.83 as I type.

Linda Piazza : 9/2/2008 11:07:24 AM

So far, the potential support on 15-minute closes at OEX 597.49 has been holding, but I would begin to factor in possible vulnerability to 596.60, too.

Keene Little : 9/2/2008 11:04:42 AM

For the past week I've been showing the sideways triangle idea on the DOW's daily chart which shows a leg down is needed to finish it before we see a rally leg ( Link ). If today's gains do not hold we could still be in this pattern and how it might play out is shown on the 120-min chart: Link . This is all somewhat of a guess because of the multiple possibilities from the very corrective price action we've had for the past month but I'll continue to show what I think are the higher-probability scenarios.

Linda Piazza : 9/2/2008 10:49:50 AM

That potential support for the OEX on 15-minute closes is now at 597.13, with further potential support on 30-minute closes now at 595.98. The powers that be graciously allowed you a period of time to view the heights today and formulate your just-in-case profit-protecting plans, and now it's time to put them into effect. I hope some at least took partial profits near the high, as I suggested. We still don't know for sure what's going to happen, so you can't do anything but heed your profit-protecting plans.

Jane Fox : 9/2/2008 10:48:16 AM

Here are your overnight charts. The DOW (YM) is the only market that has not retreated to its overnight range. Link

Jane Fox : 9/2/2008 10:46:09 AM

ES is making new daily lows but those lows are not being supported by the VIX, it should be making new daily highs so I don?t think those lows will hold. Also the AD line is quite bullish at +1065 and the TRIN is falling.

Linda Piazza : 9/2/2008 10:40:43 AM

The OEX begins to look vulnerable to 597.40, although that's not yet a forecast target since the OEX is so far clinging to support on 30-minute closes at just over 599. I would begin to add in some thought about "What if the OEX drops to 597.40?" to my bullish profit-protecting plans for the OEX, though. OEX at 598.53 as I type.

Keene Little : 9/2/2008 10:39:16 AM

NDX got rejected at its downtrend line from August 15th, currently near 1911, and the DOW continues to struggle with 11750, the 2000 high and March 2008 low. Another push higher today could see some short covering but until then we know where resistance is.

Linda Piazza : 9/2/2008 10:37:35 AM

You had some time and some warning, from me at least, to spiff up your OEX profit-protecting plans if in bullish trades. In my opinion, it's still not entirely clear what's going to happen next, but we know this: potential resistance on 15-minute closes, now up to 600.47, has been holding through all 15-minute closes so far. Countering that is the fact that potential support on 30-minute closes now at about 599.10 held on the last 30-minute close, so it's a draw so far between support and resistance. We also know that TRIN is higher than is optimal, but that it, too, has been moving down over the last hour, as it moves in concert with rather than in opposition to the equities. Something isn't working as expected there. Ten-year yields continue to drop and have sharpened their drop after the 10:00 numbers. So, there's some reason for concern if in bullish positions but not yet proof that the OEX is going to tumble lower as bond yields have been doing. That time spend spiffing up your just-in-case profit-protecting positions should have allowed for calm decisions and now it's just a matter of sticking with them.

Linda Piazza : 9/2/2008 10:28:15 AM

The OEX has potential support on 30-minute closes at 598.74. OEX at 599.10 as I type.

Linda Piazza : 9/2/2008 10:26:27 AM

The SEP 08 30-day Fed funds futures are currently quoted at 97.9850. Subtracting that from 100 yields 2.015. From this we can extrapolate a guess of 2.02% for the Fed's target rate as of September expiration, giving us the idea that these future traders still believe that the FOMC will keep rates the same at the September meeting. This is a rough estimate. As of Friday, the Cleveland Fed was still estimating a more than 80% chance that rates would stay steady at 2.00%, too: Link The Cleveland Fed obviously uses more sophisticated formulas than our rough-and-ready calculation from the Fed Funds futures, but many believe it's those futures trades that guide the Fed rather than the Fed guiding them.

Linda Piazza : 9/2/2008 10:21:11 AM

TED spread 1.11.

Linda Piazza : 9/2/2008 10:19:51 AM

There's really no resolution to the OEX's next direction yet, as it's perched at a level that's precarious for both bears and bulls. Here's the resistance being tested, and you can see that the OEX hasn't been able yet to best it, but also hasn't yet begun falling back strongly from the ongoing test: Link

Linda Piazza : 9/2/2008 10:12:45 AM

TNX, the yields on the ten-year bonds, have been dropping over the last hour and have continued their drop after the ISM release. The reaction isn't big yet, but these yields are testing their 200-sma's resistance. TNX is currently 38.40. Declining yields mean more money going into the bonds, raising their prices, perhaps in some preference to equities, although that's not always a given.

Linda Piazza : 9/2/2008 10:09:17 AM

TRIN 1.22.

Linda Piazza : 9/2/2008 10:07:06 AM

Not much reaction yet to the 49.9 ISM, a number in contraction territory, and the 0.6% drop in construction spending, with that a deeper drop than expected. I think some, as is being noted on CNBC, are unsure whether to trust the ISM with the Chicago area last week showing a surge. Nevertheless, I still urge caution as the OEX clings to potential support/resistance on 15-minute closes now at 600.24 and tests more significant resistance on daily closes. The OEX is at 600.77 as I type.

Linda Piazza : 9/2/2008 9:57:36 AM

ISM and Construction Spending in a few minutes. Decide now whether you want to hold over those releases.

Jane Fox : 9/2/2008 9:56:15 AM

Geesh I have been predicting SPX would hit 1320 for weeks now. Do ya think it may get there this week? Link

Linda Piazza : 9/2/2008 9:55:42 AM

The A/D line is now 1453, down slightly from a high of 1540, with potentially strong resistance on 15-minute closes near 1725-1750. Bulls want to see the A/D line move up toward that next resistance level or at least just trail sideways. Trailing sideways would still be supportive of equity gains but a deep drop toward next Keltner support now at about 675 would not be.

Keene Little : 9/2/2008 9:55:00 AM

NDX is now pressing its downtrend line from August 15th so the test is on for the bulls. Link

Linda Piazza : 9/2/2008 9:53:19 AM

The OEX closed the first 15-minute period slightly below potential resistance on 15-minute closes that had been shoved up to 600.11 by the early action. Resistance held for the first 15-minute period then, but the OEX has popped right back above that and is now further into the potential resistance zone that's now up to about 603.60. That's a potential resistance level on daily closes and potential resistance on 30-minute ones. The OEX is currently 600.83, with many minutes left in this current 15-minute period. This period will determine whether the OEX is in breakout mode or whether that potential resistance from 599.58-600.11 continues to hold on 15-minute closes. Bulls should be asking themselves whether they want to book partial profits, but even if they don't, they should be spiffing up their just-in-case profit-protecting plans.

Linda Piazza : 9/2/2008 9:46:55 AM

TRIN is rising this morning, not falling. Just keep a watch on it as a rising TRIN is not typically considered supportive of equity gains. It's 1.21 as I type.

Linda Piazza : 9/2/2008 9:45:34 AM

The TED spread is 1.10 per my delayed trade, up 0.003, a 0.285% change. Whatever the other measures might be telling us about the economy, this one is still showing more default risk than equities typically like to see. I don't use this as a trade signal or a market-timing tool, but I do use it to give me background, and the recent improvement in economic indicators and assurances from some financials have not acted to lessen this measure of default risk.

Linda Piazza : 9/2/2008 9:38:56 AM

Keltner outlook on the A/D line: As you might imagine, the A/D line is strong, but it's not yet at the strongest resistance showing up on the 15-minute chart, with that at about 1675 and the A/D line currently at 1281.

Jane Fox : 9/2/2008 9:38:05 AM

AD line opens at a bullish -1097 which should be no surprise. Crude is recovering as well and is back to $108.50.

Linda Piazza : 9/2/2008 9:37:15 AM

The OEX is slamming right into potentially strong resistance first thing this morning, leaping above the resistance up to the 595 zone and zooming to the 597.50-602 resistance band. Note that there's now potential resistance on 30-minute closes at 598.21 and potential resistance on 15-minute ones up to 599.95. I would be very careful here, and, if in bullish trades, I'd be considering whether I wanted to take partial profits at least. OEX at 598.96.

Linda Piazza : 9/2/2008 9:35:09 AM

Like Keene, I'm a little suspicious of the ramping up today, especially ahead of the 10:00 numbers, but not so suspicious that I am encouraging bears to jump in with a countertrend trade. You don't want to go against strong momentum until you have signs that support a countertrend trade.

Jane Fox : 9/2/2008 9:25:03 AM

TEL AVIV (MarketWatch) -- Google Inc., the Mountain View, Calif., Web-search and -services giant, on Tuesday introduced Chrome, an Internet browser that will go head to head with products like Microsoft's Internet Explorer, Mozilla's Firefox, and Opera Software's Opera. Out front, Google said on its blog, the browser window is "streamlined and simple ... clean and fast. It gets out of your way and gets you where you want to go." But the browser is also designed internally to run "today's complex Web applications much better," Google said. The browser provides "improved protection from rogue sites" and "a more powerful JavaScript engine, V8, to power the next generation of Web applications that aren't even possible in today's browsers," Google said.

Jane Fox : 9/2/2008 9:16:38 AM

I think I am going to have to back off a little from my earlier statement that the stock market is in rally mode because of Crude today. All the commodities are falling again in response to a rally in the greenback and that is having a profound affect on the overnight futures. Crude is playing a part but is not the driving force; it is the greenback that is driving this rally.

Keene Little : 9/2/2008 9:12:35 AM

Equity futures made a huge recovery off their overnight lows shortly before 4:00 AM, especially the DOW futures which are up much bigger than any of the others (more than double the others). I'm not sure why but I always get a little suspicious when I see that much of a intermarket fracture. We'll have to see how the market trades in the first hour but for now we had a bullish setup and the bulls are in control this morning so that's the way I'd look to trade initially.

Jane Fox : 9/2/2008 9:09:25 AM

US $ is in rally mode and that is the catalyst for this $30 drop in Gold. All the commodities are been hit again this morning. Link

Jane Fox : 9/2/2008 9:01:43 AM

Here is the daily chart of Crude. It hit a low of $105.46 overnight. Link

Jane Fox : 9/2/2008 8:52:22 AM

Here are your overnight charts. Even though I see very little correlation between Crude and stock market in general there are times a big move in Crude will affect the market and this is one of those times. Crude made a huge move down over the weekend and this time I do believe was the catalyst for this rally. Link

Jane Fox : 9/2/2008 8:47:36 AM

Economic reports due out today include:

10:00a.m. Jul Construction Spending: Expected: -0.5%. Previous: -0.4%.

10:00a.m. Aug ISM Manufacturing Business Index: Expected: 49.5. Previous: 50.0.

Linda Piazza : 9/2/2008 8:42:53 AM

It's the beginning of a new week, so let's start with a review of the OEX's weekly chart. That weekly chart shows three small-bodied candles trailing down after the strong green candle produced the week of 8/04. So far, the bodies of those three candles all stay within the range produced by the body of that tall green candle produced that week of 8/04. Thereforefore, the possibility remains that they could be part of a bullish candlestick reversal signal known as a rising three methods. Confirmation this week would require a strong week with a close above the close of the week of 8/04 with a close that week of 601.05. We're a long, long way from confirmation of that signal, and I urge that bulls not count on that confirmation. I'm merely warning bears not to let their biases blind them to this possibility.

As I type at least, bulls seem primed to try for that strong week, but Monday morning is a long, long way from Friday's close. If the OEX does rise toward 601, it will be rising toward a potentially strong resistance area near there. That resistance is composed in part of the top trendline of the descending price channel in which the OEX moved down out of the rising wedge in which it had previously been climbing off the July low. There's also potential Keltner resistance on daily closes that's now just under 602. In addition, the declining trendline off the May high is currently just under 600. Therefore, the possibility exists that the OEX, even if punching through that 599.50-602 zone, would close back below it again on daily closes.

We're a long, long way from 599.50-602, too. A intraday look provides a less clear picture of where resistance might lie, however. As of Friday's close, the OEX looked to have relatively strong potential resistance on 15-minute closes beginning at 592.20 and extending up to just over 593. Extrapolating where the OEX might go early in the morning from the current position of the ES contract above SPX fair values, it's possible that the OEX might pierce that resistance level, but then we'll have to see if it holds above it. Until and unless the OEX breaks above and stays above about 595, the price pattern is a potentially bearish one as seen on the 15-minute chart.

It's not a given that prices will head up where futures currently suggest that they could. If they do, though, bulls need to remain particularly vigilant about protecting profits and should be aware that we have ISM at 10:00, with that number capable of changing the trading tenor. In other words, be careful of a pop-and-drop possibility that could exist if the OEX were to pop higher, right into potentially strong resistance and then turn down after the ISM. I don't know whether that setup will occur, but only warn that it's a possibility. If the OEX gets past that 595 zone, then we look at next potentially strong resistance near 597.50 and then near Thursday's 599.52 high where all sorts of resistance, from intermediate-term on the daily chart to shorter-term on the 15-minute gathers.

If the first pop higher fizzles, particularly closing below 592.20 on the early 15-minute periods, or if it fails to occur at all, the possibility of a drop toward 587 or maybe even 582 exists.

Linda Piazza : 9/2/2008 8:08:18 AM

This weekend, the dollar firmed against both the yen and the euro. We might be experiencing some political uncertainty as our elections draw nearer, but Japan experiences more. Japanese Prime Minister Yasuo Fukuda has resigned. In addition, uprisings in Thailand create more political upheaval in Asia.

At 5:00 am ET this morning, the eurozone's PPI was released. That showed a slightly less than expected increase in costs of producer prices. That may have added to the effect of a dollar strengthening against other currencies, acting to temper the eurozone's strength against the dollar.

Market Monitor Archives