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Tab Gilles : 9/3/2008 10:58:47 PM

Could the dollar be topping out nearterm?

Euro: ECB President Trichet?s Comments Could Shake Up the Markets, Expected to Leave Rates At 4.25% Link

Bank of Canada Leaves Rates at 3.00% Link

Economic Data in the next 24 hours: Link

$WTIC/$USD: Watch the $109 level. Next support is around $100, the PnF Price Objective is $96. Fibonacci Retracement chart: Link

I've been pointing out recently and continue that Nat gas is cheap relative to crude oil. Link Link

Keene Little : 9/3/2008 10:44:23 PM

Thursday's pivot table: Link

The techs look bearish after Wednesday's price action. I had shown a parallel down-channel for price action since the August 15th high and said a drop out the bottom of it would be bearish. It did drop below it, currently near 1836, and failed at a retest of the bottom of the channel with the afternoon bounce. NDX closed a couple of points below this line. This is typical of bearish price action and has me leaning into the bears' camp here. 60-min chart: Link

But countering that bearish picture is the potential bullish triangle patterns for the DOW and SPX, which have not been broken yet. SPX dropped below the bottom of its triangle, which will be near 1271 Thursday morning, but then rallied back above it. This could be considered the throw-under finish to the triangle pattern so it's set up for a rally on Thursday. 60-min chart: Link

SPX stopped just shy of the downtrend line from May 19th, currently near 1277 so that has to be broken to the upside again in order to say the bulls are getting control back. The daily chart shows the sideways price action hasn't changed and we're still waiting for one of the key levels to break and indicate who's in control: Link

OI Technical Staff : 9/3/2008 9:59:59 PM

The Market Monitor has been archived.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

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Linda Piazza : 9/3/2008 1:34:01 PM

The typical test-the-markets period (formerly known as a stop-running period) of time, from about 1:35-1:55 pm ET, may be altered by the approach of the Beige Book's release, but be aware that we sometimes see tests of support or tests of resistance occurring during the period between now and the release of the Beige Book.

Linda Piazza : 9/3/2008 1:19:01 PM

Start watching now for rollover potential in the OEX from the current 586.93 zone up to about 588 on 30-minute closes. Especially if the OEX gets past 589, be aware that something stronger than we've seen so far this morning is happening, on a Keltner basis, anyway.

Tab Gilles : 9/3/2008 1:14:45 PM

Watch the 1.43/1.44 level on the Euro ($XEU) for nearterm support. Link

Tab Gilles : 9/3/2008 1:07:20 PM

Euro ($XEU)/ Dollar ($USD)/ $WTIC/ $NATGAS Link Link Link

Keene Little : 9/3/2008 12:59:34 PM

The bounce off the low still looks corrective and is pointing lower still. DOW 11400 and SPX 1261 are looming closer...

Linda Piazza : 9/3/2008 12:52:14 PM

Next potential OEX potential resistance on 15-minute closes is from 586.63-587.07. On 30-minute ones, it's nearer 587.70. I would watch for rollover potential somewhere in that zone, but remember that positioning ahead of the Beige Book will soon take precedence over anything we're seeing on the short-term charts.

Linda Piazza : 9/3/2008 12:29:15 PM

The OEX may have potentially strong resistance on 15-minute closes from 587.02-587.45 and on 30-minute closes from 587.76-588.35, if it gets that high. I'm not sure it will. For now, a bounce into that zone looks like a countertrend bounce but sustained 30-minute closes above 588.41 would change the tenor. Again. OEX at 586.06, and for now, I'd watch for rollover potential in that 587-588.40-ish zone.

Jane Fox : 9/3/2008 12:21:17 PM

All the internals are now once again bearish and this time the TRIN has taken a stance and is on board. Link

Tab Gilles : 9/3/2008 12:19:12 PM

USO $87.75 -$1.44 (1.61%)

WTIC $108.59 -$1.12

$NATGAS $7.19 -$0.07

The sell-off in energy continues as the Euro declines and the dollar rises.

On the USO the PnF chart has a $76 PO. Link Link

Crude has a PnF of $96. Link Link

$USD has already broken through its PnF of 76. Link Link

$XEU (Euro) the PnF has a PO of $1.30. Link Link

$USD/USO chart: Link

Linda Piazza : 9/3/2008 12:16:17 PM

To me, the consolidation from late yesterday into this morning, before this break lower, did not look bullish, as I noted in my 10:53:35 post. To me, that looks like the kind of consolidation that sometimes occurs halfway through a move. The 30-minute chart now suggests an eventual downside target lower that than 583-585 one suggested by the 15-minute one, at about 576. Obviously, the OEX would have to plow through the 583-585 potential target and potential support zone to ever reach 576, and we just don't know if bears have enough strength to plow prices through that strong support. However, I anchored a Fib chart from yesterday's high to that 576 zone and just as I suspected, that consolidation zone was right at the 50% mark. That doesn't prove anything and it certainly doesn't prove that you bears should let up on your profit-protecting plans and hold out for that 576 zone if something changes on these charts, particularly if the OEX climbs back above 588-589 and stays there. However, it does say that you want-to-be bulls should step in only if you see a good setup with a close-by logical stop in case you're wrong. All those contemplating any new position or already in a position of any kind should be aware that the Beige Book release this afternoon could do almost anything to the tenor of the markets, including change the direction, accelerate the movement in the prior direction or stall them.

Linda Piazza : 9/3/2008 12:07:58 PM

The OEX is now in the top edge of the 583-585 potential target zone. As I said in my 11:45 post, I wouldn't be surprised to see a bounce start at any time, but traders should still factor in vulnerability to 582.75, the current location of the bottom edge of that target zone.

Keene Little : 9/3/2008 12:07:32 PM

If you're brave and like the chances for a rally to follow this decline, a long play with a stop at SPX 1260/DOW 11370 would be my recommendation. Below those two levels and the bullish wave pattern gets negated. In the meantime if you're short the market pull your stops down a little closer here since the risk is for a reversal back to the upside. If no reversal and the above stop levels are reached, sit back and enjoy the ride down.

Keene Little : 9/3/2008 11:59:29 AM

The DOW is still the one that could tolerate a little lower without turning bearish yet. The bottom of its potential sideways triangle pattern is near 11400. What it does if and when it gets there will be telling. It's the last one that is holding some bullish potential today. 120-min chart: Link

Keene Little : 9/3/2008 11:52:01 AM

I understand there have been some frantic calls made to the PPT. They need to get some buying started soon otherwise they'll be caught sleeping at the switch.

Keene Little : 9/3/2008 11:46:20 AM

The bears are in control unless this gets reversed back to the upside quickly. And I mean quickly.

Linda Piazza : 9/3/2008 11:46:14 AM

I wouldn't be surprised to see a bounce begin soon on the OEX, as it finally approaches that 583-585 support zone, so bears need to be spiffing up their profit-protecting plans. At this point, I would be surprised to see any such bounce get too far above 589-589.40, but all traders should keep that Beige Book release in mind.

Linda Piazza : 9/3/2008 11:39:23 AM

Watching that potential inverse OEX H&S for clues about bullish versus bearish strength has shown us that the bulls can't quite pull it together. The formation has been invalidated.

Keene Little : 9/3/2008 11:17:35 AM

Looking to the techs for direction is not providing any clues this morning either. NDX is bouncing between the bottom of its parallel down-channel for price action since August 15th and its broken uptrend line from July 15th, as can be seen on this 60-min chart: Link . A break down below the parallel down-channel would be bearish and would likely see selling accelerate but so far the bulls haven't given up.

Tab Gilles : 9/3/2008 11:15:38 AM

Celgene (CELG) $69.04 +$0.60 (0.88%)

On the Radar----

Since peaking earlier in August, I had highlighted this biotech "best of breed" company, noting that it had a nice run and expecting a nearterm retracement. The $65 level looks like an attractive entry point.

Tab Gilles : 8/6/2008 9:47:52 AM

Celgene (CELG) $76.76 +$0.70 (0.96%) The biotech sector is on fire, Celgene recently reported stellar earnings and guided higher for 2009. In Q2, Revlimid sales surged 80% to $325.8 million. The drug is approved as a treatment for multiple myeloma, a bone marrow cancer. Thomson Financial expect 2008 profit of $1.50 per share on revenue of $2.2 billion and estimates call for $2.60 in 2009. Link Link

The stock has had a nice run YTD, up anout 70%. The PnF chart has a Price Objective of $102. The stock could see an overbought retracement nearterm, however on a valuation basis it is not too expensive. Link

Current Daily: Link Weekly: Link PnF: Link Annotated: from last month--- Link Currently--- Link

Keene Little : 9/3/2008 11:08:41 AM

The banks and brokers look somewhat bullish and that's another indicator that keeps me from getting too bearish here. Even though the consolidation near the lows looks bearish (and could result in a quick low before reversing back up), there are enough indicators and a wave pattern that tell me to look for a rally out of this. I'm patiently waiting for price to tell me which scenario is going to play out.

Linda Piazza : 9/3/2008 11:05:54 AM

If I dial down to a five-minute chart, I see a vaguely inverse-H&S-ish pattern on the OEX's chart. Confirmation would require five-minute closes above 591, it appears, but that chart then shows strong resistance just above 592, where other charts also show a resistance band, so I don't know that confirmation would produce much of a gain. Invalidation would currently likely require five-mintue closes beneath about 587.79. I don't trust these formations to be particularly predictive but I do watch them to gain insight into what's happening in the bull versus bear battle. So far, there's no resolution here, either, as the OEX chops out the right shoulder. OEX at 589.51.

Linda Piazza : 9/3/2008 10:53:35 AM

Once again, the OEX's rise renders those 583-585 potential downside target questionable. One minute, it's a viable target; the next, it's not. The strongest resistance, earlier at 593 on 15-minute closes, is currently at 592.55, but that next resistance band begins lower, at 590.63. So far, this choppy behavior since about 2:00 yesterday at the bottom of yesterday's decline isn't inspiring great bullish feelings, but if you don't believe that anything can and does happen in these markets, you haven't been paying attention.

Keene Little : 9/3/2008 10:50:43 AM

As Linda said, we're just waiting for resolution here. It remains a good setup for a rally out of this mess into opex so the bulls just need to do it.

Linda Piazza : 9/3/2008 10:49:07 AM

Slight new high for the A/D line as it drives back into the 322-850 resistance zone, with the top of yesterday's gap within that zone, at 558. The A/D line is now 482, down slightly from the 526 high of the day. No resolution yet, although it of course looks stronger than it did earlier.

Linda Piazza : 9/3/2008 10:41:38 AM

For reference, the OEX's daily 10-sma is at 590.56. The OEX is 590.09 as I type.

Linda Piazza : 9/3/2008 10:31:12 AM

We just have to wait this out with the OEX as it tests and tests resistance. The spike higher couldn't be sustained, but neither was the push lower. I see the A/D line testing potentially strong resistance, too, with TRIN not doing much of anything, as Jane mentioned earlier. The VIX is beginning to form a pattern of 15-minute closes below its 15-minute 9-ema, but the VXO is still bouncing from its 15-minute 9-ema. Pick a direction or choose the "no direction" option and I figure you have about a 33.33% chance of being right.

Jane Fox : 9/3/2008 10:26:41 AM

I am looking at forexfactory.com and see the Crude Oil Inventories that are usually released on Wed are to be released tomorrow due to Monday been a holiday. I also notice the release time has changed to 11:00 and not the usual 10:35. The time change could be due to the Natural Gas Inventories scheduled for release at 10:35.

Linda Piazza : 9/3/2008 10:22:08 AM

The OEX and SPX closed the last 15-minute period back below the potential resistance levels listed earlier. Traders should still consider vulnerability to 1264.67 on the SPX and 582.90 on the OEX, without counting on those targets being hit as an absolute thing.

Keene Little : 9/3/2008 10:17:59 AM

I'm back. After a quick dip at the open SPX bounced off its uptrend line from July 15th. Bullish. The small rally got it up to its downtrend line from May and has pulled back from it. Bearish. So here we are bouncing around in a tight range between trend lines. It has not yet tested the uptrend line from July 28th, the bottom of the potential sideways triangle which is currently just above 1269. That's the level the bulls want to see hold (no more than a brief throw-under).

Linda Piazza : 9/3/2008 10:11:35 AM

The A/D line has risen strongly but now faces potential Keltner resistance on 15-minute closes at about 325 and then up to about 750, with historical resistance at about 558, the top of yesterday's gap higher. Watch for rollover or breakout potential in the A/D line as this potentially strong resistance is tested. The A/D line is now 228, drawing back from a 479 high.

Jane Fox : 9/3/2008 10:10:12 AM

The bulls are taking a stand and the internals are now bullish. One would have a tendency to think the TRIN was talking earlier when it was basically neutral and the other internals were bearish but that would be a bad assumption to make. The TRIN is very often neutral and when it is it is not telling us anything. The internals could have remained bearish and become even moreso just as easily. Link

Jane Fox : 9/3/2008 10:06:55 AM

WASHINGTON (MarketWatch) -- Businesses stepped up their demand in July for capital equipment, the Commerce Department reported Wednesday. Core capital equipment orders rose 2.5%, the government said. Overall new orders rose 1.3% in July, compared with 1% expected by economists surveyed by MarketWatch. Orders for durable goods rose 1.3% in July, while orders for nondurable goods rose 1.2%.

Linda Piazza : 9/3/2008 10:06:30 AM

Both the SPX and OEX ended that last 15-minute period at or below the potential resistance on 15-minute closes but both are rising above it as I type. That's at about 1277.17 for the SPX and 589.22 for the OEX. They'll both now face potentially strong resistance on 30-minute closes, up to 1280.50 for the SPX and 590.67-591.12 for the OEX. The SPX is 1279.59 and the OEX 590.72 as I type. The lower targets mentioned earlier are for now rendered questionable but there's still lots of time in this 15-minute period for the SPX to drop back below 1277.17 and the OEX, below 589.22, so don't count them out yet.

Jane Fox : 9/3/2008 10:05:25 AM

July core orders rise 2.5%

July durable orders rise 1.3%

July nondurable orders rise 1.2%

July factory orders rise 1.3%

Tab Gilles : 9/3/2008 10:03:36 AM

July Factory Orders 1.3% versus June 2.1%

Linda Piazza : 9/3/2008 10:00:50 AM

I wanted to remind traders that, due to the holiday Monday, crude inventories aren't released until tomorrow morning, with the time currently listed at 11:00 am, after the natural gas numbers are released.

Linda Piazza : 9/3/2008 9:55:05 AM

Big bounce in the A/D line after it found support on the first 15-minute close at the potential support now at -530. The A/D line is now -121. There's been a correspondingly strong bounce in the SPX and OEX, the "[u]nless there's a quick pop higher" caveat from my 9:44:44 post. Both indices have charged right up to test the potential resistance on 15-minute closes listed in that previous post, with both being nudged slightly higher by the quick pop. In other words, this is a test of the first resistance and, as strong as the bounce is, is not yet predictive of what's going to happen next. It's a test.

Tab Gilles : 9/3/2008 9:48:35 AM

Volatility continues to rise: $VIX Link $VXN Link $RVX Link

Jane Fox : 9/3/2008 9:45:40 AM

Once again I see the VIX and TRIN moving in opposite directions, the VIX climbing and the TRIN falling. But today, unlike yesterday, the AD line and volume are well under 0 and supporting the VIX, which trumps the TRIN any day.

Linda Piazza : 9/3/2008 9:45:28 AM

As Jane has just reminded us, we have potential tenor-changing numbers coming out at 10:00 am.

Linda Piazza : 9/3/2008 9:44:44 AM

Lows below yesterday's on both the SPX and OEX. Unless there's a quick pop higher, which could easily happen, I think traders need to factor in vulnerability to SPX 1265 and OEX 583. Don't count on these targets necessarily being hit, but do consider vulnerability to them until and unless the SPX can maintain 15-minute closes above 1277.90, and the OEX, abot 589.60. As I type, the SPX is 1272.42. The OEX is 586.95.

Tab Gilles : 9/3/2008 9:40:32 AM

July Factory Orders are due out at 10:00 a.m. and expected to drop to 1% from 1.7%. Federal Reserve Beige Book is due out.

Jane Fox : 9/3/2008 9:40:04 AM

AD line is -707 and falling.

Linda Piazza : 9/3/2008 9:38:59 AM

Keltner outlook on the A/D line: The A/D line made its first prints in the lower or bearish half of its Keltner channels, but it nears potential support on 15-minute closes. That support is strongest at about -490 and then at about -775. The A/D line's current value -514. Conclusion? There's still more possible downside before the A/D line hits strongest potential support. If it's hit, bears should be particularly careful to protect profits, but bulls should remain aware of the possibility of the A/D line pushing that support lower or even breaking through it.

Linda Piazza : 9/3/2008 9:35:08 AM

Both the SPX and OEX head toward yesterday's lows. That's 1272.20 for the SPX and 587.57 for the OEX. Neither has hit their lows, yet.

Jane Fox : 9/3/2008 9:04:00 AM

Crude hit a high of $110.30 overnight making one wonder if $110 is now going to be resistance and if it will trade between $100 and $110 for awhile. Certainly possible. Link

Jane Fox : 9/3/2008 8:59:05 AM

Here are your overnight charts. Only the Russell 2000 (ER2) futures were able to retain their previous day lows, the other three broke through theirs. Link

Linda Piazza : 9/3/2008 8:55:10 AM

Here's what's to be seen on the OEX's daily chart: Link As mentioned late yesterday, all we can safely conclude is that the OEX is still thrashing around in a consolidation zone. Bears could argue that prices were sharply rejected from yesterday's resistance test. Bulls could point to the close at the converging 10- and 30-sma's.

Intraday charts suggested that although the OEX might rise up to test 591-593 resistance, it appears vulnerable to 583-585 until and unless it can maintain 15-minute closes above 589.64-590.20 and maybe even until it can maintain 30-minute closes above 591.80. I wouldn't yet call the 583-585 zone a target for today, since we know from historical patterns that the OEX tended to find support/resistance from 586-588, but if the OEX sustains values below yesterday's 587.57 low, not just popping down there and popping right back up, then I would definitely consider 583-585 a target. If support near 583 doesn't hold, then we have to start looking at 575-578 as a possible target. However, there are a lot of "if" statements between the current price and that one.

If the OEX does rise up to test the 590-593 zone, 593 looks to be particularly strong resistance on 15-minute closes. That number will change some as the day progresses, so I'll be updating it as needed.

One caution: traders need to remember that as happened yesterday, the 10:00 numbers today can change the tenor of trading. Make earliest trade decisions with the knowledge that the factory orders are coming shortly after the open, and that release can do anything to markets: switch the direction, accelerate the direction or stall them. This is particularly important because the omportant Beige Book is coming this afternoon.

Jane Fox : 9/3/2008 8:54:45 AM

Today's Economic Reports include:

10:00 Jul Factory Orders: Expected: +0.5%. Previous: +1.7%.

2:00 Fed Beige Book

Keene Little : 9/3/2008 8:29:37 AM

Early this morning we had the opposite to yesterday morning--equity futures dropped from their highs near 4:00 AM and at 8:30 AM it looks like we're going to have a negative start to the day (S&P futures were down 8 points and currently -6). Like yesterday will we see the opposite happen after the open? A negative open to pull shorts in could get reversed with a couple of buy programs to start the next short-covering rally.

Countering that thought is the fact that the techs have a very bearish setup that calls for a gap down and a continuation lower in strong selling. NQ is more negative than the blue chips this morning (and was not as bullish as the blue chips yesterday morning). Keep your eye on the techs this morning as I think they'll lead the way.

I'll be away from the market for about the first hour so I'll be back around 10:30 AM.

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