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OI Technical Staff : 9/5/2008 9:59:59 PM

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Tab Gilles : 9/5/2008 4:36:18 PM

Treasury Close to Finalizing Plan to Backstop Freddie and Fannie, May Happen This Weekend at the Earliest (WSJ)

Linda Piazza : 9/5/2008 3:57:01 PM

Here's where the OEX with updated annotations: Link The climb back through the former channel looks a little less likely now than it did this morning, with that climb at that time looking about equally weighted with a drop toward 568 or even 553. After a candle like today, ending where it looks likely to end the day, barring a big zoom into the close, almost anything can happen. If the candle's lower support had been on the lower trendline, that bounce through the channel or else another smallish-range (for the candle body, not the whole range) day would be the most likely, but now we also have to add in the possibility of a drop toward 553.

I can't tell you which it's going to be. The daily Keltner setup now suggests that if the OEX were to end the day above about 572.90, then it might have at least a chance of attempting to rise toward the daily 9-ema, now at 584.31, although unless it closes well above that, the chance is somewhat muted. It's not until and unless the OEX can maintain daily closes above that 9-ema that the vulnerability to 553 is lessened considerably, however.

Before I counted too strongly on the OEX charging up to 584.31, I would consider that strong resistance I mentioned this afternoon, then noting that it was between about 577.90-579. That resistance has lowered, however, with the resistance zone now beginning at 576 (descending trendline off Tuesday's high) and extending up to 578 (38.2% retracement of the slide this week, at about 577.93, and potential resistance on 15-minute closes now at 577.57). As I noted earlier in the afternoon, I would begin watching for rollover potential in that area, if it's touched, so you're going to have a hard decision if it's hit this afternoon as shorts cover and new bulls buy into the close.

Keene Little : 9/5/2008 3:49:15 PM

If the market continues lower next week, which the NDX supports, we could see it stair-step lower to finish unwinding the EW count as shown in dark red on its charts. As has been the case, follow the techs since they're leading the way up and down. 120-min chart: Link and daily chart: Link

Tab Gilles : 9/5/2008 3:35:47 PM

The July and March lows of this year are not the only support levels to watch, the July '06 and October '05 on some of the indexes are key levels. $INDU Link $NYA Link

Keene Little : 9/5/2008 3:30:24 PM

If the market can push a little higher into the close I think the a-b-c bounce higher into early next week looks like a good setup. A bounce up to about 1261 would be a great short play and then if it gets higher than 1265 I'd get neutral while waiting to see what might be playing out. 60-min chart: Link and daily chart: Link

Linda Piazza : 9/5/2008 3:29:14 PM

The TED spread jumped as high as 1.17 today but didn't maintain values above that. If it had, it would have been breaking slightly above a consolidation zone that matches one formed about a month ago, and equity trades don't want to see it break above that consolidation zone, indicating an increasing default risk. My delayed feed gives a value of 1.13.

Linda Piazza : 9/5/2008 3:25:57 PM

What happens on foreign bourses Sunday night and Monday in the wee hours? Japan's Money Supply figures will be released at 7:50 pm ET Sunday evening, followed by its Economy Watcher's Current Index at 1:00 am ET Monday morning. The eurozone's Sentix Investor Confidence will be released at 4:30 AM, at the same time as the U.K.'s PPI. The OPEC meeting will be going on, too. Canada's Building Permits comes at 8:30 am ET. Just a note of warning: the hawkish Fed Reserve Bank of Dallas President Richard Fisher will be speaking in Austin at 1:30 pm ET on Monday. I dont know whether there will be a Q&A session or not.

Linda Piazza : 9/5/2008 3:20:05 PM

TRIN is now 0.78, having just been knocked back a little from an 0.80 test. See my 3:09:14 post.

Linda Piazza : 9/5/2008 3:09:14 PM

I'm watching TRIN closely. Why? Its decline is beginning to look a little like a falling wedge and those can be bullish for the underlying being watched. If TRIN pops above about 0.80 and maintains values above that, I'd be watchful of my bullish equity profits. In fact, the 15-minute chart suggests that if the TRIN forms 15-minute closes consistently above 0.73, that something might have changed since about 11:45, since just after the equities began climbing. I wouldn't use this as a market-timing tool, but only as a heads-up. TRIN at 0.71 as I type.

Linda Piazza : 9/5/2008 2:39:54 PM

I'm going to switch now to the 15-minute chart as the OEX no longer tumbles down so quickly that we need to be watching the shorter interval for good markers. The OEX has been since the 11:45 candle, forming all 15-minute closes above the 15-minute 9-ema, now at 570.84. To continue the tenor as it climbs off its low of the day, it need to continue doing so. The OEX has potentially strong resistance on 15-minute closes at 572.45-572.73 and on 30-minute ones, at about 572.35-572.97, so at its current 571.52 level, it's testing significant resistance on both charts. A sustained break through these levels on 15- and 30-minute closes has the capacity to propel the OEX up to that 577-579 level where next significant resistance might be found, but don't count on a breakout above the currently being tested resistance levels just yet. This is another place at which new bulls should be fine-tuning their profit-protecting plans as there's no guarantee as yet that the OEX won't be knocked back. Please keep that possible small-bodied daily candle scenario in mind as the OEX climbs.

Keene Little : 9/5/2008 2:14:15 PM

There is still the chance we haven't seen the 5th wave down for the decline from Tuesday. If it were to drop from here I get a downside projection to 1199.33 where the 5th wave would equal the 1st wave, and obviously very close to the July low at 1200. If that were to play out on Monday it would also match the turn window on the 8th. Otherwise it's still looking good for a bigger bounce into next week, as shown in dark red, with an upside target near 1260. 60-min chart: Link

Keene Little : 9/5/2008 2:08:32 PM

So far the pullback from the high of today's bounce looks corrective. Watch for two equal legs down for a support level for another rally leg. That's at SPX 1229.39. That would also be a 38% retracement of today's bounce. A little lower, at 1226.12, is where the 2nd leg down would equal 162% of the 1st leg down and that's close to the 50% retracement at 1226.93.

Linda Piazza : 9/5/2008 2:04:33 PM

If by some chance, the OEX should rise toward 577.90-579, I would be particularly careful of rollover potential. The bottom of that zone would mark the 38.2% retracement of the slide off the Tuesday morning high and the top would mark the descending trendline off that high. For now, the OEX is having trouble with the 23.6% retracement with that at about 572.35 and with potential Keltner resistance on 30-minute closes at 572.47, but if the OEX should get into that 577.90-579 range, I would have my profit-protecting plans at the ready, just in case.

Linda Piazza : 9/5/2008 1:51:26 PM

The OEX clings to S/R now at 570.12 on 10-minute closes, being a little below it as I type. The OEX certainly hasn't been able to break above this benchmark S/R line, however, nor maintain even 10-minute closes above this morning's gap. So, we have a slight change in tenor, in that it's holding above the line currently at 566.25, but the next confirmation of a change in tenor just hasn't come yet. I wouldn't be surprised to see the OEX drop back to 568.34 or maybe even 566.25.

Linda Piazza : 9/5/2008 1:29:23 PM

Continued signs of improvement on the OEX, and now we have the small-bodied daily candle today. So far, in this snapshot in time. Just remember the possibility that, even if the OEX keeps rising now, we could still see a small-bodied candle by the end of the day, with a pullback again toward the open. That small body is so far forming below the former descending support line as the OEX descended in a price channel from the 8/11 high. While the OEX could rise up to pierce that former supporting line, it wouldn't be surprising to see it pull back again after doing so.

There's no guarantee that any of this will happen. I just want you to temper your expectations, to remember that this possibility existed all day long and it doesn't necessarily mean the bottom is in. It may mean that we'll have a day or a few days of consolidation before we know what happens next.

Jane Fox : 9/5/2008 1:31:14 PM

It is becoming obvious today's low will be the low for a least a few days. May be a good time to buy some SPX calls because the get-out-at-all costs stop is very clear. Link

Linda Piazza : 9/5/2008 12:51:03 PM

The OEX has so far not been able to break above the next "change in tenor" benchmark now at 571.48 on 10-minute closes, followed closely by sustained values above 572.30 or so. Those who want a recovery want the OEX to either trade sideways until it gathers enough strength to move through that next resistance level or want any pullbacks to find support on 10-minute closes at the 10-minute 9-ema, with that now at 568.95.

Keene Little : 9/5/2008 12:44:26 PM

We've got a nice recovery off the low today as the indices head for gap closure. What happens from there will be critical for how the market will head into Monday. I suspect there could be a lot of nervous bulls heading into the weekend and any return towards the lows could have them jumping out (capitulating into the close). But so far the bounce is looking good and will probably have the shorts covering if we see gaps closed and held.

Tab Gilles : 9/5/2008 12:38:38 PM

Taking a look at some of the indexes at or below their respective July 15th lows and the March 17th lows. Plus PnF charts. DJIA Link Link

SPX Link Link

OEX Link Link

COMPQ Link Link

NDX Link Link

RUT Link Link

NYA Link Link

WLSH Link Link

Linda Piazza : 9/5/2008 12:39:03 PM

Confirmed first and tentative change in tenor in the OEX, as it's now produced several 10-minute closes above former resistance at 567.71. Now it needs to make it above the next benchmark, sustaining 10-minute closes above 571.75 in concert with moving above 571.31, a Fib benchmark off the steep decline. OEX at 569.98 as I type, testing this morning's gap down. Remember these signs are tentative only, but that doesn't mean that bears whose profit stops have been hit should ignore those stops. Lock in those profits if the stops you set are being hit. Bulls, keep that vulnerability to 553 in the back of your mind as you make decisions, as you don't want to follow the OEX down that low if it should drop again, something that remains possible.

Linda Piazza : 9/5/2008 12:16:22 PM

The OEX just closed a 10-minute period above the potential resistance now at 568.23, although neither the distance above that resistance nor the shape of the 10-minute candle proved particularly convincing. All we can say at this point is that the OEX is still testing it, that there may be a slight but now even more tentative change in tenor. An immediate drop back below 567.41 would be a sign that this change isn't holding. Remember that it requires sustained 10-minute closes above that level, not a single one.

Keene Little : 9/5/2008 12:03:50 PM

We've got a sharp little bounce and if it turns into an impulsive 5-wave rally off the low then we'll know the bottom is in for today. A little pullback here followed by another push higher would give us that impulse. Then we'd get a pullback to correct the bounce followed by another leg up. Watching now to see if that's how it plays out. Take some money off the table if short as I think 1220 is going to hold. Nice bullish daily candle on SPX if it closes like this (still a big if): Link

Linda Piazza : 9/5/2008 11:50:22 AM

Jane's post about the TRIN reminded me to check the chart I had linked in my 10:24:03 post. The resistance shown there did hold on 10-minute closes and now the TRIN heads back toward the support shown on that chart, now at about 0.73. Here's the chart with the original annotations: Link

Jane Fox : 9/5/2008 11:47:17 AM

Gee the AD line as improved to -1800 :)

Linda Piazza : 9/5/2008 11:47:17 AM

For the first time since late yesterday afternoon, the OEX is moving above its 10-minute 9-ema. However, it's got potentially stronger resistance on 10-minute closes at 569.02, and the OEX hasn't even begun to change its tenor in the slightest until it can maintain 10-minute closes above that. Another test will be potentially strong resistance on 10-minute closes at 573.29. If some of these benchmarks start getting hit and exceeded, I'll switch back to the 15-minute chart.

So far, then, we haven't even seen anything that is an early or tentative sign of a change in tenor but rather just a to-be-expected now and then test of the upper boundary of the OEX's smallest Keltner band on this chart. I still maintain, however, that bears need to remain vigilant, aware that a bounce could still get started. Bulls should keep that vulnerability to 553 on their radar screens.

Jane Fox : 9/5/2008 11:46:11 AM

THe TRIN is not anywhere near as bearish as it was yesterday but the is little comfort to the bulls because the TRIN is never overly bearish or bullish two days in a row.

Keene Little : 9/5/2008 11:31:51 AM

At this point I think SPX needs to get back above 1235 to indicate we've seen a low for now. Otherwise there's a turn window on Monday, September 8th where we could see a tradeable bottom get put in.

Keene Little : 9/5/2008 11:30:20 AM

The bulls haven't given up yet (or shorts may start covering). SPX 1220 is essentially holding.

Linda Piazza : 9/5/2008 11:20:44 AM

The OEX's 10-minute 9-ema is now 566.25, with further potentially strong resistance on 10-minute closes at 569.92.

Keene Little : 9/5/2008 11:07:39 AM

SPX is pressing below 1220 and that's obviously bearish. It looks like it's headed for below 1200 next. How fast it gets there is the question.

Linda Piazza : 9/5/2008 11:02:42 AM

Please remember that the possibility of a small-bodied candle still exists today. I never thought such a candle would be a small-range one because I thought there could be long upper and/or lower shadows, but that doesn't mean that there couldn't be a strong bounce to take the OEX back near the open again. While I think the deeper the OEX goes, the less chance there is of that, the OEX hasn't yet dropped deep enough to undo that small-bodied candle possibility, so bears should keep updating their profit-protecting plans. Bulls should factor in vulnerability to 553.20 or so as they're making their plans, keeping that vulnerability on their radar screens.

Linda Piazza : 9/5/2008 10:58:42 AM

The OEX's 10-minute 9-ema is now 567.63 with potentially stronger resistance on 10-minute closes at 570.92. The tenor hasn't even begun to change in the slightest way until the OEX is maintaining 10-minute closes above that higher number. However, I still suggest that bears keep updating their just-in-case profit-protecting plans.

Linda Piazza : 9/5/2008 10:41:58 AM

The A/D line is still sinking, but it's sinking into what may be strong support on 15-minute closes, now from about -1845 to -1945. Its low has been -1833, so it's closely approached that potential support zone. It's now -1766, so that's not much of a bounce from its low and we still don't know the outcome of this test. If in bearish trades, do realize that the A/D line is at a potential bounce point and be careful with your profit-protecting efforts. Bulls need to be watchful of a strong drop through that support, creating a new breakdown mode like yesterday's. The A/D line doesn't have to drop further now to support bearish plays: it just has to trend sideways.

Linda Piazza : 9/5/2008 10:38:01 AM

Remember that if you've got SEP bear call spreads, take a look at them and see if you can exit for a pittance this morning. That way, you don't have to worry about them into opex. Depending on how much of your original credit you're willing to forego to get out more than 40 days before OCT opex and lock in part of your profit for that cycle, you could take a look at your OCT bcs, too. I'm out of all positions right now for SEP and OCT, and am ready now to enter bps if I feel that the market has had enough of a drop to swing me far enough below the action or new bcs if the market bounces hard. Or maybe just give myself a few weeks' vacation. Smile.

Linda Piazza : 9/5/2008 10:24:48 AM

Here's why I like charting under-the-markets indicators such as TRIN on the Keltner charts, because it allows me to make "yes, but" conclusions, as in yes, it's dropping, but it's hitting support or yes, it's climbing, but it's hitting possible resistance: Link Right now, the TRIN reinforces what we already know. The morning has been bearish (TRIN bouncing from support) and we're now at a make-it-or-break-it point for bulls. A TRIN breaking through about 1.50 and sustaining values above that would be a bad thing, but bears need to be aware that it could turn back down from this resistance.

Jane Fox : 9/5/2008 10:23:07 AM

Once again the bears were able to take a tenuous hold on the market and turn it into a firm hold. The internals are all in sync and all bearish. Link

Keene Little : 9/5/2008 10:22:17 AM

We've got the setup for a long play here if SPX holds near 1225. Stay aware of a potential test of the pre-market low for ES at 1220.25 and I wouldn't want the stop much lower than 1220. Daily chart update: Link

Linda Piazza : 9/5/2008 10:17:27 AM

As the OEX sinks deeper into the potential 566-568 support zone, the 10-minute 9-ema drops to 569.47 and further potentially stronger resistance on 10-minute closes sinks to 572.57. The OEX would have to sustain--not just pop above for one 10-minute close--10-minute closes above that higher number to even begin to change the tenor in a slight and tentative manner. OEX at 566.07 as I type. There's much danger here for both bears and bulls. For bears, there's the danger that dip buyers will feel that the OEX has mostly stabilized and start stepping in, leading bears to start covering and help fuel a sharp rise. For bulls, there's the danger that prices will just tip over and head down rather sharply. I think bears need to remain vigilant.

Jane Fox : 9/5/2008 10:08:41 AM

Linda mentioned earlier the $NYA had already broken through its July 15th low and I see the NDX is now testing its July 15th low as well. Link

Linda Piazza : 9/5/2008 9:58:24 AM

I don't know if many people caught Tab Gilles' 7:11:58 post last night since I imagine that a lot of people close down the Monitor after the market closes, but I thought his post was important enough that it bore repeating here: Everyone has focused on the S&P500 ($SPX) retesting its July 15 low, yet the NYSE Composite ($NYA) has already broken below its July lows. With a PnF PO of 7,850.

Jane Fox : 9/5/2008 9:58:07 AM

However, the VIX is making new daily lows so that almost trumps the AD line and then I see the TRIN at 0.87. Maybe the bears don?t have a firm hold of the ball.

Jane Fox : 9/5/2008 9:58:25 AM

As Linda mentioned earlier the AD line was bearish and although it "improved" to about -1110 it has now fallen back to -1411. The bears have a firm hold on the ball this morning.

Linda Piazza : 9/5/2008 9:54:38 AM

The OEX's 10-minute 9-ema is now 571.26. The OEX is 569.42 as I type. If it should either rise up to test the 9-ema immediately or else trend sideways until the 9-ema cycles down and catches up with it, watch for potential resitance on such a test, to see if the 9-ema is still holding as resistance. If it doesn't, watch 573.63 for potential resistance, where a first slight and tentative change in tenor would occur if the OEX could maintain 10-minute closes above it. Allow for some crazy stuff at the beginning of a day, though, with quick moves that are as quickly reversed.

Linda Piazza : 9/5/2008 9:44:07 AM

The OEX's 10-minute 9-ema is now 571.31, with further potentially strong resistance on 10-minute closes at 574.06. Until the OEX is maintaining 10-minute closes above that higher level, the tenor hasn't even begun to change in the slightest. I would watch, however, for bounce potential as this is another make-it-or-break-it point for bulls being tested now. Either the OEX steadies near this 566-568 level or it risks falling toward 553.

Linda Piazza : 9/5/2008 9:38:58 AM

Keltner outlook on the A/D line: The A/D line's number is negative and it also is heading down from its first prints below the bullish/bearish benchmark now at -582 on 15-minute closes. It heads down into first potential support near -1400 and then potentially strong support now at -1700 to -1850. The A/D line is -1405 as I type. It doesn't have to continue dropping to support bearish trades: it just has to refrain from bouncing back toward next resistance now at -756.

Jane Fox : 9/5/2008 9:37:59 AM

Here is your US$ chart. Link

Jane Fox : 9/5/2008 9:37:14 AM

Gold is making a nice come back today. I haven't looked at the US$ chart but I bet it is down.

Of course though Gold has to break the support turned resistance level at 845-850 before it can make any kind of real comeback and that means the US$ has to fall even more. Link

Linda Piazza : 9/5/2008 9:35:10 AM

Here the OEX is, gapping down toward that 566-568 potential support zone. Be particularly careful here as buying could come in where it did on 7/07, 7/28 and 7/29. But also be particularly careful as those long stock could just capitulate and send prices through this support zone. I would be readjusting my profit-protecting stops if in bearish trades, though.

Keene Little : 9/5/2008 9:27:03 AM

We've got a recovery attempt in the futures but it makes you wonder if it's being done more as an attempt to get the best selling prices possible at the open. Watch for at least a retest of the pre-market lows. But SPX 1220 remains potential support until it's not. If it breaks then I'll be looking for a continuation lower to next potential support around 1190 (below the July low).

Linda Piazza : 9/5/2008 9:26:58 AM

Obviously, the markets did not like our non-farm payrolls numbers, as futures are well below fair values. Let's start with the OEX's daily chart: Link I wanted to augment this with what the daily Keltner chart says. That says that a daily close above about 575.75 would suggest that the OEX could reach up again toward its daily 9-ema, now at about 587. However, until and unless the OEX can maintain daily closes above that daily 9-ema now near 587, it has vulnerability to 553.

What do the shorter-term charts show? Unfortunately, I can get my widest Keltner channel bands only through the 30-minute charts and the OEX was already in breakdown mode all the way through the 30-minute chart. I can't dial up to a 60-, 120- or 240-minute chart to get the next potential targets. What I can tell you is that the 10-minute chart was fairly predictive of what was happening yesterday, with the OEX being knocked back on most tests of the 10-minute 9-ema. The only time that didn't happen was after I had begun posting that it looked about time for the OEX to pop all the way up to the top of the smallest channel on that chart and test it, which is exactly what happened before the OEX headed down into the day's close. So, let's set some if/then benchmarks using the the 10-minute chart, even if we have to construct our sentence with improper grammar to do so. If the OEX can't break back above the Keltner level at 574.89 as of yesterday's close, and maybe even above the one at 577.18 at the market's close, then it hasn't changed anything about its tenor yet. That line will of course be dragged lower if the markets do drop at the open, so I'll update the level after the markets get going.

Keeping the possibility of a small-bodied (but not necessarily small-ranged) candle today, be particularly careful to protect bearish profits if the OEX should drop into the 566-568 range, as there's possible light support in that area. While the possibility of a get-me-out-at-any-cost capitulation day that drives the OEX all the way down to 553 exists, remember the typical scenario after a day like yesterday's, and don't count on a capitulation day to the extent that you ignore signs that it's time to lock in your bearish profits. Barring a strong trending-down day, I expect that today might be hard to trade.

If the OEX should surprise us and gain right away, then we'll be looking at that potential resistance on 10-minute closes at 574.89 and 577.18 as first possible resistance.

Jane Fox : 9/5/2008 9:24:54 AM

Crude may be making a bottom . If the MACD is able to make a higher low here then we have a bullish divergence and these divergences at the end of huge selloffs, like Crude has undergone, are very powerful. Crude may have a chance of making it back to at least 120.00. I know this sounds nuts because we all want Crude to go down but I am looking at it from a technicians point of view only. Link

Jane Fox : 9/5/2008 9:16:28 AM

Here are your overnight charts and they are not looking to healthy. All markets have broken their previous day lows. Link

Jane Fox : 9/5/2008 8:55:02 AM

WASHINGTON (MarketWatch) - The unemployment rate soared to 6.1% in August, the highest rate in almost five years, as the economy took a turn for the worse.

Nonfarm payrolls decreased by 84,000, the Labor Department reported Friday. These are more job losses than the 75,000 drop expected by economists surveyed by MarketWatch.

The factory sector, especially the auto industry, shed jobs in August. Employment services, considered a bell whether of future labor market trends, also had sharp losses.

The rise in the unemployment rate was unexpected. The unemployment rate has steadily climbed this year from a cycle low of 4.4%.

Keene Little : 9/5/2008 8:34:23 AM

We're getting a bearish reaction to the economic jobs numbers and futures are making new overnight lows. Now we'll just have to see how it goes before the cash market opens. ES has dropped to a low of 1220.25, right at the bottom of the potential support range I mentioned for SPX--1220 to 1225.

Keene Little : 9/5/2008 8:29:41 AM

Equity futures had a volatile overnight session with the DOW futures moving nearly 100 points low to high and nearly back again. They're currently down 36 points heading into the 8:30 AM economic reports. ES is down slightly more at -5 points. The techs continue to remain weaker than the blue chips.

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