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Keene Little : 10/7/2008 11:28:59 PM

Wednesday's pivot table: Link

I think this market is close to getting another bounce. There are some Fibs pointing to potential support at SPX 990 and 974, with the latter number being a 162% projection for the 2nd leg down for the decline from August, shown on the daily chart: Link . The 974 is also right on top of a Gann number of 973 that comes from the Square of Nine chart (90 degrees from the 1005 level that I had shown on its chart). So a quick spike down to that level tomorrow morning could set up a bounce from there.

Otherwise I see a distinct possibility for this to grind lower towards 925 in stair-step fashion for the rest of this week as depicted on the 60-min chart: Link . The trend line along the lows from September 23rd (so just for the leg down from the September 19th bounce high) is near 982 at Wednesday's open. As shown in pink it's possible we're going to get a much bigger correction into next week before it turns back down which is the reason I'm suggesting keeping a tight rein on any October puts.

OI Technical Staff : 10/7/2008 10:00:00 PM

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Jeff Bailey : 10/7/2008 9:16:12 PM

US Consumers cut up some plastic last month with consumer credit -$7.9B, well below the forecast for +5.6B.

Jeff Bailey : 10/7/2008 9:14:14 PM

Week's Economic Calendar Link

100 bp cut out of Australia late Monday evening to 6.00%. If that's not a sign of how tight things are, I don't know what is.

Jeff Bailey : 10/7/2008 8:44:01 PM

Bank of America (BAC) $23.77 -26.22% ... (see XLF today)

Jeff Bailey : 10/7/2008 8:42:50 PM

Major Global Indexes, currencies, oil, gold, HUI.X, OIX.X and XLF Link

Jeff Bailey : 10/7/2008 8:31:15 PM

Closing Internals found at this Link

Tab Gilles : 10/7/2008 8:09:15 PM

Retirement accounts have lost $2 trillion so far Link

Jeff Bailey : 10/7/2008 5:22:46 PM

XLF $15.92 -10.56% ... closed at a 52-week low. That's the MOST bearish thing I see so far today.

Jeff Bailey : 10/7/2008 5:04:53 PM

Alcoa (AA) $16.71 -7.73% Link ... Earnings Press Release Link

Jeff Bailey : 10/7/2008 4:48:30 PM

Fiscal Facts (1st Debate) ... Link

Per some of the comments being made on CNBC

Jeff Bailey : 10/7/2008 4:38:31 PM

See 400,000 shares blocked in the OIH at $112.93.

Hey, take a little retracement from yesterday's low to today's high. Mid-point or 50% is $112.93.

That's either determined seller that simply wants out on today's "strength," or bull that is looking to take a shot saying "I want in at last two day's average."

Set an al_rt at $112.93 on that one.

Can imagine the pain a rig company is going through right now. Probably has a producer lined up for a rig, but with credit facilities as they are, simply can't lease the rig/equipment/service.

Jeff Bailey : 10/7/2008 4:38:27 PM

Linda ... yes, there's been a lot of "change" the last few weeks. Can short this, can't short that, this security is backed by this, but this one isn't.

Just yesterday I was wondering how the Fed could get banks to lend. It isn't that there isn't DEMAND, its that banks won't lend.

Today, the Fed brings something I hadn't even thought about. I was thinking they might inch rates up 25 bp. Instead, they'll start paying interest on funds borrowed, looking for that to be a catalyst for banks to lend.

I'm still trading and profiling trades for subscribers. Gott'a try and make some money, navigate around in these times.

Jeff Bailey : 10/7/2008 4:26:40 PM

Closing U.S. Market Watch Link

Check out the HUI.X's 5, 20 and YrNet% then GLD's.

Linda Piazza : 10/7/2008 4:23:59 PM

Jeff, these markets are set to confound us all, aren't they? At least you well understand about risk management, something you've preached all along.

Jeff Bailey : 10/7/2008 4:18:19 PM

VXO.X ... 63.06 +5.98% ...

Jeff Bailey : 10/7/2008 4:17:49 PM

OEX opened 503.08 finished 473.61 ... only matters if you trade it though. Or part of it.

Jeff Bailey : 10/7/2008 4:15:31 PM

GLD opened $87.18, finished $87.32.

Jeff Bailey : 10/7/2008 4:14:53 PM

Well Linda ... wouldn't you know that I picked the one trade that didn't move after the open. Gold. EVERYTHING else moved.

Jeff Bailey : 10/7/2008 4:08:17 PM

HUI.X 252.34 -0.05% ... even it couldn't hold green to the close.

Linda Piazza : 10/7/2008 4:03:23 PM

Well, I said a "fast trip" down to 568, didn't I? The OEX didn't quite get there, but the trip from 478 to the day's low was fast.

Jeff Bailey : 10/7/2008 4:01:02 PM

The GLD-WD that is.

Jeff Bailey : 10/7/2008 4:00:49 PM

Sheeeoooot .... what do you think? I say we hold it.

GLD $87.42

Jeff Bailey : 10/7/2008 3:59:47 PM

I thought Art Cashin did a good job explaining the "bear trap" yesterday. But the market wouldn't cooperate and bounced higher to the close. Art wanted to see the market's close at their lows yesterday, GAP lower this morning, then ramp back higher. The GAP lower to get rid of all the "weak bulls" that have been holding on and get them to capitulate.

Today's action probably what Art was wanting to see.

Me too in a way.

Jeff Bailey : 10/7/2008 3:57:21 PM

Airline Index (XAL.X) 15.99 -15.26% ... part of the TRAN

Linda Piazza : 10/7/2008 3:56:39 PM

Keene, I couldn't agree more about the "something bugging" you part. I have been crying wolf to bears to be careful all day long for the same reason.

Keene Little : 10/7/2008 3:55:55 PM

This poor market. It needs that medical service you can call, "help, I've fallen and I can't get up." Beware the bear trap as we head into the close--a break to a minor new low to suck in the shorts and then squeeze 'em good tomorrow. I have no idea if that will happen but something's bugging me about today's decline as it's looking more like a short-term ending pattern than the start of another big leg down.

Linda Piazza : 10/7/2008 3:55:40 PM

Next time I tell everyone that we could have a pop-and-drop day and to be on guard against it, I think I'm going to load up the truck with puts and enjoy it and stop being so wary of the bounce that looks as if it's coming. Seriously, that's not something you want to do. The breakout on the A/D line signaled strong momentum, but I'm always a bit suspicious of A/D line breakouts (or breakdowns) in the first few minutes of trading or the last few. Hence, my warning, but the important point was that "nothing has changed in tenor" updates about the potential resistance on 30-minute closes that's now at 492.74. All day, it looked as if a bounce might be imminent, and I kept offering "little boy crying wolf" warnings to bears to keep updating their profit-protecting plans, but the OEX could not sustain 30-minute closes above that level.

So, if there's a bounce tomorrow morning, that's the first thing that we'll watch. If you're a bear, evaluate whether you want to stay in overnight or follow Keene's example and lock in some of your profits.

Jeff Bailey : 10/7/2008 3:53:55 PM

UNG $30.13 -2.77% ... can't find a bid to save its soul. Need a brrrrrzy cold winter.

Jeff Bailey : 10/7/2008 3:53:09 PM

HUM -4.93% ...

GLD $87.45 +3.76% ...

Jeff Bailey : 10/7/2008 3:52:33 PM

Linda! I'm talking "majors" as the S&P 500, the Dow Industrials, the S&P 100, the Russell 2000, the NSDAQ-100.

Transports kind of an IMPORTANT sector.

Linda Piazza : 10/7/2008 3:49:29 PM

The OEX is hitting the top of the consolidation zone in which it chopped around for many months in 2002 and early 2003. A trip down to the bottom of that zone isn't precluded, of course, but neither is a steadying at the top of this zone. The break back above it was significant in May 2003, so it could provide temporary support here, too. Otherwise, it looks like a quick trip down to about 468.30, near the 76.4% retracement of the climb off the 2002 low into the 2008 high. The decline is always a lot swifter than the climb, isn't it?

Jeff Bailey : 10/7/2008 3:44:37 PM

Humana (HUM) $35.92 -0.88% ... slips red. Listen to tonight's debate!

Linda Piazza : 10/7/2008 3:39:57 PM

Jeff, you have to add the TRAN to that list of indices that has not traded yesterday's lows. In fact, yesterday, it did not make a new low in the afternoon, either.

Jeff Bailey : 10/7/2008 3:39:12 PM

For the most part, all US major indexes have pretty much traded yesterday's lows. Or darned close. NDX/QQQQ and RUT/IWM still off.

Keene Little : 10/7/2008 3:35:58 PM

I decided to leg out of the rest of my October puts (still have a bunch of November) and take my money and run. I'll still participate in any further decline from here but I'm getting the sense we've got another bounce coming. I could just let the bounce take me out but it's been a good run (started legging in back in mid August) and greed can kill profits quicker than you can say Boo!

If we do get another rally leg, or especially if it consolidates sideways for another day or two, I'll put a bigger short position on again but right now I feel like protecting more than betting. Only you can decide when to hold and when to take some money off the table.

Jeff Bailey : 10/7/2008 3:33:31 PM

The industrial metals stocks continue to get clobbered.

Jeff Bailey : 10/7/2008 3:18:04 PM

GLD $86.90 ... its 38.2% dynamic now at $86.76

Jeff Bailey : 10/7/2008 3:16:38 PM

Today perhaps at least, we looked at the YM and GLD together, where gold takes on more of a "fear" indicator, or measures the pulse of sentiment. So far, the YM's "bounce" off support never did more than 38.2% of your dymanic (intra-day fib retracement).

Keene Little : 10/7/2008 3:14:28 PM

As the market drops to test today's lows now watch for bullish divergences on the 5 and 10-min charts since we already have them on the 30 and 60-min charts. This could be setting up for a another rally leg.

Linda Piazza : 10/7/2008 3:14:10 PM

Interesting. The TRAN has so far still maintained its rising trendline off yesterday morning's low.

Jeff Bailey : 10/7/2008 3:13:39 PM

The "worry" for a day trade short in gold (in my opinion) was that the move much above $87.41 this late in the session, could turn out to be a trend day higher to the next level of risk. Could still be, but I liked the BOND trade action. The DOLLAR trade action was more 50/50.

Linda Piazza : 10/7/2008 3:11:43 PM

The OEX downturn today still looks reluctant. That's of course not a technical term, but it's an impression formed back-and-forth, choppy way the OEX has declined today. Nevertheless, sustained values beneath yesterday's low may of course prompt stronger selling.

I've been looking at charts, of course, as we all have. One thing that's struck me is the potential support on weekly closes at 496.73. The OEX is of course below that and also below the FIB level at about 493.75 (23.6% of the decline from the 2000 high into the 2002 low), but not on a weekly close, so it's still possible that support will hold on the weekly close. As I said in my first post today, though, if the OEX were to bounce from this support, I would expect to see potentially strong resistance anywhere from 514-520. So far, though, there hasn't been much need to worry ourselves with those resistance levels.

Jeff Bailey : 10/7/2008 3:09:42 PM

GLD 87.07 ...

Jeff Bailey : 10/7/2008 3:09:05 PM

NASDAQ a/d 716/2,211

Jeff Bailey : 10/7/2008 3:08:53 PM

Nyse a/d 540:2,498

Jeff Bailey : 10/7/2008 3:07:56 PM

Key Interest Rates at 03:00 Link

Jane Fox : 10/7/2008 3:06:06 PM

I was going to say back to the plain Jane boring but geesh!!

Jane Fox : 10/7/2008 3:05:42 PM

Oh I wish things would go back to the plain vanilla boring.

Jane Fox : 10/7/2008 3:05:21 PM

Internals are still bearish but not as bearish as they were earlier. At least the TRIN is now reflecting the bearishness in the AD line and volume.

The only hold out is the VIX which in certainly not bullish but is it not making new daily highs so you cannot call it bearish. The VIX is a biggy for me but of late it has become more and more unreliable due to the volatility you see in the VIX. Link

Jeff Bailey : 10/7/2008 3:04:06 PM

Treasury have closed

Jeff Bailey : 10/7/2008 3:02:01 PM

GLD's October "Max Pain" theory tabulation at last night's close was $82.00 ($1 inc).

Jeff Bailey : 10/7/2008 2:59:59 PM

VIX.X's WKLY R1 is right here too at 49.67

Jeff Bailey : 10/7/2008 2:59:31 PM

VIX.X 50.17 -3.61% ...

Jeff Bailey : 10/7/2008 2:59:15 PM

Now for the GLD-WD ... I say we use a 03:55 PM close. IF GLD looks to close ABOVE $87.41, we close out the GLD-WD.

GLD $87.41 GLD-WD is $3.10 x $3.30

Linda Piazza : 10/7/2008 2:58:19 PM

You've already read about some of the events transpiring in Europe, but those aren't going to show up on a listing of regularly scheduled events. What does show up is the U.K.'s Nationwide Consumer Confidence at 7:01 pm ET tonight and Australia's Westpac Consumer Sentiment and Home Loans at 7:30 and 8:30 pm, respectively. At 1:00 am ET tomorrow morning, the Bank of Japan's Monthly report is released at the same time as the Economy Watcher's Sentiment number. The U.K.'s BRC Shop Price Index appears at 5:30 am, and Germany's Industrial Production is at 6:00 AM.

In the U.S. FOMC member Charles Plosser speaks in New York at 7:45 am ET, with a Q&A session expected. Canada's Housing Starts will be at 8:15, and that's it until we start with our releases at 10:00 am.

Jeff Bailey : 10/7/2008 2:56:46 PM

Day trade short stop alert! ... for the 1/2 position in the GLD $87.50.

Tab Gilles : 10/7/2008 2:58:09 PM

After tomorrow night the short ban on financial stocks ends. I'm expecting the up-tick rule to be inacted again.

JPMorgan (JPM) $41.25 -$2.76 (6.24%)

I've posted several charts on JPM over the last 4 months, noting the asymmetrical triangle formation. Link Link

After hitting the $50 Price Objective it has pulled back here, I believe it could still trend lower. This all hinges on any rate cut and the shortselling/uptick rules. I'd suggested the 2010 call LEAP recently, looking at revisiting that play very soon. Link

Jeff Bailey : 10/7/2008 2:51:11 PM

GLD $87.25 ... bulls wouldn't "give in" ...

Linda Piazza : 10/7/2008 2:51:07 PM

The delayed Bloomberg feed says the TED spread is 3.46, well of the day's high of 3.91, but also above the day's low of 3.29. Earlier today, I mentioned that chart I posted, a one-month chart, looked like a rising wedge formation, one in which we would typically expect values to break lower. I believe that the line under that wedge now crosses at about 3.72, if I'm guesstimating it correctly, so that would mean that the TED spread has broken below that trendline. It has not, however, broken beneath potentially strong support near 3.12-3.16. That would need to be done to confirm any break out of the rising wedge.

Keene Little : 10/7/2008 2:50:12 PM

Today's decline looks more like a 3-wave count than a 5-wave at this point. A rally back above this morning's initial pullback (SPX 1048.53 at 10:00 AM) would leave it as a 3-wave pullback. That would open up two possibilities: one, we could get another rally leg at least equal to yesterday's (up to SPX 1079); or two, we could see price chop sideways in a triangle consolidation over the next couple of days (4th wave correction). Both would be corrections to the larger decline and would be followed by new lows. It's just a matter of how high, or long in time, the correction would get.

If we see the market drop right back down to a new low from here we would then have a completed 5-wave move down today and that would then set up another bounce, possibly as strong as yesterday's or even stronger (but it would be another 4th wave correction). The bottom line is we could get some very choppy price action as the market continues to work its way lower.

Jeff Bailey : 10/7/2008 2:49:04 PM

Speaks to the massive Central Bank interventions taking place.

Jeff Bailey : 10/7/2008 2:48:38 PM

Excellent, excellent discussion/analysis regarding gold on CNBC

Linda Piazza : 10/7/2008 2:46:42 PM

The OEX needs to rally soon, perhaps after a dip toward 487.15, or it risks falling back toward the day's low.

Linda Piazza : 10/7/2008 2:40:41 PM

The OEX was knocked back in its attempt to climb above the top trendline of the parallel channel in which it has been declining today. If it could steady near 490-490.20 and stay there through 15-minute closes, it perhaps challenge that resistance again, but we still don't know the outcome. The OEX is 490.81 as I type.

Tab Gilles : 10/7/2008 2:38:15 PM

Crude $90.24; NatGas $6.74; Gold $884.20; Euro 1.3623; Yen 101.83; T-Bill 1mos 0.19% 3-mos 0.87%; Libor 1-mos 4.14% 3-mos 4.32%; TED Spread 3.26%; $VIX 49.58

Jane Fox : 10/7/2008 2:34:20 PM

The DOW futures just broke through the 9799 swing high so the YM short is off the table until I see another one setup.

Linda Piazza : 10/7/2008 2:31:05 PM

The OEX is back inside that descending price channel in which it's moved today after breaking below it. That's a first and very slight sign of a change in tenor. The next would be a move above the top of that price channel, with values above it sustained. The top of that channel is now near 493.30-493.50, and that hasn't happened yet.

The next sign and a slightly more reliable one would be sustained values above that benchmark potential resistance on 30-minute closes that I've been watching all day. That's now at about 495.25, so the OEX would need to clear that on 30-minute closes before there was any meaningful change in tenor, and that would still be only an early and tentative sign. After that, potentially strong resistance near 504.70 and up to the day's high of 509.54 would soon be faced. The OEX would have to clear that and probably confirm by sustained 30-minute closes above a Keltner level now at 510.26, before the next step in any improvement in tenor occurs.

Jane Fox : 10/7/2008 2:32:09 PM

The DOW futures have gotten overbought - ya I said overbought - how funny is that? Well I am going to take advantage of this and will be shorting this market at 9688 with a stop just above the swing high at 9799 so about 9802 or so

Tab Gilles : 10/7/2008 2:29:11 PM

The Chancellor will make a statement about a rescue plan for British banks following a meeting with the PM, the Governor of the Bank of England and the head of the FSA. Link

Jeff Bailey : 10/7/2008 2:28:06 PM

FXE 136.08 +0.81%
FXY 97.78 -0.56%
FXB 175.71 +0.75% ...

Jeff Bailey : 10/7/2008 2:26:17 PM

Anyone trading the YM long?

Keene Little : 10/7/2008 2:26:17 PM

Getting a sharp little bounce now, a little bit more than what we've seen so far. Another miracle bounce off an afternoon low coming? Stick with your downtrend lines if you want to let price prove it's coming back up or peel a little off the table here and let the rest ride for free.

Jeff Bailey : 10/7/2008 2:26:01 PM

Then it goes back to support "level" and the game begins again ...

Jeff Bailey : 10/7/2008 2:25:30 PM

This is where a gold BEAR want to see the BULL side "give up" after the BULL has seen $87.41 hold .

GLD $86.75

Linda Piazza : 10/7/2008 2:23:08 PM

The top of the descending channel in which the OEX has moved down all day is now at about 493.30-493.40.

Linda Piazza : 10/7/2008 2:21:22 PM

If the OEX keeps rising, there's potentially strong resistance on 15-minute close at 489.71. If a real bounce gets started, none of these potential resistance levels will matter any more than the potential support zones did on the way up.

Linda Piazza : 10/7/2008 2:19:55 PM

My fingers just want to start off OEX values with a "5" in front, not a "4," so all day, I've been typing things such as 595 when I mean 495.

Linda Piazza : 10/7/2008 2:19:25 PM

I've felt the same way Keene feels (Keene's 2:07 post) all day, despite starting off the day warning that it could be a pop-and-drop day and despite the OEX all day failing to confirm any change in tenor, not even that needed to sustain 30-minute closes above potential Keltner resistance on 30-minute closes that's now sunk all the way to 495.55. But I'm watching the VIX and VXO which have not broken out again to the upside today (15-minute Keltner chart), despite rising, while the OEX and SPX have broken down again on that same chart. That's a divergence. I'm currently watching the TRAN finding tentative support, but still support, on a rising trendline off its early Monday low. The TRAN did not produce a lower low in the afternoon yesterday, but instead a higher low. None of these are conclusive, but they're enough to have me warning bears all day, without any need to do so, so far, that they need to keep updating their profit-protecting plans. That's still what I'm warning.

Keene Little : 10/7/2008 2:13:32 PM

I'm watching each little bounce now for evidence of the start of something bigger back to the upside. So far I'm not seeing it.

Jeff Bailey : 10/7/2008 2:13:13 PM

02:00 Internals found at this Link

Linda Piazza : 10/7/2008 2:08:24 PM

There's been the testing that often comes this time of day and that I mentioned: the OEX was sent below the descending parallel channel in which it had been moving all day. Now there's a partial result, a spring right back up to test that channel's lower boundary. A strong continued bounce would suggest that big money decided that a dip would be met by dip-buyers. But will it hold? This is just an initial response and not the final one. The OEX now needs to find support near 484.75 on pullbacks and spring higher after such tests.

Tab Gilles : 10/7/2008 2:04:45 PM

Bernanke Speech: Link

Tab Gilles : 10/7/2008 2:04:13 PM

Sept 16th Minutes: Link

Jeff Bailey : 10/7/2008 2:02:27 PM

GLD ... day trader's chart Link

Jeff Bailey : 10/7/2008 1:58:45 PM

Day trade short alert! ... 1/2 position in the GLD $86.97 here. Stop $87.50. Target $85.10

Keene Little : 10/7/2008 1:57:16 PM

SPX has now broken below both the 78.6% retracement of the rally off yesterday's low and the bottom of today's parallel down-channel, currently near 1020. The wave pattern of today's decline does hint that yesterday's low might hold and if turns up from there it will leave a big bullish divergence on the 30 and 60-min charts. It could launch another rally that will again be just a bounce but again, think about any October put positions you have and move into protection mode now--don't let another big bounce catch you flat-footed.

Jeff Bailey : 10/7/2008 1:57:11 PM

13-week at 0.80% ...

Jeff Bailey : 10/7/2008 1:55:16 PM

YM 9,650 ... after trade of 9,616 ... an intra-day moment of truth

Jeff Bailey : 10/7/2008 1:54:27 PM

GLD $87.34 +3.63% ... after a check ag MNTHLY 61.8% ... YM at DAILY S1?

Jeff Bailey : 10/7/2008 1:53:45 PM

dj- Fannie, Home Loan Bank Chicago announce mortgage partnership

Linda Piazza : 10/7/2008 1:52:08 PM

Not far off yesterday's 480.69 low now, are we? So much for gut feelings, but at least 30-minute Keltner channels have shown us all day that nothing has changed.

Linda Piazza : 10/7/2008 1:50:30 PM

We're in a prime testing time of day, when big money tends to test and see if bounces or dips are met with selling or buying. Be aware that might be going on and that, if it occurs, you want to focus on the result of those tests (strong spring off a new low, strong move back from an attempt to push higher) rather than the direction of the test itself. That might give you the strongest information about the afternoon with a strong emphasis on "might."

As I type, the OEX is hitting a new low just below the prior one, approaching the 485.80-486 level that markets the bottom of the descending price channel in place today. The two-minute chart shows bullish price/RSI divergence as this new low is created and, now, as I type, as the OEX bounces off it. Of course, bulish divergence on a 2-minute chart isn't worth much.

Jeff Bailey : 10/7/2008 1:46:09 PM

Just reinstate the up-tick rule already!

Jeff Bailey : 10/7/2008 1:45:39 PM

dj- NYSE CEO: Considering individual stock circuit breakers

Tab Gilles : 10/7/2008 1:43:05 PM

European Central Bank:

US dollar liquidity-providing operations Link

Will oil prices decline over the longrun? Link

Bank of Japan:

Schedules for auctions of U.S. dollar liquidity Link

Bank of England:

Link

Bank of Canada:

Link

Jeff Bailey : 10/7/2008 1:39:45 PM

13-week at 0.80% ...

Jeff Bailey : 10/7/2008 1:39:19 PM

GLD ... takes another look at DAILY R2

Linda Piazza : 10/7/2008 1:38:27 PM

The OEX did bounce, at least temporarily and slightly, from the bottom trendline of the redrawn parallel descending channel in which it's been moving down today. Until and unless it breaks above the top of that channel, now at about 496.40, it's still in a descending price channel. Until and unless it sustains 30-minute closes above 496.75, it hasn't changed anything about its tenor today. Just don't discount the possibility that those changes could occur, not in this environment. OEX at 488.74 as I type, turning back again.

Jeff Bailey : 10/7/2008 1:37:57 PM

SPX 1,030.33 -2.51% ... approaching WKLY S2 and DAILY S1 overlap (1,022)

Jeff Bailey : 10/7/2008 1:36:50 PM

dj- MARCO MISSES MEXICO'S MAIN OFFSHORE OIL ZONE

Tropical storm Marco makes landfall on the coast of Mexico, NHC reports. Marco didn't affect Mexico's main offshore oil fields in the Campeche Sound, but it did cause some evacuations in the northern area of the country.

Jane Fox : 10/7/2008 1:33:20 PM

From what I can see Bernanke's words did not do anything for the market. The internals are more bearish now than at any point throughout the day.

Linda Piazza : 10/7/2008 1:31:56 PM

If we redraw the OEX's descending today as a descending parallel price channel, as I mentioned having done, the descending lower channel line is now at about 486.80, if I'm eyeballing it correctly. The OEX also has potential support on 30-minute closes at 488.41, support that it looks as if it's going to violate on this 30-minute close.

Keene Little : 10/7/2008 1:31:48 PM

The bottom of the SPX's down-channel for today's price action is now near 1023. A 78.6% retracement is at 1022.36 and anything deeper than that will mean a likely complete retracement and new lows below yesterday's.

Jeff Bailey : 10/7/2008 1:29:48 PM

YM's action (bid back to WKLY S2 and selling there) certainly would suggest a re-test of yesterday's lows if not DAILY S1

Linda Piazza : 10/7/2008 1:26:21 PM

New low for the OEX. It's approaching the support I mentioned earlier near 588-589, composed of several different types of support. I'd mentioned earlier that an approach to OEX 589 would be one place where bears needed to update their profit-protecting plans. OEX is now 489.93 having just bounced from the 489.03 low.

Jeff Bailey : 10/7/2008 1:26:08 PM

Can kind'a see how they play off each other ... there were BUYERS at DAILY R1 after trade at DAILY R2, so for now, that's BULLISH.

Linda Piazza : 10/7/2008 1:25:04 PM

It's always a quandary to know what to do when we writers have to edit a previous post, either for grammatical, spelling or mathematical errors, as I just had to edit a previous post. The problem is that the site supplies a new time stamp when we edit a post. Perhaps I've mentioned a certain price level "as I type," but obviously that price level will likely have changed by the time the edited post is uploaded with a new time stamp.

Jeff Bailey : 10/7/2008 1:24:29 PM

GLD 5-minute montage (left is conventional) and (right is pivot level) Link

Linda Piazza : 10/7/2008 1:22:58 PM

The OEX has to produce sustained 30-minute closes above about 498.35 before there's any change in tenor today, and it obviously hasn't done that in the last few minutes. It instead was knocked back from a test of resistance that begins at 497.53 and from a test of the lower trendline of that triangle that had contained most movements today. Now it's knocked back into another test of the 493-ish area. Those who want to see the OEX rebound want to see that support hold again. Bulls so far have just not been able to produce any follow through today, but something keeps me watching for the potential for them to muster enough strength to push higher. Just hasn't happened yet. I'm using that 30-minute resistance as a benchmark but not as a trading signal.

Tab Gilles : 10/7/2008 1:17:08 PM

Federal Reserve Press Release:

Federal Reserve conducted an auction of $150 billion in 85-day credit through its Term Auction Facility. Link

Board announces creation of the Commercial Paper Funding Facility (CPFF) to help provide liquidity to term funding markets

Federal Reserve and other central banks announce schedules for term and forward auctions of U.S. dollar liquidity for fourth quarter Link Link

Linda Piazza : 10/7/2008 1:14:07 PM

OEX 493 did hold on that pullback after my 1:06 post, at least, with the OEX dipping to 493.37 and rising from that. The former bottom trendline of the triangle in which the OEX had been trending down now crosses at about 495.60, and the OEX is now rising to challenge it. This bounce now could be a kiss-goodbye test or it could be the prelude to a rise through the triangle again, so both bulls and bears need to exercise caution. I don't know why, as I've said earlier, but something didn't feel right about the earlier drop, so I'm on the lookout for a possible rise through and maybe even above the former top trendline of that triangle, now at about 497.45. No promises here, but just a warning not to take anything for granted. OEX at 496.13 as I type.

Jeff Bailey : 10/7/2008 1:10:32 PM

Bernanke begins speech

Jeff Bailey : 10/7/2008 1:10:00 PM

Key US Interest Rates at 01:00 Link

Linda Piazza : 10/7/2008 1:06:42 PM

I wouldn't be surprised to see a pullback to about 493 here. Those hoping markets will steady want that to hold.

Jeff Bailey : 10/7/2008 1:06:34 PM

dj- US 4-week Bill Auction: ... 0.68%; 96.71% at the high; bid-to-cover 3.26

Jeff Bailey : 10/7/2008 1:04:26 PM

dj- IMF's Lipsky: Coherent global strategy needed to ease turmoil

Jeff Bailey : 10/7/2008 1:03:03 PM

dj- Italy regulator opens Enel market dominance probe

Keene Little : 10/7/2008 12:58:59 PM

SPX is trying to hold its 62% retracement here at 1033. Bulls have their fingers (and toes and eyes) crossed.

Linda Piazza : 10/7/2008 12:53:13 PM

Specifically, the OEX has potential support on 30-minute closes at 488.52 and the first swing low for the OEX yesterday was 490.25, so these are the reasons that I noted that you might be watchful of potential OEX support in the 489 zone. If the earlier triangle is redrawn as a descending parallel channel, the lower trendline crosses in that zone, too. OEX at 491.27 as I type.

Jeff Bailey : 10/7/2008 12:52:21 PM

GLD sets up for "one test" ... $85.53 +1.48% ...

Linda Piazza : 10/7/2008 12:49:35 PM

One possible target for the OEX if it continues lower is 489. I would update my bearish profit-protecting plans if it hits that zone.

Keene Little : 10/7/2008 12:47:37 PM

A 62% retracement of the rally off yesterday's low is at SPX 1033.17 so much below that will start to make bulls a bit more nervous about holding.

Linda Piazza : 10/7/2008 12:47:11 PM

Potentially strong resistance for the OEX on 30-minute closes now at 498.09 and 499.32. Sustained 30-minute closes above those would let bears know that something had changed at least slightly in tenor, but for now, those should be considered potential resistance. I tell you, though, that it wouldn't surprise me greatly to see the OEX bounce right back above that, but that's just that "gut instinct" again and I don't know how trustworthy it is.

Keene Little : 10/7/2008 12:46:01 PM

The bottom of a parallel down-channel for today's decline is at SPX 1029 and dropping so. Any drop below the bottom of the channel would indicate the selling will accelerate lower. Just keep pulling your stop down to just above today's downtrend lines for now. If the selling kicks in then you can give it a little more wiggle room.

Jeff Bailey : 10/7/2008 12:46:00 PM

dj- Bank of Canada liquidity injection now at C$1.675B

Linda Piazza : 10/7/2008 12:43:54 PM

Bears, just keep updating your profit-protecting stops. I was warning of a pop-and-drop day today, but there's just something I'm picking up that doesn't seem right about the way this one is unfolding. I don't know whether that gut instinct is trustworthy so all I can do is continue to warn to keep updating your profit-protecting plans, just in case. That's always a good idea in any market, but particularly in this one.

Jeff Bailey : 10/7/2008 12:43:13 PM

Humana (HUM) $37.20 +2.64% ... "holding tough"

Jeff Bailey : 10/7/2008 12:42:36 PM

Sentiment ... that's what bears will continue to press, each and every chance they get.

Jeff Bailey : 10/7/2008 12:42:07 PM

dj- GM, Ford shares hit new lows as sentiment fades further

Jeff Bailey : 10/7/2008 12:40:41 PM

Hey ... GLD's DAILY Pivot is $84.90. That 1, 2, 3 pivot levels around $85.00.

Jeff Bailey : 10/7/2008 12:39:49 PM

GLD $86.32 +2.42% ... not much since the open.

Jeff Bailey : 10/7/2008 12:39:24 PM

I'd be monitoring gold ... what do you THINK it should be doing?

Jeff Bailey : 10/7/2008 12:38:43 PM

IF I were long, I'd be assessing downside to DAILY S1

Jeff Bailey : 10/7/2008 12:38:17 PM

I'm flat here in the MM, but IF I were short, at WKLY S1, I'd be snugging a stop down just above the overlap.

Jane Fox : 10/7/2008 12:36:57 PM

The last time the VIX and S&P futures were this out of sync was the day before Paulson and company announced the $500 billion bailout (the original estimate). Link

Jeff Bailey : 10/7/2008 12:36:50 PM

OK YM traders (longs or shorts), start getting your 'dynamic' on the day's range.

Jeff Bailey : 10/7/2008 12:35:34 PM

That's equivalent to US's 13-week, now at 0.95% ...

Jeff Bailey : 10/7/2008 12:35:04 PM

dj- Mexico's 91-day Cetes Yield falls 0.04 pct pt to 8.24%

Jeff Bailey : 10/7/2008 12:34:29 PM

dj- Mexico's 28-day Cetes Yield falls 0.13 pct pt to 7.99%

Linda Piazza : 10/7/2008 12:32:48 PM

The OEX is breaking through the potential support on 15-minute closes now at 496.62 as well as beneath the lower trendline of the triangle in which the OEX has been chopping back and forth this morning. I don't know why, but I remain a bit skeptical of this breakdown. Take that for what it's worth, which is not much at this point, but keep updating your profit-protecting plans if in bearish positions because I'm afraid this could be just a trap. No evidence for that.

Jane Fox : 10/7/2008 12:30:52 PM

I am now reading that the current financial crisis has fueled speculation the major central banks will coordinate a round of interest rate cuts if conditions do not improve. The one stand out would probably be the Bank of Japan because BOJ Governor has said each central bank should set their own monetary policy. Japan's interest rates are already very low and they don?t have much room to move in this arena.

Jeff Bailey : 10/7/2008 12:29:25 PM

YM 9,872 ....

Linda Piazza : 10/7/2008 12:28:19 PM

At 47.78 as I type, the VIX has reversed a hefty proportion of yesterday's gains. My Keltner charts tell me that it needs to produce sustained daily closes beneath about 43.50 before anything at all has changed in tenor, and then it needs to confirm that daily closes beneath 40.20. Each of those levels might serve as potential support on daily closes, bouncing the VIX again, so that's why there will be no change in tenor on a Keltner basis, at least, until we see those daily closes beneath those levels.

Keene Little : 10/7/2008 12:28:14 PM

Right now today's pullback looks like a bull flag but if we see the market drop to new lows it could be followed by some stronger selling as 3rd waves for today's decline start to kick in. Draw a parallel down-channel for today's pullback and watch price action at the bottom of the channel if it gets there.

Jeff Bailey : 10/7/2008 12:27:31 PM

YM 5-minute interval chart with QCharts' DAILY and WKLY Pivot Levels Link .... this is the "test" we wanted to monitor.

Keene Little : 10/7/2008 12:26:40 PM

We've got a series of lower highs today so a break of the downtrend line from this morning's high would be a heads up that we'll probably see either a larger consolidation beneath today's high or else a rally to new highs. Lowering stops to follow the downtrend line down will lower your risk/capture profits but subject you to potential whipsaws.

Linda Piazza : 10/7/2008 12:24:49 PM

All day today, I've been thinking it's Friday. We've surely gone through a week's worth of market action, it seems.

Linda Piazza : 10/7/2008 12:21:51 PM

The A/D line, at -1030 as I type, has fallen all the way to the bullish/bearish benchmark on its 15-minute Keltner chart with that benchmark now at about -1080. It's do-or-die time for the A/D line and for those hoping for a bounce. I thought we'd see chop this morning before we knew next direction but I didn't expect it to take quite this form or take quite this long. I expected the OEX to either lose the sinking-lower potential support on 15-minute closes now at 596.95 or move up through the also-sinking-lower resistance on 30-minute closes now at 500.24, but it's done neither, so, despite drifting lower all day, we still don't have the resolution as to final direction. Both bulls and bears need to stay on their toes. Bulls have no choice but to have followed through on their stops if they were hit, since the ultimate direction is as yet uncertain but bears need to keep updating those profit-protecting plans, too, being careful not to let a gain turn into a loss. We just don't yet know the ultimate direction today.

Jeff Bailey : 10/7/2008 12:21:43 PM

From the 10:00 to 12:00 benchmarks, we can see the 13-week yield has moved higher (selling of those short-term instruments and the unclog), but so far, the cash has moved out the maturity to 5, 10, 30. I would think an EQUITY BULL wants that to stop. Find its way to STOCKS, which may reflect the economy itself.

Jeff Bailey : 10/7/2008 12:19:49 PM

12:00 Internals found at this Link

Jeff Bailey : 10/7/2008 12:11:47 PM

And be alert to the "pump" and "dump"

Jeff Bailey : 10/7/2008 12:11:22 PM

Check out your 5, 10 and 30's

Jeff Bailey : 10/7/2008 12:10:02 PM

Be alert for a "cramp" then "ramp" should 13-week make a move above 1.00%.

Jeff Bailey : 10/7/2008 12:08:16 PM

13-week up 56 bp at 0.97% ... be alert here.

Linda Piazza : 10/7/2008 12:07:57 PM

No change in tenor. The OEX did not close that 30-minute period above the potential resistance on 30-minute closes that has now lowered to 499.95. Continued 30-minute closes beneath it will keep pushing this resistance lower, which is not a good thing if you want to see a bounce. The OEX now has potential support on 15-minute closes at 497.35. We still have to see which breaks. The earlier bullish scenario has been invalidated. The pullback today is now in a the form of a triangle with top resistance near 501.25 and bottom support near 496.40 and the OEX so far still chopping around inside that triangle. OEX at 497.71 as I type.

Jeff Bailey : 10/7/2008 12:03:24 PM

Now ... several months ago I received an email from a subscriber regarding investing in Icelandic bonds/certificates of deposit that offered a rather HIGH yield. I haven't touched base to see what decision was made. However, I thought ONLY as a very small portion of a fixed income, kind of like using "junk bonds" to sweeten a fixed income portfolio.

However, from the Reuters story, you can see what's taking place in that part of the world.

Jeff Bailey : 10/7/2008 12:00:09 PM

Wounded Iceland takes over top bank, seeks Russia loan ... Reuters Story Link

Jeff Bailey : 10/7/2008 11:56:33 AM

OK ... now ... as you look at the various gold charts I've posted this morning, you should begin to say ... "if that level is truly support/resistance, the gold should NOT be able to trade below/above that level if ....

1) BULLISH scenario for gold (banking crisis, lending crisis, monetary crisis)

2) BEARISH scenario for gold (factored in, problems identified, problems being fixed).

My thoughts at this point with GLD ABOVE $83.00 is that MARKET isn't so sure everthing "just fine." I'm not thinking just here in the U.S. either. OVERSEAS has MAJOR problems, even before/with U.S. problems.

Linda Piazza : 10/7/2008 11:50:11 AM

The OEX is attempting to get over its first hurdle in any attempt to steady and climb: potentially strong resistance on 30-minute closes at about 501.08. The OEX hasn't been able to sustain a 30-minute close above that particular resistance level all day, so it would be a slight change in tenor to see sustained closes above that Keltner level followed by bounces that turned that support higher. It's of course not a given that such an improvement in tenor will happen. OEX at 500.78 as I type.

Jeff Bailey : 10/7/2008 11:43:12 AM

StreetTracks Gold (GLD) $86.71 +2.88% ... now a 10-minute interval with QCharts' WKLY Pivot Levels turned on. Here we see another overlap at $85.00. Link

Linda Piazza : 10/7/2008 11:41:02 AM

The delayed Bloomberg feed for the TED spread now shows a value of 3.35, significantly off the 3.91 high of the day although of course still sky high.

Linda Piazza : 10/7/2008 11:38:58 AM

The A/D line has now dropped to potentially strong support near -750 and then at -1075. It's -781 as I type, with a day's low of -1012, reached a few minutes ago. Like the OEX, it needs to bounce from one of these or the potentially bullish short-term tenor, already questionable, will be invalidated.

Linda Piazza : 10/7/2008 11:36:06 AM

The OEX barely, just barely, closed that last 15-minute period above that potential support on 15-minute closes now at 498.05. As I said in an earlier post, the OEX needs to climb soon above potential Keltner resistance that was then near 506 but is now at 505.64. It's got another hurdle to cross first, though, as 30-minute closes have been mostly below potential resistance on 30-minute closes at about 501.50. It needs sustained 30-minute closes above that level. The OEX is 499.61 as I type, and something needs to happen soon or bears are going to take over.

Jane Fox : 10/7/2008 11:27:33 AM

The FED's does not have the mandate to step into the Commercial Paper market and make unsecured loans so it will need the Treasury to guarantee and losses. The FED and the Treasury are consulting with market participants on how to provide support to the Commercial Paper market - legally.

Keene Little : 10/7/2008 11:26:33 AM

With new daily lows it's time to lower stops on short plays to this morning's bounce high near 10:30 AM. A rally above that level from here would leave this morning's pullback is just a corrective 3-wave move and we could see another rally leg equal to the one off yesterday's low.

Jeff Bailey : 10/7/2008 11:24:45 AM

The "reason" the preferred is important (in my opinion) is it gives us a view of what MARKET PARTICIPANTS think about the future, and a retail realestate operator. The preferred can be converted into stock. The preferred pays a 6.00% dividend.

Jeff Bailey : 10/7/2008 11:20:51 AM

Simon Property Group (SPG) $78.04 -3.93% ... closed out the Oct. puts yesterday, but this stock and that preferred that could be converted still a good one to monitor. Set to test yesterday's lows.

Linda Piazza : 10/7/2008 11:18:32 AM

And the OEX is indeed approaching that next support level on 15-minute closes that I mentioned in my 11:05:57 post. It needs to steady soon and bounce up through potential resistance on 15-minute closes now at about 506 or it's going to invalidate the potentially bullish setup. OEX at 500.06 as I type.

Jane Fox : 10/7/2008 11:16:08 AM

...but the VIX is still bullishly hovering at daily lows.

Jeff Bailey : 10/7/2008 11:15:46 AM

StreetTracks Gold (GLD) $68.42 +2.53% ... with QRTRLY Pivot retracement (dark green) and MNTHLY Pivot retracement (dark purple) on 60-minute intervals Link

Jane Fox : 10/7/2008 11:14:49 AM

AD line has now fallen to below 0 at -500.

Jane Fox : 10/7/2008 11:10:28 AM

Bank of America's quarterly profit fell by 68% from a year ago and many Wall Street analysts think this is only the beginning. BOA is pessimistic on the outlook for the consumer credit and expect losses to accumulate well into 2009.

This is going to be the tone for many many months to come.

Linda Piazza : 10/7/2008 11:05:57 AM

An OEX test of potential support on 15-minute closes now at 498.93 can't be ruled out, although so far, higher potential support on 15-minute closes near 501.40 has been holding.

Linda Piazza : 10/7/2008 11:00:31 AM

The price action setup is potentially bullish for the OEX and Jane has mentioned the falling VIX, but something else isn't as bullish: the A/D line. It fell below the Keltner support and below the potential historical support at 400 and it's now moving sideways. It looks as likely to drop toward about -700, potential support, as it does to climb toward about +740, potential resistance. Given that it as in breakout mode and tumbled below breakout mode, this chart gives a slight nod to more weakness, although that's not a given. It's at -197 as I type. Bears should watch for potential support at -700 if it's hit, but bulls don't want it to be hit at all. They should watch for ptoential resistance at about +740.

Keene Little : 10/7/2008 10:53:26 AM

On the Square of Nine chart that I discussed in last night's chart, moving 180 degrees around the wheel from yesterday's 1008 low gives us 1072. This morning's high so far is 1072.91. This is another reason why a push to a new daily high would be potentially bullish.

Jane Fox : 10/7/2008 10:52:55 AM

The VIX is testing daily lows telling me the bulls have at least some control today.

Linda Piazza : 10/7/2008 10:51:15 AM

The OEX is still churning, as the charts setup lead us to expect it to do. It's so far finding support on 30-minute closes above 500.21 and, on 15-minute ones, at 501.47. It's also so far finding resistance on 15-minute closes, other than a single instance, below resistance now at about 506.65. The OEX needs to sustain 15-minute closes above that, not just pop above it and pop back down again, before anything has changed to the upside, and needs to sustain 15-minute closes beneath 499.30 before anything has changed to the downside.

The setup is a potentially bullish one, but it's not confirmed and, many times, such confirmation doesn't come or proves false when it does in such an environment, so bulls shouldn't count on confirmation.

Jeff Bailey : 10/7/2008 10:51:43 AM

StreetTracks Gold (GLD) $86.61 +2.76% ... daily interval chart with two (2) conventional use of retracement Link ... where current level of trade more BULLISH than a BEAR wants to see. If we close ABOVE $86.47/$86.31 overlap, I'll establish a stop on the GLD-WD.

Jeff Bailey : 10/7/2008 10:40:57 AM

Monitoring gold as depicted by the StreetTracks Gold (GLD) $86.56 +2.69% here this morning. (chart to follow)

Linda Piazza : 10/7/2008 10:34:16 AM

If I were looking at an equity chart that looked like this TED spread one, I'd say that climb looked suspiciously like a rising wedge, a formation that usually but not always breaks to the downside. We can only hope it does. Here's the chart, a chart of the TED spread chart over the last month (not including today's values): Link

Jeff Bailey : 10/7/2008 10:31:07 AM

10:00 Internals found at this Link

Linda Piazza : 10/7/2008 10:30:54 AM

Per Bloomberg's delayed quote, the TED spread is 3.52. I've previously posted the link to this but wanted to show it again for those who would like to follow it themselves: Link

Keene Little : 10/7/2008 10:29:51 AM

Yesterday SPX broke below its support trend line along the lows since August (after the August high) which is now acting as resistance. That's another reason to not be thinking about the short side if the market rallies higher today. That would then open up the possibility for gap closure (at 1099) and even up to its downtrend line from September 19th, currently near 1150. 60-min chart update: Link

Linda Piazza : 10/7/2008 10:27:29 AM

It felt a bit foolish earlier today to keep warning that the OEX could still pull back toward 499-501 (with numbers varying a bit as these dynamic levels reacted to the OEX's move) but it's happened after all. What next? The chart setup is that the OEX might now chop between the day's high and the day's low for a while before we know the answer to that. Sustained 30-minute closes above about 505, confirmed by sustained 15-minute closes above 506.80, would suggest a continued bounce attempt. Sustained 15- and 30-minute closes beneath 499 would suggest more downside.

Jeff Bailey : 10/7/2008 10:25:03 AM

13-week 0.79% ... per prior market wrap and the 1.0% level. What we've seen this morning is like pouring some Drano in the drain. Will it unclog? Or does the garbage disposal need to be turned on?

Linda Piazza : 10/7/2008 10:24:29 AM

I don't want to represent myself as an expert. I know others who made much money while I was working so hard for that $133 profit this month. I'm still learning, still representing those of you out there who are self-taught traders. All I know for certain is that shame and recriminations, either of yourself or others, doesn't move you forward. There are many ways of looking at high-probability condors, and letting them just play out is one. It often results in bigger gains than I make, offsetting the bigger losses that occasionally hit, too. It's not the method for me, though. It undermines my confidence in myself and my trading and I tend to be too cautious lately as it is. So cautious in fact that I'm employing another tactic that I learned long ago for November: cash is a position, too. These days, all I'm doing is a little scalping here and there, not feeling like putting anything else at risk in a volatile period when I know that life circumstances are frequently going to pull me away from the markets.

Jeff Bailey : 10/7/2008 10:23:36 AM

YM day traders will monitor the 9,895 level here this morning. Bulls and bears want to see a test.

Jane Fox : 10/7/2008 10:20:33 AM

We were sitting on a tinder box and the fall of Lehman was the firecracker that set it off. Right after Lehman fell money markets "broke the buck" and the Commercial Paper Market started to cease up. I think if the government and JPMorgan had not helped Bear we would have been where we are now months ago.

Keene Little : 10/7/2008 10:19:19 AM

The bounce off yesterday's low, as sharp as it is, is so far just a 3-wave move and therefore fits as just a correction. There's already overlap between the high near 3:30 PM yesterday and this morning's pullback which leaves the bounce as a 3-wave correction. Now it's a matter of figuring out if the correction will get larger, go sideways (maybe a triangle) or is finished. That's why short against this morning's high is the recommendation for now until I see what develops from here.

Linda Piazza : 10/7/2008 10:20:08 AM

(Continuation of discussion of condors/credit spreads.) I wanted to let you know what I did yesterday. Because markets were trending down, I've done mostly bear call spreads on rally periods and few bull put ones. In fact, I did not place a bull put spread for OCT until 9/15, when markets had swung down to test a long-term trendline. I placed 25 SPX 1030/1020's at that time, and that's it. In previous times I would have between 75-110 full condors, but one way I managed risk this month was to change that proportion: hence, only 25 bull put spreads. Then, in late September, when the SPX began breaking beneath the long-term trendline that I had used as a basis for entering the position, I hedged. I did so by looking at the deltas of the full position (many brokerages will show you this or you can calculate it) and then by buying November puts that would equalize the deltas. In my case, at the time I originally hedged, I was negative about -50 deltas and I hedged with two NOV 1040 puts, about +50 deltas, so the deltas were about zero. For the time being, for a short-term period at least, I wasn't in too much danger from a downside move. Of course, an upside move would hurt my hedge, and I did go through some time when the hedge was losing money. I had calculated, however, that it wasn't going to completely hedge my position, so I had a plan for handling a swift downturn like yesterday's. I figured I could either add to the November 1040's as the markets went down or I could keep the 2 I had in place while I closed out my OCT bps in tranches. The second is what I did. I closed out my OCT bps in lots of 8, 8 and 9 as the markets went down, and I sold my November 1040's, with their gain in price somewhat masking the other losses. If I'd waited until the sold strike was violated, however, it wouldn't have done so.

So I worked hard in October and came up after all that work with a profit . . . of just under $133. However, I know many of you would be glad to have that $133. I can remember times when I would have been glad, too, but it's because of those times that I learned some things that helped. Hedging is an imperfect way to deal with things, but I didn't want to go into the weekend without a hedge, and I'm certainly glad it was there.

So, if you've had losses, have hope, too. Initiate your own search. Figure out what works for you.

Keene Little : 10/7/2008 10:13:39 AM

This morning's decline has an impulsive look to it so a bounce back up should lead to a lower high and then continue lower again. We could start back down from here or consolidate for a day before heading lower (which would likely be marked with some rather large and volatile swings). Short against this morning's high is the recommendation so far. Any higher than that and we'll see yesterday's gaps getting penetrated.

Linda Piazza : 10/7/2008 10:07:46 AM

(Continuation of discussion about condors/credit spreads.) In addition to varying my risks more by employing other types of trades that benefit from an increase in volatility while condors suffer from them, and other such techniques, I've learned when to start closing out my positions when things start going wrong. I use deltas on the sold strikes to decide when I should begin closing those positions. You can go to CBOE and listen to some webinars by Dan Sheridan and learn more about this technique. That gave me the road map I needed, and, furthermore, allowed me to control the emotion associated with positions that were going wrong. (To be continued.)

Linda Piazza : 10/7/2008 10:02:50 AM

(Continuation of discussion about condors/credit spreads.) If you suffered a big loss this month, let that loss prod you into a similar search. What I found was a way of deciding when to close out positions, both when they were doing well (important) and when they weren't. On days when we've had big downdrafts or big rallies, many of you have read my reminders to check your bear call spreads or bull put spreads to decide whether you could close them out and keep most of your profit, removing risk. (To be continued.)

Jeff Bailey : 10/7/2008 10:02:03 AM

Federal Reserve and other central banks announce schedule for term and forward auctions of U.S. dollar liquidity for Q4 ... Federal Reserve Statement Link

Jane Fox : 10/7/2008 9:58:56 AM

DOW is now back under 10,000.

Linda Piazza : 10/7/2008 9:58:31 AM

(Continuing the discussion about condors/credit spreads.) I also want to offer hope, however. My life is such that I need a trading style such as the income-producing trades like condors, calendars, double diagonals, butterflies and all those sorts of trades, so what to do? It was a after a big loss that I went on a search to learn how to better handle risk. I needed a roadmap, some guidelines that worked for me. A big loss turned out to be the best thing that happened, as I found a way of handling these things that works for me and helps me limit risks. (To be continued.)

Linda Piazza : 10/7/2008 9:57:24 AM

I know that many of our subscribers trade condors or just credit spreads. I know some must have lost money this month, and I want you to know that my sympathies go out to you. I've been caught in other market turmoils in the past. Our way of trading can be productive month after month after month, but credit spreads are terrible to handle in markets such as the ones we've had lately. (I'll continue this in the next post, so this isn't too long to read.)

Jeff Bailey : 10/7/2008 9:56:00 AM

Federal Reserve Announce Creation of CPFF ... Federals Reserve Statement Link

Jeff Bailey : 10/7/2008 9:54:07 AM

13-week Yield ($IRX.X) up 39 bp at 0.8% ... more of an "unclogging" sign.

Jane Fox : 10/7/2008 9:53:01 AM

Amazing how quickly the bulls can run out of steam. They have not even been able to break their overnight highs. Link

Keene Little : 10/7/2008 9:52:53 AM

At the rate the Fed and Treasury are moving I can foresee an effort to buy unsold inventory from companies so that they can be recapitalized and keep people working, producing more goods that people aren't buying. Then they'll pay for more storage space where inventory will become obsolete and have to be written off. The Fed is into unchartered waters with the buyout of commercial paper and while in theory it should help loosen up credit I think this problem is way too big for even the mighty Fed and American taxpayer. An increase in commercial loan defaults (along with credit card and car loan) is the next shoe to drop and buying commercial paper could leave US without a chair when the music stops.

Linda Piazza : 10/7/2008 9:52:06 AM

I am trying to post as much as possible today, but will have blocks of time when I'm away from the office. The need to be away frequently will unfortunately increase over the coming months, but I am trying to be here as much as possible right now, while markets and, probably, our subscribers, are under great duress.

Linda Piazza : 10/7/2008 9:48:44 AM

OEX bulls: don't yet completely rule out the possibility of a pullback. A pullback toward 505-505.75, and maybe even 499.65-501.15, is still a possibility if not a given.

Linda Piazza : 10/7/2008 9:46:57 AM

The TRAN is gaining strongly. Unlike some other indices, the TRAN's late afternoon intraday low yesterday was a higher low, not a lower low.

Keene Little : 10/7/2008 9:45:26 AM

I liked one of the comments to this morning's news that the Fed will buy unsecured commercial paper (what the heck, it's only another trillion dollars, at least, on taxpayers' backs):
Next breaking headline: "Federal Reserve to buy all unsold Girl Scout Cookies!"

Linda Piazza : 10/7/2008 9:45:23 AM

The A/D line is now bouncing from that potential support now at 595. RSI is already sky-high, however, at 96.60. This means that bullish traders should remain on their toes, but it doesn't guarantee that either the A/D line or the RSI will pull back. It means that, currently, momentum to the upside is at an extreme. Whether it will stay there or not, we don't yet know. So far, the direction of the action favors bulls, but you just want to keep adjusting your what-if profit-protecting plans. A/D line now 1198.

Jane Fox : 10/7/2008 9:44:30 AM

AD line opens in the bull's corner at -1176 and the VIX is falling.

Linda Piazza : 10/7/2008 9:40:03 AM

Keltner outlook on the A/D line: The A/D line went into breakout mode this morning first thing, which is always a bit iffy of a setup. It's the type of setup seen on a pop-and-drop day but it's also the kind seen on a strong momentum day. The A/D line is currently testing likely support at about 575 on 15-minute closes with further historical and trendline support near 400. Bulls don't want to see it drop much further than 400, though. It's currently 594.

Linda Piazza : 10/7/2008 9:38:18 AM

In normal trading conditions, the OEX would likely pull back now toward support levels now at 499-501.30. (They are dynamic and change a little as prices move.) These are not normal trading conditions, so I'm not sure what weight to give the predictions being made on these charts.

Linda Piazza : 10/7/2008 9:36:46 AM

Jane, I hadn't even read your request for an update on the TED spread, but our minds were focusing the same direction at the same time. CNBC has been talking about other spreads this morning, their favored ones, and it seems some of those are drawing back, too, although I'm not familiar with theirs. When I was first doing research for the TED spread, it seemed that everyone had a favorite spread to watch.

Linda Piazza : 10/7/2008 9:35:10 AM

The OEX didn't leapfrog as high as I thought it would in early trading, and it's only now testing potentially strong resistance on 30-minute closes now pushed up to about 506. The OEX is just above that, but the possibility of finding resistance somewhere between here and the resistance now at 507.20 on 15-minute closes exists, with a resultant pullback toward 499.50-501.40 exists, so keep it in mind. It's not a given but is more of a possibility than futures had suggested.

Jeff Bailey : 10/7/2008 9:33:11 AM

European Markets: Link

Jeff Bailey : 10/7/2008 9:32:40 AM

Asian Markets: Link

Linda Piazza : 10/7/2008 9:32:25 AM

Bloomberg's TED spread quote is delayed but it is currently 3.56. That's still sky high, but well off this morning's 3.91 high. Let's see what develops. Don't use this as a timing tool because its history is spotted the last few years at TED spread peaks and is a better predicting tool at the troughs. Do use it as a sort of market breadth indicator.

Jane Fox : 10/7/2008 9:31:51 AM

LInda, will you give us an update on the TED spread if you can. I would like to know if it has come down at all. I'm thinking that it has not and why the FED moved to buy Commericial Paper.

Linda Piazza : 10/7/2008 9:27:09 AM

Jane has mentioned some of the events for today, with any of those likely to impact trading conditions. Make those trading decisions with that reality in mind.

Futures are higher this morning. I wanted to start with the daily chart, noting that it shows potentially strong resistance on daily closes at 514.75-517. Traders on the bullish side might exercise particular caution if that level is hit.

Intraday charts show the OEX ending the day jammed against likely resistance in the 505.90-507.50 zone, with the setup at that time looking as if the OEX might be most likely to pull back and spend some time testing the 498-501 zone before attempting another bounce. That's been changed, of course, by the premarket actions, with the OEX now looking likely to leapfrog over that resistance this morning.

Remain watchful, however, for a pop-and-drop scenario, always keeping your stops up-to-date, just in case the scenario that had looked most likely does indeed play out with some sellers waiting on any early pop higher. If, however, the OEX can maintain 30-minute closes above about 506, then startw watching that next resistance level beginning near 515 and extending up to 520.

Jane Fox : 10/7/2008 9:22:19 AM

Now this is a smart move.

Jane Fox : 10/7/2008 9:21:13 AM

WASHINGTON (MarketWatch) -- The Federal Reserve announced Tuesday it is going to buy commercial paper in an effort to restart a market that has virtually shut down in recent weeks. In another unprecedented move to combat the credit crunch, the Fed said it would set up a special purpose vehicle to purchase three-month unsecured and asset-backed commercial paper. Lending in the commercial paper market has shrunk in recent weeks given the turmoil in U.S. financial markets. The Fed said that the Bush Administration believed the move was necessary and will make a special deposit with the central bank to support the facility. "By eliminating much of the risk that eligible issuers will not be able to repay investors by rolling over their maturing commercial paper operations, this facility should encourage investors to once again engage in term lending in the commercial paper market," the Fed said in a statement. The Fed did not give an estimate of how much commercial paper it would purchase.

Jane Fox : 10/7/2008 9:20:15 AM

Remember yesterday when I was talking about Commercial paper and the Commercial Paper Market. I was saying one of the reasons the government acted so quickly was because this market had virtually ceased up and the Commercial Paper market is the grease that keeps the wheels of economy running.

Today the FED announced it is going to buy commercial paper in an effort to restart the market.

Keene Little : 10/7/2008 9:17:24 AM

Equity futures had a lot of volatility overnight and even pre-market as futures dropped to their overnight lows just before 9:00 AM and then got jammed higher (DOW futures ramped almost 150 points in about 10 minutes) as we head for the open. I never trust that kind of move just before the open as it's too easy to push futures around in light volume so be careful of the gap up this morning.

Jane Fox : 10/7/2008 8:57:22 AM

At 9:30 ECB President Trichet Speaks

At 11:00 FOMC member Stern speaks

AT 1:15 FED chariman Bernanke speaks

2:00 FOMC minutes are released.

Jane Fox : 10/7/2008 8:55:32 AM

Good morning everyone. Here are your overnight charts. They don't give me a lot of warm and fuzzes that the markets are going to rebound today. Link

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