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Keene Little : 10/10/2008 12:37:53 AM

Friday's pivot table: Link

Asian markets are down hard tonight and that has dragged our futures down hard. DOW futures dropped more than 300 points and currently sit about -250 points (-2.9%). ES is down a -30 points (-3.2%). I have no idea what tomorrow morning will bring but it's says we could gap down again and maybe get the capitulation flush. But the EW pattern would look best with a bounce that stays below the Thursday morning low and then a final new low before we'll see a setup for a bigger bounce into next week. So be careful with any v-bottom recovery off a morning flush (if we get one).

Just one chart tonight and then a Gann Square of Nine update. Using the SPX 60-min chart, I've removed all EW labeling and price depictions in order to stress the point to keep it simple here. Price is marching down a tight and sharp parallel down-channel so stick with it until it's broken. The bottom of the channel is near 890 tomorrow morning (tonight's futures hint of that breaking) and the top of the channel is at 976. The trend is your friend (or your enemy if on the wrong side): Link

Since we're into territory where it's hard to find potential support levels (the market has sliced right through them, including the last one I was showing on the charts at a Fib projection at 925), I looked at the Gann Square of Nine chart again to see what numbers we want to keep an eye on. I pointed out in previous Gann charts the fact that 768 (2002 low) and 1576 (2007 high) squared out to each other by 6 cycles around the circle.

I was then looking at 1005 on Monday since it squared out to both numbers. SPX bounced off that level on Monday before dropping lower on Tuesday. The next full cycle around the circle brings us to 882 and that's where ES is cycling around this evening. If that doesn't hold then 90 degrees from 882 is 852 and another 90 degrees is at 824. These are highlighted in the section of the Gann chart shown here: Link

One more full cycle around the circle from 882 is of course 768, back to the 2002 low. Could we really get there before we get a bigger bounce? I think we could get there this year but not from here. Of course I didn't think we'd drop this low this quickly so I'm not going to argue with price. Follow the down-channel. KISS.

Keene Little : 10/9/2008 11:45:46 PM

Tab makes some good points about the previous bear market and comparing the current decline. I don't want to be argumentative but I'd like to make two points for something else to consider. As for comparing the current decline to the 2000-2002 decline, the current one is impulsive whereas the 1st leg down from 2000 to 2002 was more corrective. In a nutshell that means the next bounce we'll get will be a relatively shallow 4th wave correction vs. a stronger b-wave kind of rally in the 1st leg down. So there's a difference from an EW perspective between the two declines.

Second, historically speaking, bear markets don't end until P/E ratios are down in the 7-8 range. This usually happens through improvement in company earnings while stock prices remain low (people become uninterested in owning stocks and therefore stock prices remain low). This takes a few years to establish the lower P/E ratio. No bull market in history has started from a P/E ratio returning to the mid range (12-15). It has always swung from overvalued (above 20) to undervalued (below 10) before the next generational shift from a bear market to a bull market.

Tab Gilles : 10/9/2008 11:07:12 PM

Looking at the 2000/2003 SPX decline as compared to the last year. Unbelievably similar patterns!

Could we get a capitilation day tomorrow?

If so I would estimate a 25% rally in coming weeks bring ing the SPX upto it's 50-ma.

Followed by another decline based on revised earnings and recession data in coming months.

That said, comparing P/E ratio levels now & then.... Right now the S&P is trading at about 12Xs. Historically, the SPX has traded an average of 15XS...okay but you say how about adjusting for forward earnings . Well...even if you take say a 20% cut in earnings it would equate to 15Xs. If you factor in my 25% rally here that would put the 12Xs upto 15Xs.

2000 - present SPX: Link

Lets see what happens with the G-7 meeting and over the Columbus Day weekend. The rising LIBOR rate is killing the market, what is expected to comeout of the G7 is a guarantee of interbank loans in the capital market. That SHOULD bring down the LIBOR rate!

What we have going now as compared to previous market crashes is, a low inflation rate [at least for now], low p/e ratios on the SPX and declining commodity prices.

OI Technical Staff : 10/9/2008 9:59:59 PM

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

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Jeff Bailey : 10/9/2008 8:09:35 PM

Asian Markets Link

Jeff Bailey : 10/9/2008 8:07:44 PM

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

Jeff Bailey : 10/9/2008 7:47:45 PM

Closing Internals at this Link

Tab Gilles : 10/9/2008 6:22:55 PM

1929 - The stock market crash ushered in the Great Depression.

What made the stock market crash? Here's a brief summary.

Capital is the tools needed to produce things of value out of raw materials. Buildings and machines are common examples of capital. A factory is a building with machines for making valued goods. Throughout the twentieth century, most of the capital in the United States was represented by stocks. A corporation owned capital. Ownership of the corporation in turn took the form of shares of stock. Each share of stock represented a proportionate share of the corporation. The stocks were bought and sold on stock exchanges, of which the most important was the New York Stock Exchange located on Wall Street in Manhattan.

Throughout the 1920s a long boom took stock prices to peaks never before seen. From 1920 to 1929 stocks more than quadrupled in value. Many investors became convinced that stocks were a sure thing and borrowed heavily to invest more money in the market.

But in 1929, the bubble burst and stocks started down an even more precipitous cliff. In 1932 and 1933, they hit bottom, down about 80% from their highs in the late 1920s. This had sharp effects on the economy. Demand for goods declined because people felt poor because of their losses in the stock market. New investment could not be financed through the sale of stock, because no one would buy the new stock.

But perhaps the most important effect was chaos in the banking system as banks tried to collect on loans made to stockmarket investors whose holdings were now worth little or nothing at all. Worse, many banks had themselves invested depositors' money in the stockmarket. When word spread that banks' assets contained huge uncollectable loans and almost worthless stock certificates, depositors rushed to withdraw their savings. Unable to raise fresh funds from the Federal Reserve System, banks began failing by the hundreds in 1932 and 1933.

By the inauguration of Franklin D. Roosevelt as president in March 1933, the banking system of the United States had largely ceased to function. Depositors had seen $140 billion disappear when their banks failed. Businesses could not get credit for inventory. Checks could not be used for payments because no one knew which checks were worthless and which were sound.

Roosevelt closed all the banks in the United States for three days - a "bank holiday." Some banks were then cautiously re-opened with strict limits on withdrawals. Eventually, confidence returned to the system and banks were able to perform their economic function again. To prevent similar disasters, the federal government set up the Federal Deposit Insurance Corporation, which eliminated the rationale for bank "runs" - to get one's money before the bank "runs out." Backed by the FDIC, the bank could fail and go out of business, but then the government would reimburse depositors. Another crucial mechanism insulated commercial banks from stock market panics by banning banks from investing depositors' money in stocks.

Tab Gilles : 10/9/2008 6:01:43 PM

History of U.S. Stock Market Crashes --------------------------------------------------------------------------------

The Crash of 2000

From 1992-2000, the markets and the economy experienced a period of record expansion. On September 1, 2000, the NASDAQ traded at 4234.33. From September 2000 to January 2, 2001, the NASDAQ dropped 45.9%. In October 2002, the NASDAQ dropped to as low as 1,108.49 - a 78.4% decline from its all-time high of 5,132.52, the level it had established in March 2000.

Causes of the Crash:

Corporate Corruption. Many companies fraudulently inflated their profits and used accounting loopholes to hide debt. Corporate officers enjoyed outrageous stock options that diluted company stock;

Overvalued Stocks. There were numerous examples of companies making significant operating losses with no hope of turning a profit for years to come, yet sporting a market capitalization of over a billion dollars;

Daytraders and Momentum Investors. The advent of the Internet enabled online trading ?a new, quick, and inexpensive way to trade the markets. This revolution led to millions of new investors and traders entering the markets with little or no experience;

Conflict of Interest between Research Firm Analysts and Investment Bankers. It was common practice for the research arms of investment banks to issue favorable ratings on stocks for which their client companies sought to raise capital. In some cases, companies received highly favorable ratings, even though they were actually in serious financial trouble. A total of 8 trillion dollars of wealth was lost in the crash of 2000.

Following the Crash:

New Rules for Daytraders. Under the new rules that were introduced, investors need at least $25,000 in their account to actively trade the markets. In addition, new restrictions were also placed on the marketing methods daytrading firms are allowed to use;

CEO and CFO Accountability. Under the new regulations, CEOs and CFOs are required to sign-off on their statements (balance sheets). In addition, fraud prosecution was stepped up, resulting in significantly higher penalties;

Accounting Reforms. Reforms include better disclosure of corporate balance sheet information. Items such as stock options and offshore investments are to be disclosed so that investors may better judge if a company is actually profitable;4. Separation between Investment Banking and Brokerage Research. A major reform was introduced to avoid conflicts of interest in the financial services industry. A clear split between the research and investment banking arms of brokerage houses was mandated. The Crash of 1987

The markets hit a new high on August 25, 1987 when the Dow hit a record 2722.44 points. Then, the Dow started to head down. On October 19, 1987, the stock market crashed. The Dow dropped 508 points or 22.6% in a single trading day. This was a drop of 36.7% from its high on August 25, 1987.

Causes of the Crash:

No Liquidity. During the crash, the markets were not able to handle the imbalance of sell orders;

Overvalued Stocks;

Program Trading and the Use of Derivative Securities Software. Large institutional investment companies used computers to execute large stock trades automatically when certain market conditions prevailed. Some analysts claim that the program trading of index futures and derivatives securities was also to blame. During this crash, 1/2 trillion dollars of wealth were erased.

Following the Crash:

Uniform Margin Requirements. New margin requirements were introduced to reduce the volatility for stocks, index futures, and stock options;

New Computer Systems. Stock exchanges changed to new computer systems that increase data management effectiveness, accuracy, efficiency, and productivity;

Circuit Breakers. The New York Stock Exchange and the Chicago Mercantile Exchange instituted a circuit breaker mechanism, which halts trading on both exchanges for one hour should the Dow fall more than 250 points in a day, and for two hours, should it fall more than 400 points. The Crash of 1929

On September 4, 1929, the stock market hit an all-time high. Banks were heavily invested in stocks, and individual investors borrowed on margin to invest in stocks. On October 29, 1929, the stock market dropped 11.5%, bringing the Dow 39.6% off its high.

After the crash, the stock market mounted a slow comeback. By the summer of 1930, the market was up 30% from the crash low. But by July 1932, the stock market hit a low that made the 1929 crash. By the summer of 1932, the Dow had lost almost 89% of its value and traded more than 50% below the low it had reached on October 29, 1929.

Causes of the Crash:

Overvalued Stocks. Some analysts also maintain stocks were heavily overbought;

Low Margin Requirements. At the time of the crash, you needed to put down only 10% cash in order to buy stocks. If you wanted to invest $10,000 in stocks, only $1,000 in cash was required;

Interest Rate Hikes. The Fed aggressively raised interest rates on broker loans;

Poor Banking Structures. There were few federal restrictions on start-up capital requirements for new banks. As a result, many banks were highly insolvent. When these banks started to invest heavily in the stock market, the results proved to be devastating, once the market started to crash. By 1932, 40% of all banks in the U.S. had gone out of business. In total, 14 billion dollars of wealth were lost during the market crash.

Following the Crash:

The Securities and Exchange Commission (SEC) was established;.

The Glass-Stegall Act was passed. It separated commercial and investment banking activities. Over the past decade though, the Fed and banking regulators have softened some of the provisions of the Glass-Stegall Act;

3. In 1933, the Federal Deposit Insurance Corporation (FDIC) was established to insure individual bank accounts for up to $100,000.

Tab Gilles : 10/9/2008 5:30:42 PM

President to speak to the nation tomorrow @ 10 AM.

Jeff Bailey : 10/9/2008 5:23:47 PM

Hmmm... this might be an answer to why the SEC still allows ability to short at the bid.

Maybe they want to allow that in order to try and free up credit markets.

Say, a hedge fund won't buy any commerical paper from a Caterpillar because they aren't sure they'll be able to get "short enough" the stock in order to hedge it.

Maybe the SEC is thinking that by allowing traders to "short the bid" of stocks, they're hoping it will at least have some investors looking to buy commercial paper, even though the credit markets are tight.

Jeff Bailey : 10/9/2008 5:19:00 PM

Excellent, excellent point from CNBC trader regarding the "no short" and lifting of the "no short" rule today.

It SCREWED UP a lot of things. the "no short" had some doing what they wouldn't normally have to do to hedge their trade. Now they lift it, and they all "undo" what they did before.

In essence, I think the point was that today's action wasn't JUST the ability to short, but the "usually don't hedge like this" trade coming off.

That was the VIX.X observation I made at 12:22:51.

Jeff Bailey : 10/9/2008 5:12:13 PM

Mmmm ... that reminds me. I had a question on "how can I hedge my mutual funds where I can't trade futures or options in my IRA?"

Here's the ProShares product Link

Jeff Bailey : 10/9/2008 5:08:01 PM

Trade Blotter of CLOSED and still OPEN/Active Trades that I (Jeff Bailey) have made, or closed out this month. Link

Even without the YM short this afternoon, see how the one (1) HUM-MF provided some cushion to the 31 shares (31 x $40.25 = $1,247.75) 1/8 position in the DDM from yesterday?

I'm "very small" now as it relates to amount of capital currently in the OPEN position.

Anyhow ... a little "teach" with the "preach."

Tab Gilles : 10/9/2008 5:07:05 PM

For those who are CNBC viewers know that veteran trader Art Cashin has been telling viewers that he wanted to see- a big down day closing at its lows, followed by a down opening the next day and then a rally. He basically wants to see a classic capitulation day, hopefully on heavy volume. Will we see that tomorrow???? Maybe! This market is sooooo oversold, some stocks are at rediculous levels.

Joe Terranove on Fast Money believes the Fed should buy US stock futures.

Tab Gilles : 10/9/2008 4:59:58 PM

JPMorgan (JPM): $36.68 -$2.62 (6.67%)

WJPAI: close $6.80/$7.85 [Hit suggested STOP of $7.00 (-8.5%)

Tab Gilles : 10/8/2008 2:20:05 PM

JPMorgan/Chase (JPM) $42.60 +$3.29 (8.2%) WJPAI Jan. 2010 $45 Call entered 1/2 position $7.65, currently trading at $8.40 Bid/ $8.80 Ask. *NOTE set stop at $7.00

Jeff Bailey : 10/9/2008 4:44:17 PM

When you look at the Beetle's Balanced just since September 30, it really is amazing.

Jeff Bailey : 10/9/2008 4:42:56 PM

Excellent, excellent discussion on CNBC regarding rebalancing portfolios.

Over the last couple of days, that's been THE MAJOR advice I've been giving to those that I haven't heard from in years.

Tab Gilles : 10/9/2008 4:42:36 PM

Since October of 2007 market top.....

DJIA -40%; SPX -42%; NYSE -44%; NASDAQ -43%; NDX -44%; RUT 41%; WLSH 42.5%

30% of DJIA is down 50%; 75% of DJIA is down 25%; 25 out of 500 SPX stocks New Highs

Jeff Bailey : 10/9/2008 4:34:57 PM

As an example ...

Today you may have seen me SHORT the YM before we were stopped out of the DDM.

Now "pretend" you're a specialist, or a market maker and you're just getting hammered with sellers (long liquidators and short the bid). You've GOT to hammer the YM short in order to hedge market making activit at the bid.

Jeff Bailey : 10/9/2008 4:31:50 PM

Heck, for us YM traders, it "used to be" a decent YM trade was 40-points ($200.00/contract). Now you have give an entry THAT amount from the first entry.

Jeff Bailey : 10/9/2008 4:30:38 PM

Tab ... I think most agree (at least traders longs/shorts), and NOBODY can figure out why they don't.

One reason that many want the up-tick back in place is simply to ease some of the volatility (upsy/downsy) quick intra-day jerk.

Jeff Bailey : 10/9/2008 4:26:38 PM

Time calibration ... 04:24:00 PM EDT

Jeff Bailey : 10/9/2008 4:14:52 PM

VIX.X 64.44 +12.01% ... it did get the trade at QRTRLY R2.

Linda Piazza : 10/9/2008 4:12:10 PM

The OEX's 2002 low was 384.96. The OEX is only 47.07 points away.

Linda Piazza : 10/9/2008 4:11:05 PM

I thought I had posted this earlier, but see that I hadn't: So far this week, the OEX has moved covered a range 89.05 points wide. The only other week I can find on my charts (going back to '94) that's bigger was the week of 4/10/2000, when the range was 96.95 points. Give us another day of this, and we could beat it.

Jeff Bailey : 10/9/2008 4:08:52 PM

The OEX Link

Jeff Bailey : 10/9/2008 4:08:14 PM

The RUT.X Link ... really spectacular

Jeff Bailey : 10/9/2008 4:07:21 PM

Here's the SPX Link

Jeff Bailey : 10/9/2008 4:06:45 PM

Here's an INDU 8,683.76 -6.20% PnF chart, but here I show a 2% box size, where each box represenets a 2% move. Still use the 3-box reversal method of charting Link

Tab Gilles : 10/9/2008 4:06:21 PM

Jeff...I agree they should reinstate the uptick rule.

Tab Gilles : 10/9/2008 4:04:55 PM

WOW!!!! The Aussie/Yen trade...in free fall....as are commodities. Link

Keene Little : 10/9/2008 4:02:36 PM

From a short term perspective, today's decline looks like it needs a bounce and then new low to finish a 5-wave move down from this morning's high. That would mean one more new low tomorrow morning to then set up at least a larger bounce and potentially much larger.

Tab Gilles : 10/9/2008 3:59:39 PM

TED Spread 4.01%

Jeff Bailey : 10/9/2008 3:58:51 PM

GLD $90.10 +0.76% ...

Jeff Bailey : 10/9/2008 3:58:32 PM

FXE $136.07 -0.50%
FXY $99.74 -0.14%
FXB 171.06 -1.21%

Keene Little : 10/9/2008 3:58:28 PM

I stand corrected (thanks Allen)--Yom Kippur is today and ends at sundown.

Tab Gilles : 10/9/2008 3:58:27 PM

JPM $38.50 -$0.80 (2.04%)

WJPAI $7.10/$7.90

Tab Gilles : 10/9/2008 3:57:28 PM

USO 69.42 -3.04 (4.21%) UNG 29.96 +0.07 (0.23%)

Jeff Bailey : 10/9/2008 3:57:09 PM

It seems so crazy ... "lifting the short sale ban, but not reinstating the up-tick rule."

At times, I think it is some type of "trap" by the SEC.

Mr. Cox can't be that silly. Can he?

Tab Gilles : 10/9/2008 3:56:38 PM

Could this selling near the close be due to the lofting of short selling ban?

Tab Gilles : 10/9/2008 3:55:39 PM

$VIX 64.74 +7.16

$VXD 54.02 +2.75

$VXO 78.10 +10.09

$VXN 70.00 +6.73

$RVX 65.91 +3.97

Tab Gilles : 10/9/2008 3:52:22 PM

CT Gov. Rell asks banks to help small businesses Link

Keene Little : 10/9/2008 3:49:01 PM

I think the saying is "sell on Rosh Hashanah, buy Yom Kippur" and Yom Kippur is tomorrow. We'll see. Also, the market likes the number 7 and today marks the 7th down day and that sets up a reversal tomorrow. Think about taking some more bearish profits off the table today.

Jeff Bailey : 10/9/2008 3:46:51 PM

GLD 90.14 +0.80% ...

Linda Piazza : 10/9/2008 3:42:40 PM

What's scheduled for overnight sessions? In Japan, the Monetary Policy Meeting Minutes are released at the same time as Bank Lending and M2 Money Stock numbers, at 7:50 pm ET. Tomorrow morning beginning at 2:45, a couple of eurozone countries report industrial production numbers, but those don't include Germany's, and the ECB often operates around what Germany reports. At 7:00 am ET, Canada's unemployment numbers are reported and, at 8:30, their Trade Balance and NHPI. At 10:30, the Bank of Canada's Business Outlook Survey will be reported.

Of course, the G7 (Group of Seven Finance Members) may be the most important development, although the press will not be invited to the meeting. Developments or sporatic press conferences during the day could most certainly impact the markets, but it's impossible to tell what might be done or said.

Since Jane is struggling with connectivity issues today, I'll point out that we have our Trade Balance tomorrow morning at 8:30 am ET, with that number normally capable of moving the markets. The trade deficit is expected to narrow to $59.5 billion from the prior $62.2 billion.

Keene Little : 10/9/2008 3:41:11 PM

One of the reasons I thought SPX would find support near 1010, when I did the weekly projection back in August, was because of the uptrend line from 1990. The first chart I showed is using the Log price scale but when I switch to the Arithmetic price scale you can see the trend line drops down: Link . Still it didn't offer any support. But it's the weekly close that's important so the bulls need to drive it back up for a close on or above that line by tomorrow.

Jeff Bailey : 10/9/2008 3:40:04 PM

Humana (HUM) $33.22 -7.46% ...

Jeff Bailey : 10/9/2008 3:36:51 PM

HUI.X 280.51 -6.33% ... (see 03:36:09) and last night's wrap.

Linda Piazza : 10/9/2008 3:36:16 PM

For the second day this week, I've seen pop-and-drop potential show up on the A/D line, and it's been realized despite other chart setups that warned to protect bearish profits in case of a rally that could be around the corner. Sure wish I'd scalped some bearish trades while waiting for that non-existent rally to appear.

However, I still have to warn to be careful of how much bearish risk you carry overnight, just in case. I always get scared about portfolios weighted too far one direction or the other when the news is either unrelentingly dire or unrelentingly optimistic.

Jeff Bailey : 10/9/2008 3:36:09 PM

Test?

Jeff Bailey : 10/9/2008 3:35:59 PM

On the GLD-WD, I'm doing two (2) things. Same as initial thought on Tuesday "close above $87.41" and seeing GLD trade more with psychology of market.

Keene Little : 10/9/2008 3:34:54 PM

Back in the beginning of August I was making some projections for the bear market decline and I checked it several times because frankly I thought I was being too bearish. I use Fib price and time projections but it just looked too bearish. Here's the weekly chart from August 1st that I did and you can see I wasn't bearish enough: Link

Jeff Bailey : 10/9/2008 3:34:44 PM

NCC $2.21 -0.89% ... "miniscule" bullish position for my MM Profiles

Jeff Bailey : 10/9/2008 3:33:37 PM

WFC $26.42 -17.21% ...

Linda Piazza : 10/9/2008 3:33:08 PM

VIX still pushing higher, now well above yesterday's 59.06 high. There's potential resistance on 15-minute closes at 59.66, which the VIX looks as if it's clearing handily this 15-minute close, with the next potential target now 61.42. VIX at 60.27 as I type.

Jeff Bailey : 10/9/2008 3:33:07 PM

VIX.X 59.97 +4.24% ... as in, the PREMIUM of the put should be somewhat HIGHER than when we bought/profiled it.

Jeff Bailey : 10/9/2008 3:32:00 PM

Swing trade put exit alert! ... for the StreetTracks Gold GLD Nov. $82 Put (GLD-WD) at the bed of $2.75.

GLD $88.67 -0.83%

Keene Little : 10/9/2008 3:28:27 PM

I guess the market didn't like the news about GM. Not to worry, I'm sure the Treasury will nationalize them too.

Jeff Bailey : 10/9/2008 3:28:39 PM

I've got a "growing list" of stocks to put/short on a rally, but the rally still hasn't shown

Jeff Bailey : 10/9/2008 3:27:24 PM

Daimler (DAI) $32.32 -5.96% ... still looks expensive if S&P is citing concern over global downturn for autos.

Jeff Bailey : 10/9/2008 3:25:43 PM

CNBC ... S&P placing GM on credit watch negative

Jeff Bailey : 10/9/2008 3:22:56 PM

TRIED to help the DDM with the cover.

Jeff Bailey : 10/9/2008 3:22:40 PM

YM 8,895 ...

Jeff Bailey : 10/9/2008 3:22:14 PM

DDM Stop alert! $36.00

Jeff Bailey : 10/9/2008 3:21:53 PM

YM short cover alert!! ... 8,920

Keene Little : 10/9/2008 3:19:31 PM

What's scary is that the DOW's weekly chart is starting to take on the appearance of the banks' charts.

Jeff Bailey : 10/9/2008 3:17:35 PM

YM short lower stop alert! to 8,980.

YM 8,949

Linda Piazza : 10/9/2008 3:17:20 PM

When the OEX and other indices started breaking through support, the VIX broke up throug the descending trendline off yesterday morning's high. I had mentioned some potential targets and potential resistance levels this morning, but they've changed now. They're at 59.90 and 61.09, with the VIX at 59.40 as I type.

Jeff Bailey : 10/9/2008 3:16:51 PM

I don't like "trading against" the DDM long, but its pretty evident ...

Jeff Bailey : 10/9/2008 3:15:52 PM

YM short ... stop goes real tight at 9,050. Target 8,907

Jeff Bailey : 10/9/2008 3:15:07 PM

YM short alert! here at 8,990.

Keene Little : 10/9/2008 3:14:07 PM

Here's the same SPX 30-min chart with an ending diagonal pattern (descending wedge) which is supported by the bullish divergences and the corrective wave structure I'm seeing in this move down. Possibly another up-down sequence to finish tomorrow (at the 925 level): Link

Jeff Bailey : 10/9/2008 3:13:51 PM

GLD $87.67 -1.95% ... off its afternoon low of $87-ish.

Jeff Bailey : 10/9/2008 3:10:20 PM

YM 9,046 ... sticks its head back above DAILY S1. ONLY buyer here is a short locking in gain.

Linda Piazza : 10/9/2008 3:10:04 PM

Keene and I use completely different tools in our technical analysis, and we're echoing each other here.

Keene Little : 10/9/2008 3:10:01 PM

I've got a lower Fib projection at 925 but the bottom of a small parallel down-channel for this decline from Monday is now closer to 918, as shown on this 30-min chart: Link . But notice the bullish divergences on the chart--they'll either get negated or else we're into an ending pattern of some kind and we'll see a rally come flying out of this. That's why I'm urging caution for both sides at the moment.

Jeff Bailey : 10/9/2008 3:09:45 PM

See the YM volume on the move below 9,029 and DAILY S1. Now a bull NEEDS to see a bit of a "ramp" above. If the little bounce stalls there, and starts to give way, it goes DAILY S2 most likely.

Linda Piazza : 10/9/2008 3:09:18 PM

Please do not get complacent, however, if in bearish positions. Keep updating those profit-protecting plans and make decisions about the weighting of bearish positions you want to carry in your portfolio. Markets could keel over and we could wake up tomorrow morning with crashing markets--so you bulls need to know what you're willing to carry overnight, too--but sometimes when we see this "it should bounce" signs set up all day one day without any bounce, the bounce is merely postponed.

Linda Piazza : 10/9/2008 3:07:12 PM

So much for strengthening Keltner support, Keltner-style bullish divergences and fitted Fib brackets that seem to work. Next potential support for the OEX, if this potential support on 15-minute closes now near 451 doesn't hold appears to be about 443.

Keene Little : 10/9/2008 3:05:46 PM

So much for a bounce. It's now looking like it could ugly again in the final hour. Just be careful at this point about a bear trap with a reversal into opex week.

Jeff Bailey : 10/9/2008 3:04:57 PM

NASDAQ 722/2,181

Jeff Bailey : 10/9/2008 3:04:46 PM

NYSE a/d 598/2,439

Jeff Bailey : 10/9/2008 3:04:12 PM

QQQQ $32.39 (unch) ... has given up its YM-Like 19.1% ... not bullish if this is the bull's leader.

Jeff Bailey : 10/9/2008 3:03:16 PM

YM 9,065 ... sets up for test of DAILY S1 and yesterday's S2.

Jeff Bailey : 10/9/2008 3:02:20 PM

Having booked $+1,323.79 so far this month, maybe we forgo the BIG premiums of a call option, go with the underlying.

Linda Piazza : 10/9/2008 3:01:20 PM

The TED spread is now 4.14, another all-time high, I believe, or at least a high compared to what I've been able to find on historical charts. It's certainly well above what occurred even in the 1987 debacle. However, as I've been warning for a while, SPX behavior at the spike high for the TED spread over the last year has been spotty. Sometimes the SPX is just getting rolling to the downside: sometimes it's already begun to steady and recover. The correlation has been stronger when the TED spread is hitting support and bouncing and the SPX, turning lower after a bounce.

Jeff Bailey : 10/9/2008 3:01:13 PM

Do you see how the HUM-MF helps "hedge" the DDM though?

Keene Little : 10/9/2008 2:59:57 PM

If SPX doesn't bounce here and instead drops below 957, a Fib extension from the previous bounce, it will likely drop to at least 941-945 where some Fibs reside based on the 2002-2007 rally (78.6% retracement) and a projection from the 1st leg down from last October. After that there's the Fib projection at 925.

Jeff Bailey : 10/9/2008 2:59:52 PM

DDM $37.70 -2.30% ... testing its DAILY S1 ($37.52) again. Daily S2 at $36.09 and that's probably not all that good for the 1/8 DDM as thin as this is.

IMPORTANT LEVEL HERE

Linda Piazza : 10/9/2008 2:58:58 PM

If the potential support on 30-minute closes doesn't hold, the OEX has potential support on 15-minute closes that extends down to 451.87.

Linda Piazza : 10/9/2008 2:56:39 PM

Potential support for the OEX on 30-minute closes at about 455.20. Potentially strong resistance on 30-minute closes that's held all day is at 461.71.

Keene Little : 10/9/2008 2:56:00 PM

I'm still liking the idea of a bounce back up this afternoon although it had better hurry up and get started.

Jeff Bailey : 10/9/2008 2:52:43 PM

So, I now KNOW the emerging markets aren't any stronger than they were on 10/6/08.

Jeff Bailey : 10/9/2008 2:52:04 PM

I closed out those EEM-VA as EEM traded $26.95.

Jeff Bailey : 10/9/2008 2:51:15 PM

EEM $25.93 -1.03% ... shows up #5 most active.

Jeff Bailey : 10/9/2008 2:49:56 PM

SMH $21.47 +1.84% .... has been "sloppy" either side of its WKLY S2 ($21.57). Here too, maybe a 2, or 3-day consolidation?

Jeff Bailey : 10/9/2008 2:47:45 PM

Maybe the QLD was/is the play.

See, maybe my "pschology" about the Q's is impacting me. Psychology more bearish, so I avoid what I think is risky?

Jeff Bailey : 10/9/2008 2:46:01 PM

Wellll .... maybe the Q's

Linda Piazza : 10/9/2008 2:46:54 PM

Hmm. If you anchor a Fib bracket to the OEX high on September 19 and the current low of today, the bracket finally, finally begins to make some sense, with the important retracement levels hitting near places where we saw S/R come into play on the way down, such as near 486-487, 504-507, 519-521. It's not a proof that the selling is finally done, but I've kept readjusting that bracket as the OEX moved lower since September 19, and it just never seemed to fit right, and now it does begin to fit a little better.

Again, not a sign that the markets are going to immediately rebound because perhaps ultimately there's going to be another better fit, but it's again another sign that those of you in bearish positions might want to readjust stops, consider locking in partial profits at least, those sorts of things.

Jeff Bailey : 10/9/2008 2:45:46 PM

5, 10 and 30's yield all higher, but EQUITIES still not responding.

Jeff Bailey : 10/9/2008 2:45:17 PM

GLD $87.34 -2.32% ...

Jeff Bailey : 10/9/2008 2:45:00 PM

FXE $136.68 -0.05% ... for those listening to that Excellent, excellent commentary/analysis for CNBC's Rick Santelli.

Jeff Bailey : 10/9/2008 2:41:48 PM

That "might make sense" as to what the BOJ can do with rates compared to the rest of the world.

Jeff Bailey : 10/9/2008 2:41:02 PM

One thing I forgot to mention yesterday, maybe you noticed it ... was the yen came back to par vs. the dollar at 100

Jeff Bailey : 10/9/2008 2:38:27 PM

QQQQ $32.78 +1.17% ... its 19.1% is at $32.49.

Jeff Bailey : 10/9/2008 2:37:56 PM

There ... maybe take a similar short-term retracement on the QQQQ like I did on the YM.

Jeff Bailey : 10/9/2008 2:36:36 PM

Yesterday, and even today at times ... I'll look at my US Market Watch, and it's something "Nasdaqy" that's in the green by more than 1%. Then I'll look back at is red.

Linda Piazza : 10/9/2008 2:36:01 PM

All day today, all OEX 30-minute closes have been below the 30-minute 9-ema, now at 462.22. All day today, all OEX 30-minute closes have been at or above the 30-minute support now at about 455.80.

Jeff Bailey : 10/9/2008 2:35:41 PM

INDU/DIA, SPX/SPY, OEX and RUT ... maybe a 1-day?

Jeff Bailey : 10/9/2008 2:35:03 PM

NDX/QQQQ might be in a 2-day consolidation.

Jeff Bailey : 10/9/2008 2:34:02 PM

YM 10-minute interval chart per my comments earlier. With QCharts' weekly and daily pivot levels turned on Link

Jeff Bailey : 10/9/2008 2:27:22 PM

DIA's is $107.00 ($1.00 inc.)

Linda Piazza : 10/9/2008 2:26:25 PM

The OEX again tests potential support on 30-minute closes, now at about 456.70. On 15-minute closes, it's thickening or firming near 452.16-454.35. I continue to see Keltner-style bullish divergences, but those of course have not meant anything as the OEX drifts slowly lower. They may not mean anything the rest of the day or even tomorrow, either, as the OEX could just keel over at some point, but they're there and they've offering a warning that, although prices are decreasing, the outlook may be improving. This absolutely would not be enough to ward off a collapse caused by bad news overnight.

Jeff Bailey : 10/9/2008 2:26:07 PM

HUM $34.30 -4.45% ... is $45 ($5 inc.)

Keene Little : 10/9/2008 2:25:58 PM

Basically the wave pattern is full of chop and therefore full of interpretations. It's not a good time for new trades.

Jeff Bailey : 10/9/2008 2:25:23 PM

UNG's "Max Pain" theory tabulation for October is $37 ($1 inc.)

Keene Little : 10/9/2008 2:25:20 PM

Today's price pattern has me thinking that we'll continue to consolidate which might mean another rally leg. The pullback from this morning's and the mid-day high is clearly corrective and that means we should not head for new lows from here. Therefore I consider the short side (day trading only) the riskier side at the moment. I think we'll get another leg up which may or may not break this morning's highs.

One other possibility, which will bring new lows, is that we'll chop lower in a descending wedge pattern. That would also set up a bigger rally into next week but not before chopping maginally lower for another day or so.

Jeff Bailey : 10/9/2008 2:22:56 PM

02:00 Internals found at this Link

Linda Piazza : 10/9/2008 2:18:47 PM

There's a real danger here if no big bounce occurs in the last two hours of trading. Both Keene and I mentioned the potential reversal signals produced by yesterday's candles. Obviously the rest of the potential reversal has not occurred. In my posts, I also mentioned that when the OEX and SPX are trending strongly, then tend to stall and produce 2-5 days of sideways candles before the trend resumes. The possibility arises then that this is just the pause before the trend resumes and not a potential reversal signal. Many signs have been gathering that it's time for a reversal--although only a relief bounce in my mind, but perhaps a fierce one--but that doesn't mean that one will occur right now.

Jeff Bailey : 10/9/2008 2:16:16 PM

Or you can look at it like a stock and use conventional PnF chart scale of $1.00 ($1.00 is used from $20 to $100) Link

Jeff Bailey : 10/9/2008 2:14:25 PM

StreetTracks Gold (GLD) $97.02 -2.68% ... $0.40 box to match futures (see 12:03:55) Link

Keene Little : 10/9/2008 2:12:57 PM

The market has gone dormant on us here. The DOW is down -120 points while NDX is up +11.5 points and everyone's standing around a bit shell shocked wondering what's the next shoe to drop.

Linda Piazza : 10/9/2008 2:08:10 PM

Absolutely sideways. After I'd mentioned that it was painful to watch this, Jeff reminded traders to know what they were going to do if the markets broke one direction or the other. I'd like to add that, if in front-month options trades, subscribers also need to know what they'll do if markets just trend sideways. If you're in front-month puts or calls, for example, the value of those might be decreasing as the markets trend sideways. If you're used to setting stops continent only on the price of the underlying, you might also want to closely watch how the value of your option itself is changing as option expiration next week gets nearer and nearer.

Jeff Bailey : 10/9/2008 2:03:32 PM

Are you GLD-WD traders monitoring GLD intra-day on your two different charts? Conventional and pivot? What is the MARKET trading?

Jeff Bailey : 10/9/2008 1:57:22 PM

Oh ... I should REALLY mention, that as part of YOUR current strategy and TRADES you have underway you MUST MAKE SURE WHAT YOUR BOTTOM LINE of CLOSED trades are.

Are you UP or are you DOWN? THAT WILL DICTATE WHAT YOU CAN, OR CAN'T do.

Jeff Bailey : 10/9/2008 1:54:14 PM

US Market Watch ... screen capture I just took. Focus on the the relationship between USO/OIX.X and GLD/HUI.X

Not just today's change, but what I like about QCharts' 5.01 version and ability to look at 5, 20 and YRNet%.

Linda Piazza : 10/9/2008 1:50:25 PM

The OEX potential support on 30-minute closes is weakening a bit. That's now at 457.48. The OEX needs to bounce up through potential resistance now at 464.53 and stay above that to strengthen the support again. Otherwise, it risks dropping down to 455.84 or even 452.08. Or, heck, even lower than that these days.

Jeff Bailey : 10/9/2008 1:47:39 PM

YM traders ... now that you've done that, you're probably not the LEAST bit interesting in looking long until it can get above 19.1%.

Jeff Bailey : 10/9/2008 1:38:05 PM

Ah ... talking about OPEC and cutting production.

Now, pretend you're an OPEC member and oil prices are falling. You've got some credit problems too. Do you cut? Or do you cheat?

Jeff Bailey : 10/9/2008 1:36:06 PM

YM traders ... do this ... Take your retracement from Monday's cash session high, to this morning's cash session low.

Jeff Bailey : 10/9/2008 1:33:36 PM

Anyway ... that my MM Profiles strategy.

Jeff Bailey : 10/9/2008 1:33:03 PM

DDM $38.39 -0.46% ... a 1/8 position here, is like 1/4 position long in the DIA.

With the bullish % where they are, I KNOW the market internals are VERY WEAK, but I also have an idea that the RISK favors a bull.

All the fed cuts, etc. won't be "realized" until 6-to-9 months AFTER the initial action. Those take TIME.

This $700B rescue has yet to see first action. If the banks do take the action, it would be more IMMEDIATE as to getting some garbage off the books. Free up some CREDIT market crisis.

I think the PLAN is for the government (you and I when it comes down to it) to TAKE that junk and sit on it, wait for the housing/real estate cycle to turn higher, the sell it for a profit. Like the S&L crisis, and helpful for the budget surplus during Clinton presidency.

Yes, but does the government spend it? Or does the government cap spending and either reduce the deficit, or give it back to the taxpayer in the form of lower taxes?

Jeff Bailey : 10/9/2008 1:26:53 PM

HUM-MF ... This one goes back to my 2008 economic forecast, and "chapter" on this year's election.

Two VERY different methods of "affordable healthcare." I don't see how FORCING an employer, or insurer to insure a pre-existing condition is going to LOWER my health insurance premium. Except for my mind, I'm in pretty good health. (wink). If some new enrollees HAVE to be insured by my insurance company, THEIR cost will go up, and THEY WILL RAISE my premium to compensate for it.

Or, a special interest group may do a study, and tell the government that there is DISCRIMINATION among the insurers taking place, and the government MANDATES that the insurer offer a LOW PREMIUM to the HIGH RISK insurer.

Also, with unemployment on the rise, may be FEWER consumers able to keep paying their OWN premium, which their employer may have been paying a portion of.

Now, one of the candidates want to offer a government-sponsored health plan. It too will take on pre-existing conditions. And all will share in its costs. Kind'a like medicare and medicaid, which run nice deficits.

Keene Little : 10/9/2008 1:20:57 PM

Two equal legs up for SPX off this morning's low is at 990.90 so same thing there--watch to see if it becomes resistance if reached.

Jeff Bailey : 10/9/2008 1:20:13 PM

GLD-WD ... this one's a 50/50 in a way.

ECB's Trichet coming to the side of "slower economy, abates inflation," and gold is often deemed a hedge against inflation.

Ah yes, but the financial crisis and impact it is having, that's a POSITIVE scenario for gold.

Jeff Bailey : 10/9/2008 1:18:22 PM

UNE-AJ ... part of the plan was to be long into Ike. That plan didn't work out to the benefit of higher nat gas. The additional part of the plan is for a cold winter. One "good thing" we've heard is shutting in of some nat. gas wells due to low price. Takes some supply off the market.

Somewhat of a "food, clothing, shelter"

Keene Little : 10/9/2008 1:18:26 PM

I'm definitely getting that sideways feeling (common for a 4th wave correction). On the next bounce I'm thinking of getting rid of my October call position (hedging my November puts) and add to my short position. This is just not bullish price action here. Since I'm playing the QQQQ options at the moment and therefore watching NDX, another leg up equal to the one off this morning's low would be at NDX 1376.47/QQQQ 33.86. If it stalls there and is unable to push to a new daily high I'll exit my calls that I got back into at yesterday's close.

Jeff Bailey : 10/9/2008 1:16:16 PM

Have some longs, have some shorts.

Or reduce the risk and have some long calls, have some long puts.

Jeff Bailey : 10/9/2008 1:15:32 PM

It's kind'a like having heating oil in the tank before its 20-below zero.

Jeff Bailey : 10/9/2008 1:13:13 PM

Linda ... great comment. Waiting for something to happen.

What's EVERYONE's plan when it does happen?

Jeff Bailey : 10/9/2008 1:12:24 PM

13-week Yield ($IRX.X) ... with "adjustments" based on yesterday's 50 bp cut. Link

Linda Piazza : 10/9/2008 1:08:18 PM

Painful, isn't it, watching this and waiting for something to happen. Potential support 30-minute closes for the OEX is at 458.27 currently. It will get pushed a little lower if the OEX dcelines again. Potential resistance on 30-minute closes is at 464.45. It will get pushed a little higher if the OEX rises. OEX at 460.83.

Jeff Bailey : 10/9/2008 12:59:51 PM

PHF's recent NAV was $6.73 on 10/02/08. We know the credit markets have been VERY tight, and likely "junk bonds" prices have deteriorated as a result.

Commercial paper has been a tough sell to investors.

Jeff Bailey : 10/9/2008 12:56:57 PM

HYG $75.62 +1.16%

PHF $4.10 -12.20% ...

This would suggest to me that PHF may be set to cut its monthly dividend from 0.075/share.

Linda Piazza : 10/9/2008 12:54:54 PM

We're about to see if that stronger-looking support really is stronger. That's now moved down to about 458.90 on 30-minute closes. The potential support on 15-minute closes doesn't look quite as strong, and is now 457.97 and then 453.60. Combining those two presents the possibility that the 30-minute support could be pierced but that the lower 15-minute support levels could then prompt a bounce back up to the potential support on 30-minute closes. It's just one way that it sometimes happens and certainly not a given.

Keene Little : 10/9/2008 12:52:38 PM

The market is not exactly busting a move to the upside. In fact the bounce still looks corrective and that points to lower prices coming (or is just part of what will be a bigger sideways consolidation before heading lower again. This NDX 120-min chart shows what I think could play out into next week: Link . I had shown on the SPX 60-min chart the possibility for a rally into opex week but that's only a possibility. I don't think it's a high probability at this point.

If NDX manages to push up to the 1405 area it could complete an a-b-c 4th wave correction (wave (4) on the chart). There's even a Fib projection for NDX to push as high as 1460. The other possibility, as already mentioned, is for price to consolidate sideways in more of a triangle pattern. It should then head lower again. The downside targets would be Fib projections near 1195, 1180 and then as low as 1055. Depending on how the decline develops, assuming it will, I'll get a better idea which downside target will be the more likely one.

The daily chart shows the move in perspective with the decline from June and how a larger correction could then follow the new low (another but larger 4th wave correction): Link . At this point I see the possibility we could decline right into the end of the year before we get a decent rally into the new year.

Linda Piazza : 10/9/2008 12:50:02 PM

The TED spread is 4.04.

Jeff Bailey : 10/9/2008 12:46:59 PM

EIA Inventory (partial) Link

Noting the "seasonality" of Nat. Gas and heating oil.

Hurricane Ike didn't do enough damage to impact any of the complexes significantly.

At a MINIMUM, I would think any consumer that has a utility company offering a "lock in rate" for this winter, would be doing so here pretty quick. You can see the DRAW's begin, which can impact prices just as the temperatures usually get cold.

Linda Piazza : 10/9/2008 12:44:16 PM

There's just nothing out there pointing strongly one direction or the other over the short term. The A/D line is finding support 15-minute period after 15-minute period above the support at about -1250, but it's certainly not bouncing from that. The VIX keeps finding resistance at the descending trendline off yesterday's midday high, but it's certainly not dropping away from that test. On the OEX, support looks to be firming a bit, but the OEX certainly can't mount any kind of bounce. On the 30-minute chart, the support now at 458.93 is actually turning higher, just a little kink upward, but that's something that hasn't happened since Friday morning.

So, there's no real guide to where the indices are going next to be found here. You have to be prepared for anything.

Jeff Bailey : 10/9/2008 12:30:46 PM

UNG $30.08 +0.56% ...

Jeff Bailey : 10/9/2008 12:30:40 PM

Again ... I've been on the phone, but here too, NOBODY thinking of Nat. Gas. prices these days.

Jeff Bailey : 10/9/2008 12:30:35 PM

EIA: Nat. Gas Storage Table Link ... build of 88 Bcf.

Jeff Bailey : 10/9/2008 12:30:30 PM

I've been on the phone almost constantly this morning ... "Old friends" coming out of the woodwork regarding what to do with their mutual funds!

Crazy!

NOT A ONE commenting on oil or energy prices these days.

Jeff Bailey : 10/9/2008 12:25:01 PM

I see Tab showing the $NYHGH ... the reason I like RATIO's is that it puts the measure in a "field of play" from 0% to 100%. And gives me an observation of RISK and REWARD.

Linda Piazza : 10/9/2008 12:24:27 PM

OEX potential resistance on 30-minute closes at 467.01. Bulls want to see that bested on 30-minute closes as a first baby step in tenor. Remember how easily babies lose their balance, though, when first learning to walk. A close above that wouldn't mean that the baby is necessarily ready to take off running.

Jeff Bailey : 10/9/2008 12:22:51 PM

VIX.X 55.51 -3.51% ... OK, this needs some follow up.

When the SEC came up with its "no short" I commented on the impact to market makers and how option premiums might have to be "artificially inflated" as option market makers that were selling put in order to make a market for put buyers, would likely "inflate" the premiums of options, simply because they couldn't short the stock to hedge their risk.

While VIX.X down slightly today, probably NOT the type of decline I would have thought, say 50-ish.

Now, Op-EX for October is next Friday and we might be seeing some "let it ride" for now by market makers into October experation.

IF after this month's expiration, just be careful what we "think" the volatility measures are telling us.

Tab Gilles : 10/9/2008 12:18:27 PM

Several indicators I track:

NYSE:

$NYHGH weekly 10-ema Link

$NYLOW weekly 10-ema and daily Link Link

$BPNYSE lowest reading since August '98 Link

$NYSI Low '98 of [-1500] Link

$VIX Link

Nasdaq:

$NAHGH weekly 10-ema Link

$NALOW weekly 10-ema and daily Link Link

$BPCOMPQ lowest reading since Oct. '98 Link

$NASI weekly, record Oct '98 [-1600] Link

$VXN Link

Stocks over their 200-ma:

SPX: Link

NASDAQ: Link

Utility Index; Link

Jeff Bailey : 10/9/2008 12:17:22 PM

12:00 Internals found at this Link

Jeff Bailey : 10/9/2008 12:13:43 PM

The "reason" INDU -0.73% and DIA +0.54% is that DIA close is at 04:15 PM EDT, INDU is marked/closed at 04:00 PM EDT. Yesterday's selling to the close(s) had DIA falling further.

Same for SPX and SPY today.

Jeff Bailey : 10/9/2008 12:12:25 PM

INDU -0.73% ...

DIA +0.54%

DDM $38.52 -0.18% ...

Linda Piazza : 10/9/2008 12:09:19 PM

The OEX's potential support on 15-minute closes is now 459.82, with next potential support on 15-minute closes at 454.75. Again, it's cold comfort to bulls, but so far, as the OEX dips, the Keltner setup looks slightly stronger than it did yesterday. Support isn't firm, but it looks a bit firmer. Nothing seen on the 15-minute chart is going to promise gains, but I do keep warning that this is Keltner-style bullish divergence, even if tentative and not trustworthy. It's a signal to bears to temper their expectations and update their just-in-case profit-protecting plans. Prices could just crater from here, but if they do, it hasn't hurt you to readjust your profit-protecting plans anyway.

Jeff Bailey : 10/9/2008 12:03:55 PM

Dec. Gold (gc08z) Dorsey's PnF chart where I've charted "?" today's action so far Link

Keene Little : 10/9/2008 11:57:59 AM

Updating the SPX 60-min chart I'm showing, in pink, the idea that we could get a larger rally into the end of opex week--a larger a-b-c rally up to the downtrend line from September 19th, up near 1100 next week. That's the bullish potential. The bearish wave count calls for only minor bounces along the way to lower prices as SPX works its way down below 900 by the end of next week. Link

First thing the bulls have to do is break above this month's down-channel with a rally above 1015. Then rally up to the 1040 area, pull back and then rally above 1050. That will be no small task in this market environment but with a little help from short covering it could easily happen. Long against this morning's low, short below. Easy, no?

Linda Piazza : 10/9/2008 11:55:47 AM

The VIX is 55.59 as I type, in the center of a neutral triangle at the top of its range (with a possible bull flag forming within that triangle). Until the VIX sustains values above about 57.16 or below about 52.90, we don't know which way this is going to break.

Jeff Bailey : 10/9/2008 11:53:46 AM

Humana (HUM) $34.69 -3.37% ...

Jeff Bailey : 10/9/2008 11:52:20 AM

Obama has 4-point lead on McCain ... Reuters Story Link

Jeff Bailey : 10/9/2008 11:51:15 AM

Morgan Stanley (MS) $14.92 -11.01% ...

Jeff Bailey : 10/9/2008 11:50:50 AM

Citigroup (C) $14.55 +1.04% ...

Jeff Bailey : 10/9/2008 11:50:26 AM

Bank of America (BAC) $22.35 +1.08% ...

Keene Little : 10/9/2008 11:50:07 AM

Techs continue to lead the way back up so it's looking more bullish than bearish here.

Jeff Bailey : 10/9/2008 11:47:51 AM

Market nervously eyes return of short sellers ... Reuters Story Link

Jeff Bailey : 10/9/2008 11:46:01 AM

BIX.X 146.56 -8.41% ... has retraced 80.9% of its 07/15 low to recent 09/19 high.

Keene Little : 10/9/2008 11:43:57 AM

Remember too that today is head-fake day. The Thursday prior to opex week has typically seen a low in the morning followed by a rally into opex week. It's an opportunity for the big investment banks to load up on cheap front-month call contracts while selling front-month puts. Drive the market back up, pocket a few hundred million dollars and wait for next month to do it again. I think it's also what causes a strong decline in opex week if that plan doesn't work--everyone starts shorting stock and index futures to hedge their short puts if the market starts moving against them.

Linda Piazza : 10/9/2008 11:41:24 AM

The OEX's 30-minute 9-ema is now 467.84. That dipping-lower average has been resistance all day on 30-minute closes, so you need to see a 30-minute close above it before there's any change in tenor. That will be a tentative change only, as I warned yesterday when we were watching the same average. You can see that warning was needed yesterday and it should still be today. It's not until the OEX closes 30-minute periods above 487 that I think bulls can breath any easier at all, but between here and there, we'll watch the first baby steps toward improvement, if they occur.

Keene Little : 10/9/2008 11:32:55 AM

On the SPX 10-min chart you can see how this morning's decline found support (so far) at the broken downtrend line from Tuesday morning. I'm showing the A-B-C bounce idea I discussed in my previous post. At this point I'd say this morning's low now needs to hold for this short-term bullish scenario. Otherwise a continuation lower raises the possibility that we'll see SPX work its way down to the 925 target. Link

Linda Piazza : 10/9/2008 11:25:49 AM

A/D line now -1033, with potential resistance on 15-minute closes at about -700 and with potential support on 15-minute closes down to -1300.

Linda Piazza : 10/9/2008 11:24:26 AM

The A/D line did bounce back above -1250 by the close of that last 15-minute period, so the support shown in the chart linked to my 11:03 post did hold. At least for now, it did.

Keene Little : 10/9/2008 11:24:20 AM

For SPX we've got two equal legs down from yesterday afternoon (went slightly below it at 968) and that could be wave-b of an a-b-c bounce off yesterday's low. With the minor new low for that index it would say it's an expanded flat correction and wave-c (the next leg up for this pattern) would achieve 162% of the 1st leg up (yesterday afternoon's rally). That gives us an upside target of SPX 1042.66. Ready for that kind of rally potential (if you're short)?

Linda Piazza : 10/9/2008 11:17:31 AM

The VIX has risen this morning to test a descending trendline off yesterday's high. It punched above that trendline, now crossing at about 56.90, but has now pulled back below it. The VIX is making a series of lower highs and lower lows since yesterday morning, but the possibility of this being a bull flag must be considered. If the VIX sustains values above about 57.20 and then confirms by a move above this morning's 57.57 high, then we must consider that the bull flag is being broken to the upside and that the VIX could be headed into a test of the 58.90-59.32 zone again, which would of course be negative for equities. If it turns down sharply, however, and particularly if it were to break below 53, the evidence is more supportive of short-term bullish positions.

Linda Piazza : 10/9/2008 11:11:51 AM

Keene has made some observations about the techs. The TRAN, too, is not down as hard as some other indices. In fact, at 3887.58, it's still well off yesterday's 3788.86 low. I tend to be a bit skeptical of OEX, SPX and Dow moves when the TRAN is only reluctantly following and not leading. However, I use that as I would a divergence, not as proof that the OEX will turn around and bounce, but just as evidence that, if in bearish trades, I need to be aware that not all the ducks are in a row.

Linda Piazza : 10/9/2008 11:09:15 AM

A/D line now -1510. It needs to bounce back above about -1250 soon or else we risk it dropping to -2850 or below.

Keene Little : 10/9/2008 11:08:53 AM

Whenever the DOW was rallying strongly while the techs held back (or even stayed in the red) I urged caution to not trust the rally in the DOW. Today we have the opposite (at least with the futures) where the DOW is down fairly hard while the techs are holding up better (NQ still in the green). Does that mean we shouldn't trust this morning's decline? The path of least resistance is down and yesterday's lows have been broken so that's all bearish. But we may have a hint from the techs that a tradable bottom could be found soon.

Linda Piazza : 10/9/2008 11:08:26 AM

Next potential support on 15-minute closes for the OEX has been pushed down to 456.75. We're about to see if it holds. Below that, I would look for possible support at 450.

Linda Piazza : 10/9/2008 11:05:35 AM

Since Jane is having Internet trouble, I'll try to post as often as I can although I had planned a day away. Sometimes the Internet gods intervene, don't they? I'm glad to report that Jane has no open positions to manage, but Jane is spectacular about risk management anyway and would have had stops in place. That's a reminder to us all that we never know what's going to happen and should always have those just-in-case stops set.

Linda Piazza : 10/9/2008 11:03:20 AM

Here's what I was and am seeing on the A/D line's chart: Link

Linda Piazza : 10/9/2008 10:58:43 AM

Early this morning, in my first post about the A/D line, I said that it had unfortunately opened near significant Keltner resistance. I said that was unfortunate because, although the A/D line was strongly positive at the time, it frequently pulled back from that particular resistance level and there was no nearby support if it did pull back. Well, it did pull back. In fact, it dropped. It's now in a congestion zone from yesterday, but is still vulnerable to a drop to near -1250 and in fact is starting down further as I type. I would, however, watch for a potential steadying anywhere from its current -996 level down to about -1250.

Linda Piazza : 10/9/2008 10:54:54 AM

Testing, testing, testing. The OEX is testing potential support on 15-minute and 30-minute closes. If this current support does hold, the OEX continues to look stronger than it did Wednesday morning when it first tested these levels, at least on a Keltner basis, but that's cold comfort right now. If this support doesn't hold, next potential support on 15-minute closes is at 457.70. OEX at 463.26 as I type.

Keene Little : 10/9/2008 10:36:26 AM

The 30 and 60-min oscillators have turned back over but so far remain above yesterday's lows. That keeps open the possibility that we'll see continuing bullish divergence that leads to another bounce back up. What this might be doing is simply relieving the oversold conditions as the market essentially chops sideways and that's what happens in 4th wave corrections. At this point I don't know if we'll continue to chop sideways or break down from here. Watch to see if we get another test of yesterday's lows.

Linda Piazza : 10/9/2008 10:33:41 AM

The OEX is testing potential support on 15-minute closes at 464.24; on 30-minute, at 463.27.

Linda Piazza : 10/9/2008 10:30:35 AM

Jane just called. Her Internet is out. She has been troubleshooting but will now have to wait for a technician to get there.

Jeff Bailey : 10/9/2008 10:22:33 AM

Now ... what is taking place in Iceland, takes place in other banks around the world.

If you're a US-based investor and you're cashing out from other parts of the world, what might you do?

Let's say you move your cash back home to the U.S.

What impact does that have on the dollar?

You repatriate to the dollar, and the dollar rises.

Now, what "should" happen to other things we monitor, that historically move with, or inverse the dollar?

If the DO NOT move the way they "should," then what does that say about INFLATION?

Jeff Bailey : 10/9/2008 10:17:23 AM

It's probably time to share a story with you regarding Iceland.

A couple of months ago, maybe several I'll have to look, a newsletter subscriber sent me an email ragarding Icelandic CDs and bonds that were paying very attractive yields.

I said I didn't know much about Icelanding bonds/cds, but the fact that they were paying such attractive rates probably brought some risk.

Now, long story short, but what is MOST LIKELY happening in Iceland is MASSIVE WITHDRAW of those instruments by investors AROUND THE WORLD, that did put even a small portion as part of an asset allocation into their portfolios.

Jeff Bailey : 10/9/2008 10:13:41 AM

Iceland suspends stock trading, creates new bank ... AP Story Link

Tab Gilles : 10/9/2008 10:10:16 AM

Treasuries Fall as Stock Futures Gain Before Special Auctions Bloomberg Link

Tab Gilles : 10/9/2008 10:10:16 AM

Treasuries Fall as Stock Futures Gain Before Special Auctions Bloomberg Link

Keene Little : 10/9/2008 10:07:24 AM

I believe we're in a 4th wave correction (one of several degrees as the wave count continues to get unwound) and 4th waves tend to be very choppy corrections and full of whipsaws. That may be all we're seeing here so be careful in this. Bearishly I see SPX bounced up to its long-term broken uptrend line from 1990, just under 1001 this morning, and failed. It looks like a bearish kiss goodbye at the moment. But again, it needs to break yesterday's low near 971 to confirm the market is breaking down again.

Linda Piazza : 10/9/2008 10:07:12 AM

I'll be leaving now. I'll try to check in later.

Linda Piazza : 10/9/2008 10:06:17 AM

Potentially strong support for the OEX on 15-minute closes at 465.58; on 30-minute ones, at 464.56.

Linda Piazza : 10/9/2008 10:04:40 AM

Oh, forgot to note potential historical S/R for the A/D line at +400. A/D line at +431.

Linda Piazza : 10/9/2008 10:04:11 AM

The A/D line is reversing back below the benchmark resistance that identifies breakout mode. This is why I worried earlier, as it now threatens to drop toward next light support at about +190 or stronger potential support at -157. It's +447 as I type. I never like to see the A/D line open against or above this benchmark resistance as there's just too much chance of a reversal. You can't just look at whether it's positive or negative, but need to asses how it is performing in relationship to support or resistance. Those of you who don't have access to Keltner channels or bands can try Bollinger bands, although I can't very that works as well.

Keene Little : 10/9/2008 10:01:06 AM

This market just can't get follow through to the upside. If the market breaks below yesterday's lows we could see another flush which takes SPX down to the next Fib projection at 925 (DOW 8600).

Jeff Bailey : 10/9/2008 9:57:55 AM

HUI.X and GLD ... HUI.X with a "fitted" retracement Link

(See last night's MW)

Linda Piazza : 10/9/2008 9:54:15 AM

I'm thinking that sustained OEX 15-minute closes above 481, confirmed by a push above yesterday's 485.56 high, might see a quick push up toward 489-491 and maybe even eventually toward 497-499. That's a very iffy conclusion in this market environment, and particularly just ahead of economic numbers at 10:00 am. It's issued more as a warning to bears than as an invitation to bulls.

Linda Piazza : 10/9/2008 9:50:08 AM

You know, both chart signs and the news--unfailingly dire--point to signs that perhaps it's finally time for a relief bounce. That's not proof that it will happen, but it is a sign that those of you heavily into bearish positions start considering steps similar to Keene's: locking in some of your bearish profits. As John Hussman of Hussman Funds points out, the 2000-2003 stock market decline saw three separate relief rallies that produced 20% gains. You absolutely do not want to let a relief bounce get away from you, taking away the gains you worked so hard and took such risks to garner. Locking in some bearish gains is not the same as switching sides. I would suggest only small positions to the long side if that's what you're considering doing.

I find this period in market trends to be particularly difficult. A trend pauses, but there can be a period of extreme disorder before another one begins, and that period of disorder can rob all of hard-earned gains, whipsawing both bulls and bears out of their positions. I tend to either stand aside or else trade in smaller amounts when we're in one of those periods.

Keene Little : 10/9/2008 9:43:56 AM

The gap higher was quickly followed by a pullback but no gap closure. If the pullback does not close the gaps and instead turns back around and heads higher again I think we can assume the gaps will not get closed today.

Linda Piazza : 10/9/2008 9:43:23 AM

The OEX now has potentially strong support on 15-minute closes at 467.08 and then 461.84. On 30-minute closes, it's at 465.78. Resistance on 15-minute closes is at 475.82 and then 481.02. The OEX is 472.52 as I type.

Linda Piazza : 10/9/2008 9:42:14 AM

I see Keene is alone this morning, so I'll delay my departure.

Linda Piazza : 10/9/2008 9:39:38 AM

I also wanted to provide the Keltner setup for the A/D line before I leave. The A/D line has unfortunately begun the day jammed up against potentially strong resistance on 15-minute closes at about +1000. I say unfortunately because there's not much nearby support. What bulls want to happen, then, is for the A/D line to push above that potential resistance, at which time it will be in a dangerous breakout mode, but then to find support on 15-minute closes on any test of that breakout benchmark. Or, they want the A/D line to trend sideways as the breakout market rises above it and support rises below it. For now, though, remain a bit wary of the possibility of a strong pullback, perhaps to +400 historical or to -128 to -245 potential Keltner support. The A/D line is now +957. If it should drop toward Keltner support, watch for bounce potential there.

Linda Piazza : 10/9/2008 9:29:48 AM

Before I leave, I wanted to note that the TED spread has widened to 4.07 this morning, down slightly from a high of 4.13. Here's the link in case you want to watch it for yourself today while I'm gone: Link

Linda Piazza : 10/9/2008 9:28:21 AM

As you're making early trading decisions, remember that we have Wholesale Inventories at 10:00 am. In this climate, when it's hard to even notice routinely scheduled economic developments, this may not matter much, but it's sometimes a number that can mildly impact trading.

Keene Little : 10/9/2008 9:21:56 AM

Equity futures climbed steadily during the overnight session, gave up a bunch after the high near 4:00 AM but stayed positive all night. We've got a good start to the day so now all the bulls need is some follow through. With NQ up 28 points (+2.1%) techs are leading the way this morning so that's a good sign.

Linda Piazza : 10/9/2008 9:17:53 AM

As Keene also noted yesterday and today with regard to other indices, I had noted yesterday that the OEX's daily candle was a potential reversal signal, with the emphasis on "potential." The OEX needed a higher open this morning, preferably a gap higher although such gaps are rarer on indices than on individual stocks, to begin a confirmation. However, I can't emphasize enough that this potential reversal signal is composed in part of a candle yesterday that indicates indecision. Such potential reversals aren't always fulfilled. In strong trends, the OEX and SPX sometimes just produce 2-5 days of candles indicating indecision before resuming the trend. So, don't assume that "potential" means "promised."

On a short-term basis, the OEX ended the day at or slightly above potentially strong support on 15-minute closes at about 467.60 and on 30-minute ones, at 466. There's further potential support on 15-minute closes at 462.07. As long as one of those holds, the OEX looks improved on a Keltner basis since the last time it was at those levels. That's only small and tentative improvement, of course, but improvement. If the OEX should rise again, there's potentially strong resistance on 15-minute closes just under 481, and there's a short-term descending trendline that's been resistance also crossing at about 481.50-482, so that whole zone could be resistance. Next levels to watch for rollover potential are from 489-491 and then 497-499 and then 506-510.

I will likely be away from the MM for much of the day today, but I'll try to fill in if I see that other writers have been called away.

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