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

The Market Monitor has been archived.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

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Tab Gilles : 10/10/2008 8:47:23 PM

Report: Palin abused power, broke no laws in trooper case Link

Tab Gilles : 10/10/2008 8:08:53 PM

thought...For those who remember

On a week like this, I'd turn on PBS and listen to some calming and reassuring words from the master... Louis Rukeyser.

Tab Gilles : 10/10/2008 7:07:29 PM

Chesapeake CEO Sold `All' Stock to Meet Margin Calls

By Steven Bodzin and Dan Lonkevich

Oct. 10 (Bloomberg) -- Chesapeake Energy Corp. said its chief executive officer, Aubrey McClendon, involuntarily sold "substantially all" of his common shares of the company's stock over the past three days to meet margin loan calls.

"These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis," McClendon said in today's statement. "In no way do these sales reflect my view of the company's financial position or my view of Chesapeake's future performance potential."

McClendon owned 33.5 million shares, or 5.8 percent of the company's common stock, according to a Sept. 30 filing with the U.S. Securities and Exchange Commission. He was the company's third-largest shareholder.

Chesapeake, this year's worst-performing petroleum producer in the Standard & Poor's 500, fell 6.7 percent in New York trading today amid concern hedging contracts won't protect the company against a plunge in natural-gas prices. McClendon's divestiture was announced after the close of regular stock trading.

Company spokesman Jeff Mobley declined to comment beyond the content of the statement. He said in an interview the company will soon file forms that will show what price McClendon received for his shares.

Investors are concerned that Chesapeake and other U.S. oil and gas producers have hedging contracts with financial firms and other counterparties that won't be able to pay for their output at the agreed-upon prices because of the global credit crisis, said Robert Goodof, who helps manage $25 billion at Loomis Sayles & Co. in Boston. Locking in Prices Oil and gas producers use hedging contracts to lock in prices and ensure adequate returns from their wells and sufficient cash flow to pay off their debt. McClendon is the second oil chief executive officer in as many days to reveal company stock sales. XTO Energy Inc. Chief Executive Officer Bob Simpson sold more than $101 million of stock, according to an Oct. 8 filing with the Securities and Exchange Commission. Simpson, 60, sold shares of the Ft. Worth, Texas-based company at prices ranging from $34.64 a share to more than $39.50 a share, the filing said. The sales represent about a third of Simpson's stake in XTO. He was the company's tenth-largest shareholder. Chesapeake also has so-called knockout swap contracts on more than one-third of its 2009 production, and those deals don't obligate the buyers to take gas when prices drop to $6.28 per thousand cubic feet of the heating and power-plant fuel, according to analyst Joseph Allman of JPMorgan Chase & Co. in New York. Plunging Prices Gas futures traded in New York dropped to $6.65 today and have plunged 50 percent since the end of June. "With natural gas close to $6.60, we think the concern about Chesapeake's knockout swaps is legitimate," Allman said in a note to clients. He rates Chesapeake shares "neutral." A portion of the company's hedging positions contain such provisions, Chesapeake said in a separate statement. "The company has consistently utilized kick out swaps for a portion of its production, and over the past 57 months, only four months have resulted in any portion of the company's hedges being kicked out." In response to the lower gas prices, Chesapeake plans to further cut its capital expenditures by about $1.5 billion in 2009 and 2010 through reduced drilling and lower leasehold expenditures. Reduced Spending The company on Sept. 22 lowered its capital expenditure budget by $3 billion through 2010. To ensure its revolving credit can be fully used during these "turbulent economic times," the company said it borrowed the remaining capacity of its facility at the end of the third quarter. It has invested the cash proceeds in short-term U.S. Treasury and other highly liquid securities. Chesapeake said it has cash and cash equivalents of about $1.5 billion as of Sept. 30. All 36 lenders that participate in Chesapeake's revolving credit facility fully funded their commitment, except for Lehman Brothers Holdings Inc., which didn't fund its $11 million share of the advance, the company said. Chesapeake's financial exposure to Lehman Brothers included unpaid gas sales and derivates contracts. Chesapeake said it received cash payment for all natural-gas marketed through a former affiliate of Lehman Brothers. The company estimates a loss on terminated derivate contracts and the net value of hedges with Lehman won't be more than $50 million. The company said it has hedging arrangements with 19 different counterparties.

Tab Gilles : 10/10/2008 7:03:50 PM

There are no specifics in the statement, but Paulson basically stated that the G7 will buy stock in financial institutions and they will be nonvoting. I'm sure more will be known over the weekend.

Tab Gilles : 10/10/2008 6:55:39 PM


Statement by Secretary Henry M. Paulson, Jr. Following Meeting of the G-7 Finance Ministers and Central Bank Governors

Washington, DC-- At today's meeting of the G-7 Finance Ministers and Central Bank Governors, we finalized an aggressive action plan to address the turmoil in global financial markets and the stresses on our financial institutions. This action plan provides a coherent framework that will direct our individual and collective policy steps to provide liquidity to markets, strengthen financial institutions, protect savers, and enforce investor protections.

The G-7 is compelled to robust international partnership and cooperation. Never has it been more essential to find collective solutions to ensure stable and efficient financial markets and restore the health of the world economy.

Global financial market conditions are severely strained. In the United States, our economy has been facing a prolonged period of uncertainty and our financial markets are experiencing unprecedented and extraordinary challenges. A root cause of this situation is the housing correction and a lack of confidence in mortgage assets, as well as a lack of confidence in many of the financial institutions that hold these assets. We are squarely focused on the immediate need to stabilize our financial markets, and recognize that investor confidence is critical to restore liquidity and enhance the stability of our financial system.

As recent developments have demonstrated, the market turmoil is a global event. Governments around the world have taken actions to address financial market developments, and international cooperation and coordination has been robust. It is critical for governments to continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions, enhance market stability, and develop a comprehensive regulatory response. We must continue to closely coordinate our actions and work within a common framework so that the action of one country does not come at the expense of others or the stability of the system as a whole.

Central banks from around the world have acted together to provide additional liquidity for financial institutions, taking the necessary steps to support the global economy. The Federal Reserve has established swap lines with nine central banks to reduce pressures in global short-term U.S. dollar markets. Additionally, the U.S. Treasury implemented a temporary guaranty program for the U.S. money market mutual fund industry.

Here in the United States, the members of the President's Working Group on Financial Markets (PWG) made it clear that we will coordinate the use of our existing and new authorities to restore market confidence. Other countries are considering appropriate programs given their national circumstances, and we pledge to stay in close contact as they move forward with their plans.

I briefed my colleagues on the work we are pursuing to implement swiftly and thoughtfully the new financial rescue package. We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability. As we develop plans to purchase equity, as in the approach we are taking to broad mortgage asset purchases, we are working to develop a standardized program that is open to a broad array of financial institutions. Such a program would be designed to encourage the raising of new private capital to complement public capital. Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market standard terms to protect our rights as investors.

Securities regulators around the world have taken measures to enhance market stability by addressing market abuse. Here in the United States, we have taken steps to protect the savings of the American people by increasing deposit insurance limits, and the European Union member states have raised individual deposit limits to an EU-wide minimum.

The G-7 and others are working together through the Financial Stability Forum (FSF) to ensure a comprehensive, international regulatory response to the financial market turmoil. FSF Chairman Mario Draghi reported to us on the good progress that has been made in improving prudential supervision and regulation, increasing disclosure and transparency, and enhancing accounting frameworks. I am committed to making sure this work continues. We are also committed to tackling the next steps laid out by Chairman Draghi to be done by the end of this year and our ambitious agenda for 2009.

Jeff Bailey : 10/10/2008 5:29:27 PM

G7 pledges united crisis response but rifts emerge ... Reuters Story Link

Jeff Bailey : 10/10/2008 5:25:12 PM

RUT.X ... monthly interval chart Link

Be careful of those that suggest the "capital gains tax" issue should now be taken off the table this election year.

Jeff Bailey : 10/10/2008 5:14:59 PM

Russell 2000 ($RUT.X) 522.48 +4.66% ... holds its 200-mo SMA (466), but closes below its 150-month SMA (537). See Oct'02; then Mar'03

Keene Little : 10/10/2008 5:03:14 PM

Almost forgot to post the updated SPX 60-min chart. I've kept both potential wave counts on its chart because, unlike NDX, it still supports the idea that we could see a quick low on Monday before bouncing up higher again, shown in pink: Link

The dark red count shows one idea for a sideways triangle consolidation into Tuesday before the next leg down on Wednesday to then be followed by another leg up to perhaps the 930-940 area by opex Friday. 942 is 1-1/2 times around the Gann Square of Nine chart from 768, the 2002 low, which is 540 degrees and therefore potentially important resistance now. Both scenarios point to lower lows after the expected bigger bounce next week, the difference being the pink count calls for selling into opex Friday (a little ahead of the dark red wave count).

I'll have a better feel for which scenario could be playing out after Monday's price action. Have a great weekend and let your mind flush.

Keene Little : 10/10/2008 4:49:45 PM

Actually Jim has this weekend's newsletter. I'm taking some time off and I'll be trying not to think about this market (easier said than done). I'll send everyone off for the weekend with a little story that came across my desk:

It was autumn, and the Red Indians asked their New Chief if the winter was going to be cold or mild. Since he was a Red Indian chief in a modern society, he couldn't tell what the weather was going to be.

Nevertheless, to be on the safe side, he replied to his Tribe that the winter was indeed going to be cold and that the members of the village should collect wood to be prepared.

But also being a practical leader, after several days he got an idea. He went to the phone booth, called the National Weather Service and asked "Is the coming winter going to be cold?"

"It looks like this winter is going to be quite cold indeed," the weather man Responded.

So the Chief went back to his people and told them to collect even more wood. A week later, he called the National Weather Service again. "Is it going to be a very cold winter?"

"Yes," the man at National Weather Service again replied, "It's definitely going to be a very cold winter."

The Chief again went back to his people and ordered them to collect every scrap of wood they could find. Two weeks later, he called the National Weather Service again. "Are you absolutely sure that the winter is going to be very cold?"

"Absolutely," the Man replied. "It's going to be one of the coldest winters ever."

"How can you be so sure?" the Chief asked.

The weatherman replied, "The Red Indians are collecting wood like Crazy."

This is how stock markets work.

With that, I hope everyone relaxes and has a good weekend.

Jeff Bailey : 10/10/2008 4:35:30 PM

dj- NYSE Composite volume 11.1 Billion; Record volume

Linda Piazza : 10/10/2008 4:07:10 PM

Go home and rest, everyone except Keene who is going to be busy writing the Wrap for the weekend. I've already written and submitted my Trader's Corner article, so I'm going to eat some lunch. (It's 3:00 pm here, so it's a bit overdue, but who can leave the computer screen?)

In some fashion, all of you have survived market conditions that will be talked about for generations. Although I know it's unlikely, I hope that none of our subscribers suffered big losses, either in the accounts they're trading or the accounts that someone else is managing for them. If you did, you've been offered an opportunity to reassess your risk tolerance and to compare the performance of your trading methods or your financial advisor's allocations to to see whether you were able to beat the broad market performance. If the account managed by your financial advisor did not beat the market, (beating by dropping less than the 40-44% that most major indices dropped), why not? Was it because you told that financial advisor that you wanted to load up on aggressive, high-yield (read "risky") investments or because the advisor didn't do his or her job?

Keene Little : 10/10/2008 4:04:54 PM

I fixed the wave count on the NDX chart, which now agrees with the count on the SPX 60-min chart posted earlier this afternoon, except that I removed the pink wave count (this afternoon's high negated the pattern which expected another move lower first thing Monday morning). So the most probable wave count is shown on this updated NDX 60-min chart: Link

We should get a pullback on Monday that then leads to another leg up (or we could chop sideways for a day or so). Upside potential is in the 1350 area. Then another leg down next week. That would then set up a larger bounce into November before again heading lower (that kind of move might be timed around the election).

Jeff Bailey : 10/10/2008 4:01:39 PM

dj- Canada's big banks cut their prime lending rate for the second time in a week, though they varied between reductions of 15 basis points and 25 basis points. Not to be outdone by Toronto-Dominion Bank's (TD) surprise 15-basis-point prime-rate cut earlier Friday, Royal Bank of Canada (RY), Bank of Nova Scotia (BNS) and Bank of Montreal (BMO) cut their prime lending rate by 25 basis points to 4.25%. Canadian Imperial Bank of Commerce (CM) stuck to a 15-basis-point reduction to 4.35%. The moves follow on the heels of a 25-basis-point cut by each of Canada's major banks earlier this week. Toronto-Dominion said its latest cut is a result of the Canadian government's decision early Friday to buy C$25 billion in insured mortgage pools to address Canadian banks' increased cost of borrowing. Toronto-Dominion said the government program will reduce its overall cost of funds. "Financial markets are very turbulent, and funding costs are still high. However, we anticipate that our cost of funds will decrease with the implementation of this program," Toronto-Dominion said in a release. The chartered banks' prime rate cuts earlier in the week were in response to the Bank of Canada's move to cut its overnight lending rate by 50 basis points as part of a coordinated action with other major central banks. The banks initially passed on only half of the Bank of Canada's rate cut to customers as they grapple with higher funding costs as a result of market turmoil. The new prime-rate levels are effective Tuesday, Oct. 14. Banks, government offices and financial markets are closed in Canada Monday for the Thanksgiving Day holiday. Toronto-Dominion was the first of the big Canadian banks to move Friday, just as it was the first to follow the central bank earlier this week.

Jeff Bailey : 10/10/2008 3:58:20 PM

dj- Canada banks cut prime rate again

Jeff Bailey : 10/10/2008 3:57:12 PM

Oil Service HOLDRs (OIH) $88.04 -9.79% ...

Jeff Bailey : 10/10/2008 3:56:43 PM

dj- Saudi OPEC Gov: Financial crisis impact on global upstream oil investment limited

Jeff Bailey : 10/10/2008 3:55:47 PM

Prudential Financial (PRU) $36.70 +10.30% ...

Jane Fox : 10/10/2008 3:56:12 PM

Although the volume today is certainly impressive one would like to see it break the volume reached on September 18th to safely say today is a capitulation day. Link

Jeff Bailey : 10/10/2008 3:55:15 PM

dj- Prudential Financial (PRU) ... Raised to "buy" from "hold" at Sterne Agee

Jeff Bailey : 10/10/2008 3:54:21 PM

dj- ECB: Bini Smaghi foresees high oil prices for quite some time

Jeff Bailey : 10/10/2008 3:52:40 PM

CHB $3.17 -9.16% ...

Jeff Bailey : 10/10/2008 3:52:19 PM

dj- Champion Enterprises (CHB) cut to "market perform" by Avondale. Had at "market outperform."

Jeff Bailey : 10/10/2008 3:50:56 PM

XAL.X 15.84 +8.04% ... has not yet violated its 07/15/08 low of 12.66

Linda Piazza : 10/10/2008 3:50:06 PM

The OEX closed that last 15-minute period above the potential S/R now at about 431.50, but only barely. It looks as vulnerable to a pullback to 418-422 as it does to another climb up toward the day's high and maybe even beyond that. It's a toss-up at this point.

Jeff Bailey : 10/10/2008 3:47:41 PM

Linda ... ANYTHING that hasn't made new 52-week lows on the equity side are probably ONLY places a bull should be looking.

Linda Piazza : 10/10/2008 3:44:46 PM

Next potential support for the OEX is near 419-422.75. This is potential support on 15-minute closes. Bulls would prefer that in the last couple of minutes of this 15-minute period, the OEX bounce up strongly, well above about 432.

Linda Piazza : 10/10/2008 3:43:21 PM

OEX bulls would like to see a 15-minute close hold support at 432. Actually, they would like to see it far closer to the high of the day than that as a close there still leaves a long upper shadow on the current 15-minute period's candle. OEX is 434.12 with several minutes to go. Nope: dropped to 431.26 as I type.

Keene Little : 10/10/2008 3:40:30 PM

I bought QQQQ Nov calls based on your post about an hour ago when the market was down bigtime, nice move upward, Would you hold these over the weekend, looking to get out on Monday, or just dump them here for a nice gain.

I just exited half my long call position entered near today's low. They're November so I'm not terribly worried about time decay over the weekend (as opposed to October calls). But just in case this "little" flare-up ends up being reversed on Monday I want to take some money off the table.

Linda Piazza : 10/10/2008 3:39:42 PM

The OEX's 30-minute chart suggests potential resistance on 30-minute closes at 446 and then again at 451. No resistance has mattered so far and might not until the close, but remember that we get market-on-close orders in a few minutes and that could again change the tenor. Keep adjusting your stops.

Linda Piazza : 10/10/2008 3:34:42 PM

If the markets end up green, above their opens today, you'll start hearing talk about a key reversal day. Please remember that on 1/22, the OEX and many other indices produced a strong spring off the day's low (but without the close above the open) and, the next trading day, did a rinse and repeat of the whole thing. Even a key reversal doesn't mean that the OEX can't drop back into a retest early next week. Consider how much risk you have before you decide whether to hold over the weekend or to lock in some bullish profits.

Jeff Bailey : 10/10/2008 3:32:55 PM

Money Flows @ 03:24 PM EDT Link

Linda Piazza : 10/10/2008 3:31:24 PM

For reference, the OEX's high of the day was 437.51. Yesterday's close was 432.19. Those are obvious places of potential resistance.

Jeff Bailey : 10/10/2008 3:28:18 PM

Reports from newswire does suggest that Germany is at G7.

Linda Piazza : 10/10/2008 3:27:19 PM

Jeff, I was looking at the homebuilders earlier this week, too. I think I have some charts to study this weekend.

Jeff Bailey : 10/10/2008 3:25:32 PM

VIX.X 72.42 +13.29% ...

Jeff Bailey : 10/10/2008 3:25:11 PM

Swing trade put option exit alert! ... for the one (1) Humana HUM Jan $30 Put (HUM-MF) at the bid of $4.10.

HUM $31.27 -3.30% ...

Linda Piazza : 10/10/2008 3:23:32 PM

The OEX zipped right through the 30-minute 9-ema and headed straight up to test potentially strong resistance on 30-minute closes that's up to about 427.27. This kind of zipping through resistance is going to be necessary to pierce some fairly tough resistance levels, but if the OEX should pull back, you now want it to find support near 421 or at least above 416.

Jeff Bailey : 10/10/2008 3:21:47 PM

KBH $15.43 +5.39% ...

Jeff Bailey : 10/10/2008 3:21:27 PM

TOL $19.91 +5.51% ...

Jeff Bailey : 10/10/2008 3:21:11 PM

PHM $11.31 +4.72% ...

Jeff Bailey : 10/10/2008 3:20:34 PM

DJUSHB $237.54 +2.73% ... inches green.

Keene Little : 10/10/2008 3:19:41 PM

45 minutes to get the market at least back up to the day's high. That would leave a strong-looking hammer candlestick on the daily chart. That could certainly entice a few bulls back into the market on Monday.

Linda Piazza : 10/10/2008 3:19:36 PM

A first higher swing high in intraday trading for the OEX. Trouble is, I don't know how many shorts there are to keep fueling this, so those in bullish positions should of course keep raising stops.

Jeff Bailey : 10/10/2008 3:16:20 PM

XAL.X 15.25 +4.02% ... comes to morning and session high.

Linda Piazza : 10/10/2008 3:19:50 PM

Would someone tell the floor traders that, should the markets go green again, they should not start cheering and scare the rally away?

Jeff Bailey : 10/10/2008 3:14:03 PM

YM 8,271 ... DAILY S1 again.

Linda Piazza : 10/10/2008 3:13:08 PM

The OEX is coming up again to retest its 30-minute 9-ema. Since late Wednesday, it's been knocked back every time it's tested that, and it spend quite a bit of time testing it from the underside yesterday before the OEX finally fell away from it, into the steep decline. We want to see a 30-minute close above about 413.50 and then sustained values above it. OEX at 411.32 as I type.

Linda Piazza : 10/10/2008 3:11:28 PM

Uh, oh. (Keene's 3:09:05 post.)

Keene Little : 10/10/2008 3:09:59 PM

In the kind of scary department:

I don?t know what this is all about, but I just got off the phone with physician friend of mine down in Lakeland (Fl). He has about $100,000 on deposit at a Bank of America branch and he went in and wanted to withdraw $9,000 and they would only let him have $5000. They said they did not have enough money. Is there a stealth bank run going on out there?

Linda Piazza : 10/10/2008 3:05:44 PM

Bears, now is the time to be careful. The bond market has closed and the market tenor sometimes changes, as we all know by now. Bulls, it's time for you to be careful, too, as lately that change in tenor has been an acceleration of the previous downtrend.

Linda Piazza : 10/10/2008 3:04:07 PM

The OEX's 30-minute 9-ema is now 412.79.

Linda Piazza : 10/10/2008 3:03:32 PM

Keene, I'm glad it's you doing the weekend Wrap this weekend, as I hated even writing it the last two weekends. You've had more to write, substituting for Jim, and I feel for you while I appreciate your efforts. As you know and as I can ascertain from Jeff's posts, too, I've shared your experiences about distressed friends and families calling. Each night, I schedule in a couple of hours of phone calls, as I know I'll get them. I think one of my relatives is avoiding talking to me now, though, as I can't give that relative the news that's wanted: the bottom is in.

Linda Piazza : 10/10/2008 3:00:03 PM

No move yet up through the OEX's 30-minute 9-ema yet. No change in tenor yet. That moving average is now 413.81. The OEX is 405.76. I can remember times when the thought of the OEX moving up 8 points in a little more than an hour would have seemed an impossibility, an irrational posting to even postulate it as something to watch for. These days, the only impossibility about that sentence is the "up" part, it seems. An 8-point move in a little more than an hour is just a snap of the fingers.

Nevertheless, do watch for that possibility, of a move up toward that moving average as a first sign of a change in tenor.

Jeff Bailey : 10/10/2008 2:58:37 PM

HMO.X 896.42 -9.55% ...

Jeff Bailey : 10/10/2008 2:58:20 PM

IUX.X 123.49 -5.60% ...

Jeff Bailey : 10/10/2008 2:57:52 PM

HUM $29.36 -9.21% ... HUM-MF $4.40 x $5.30

Tab Gilles : 10/10/2008 2:56:32 PM

$VIX 75.63

$VXO 99.75

$VXD 62.63

$VXN 81.23

$RVX 72.40

Keene Little : 10/10/2008 2:55:27 PM

Linda, filling in for Jim over the weekend and on Tuesday, plus my regular Thursday newsletters either side of those, plus this week's price action and family and friends cries for help...I think I'm ready for more than a 3-day weekend (wink). Too bad it's not snowing yet--I could really use the rush of a downhill skiing about now.

Jeff Bailey : 10/10/2008 2:55:22 PM

BKX.X 50.45 +3.48% ...

Jeff Bailey : 10/10/2008 2:55:07 PM

BIX.X 139.48 +0.91% ...

Jeff Bailey : 10/10/2008 2:53:12 PM

Disclosure needed: I hold bullish position in NCC

Jeff Bailey : 10/10/2008 2:51:56 PM

Swing trade long alert! ... for 70 shares ($10K account) in National City (NCC) at the offer of $1.85.

Jeff Bailey : 10/10/2008 2:47:24 PM

dj- FDIC: OKs deposit insurance hike; rules for mortgage accounts

Linda Piazza : 10/10/2008 2:46:57 PM

Keene, I kept staring at that little circle around Monday's date on the Options Expiration Calendar, trying to convince myself that it was a market holiday as well as a bank holiday, but, sigh, no such luck. I think we all, writers and subscribers, need a three-day weekend.

Jeff Bailey : 10/10/2008 2:46:16 PM

Farmer Bros. (FARM) $17.55 -6.54% ...

Jeff Bailey : 10/10/2008 2:45:34 PM

dj- Farmer Brother's Coffee Bean Intl. Opens New Facility In Portland

Keene Little : 10/10/2008 2:45:10 PM

OK, one more possibility and it supports the idea that we're ready for a bounce. I'm trying to do this real time in a choppy 4th wave or ending diagonal 5th wave environment so forgive my constant changes. But the choppy price action today, up and down, is what has me thinking either a sideways correction or an ending diagonal 5th wave. The latter suggests a bottom within the next 15 minutes and then start a rally into the close (may be small) and continue on Monday (no market holiday on Monday). It would look something like this on the SPX 10-min chart: Link

Linda Piazza : 10/10/2008 2:45:14 PM

During the previous 30-minute period, we had another OEX test of the 30-minute 9-ema and the OEX was pushed right back from that test. That moving average is now 414.01. It's beginning to flatten a little, and such flattenings are sometimes the times when we see the OEX finally punch up through it. That's no guarantee. You know that I've been watching for a relief bounce for several days now and I missed a whole bunch more downside while I was being careful and watching for it. However, we keep having these signs show up that urge carefulness on the part of bears and I'd be remiss if I didn't warn you to keep examining how much bearish risk you wanted to keep in your portfolio.

Jeff Bailey : 10/10/2008 2:42:18 PM

GoldBugs ($HUI.X) 236.23 -16.88% ... set to probe Monday's lows. (See Wednesday's Wrap)

Linda Piazza : 10/10/2008 2:40:27 PM

We're hearing various predictions about the last 80 minutes or so of the trading day--big downdraft that makes this morning look like a walk in the park or traders afraid to go short into the close, therefore predicting at least a steadying if not a bounce. The truth is that we don't know which is going to occur. Are you ready, whatever it is, including a sideways movement right here?

Linda Piazza : 10/10/2008 2:39:14 PM

Potential support for the OEX is now about 400.75 on 15-minute closes, but it's light support. It's been bouncing the OEX all afternoon, but it's turning lower again and, therefore, possibly weakening.

Jeff Bailey : 10/10/2008 2:36:55 PM

dj- Crude Oil heads for lowest settlement since Sep'07

Keene Little : 10/10/2008 2:36:43 PM

Linda, I did a Mark II eyeball calculation for VIX and came up with "it's very high!"

Linda Piazza : 10/10/2008 2:35:23 PM

I can't find the old formula for the calculation of the VXO, so I'll have to dig through my books to do so, but if we extrapolate what a certain VIX level means back to the VXO, a VXO of 101.22 would mean that the markets expected the OEX to move about 29% over the next 30 days.

Keene Little : 10/10/2008 2:34:30 PM

We're not getting the follow through to the upside. This now raises the possibility we're either hammering out a small sideways correction before heading lower again or else we're going to chop lower into tomorrow and put in a relatively minor new low. The first scenario could lead to another sharp decline tomorrow whereas the second scenario says we'll find a minor new low tomorrow and rally into Monday, maybe Tuesday. There's just no get up and go to this market yet.

Jeff Bailey : 10/10/2008 2:25:04 PM

GLD 82.16 ... slips below MPivot. October "Max Pain" $82.00 at last night's close.

Linda Piazza : 10/10/2008 2:28:51 PM

You know, James, I was just reporting what I had seen on the VXO and was reacting so quickly that I hadn't even thought about the way the VXO was computed and whether it was possible to have it above 100%! LOL. I agree with you, though, that we're probably seeing it the highest it will ever have been in our lifetimes (certainly mine, since I'm a generation older) and I hope in many, many generations to come.

I have to check out the exact calculation method again--Jeff? Keene?--but since the VXO is measuring volatility and I know volatilities on individual stocks can go over 100%, could the VIX or VXO also do so?

Linda Piazza : 10/10/2008 2:18:15 PM

Let's see if this push is sustained any better than the earlier one today. The 30-minute 9-ema is now 417.72 and we want to see 30-minute closes above that. Well, unless you're in bearish positions, as some of our subscribers surely still are. You don't want to see those closes above that 30-minute 9-ema, and such closes should be a first but tentative sign that it's time to update your profit-protecting plans as the OEX has not maintained such closes since late Wednesday.

James Brown : 10/10/2008 2:16:10 PM

Linda, I don't believe it. I can't believe my eyes! Is that even possible on the VXO? A reading of 101.22.

I know the monitor crew has been keeping you posted on the VIX and VXO.

Earlier highs this morning were 96.29 or 99.65 for the VXO depending on which quote service you were using. With a range of 0-to-100% volatility I figured we had just seen the highest reading the VXO will every produce, probably in my lifetime.

Yet now, in the last few minutes, Qcharts is showing the VXO with an intraday high of 100.53%. Maybe it's a computer error or maybe my understanding of how the VXO is calculated is wrong but I seriously thought that was an impossibility - to get a reading over 100.

The VIX is calculated with the options on the S&P 500. The VXO is calculated with the options on the S&P 100.

From the CBOE website, these provide a "minute by minute snapshot of expected stock market volatility over the next 30 calendar days." So the VXO is predicting a 100% move for the S&P 100 index in either direction in the next 30 days.

The current VIX is predicting 75% volatility for the S&P 500 index over the next 30 days.


Jeff Bailey : 10/10/2008 2:14:56 PM

02:00 Internals found at this Link

Keene Little : 10/10/2008 2:13:01 PM

I'm studying the veins of the leaves here for some clues (so the danger is having a limb fall on my head) but so far the maximum amount I wanted to see for this afternoon's decline is holding. It must hold now--another drop lower and it's timber, get out of the way.

If we get a sharp leg back up look for SPX 889 (ES 893.50) for a potential high before turning back down again (pink wave count on 60-min chart posted at 1:17 PM). If we're into a slightly larger 4th wave correction (dark red) then we'll get another pullback from a new afternoon high and then another push slightly higher (915-ish) tomorrow. This is a very tough correction to play so trade lightly or not at all right now.

Linda Piazza : 10/10/2008 2:09:06 PM

The OEX did close that 15-minute period above potential support now at 404.05 on 15-minute closes. I want to see the OEX closing 30-minute periods above the 30-minute 9-ema before I believe that anything positive is occurring at all, even over the shortest term. That moving average is currently at 416.29. Realize that potential resistance zones are thickly layered overhead, so the OEX is going to need a real zoom higher to get through them.

Linda Piazza : 10/10/2008 1:59:48 PM

VXO is 101.22.

Linda Piazza : 10/10/2008 1:55:00 PM

I'm going to blame the floor traders who jinxed any bounce by cheering this morning too much on the first bounce. They should have been knocking on wood instead.

I'm just kidding, of course. As painful as this is, we just have to wait it out.

Linda Piazza : 10/10/2008 1:53:29 PM

The OEX has obviously fallen through both the 410 and 404 potential support zones, but the 404 zone has been pushed lower to about 403, and there's still a chance that the OEX will close above that by the end of this 15-minute period. Cold comfort that is, right?

Linda Piazza : 10/10/2008 1:45:57 PM

The A/D line is just trending sideways above potentially strong support on 15-minute closes that now dips to about -2800 to -2900. The A/D line is currently -2777 and it should be given a little leeway when considering these support/resistance levels. Basically, there's no real prediction here. Potentially strong support is holding, but so is the resistance at the 15-minute 9-ema now at -2610.

Keene Little : 10/10/2008 1:42:55 PM

I'm still getting a better feed on ES than SPX today so looking at ES, two equal legs down from today's mid-day high is at 848. I don't want to see ES below 842.75 (127% extension of the bounce off today's mid-day low). Therefore a bounce off 848 could lead to a sharp rally leg whereas a drop below 842 could lead to a sharp selloff. In between those two numbers is no-man's land.

Linda Piazza : 10/10/2008 1:40:34 PM

Potential support now for the OEX near 408, but if that doesn't hold, a trip down to 404-405 looks at least possible.

Linda Piazza : 10/10/2008 1:27:32 PM

Ouch. TED spread, according to Bloomberg, is 4.62. Are we going to hear an announcement about a big financial over the weekend? Frequently when we see the TED spread up like this at the end of the week, there's something going on in a financial that we haven't yet learned much about yet.

Keene Little : 10/10/2008 1:27:30 PM

Last night I had pointed out SPX 852 on the Gann Square of Nine chart and that's where SPX is trying to find its footing today. That's another reason a break below 847 would be bearish now. It would bring the next Gann level (another 90 degrees around the square) of 824 into play.

Linda Piazza : 10/10/2008 1:25:35 PM

So, we've got about 40 minutes left until the LEH credit derivatives auctions are concluded, if I have my information correct. Then what happens? We don't know, but now is the tiem for you to begin making some what-if plans for various scenarios.

Keene Little : 10/10/2008 1:25:57 PM

If we're into a larger 4th wave bounce the current pullback could make a minor new low and then be followed by a strong c-wave rally to get above today's mid-day high. But using a Fib extension off the mid-day bounce I would not want to see SPX below 847 (127% of the bounce). Below that level and I'd say there's a good chance we'll get another strong selloff into the close.

Jeff Bailey : 10/10/2008 1:21:08 PM

$2500 / $86 = 29 shares.

29 shares with risk to 78 = $232.

Keene Little : 10/10/2008 1:17:58 PM

I was working on the SPX 60-min chart when I noticed my wave count error on the NDX chart. Here's the count on the SPX chart that calls for either a small bounce before heading lower tomorrow or a slightly larger bounce into Monday before heading lower again: Link

Right now it's not looking good for a bounce but 4th waves tend to be very choppy and full of whipsaws. It can even make a minor new low as part of a larger correction. These are very tricky times to trade.

Jeff Bailey : 10/10/2008 1:15:59 PM

GLD $85.18 ... has probed QPivot.

Linda Piazza : 10/10/2008 1:10:39 PM

There's potential support for the OEX near 410, but if that doesn't hold, there's the potential for another pullback to 405 or so. Bulls want to see no pullback and a climb up to test next significant resistance, at the 30-minute 9-ema now at 421.57. I have to say that when I scan intraday charts, though, I see any number of potentially tough resistance zones just overhead, so that it's difficult to compare one with the other and come up with "the" support or resistance that matters. I do know that when the OEX is trending strongly, either up or down, it frequently finds either support or resistance on 30-minute closes at the 30-minute 9-ema, so that's the next benchmark I'm watching. Just be aware that if you look at another chart, you might find that once past that benchmark, the OEX would just soon slam into another potentially strong resistance area.

Jeff Bailey : 10/10/2008 1:04:36 PM

VIX.X 72.78 +13.86% ... sits on DAILY R2

Jeff Bailey : 10/10/2008 1:03:42 PM

HUM-WE $1.50 x $2.05

Jeff Bailey : 10/10/2008 1:03:13 PM

HUM $30.00 -7.23% ...

Jeff Bailey : 10/10/2008 1:02:44 PM

Swing trade COVERED put order CANCEL alert! ... for the HUM-WE from 10:04:41 AM EDT.

Jeff Bailey : 10/10/2008 12:59:28 PM

In Paul Volkers interview, he STRESSES reasons why global banks need to be COORDINATED.

Jeff Bailey : 10/10/2008 12:57:44 PM

Take another day trader's "dynamic" from this morning's high to the 11:57 AM low. Note the overlaps.

Jeff Bailey : 10/10/2008 12:56:55 PM

YM traders ... important trading zone from here becomes 8,200 and 8,387

Keene Little : 10/10/2008 12:56:22 PM

My bad. Even I'm losing track of the EW counts as the 3rd waves unwind. I've got the wrong 3rd wave completing on the NDX chart I posted earlier and will correct it. It just means the bounce off the next low (assuming we rally first for a day or week before getting the next low) will only last a few days and not weeks before heading lower again. It simply means this market will continue to stair-step lower into November so any long trades should strictly be day trades at this point.

Jeff Bailey : 10/10/2008 12:52:27 PM

YM long stop alert! 8,320

Jeff Bailey : 10/10/2008 12:51:49 PM

YM 8,346 here

Jeff Bailey : 10/10/2008 12:51:32 PM

YM long raise stop alert! ... to 8,320

Linda Piazza : 10/10/2008 12:49:07 PM

The OEX's 30-minute 9-ema, often resistance on 30-minute closes on the way down, is now about 424. Sustained 30-minute closes above that moving average would be a victory for bulls, although a tentative one only.

Jeff Bailey : 10/10/2008 12:48:25 PM

NYSE a/d 253/1,645

Linda Piazza : 10/10/2008 12:47:09 PM

The A/D line is finally bouncing and is just coming up into another test of the 15-minute 9-ema from the underside. That moving average is about -2450 with the A/D line now just under it at -2503. Bulls need to see the A/D line sustaining 15-minute closes above that average.

Jeff Bailey : 10/10/2008 12:45:06 PM

YM long triggered alert!

Jeff Bailey : 10/10/2008 12:43:54 PM

YM long setup alert! ... with YM 8,225.

Go LONG a trade at 8,298.

Stop will go 8,268. Target will be 8,520.

Tab Gilles : 10/10/2008 12:43:19 PM

With GM dropping under $5.00 and currently flirting around it today, many traders were faced with margin calls and were not able to short it under $5.00

From Scottrade --Securities under $5 may not be sold short-- Link

Keene Little : 10/10/2008 12:42:53 PM

There are two higher-probability scenarios that I see at the moment. Using the NDX 60-min chart I show the two possibilities: one, a small bounce, in pink (perhaps up to about 1300, or today's high), and then a new low on Monday but holding not much lower than today's low of 1201; or two, shown in dark red, a larger bounce into Monday/Tuesday and up to about 1350-1360 before a long slow bleed back down to a new low by the end of the week and down closer to 1000. 60-min chart: Link

Both cases point to another low within the next day or week. From there the market should be ready for a larger multi-week bounce into early November before again turning back down and heading for a new low. Both cases are also obviously looking for a bounce back up this afternoon. If the decline continues I'll get stopped out and it'll be back to the drawing board.

Jeff Bailey : 10/10/2008 12:41:08 PM

Perhaps ... perhaps ... some sing of "fear" subsiding.

Jeff Bailey : 10/10/2008 12:39:52 PM

GLD 87.00 ... probes yesterday's lows. YOU pivot traders know where it is.

Jeff Bailey : 10/10/2008 12:38:42 PM

Gold bugs -34.86% ... equity sector winner

Jeff Bailey : 10/10/2008 12:37:40 PM

All majors US indexes now down about 43%-44% for 52-weeks.

Jane Fox : 10/10/2008 12:34:08 PM

I am reading a major catalyst for this selling is due to the new holding banks, JPMorgan and Goldman Sachs. They have issued massive margin calls to hedge funds and other professional traders who had used these banks as prime brokers. These calls were not issued because of market losses, but to reduce their leverage and, hedge funds who had been used to operating on high leverage were told bring down their level of risk. In this illiquid environment, where all these exotic securities have no bids, the only place to raise the cash to meet margin calls was to sell stock.

Is this what really set the market over the edge? Don't know but the first notice of these calls were issued on October 2nd and 3rd. There was something of a grace period to meet the calls, but funds realized they weren't going to be able to meet them other than by selling stock. There are rumors that the most massive of the calls are due Monday (October 13th). If so, this market could continue to decline through then.

Jeff Bailey : 10/10/2008 12:32:04 PM

YM long stop alert! 8,270

Keene Little : 10/10/2008 12:31:45 PM

I'm going to wait for the first big pullback against the bounce off the mid-day low before raising my stop on the long play. It might not get that high but it should at least get back up to this morning's high and the potential is for a multi-day rally back up to yesterday's highs (so not in a straight line up). Amazing to think about but the higher potential means a 1000-point rally for the DOW. Obviously the mid-day low needs to hold for one of these bullish scenarios to play out.

Linda Piazza : 10/10/2008 12:30:43 PM

Jane mentioned the A/D quotes or that she wasn't getting them. I have it now at -2610. It's tested potentially significant support down now to about -2865, and it's steadied but it hasn't bounced much. Bulls need to see a bounce in the A/D line to go along with the bounce in the equities.

Jeff Bailey : 10/10/2008 12:29:47 PM

YM long raise stop alert! ... to 8,270

YM 8,315

Jeff Bailey : 10/10/2008 12:27:11 PM

NYSE a/d 261/1,642

Jeff Bailey : 10/10/2008 12:26:28 PM

YM 8,327 ...

Jane Fox : 10/10/2008 12:23:22 PM

I'm not getting AD quotes but these internals are still very bearish. Link

Jeff Bailey : 10/10/2008 12:22:45 PM

YM bulls need the kick here ... ym 8,270

Jeff Bailey : 10/10/2008 12:22:19 PM

YM long raise stop alert! to 8,260.

YM 8,269

Linda Piazza : 10/10/2008 12:22:24 PM

Potential resistance on 15-minute closes for the OEX at 416.90. That could be strong enough resistance to send the OEX back toward 404.40, but we have to consider the possibility that a stronger bounce could be beginning and there might not be many pullbacks. We just don't know yet. The next roadblock and a more significant one would be a test of the 30-minute 9-ema, with that now at 426. OEX at 414.53.

Jeff Bailey : 10/10/2008 12:20:14 PM

YM Long raise stop alert! ... to even.

YM 8,306

Linda Piazza : 10/10/2008 12:19:43 PM

VXO is 97.96, down from its 99.65 high. Wow.

Jeff Bailey : 10/10/2008 12:19:06 PM

YM 8,271 ... probes DAILYS1 again.

Jeff Bailey : 10/10/2008 12:18:43 PM

YM long ... stop goes 8,190. Target 8,450

Jeff Bailey : 10/10/2008 12:17:56 PM

YM long alert! ... here at 8,250

Jeff Bailey : 10/10/2008 12:14:51 PM

12:00 Internals found at this Link

Linda Piazza : 10/10/2008 12:11:29 PM

For the first time since the first bounce this morning, the OEX has closed a 5-minute period above resistance that's now at 409.86. This is a first and barely note-worthy change in tenor, but it is a slight change in tenor. A stronger test today will be a 30-minute close above the 30-minute 9-ema, with that moving average now at 425.05 but likely to move a bit higher as the OEX climbs, if it does.

I warned all day that the downturn might not be finished until the A/D line slipped to that target I had been noting but said that bears needed to have updated profit-protecting plans if that A/D line level was hit. I don't know what's going to happen from this point forward, but bears do need to make sure they have those plans in order just in case we get a big bounce.

Keene Little : 10/10/2008 12:11:01 PM

We've now got a buy signal out of the descending wedge pattern I just posted. Long against this mid-day low is the recommendation--keep the stop very tight for now to see if it works.

Jeff Bailey : 10/10/2008 12:03:27 PM

dj- Dollar nears 14-month high vs. euro as US stocks fall

Jeff Bailey : 10/10/2008 12:02:57 PM

dj- IEA sees deeper drop in US oil demand than EIA forecast

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

USO $65.07 -6.50% ... trades MONTHLY S2

Linda Piazza : 10/10/2008 12:00:17 PM

The A/D line is now -2753, still testing that potentially strong support on 15-minute closes. It's still time for both bulls and bears to exercise extreme caution here. I've been mentioning the possibility that the A/D line could tumble to this zone all morning, although the exact numbers have changed a little as the day proceeds and said early on that could be support if it did hit it, and so I'm still saying that it could be. I've also said that if the A/D line sustains 15-minute closes well beneath about -2800 currently, then would be bulls will likely be the ones in trouble.

Jeff Bailey : 10/10/2008 11:59:55 AM

YM trade can "flip" to a 15-minute interval chart. Note since morning high, YM has NEVER been able to trade above a prior 15-minute interval.

Linda Piazza : 10/10/2008 11:57:19 AM

Those five-minute "it hasn't improved in tenor until" numbers for the OEX have converged and are now both at about 413.17. So, the OEX has not even begun any improvement in tenor until and unless it has sustained 5-minute closes above those numbers. The OEX is 407.12 as I type. Shoulda kept that put a bit longer, shouldn't I?

Jeff Bailey : 10/10/2008 11:55:14 AM

"should go" 8,050

Jeff Bailey : 10/10/2008 11:54:43 AM

YM 8,131 ... gives up third "upward trend."

Jeff Bailey : 10/10/2008 11:54:06 AM

YM 2-minute interval chart Link

BLUE is "dynamic" ... PINK dashed is DAILY Pivot retracement.

Keene Little : 10/10/2008 11:46:55 AM

I'm trying hard not to jump the gun this morning since the number one rule in this market is capital preservation. The 2nd rule is to see rule #1. But so far I'm liking the decline from this morning's bounce as far as a 5th wave down for the leg down from Wednesday. It has a bit of an ending diagonal (descending wedge) look to it which is pretty classic for a 5th wave. I'm looking at a 2-min chart for this.

It could result in a waterfall decline from this morning's high so that's the risk for a long entry. But so far if we get another small drop it could finish the downside pattern. Look for a slight throw-under, maybe ES 850-855 (I'm getting a better pattern this morning on futures rather than cash thanks to QCharts missing data on cash) and then a recovery back up inside the pattern for your buy signal. ES 2-min chart: Link

Jeff Bailey : 10/10/2008 11:44:36 AM

YM 8,265 ... comes to DAILY S1.

Linda Piazza : 10/10/2008 11:39:15 AM

Sorry, in my previous post, I meant that the A/D line was at potentially strong support. I hope that was clear from the context. I'll change that post now.

Linda Piazza : 10/10/2008 11:39:33 AM

Okay, the A/D line is now at that potentially strong support, the potential target that I've been mentioning. Rather, it's just above it. This is a dangerous spot for bulls and bears alike: for bears because the A/D line often finds support here and bounces; for bulls, because it might not bounce this time. The A/D line is -2626 as I type, with potential support on 15-minute closes now down to about -2780. Those who want the carnage to end want the A/D line to not only find support here but to bounce strongly from here.

Linda Piazza : 10/10/2008 11:33:48 AM

We can now switch to the five-minute chart to obtain some "first signs of improvement" benchmarks for the OEX. A first and so tentative sign would be five-minute closes above the five-minute 9-ema now at 414.60 but still sinking quickly. A next sign would be five-minute closes above potential resistance on five-minute closes that's now at 417.90. The OEX is 410.28 as I type.

Jeff Bailey : 10/10/2008 11:32:20 AM

dj (correction)- Obama proposes emergency small business tax relief

Jeff Bailey : 10/10/2008 11:31:31 AM

dj- S&P Cuts another $4.41B in CDOs; Total at $456.8B

Jeff Bailey : 10/10/2008 11:30:23 AM

SPX 868.54 -4.54% ...

INDU 8,228 -4.09% ...

Jeff Bailey : 10/10/2008 11:29:47 AM

dj- Peru's Broad Stock Index Down 7.67%; Blue Chips Down 11.98%

Keene Little : 10/10/2008 11:28:57 AM

Following up the VIX discussion, here's a monthly chart of VIX back to 1997. It's in blue-sky territory, as expected. Link

Jeff Bailey : 10/10/2008 11:28:24 AM

dj- UK's Darling: G7 Govts. should guarantee interbank lending

Jeff Bailey : 10/10/2008 11:27:31 AM

dj- France's AMF: Won't extend short-selling ban to all stocks

Jeff Bailey : 10/10/2008 11:26:49 AM

dj- France's AMF: No intension to temporarily close Paris exchange

Linda Piazza : 10/10/2008 11:26:23 AM

Potential support now for the OEX, although light support, is now at 410.97 and then 405.15 if that doesn't hold.

Jeff Bailey : 10/10/2008 11:25:28 AM

RUT.X 483.64 -3.11% ...

Jeff Bailey : 10/10/2008 11:24:41 AM

dj- Obama: Proposes Emergency loans for small business

Linda Piazza : 10/10/2008 11:24:23 AM

A/D line now -2496, more closely approaching potentially strong support on 15-minute closes at about -2670. The A/D line could of course drop lower, breaking through that potential support and it will be a bad day (well, a worse day than it's been) if it sustains levels much below that. Give it a little leeway because it tends to overrun support and resistance a bit. However, the idea is that it's already extreme enough that risk is mounting on bearish trades, risk of a steadying or a bounce.

Jeff Bailey : 10/10/2008 11:23:49 AM

dj- JPMorgan Analyst, BP Economist see crude floor price at $60-$70/Bbl

Jeff Bailey : 10/10/2008 11:22:44 AM

XBD.X 79.91 -6.15% ...

Linda Piazza : 10/10/2008 11:21:52 AM

New high for the day for the VXO. It's 93.24 as I type, just off that low. Wow. That's all I can say. I think Tab posted some historical information about the VXO the other day, too. I don't have charts back to 1987, but the VXO (old VIX, computed using OEX options) hasn't been this high since 1997, at least.

Jeff Bailey : 10/10/2008 11:21:50 AM

Morgan Stanley (MS) $8.35 -32.93% ...

Jeff Bailey : 10/10/2008 11:21:28 AM

Morgan Stanley shares under pressure ... MarketWatch Story Link

Tab Gilles : 10/10/2008 11:20:34 AM

Here's a VIX/VXO chart I posted Monday. Link

Linda Piazza : 10/10/2008 11:19:31 AM

Thanks, Tab. I was just letting Bloomberg chart it for me rather than making the calculations myself because my quotes for those are delayed, too. Fortunately, I can legitimately claim due to my previous articles that I did know how it's calculated! Smile.

Jeff Bailey : 10/10/2008 11:18:00 AM

BIX.X 139.01 +0.57% ...

Linda Piazza : 10/10/2008 11:17:15 AM

I looked back through to 1997 on my weekly Keltner charts, and, while the VXO has at times pierced the weekly resistance that is today at 66.05, it has never during that period closed the week above it. Weeks that it tested this Keltner resistance, although the resistance was of course at different levels then, were 8/17/07 and 10/27/97. Weeks that it closely approached it but did not pierce it were 7/22/02, 9/17/01, 10/05/98, 9/08/98 and 8/31/98. We are truly in historic times. This shows, however, how possible it is for bears to get whipsawed. Breakout moves are strong momentum moves, but there's much potential for whipsawing. While I can't imagine the VXO dropping 15 points by the close today, strange things can happen.

Tab Gilles : 10/10/2008 11:16:40 AM

Linda, Taking LIBOR 3mos - 3mos T-bill = TED

4.819 - 0.275 = 4.544

Jeff Bailey : 10/10/2008 11:14:58 AM

VXO.X 90.39 +18.99% ... DAILY Pivot at 71.03

Linda Piazza : 10/10/2008 11:11:43 AM

Wow. VXO at 90.37. For there to be any improvement at all in tenor in the OEX, you'd like confirmation by a VIX level below 83, with 15-minute closes sustained below that. Seems ridiculous for an 83 level on the VXO to be an improvement in tenor, doesn't it?

Tab Gilles : 10/10/2008 11:10:36 AM

NYSE New Lows 2,300 Link

Nasdaq New Lows 1,342 Link

Jeff Bailey : 10/10/2008 11:09:38 AM

YM long setup CANCEL order alert! ... from 10:57:52 ... YM 8,316 here.

Linda Piazza : 10/10/2008 11:07:19 AM

There's still the potential for the A/D line to drop further, toward -2670. It is testing potentially strong support on 7-minute closes now, so it's not a given that it will drop back that low, but it is a possibility. As I said earlier, though, I would be careful about bearish positions from now, with the A/D line at -2324 and especially as it approaches -2670. Give it a little leeway with these numbers as it tends to overrun S/R a bit.

Keene Little : 10/10/2008 11:06:09 AM

It amazes me that a 300-point move on the DOW (just this morning's high to the current pullback) can look like a tiny little correction on my 60-min chart. Just amazing volatility.

Linda Piazza : 10/10/2008 11:03:12 AM

Hmm. Tab and I were getting TED spread quotes at about the same time but had very different numbers. I hadn't seen his post. Perhaps he has a more up-to-date number than the delayed Bloomberg quote?

Linda Piazza : 10/10/2008 11:00:49 AM

Potential support, although light support because of the particular Keltner line as well as the way it's sliding lower, for the OEX is now from about 411-414. A 7-minute close above 432 would be a significant improvement in tenor although only a first step in any improvement today and not any gold-plated proof. OEX at 417.97.

Linda Piazza : 10/10/2008 10:59:05 AM

The TED spread is 4.51. While it's a bit off its day's high of 4.59, it hasn't exactly plummeted as the LEH credit derivates auction begins. I had hoped to see an improvement.

Jeff Bailey : 10/10/2008 10:57:52 AM

YM Long setup alert! ... with YM 8,373.

Go LONG a trade at 8,415. Stop 8,257. Target 8,740

Tab Gilles : 10/10/2008 10:52:04 AM

TED Spread 4.44

Linda Piazza : 10/10/2008 10:48:52 AM

The A/D line is at -2374. This is potential support on 7-minute closes, although the 15-minute chart suggests that the A/D line could drop as low at -2690. Beginning now, I would be very careful with my stops on bearish positions and I would watch for possible bounce potential near -2690. If the A/D line breaks through that and sustains levels well below it (give it a little leeway), then we're in deep do-do, but there's the potential for a bounce.

Jeff Bailey : 10/10/2008 10:48:22 AM

SPX 873.50 -4.01% ... lows of the session

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

The OEX is approaching potential support in the 412-414 zone. It's light support only, so I have no idea whether it will hold or not, but just as I thought we'd likely get a rollover this morning, I also think it's possible that the OEX could bounce from a higher low.

Tab Gilles : 10/10/2008 10:46:29 AM

Revised SPX from late last night. Link

Linda Piazza : 10/10/2008 10:45:31 AM

Just so you know: I entered an OCT OEX 420 put when the OEX was bouncing off its low and I've just exited. I believed it was a risky trade to enter a put, too risky to even entice readers into it, and I believed it was even riskier to stay in it any longer. I collected my modest profit and I'm outta there as I think it's possible that we'll get a snap-back rally any time now: possible but not a given.

Jeff Bailey : 10/10/2008 10:44:54 AM

ExxonMobil (XOM) $61.51 -9.55% ... has retraced must more than 50% ($62.51) of its 07/21/02 to 10/14/07 high.

Linda Piazza : 10/10/2008 10:38:02 AM

Light potential support for the OEX on 15-minute closes at 415.60, so watch that level, too, for potential support.

Jeff Bailey : 10/10/2008 10:37:20 AM

Charlie Rose Interviews Paul Volcker ... Replay from last night on YouTube Link

Tab Gilles : 10/10/2008 10:35:02 AM


Jeff Bailey : 10/10/2008 10:32:52 AM

10:00 Internals found at this Link

Tab Gilles : 10/10/2008 10:30:53 AM

DJIA at 8,498/ SPX 898 as the President addresses the nation, lets see where it goes?

Tab Gilles : 10/10/2008 10:28:34 AM

Jane great observation on SPX rise and fall chart. Yesterday I posted an Aussie/Yen chart on MM, where it took 5 years to rise and in a few weeks gave it all back and more.

Keene Little : 10/10/2008 10:25:00 AM

Once again the techs are holding up better than the blue chips and got back into the green first. The DOW and SPX came close to gap closure (not bad all things considered) and the market is pulling back again. As I said, ideally we'll see a consolidation this morning followed by another leg down, even if it's just a retest with a higher low, to give us a decent setup to try a, dare I say, long play.

Linda Piazza : 10/10/2008 10:24:54 AM

The A/D line is back below the bearish/bullish benchmark again. It is so far finding support on 15-minute closes at the 15-minute 9-ema, now at about -1870, but there's no guarantee that it will continue to do so. It's vulnerable to a deeper pullback toward -2770. Bears need to be aware that it could also continue to find support on that 15-minute 9-ema and eventually sustained 15-minute closes above that bearish/bullish benchmark, climbing from there. The A/D line is -1625 as I type.

Tab Gilles : 10/10/2008 10:24:38 AM

Hedge Funds motto:

Live by the sword...Die by the sword!"

Linda Piazza : 10/10/2008 10:22:21 AM

If the OEX heads down again toward the day's lows, watch for potential support near 408-409. I don't know that the OEX will get that far, or that the support will hold if it does, but a further drop back toward the day's low remains a possibility.

Keene Little : 10/10/2008 10:21:08 AM

From a reader (thanks John):

Did you know:

1. "Under the Constitution and the International Emergency Economics Powers Act the President has the right to suspend Constitutional rights - including the Contracts clause of the Constitution - and block transactions and assets".

2. Paulson and Bernanke are seriously considering invoking this power to invalidate all credit default swap contracts by all but the ones held by the holder of the underlying debt security. Poof - gone before your very eyes.

3. Since it is a $500 trillion dollar problem they may have no choice. Hedge funds may be something our grandchildren read about in history books.

I was not aware of this authority and have not checked it out but I thought interesting enough to pass along. I can only imagine the relief to the market if this happens.

Linda Piazza : 10/10/2008 10:13:04 AM

Unfortunately, we have to watch now for potential resistance on the A/D line at -1379 to kick in. The A/D line is now above that level, at -1189, but we don't know whether this is going to hold or not as resistance. The OEX has also reached up for the first time today to test the 15-minute 9-ema at 437.33 and that may also hold as resistance on 15-minute closes, knocking the OEX back again. I wish it weren't possible, but it remains possible that the OEX will roll down again toward the day's lows, so you must be on guard against that possibility. OEX at 432.94 as I type.

Jane Fox : 10/10/2008 10:12:48 AM

A market axiom is fear is much more a motivating factor than greed. Here is a very good example of it. Link

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

Trading floor comes alive .... SPX 906.06 -0.42% ...

Tab Gilles : 10/10/2008 10:10:33 AM

Keene, the P is coming down fast due to the need to raise cash, fundamentals and technicals are out the window. This is "irrational pessimism", market always trade at extremes when emotions take over.

So..now we have "P", in coming monthe the fundamental and "E" will become important and as we look into the future "G" - Growth- will enter or PEG valuations.

As I type we are going GREEN on the DJIA!!!

Jeff Bailey : 10/10/2008 10:07:25 AM

dj- BlackRock's Fink: Expect more failures in this crisis

Jeff Bailey : 10/10/2008 10:04:41 AM

Swing trade sell COVERED Put ... Let's sell COVERED by the HUM-MF ... One (1) of the Humana HUM Nov. $25 Puts (HUM-WE) for a LIMIT price of $2.00. ($1.25 x $2.40).

HUM $30.69 -5.10% ...

VIX.X 68.83 +7.68%

Linda Piazza : 10/10/2008 10:02:01 AM

If the OEX gets through that 427.50-ish level then I would watch for stronger potential resistance near 436-437.

Linda Piazza : 10/10/2008 10:00:25 AM

I mentioned earlier that you should be careful about rollover potential if the OEX should approach 429. That level to watch is lower and is now at about 427.50, but can be pushed a bit higher than that as the OEX climbs. I'm watching this on a 7-minute chart, and so would be watching what happens on 7-minute closes, of course, but I know many of you can't watch that interval.

Jeff Bailey : 10/10/2008 9:58:03 AM

SMH $20.56 +0.19% ... inches green.

Jeff Bailey : 10/10/2008 9:57:44 AM

XAL.X 14.85 +1.29% ... inches green.

Linda Piazza : 10/10/2008 9:58:45 AM

The TED spread, according to Bloomberg's delayed quote, is 4.59, obviously another new high. I think we ought to watch it as the day progresses and as the Lehman credit derivatives are auctioned today. If you want to read what Leigh Stevens had to say about it last night, you can find his article here: Link

Keene Little : 10/10/2008 9:55:57 AM

Yesterday morning's lows are the key levels for now--a break above those would suggest we've seen the bottom for now (for at least a few days). Otherwise a bounce back up should be the 4th wave correction in the leg down from Wednesday and then one more decline to finish a 5-wave move. For the DOW, SPX and NDX those upside key levels are 9046, 963.43 and 1317.70, resp.

Tab Gilles : 10/10/2008 9:55:48 AM

USO $66.27 -$3.28 (4.6%)

UNG 29.38 -$0.68 (2.26%)

Tab Gilles : 10/10/2008 9:54:45 AM

$VIX 70.18 +6.26

$VXO 86.21 +10.25

$VXD 58.03 +4.61

$VXN 74.13 +4.47

$RVX 68.27 +2.75

Jeff Bailey : 10/10/2008 9:54:23 AM

European Markets Link

Jeff Bailey : 10/10/2008 9:53:57 AM

Asian Markets Link

Jeff Bailey : 10/10/2008 9:52:07 AM

BIX.X 145.76 +5.46% ... morning low holds above 07/15 low.

Keene Little : 10/10/2008 9:51:59 AM

Remember, the first v-bottom probably won't mark the low. It could lead to a sizeable rally but it should be followed by another decline back down to either test or break the low. I'd like to see a consolidation followed by a new low in order to finish the leg down from Wednesday. That would set up a decent buying opportunity (for a trade only).

Linda Piazza : 10/10/2008 9:47:12 AM

I would be very careful about rollover potential if the OEX were to rise up to about 429 or slightly above. I don't know that such a rollover will occur as we're long overdue for a snap-back rally, but there's a possibility.

Jane Fox : 10/10/2008 9:46:04 AM

VIX is up to 70.14 this morning and still climbing. Link

Linda Piazza : 10/10/2008 9:45:19 AM

The OEX came awfully close to a 10% drop from yesterday's close. That would have been at 392.13, and the low has been 397.34. Close enough? I don't know.

Keene Little : 10/10/2008 9:45:08 AM

Tab, you're sure right about the E of P/E coming down fast. Unfortunately so far the P is coming down faster. We'll have to see how the ratio does after the market finds a bottom and the next quarter's numbers come out. I guess my only was that the P/E ratio is not a good indicator for timing the market, not even from a longer-term perspective, unless you're really long term (beyond 5 years) and even then you can be way too early in a secular bear market (which is by nature a trading environment).

Linda Piazza : 10/10/2008 9:43:49 AM

Bears, be careful here. Would be bulls, I'd be cautious, of course, but especially cautious as the A/D line is not either back above -1375 nor all the way down at -2660 support. It is closely approaching the 15-minute 9-ema, but is essentially between strongest support and resistance. The markets could rally straight up from here--hence, the warnings to bears--but without the A/D line either surmounting strongest resistance or sitting on strongest support, I just don't feel comfortable calling it from here. I would warn to watch for a possible A/D line bounce back toward about -1750 or maybe even higher, toward that benchmark potential resistance, but I just don't know yet what's going to happen if that does occur.

Linda Piazza : 10/10/2008 9:39:49 AM

Keltner outlook on the A/D line: the A/D line's first prints are negative, of course, but not as negative as you might imagine. The A/D line's first prints were just below today's bearish/bullish benchmark at about -1375. This is a good news/bad news setup because this leaves plenty of room for the A/D line to decline toward -2100 or even -2650, the next potential levels of Keltner support. The good news is that it's still possible for the A/D line to steady and bounce above -1375 by the close of this first 15-minute period and then climb from there. Think these Keltner levels don't matter? Take a look at this chart that I showed yesterday: Link

Tab Gilles : 10/10/2008 9:37:30 AM

Keene, I agree with your earlier comment that bear markets don't end with pe's down at 6.

As I posted...

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

I see a rally here, but as earnings and recession weigh on the markets the "E" will come down, thus overall the p/e ratio will rise. My point was that we are not coming off an overvalued market like the bubble of 2000. This time the credit market is pushingf the equity market down.

Historical P/E Ratio chart... Link

Jane Fox : 10/10/2008 9:34:31 AM

AD line is of course bearish but certainly not as bearish as I suspected it would be. -1500

Linda Piazza : 10/10/2008 9:30:52 AM

Keene and I are obviously hooked up psychically lately, apparently, because we keep echoing each other.

For whatever it's worth, many of you know that I went to cash in all but one tiny mixed stock/bond fund last October. We would have had to pay some taxes on that that I didn't want to pay last year and it's a tiny account in percentage to our other accounts. Also for whatever it's worth, I of course want to reinvest, but I haven't done so yet and am not doing so yet. I am beginning to watch closely the investment ideas that I have so far, as few as they are since I'll be legging into investments very gradually when I do. Although it's hard to think of it this way, we've been gifted with an opportunity to see how financial advisors, brokers and our own investment ideas have fared in a rough market condition.

Jane Fox : 10/10/2008 9:30:51 AM

Crude hits a low of 78.61 overnight but really who cares? Link

Jane Fox : 10/10/2008 9:28:11 AM

I was telling my daughter yesterday about the DOW, has I have been each and every day for the last few days and she said it sounds like it shouldn't be called the DOW but DOWN. Out of the mouth of babes ( my 32 year old babe).

Linda Piazza : 10/10/2008 9:25:35 AM

Late yesterday, hopes of a bounce off the low were dashed as the OEX headed down to close on its lows. The OEX has broken through potential Keltner and other support levels on everything, up until the monthly chart. Even on the monthly chart, it will set a downside target below the 2002 low if it closes this month below 506.90. On the SPX, the monthly Keltner chart warns us to factor in vulnerability to a Keltner target of about 600 unless the SPX can close this month above 1092. Both indices have broken through rising trendlines that began to be put in place in about 1994 on both arithmetic and semi-log charts.

Because the OEX is in breakdown mode on all charts through the weekly chart, I don't have any short-term targets or potential support levels to give you and we know anyway that when vicious declines are set in motion, support doesn't matter.

However, I again warn you, as I have been for a couple of days now, to be careful about protecting your bearish profits and even to consider locking in some of those profits if you haven't already done so. I know it's painful to lock in partial profits and then count up how much money you could have made. Believe me, I know. I went into this week with some NOV SPX 1040 puts that I had purchased for $37.00 and sold for $68.30 but which are now bid $145 and ask $153. Do I feel bad for locking in the profits on those? Of course I have a wee bit of longing when I look at those, but mostly in this market, I'm glad to have had those which were entered as a delta hedge on 25 OCT 1030/1020 credit spreads, and I removed them when they had served their purpose of buffering any potential loss on those credit spreads while I exited them as the markets headed down.

The OEX has moved into a consolidation zone that persisted for almost a year from mid 2002 to mid 2003, so it's possible but certainly not proven that the OEX's decline could stall anywhere through here, so just keep updating those stops as the markets head down and consider where you might want to lock in profits.

Both Jim in his LEAPS column and Leigh Stevens in last night's Trader's Corner mentioned the auction this morning in Lehman's CDS's, with that auction likely exacerbating the negative attitude this morning. That auction will conclude about 2:00 pm, I believe Leigh said, but I want you to be aware that's a factor in the markets and that a sell-the-rumor (of a terrible auction result) and buy-the-fact result could occur. One of these days we're going to get a snap-back rally, and I want you to be prepared for it.

Keene Little : 10/10/2008 9:21:38 AM

With the futures down as hard as they are (YM -414, ES -48) it's looking like SPX will drop below the bottom of the parallel down-channel I showed on the 60-min chart. Accelerating lower below that steep down-channel is a crash. There's no other way to look at it. Obviously I legged out of my puts a tad early at this point but I have no regrets (well, a little). I'm basically flat now and like most people I'm watching this in awe. I don't want to jump in short now because the risk for a snap-back rally is real. And I sure don't want to buy it. There are times when being on the sidelines is truly the safest place to be. Let's see what develops this morning to see what sets up from there.

Jane Fox : 10/10/2008 9:15:27 AM

This is aimed at stopping the bleeding financial institutions are feeling from the exodus of cash but will require multiple government agencies to agree.

Jane Fox : 10/10/2008 9:12:07 AM

I am reading the US Treasury is considering insuring ALL bank deposits (not just those covered by FDIC) for a temporary period.

Jane Fox : 10/10/2008 9:09:51 AM

DOW futures down -342

S&P futures down -40.75

NDX futures down -29

Russell futures down (delayed) -2.50

Jane Fox : 10/10/2008 9:07:40 AM

WASHINGTON (MarketWatch) -- The U.S. trade deficit narrowed in August, as U.S. trading partners cut back their demand for American products, a government report showed Friday.

The nation's trade deficit narrowed by 3.5% to $59.1 billion, the Commerce Department said.

Exports dropped by 2.0% in August, the biggest decline since June 2004, even though exports from Boeing Co. increased.

Boeing machinists went on strike in early September, which will depress aircraft deliveries in coming months. That is just one factor leading economists to conclude that export will decline throughout the rest of the year.

Analysts had been assuming that weaker global growth would trim exports. Economists surveyed by MarketWatch had expected the deficit to narrow to $58.5 billion.

Jane Fox : 10/10/2008 9:04:57 AM

A friend told me Jim Cramer said he thought the DOW would hit 8200 at some point and I joking said the way things were going it could make it this week. I truly did not think it would happen.

Jane Fox : 10/10/2008 9:03:59 AM

I figured everyone would like to see the overnight charts sooner than later. Link

James Brown : 10/10/2008 8:39:33 AM

Traders continue to sell crude oil.

Oil futures are down about 5% and trading under $83 a barrel. The intraday low in pre-market trading on Friday was $81.13.

James Brown : 10/10/2008 8:39:23 AM

Friday is not shaping up to be a very good day in the stock market.

Asian and European markets are getting crushed.

-9.6% ... Japan's NIKKEI 225 index
-8.3% ... Australia's ASX 100 index
-7.3% ... Singapore's Straits Times
-7.0% ... Hong Kong Hang Seng

-8.9% ... Germany's DAX 30 index
-8.4% ... France's CAC 40 index
-7.3% ... Britain's FTSE 100 index

Investors looking for safety have jumped into gold.
Gold is up +$31.00 to almost $918.00/ounce.

Futures for the U.S. market are forecasting a painful open on Friday morning.

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