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Keene Little : 10/14/2008 10:48:20 PM

Wednesday's pivot table (using RUT futures again): Link

At the end of the day Tuesday I provided some updated charts on SPX to show projections for the next move down (and the potential to run up to 1073 if Tuesday's highs are exceeded). Also check out the chart of the DOW during the 1929 crash if you haven't seen it. Very interesting setup for us right here. The NDX 60-min chart shows the October 6th gap was closed at Tuesday's open and then selling kicked in from there. So far NDX is holding above its broken downtrend line from September 25th and above the trend line along the lows from August 19th, which it climbed back above on Monday: Link

A drop below 1349 would indicate we've probably seen the high for the bounce off last Friday's low. While it could pull back and then rally higher again that's not the higher-probability scenario at this time. A continued decline on Wednesday is expected and it should lead to another new low before bouncing again. I had recommended a short on Tuesday using the mid-day bounce high as your stop and that continues to be the recommendation for Wednesday morning. It was a good setup for a gap down on Wednesday so we'll see if that's what we get.

The daily chart shows how the stair-stepping lower should continue into the end of the year with the bounces now getting larger and larger before a final bottom some time next year: Link

OI Technical Staff : 10/14/2008 9:59:59 PM

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Jeff Bailey : 10/14/2008 9:00:21 PM

Closing U.S. Market Watch Link

Jeff Bailey : 10/14/2008 8:52:19 PM

Week's Global Economic Calendar Link

@ 04:00 PM EDT, Federal Budget was released. +$45.7B

Jeff Bailey : 10/14/2008 8:45:14 PM

Today's selling in Treasuries a potential positive for U.S. equities as long as the cash stays in the U.S. The negative was today's 13-week and 6-month Treasury auction results (low yields bought) when compared to the Freddie note auction (higher yields bought), which still suggests a very tight credit market.

Jeff Bailey : 10/14/2008 8:41:20 PM

Trade Blotter of CLOSED and still OPEN trades that I (Jeff Bailey) have profiled at this Link

Jeff Bailey : 10/14/2008 5:05:22 PM

Closing Internals found at this Link

Keene Little : 10/14/2008 4:21:24 PM

After their holiday yesterday the bond market sold off hard today (driving yields higher) thus blowing a collective raspberry at the global central bankers, essentially telling them "nice try but not enough". Between that and the TED spread remaining stubbornly high I think we have our short-term answer and it supports my contention that we have not yet seen the lows for the stock market.

Jeff Bailey : 10/14/2008 4:20:24 PM

Intel (INTC) $15.93 -6.23% ... Earnings Press Release Link

Keene Little : 10/14/2008 4:13:43 PM

The SPX daily chart is sporting a spinning top doji at resistance today. It could be just an indecision marker or it could be the start of a reversal pattern back down. A down day tomorrow would confirm the reversal pattern. Link

Keene Little : 10/14/2008 4:09:01 PM

I continue to like the short side with my stop just above today's mid-day high (I'm playing with options and Not futures). It's a good setup for downside follow through tomorrow but we should know relatively quickly tomorrow morning.

Keene Little : 10/14/2008 4:02:45 PM

Interesting chart of the DOW leading up to and following the 1929 crash. After a couple of hard down days the market saw a strong 2-day rally that was then followed by another 7 days of strong selling. I think we're in the same pattern. It's uncanny how similar both parabolic rallies and crashes are to each other. Human beings react very predictably which is measured in the stock market (and EW patterns). Link

Jeff Bailey : 10/14/2008 3:59:53 PM

BKX.X 62.73 +12.86% Link ... session highs.

Jeff Bailey : 10/14/2008 3:57:56 PM

$SPX.X 999.53 -0.38% Link


Keene Little : 10/14/2008 3:55:24 PM

The market remains in limbo land after today's price action. SPX maintains the potential to rally up to 1073 to meet some Fibs (1073 and 1077), the previous 4th wave of a 3rd wave, and the downtrend line from September 19th. Or it's going to drop hard tomorrow and break below 950 and raise the probability that we'll head for new lows into the end of the week. SPX 60-min chart update: Link

Jeff Bailey : 10/14/2008 3:54:50 PM

Hang in there mom!

Jeff Bailey : 10/14/2008 3:54:11 PM

SPY $100.00 -1.36% ... most redemtion or buy a little here should be in to mutual funds.

Jeff Bailey : 10/14/2008 3:50:55 PM

Bank of New York Mellon (BK) $34.56 +12.71% ... can see the news impact here.

Jeff Bailey : 10/14/2008 3:50:04 PM

dj @ 02:00 PM EDT- US Tsy taps Bank of New York Mellon for Market Rescue Program

Jeff Bailey : 10/14/2008 3:48:48 PM

dj- Petroecuador Sep Oil Export Revenue -20% on Mo. To $526.33M

Jeff Bailey : 10/14/2008 3:47:20 PM

FXY 97.72 +0.05% ... just below parity.

Jeff Bailey : 10/14/2008 3:46:50 PM

dj (earlier) - US Fed announces unlimited dollar swap line with Japan

Keene Little : 10/14/2008 3:38:07 PM

So far the bounce off the afternoon low is a 3-wave move. As long as it stays under the mid-day high it's a good setup for a short play into tomorrow as it's a setup for a strong down day. Stop just above the mid-day high.

Keene Little : 10/14/2008 3:28:19 PM

Because NDX made its October 2007 high later, by about 3 weeks, the 55-week projection from its high gives us the week of November 16th for its low. As with SPX, depending on which 3rd wave we'll be completing will determine which bounce scenario plays out into 2009: Link

I'm showing support for the next leg down at a Fib projection near 1132 but if stronger selling kicks in then we could see NDX tag its 1998 and 2003 lows near 940.

Keene Little : 10/14/2008 3:20:34 PM

We often measure the market's moves with Fibonacci projections and retracements but usually more for price than time. Time also tends to follow Fibonacci relationships and a Fibonacci 55 weeks from the October 2007 high falls during the last week of this month. I'm showing on the SPX weekly chart another low during that week with SPX finding support at/near the October 2002 low of 768: Link

Depending on which degree 3rd wave is completed at that time will determine how big and long lasting the next bounce will be. I'm showing a relatively short-lived bounce and then a low for the year in November (another cycle study shows November 10-16 to be a potential turn window). But it's possible we'll see the kind of bounce from the October low that I'm showing from the November low.

Regardless, the EW pattern is very clear in the need for additional lows. The question right here is whether the bounce off Friday's low is finished or if instead we've got a little more time/price consolidation to go before we head lower again.

Keene Little : 10/14/2008 3:12:19 PM

TED spread has remained stubbornly high today, slightly higher than mid day's 4.36 points.

Jeff Bailey : 10/14/2008 3:07:11 PM

See the difference (per Rick Santelli's observation?)

Jeff Bailey : 10/14/2008 3:06:50 PM

Freddie Mac Sells $4 Bln Bills at mixed rates ... Reuters Story Link

Jeff Bailey : 10/14/2008 3:04:44 PM

dj 01:01 PM EDT- 6-month Bills: 1.100%; 52.79% at the high; Bid-to-cover 2.55%

Jeff Bailey : 10/14/2008 3:03:46 PM

dj 01:01 PM EDT- 3-month Bills: 0.50%; 48.2% at the high; Bid-to-cover 3.32%

Keene Little : 10/14/2008 3:03:24 PM

Two equal legs down for the DOW today is at 9010 so that's the level to watch carefully for support if you're trading the DOW.

Jeff Bailey : 10/14/2008 3:02:37 PM

dj- Mexican retailer's Sept. same-store sales drop 6.5%

Jeff Bailey : 10/14/2008 2:58:16 PM

SPY $97.78 -3.52% ... 38.2% retracement of Friday's low to this morning's high is $96.98.

Keene Little : 10/14/2008 2:57:00 PM

The daily chart for the DOW shows downside potential to the March 2003 low at 7416 by next week and then another bounce followed by a final low for the year in November slighly below its October 2002 low: Link . The only caveat is that the decline has taken less time than I had anticipated so it could be over sooner than early November.

Jeff Bailey : 10/14/2008 2:53:33 PM

One thought regarding MUTUAL FUND investors.

You've probably got some, I've got some.

Now ... What MIGHT you, or others have done into YESTERDAY's close?

Now ... what do you do into today's close?

Jeff Bailey : 10/14/2008 2:48:26 PM

It makes "NO SENSE" to place $1,000; $2,000; $3,000; $4,000; $100,000 in the DDM when it goes UP about the same as the DIA, but goes DOWN nearly 200-times the DIA.

Jeff Bailey : 10/14/2008 2:45:47 PM

DDM $37.63 -5.42% ...

DIA $91.50 -3.71% ...

Per yesterday's observation.

Jeff Bailey : 10/14/2008 2:43:45 PM

FOMC Discount Minutes ... released at 02:00 PM EDT.

Jeff Bailey : 10/14/2008 2:39:06 PM

Excellent, excellent observation/comments from CNBC's Rick Santelli regarding today's Treasury auction.

Jeff Bailey : 10/14/2008 2:24:51 PM

02:00 Internals found at this Link

Keene Little : 10/14/2008 2:17:11 PM

With the drop to new daily lows now I'll watch to see how price behaves around the level where today's decline will have two equal legs down (SPX 966.34, NDX 1328.51). If this is just a correction to the rally then we could see support kick in around those levels and then start another rally leg. Stay aware of that possibility if you're short. Otherwise lower your stop now to the mid-day high.

Jane Fox : 10/14/2008 2:11:45 PM

Internals have turned much more bearish now with the AD line below 0 and the AD ratio below 1.00. Vix is supporting the bearishness testing new daily highs and the TRIN is quite bearish at 1.41. Link

Jeff Bailey : 10/14/2008 2:00:23 PM

And ... booking more profits.

Jeff Bailey : 10/14/2008 1:59:37 PM

Removing some "risk" and turning to the call options market.

Jeff Bailey : 10/14/2008 1:58:57 PM

Swing trade long exit alert! ... for the 100 shares of National City (NCC) at the bid of $3.33.

Jeff Bailey : 10/14/2008 1:46:43 PM

VIX.X 55.17 +0.32% ...

Jeff Bailey : 10/14/2008 1:46:23 PM

Swing trade call alert! ... for one (1) of the National City NCC Jan. $2.50 calls (NCC-AZ) $1.35 x $1.45 at the offer of $1.45.

NCC $3.29 +43.04% ...

Jeff Bailey : 10/14/2008 1:35:43 PM

SMH $21.55 -3.14% ... most likely attributed to CSCO's news.

Jeff Bailey : 10/14/2008 1:31:25 PM

Increase follows a 0.1% rise in the prior week in the ICSC/Goldman Sachs Chain Store Sales Index as grocery and drug store consumer traffic improves while other shopping venues are mixed. Meanwhile, the Johnson Redbook index reports sales drop a steeper-than-expected 1.2% for the week.

Jeff Bailey : 10/14/2008 1:30:36 PM

The U.S. Commodity Futures Trading Commission tells lawmakers that centralized clearing is one immediate way to mitigate the risks surrounding over-the-counter derivatives, including credit-default swaps.

Jeff Bailey : 10/14/2008 1:30:02 PM

Insurance superintendent Eric Dinallo tells lawmakers a lack of transparency on credit-default swaps made it hard for the state to know the broader effects of what an AIG bankruptcy could mean, and calls for US regulation of over-the-counter swaps.

Jeff Bailey : 10/14/2008 1:28:38 PM

dj (earlier)- DOMINO'S PIZZA NET DROPS 8%
Pizza chain's fiscal 3Q earnings decline to $10.1 million, or 17c a share, while revenue falls 4% amid higher commodity costs. Excluding items, earnings fall to 13c a share, well short of analyst estimates of 21c. Company also says it may to raise additional funding after the bankruptcy of Lehman Brothers.

DPZ $7.06 -29.40% Link

Jeff Bailey : 10/14/2008 1:20:34 PM

dj (earlier)- CISCO TO UP IT SPENDING BY 10%
Cisco Systems Chief Executive John Chambers says the company expects to increase its own technology spending by 10% over the next year despite sectorwide concerns over a slowdown in tech spending.

CSCO $18.87 -2.07% Link ...

Keene Little : 10/14/2008 1:19:35 PM

The TED spread is down marginally, at 4.35 as of mid day. Its closing high on Friday was 4.64 and yesterday's close was 4.57. The huge stock market rally from Friday is not being supported by a drop in credit spreads. Fear remains in the credit market despite the promises of a global central bank save. They of course have to assure the best they can but the credit market is literally not buying it and therefore you should not be buying the stock market, not yet anyway.

Jeff Bailey : 10/14/2008 1:17:27 PM

Index of Small Business Optimism rises 1.8 points last month to 92.9, reported the National Federation of Independent Business. An increase in owners expected the economy to strengthen in the next six months.

Jeff Bailey : 10/14/2008 1:16:44 PM

dj (earlier)- PEPSICO'S NET FALLS 10%, TO CUT COSTS BY $1.2B
Beverage giant posts 3Q net of $1.58 billion on revenue of $11.24 billion amid rising commodity costs. Company cuts its full-year revenue view and will cut costs by $1.2 billion over the next three years, slashing 3,300 jobs.

Jeff Bailey : 10/14/2008 1:16:01 PM

Former Fed Chairman Paul Volcker says that the U.S. economy is now in recession and it would be unreasonable to expect a strong recovery anytime soon. He adds that the global economy is also facing a "considerable recession."

Keene Little : 10/14/2008 1:14:54 PM

The updated NDX 60-min chart shows that this morning's open closed last Monday's gap near 1470. That's clearly an important high and should now stand as resistance for any longer-term short play here. Link

Jeff Bailey : 10/14/2008 1:14:44 PM

JNJ Earnings Press Release at this Link

Q2's Link

Jeff Bailey : 10/14/2008 1:12:49 PM

Company 3Q net rises to $3.31 billion, or $1.17 a share from $2.55 billion, or 88c, a year earlier, as strong consumer-products and medical-devices sales offset the impact of stepped-up competition from generic-drug makers.

JNJ $64.80 +3.38% ...

Jeff Bailey : 10/14/2008 1:10:36 PM

Wells Fargo asks a federal court to block Citigroup from pursuing liability claims against Wells Fargo after Wachovia chose to accept a competing acquisition offer from Wells Fargo.

Jeff Bailey : 10/14/2008 1:09:10 PM

Jefferson County, Ala., commissioners vote not to pursue a Chapter 9 bankruptcy filing to deal with the county's sewer debt. The vote to oppose such a filing was 3-2, the Birmingham News reports.

Jeff Bailey : 10/14/2008 1:08:07 PM

HYG $77.74 +1.62% ...

Jeff Bailey : 10/14/2008 1:07:53 PM

LQD $86.55 +0.40% ...

Jeff Bailey : 10/14/2008 1:07:39 PM

MUB $91.51 +1.90% ...

Jeff Bailey : 10/14/2008 1:07:16 PM

PHF $5.60 +17.64% ...

Jeff Bailey : 10/14/2008 1:06:53 PM

PIMCO, the world's largest bond fund, will manage the commercial paper assets for the Fed as part of the government's Commercial Paper Funding Facility program, according to the U.S. Federal Reserve.

Jeff Bailey : 10/14/2008 1:06:18 PM

The U.K. Debt Management Office, an agency of the treasury, says that it will issue EUR30 billion, or $42.2 billion, of gilts and EUR7 billion of treasury bills to fund the government's bank support plan.

Jeff Bailey : 10/14/2008 1:05:40 PM

The commercial paper market sees a boost after the Federal Reserve details plans for a facility to backstop the debt and global leaders outline steps to invigorate credit markets. Some top-tier companies cut short-term interest rates

Jeff Bailey : 10/14/2008 1:01:26 PM

NCC $3.29 +43.04% ... pressed against GREEN #1

Jeff Bailey : 10/14/2008 1:00:05 PM

dj- ECB's Trichet:
Global finance was potential unstable before crisis.
Quick decisions indispensible at this stage.
ECB doing everything needed to preserve liquidity.
ECB can't assume role of executive branches.
Impressed by decisiveness of EU, US action
ECB applies separation policy
Downside growth risks have materialized
Growth will trough in 2Q, 3Q; Recover 2009

Keene Little : 10/14/2008 12:54:13 PM

Looks like we're going to get a larger bounce, Two equal legs up would now be at SPX 1024.50 and a 62% retracement of this morning's decline is at 1024.58 so good Fib correlation there to watch for a high for the bounce.

Jeff Bailey : 10/14/2008 12:52:16 PM

VIX.X 54.00 -1.80% ...

Jeff Bailey : 10/14/2008 12:52:00 PM

NCC-KH $0.45 x $0.50

Jeff Bailey : 10/14/2008 12:51:44 PM

Swing trade COVERED call cancel order alert! ... with NCC $3.29 +43.04% ... let's cancel the order from 10:45:51

Jeff Bailey : 10/14/2008 12:45:36 PM

QQQQ @ $34.72

Jeff Bailey : 10/14/2008 12:43:20 PM

NYSE a/d 1,264/1,053

Jeff Bailey : 10/14/2008 12:42:34 PM

You can also "lower stack" your RED 5-mrt if you like (red #7 .... red #12). But don't underestimate the possibility of a squeeze above 9,514 (see your dynamic overlap?)

Jeff Bailey : 10/14/2008 12:40:40 PM

YM traders ... NOW place your "dynamic" on the YM

Jeff Bailey : 10/14/2008 12:34:12 PM

QQQQ last 3-days "5-MRT" Link

Keene Little : 10/14/2008 12:33:49 PM

Stepping away for about 30 minutes.

Keene Little : 10/14/2008 12:33:21 PM

Updating the 60-min chart I'm continuing to show the possibility that we'll get another leg up to the 1073 area before the market is ready to resume its downward trend. It takes a break below 950 to negate that short-term bullish possibility. Link

Jeff Bailey : 10/14/2008 12:17:28 PM

12:00 Internals found at this Link

Keene Little : 10/14/2008 12:06:50 PM

Right now SPX is cycling around the important Gann number of 1005, which is also where the broken uptrend line from 1990 is located. It's far too early to know what kind of candle we'll have for today but the daily SPX chart shows a bearish one so far: Link

Jeff Bailey : 10/14/2008 12:04:46 PM

YM 9,412 ... after 11:45-50 "high" of 9,513.

Keene Little : 10/14/2008 12:04:01 PM

It doesn't look like the Fib targets I gave for YM and ES will be reached but we did get the one more minor push higher (to complete a 5-wave move up from the lows near 11:15 AM). The correction should be over now and we'll head for new daily lows.

Jeff Bailey : 10/14/2008 12:03:22 PM

YM ... example of "GREEN 5-MRT" and "RED 5-MRT" with some "rules" Link

Jeff Bailey : 10/14/2008 11:53:23 AM

I'm working on a YM "educational" chart with my 5-MRT day trader's technique.

Jeff Bailey : 10/14/2008 11:52:44 AM

YM 9,513 ... RED #5.

Keene Little : 10/14/2008 11:41:56 AM

SPX has bounced back up to its broken uptrend line from Friday so a kiss goodbye here could be followed by a quick drop to new daily lows (especially if we get one more minor push higher to tag the Fib levels just posted for YM and ES).

Keene Little : 10/14/2008 11:39:49 AM

Looking at this morning's decline in the futures from their highs just past 8:30 AM, a 38% retracement would be at YM 9527 and ES 1022.50. The 3-wave bounce off this morning's low would have the 2nd leg up 162% of the 1st at YM 9543 and ES 1021.25 so we've got some correlation with the Fibs to watch for resistance and a reversal back down.

Jane Fox : 10/14/2008 11:38:38 AM

It serves no purpose to demonize Wall Street when almost everyone has had a hand in the tribulations we're likely to suffer. The greater aim would be for all of us to look within ourselves to determine how we'll best endure and recover, so we don't end up asking in too-short order: "Does anybody remember laughter?

Just read and article that laid the blame for our current financial situation in various places but ended with this statement.

Jeff Bailey : 10/14/2008 11:31:20 AM

YM 9,456 ...

Jane Fox : 10/14/2008 11:30:59 AM

Yup looks like I should have put my stop below the last swing low at 9295.

Jeff Bailey : 10/14/2008 11:30:33 AM

YM 5-minute interval chart Link

Keene Little : 10/14/2008 11:26:26 AM

After a brief bounce this morning off the uptrend lines from Friday afternoon the DOW and SPX have now broken those lines. That should be a good indication that at least the leg up from Friday is finished. We might get just a pullback before heading higher again (and in this market a pullback could be a 1000-point move on the DOW) but the risk for longs is that the bear-market rally may have already finished and now we'll start the next leg down.

Jeff Bailey : 10/14/2008 11:24:37 AM

When trading an oversold bounce, like I did yesterday, I look for the continued short covering points, or those where further short covering is likely. Use your pivot levels to have an idea where the computers will systematically turn on, as they too are managing RISK in their inventory/hedges.

Jane Fox : 10/14/2008 11:21:44 AM

When trading an oversold or overbought the rule is to put your stop under/over the last swing low/high but that is too much risk for me usually so I put it closer and today I was stopped. Remains to be seen if that was a right decision or not. So far it seems the wrong decision.

Jane Fox : 10/14/2008 11:19:56 AM

Looks like I had my stop too close. Stopped at 9338.

Keene Little : 10/14/2008 11:08:46 AM

While the DOW and SPX have returned to the flat line for the day it's telling that YM and ES are down more than 100 and 10 points, resp. Yesterday's rally right after the close (giving futures a higher closing price), and the rally higher during the overnight session, has been strongly reversed. YM is now down more than 500 points from its overnight high. The volatility continues.

Jeff Bailey : 10/14/2008 11:04:12 AM

European Markets Link

Jeff Bailey : 10/14/2008 11:03:42 AM

Asian Markets Link ... Nikkei-225 +14.15% (was closed Monday for holiday).

Keene Little : 10/14/2008 11:03:16 AM

The DOW is back to the flat line after a strong gap up so that might be the first sign of impending weakness. Certainly the techs having gone strongly negative this morning (NDX down -2% while NQ is down -4%) is not a bullish sign.

Jane Fox : 10/14/2008 10:58:01 AM

My stop is 9338 and profit target at 9500.

Jane Fox : 10/14/2008 10:56:43 AM

The DOW is very oversold now so I will take advantage of it and put a long order in at 9418.

Jane Fox : 10/14/2008 10:55:37 AM

LONDON (MarketWatch) -- Shares in Societe Generale jumped as much as 14% Tuesday after the French bank said it made an underlying profit of around 1 billion euros ($1.4 billion) in the third quarter and again denied rumors that it would need more capital.

The group said late Monday that it continued to cut risky assets in the third quarter, while strengthening its hedging positions. After taking account of losses linked to the collapse of Lehman Brothers , the bank said it will still post a positive net income for the quarter.

Jeff Bailey : 10/14/2008 10:55:28 AM

NCC-KH covered call alert! ... Let's make that a Day order only, NOT GTC.

Jane Fox : 10/14/2008 10:53:56 AM

Australia has unveiled a 10.4 billion fiscal stimulus package. It will include 4.8 billion for pensioners, 3.9billion for low and middle income groups and 1.5 billion for first time home owners and 187B to a labor-skills program. Australian Prime Minister Kevin Rudd said this is the greatest global financial crisis to hit Australia since the great Depression.

Jeff Bailey : 10/14/2008 10:46:51 AM

Swing trade sell COVERED call alert! ... for one (1) of the National City Corp. NCC Nov. $4.00 Calls (NCC-KH) at a LIMIT of $0.55.

NCC-KH $0.40 x $0.50

NCC $3.17 +37.82% ...

Jeff Bailey : 10/14/2008 10:38:16 AM

On 10/06/08 at 01:01 PM EDT, VIX.X was 53.36 with HUM $36.82

Jeff Bailey : 10/14/2008 10:36:52 AM

Seem "expensive" don't they?

Jeff Bailey : 10/14/2008 10:36:00 AM

HUM $38.50 +7.87% ...

HUM-MF currently $1.65 x $2.05

Jeff Bailey : 10/14/2008 10:35:08 AM

VIX.X 54.49 -0.90% ...

Keene Little : 10/14/2008 10:24:56 AM

On the SPX 60-min chart I showed some potential upside target/resistance levels and this morning's rally took it right in between the two previous 4th wave levels (4th waves of different degrees as the EW count unwinds the multiple 3rd waves that had built up) at 1020 and 1073. It's still possible we'll see SPX push up to the 1073 level since it would also accomplish two equal (and sharp) legs up (at 1072) from Friday, as shown on this 30-min chart: Link

I would not want to bet my money that it will get up to 1072-1073 but that remains the upside potential until it drops back below yesterday afternoon's low near 951.

Jeff Bailey : 10/14/2008 10:16:51 AM

10:00 Internals found at this Link

Keene Little : 10/14/2008 9:56:57 AM

The cash index, NDX, has now joined NQ in the red. The techs have been the leaders and any rally without them has led to failure of the rally so take your cue from them today. We could get a bounce back up but right now we've got a bearish signal.

Keene Little : 10/14/2008 9:41:57 AM

The techs could be leading the way again--NQ is the first into the red.

Jane Fox : 10/14/2008 9:40:17 AM

VIX is now down to 55.10.

Jane Fox : 10/14/2008 9:39:58 AM

AD line opens very bullishly at 2049.

Jane Fox : 10/14/2008 9:34:50 AM

I think the SPX could reach 1074, a 50% retracement of the selloff from August highs before it takes a breather. Link

Linda Piazza : 10/14/2008 9:31:53 AM

I agree, Jane, that there was a lot of scrambling going on at the time the LEH decision was taken, and it's easy to make rearview mirror judgments about what should or shouldn't have occurred. Not even everyone agrees yet on those rearview judgments. I know you agree that we don't like all the decisions being made, but I tend to lean toward the side that something had to be done, that we weren't just looking at a stock market collapse but the kind of collapse where I needed to make sure that there were temporary sources for local produce, milk and other goods that I could purchase with cash, and that I had the cash squirreled away and I could find someone who would trust the dollar. Not the way I want to live.

Linda Piazza : 10/14/2008 9:26:34 AM

As I mentioned in a previous post, I will be away for most of this week. I'll try to fill in if I see that other writers are called away, but I'm officially going to be away.

Futures are higher, of course. I want subscribers to keep in mind that what we're seeing may well be the anticipated relief rally. Late last week, I was early anticipating it when I kept warning bears to be careful of their stops as the risk was shifting, but early or not, this was anticipated from a technical point of view. Markets still have much to digest, and now it's time for bulls to be careful. Various types of resistance on daily and other charts (Keltner, Fib, etc.) suggest that if the OEX were to rise into the 491.80-493.80 zone, there might be considerable resistance there. The fast action has scrambled my intraday charts so that there's little cohesion between them, little ability to weigh where support/resistance levels are converging and impose judgments about which looks strongest, so I must first go to those longer-term charts and warn bulls that if the OEX should rise into that 491.80-493.80 zone, I would carefully guard profits. Don't count on the OEX rising that far, but do have advance plans for how you'll handle a test of that zone if it should be reached.

Intraday charts suggest resistance that could be lower, first near 480.30 and then near 489.40, but the OEX is likely to blow right past that first one, at least, early this morning.

We have a confirmed reversal signal on the daily chart, but be aware now of the possibility that one of these days, we're going to be due for a consolidation day or a rollover day, and be prepared for when it comes. I don't know if it will come today, but most feel that it's unlikely that we'll get a V-shaped bottom without a retest and I personally will be fairly worried about rollover potential.

Keene Little : 10/14/2008 9:21:49 AM

The plan to recapitalize the banks doesn't address the core problem that's causing the credit freeze--fear. While the government moves help in that regard we can see from measures like the TED spread that adding liquidity will not solve the problem. I've said before that the Fed was pushing on a string when trying to use liquidity to fix the problem. Now the Fed has joined in pushing on the string but at the end of that string is a consumer who's tapped out and afraid to borrow more.

The TED spread says it all. The last few times the stock market rallied while credit spreads widened or stayed wide we saw the stock market completely retrace those gains and make new lows. I fully expect the same thing to happen again. This rally is built on hope that the fixes will work but disappointment will set in again so be very careful about your long positions (I'm recommending to family and friends that they use this opportunity to go to cash if they hadn't already done so--there will be an opportunity, lower, to get back in).

Jane Fox : 10/14/2008 9:21:17 AM

Here are your overnight charts. The major American Equity Indexes are all above their previous day highs. Link

Jane Fox : 10/14/2008 9:19:14 AM

Linda, I truly do not think we would not be quite as bad off if Lehman had not been allowed to fail yet how could Paulson have known how volatile things would get. I know I know he is the Treasury Secretary but he is not an oracle. And if Lehman had been bailed we would be hearing, " The treasury is bailing out all those Wall Street fat cats" and we would never have known just important bailing out Lehman would have been.

Of course I would have preferred that route but still.

Linda Piazza : 10/14/2008 9:13:29 AM

Jane, I was just noticing your comments about Lehman. I don't understand all the ins and outs of that decision, but I do know that those in the convertible/preferred markets say that allowing LEH to fail crashed that market, with one hedge fund manager saying that it had been the only credit market still operating at least somewhat efficiently up until that time.

Linda Piazza : 10/14/2008 9:12:04 AM

My quote for the TED spread is delayed, but the currently quoted value is 4.45. That's still sky high but is down from Friday's values. (Yesterday, the bond market was closed.) We really need to see it drop much further than this if we're to have confidence that corporations are finding funding. I'll be gone today and much of this week, so here's the link if you want to check the values for yourselves today: Link

Jane Fox : 10/14/2008 9:08:59 AM

I am quite impressed with how Paulson has handled this whole mess so far however, the only misstep he took was not bailing out Lehman. Questioned about this last night he said for one there was no buyer for Lehman and they had time to bail themselves out. I still think he should have tried. But in any case his quick reaction to the crisis and now changing it to match the UK/Euro plan is encouraging.

Jane Fox : 10/14/2008 9:05:48 AM

From what I am reading the US plan is based on the banks voluntary participation and some are questioning if that may not be the route to go since the banks will only ask for modest amounts to keep the government's stake in them to a minimum. If the banks do not ask for enough lending will not get the jump start the economy needs.

Jane Fox : 10/14/2008 9:01:08 AM

The plan Paulson and company are proposing is based on the UK plan but the US plan details are still sketchy however, Paul Krugman, the Princeton University economics professor and New York Time columnist who won the Nobel Prize for Economics praised the British and Euro Zone rescue plan. Krugman said he was "significantly more encouraged" about the prospects for curbing the crisis now.

Jane Fox : 10/14/2008 8:53:30 AM

Paulson is expected to announce today a recapitalization of 8 banks with the hope this will begin to get credit moving again. Those banks are:

Citigroup - 25B
JP Morgan 25B
Bank of America 12.5 B
Merrill Lynch 12.5B
Goldman Sachs 10B
Morgan Stanley 10B
State Street Bank 3B
Bank of New York 3B

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