Option Investor
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Jeff Bailey : 10/21/2008 5:26:12 PM

Apple Computer (AAPL) $91.49 -7.06% ... released for trade.

Extended session low/high has been $85.00/$98.45. $96.50 here.

Jeff Bailey : 10/21/2008 4:59:43 PM

Closing Internals at this Link

Jeff Bailey : 10/21/2008 4:47:14 PM

Apple Computer ... Earnings Press Release Link

Jeff Bailey : 10/21/2008 4:45:13 PM

Apple Computer (AAPL) $91.49 -7.06% ... Halted for trade.

Jeff Bailey : 10/21/2008 4:22:58 PM

Most Actives ... QQQQ $31.50 -5.12%, MSFT $23.31 -5.70%, C $14.18 -6.03%, GE $20.35 +1.04%, INTC $15.21 -5.17%, CSCO $17.83 -5.95%, SPY $95.86 -2.98%, AAPL $91.49 -7.06%, WFC $32.64 +1.27%, PFE $17.34 (unch)

Jane Fox : 10/21/2008 4:14:11 PM

Here are the overnight charts and as you can see TF (Russell 200o) retraced 76.40% of its previous day range, NQ (NDX future) more than 100%, ES 61.60% and YM only 50%. Link

Jane Fox : 10/21/2008 4:06:51 PM

NEW YORK (MarketWatch) -- Credit-default swaps related to Lehman Brothers were settled Tuesday, relieving anxiety in markets that the derivatives could have caused too much strain on a number of buyers or sellers of the insuarance on the bank's debt. The Depository Trust & Clearing Corpration said in a statement that "no loss allocations will be imposed on [mortgage-backed securities division] member firms as a result of the liquidations of these forward trades." It was unclear earlier whether just $6 billion or up to $400 billion in swaps on Lehman's (LEHMQ:Lehman Brothers Holdings Inc News, chart, profile, more Last: 0.05-0.01-14.81% 3:48pm 10/21/2008 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: LEHMQ 0.05, -0.01, -14.8%) debt would have to be settled.

Keene Little : 10/21/2008 4:00:05 PM

I'm thinking NDX will be the better pattern to keep an eye on for now. This afternoon's high (1326.33) is now important and I'm thinking it's better to be short/flat below that level for a potential ride back down to last week's lows.

But two equal legs down from last Friday is at 1273.97 so keep an eye on that level as it could mark the end of a pullback before getting another rally leg to match last Thursday/Friday's rally. This correction remains very tricky to figure out real time. Once I figure out how to successfully employ hindsight trading I won't worry so much about real-time analysis.

Jeff Bailey : 10/21/2008 3:54:33 PM

USO $58.42 -5.48% ...

Jeff Bailey : 10/21/2008 3:54:17 PM

FXE $130.54 -2.18% ...

Keene Little : 10/21/2008 3:48:34 PM

Keep an eye on NDX, the weaker index. If it breaks much below the mid-day low (breaking it as I type) and stays below it then it's more bearish for now and I would not try a long play.

Jane Fox : 10/21/2008 3:41:25 PM

Starting to see more of the strings attached to Paulson's $250B cash infusion into nine major banks. Sounds like there will be stipulation to not only lend the new money but to also buy weaker banks although they seem to be doing a pretty good job of that already (re the fight over Wachovia). Financial acquisitions have been over 18% of all M&A so far this year.

Keene Little : 10/21/2008 3:36:05 PM

Updating the SPX 30-min chart I'm showing the same sideways triangle idea as just shown on the DOW chart: Link . That would be for the b-wave of an a-b-c bounce off last Thursday's low. A c-wave equal to the a-wave gives us an upside projection near 1073, the same 1070 area that is showing up in several Fibs and a Gann number. That one is a real possibility if one more leg down finds support near the the uptrend line from Friday afternoon (maybe with a little throw-under finish), currently near 958.

The larger sideways triangle (pink) remains a possible pattern since price action is so choppy up and down (which is very common in a triangle pattern). So it's dicey here as to which direction the short term holds for us but I think it will be worth testing the long side if SPX holds in the 954-958 area.

Jeff Bailey : 10/21/2008 3:17:07 PM

VIX.X 51.58 -2.62% ... still holding above WKLY S1 (50.73)

Jeff Bailey : 10/21/2008 3:15:21 PM

SPX 979.27 -0.62% ...

Keene Little : 10/21/2008 3:10:47 PM

Looking at the DOW I see a very good possibility for one more pullback that then leads to a big rally to match the one from last Thursday. For the DOW it would like this and point to about 10120 (30-min chart): Link

Jeff Bailey : 10/21/2008 3:05:34 PM

NYSE a/d 1,344/1,747

Jeff Bailey : 10/21/2008 2:52:11 PM

DXY 84.00 +1.08% ...

Jeff Bailey : 10/21/2008 2:51:36 PM

FXE $131.41 -1.52%
FXY $99.25 +1.24%
FXB $99.28 +1.27% ...

Jeff Bailey : 10/21/2008 2:50:33 PM

DUG $41.65 -0.83% ...

DIG $36.63 -0.53% ...

Jeff Bailey : 10/21/2008 2:49:30 PM

USO $59.26 -4.11% ...

Jeff Bailey : 10/21/2008 2:49:15 PM

UNG $30.44 +1.43% ...

Keene Little : 10/21/2008 2:48:58 PM

DOW back in the green while NDX is still down -2%. Something still smells funny about the rally but can't argue with price right now.

Jeff Bailey : 10/21/2008 2:48:26 PM

Oil Service HOLDRs (OIH) $102.21 +1.44% ... notable reversal from WKLY Pivot.

Keene Little : 10/21/2008 2:34:12 PM

Two equal legs up for this afternoon's bounce is at SPX 975.90 and NDX 1318.78. SPX has made it but NDX is still a little shy (and is also only just past the 38% retracement of today's decline--quite a bit weaker than SPX, still).

Jeff Bailey : 10/21/2008 2:27:10 PM

DUG $43.07 +2.54% ...

DIG $35.60 -3.33% ...

Keene Little : 10/21/2008 2:26:00 PM

SPX has now retraced 62% of today's decline (973.48). Any higher than 78.6% (978.74) would suggest we'll get a complete retracement and head higher again. As I said, this pattern defies figuring out right now. But if it turns back down from here, then it will look like just a sharp upward correction to today's decline and the next leg down could see some strong selling. Based on that you can probe with a small short play here with a stop near 980.

Jeff Bailey : 10/21/2008 2:23:58 PM

Current Temperatures Link

Jeff Bailey : 10/21/2008 2:22:30 PM

US Nat. Gas Fund (UNG) $30.41 +1.36% ... inches above correlative DAILY/WKLY Pivots.

Keene Little : 10/21/2008 2:14:10 PM

Jane, I agree on the dollar cost averaging--into a money market account (wink).

Actually the next low in the market (down to SPX 768 and perhaps a little lower such as 700) should be a good time to get back in for a relatively short ride back up. I see the possibility for rally from there up to SPX 1000-1070 by early 2009. That would be good for a 40%-50% gain. Then get out again.

Jeff Bailey : 10/21/2008 2:09:49 PM

02:00 Internals at this Link

Jane Fox : 10/21/2008 2:04:30 PM

The other thing to be careful of is don?t make major changes too quickly and probably should not make any changes to your portfolio right now. You need to let the smoke clear and the volatility to settle down. And don?t forget dollar cost averaging.

Keene Little : 10/21/2008 1:58:45 PM

Hopefully you can read this as I think Forrest Gump, if he were to have said this, explains all you need to know about investing. Link

Keene Little : 10/21/2008 1:41:27 PM

The current bounce looks to be the correction of the decline from this morning's high. It has retraced 38% so far (966) and a 50% retracement is just under 970. A typical time for the correction to the decline would have the high for the bounce finishing around 2:30 PM.

Jeff Bailey : 10/21/2008 1:14:06 PM

52-week Bill Auction: 1.720%; 40.64% at the high; Bid-to-cover 3.11

Jeff Bailey : 10/21/2008 1:13:18 PM

4-week Bill Auction ... 0.70%; 87.14% @ the high; Bid-to-cover 2.49.

Jeff Bailey : 10/21/2008 1:11:55 PM

Goodrich (GR) $32.94 -5.48% ... raising QRTRLY dividend to $0.25/share.

Keene Little : 10/21/2008 1:10:31 PM

Adding to Jane's advice on retirement (or any investment) account, the old assumptions of financial advisors need to be thrown out the window. Most are still assuming we're in a longer-term bull market and that it will always go higher. Maybe in another 20 years but not in the next 5-8 years (and likely from a lower level than today). As for doubling every 9 or 10 years? Since 1998 stock funds are negative whereas bond funds are positive. It's not the stock market it was from 1982 to 2000.

Jane Fox : 10/21/2008 1:08:14 PM

You also need to own a percentage of bonds equal to your age. That means if you are 30 you should own 30% bonds and 70% stocks. If you are 60 that is 60% bonds and 40% stocks. That is pretty darn simple heh?

If you can tolerate more risk and say read things like the Market Monitor you can adjust the level of bonds but this is a good rule of thumb.

Jane Fox : 10/21/2008 1:05:42 PM

Next the best place to put your money is into index funds. You never know what company will be next to implode so you're better off owning the whole market.

Jane Fox : 10/21/2008 1:03:11 PM

Because of compound interest your money doubling every nine or so years, again and again that little 2 percent fee, every year over 50 years, ends up wiping out most of your gains. It takes away nearly 70 percent.

Jane Fox : 10/21/2008 1:01:23 PM

Now is the time to see if your particular strategy or financial advisor did a good job or not. If you lost less than the overall stock market then that is good but if you lost more that is bad. However, if you decide to jump into a something new make sure the annual charges are minimal. John Bogle, the founder of Vanguard, calls annual charges the silent killer of retirement accounts. If you invest 1000 at 8% after 50 years it is worth 47K but if you pay 2% annual charges that 47K now looks like 18K. Makes a big difference.

Jane Fox : 10/21/2008 12:56:14 PM

If you already have a good idea of how your asset allocation mix now is the time to revisit it. Stocks have fallen a lot and will probably take up a smaller percentage of your portfolio. If you had allocated 25% stocks that may be only 20% now and you will have to move some money from bonds or cash to bring it back to 25%.

Jane Fox : 10/21/2008 12:53:39 PM

You are all probably really sick of hearing how to invest and what you should invest in but there some things that people with IRAs, 401(k)s, etc should revisit. These type of accounts (at least the 401(k)s) do not allow you a lot of room to maneuver - I know my daughter's 401(k) gives us only 10 choices - so this first tip may be the hardest.

First of all you should have a predetermined idea of how you want your portfolio balanced. If you are young you can have a larger percentage in risky type investments but older individuals need to lower that percentage, in some cases a lot. There is a lot of help on the internet as to how to balance your assets and your own financial advisor or financial website should be able to help a lot.

Jeff Bailey : 10/21/2008 12:52:46 PM

4-week and 52-week Treasury auction results announced.

Jeff Bailey : 10/21/2008 12:52:03 PM

10-year ($TNX.X) down 16 bp at 3.73%

30-year ($TYX.X) down 9 bp at 4.20%

Jeff Bailey : 10/21/2008 12:50:55 PM

dj- Mexico's 20-year Bond Yield Rises 1.69 Pct Pt to 10.20%

Jeff Bailey : 10/21/2008 12:48:07 PM

dj (earlier)- Sun Microsystems Inc. (JAVA) $4.78 -17.30% ... warned of a deep quarterly loss and a possible charge for the diminished value of acquisitions, the latest sign of the economic slowdown's toll on the computer industry.

Jeff Bailey : 10/21/2008 12:46:49 PM

dj (earlier)- Texas Instruments Inc.'s (TXN) $16.50 -8.23% ... third-quarter net income dropped 27% on lower sales, and the company said it is trying to sell part of its wireless operations. The communications chip giant expects fourth-quarter revenue to fall substantially, based on weak orders during the past few months.

Keene Little : 10/21/2008 12:46:42 PM

Arghh, the market refuses to finish any of its patterns. We didn't get much of a 5th wave down and that raises the question about what's next. As large, in points, as these moves are, the market is just flopping around and consolidating. Trying to figure out intraday moves remains a big challenge.

For now though, if we get a another leg down (SPX 952 is now the downside projection) that leaves a bullish divergence against the mid-day low then it will signal another bigger bounce coming. It's the bigger bounce that I'm hoping to see (not from right here though) for the short play to set up.

Jeff Bailey : 10/21/2008 12:45:45 PM

dj (earlier)- United Airlines (UAUA) $13.49 +6.47% ... swung to a third-quarter loss amid surging fuel costs and fuel-hedging losses. Results beat analysts' expectations.

Keene Little : 10/21/2008 12:20:39 PM

A small consolidation looks like it's being followed by another leg down. Equality between the 1st and 5th waves for today's decline is at SPX 949.76 so call it 950 for support for a bigger bounce. You can look to buy it for a quick bounce and then when it looks like the bounce may be ending I'll be watching for a short play entry.

Keene Little : 10/21/2008 12:18:44 PM

Actually Jane, enquiring minds would like to know how the government is coming up with all this money to buy up all the assets of this country (and other countries). Never mind, I know the answer to that question. Oh the pain of the debt burden we're placing on our children.

Jane Fox : 10/21/2008 12:15:26 PM

The FED has announced a new facility to ease the stress on the short term debt market. It is called the Money Market Investor Funding Facility and will purchase assess from US money market mutual funds if the fund feels it needs liquidity. The assets the facility will buy are CDs and commercial paper with maturities of 90 days or less.

The MMIFF will be run by JP Morgan who will set up 5 conduits to purchase the assets.

Inquiring minds would like to know how much JPM will be reimbursed for its role in this facility.

Jeff Bailey : 10/21/2008 12:10:56 PM

12:00 Internals found at this Link

Keene Little : 10/21/2008 12:08:54 PM

SPX bounced off the 957 projection so that needs to hold otherwise we'll be into a larger pullback at a minimum. A small consolidation followed by another drop lower would give us a 5-wave move down from this morning's high and that would be followed by a larger bounce and then another leg down. So first I want to see if we get the 5-wave move down and then we can set up some trades from there.

Keene Little : 10/21/2008 12:02:57 PM

Did someone say something? Nasty little spill here, with volume behind it.

Jeff Bailey : 10/21/2008 12:02:32 PM

US Oil Fund (USO) $57.75 -6.53% ... remains weak.

Jeff Bailey : 10/21/2008 12:02:04 PM

Euro CurrencyShares (FXE) $131.30 -1.61% ... remains weak.

Jeff Bailey : 10/21/2008 11:59:38 AM

ProShares Ultra Oil & Gas (DIG) $33.48 -9.09% ...

Jeff Bailey : 10/21/2008 11:57:39 AM

ProShares UltraShort Oil & Gas (DUG) $45.37 +8.02% ...

Keene Little : 10/21/2008 11:53:23 AM

There is a way for me to look at the decline from this morning's high as impulsive and that suggests we're about to get another leg down here. Two downside Fib projections are SPX 963 and then 957. The bigger pattern remains choppy and maintains several possibilities. Day trading these moves is about the only thing I see at the moment and even that's a challenge.

Jeff Bailey : 10/21/2008 11:44:36 AM

Nymex Crude Oil (Open Interest) Link ... Remember! Today is termination of November Contract (per Wednesday's Wrap) and comments.

Keene Little : 10/21/2008 11:30:00 AM

The important level for the bulls to defend is this morning's low, a break of which would indicate at least a larger pullback is in progress. But unfortunately the pattern would then be left even uglier than it already is and I wouldn't have much of a clue as to where it's going.

Jane Fox : 10/21/2008 11:14:18 AM

The VIX is getting pulled and prodded in every which way today so I will not be using it as an internal until it smoothes out. I was so encouraged that it worked wonderfully yesterday but today is a different story. Link

Jeff Bailey : 10/21/2008 11:08:33 AM

Humana (HUM) $37.99 -0.10% ... HUM-MF $1.40 x $1.65

Jeff Bailey : 10/21/2008 11:07:38 AM

Obama opens 8-point lead over McCain ... Reuters Story Link

Keene Little : 10/21/2008 10:56:14 AM

It's a 3-wave pullback so far and the bottom of the parallel up-channel for SPX that I showed earlier (9:45 AM) is currently near 972 so there's room for a slightly deeper pullback. From yesterday this is one of the uglier rallies I've seen--it looks very weak (and lacks volume). But it is what it is and I'd rather wait for a good setup at the top of the rally or get confirmation of it breaking down before I step in and try to short it. Just biding my time here while this plays out. Good time to catch up on some reading/research.

Jeff Bailey : 10/21/2008 10:46:31 AM

Pfizer (PFE) $17.76 +2.45% ... Earnings Press Release Link

Jeff Bailey : 10/21/2008 10:44:42 AM

DuPont (DD) $34.88 -3.55% ... Earnings Press Release Link

Jeff Bailey : 10/21/2008 10:43:13 AM

Caterpillar (CAT) $40.00 -2.18% ... Earnings Press Release Link

Jane Fox : 10/21/2008 10:41:59 AM

It's been a while since I posted a chart of Crude. Funny how Crude is just not something we care all the much about anymore. But what I do care about is that I actually bought gas at $2.99/gal yesterday. I truly never thought I would ever see that price again.

Anyway this is not a healthy looking chart and I cannot find anything bullish about it at all. Link

Jeff Bailey : 10/21/2008 10:41:33 AM

3M (MMM) $59.80 +3.98% ... Earnings Press Release Link

Jeff Bailey : 10/21/2008 10:34:09 AM

Most Actives ... CSCO $18.76 -1.10%, INTC $15.85 -1.18%, AAPL $96.57 -1.86%, SPY $98.31 -0.50%, QQQQ $33.08 -0.36%, C $14.37 -4.77%, NCC $3.08 +5.48%, QCOM $38.79 -3.79%, SDS $88.21 +1.13%

Keene Little : 10/21/2008 10:21:29 AM

The DOW is the first back into the green (flirting with it anyway). The idea for a higher bounce is so far still looking good.

Jeff Bailey : 10/21/2008 10:18:22 AM

BOE's M4 Money Supply M/M (Aug-Sep) Link

Jeff Bailey : 10/21/2008 10:15:24 AM

13-week ($IRX.X) up 23 bp at 1.25% ... some notable unclogging yesterday.

Jeff Bailey : 10/21/2008 10:14:13 AM

10:00 Internals found at this Link

Jeff Bailey : 10/21/2008 9:56:58 AM

National City (NCC) ... Earnings Press Release Link

Jane Fox : 10/21/2008 9:53:41 AM

WASHINGTON (MarketWatch) -- The Treasury Department said Tuesday it has hired accounting giants PricewaterhouseCoopers and Ernst & Young to aid in the financial market rescue program. PricewaterhouseCoopers will help set up an internal audit system and Ernst & Young will provide general accounting support, the agency said.

Jane Fox : 10/21/2008 9:51:03 AM

AD line opens at -1411 so obviously the bears are in control this morning.

Keene Little : 10/21/2008 9:45:25 AM

Ideally, from an EW and Fib perspective, we'll see the market rally a little higher before tipping back over. This 15-min chart shows a minimum Fib projection to SPX 1013 for an a-b-c bounce off last Thursday's low: Link . The top of a parallel up-channel for the c-wave crosses that Fib projection this afternoon so if the market continues to press higher that's what I'll be watching for. But a break below 940 would negate that short term bullish expectation.

Keene Little : 10/21/2008 9:37:00 AM

It's not surprising to see NDX the weakest this morning--it was the weakest yesterday and was one of the reasons I was warning that the rally is very likely just another bear market bounce and nothing more (although these bounces can tack on a 1000 points to the DOW in a hurry).

Keene Little : 10/21/2008 9:34:58 AM

SPX's uptrend line from last Thursday is near 967 this morning so I'm watching to see if that holds or not. Futures had dropped lower than that just after 9:00 AM.

Jane Fox : 10/21/2008 9:33:19 AM

Good morning all. Overnight the futures made a series of lower lows and highs and that means the trend was down. I have placed a fib retracement on each of the charts showing which market will open the weakest and so far that is NQ (NDX futures). Link

Linda Piazza : 10/21/2008 9:32:15 AM

This morning, the Bank of Canada cut its interest rate by a quarter-point, which was less than market watchers had anticipated. The central bank signaled, however, that "some further monetary stimulus will likely be required to achieve the 2 percent inflation target over the medium term."

Linda Piazza : 10/21/2008 9:27:41 AM

I thought I would sign on until other writers are signed on and contributing this morning, giving Keene a little help. Yesterday the OEX ended the day jammed up against potential resistance on 15- and 30-minute closes, at about 470.50-471.50 on the two charts. Since mid-morning yesterday, the OEX had been finding support on 15-minute closes at its 15-minute 9-ema, now at 465.16 but likely to be pushed lower by early action, and on 30-minute closes at its 9-ema there, now at 463.88. If it couldn't push soon through that resistance overhead, it was beginning to appear about time for a retreat all the way to test stronger support, now at about 459-460, before another try could be attempted. If that support didn't hold, then other support was layered all the way down to about 455 and then began again at about 447. If we extrapolate where the OEX might go from SPX futures' current distance from fair values, then that 459-460 test might indeed occur and it's possible that the 455-ish area could even be tested, but it will be important to see how the A/D line sets up this morning before we start making too many assumptions. We've seen a couple of days over the last two weeks when the cash market open did not produce the expected move or, if the move was in the expected direction, did not produce as big a pullback or a rally as expected.

With the daily 9-ema at 464.55, perhaps ready to serve as support on daily closes now and with potentially strong resistance on daily closes gathering from 478-482, and with the OEX clumping up in a rough triangle pattern over the last couple of weeks, I think we should be aware of the possibility that we're going to begin seeing some difficult-to-game days.

I'm a "it's probably going to retest" sort of person, but I don't have a good read for whether that will occur soon (perhaps after a few more days of chop that firm up the parameters of that triangle) or maybe not until a stronger thrust up through that strong resistance near 482 and perhaps a run up to 504 or even 520-525. If you're trading, trade with caution because the signs aren't strong for one thing or the other in my opinion. I know I would watch for strong rollover potential if 478-482 is approached, but that doesn't mean that rollover potential will necessarily be realized.

Keene Little : 10/21/2008 9:23:52 AM

We've got a bearish start to the day with DOW futures off 220 points here. But the choppy price pattern we've been in does not make it an easy call here as far as identifying whether or not we will now start something bigger to the downside. It may just be part of a large choppy consolidation so caution is still warranted for both sides.

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