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Jim Brown : 10/22/2008 9:22:14 PM

Website Changes - Over the weekend we will be moving the Option Investor website to another hosting company. As part of the change we are happy to announce the return of the old website format with educational content dating back over 10 years.

Unfortunately when moving domain names from one location to another there is always the issue of propagation across the Internet. Sometimes it takes 24-48 hours for all the domain name servers to flush the old server address and replace it with the new one.

Since the move will occur over the weekend we are not expecting any material downtime but I am sure Monday will be full of surprises.

One of those surprises could be the Market Monitor. We are trying to take all the appropriate measures to guard against any down time but due to the various versions of the desktop monitor in existence as well as the real time nature of the product there may be some unexpected problems on Monday. Should we experience problems we have a team ready to act immediately once those problems appear.

Please bear with us as we attempt to improve our products.

Jeff Bailey : 10/22/2008 5:50:18 PM

AMZN ticks $43.00 extended.

Jeff Bailey : 10/22/2008 5:50:02 PM

Amazon.com (AMZN) $49.99 -0.47% ... Earnings Press Release Link

Jeff Bailey : 10/22/2008 5:48:46 PM

AMGN ticking $52.04 extended.

Jeff Bailey : 10/22/2008 5:48:31 PM

Amgen (AMGN) $49.70 -5.02% ... Earnings Press Release Link

Jeff Bailey : 10/22/2008 5:46:31 PM

dj- Money-Market Funds Add $26.46B In Week Ended Tuesday

Jeff Bailey : 10/22/2008 5:15:19 PM

Today's Global Econ. Calendar Link

Jeff Bailey : 10/22/2008 5:15:14 PM

New Zealand: Lowers Cash Rate 100 bp to 6.50% ... Reserve Bank Statement Link

Jeff Bailey : 10/22/2008 5:04:48 PM

Closing Internals at this Link

Jeff Bailey : 10/22/2008 4:18:01 PM

Nymex Dec Crude Link ... settled down $5.43, or -7.66% at $66.75.

Keene Little : 10/22/2008 4:07:11 PM

We've got SPX closing back above its uptrend line and a bullish hammer candlestick at that support line on the 60-min chart. The question now is whether a rally tomorrow (assuming we'll get one) turns into something more than just a bounce to correct the decline from yesterday before heading lower again (dark red on updated 60-min chart) or continues all the way back up to the 1000 area (pink). Link

Keene Little : 10/22/2008 3:55:15 PM

After breaking its uptrend line from October 10th, currently near SPX 897.50, one wonders if it will now become resistance. A close at that level would leave both sides guessing what's next for tomorrow.

Keene Little : 10/22/2008 3:42:29 PM

If the market closes at or very near the low that's also a good time to take your day-trade profits. We often see these minor capitulation moves into the close that then get reversed the following day.

Jeff Bailey : 10/22/2008 3:42:09 PM

DUG $54.88 +21.46% ... gets the trade at WKLY Pivot.

Keene Little : 10/22/2008 3:39:05 PM

A downtrend line from the high near 2:30 PM is now a good line to use to trail your stop down. It's getting close now to completing a wave count for the move down from mid day. NDX 1225.82 is not holding but so far it's only a minor throw-under.

Keene Little : 10/22/2008 3:22:48 PM

A downside Fib projection of interest for NDX is at 1225.82 (2nd leg of move down from Friday afternoon equals 162% of the 1st leg down). I don't see a clean ending pattern yet for the move down so I'm not sure that level will have much significance but if price appears to be holding there I may just pull the plug on my QQQQ puts (day trade) and call it a day.

Keene Little : 10/22/2008 3:10:38 PM

Use a downtrend line from today's mid-day high to start dragging your stop down on a day-trade short play. I want to follow this lower into the final hour of trading and squeeze out as much as I can without crowding the play too much. I like to watch both SPX and NDX in case one or the other gives a heads up (and I like to get confirmation as a way of avoiding a head fake break).

Jeff Bailey : 10/22/2008 2:54:13 PM

FXY $102.00

Keene Little : 10/22/2008 2:53:44 PM

Last-hour selloffs have been indicative of fund redemptions and fund managers hitting the sell button at the end of the day. If SPX blasts through 900 and then 890 I certainly would not want to step in front of it and try a long play. But if it holds above 897 (the uptrend line now), especially if it chops its way lower in a descending wedge towards that level in the final hour, I'd be tempted to try a call play into tomorrow.

For the day-trade short I'm just sitting on my put options and watching to see what kind of decline we get. I almost got spooked out of them in that last spike up and have now lowered my stop to the high just before 2:30 PM (in case of lost internet connection or some other reason preventing me from submitting a sell order). I will not take the day-trade short home with me tonight (only my longer-term short position which I'll hold for another week or two until we get the new low).

Jeff Bailey : 10/22/2008 2:48:30 PM

200 - 101.87 = ~Y98.13

Jeff Bailey : 10/22/2008 2:47:52 PM

FXY $101.88 +2.23% ...

Jeff Bailey : 10/22/2008 2:47:24 PM

dj- Dollar sinks below Y98.0

Jeff Bailey : 10/22/2008 2:44:57 PM

OPEC President: ...
Doesn't want OPEC affected more by low prices
OPEC has to consider needs of consumers, producers
If oil price goes too low, it will affect producers
Oil market is oversupplied
Sure non-OPEC countries to join action
Some oil tankers not finding buyers

Jim Brown : 10/22/2008 2:43:19 PM

Website Changes - Over the weekend we will be moving the Option Investor website to another hosting company. As part of the change we are happy to announce the return of the old website format with newsletter and educational content dating back over 10 years.

Unfortunately when moving domain names from one location to another there is always the issue of propagation across the Internet. Sometimes it takes 24-48 hours for all the domain name servers to flush the old server address and replace it with the new one.

Since the move will occur over the weekend we are not expecting any material downtime but I am sure Monday will be full of surprises.

One of those surprises could be the Market Monitor. We are trying to take all the appropriate measures to guard against any down time but due to the various versions of the desktop monitor in existence as well as the real time nature of the product there may be some unexpected problems on Monday. Should we experience problems we have a team ready to act immediately once those problems appear.

Please bear with us as we attempt to improve our products.

Jeff Bailey : 10/22/2008 2:38:58 PM

13-week ($IRX.X) steady at 1.02%

Jeff Bailey : 10/22/2008 2:38:31 PM

US 98-day bills auction ... 1.240%; 83.17% at the high; Bid-to-cover was 2.17%.

Keene Little : 10/22/2008 2:30:07 PM

The current spike back up could be the completion of an a-b-c bounce off the low near 1:30 PM. If so then watch for failure at or below SPX 921, which would also be a retest of the broken uptrend line from Friday through this morning's low. Any higher than 923 would have me thinking we started at least the correction of the decline from yesterday.

Jane Fox : 10/22/2008 2:22:15 PM

The VIX and the S&P futures are certainly not in sync today. I was hoping these two had got it back together again. Link

Jeff Bailey : 10/22/2008 2:12:48 PM

02:00 Internals found at this Link

Keene Little : 10/22/2008 2:10:13 PM

This updated SPX daily chart shows the two higher-probabilty (in my opinion) scenarios at the moment: Link . We could drop lower from here and make new lows into November (dark red) or we could see a larger consolidation pattern (triangle) play out into the end of the month before dropping to a new low in November. The commonality is the new low in November and it's only a question where and when the 4th wave correction finished/finishes. The October 2002 low of 768 should get tested or slighly broken before we get a larger bounce into December.

Jeff Bailey : 10/22/2008 2:06:45 PM

"Bad tick" in the GLD $71.54 -5.92% ... to $66.00.

Keene Little : 10/22/2008 1:54:54 PM

An uptrend line from Friday through this morning's low is near SPX 920.50 which would be between a 50% and 62% retracement of the drop from the mid-day high. Any higher than that and I'd say the low is in for now and we'll get at least a retracement of the decline from yesterday. Otherwise I don't think we've seen the low for the day yet.

Jeff Bailey : 10/22/2008 1:48:10 PM

UNG $29.96 -1.51% ... slips back under the $30 strike. MNTHLY S1 remains a sticking point of resistance.

Jeff Bailey : 10/22/2008 1:45:25 PM

StreetTracks Gold (GLD) $72.11 -5.15% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:44:41 PM

US Gasoline Fund (UGA) $31.20 -6.25% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:44:05 PM

US Oil Fund (USO) $54.94 -6.51% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:43:33 PM

iShares GSCI Commodity Index (GSG) $37.66 -5.98% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:42:49 PM

Pound CurrencyShares (FXB) $162.74 -2.65% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:41:48 PM

Biiiig squeeze underway in the yen. Biiiig squeeze.

Jeff Bailey : 10/22/2008 1:41:15 PM

Yen CurrencyShares (FXY) $101.55 +1.90% ... threatens a new 52-weeker (03/17/08 $103.46).

Keene Little : 10/22/2008 1:39:57 PM

The break of this morning's lows (SPX has already broken its low) confirms the bounce is over and now we look for where the 5th wave should end. SPX 900 is potential support and only slightly lower is the uptrend line from October 10th, currently just under 894. From there we should get a larger bounce back up, at a minimum (more bullishly we'll get a strong rally over the next couple of days).

Jeff Bailey : 10/22/2008 1:39:43 PM

Euro CurrencyShares (FXE) $128.49 -1.66% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:38:28 PM

Gold Bugs ($HUI.X) 178.73 -11.21% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:37:53 PM

MS Cyclical (CYC.X) 518.40 -6.11% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:36:27 PM

Disk Drive (DDX.X) 59.10 -6.35% ... new 52-weeker.

Jeff Bailey : 10/22/2008 1:34:32 PM

dj (earlier) - 3-MONTH USD LIBOR FALLS TO 3.54125%

The cost of borrowing three-month U.S. dollar funds in the interbank market falls further, moving closer to levels last seen before the collapse of Lehman Brothers, after measures implemented by governments and central banks lift confidence.

Jeff Bailey : 10/22/2008 1:32:08 PM

XAL.X 23.39 (unch) ... today's sector winner.

Jeff Bailey : 10/22/2008 1:29:54 PM


dj- Former executives from Moody's and Standard & Poor's testify before a House committee that conflicts of interest and the pursuit of profits led credit-rating agencies to take an overly rosy view of securities backed by risky subprime mortgage loans.

Jane Fox : 10/22/2008 1:18:11 PM

Ned Davis Research looked at all the panics since 1929, panics being defined as 20% declines in a short period of time. October 2008 certainly fits that definition. According to the definition there have been 10. Of those 10, 7 times the panic selling did not mark the bottom.

Jane Fox : 10/22/2008 1:13:25 PM

To make a market bottom we need capitulation, not panic, capitulation. What is capitulation? It is a term that means the bulk of investors have given up and sold everything they can and many experts say it's the best time to buy. When it's happening, it's bad. Panic abounds as investors watch their portfolios plunge and bail out at low prices. And those who sell low and don't buy back in ahead of the market's upswing are often left with big losses.

But capitulation can turn into a positive thing, because once the purge is over, it's often a great time to buy. Prices are cheap, and there's a lot of money on the sidelines ready to pour back in.

No one knows if capitulation has fully happened yet. That's the thing about capitulation - you don't know for sure it's happened until after it's over.

And even if capitulation has happened, the market could swing erratically at these levels for some time before heading higher again. Even Warren Buffett in his New York Times guest column Friday wrote that while he tends to "be fearful when others are greedy, and be greedy when others are fearful," he "cannot predict the short-term movements of the stock market."

Signs of capitulation are high trading volume and extreme levels of fear. But was it the fear and large volume truly due to capitulation in the last few weeks or was it due to hedge funds unwinding their high and un-sustainable levels of leverage. Or due to margin calls and investors had to sell stocks to meet those calls.

Jeff Bailey : 10/22/2008 1:07:10 PM

MBA's Weekly Application Survey Link

Keene Little : 10/22/2008 1:06:10 PM

SPX may be breaking down early but so far NDX is holding the line. Dicey here--I'm tempted to short the breakdown here and hold through a bounce (with put options).

Jeff Bailey : 10/22/2008 1:04:37 PM

Most Actives ... QQQQ $31.43 -0.15%, XLF $15.22 -2.56%, MSFT $22.48 -3.72%, AAPL $99.08 +8.29%, SPY $92.46 -3.48%, CSCO $17.70 -0.88%, XLE $45.05 -7.96%, SNDK $10.22 -30.75% (should'a taken the deal), RIO $11.72 -10.67%, INTC $15.00 -1.70%

Keene Little : 10/22/2008 12:54:55 PM

We could have a nice little day trade setting up if we see SPX get one more bounce back up inside what looks like a rising wedge pattern for the correction off this morning's low. Back up to around 933 would be a good setup for a drop to the 900 area. The completion of a 5-wave move down from yesterday's high would then set up at least a bounce to correct the decline from yesterday and would therefore make a good day-trade long play. SPX 10-min chart: Link

Jeff Bailey : 10/22/2008 12:51:26 PM

Would sure like to have that GLD-WD back (10/03/08 to 10/09/08).

Jeff Bailey : 10/22/2008 12:50:05 PM

Based on my recent commentary ... surprised the word "grow" was used for gold.

Jeff Bailey : 10/22/2008 12:49:30 PM


Russia's central bank says it expects its gold and foreign exchange reserves to grow at a slower pace than originally planned this year and next, amid a plunge in oil prices and outflow of capital from the country.

Jeff Bailey : 10/22/2008 12:43:44 PM

HMO.X 1,031 -8.76% ...

Jeff Bailey : 10/22/2008 12:41:52 PM

HUM slated to report earnings 11/03/08. Day before Election Day

Jeff Bailey : 10/22/2008 12:41:16 PM

Humana (HUM) $34.95 -6.84% ... HUM-MF are $2.10 x $2.35. (See my MM trade profiles.

Jeff Bailey : 10/22/2008 12:39:56 PM

Wellpoint (WLP) $39.41 -5.73% ... Earnings Press Release Link

Jeff Bailey : 10/22/2008 12:37:21 PM

McDonald's (MCD) $55.45 +0.58% ... Earnings Press Release Link

Jeff Bailey : 10/22/2008 12:34:57 PM

Boeing (BA) $43.44 -6.37% ... Earnings Press Release Link

Jeff Bailey : 10/22/2008 12:33:10 PM

AT&T (T) $24.40 -5.16% ... Earnings Press Release Link

Jeff Bailey : 10/22/2008 12:29:22 PM

Merck (MRK) $29.40 -1.90% ... Earnings Press Release Link

Keene Little : 10/22/2008 12:22:48 PM

For all you sport fans who like to bet on teams, I've got a hot tip for you to bet on the Phillies this year to take the World Series. They haven't won the Series since 1980 and before that in 1929. Those years should sound familiar about now. Frank Fitzpatrick reported on this in the Philly Inquirer and made note of the fact that the Phillies seem to do best when the economy and stock market are tanking. But as he says, "But remember, every time they get a hit, your portfolio's taking one."

Jeff Bailey : 10/22/2008 12:21:35 PM

OIH $88.45 -9.82% ...

Jeff Bailey : 10/22/2008 12:21:15 PM

dj- Conoco: 2009 $15 billion capex to include cut in N. America budget

Jeff Bailey : 10/22/2008 12:21:10 PM

dj- Conoco: 2009 $15 billion capex to include cut in N. America budget

Jeff Bailey : 10/22/2008 12:19:38 PM

12:00 Internals found at this Link

Keene Little : 10/22/2008 12:09:50 PM

Price is definitely consolidating and that remains bearish for now. It doesn't preclude another rally leg but so far the bounce looks clearly corrective and I am not interested in the long side.

Jeff Bailey : 10/22/2008 11:56:35 AM

dj- Conoco's CEO: We have started to see cost moderation

Jeff Bailey : 10/22/2008 11:33:57 AM

Refinery Utilization, USO, FXE Table with period from 09/29/2006 to 09/14/2007 with focus on Day's Supply, USO and FXE Link

Jeff Bailey : 10/22/2008 11:24:39 AM

Refinery Utilization, USO, FXE Table that I keep Link

09/05/08 to 09/19/08 is Hurricane Ike impact.

Jeff Bailey : 10/22/2008 11:09:39 AM

USO $55.59 -5.41% ...
UGA $32.08 -3.60%
UNG $30.42 (unch)

Keene Little : 10/22/2008 11:06:01 AM

Wondering if the MM might discuss sometime the frustration in missing big moves and the, could have, should have game. I look at material and energy trades and wonder why I didn't go heavy short that trade. My god, just short the UYM and DIG I could have retired. These are once in a lifetime moves.

I know what you mean. There are whole books on the subject. It's called the greed factor (smile).

But seriously, get used to it--I miss far more moves than I capture. I sit there and grit my teeth at what could have been but I have learned to quickly move on because that attitude has gotten me into way too much trouble in the past--I force trades when I shouldn't (to make up for my perceived "loss") and end up losing.

The beauty of our business is that it's like standing at the bus stop and waiting for a bus that arrives every 5 minutes. If we don't like the first bus (too many people, the driver looks surly, the seats aren't soft leather) we simply step aside and wait for the next bus. If not today then tomorrow. This market will always be here and we have the luxury of waiting for the right bus. Don't feel like trading today? No problem, come back tomorrow and more busses keep coming by.

It's always a good reminder for us to think about what's coming and not what's behind.

Jeff Bailey : 10/22/2008 11:03:56 AM

DUG $50.12 +10.88% ...

Jeff Bailey : 10/22/2008 11:03:52 AM

Sold partial DUG at $50.00 this morning (from long yesterday in personal accounts). Would snug a stop under rest at $49.25/$49.00.

Keene Little : 10/22/2008 10:59:23 AM

Speaking of the NYSE, its price pattern supports the idea that we'll get one more leg up within a developing sideways 4th wave triangle to then be followed by a 5th wave down. The bottom of the triangle is currently near 5693 (trading 5825 as I type) and the top of the triangle will be near 6115 tomorrow morning. The other alternative is the pink wave count calling for a more immediate, and deeper, decline. A break below the uptrend line would suggest this one. NYSE 60-min chart: Link

Jeff Bailey : 10/22/2008 11:03:36 AM

EIA Weekly Inventory

Crude Oil stockpiles up 3.18M bbls to 311.38M bbls.
Total Gasoline up 2.71M bbls to 196.49M bbls.
Conventional Gasoline up 535K bbls to 94.15M bbls.
Total Distillate up 2.15M bbls to 124.30M bbls.
ULS Diesel up 1.43M bbls to 67.13M bbls.
Jet Fuel up 321K bbls to 36.58M bbls.
Heating Oil up 835K bbls to 38.28M bbls.
SPR down 247K bbls to 701.88M bbls.

US Refinery Inputs/Capacity

Gross Inputs up 442K bbls/day @ 14.92M bbls/day.
Crude Oil Inputs up 447K bbs/day @ 14.56M bbls/day @ 14.56M bbls/day.
Refinery Oper. Capacity unch at 17.61M bbls/day
Pct. Utilization rose to 84.75% from prior week's 82.24%.
My # Days Supply of Crude Oil FELL to 22.6 days from 23.7 days.

Jane Fox : 10/22/2008 10:43:50 AM

Social mood and risk appetites determine the direction of the stock market - plain Jane simple. So both the social mood and risk appetites have to improve before the stock market will.

Keene Little : 10/22/2008 10:41:23 AM

If we get a small consolidation near the lows, lasting about an hour or so (and could bounce back up to as high as SPX 940), it should then drop lower again. That would create a 5-wave move down from yesterday morning and that's when it could find support near SPX 890. This is not the same for the DOW since it made a slightly higher high yesterday afternoon but I consider the DOW too highly manipulated to use for accurate EW analysis. That's why I'm primarily sticking with SPX and NDX (Wilshire and NYSE are even better).

Jane Fox : 10/22/2008 10:41:09 AM

You know the old saying sell the greed and buy the fear? How many of us have the staying power to ride out the storm if we get in too early. As John Maynard Keynes so eloquently said, irrational markets can stay irrational much longer than you can stay solvent.

Jane Fox : 10/22/2008 10:37:11 AM

The TED spread is falling but it is not anywhere near normal. No one knows how long it will take to normalize and until it does it means credit, the backbone or our economy, is still broken. And we all know we cannot walk without a backbone.

Jane Fox : 10/22/2008 10:37:39 AM

Globally there is about $500 trillion (BTW a 1000 Trillion is a quadrillion) in outstanding derivative contracts. Nationalizationing our financial institutions transfers but does not erase that risk.

Jeff Bailey : 10/22/2008 10:33:04 AM

Euro CurrencyShares (FXE) $128.59 -1.59% ... remains weak. Continues to pressure oil (priced in US$)

Keene Little : 10/22/2008 10:30:47 AM

SPX held 913 and got a strong pop off it but now it's dropping right back down. A break of it should lead to the next support level near 890 (DOW 8500).

Jane Fox : 10/22/2008 10:30:54 AM

While we all ponder if the stock market has found a bottom and when can I start to dip my toe back in the water there are few other things we should be thinking about as well. The world financial situation is very bad and will be stay this way for while yet. There is a saying, "When the going gets tough the tough tend to their own interests." Countries around the world are doing whatever they can to keep their own financial systems from imploding. How many do you think are worrying about global terrorism. I know I have not even heard those word for at least a month. Wouldn?t this be a very good time for a terrorist attack?

The US government is at its weakest right now due to the financial crisis, the looming elections and a changing of the guard. While we have our attention focused on domestic issues our global issues may be not getting the attention they need.

Jeff Bailey : 10/22/2008 10:30:38 AM

USO $55.84 -4.98% ... Chart from Wednesday's wrap Link

Jeff Bailey : 10/22/2008 10:29:10 AM

Nymex Dec. Crude (cl08z) $67.88 -5.94% ... still some room to PnF chart bearish vertical count of $63.

Jeff Bailey : 10/22/2008 10:27:57 AM

European Markets Link ... FTSE-100 lower by 3.96%, Germany's DAX off 4.92% and France's CAC-40 -4.84%.

Jeff Bailey : 10/22/2008 10:26:48 AM

Asian Markets Link ... Japan's Nikkei-225 fell 6.79%, Hong Kong's Hang-Seng -5.15% and China's Shanghai -3.20% were weak again.

Jeff Bailey : 10/22/2008 10:24:17 AM

BOE's 10/08/08 Meeting minutes (.pdf file) Link

Jeff Bailey : 10/22/2008 10:21:52 AM

Today's Global Economic Calendar Link

Jeff Bailey : 10/22/2008 10:20:07 AM

10:00 Internals found at this Link

Keene Little : 10/22/2008 10:09:54 AM

The DOW's uptrend line from October 10th, to match the 890 level for SPX, is near 8500. It looks pretty close on the 60-min chart but it's still 150 points lower.

Keene Little : 10/22/2008 10:07:25 AM

NDX is breaking down but SPX is now nearing its Fib projection near 913. If that also breaks then I expect SPX to head for possible support near 890.

Keene Little : 10/22/2008 10:01:02 AM

The ideal level for NDX to find support, in considering the bullish possibility for another strong rally leg, is 1266.84 which is where the move dwon from Monday's high has two equal legs down (the 2nd a-b-c of a double a-b-c zigzag pullback from last Friday). The low so far is 1267.08. Much of a break below 1266 that doesn't recover would suggest something more bearish may have already begun.

Keene Little : 10/22/2008 9:52:19 AM

The upside potential for NDX, if we're seeing the completion of a bull flag consolidation pattern, is a projection to 1445 where an a-b-c bounce off last Thursday's low would achieve two equal legs up. I have no idea if we'll see that kind of move but that's the potential if this starts to rally again.

Keene Little : 10/22/2008 9:47:52 AM

Looking at NDX, if you draw a parallel down-channel for the price consolidation (if that's what it is) since last Friday's high it could be a bull flag pattern. The bottom of the channel was just tagged near 1269. The price pattern of the decline from Friday supports the idea that it's a bull flag consolidation. The risk therefore, if you're short, is for a reversal now and a strong rally back up.

Jane Fox : 10/22/2008 9:42:39 AM

DOW is down 269 points this morning.

Jane Fox : 10/22/2008 9:42:01 AM

The only report I see on the horizon this morning is the 10:35 Crude Inventory and that will not be a stock market mover.

Jane Fox : 10/22/2008 9:40:25 AM

I am not sure about the VIX yet but it looks like it has jumped from the close last night of 53.00 to almost 80 this morning.

Jane Fox : 10/22/2008 9:37:39 AM

The Nikkei is down 6.8% this morning partly due to Nikon and Mitsubishi, both reporting they are getting hit due to the currency markets.

Jane Fox : 10/22/2008 9:35:08 AM

AD line opens at a bearish -1208 but lately that is bearish but overly so. I wonder if we will ever get back to -500 been the level of bearishness. Probably not.

Jane Fox : 10/22/2008 9:34:03 AM

The instability in the currency markets could further unsettle the asset markets and is one reason the futures are down this morning.

Jane Fox : 10/22/2008 9:32:39 AM

I haven't looked at the US$ too much lately but geesh it is on some major rally. The chart I use for the US$ is the DXY, an index that measures the dollar against a trade-weighted basket of six major currencies.

The rally overnight may be due to expectations the European Central Bank and Bank of England will aggressively cut interest rates in the next few months. Investors will buy the US$ when central banks elsewhere in the world cut rates because there is a widely held belief the US will weather a deep recession better than other countries. Also the European Central Bank has more room to cut rates than the US, which has already cut rates and has less room to maneuver. Link

Keene Little : 10/22/2008 9:25:53 AM

It would appear that SPX will be dropping below 940, last Friday's low and that continues to support either of the price projections I showed last night. ES dropped to a low of 922.50 pre market. One level to keep an eye on is SPX 913 which is a Fib projection for a possible consolidation pattern playing out since Friday's high. If it finds support near there and starts heading back up then we could see a strong rally shown in pink on last night's 120-min chart (back up to the 1000 area). It takes a break below 890 to suggest the 5th wave down is already in progress.

Jane Fox : 10/22/2008 9:21:51 AM

Crude continues its weakness and made a low of 68.64 ON. Link

Jane Fox : 10/22/2008 9:20:54 AM

Here are the overnight charts. Interestingly the weakest market of late, NQ (NDX futures), seems to have held up the best during the ON session. This market is the only one is trading above its previous day lows. Link

Jane Fox : 10/22/2008 9:10:37 AM

SAN FRANCISCO (MarketWatch) -- Mortgage applications filed last week decreased a seasonally adjusted 16.6% compared with the week before, caused mainly by a sharp drop in refinancing activity, the Mortgage Bankers Association reported on Wednesday.

Volume was down 44% for the week ended Oct. 17 from the same week in 2007, the MBA said. Weekly application volume hasn't been lower since the week ended Dec. 29, 2000.

Applications to refinance existing mortgages were down 23.5% last week, compared with the week before. Home-purchase mortgage filings were down a seasonally adjusted 10.9% week to week, the data showed. The results were adjusted to account for the Columbus Day holiday.

The four-week moving average for all mortgages was down 9.2%.

Keene Little : 10/22/2008 1:03:30 AM

To keep things in perspective and to show where I think we are in the bear market leg down from October 2007, this updated SPX weekly chart shows how I think it could play out into a final low in the 2nd quarter of 2009: Link . The depiction is obviously just a guess at this point but it would follow some typical EW relationships. It calls for a short term bottom next week by the 55-week turn window (dark red on the daily chart shown below) but if it instead plays out sideways into next week then I think we'll be looking for a low in early to mid November.

Keene Little : 10/22/2008 12:42:40 AM

Wednesday's pivot table: Link

I've made several posts since the October 10th low about how difficult it will be to determine what kind of correction will play out and how frustrating it will be to try to trade it. The price action since then confirms how difficult it has been. My efforts to keep you up to date as to what could be playing out is probably only frustrating (and confusing) you even more.

There are 13 different types of EW corrections and trying to figure them out in real time, especially in a 4th wave correction which we're in, can be very frustrating. Between the October 10th low and October 14th high, a span of a little more than 200 S&P points we could see just a bunch of whipsaw and choppy price action. I'll continue to urge caution inside this range since you're likely to get chopped to pieces.

Having said that (and warned you), I will try to show what I think are the two most likely price scenarios from here (of a possible 13). The bottom line is that we are due another leg down and it's a matter of figuring out where the correction ends and how high. The correction has either finished and we'll start down in earnest now (dark red) or else we'll stay trapped inside a large sideways triangle that could play out into next week before heading lower (pink). SPX 120-min chart: Link

There is a more bullish possibility (not shown) for a run up to SPX 1070 but I'll wait for price action to tell me that's a higher probability. Just stay aware of it if you're holding out for another leg down and can't tolerate that kind of move against you. And if you're in November put options you need to keep in mind that another week of sideways price action will cause more premium decay. I believe we'll get the new low before mid November but want you to be aware of the risks.

Jeff Bailey : 10/21/2008 10:09:52 PM

Apple Computer (AAPL) $91.49 -7.06% ... Last tick $103.61

OI Technical Staff : 10/21/2008 9:59:59 PM

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