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Jeff Bailey : 10/24/2008 6:15:53 PM

Retail Gasoline Heat Map ... Link ... OK City nearing the $2.00 mark!

Jeff Bailey : 10/24/2008 5:41:44 PM

Dow Components Link

Jeff Bailey : 10/24/2008 5:26:08 PM

Good gravy ... all those pop and beer cans I've been saving up for the depression. AA $9.41 -5.80% ...

Jeff Bailey : 10/24/2008 5:24:23 PM

Dow component weekly losers ... AA $9.41 -20.25%, C $12.14 -18.41%, HPQ $32.44 -18.30%, CAT $33.30 -15.31%, DD $29.33 -13.14%

Jeff Bailey : 10/24/2008 5:24:17 PM

Dow component weekly winners ... MMM $59.61 +5.52%, AXP $24.05 +3.08%, CVX $63.91 +2.50%, BA $45.24 +1.54%, XOM $69.04 +1.46%

Jeff Bailey : 10/24/2008 4:48:55 PM

"They" plinked the YM just before the close ...

Tab Gilles : 10/24/2008 4:27:43 PM

Will The Fed Cut Rates Next Week? Link

Keene Little : 10/24/2008 4:14:04 PM

While it looks like we could see a further bounce on Monday I do want to reiterate that the market remains vulnerable to downside surprises. While I am not comfortable carrying a new short home for the weekend I would definitely not want to be long. The risk is still much higher to the downside. Consider a "hedge" short with put options just in case.

Keene Little : 10/24/2008 4:03:41 PM

No rally into the close. Mom and Pop aren't going to like hearing that the DOW had another down week (looks like it will down about 500 for the week). The consolidation in the final hour gives me the impression the market will head higher early Monday morning.

Keene Little : 10/24/2008 3:57:08 PM

Only 8 more minutes to get the DOW to rally 165 points to get it into the green. Piece of cake. That would be only a 500-point rally off today's low--all in a day's work.

Jeff Bailey : 10/24/2008 3:54:14 PM

CBOE's backed off to $2.23

Keene Little : 10/24/2008 3:54:08 PM

BTW, I'm talking about new positions when I say I'm going home flat. I'm still carrying my longer-term flat positions into next week. There's little doubt in my mind that we've got lower prices ahead of us. How low is the only question right here.

Jeff Bailey : 10/24/2008 3:54:01 PM

$59.63 ... $2.17 offer

Jeff Bailey : 10/24/2008 3:53:15 PM

PNC $59.43 ... NCC $2.15 offer ...

Jeff Bailey : 10/24/2008 3:52:54 PM

It's gonn'a make it isn't it?

Keene Little : 10/24/2008 3:52:30 PM

We're close enough to the close for an assessment of what could happen on Monday. I will Not be going home short. Flat is the place for me. The updated SPX and NDX 60-min charts show the potential to rally a bit further before heading back down:
SPX: Link
NDX: Link

Jeff Bailey : 10/24/2008 3:50:36 PM

Not sure what this $2.14 is about on NCC ...

Jeff Bailey : 10/24/2008 3:49:14 PM

PNC and NCC 5-minute montage Link

Jeff Bailey : 10/24/2008 3:43:12 PM

Really wanted to see PNC gravitate higher to the close above DAILY R2 and "drag" NCC to the offer price by the close.

Juuuust not sure what they do with PNC to the close.

Jeff Bailey : 10/24/2008 3:40:33 PM

PNC $58.90

Jeff Bailey : 10/24/2008 3:40:11 PM

Day trade stop alert! ... NCC $2.09.

Jeff Bailey : 10/24/2008 3:36:04 PM

Day trade long raise stop alert! ... for NCC to even.

NCC $2.11

Jeff Bailey : 10/24/2008 3:32:32 PM

PNC $59.31 +4.27% ...

Jeff Bailey : 10/24/2008 3:32:16 PM

NCC trade ... Stop is $2.05 and target is $2.21

Jeff Bailey : 10/24/2008 3:31:34 PM

Day trade long alert! ... for 1/2 position in shares of National City (NCC) at the offer of $2.09.

Keene Little : 10/24/2008 3:31:32 PM

The pattern of the bounce off this afternoon's low is now looking choppy and could be simply part of a larger corrective pattern. The setup for a short play into Monday is not looking as good as it was. We'll see what the final 30 minutes brings us.

Jeff Bailey : 10/24/2008 3:29:57 PM

FXY alert! $105.02

Jeff Bailey : 10/24/2008 3:26:05 PM

BIX.X ... unch

Jeff Bailey : 10/24/2008 3:25:35 PM

Don't care for it myself. I never buy anything that's $13

Jeff Bailey : 10/24/2008 3:25:00 PM

If Jane were here, she'd say she "hates" that advance number.

Jeff Bailey : 10/24/2008 3:24:31 PM

NASDAQ a/d stuck 666/2,186

Jeff Bailey : 10/24/2008 3:24:06 PM

Gotch'a

Jeff Bailey : 10/24/2008 3:21:40 PM

Not finding "the stock" that seems to be driving the IUX.X late

Keene Little : 10/24/2008 3:21:29 PM

Jeff, looking at the November QQQQ 30 puts. We're still far enough away from expiration to prevent too much time decay over the weekend. I still like the way the techs are leading to the downside so I'm picking on them for the short play. But the setup has to look good into the close before I'll step into them. If price drops back down from here rather than rally further it's going to look like more consolidation which could then head either way on Monday.

Jeff Bailey : 10/24/2008 3:18:32 PM

NYSE a/d 395/1,788

Jeff Bailey : 10/24/2008 3:16:47 PM

Other than the HUM-MF of course.

Jeff Bailey : 10/24/2008 3:15:35 PM

What puts do you have Keene?

Jeff Bailey : 10/24/2008 3:14:49 PM

03:10 Watch Link

Jeff Bailey : 10/24/2008 3:13:26 PM

Looks like it to me

Jeff Bailey : 10/24/2008 3:12:53 PM

Will the pros buy the close?

Jeff Bailey : 10/24/2008 3:06:53 PM

EVERY pivot trader knows why ... GG's WKLY S1 is $16.75

Jeff Bailey : 10/24/2008 3:06:18 PM

CBOE's sitting with 2,000 at $16.76.

Keene Little : 10/24/2008 3:05:17 PM

That's more like it--should see this drive higher into the close and I'll definitely be taking a few puts home with me. This could obviously continue higher on Monday but this is one of the nicest setups you'll see for a down Monday, potentially hard down. The rally leg needs to stair-step a little higher now to finish.

Jeff Bailey : 10/24/2008 3:04:59 PM

NYSE a/d 483/1,687

Jeff Bailey : 10/24/2008 3:04:37 PM

GG $16.68 ... GREEN #7.

Jeff Bailey : 10/24/2008 3:03:28 PM

GLD $71.50 ... 50% dynamic

Jeff Bailey : 10/24/2008 2:58:58 PM

YM 8,397

Tab Gilles : 10/24/2008 2:58:24 PM

Todays Intraday low for $WTIC was $62.65.

A Fibonacci Retracement from '99 low of $10.35 to '08 high of $147.27 for crude.

61.8% Retracement = $62.65

Currently tradin at $64.45

Jeff Bailey : 10/24/2008 2:55:14 PM

GG 5-minute Link

Keene Little : 10/24/2008 2:53:29 PM

Two equal legs up for NDX would be at 1258. Its downtrend line from October 14th is near the same level by the end of the day. What a sweet setup that would be for a short play into Monday. Come on bulls, you can do it (not too sure about it the way the bounce is progressing so far). NDX 60-min chart update: Link

Jeff Bailey : 10/24/2008 2:50:42 PM

So far.

Jeff Bailey : 10/24/2008 2:50:33 PM

GG Green #6. Danny! See how it did CLOSE above #7, then see how it DID NOT close back below #5.

Jeff Bailey : 10/24/2008 2:45:57 PM

HUM continues to "stick" with buyers at $33.50. Its 03/12/08 low.

Jeff Bailey : 10/24/2008 2:44:48 PM

HMO.X 952.28 -4.26% ...

Jeff Bailey : 10/24/2008 2:44:32 PM

HUM #35.01 -2.09% ...

Jeff Bailey : 10/24/2008 2:43:41 PM

Hmmmm ... IUX.X +0.01% ... don't remember that.

Jeff Bailey : 10/24/2008 2:43:12 PM

Due to MM profiles ... I've been unable to get you today's internal benchmarks.

Jeff Bailey : 10/24/2008 2:42:39 PM

02:36 Watch Link

At the very top would be NYSE and NASDAQ a/d

Jeff Bailey : 10/24/2008 2:38:43 PM

They were (11:50:39) .. HUI.X, SMH, XAL.X and NWX.X

Jeff Bailey : 10/24/2008 2:37:55 PM

If we were to get any further rally to the close, then usually, its the "early green" that would get green from here.

Jeff Bailey : 10/24/2008 2:37:11 PM

HUI.X +3.61% and SMH +0.27% ... what were the others?

Jeff Bailey : 10/24/2008 2:36:45 PM

SMH $18.37 +0.10% ... inches back green.

Jeff Bailey : 10/24/2008 2:33:59 PM

"Shock and awe!" (wink)

Keene Little : 10/24/2008 2:33:08 PM

If this little bounce is followed by another drop lower it could pick up speed and drop right through this morning's low as it heads much lower. If the bulls can step up to the plate here and drive it higher, two equal legs up from this morning would now be at SPX 895.

Jeff Bailey : 10/24/2008 2:31:24 PM

Oh ... the New York Times endoresed Senator Obama last night.

Jeff Bailey : 10/24/2008 2:29:27 PM

The MEDIA and policy makers making false claims? You've got to be kidding ahead of the election!

Jeff Bailey : 10/24/2008 2:26:39 PM

See the little additional zone we get from the 5-mrt at the daily pivot retracement? 8,223-8,237. The "once above, SHOULDn't close 2-below."

Jeff Bailey : 10/24/2008 2:24:08 PM

YM 5-minute Link

Tab Gilles : 10/24/2008 2:23:09 PM

Is the DJIA really undervalued?

Taking a long term look at the DJIA -Inflation Adjusted. Link

Jeff Bailey : 10/24/2008 2:19:09 PM

Problem is, so could the FXY shorts

Jeff Bailey : 10/24/2008 2:18:51 PM

FXY 105.79 +2.94% ...

Jeff Bailey : 10/24/2008 2:14:32 PM

Could still get squeeze higher to the close.

Tab Gilles : 10/24/2008 2:18:06 PM

The Federal Reserve Bank of Minneapolis has published a working paper that argues claims made by the media and policy makers about the ongoing financial crisis are false.

Authors V.V. Chari, Lawrence Christiano and Patrick J. Kehoe wrote in "Myths About the Financial Crisis of 2008" that four frequently cited statements about the crisis were untrue:

Bank lending to non-financial corporations and individuals has declined sharply.

Interbank lending is essentially nonexistent.

Commercial paper issuance by non-financial corporations has declined sharply and rates have risen to unprecedented levels.

Banks play a large role in channeling funds from savers to borrowers.

Using Federal Reserve Board data through October 8, the paper argues that lending to non-financial businesses has not declined. It also notes interbank lending in the aggregate is healthy. Commercial paper issued by non-financial corporations has actually remained unchanged, although financial institutions are issuing less, the report said.

Interest rates for financial institutions remain below levels seen in 2006 and 2007, however. The report argues that 80 percent of borrowing by non-financial businesses takes place outside the banking system.

Link to Federal Reserve Bank of Minneapolis Link Link

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

See the "zone?"

Jeff Bailey : 10/24/2008 2:13:34 PM

That would be GREEN #1.

Jeff Bailey : 10/24/2008 2:13:19 PM

YM did see a 5-minute close ABOVE Green #3. Should NOT see a close 2-levels below.

Jeff Bailey : 10/24/2008 2:11:55 PM

YM 8,226 ... you know where its at? Boy was I tired last night.

Jeff Bailey : 10/24/2008 2:09:11 PM

GLD $72

FXE $125.85

USO $52.00

Jeff Bailey : 10/24/2008 2:08:16 PM

PNC ... 5-minute interval Link

Keene Little : 10/24/2008 2:05:01 PM

Things change quickly and direction remains uncertain. If SPX 860 holds we could still see another strong rally leg into the close today. If it doesn't hold then obvioulsy we're looking for a test of this morning's low and if that doesn't hold, well it could get ugly. If we do get a bounce into the close we still won't know what will happen from there. But because of the potential for a strong decline on Monday I think it would be worth the risk of taking a short position home (November put options since it would be a play for Monday only). Link

Jeff Bailey : 10/24/2008 2:00:00 PM

Excellent, excellent comment from CNBC ...

Regarding getting a STOCK to open on a gap morning situation.

We'll see this for NYSE-listed stocks.

For 5-mrt traders, if the specialist gets the stock open say 3-minutes into the session, then we want to take that partial bar, and the NEXT 5-minute interval.

Jeff Bailey : 10/24/2008 1:56:39 PM

Yes, yes, yes ... at first it is "so messy" with those levels, but once you get used to it, day after day after day of trading, you pick out the overlaps. The zones.

Jeff Bailey : 10/24/2008 1:54:28 PM

I kind'a "quick stacked" the 5-mrts there

Jeff Bailey : 10/24/2008 1:53:45 PM

GLD 5-minute interval Link

It would be my analysis, based on observation, that there is some computer action at QS1.

Jeff Bailey : 10/24/2008 1:48:55 PM

See that VOLUME in the GLD at about 01:00 ?

Keene Little : 10/24/2008 1:45:24 PM

And of course, this being a Friday after traders have been thoroughly beat about the head and shoulders, we could see the market just chop sideways. I'm sure most everyone is pretty tired about now in trying to figure out what's next.

Jeff Bailey : 10/24/2008 1:45:19 PM

Just think if we LEARNED from our "mistakes."

Oh what a different world we would live.

Jeff Bailey : 10/24/2008 1:44:28 PM

Now we can REVIEW a "trade gone bad" ... understand perhaps where a STOP is place (and why), and for the 5-mrt, we really want to see a 5-minute close ABOVE a green #2, or BELOW a red #2.

Now, a trader will still trade a BIG 5-minute bar, but when we DON'T see an early ability, or prior to trade ENTRY of a #2, then we use PARTIAL positions.

Keene Little : 10/24/2008 1:44:05 PM

If instead of a bounce, as depicted on the SPX 5-min chart I just posted, we get another leg down then watch for two equal legs down from this morning's high--SPX 860.36. That could support the next rally leg (wave C).

Jeff Bailey : 10/24/2008 1:42:14 PM

Danny! Now, go back to YESTERDAY on GG. Take an UPPER 5-mrt (what DIDn't GG do?) and you'll note that even though we had a VERY nice BIG 5-minute bar, GG NEVER was able to see a 5-minute CLOSE above GREEN #2.

Also take a LOWER 5-mrt.

Jeff Bailey : 10/24/2008 1:39:52 PM

GG 5-minute interval chart ... The PINK retracement is from today's comments @ 12:25:54. QCharts' DAILY and WKLY Pivot levels.

REMEMBER YESTERDAY's "scalp trade."

BLUE is today's "dynamic" and the green dashed are the first "5-mrt" and then the stacked. Link

Jim Brown : 10/24/2008 1:38:30 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.

Keene Little : 10/24/2008 1:37:15 PM

I don't know where the market will be at the end of the day. As I watch the moves I try to get a sense as to whether or not we're getting any impulsive moves to help establish at least a short term direction. So far today we have a 3-wave bounce and a 3-wave pullback. That could lead to another rally leg or a further pullback--there's just no way to tell which. So I'm flat and watching for now. No clean setups, no trading. It's as simple as that.

An example of a corrective wave count is shown on the following SPX 5-min chart: Link . An a-b-c bounce off this morning's low could be considered a larger degree wave-A. An a-b-c pullback would then be wave-B. A sharp rally leg would be wave-C. That larger A-B-C bounce could then create a larger degree wave-(a). Then a wave-(b) pullback and then a sharp rally on Monday for wave-(c).

But that's only one possibility of 13 types of corrective patterns in EW. If you want to know why I have no hair left it's because of these corrections (smile). If price continues to break down from here then I'll have to reconsider what other kind of pattern is playing out. I do this all day and when something makes sense to watch for I'll point it out. When it doesn't I stay quiet and watch for more evidence of what we can look for. Right now there's nothing to recommend, hence my being flat (except for longer-term short positions I'll carry into next week).

Keene Little : 10/24/2008 1:21:20 PM

Thanks to John for sending:

Here is a little tidbit from Todd Harrison [Minyanville] you may want to remember as it relates to bear market rallies: There have been 36 times over the last 80 years when SPX rallied more than 6% in a single session. Thirty-two (32) of the 36 occurred between 1929 and 1933.

Jeff Bailey : 10/24/2008 1:20:51 PM

CNBC mentioning the TARP ... from the PNC/NCC news, we see the use of the TARP

Jeff Bailey : 10/24/2008 1:12:17 PM

what did the QQQQ do with its gap?

Jeff Bailey : 10/24/2008 1:11:36 PM

DON't assume answers ... LOOK

Jeff Bailey : 10/24/2008 1:11:14 PM

What has SMH done with its gap this morning?

Jeff Bailey : 10/24/2008 1:10:19 PM

What has NCC done with its gap this morning?

Jeff Bailey : 10/24/2008 1:09:07 PM

Humana (HUM) ... what's it done with its gap lower this morning?

Jeff Bailey : 10/24/2008 1:07:51 PM

S, se, sellllllll the call.

Jeff Bailey : 10/24/2008 1:07:34 PM

Now, the REASON I mention these 1/2 gaps and focus in on GG is this ....

WHAT IF, say on MONDAY, GG has a gap open higher, 1/2 into the 10/22 gap, but GOLD commodity is FLAT, or DOWN? What should we DO?

Jeff Bailey : 10/24/2008 1:03:15 PM

Never know for certain ... but 1/2 the GG 10/22 gap is about $19.50

Jeff Bailey : 10/24/2008 1:02:10 PM

Yes ... 1/2 the gap.

Jeff Bailey : 10/24/2008 1:02:00 PM

Did anyone NOTICE what the YM did at roughly 11:35?

Jeff Bailey : 10/24/2008 1:01:21 PM

You can "stack" your first 5-mrt, on top of itself.

Jeff Bailey : 10/24/2008 1:00:43 PM

GREEN #8 and DAILY R1 correlative.

Jeff Bailey : 10/24/2008 1:00:24 PM

GG $16.66 +8.25% ... trades Green#7

Keene Little : 10/24/2008 12:55:58 PM

Playing with some Fibs for NDX, if it pulls back to 1165 today (which would be a deep retracement of today's bounce) it could then get two equal legs up from this morning's low at 1240 on Monday and set up the next leg down in its descending wedge pattern, shown in dark red on the 60-min chart: Link . As pointed out with the SPX chart earlier, the downside risk with this setup (if it's not a descending wedge) is for a very strong decline (crash), pink wave count, which could be particularly true if we get a stronger bounce into today's close.

Keene Little : 10/24/2008 12:37:08 PM

Two equal legs in the pullback from this morning's high is at SPX 860.60. This could lead to another rally leg. NDX has already exceeded equality so the next downside Fib projection for its pullback is at 1194.75 (2nd leg down = 162% of the 1st leg down).

Jeff Bailey : 10/24/2008 12:33:34 PM

ZION $31.86 +1.04% ... as ONE example. We have SOME idea of what we MAY have to look for. IF looking bull/bear.

Jeff Bailey : 10/24/2008 12:32:20 PM

OK ... BANK STOCK TRADERS ... regardless of PNC's purchase ... TAKE note of PNC trading "buy signal" to the penny of $61.00. And action to now.

Jeff Bailey : 10/24/2008 12:31:34 PM

NCC $2.07 ... PNC $58.94

Jeff Bailey : 10/24/2008 12:30:20 PM

GG $16.67 +8.31% .. bench

Jeff Bailey : 10/24/2008 12:29:22 PM

BENCHMARK GLD $72.55 ... QS1 here.

Keene Little : 10/24/2008 12:29:13 PM

The DOW is only down 330 points and the VIX is below 80 (76.80). Not a bad day really (wink). I had mentioned a while ago that I thought we'd see VIX (not VXO) above 100 before we find a bottom. Certainly a crash on Monday would achieve that. But that's far from certain. I'll have a better feel for that possibility by the end of the day.

Jeff Bailey : 10/24/2008 12:28:27 PM

Now, tomorrow, PIVOT traders should get a WKLY calibration done for them GG/GLD on a weekly basis. Next Friday we would get a MONTHLY calibration done for us.

In the meantime, let's use CONVENTIONAL

Jeff Bailey : 10/24/2008 12:26:45 PM

REMEMBER the GLD PUT trade. Even though it didn't work out. We now KNOW the importance up there.

Jeff Bailey : 10/24/2008 12:25:54 PM

GG traders ... take a conventional retracement from the 09/24/08 CLOSE to YESTERDAY's CLOSE.

Keene Little : 10/24/2008 12:12:18 PM

This morning's bounce for SPX is looking either corrective (the current pullback has overlapped the initial bounce high at 10:00 AM and therefore leaves the bounce to this morning's high as a 3-wave move so far) or it's building up for a strong move higher (1-2, 1-2 wave count to the upside). I suspect it's corrective since regardless of the two scenarios I showed for SPX, both are looking for lower prices after the bounce completes. It's the next leg down that will tell us something.

Therefore we should be looking for a corrrective move to the upside. All that means is that we can expect a choppy rally at best and an eventual break lower. But as with NDX, the top of the wedge pattern could mean a heck of a rally (in points) and not mean anything. The top of the wedge for SPX will be near 935 by the end of the day (55 points higher).

Jeff Bailey : 10/24/2008 12:10:05 PM

YM 8,384

Jeff Bailey : 10/24/2008 12:09:46 PM

FXY 105.87 +3.02% ... has back filled 1/2 of this morning's gap

Keene Little : 10/24/2008 12:06:08 PM

Looking at SPX, the same idea for a descending wedge that I showed for NDX shows a shallower wedge that would result in a low that essentially retests the October 10th low (SPX 60-min chart): Link . This possibility makes me wonder if there might be too many people thinking the market is about ready to crash. We all know what happens when too many expect something.

The risk in this setup is that if we're building a series of 1st and 2nd waves to the downside, shown in pink, we will see a crash leg lower. They key to determining which scenario is likely playing out will be the form of the decline. If it remains a choppy move lower with bullish divergences building then it will not be the 3rd of a 3rd wave down (of the larger degree 5th wave). In that case I will be looking to exit All my short positions next week and looking for a buying opportunity for at least a larger bounce back up (SPX 1000 area maybe).

Jeff Bailey : 10/24/2008 12:01:36 PM

Those using QCharts5.1 ... could also add $HUI.X to your "position" area with 5, 20 and YrNet% observations.

Jeff Bailey : 10/24/2008 11:55:32 AM

11:50 AM Watch Link

Jeff Bailey : 10/24/2008 11:50:39 AM

Sector Winners was all red earlier ... HUI.X +7.99%, SMH +1.25%, XAL.X +0.79%, NWX +0.79%

Jeff Bailey : 10/24/2008 11:46:25 AM

GLD $71.36 +1.00%

GG $16.75 +8.96%

Jeff Bailey : 10/24/2008 11:44:24 AM

MM Profiles and monitoring arbitrage between GG and GLD from yesterday's GG-KW ENTRY.

Note: I am NOT following/managing a GLD SHORT! I am using it as an EXAMPLE of how I look to MANAGE the GG-KW. Link

Jeff Bailey : 10/24/2008 11:32:18 AM

Benchmark ...

GG $16.64 +7.73%

GLD $70.42 -0.28%

Keene Little : 10/24/2008 11:31:19 AM

The downtrend line from October 14th is currently near NDX 1260. If we do rally to the top of the wedge pattern (if that's what's playing out) by the end of the day it will be closer to 1254. For the more bearish wave pattern, a bounce with two equal legs up this morning will find resistance near 1238 which would also be near gap closure (1241).

Keene Little : 10/24/2008 10:58:50 AM

I briefly mentioned last night, including in the newsletter, that we could be forming a descending wedge from the October 14th high. That's just an idea at this point but so far it has a lot of potential. It calls for another up-down sequence, probably into next week, to put in a tradable bottom. NDX 120-min chart: Link

Jeff Bailey : 10/24/2008 10:50:02 AM

PNC's PnF chart Link

Jeff Bailey : 10/24/2008 10:45:32 AM

PNC alert! $61.00 ... gets back on a PNF "buy signal"

Jeff Bailey : 10/24/2008 10:44:20 AM

PNC $60.17 +5.78% ...

NCC $2.30 -16.36% ...

Keene Little : 10/24/2008 10:41:22 AM

The bond market is not reflecting fear in the stock market--after a gap up bonds then sold off (driving yields higher) and closed the gap. So far it's a strange morning with big moves but no sense for what's next. But so far the bounce in stocks looks like a correction to the gap down and therefore my initial guess for what's next is more downside (although we could see another leg up for this morning's bounce).

Linda Piazza : 10/24/2008 10:41:05 AM

I'm glad to see Keene back and I'm sure those of you who trade the Nasdaq-related indices will be, too, to get his commentary on that as well as on the SPX. I see Jeff is on, too. Before I leave, I wanted to post a chart of the A/D line to show you what I've been watching as I've been noting that it's moving sideways beneath resistance: Link

Jeff Bailey : 10/24/2008 10:37:46 AM

PNC buys National City ... Reuters Story Link

Linda Piazza : 10/24/2008 10:33:32 AM

VIX is testing potentially strong resistance on 15-minute closes up to about 81. The VIX is 79.40 as I type. As long as it's bouncing from tests of potential support on 15-minute closes at 77.36, experience suggests that it will at least go on testing the resistance and nudging it higher, if not breaking above it. So those who would like to see an SPX bounce would like to see the VIX sustaining 15-minute closes beneath 77.71 and then 30-minute ones beneath 75.

Keene Little : 10/24/2008 10:33:11 AM

I'm back. Thanks Linda for filling in. It actually doesn't look that bad out there. It still amazes me to say that after seeing the DOW gap down some 500 points. But price is basically at the lows of the recent price range. Whether it will drop lower from here or bounce back up as part of the whippy price action is now the questtion.

Linda Piazza : 10/24/2008 10:26:42 AM

If I sound as if I'm not sure what's going to happen next, that's because I'm not. You shouldn't be either. What we're waiting to see is what happens next. I think in terms of vulnerabilities and benchmarks and so far the vulnerabilities to more downside remain and important benchmarks that would undo that vulnerability to lower prices have not yet been surmounted, either by the indices themselves or the A/D line. I warned that markets might bounce when they were hitting their lows today during the first few minutes of trading, but I still unfortunately have to warn that nothing that I've seen yet in the bounce proves that the potential for more downside is lessened. I wish I could say differently because I know a lot of people are hurting, but I can't. So, the vulnerability remains. I wouldn't think it time for bulls to step in, although I continue to caution bears to keep updating stops just in case.

Linda Piazza : 10/24/2008 10:22:16 AM

The A/D line still moves sideways beneath potential resistance on 15-minute closes now at about -2440. It hasn't even risen to closely test its 15-minute 9-ema, now at -2085, as the OEX has done, so this is a bearish divergence in my experience. It doesn't prove anything other than that bulls should remain skeptical of the bounce, but a little healthy skepticism is a good thing in this market environment, in my opinion. The A/D line is now -2573.

Linda Piazza : 10/24/2008 10:16:40 AM

RUT traders: I don't have a potential downside target to give you as the RUT is in breakdown mode on both the 15-minute and 30-minute charts. As long as the RUT is finding resistance on 15-minute closes beneath a Keltner band now at about 479.50, it hasn't changed anything about its tenor since Wednesday morning, and as long as it maintains 15-minute closes beneath a Keltner band now at 487.97, it remains in breakdown mode on the 15-minute chart. Fifteen-minute closes back above these benchmarks should be treated as you would treat an RSI or CCI signal: an early but perhaps false signal that something had changed. Until those closes are produced, though, nothing at all has changed, early or false or anything. Remember that these Keltner lines are dynamic and will move up or down a bit with price movement, so these numbers aren't set in stone and won't endure all day.

Linda Piazza : 10/24/2008 10:11:04 AM

The SPX's and OEX's 30-minute charts tell us that we have to factor in vulnerability to about 830 and 395, respectively. They don't prove that the SPX and OEX will reach those levels, but they do tell us to factor in vulnerability to them.

Linda Piazza : 10/24/2008 10:07:38 AM

I'm frankly puzzled. The A/D line is still not moving much. It's -2504 as I type. While the VIX's sharp pullback would support the idea of the equities bouncing, this A/D line action certainly is not. Be careful out there.

Linda Piazza : 10/24/2008 10:06:27 AM

The OEX and SPX 15-minute 9-ema's that I mentioned as potential resistance on 15-minute closes in my 9:53 post are now at 425.03 and 878.71. They will get pushed a little higher as the indices rise.

Linda Piazza : 10/24/2008 10:04:54 AM

The VIX has pulled back strongly from its 89.53 high of the day and is now at 76.00. Watch for the possibility that it could bounce back above about 79.65 and be off to the upside again. Bulls of course want it to continue its sharp descent off the day's high.

Linda Piazza : 10/24/2008 10:01:54 AM

Bulls, I would exercise some caution about believing that the downturns are finished. In these market conditions, we have had absolute evidence that anything not only can but does happen, so a bounce from here that never looks back is certainly possible. However, I'm not yet seeing a strong bounce in the A/D line to match that seen in the OEX, for example, so I think that there's some buying of the strongest blue-chip stocks only. At least, that's the conclusion for now. The A/D line is -2525, off its low, but not yet above first potential resistance on 15-minute closes at about -2400.

Linda Piazza : 10/24/2008 9:53:15 AM

Watch for potential resistance on 15-minute closes for the OEX now at about 416.75 and for the SPX, at about 864.86-868.67. If both can scramble above those levels, then the 15-minute 9-ema's now at about 424.85 and 878.25 are the next places to watch for potential resistance.

Linda Piazza : 10/24/2008 9:51:01 AM

I'm seeing some bullish price/RSI divergences set up on the short-term (5 to 15-minute) intraday charts. I mention them not because they prove that markets are going to bounce but because they prove that bears just need to keep updating their stops.

Linda Piazza : 10/24/2008 9:46:41 AM

The A/D line is now -2582, into the potential support band that now extends down to about -2715. The A/D line doesn't have to keep dropping now to be bearish: it just has to move sideways and not bounce too much. Bears don't want to see it bounce high enough to close 15-minute periods above -1610 or particularly above -1280, the next potential resistance levels. Bulls or anyone who just wants the carnage to end want exactly that.

Linda Piazza : 10/24/2008 9:43:48 AM

And, as soon as that 9:43 post is uploaded, the markets head lower again.

Linda Piazza : 10/24/2008 9:43:00 AM

Potential support on 15-minute closes for the SPX is now 866.82-869.95. For the OEX, it's 417-417.50. I wouldn't normally expect that to hold on a day like today (although nothing is normal about the markets right now) although I wouldn't be surprised to see it stall the decline for a little. I'm just warning that although bears need to keep their stops updated, bulls shouldn't count on this stalling we're having right now to necessarily mean the bottom is in. In the normal course of a capitulation-type day, it wouldn't be. Not yet.

Linda Piazza : 10/24/2008 9:39:02 AM

The OEX is approaching yesterday's low and is hitting first potential support on 15-minute closes at 417.21. For the SPX, that's at 870.30. On a day like today, I wouldn't expect these to hold, but there's always the possibility that they will or that they will at least be good for a bounce attempt. Both just pushed through as I was typing, but we still have much time left in the first 15-minute period. I'm not seeing any signs of a bounce and the A/D line tells me it might not be time yet, but just be aware that surprises can come out of nowhere in this market.

Linda Piazza : 10/24/2008 9:36:32 AM

Keltner outlook on the A/D line: Not surprisingly, of course, the A/D line makes its first prints in the lower or bearish half of its Keltner channels or bands. Barring a bounce back above about -1230 by the end of the first 15-minute period, it's set a downside target of -2077 down to a possible -2646, but there's potential support layered all through there. That's the good news. The bad news is that the A/D line is currently only -1666 so it's got a long way to go still to reach that support.

It's not as negative as I expected it would be, so bears need to be aware of that.

Linda Piazza : 10/24/2008 9:32:47 AM

Take a deep breath.

Linda Piazza : 10/24/2008 9:28:45 AM

I see that Keene must be away for the first hour. Although I'm officially retired from the MM, I wanted to sign on to be with subscribers until Keene is able to return. Futures are of course well below fair value, but because they're limit-down in the pre-market action, we don't know how low they would actually be if allowed to run lower. It's impossible to gauge where the SPX or OEX might go based on extrapolations made from futures in the pre-market session. Those extrapolations might not be helpful anyway because we know when markets are cascading lower, they cut straight through support that seems as if it should hold. Any targets I give you now, without even knowing how sharply futures might be down if those limit-down actions weren't being taken, would be less than helpful. Thirty minute charts provide potential downside targets of about 398 for the OEX and 833 for the SPX, but both will get pushed lower by early slides lower and I don't know whether such benchmarks are useful in this environment anyway. We can also benchmark 2002 lows at 384.96 for the OEX and 768.63 for the SPX. Although no one wants to see that kind of downturn, traders should of course be prepared for a de rigueur bounce attempt if they should be approached.

In fact, bears should guard their profits carefully in case some magic bottom point is reached and markets rebound strongly, but I wouldn't be standing in front of this freight train trying to pick a bottom with bullish trades.

Keene Little : 10/24/2008 9:24:02 AM

It looks like the move down from October 14th is a 1-2, 1-2 wave count after all (instead of being corrective). That left a set up for another 3rd of a 3rd wave down and it's starting with a huge gap down. Futures have been closed (first time I know of) to prevent further selling before the open. Wow. This is obviously another crash leg starting. I don't have to tell you it's going to be dangerous waters for both sides--the volatility is going to be extreme.

Not a good time but I'm going to be away from the market for the first hour. I'll be back at my desk around 7:30 AM.

Jeff Bailey : 10/24/2008 5:05:51 AM

That's it for me tonight ...

Jeff Bailey : 10/24/2008 5:05:13 AM

YM alert! ... 8,236

Jeff Bailey : 10/24/2008 4:20:07 AM

European Markets Link

Jeff Bailey : 10/24/2008 4:19:30 AM

Asian Markets Link

Jeff Bailey : 10/24/2008 4:16:13 AM

YM off 440 at 8334 ... 5-minute with updated DAILY pivot retracement (brown) Link

Jeff Bailey : 10/24/2008 4:03:42 AM

EIA Nat. Gas and Heating Oil table Link

Farmer's Almanac forecast Link

Jim Brown : 10/24/2008 3:45:53 AM

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 : 10/24/2008 2:31:04 AM

Options are like 1-year Adjustable Rate Mortgages. They allow for a MINIMUM amount of CAPITAL exposure, for a SPECIFIC period of TIME. They are NOT to be OVERLEVERAGED.- Jeff Bailey

Jeff Bailey : 10/24/2008 1:34:10 AM

BPPREC and GG Link

Here too a "Bearish Triangle" at $23.

BPPREC is 0% so sector RISK largely removed near-term. OPTIONS ONLY! (Other than day trading where risk can be managed intra-day).

Jeff Bailey : 10/24/2008 1:15:10 AM

BPSPX Link

Keene Little : 10/24/2008 1:10:57 AM

I don't understand the day-to-day reasoning for why the market goes up or down. On one day the market goes down due to recession fears. The next day some economic report or earnings come out and the market goes up because recession fears ease. The next day the market goes down again because recession fears are back.

Why don't "they" tell it like it is? The market goes up or down because the Big Boys want the market to go up or down. And the market won't bottom til the Big Boys want it to bottom, whether we have (or are in) a recession or not, or whether we're at the proper EW count or not, or whatever.

The stock market is a perfect reflection of social mood--day to day and even intraday. Fundamentals have nothing to do with market movement. Fundamentals are used to describe where the market is not where it's going. Fundamentals follow the market, not the other way around. All the explanations you hear on TV (the bubbleheads on CNBC for example) are efforts by people to explain why the market did what it did. I'll be blunt--most them haven't a clue what they're talking about and I highly suspect when they get off camera they're amazed that people actually believe the nonsense that comes out of their mouths.

So as people swing between fear and greed they take the market with them. Lately the mood swings have been violent and fast changing. We are obviously seeing this reflected in stock market swings. It may be swinging at times because big money (including the government's) can move the market but it really is based on herd mentality and the herd is in panic mode right now.

You've seen flocks of birds and schools of fish turn on a dime and head in a completely different direction in unison only to reverse again in unison. Think of stock market participants doing the same thing. It's really no more complicated or complex than that. Our job is to figure out where the herd is going to turn and how far it will run before stopping and reversing course.

Keene Little : 10/24/2008 12:49:35 AM

Friday's pivot table: Link

(said tongue firmly implanted in cheek) It's a relatively calm session in after hours--the DOW futures are only down 180 points currently, not even a 38% retracement of the late-day rally on Thursday. Boring.

It's obviously a fairly large move for the overnight session but we have absolutely no clue how that will translate into Friday's trading. It just continues to emphasize the risk of carrying trades overnight (and trading in general).

As for Friday, based on the bounce back up at the end of the day Thursday it's looking like we could see the price consolidation since October 10th continue. How high the bounce could get is anyone's guess in this market. The SPX daily chart shows a potential bounce up to the downtrend line from October 14th, currently near 950, before turning back down. It could go even higher but I don't see that as a likely scenario. Link

One other possibility that's not shown on the chart is for a descending wedge pattern to form since the October 14th high. I will look at this possibility a little more on Friday and draw it out if it makes sense. It would say we'll chop slighly lower but find a low by the end of the month that's not much lower than the October 10th low. The other indices support the same possibility. Bottom line is that we're in a very choppy pattern with lots of whipsaws that are whipping several hundred DOW points in the span of an hour. Flat is a good position during times like these.

Jeff Bailey : 10/23/2008 11:43:56 PM

National City (NCC) Pnf Chart Link

You traded NCC-VQ puts on 9/26/08 @ $3.67 in the underlying ($0.80/contract) and you covered/closed on 09/29/08 at $1.60 in the underlying.

On 09/26/06 you also bought a very small position in NCC shares (covered by your puts) at $3.65. Then on 10/10/08 you bought more shares at $1.85 with the handsome profits from your puts!

Then on 10/14/08 you SOLD the underlying shares of NCC at $3.33, and you bought a NCC-AZ for $1.45.

Now, I'm not about to say that NCC is a "better" long bank stock due to its relative strength measure of late. YOU know how this stock can move on given days. However, it is a slight plus.

Some "market psychology" here too as the stock is "only $3.00" and may keep some retail shorts off of it (damage done?). No, it is RISK management and exposure to a bank, where it remains MASS CONFUSION has to value assets/liabilities. You're simply taking a portion of the NCC past gains and playing the option.

We'll follow that BPBANK too.

ZION or otherwise.

Jeff Bailey : 10/23/2008 11:20:05 PM

Hey! Any other banks out there that have triggered a "bearish triangle" of late?

Jeff Bailey : 10/23/2008 11:13:34 PM

BPBANK and ZION side-by-side Link

This is kind of wide to look at if you're on a single monitor, but gives the trader/investor a look at a BANK stock, and the sector in general.

6 Phases of market "condition" and I'm point out some of the more recent.

Say it with me as we start back in early July (7) in the bullish % .... "bull alert" as the sector reverses up from deeply oversold <30% at 14%.

"bull confirmed" as the sector achieves 44% (above prior column of X 42%).

"bull correction" as we see a 3-box reversal back lower to 40% (this is where the "bear trap" takes place in ZION).

"bull confirmed" as the BPBANK sees the 3-box reversal back up at 46%. (feel/observe the power in ZION as shorts know the gig is up).

"bull correction" as the BPBANK sees a 3-box reversal back lower at 54%.

"BEAR CONFIRMED" as the BPBANK generates a "sell signal" at 38%. (ZION likely either traded, or about to trade $34.

"Bull alert" as the BPBANK reverses back up from <30% at deeply oversold at 14%.

"BEAR CONFIRMED" as BPBANK sees a 3-box reversal back lower at 16% (ZION one of the stock early, generates the "bearish triangle" at $33).

The BEARISH TRIANGLE : Must have a MININIMUM of 5 columns, alternating X and O, pattern of LOWER HIGHS and HIGHER LOWS. Pattern is when 5th (or more) column of O generates the "sell signal"

The PINK dots I placed on ZION would be a POTENTIAL bullish support trend, IF the current bearish resistance trend (blue dots, where I also added PINK dots) were to be violated.

Jeff Bailey : 10/23/2008 10:38:30 PM

Zion Question: ... Jeff: Good day,

Could you give me your chart thoughts about the bank stock ZION. The pnf chart posts 6.00 dollars. How often are these charts correct in regards to reaching that price??

What price might I watch for to be a good short or a good long from the charts..

Jeff's Reply: Here's the PnF chart of ZION Link

There haven't been any studies that I know of regarding the percentage, or probability of the time that a stock achieves its bearish vertical count.

However, the bearish triangle pattern has been studied by Professor Davis at Purdue University.

Under BEAR phase market/sector conditions (as depicted by the bullish %)

The BEARISH TRIANGLE is profitable 87.5% of the time.
Average gain 33.3%
Average time 2.5 months.

ZION recently triggered the BEARISH triangle with the trade at $33.

A 33.3% decline would be to $22.01

The BEARISH VERTICAL COUNT to $6.00 would at least suggest the pattern probability is in play. The BEARISH VERTICAL COUNT column is the column of O from $46 to $27. The BEARISH VERTICAL COUNT would only be negated once ZION was able to generate a "buy signal," which would currently take a trade at $40.

RISK to buy signal from $30, is currently $10.

REWARD to $22.01 from $30, is currently $10, so RISK/REWARD 1:1 not overly attractive for FULL position. REWARD to the BEARISH VERTICAL COUNT from $30 is $24, so RISK/REWARD $10/$24 is 1:2 longer-term.

BANKS bullish % is BEAR CONFIRMED at 14%, so at low end of bullish %. I'd probably have to lean only to Professor Davis study at this time. Price out put that is 3-months out (pattern is 2.5 months). Maybe look for bounce back up into $34-ish, or the apex the of bearish triangle as an entry point.

Jeff Bailey : 10/23/2008 10:07:17 PM

Trade blotter of CLOSED and OPEN/active profiles that I (Jeff Bailey) have made at this Link

UNG $28.20 -4.98%
NCC $2.75 -2.13%
HUM $35.76 +4.34%
GG $15.39 -8.11%

OI Technical Staff : 10/23/2008 9:59:59 PM

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