Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
Jeff Bailey : 12/1/2008 9:47:16 PM

Retail Gasoline Heat Map at this Link (Seeing signs of price stability at the retail level)

11/24/08 Link

Jeff Bailey : 12/1/2008 4:41:08 PM

EIA: US Retail Gasoline -8.1c In Week To $1.811/Gallon

Keene Little : 12/1/2008 4:36:04 PM

Updating the SPX 30-min and 120-min charts shows the same ideas for what could happen from here but obviously from a little lower level than where I thought it might find support around 836. Now I like the downside target near 794 (two equal legs down from Friday) for a better support level. The next potential support level is near 768. 30-min chart: Link and 120-min chart: Link

It could turn around immediately tomorrow so stay aware of that possibility. Whether from here or a little lower first, we should then get a bounce that could lead to another run higher for an upside target near 950 where it would have two equal legs up from the November 21st low, assuming support is found at 794. SPX 950 is also price-level support and resistance from 2001 and 2002. This possibility is shown in dark red on the charts.

The pink wave count continues to show the possibility we'll get a new annual low this month so after a bounce we could see the decline continue into mid month. The downside target for that scenario remains 661.

Jeff Bailey : 12/1/2008 4:21:10 PM

Governor Schwarzenegger Calls New Legislature Into a Prop 58 Special Session ... CA Office of the Governor Link

Jeff Bailey : 12/1/2008 4:18:07 PM

FOX News - California Gov. Declares State Fiscal Emergency

Jeff Bailey : 12/1/2008 4:14:08 PM

Jane! When I switched back over to QC6.0, TRIN there did jump to a "good gravy" 5.96 from 01:45-50 PM ET. Finishes 8.59.

Jeff Bailey : 12/1/2008 4:07:33 PM

US Dollar Index 04:00 tick was 87.06. +1.55% from Friday's closing tick.

Keene Little : 12/1/2008 4:05:46 PM

The downside risk at the moment is to SPX 794 which is where the sharp move down from Friday would now have two equal legs if we consider today's mid-day consolidation as the half way point.

Keene Little : 12/1/2008 4:00:42 PM

SPX has made it down to the 50% retracement of last week's rally (818.40). Amazing--just one day to regurgitate all that turkey.

James Brown : 12/1/2008 4:00:07 PM

Citigroup is down 21% at $6.50ish and is already testing the 38.2% retracement of last week's bounce.

Jeff Bailey : 12/1/2008 3:59:23 PM

DIA -7.13%
SPY -8.44%
QQQQ -7.21%
RUT.X -10.56% ...

Jeff Bailey : 12/1/2008 3:58:40 PM

Yen CurrencyShares (FXY) $106.93 +2.50% ... another security that's positive on the day.

James Brown : 12/1/2008 3:57:56 PM

The RUT is now off more than 10%.

James Brown : 12/1/2008 3:57:08 PM

Jeff mentioned the UNG natural gas ETF a couple of hours ago. This is one of the few securities that is positive today. The UNG is currently up 1.6% around $27.40.

Jeff Bailey : 12/1/2008 3:49:06 PM

Exiting long partial of EEV from Wednesday afternoon here at $84.90 in personal account.

Jeff Bailey : 12/1/2008 3:47:52 PM

RUT.X 428.07 -9.52% ... gets the trade at WKLY S1. 120-minute interval MACD slips below Signal at 2.534/3.355.

Keene Little : 12/1/2008 3:45:51 PM

And here I thought I was being too bearish to expect SPX 836 by the end of today, which would have been a negative 60-point day. Here we are down -68 points and no bottom yet. However, just as last Friday's buying into the close set up today's reversal I think today's selling into the close is setting up a another reversal for tomorrow. If you made some money on the short side today consider taking a little and buying a call position to see if we get at least a correction of today's decline.

James Brown : 12/1/2008 3:44:14 PM

IBM is looking like a bearish candidate here. The question is where do you put the stop? Would you put it above Friday's high of $81.90 or above today's afternoon high around $79.25. The stock has possible support at $75.00 and then again at $70.00. Chart: Link

Jane Fox : 12/1/2008 3:36:53 PM

VIX has been telling you all day today to stay short. Link

Jeff Bailey : 12/1/2008 3:35:58 PM

BIX.X 126.09 -12.01% ... still holding WKLY S1/MNTHLY S1 correlation.

Keene Little : 12/1/2008 3:29:01 PM

SPX just rang the bell by dropping into th3 835-836 area. Now will it hold? NDX is getting closer to its 50% retracement level just under 1106 (printing 1113 currently).

James Brown : 12/1/2008 3:28:45 PM

Rambus (RMBS) is showing relative strength today with a 10% gain to $11.34. This move follows Friday's breakout over the 50-dma and the $10.00 mark. The stock has exploded higher from its November bottom near $5.00.

James Brown : 12/1/2008 3:26:16 PM

Research in Motion (RIMM) is down 4.7% and nearing round-number support at the $40.00 level. Given the trend of lower highs it would not be unreasonable to expect a bearish breakdown. The Point & Figure chart is bearish with a $20 target.

Jeff Bailey : 12/1/2008 3:14:01 PM

Majors should go out at/near lows of session.

Jeff Bailey : 12/1/2008 3:13:44 PM

NASDAQ a/d 514:2,349

Jeff Bailey : 12/1/2008 3:13:30 PM

NYSE a/d 217:2,666

Jeff Bailey : 12/1/2008 3:13:03 PM

RUT.X 434.45 -8.17% ... session low. Set to test WKLY S1.

Jeff Bailey : 12/1/2008 3:07:08 PM

U.S. Oil Fund (USO) $39.86 -5.29% ... set to test its 11/20/08 December futures benchmark settlement.

Keene Little : 12/1/2008 3:06:49 PM

The corrective looking bounce is leading to another stab back down so a new low is still not out of the question.

Jeff Bailey : 12/1/2008 3:03:22 PM

NASDAQ a/d 513:2,344

Jeff Bailey : 12/1/2008 3:02:57 PM

NYSE a/d 236:2,645

Jeff Bailey : 12/1/2008 3:01:29 PM

Oracle (ORCL) $15.97 -0.74% ...

James Brown : 12/1/2008 2:59:14 PM

Here's a chart of AAPL and its bounce from the 38.2% Fib retracement. chart: Link

Jeff Bailey : 12/1/2008 2:57:11 PM

Ford Motor (F) $2.56 -4.46% ... price action ties to TRIN jump as noted. However, volume at the 01:45 PM ET mark not overly conducive to a large amount of selling to have TRIN jumping as it did.

James Brown : 12/1/2008 2:56:18 PM

Trading Idea: Apple Inc. (AAPL) is only down 1.4% versus the 5.6% drop in the NASDAQ Composite. AAPL is bouncing from a test of its simple 10-dma near $89.00. I could see buying this bounce with a stop loss under $89.00 and a short-term target at $95.00.

Keene Little : 12/1/2008 2:55:37 PM

And right after my last post the push above the high near 1:30 PM negates the pattern calling for one more new low. I think we'll see the bounce in the last hour, hopefully up to about SPX 865.

Keene Little : 12/1/2008 2:53:51 PM

It's looking like the stock market is hammering in a short-term bottom this afternoon so the chances are improving for a rally, maybe in the last hour. From a short term pattern perspective it would look best with one more minor new low (with more bullish divergences) and so far the bounce looks corrective enough to suggest another low is coming. But I think we're close enough to a low for the day (with perhaps one more push down to SPX 835-836 support) and I consider the short side the riskier side for now.

James Brown : 12/1/2008 2:44:19 PM

Art Cashin on CNBC calling the rush into Treasury bonds a "stampede to safety".

James Brown : 12/1/2008 2:42:59 PM

The small cap Russell 2000 index is under performing with a 7.4% decline and a drop back to its simple 10-dma. The candlestick pattern on the Russell 2000 is getting ugly. chart: Link

Jane Fox : 12/1/2008 2:42:14 PM

Jeff your TRIN is not as high as mine I see. Mine just fell back to about 4.70 more in line with yours.

Keene Little : 12/1/2008 2:37:41 PM

There's been another big run into the perceived safety of Treasuries today--bonds are up big (yields down), nearly 4 handles at today's high so far. Looking at a longer-term chart of the 30-year yield shows it has now dropped down to the bottom of a potential parallel down-channel from the high back in 1994 (7.9%). A Fib projection for the move down from 1994 is at 3.168% and today's low so far is 3.185% so pretty close to that Fib projection at the same time it's hitting the bottom of the channel: Link

The long side of bonds should be the riskier side now. It can certainly press higher but at a minimum I'd expect a pullback in bonds (bounce in yields). The 30-year yield could then drop a little lower into early 2009 to another Fib projection at 2.873%. If we do get a reversal in bonds soon that could provide a lift for stocks (as money rotates out of bonds).

Jeff Bailey : 12/1/2008 2:28:03 PM

TRIN 3.98 ... I'm showing session high of 4.12. Notable jump at 01:45 ET from 1.58 measure.

James Brown : 12/1/2008 2:26:24 PM

Now shares of General Motors (GM @ $4.51) are following Ford lower. The stock failed to rally past last Wednesday's high and it's painting a bearish engulfing candlestick pattern with today's 14% decline. Currently GM has short-term support at $4.00.

Jane Fox : 12/1/2008 2:26:27 PM

Holy mugoly Trin has spiked to over 6.00. Not sure if this is right or not since my charts were having issues with the AD line and volume this morning. Link

Jeff Bailey : 12/1/2008 2:24:07 PM

Ford Motor (F) $2.21 -17.84% ... slips red.

Jeff Bailey : 12/1/2008 2:22:01 PM

dj- Investment Fund Leucadia National Won't Pay 2008 Dividend

Leucadia National Corp. (LUK) said it won't pay a dividend for 2008, citing "market conditions and current economics."

The investment fund paid a 25-cent-a-share dividend in 2007; at that rate, Leucadia is saving $62 million from withholding the payment.

Numerous financial firms have been slashing or suspending dividend payments the past year in efforts to save capital. But Leucadia's results haven't been suffering. In the first three quarters of the year, net income was five times higher than last year.

But its shares have slumped like most financials, dropping 64% this year. Leucadia's stock was recently down 12% to $17.14 amid another broad market selloff.

Jeff Bailey : 12/1/2008 2:17:42 PM

S&P 500 Index (SPX.X) 844.23 -5.80% ... Dr. Bernanke ends speech.

Keene Little : 12/1/2008 2:14:34 PM

We're continuing to see bullish divergences at the new lows today so I wouldn't trust the downside. Continue to lower stops to just above the previous bounce highs, the last one being near 1:30 PM. I wouldn't be a bit surprised to see a rally attempt this afternoon. In fact I'm hoping we'll see a rally back up to the SPX 865 area to set up another short play.

James Brown : 12/1/2008 1:55:56 PM

Ford (F) is falling quickly. The stock rallied to the $3.00 level this morning but shares are now down 11.5% at $2.37. Today's session is producing a big bearish engulfing candlestick pattern.

James Brown : 12/1/2008 1:54:58 PM

Another stock that is reversing lower at technical resistance at its 50-dma is Nucor (NUE). Shares rallied to the 50-dma on Friday and today the stock is down 9.3% at $32.36. There might be some support at $30.00 but the recent bottom was the $26.25-26.00 zone. chart: Link

Jeff Bailey : 12/1/2008 1:50:20 PM

S&P 500 Index (SPX.X) 846.06 -5.59% ... Dr. Bernanke at the Greater Austin Chamber of Commerce, Austin, TX. Link

James Brown : 12/1/2008 1:49:30 PM

Chipotle Mexican Grill is struggling with resistance near $50.00, its 50-dma and the top of its bearish channel. This may be a new entry point for bearish plays. Chart: Link

Jeff Bailey : 12/1/2008 1:47:44 PM

dj- Credit Suisse Cutting U.K. Headcount by 650 ... citing market conditions.

CS $25.27 -14.65% ...

Keene Little : 12/1/2008 1:45:10 PM

While I've been looking for last week's lows on the 24th and 25th to act as support for SPX (826-835), NDX has already been testing those lows at 1118 (low so far 1114.90). If those lows do not hold then the next downside target is first its 50% retracement at 1105.78 and then 62% at 1085.27. It would close its November 24th gap at 1082.75.

James Brown : 12/1/2008 1:44:23 PM

I don't see any news but Genzyme Corp. (GENZ) is getting crushed. The stock is down 7.5% and has broken down through what should have been support at its October low near $60.00. The weekly chart suggests there might be some additional support at $59.00. If it breaks $59.00 the next level of support is the $55.00 mark.

Keene Little : 12/1/2008 1:36:55 PM

If we've seen the low for the day a 50% retracement of today's decline is at SPX 868 which would be back up to the downtrend line from September. But so far we don't have enough evidence that a low is in. The bounce off the low is so far just a 3-wave bounce (which could get a little higher before turning back down--two equal legs up would be at 850.22).

Keene Little : 12/1/2008 1:20:49 PM

And finally, for an even longer-term term view of what the SPX daily chart looks like, looking at the bear market leg down from October 2007, the weekly chart shows the complete EW count for the move down to a low by mid year 2009: Link

Jeff Bailey : 12/1/2008 1:14:30 PM

US 3-Month Bill Auction: ... 0.050%; 92.36% at high. Bid-to-cover was 3.04.

Keene Little : 12/1/2008 1:13:07 PM

Taking the SPX 120-min chart a step further and looking at the daily chart I'm showing the possibilities for how price action might play out into the early part of the year: Link

Even if we get another rally leg higher, up to perhaps the 960-1000 area, we could find that's it's just the first of 5 legs inside a big sideways triangle pattern (dark red). That's purely a guess right now but it would be a fitting pattern for the big 4th wave correction before the final 5th wave down to end the bear market leg down from October 2007.

The pink wave count says we haven't even seen the end of the 3rd wave down yet and once we put in a new low then we'll start the clock on the big 4th wave correction. The bottom line is that each scenario calls for a very choppy price pattern (essentially continuing what we've been seeing since the October 10th low) and therefore it will be a difficult trading environment. Go for quick hits and get out. Rinse and repeat.

Jeff Bailey : 12/1/2008 1:08:20 PM

XNG.X 375.35 -8.22% ... WKLY S1 375.71

Jeff Bailey : 12/1/2008 1:06:30 PM

US Nat. Gas Fund (UNG) $27.63 +2.52% ... tries to hold WKLY Pivot ($27.42)

James Brown : 12/1/2008 1:05:50 PM

Some of today's worst performers are Gambling stocks, Broker-dealers, and Gold. The DJUSCA casino index is off 10.9%. The XBD broker-dealer index is off 12.4%, the GOX gold index is down 9.7%.

LVS continues to be the anchor for the gambling sector with the stock down 20% today. WYNN is down almost 13% at $34.65 and looks like it could fall toward support near $30.00.

Goldman Sachs (GS) is down more than 15% after bouncing back to the $80.00 level last week. The stock is currently around $67. GS might have some support at its 10-dma around $64.65. If that doesn't hold then the next level of support appears to be the $57.50 region. Morgan Stanley (MS) is down 17.6% at $12.15 and the nearest level of support looks like the $10.00 level or $9.00 level.

The GLD gold ETF gapped open lower and it trading near $76.25 off 5%. The U.S. dollar's rise is putting pressure on gold prices (in addition to fears of deflation). The dollar is currently up three days in a row after last week's early breakdown. The UUP (U.S.dollar ETF) is at 26.65. Watch for resistance in the $27.00-27.25 region.

Keene Little : 12/1/2008 12:55:58 PM

For a slightly wider view of the two possible price paths shown on the SPX 30-min chart, this 120-min chart shows how those moves might play out for the month. The spread between the two possibilities--961 to the upside and 661 to the downside is "only" 300 points. You can see why spread traders will still have a tough time in this market (unless they can sell at the edges of the range). Link

James Brown : 12/1/2008 12:55:24 PM

The 13-week (3-month) T-bill's yield continues to flirt with its lows near zero. It's currently at a yield of 0.10% after bouncing from this morning's lows of 0.05%. The 0.05% level was the low a few days ago for three days in a row.

Jeff Bailey : 12/1/2008 12:53:57 PM

dj- PIRATES HOLDING TANKER STILL READY TO NEGOTIATE

Somali pirates holding Saudi's Sirius Starsay they are still ready to negotiate its release while Somali President Abdullahi Yusuf Ahmed says in an interview that a Saudi oil tanker seized by Somali pirates will be freed soon without a ransom.

Jane Fox : 12/1/2008 12:52:13 PM

This is no time to be long. We may get an oversold bounce but those are usually volatile and almost impossible to trade. Stick with the short side for now. Link

Jeff Bailey : 12/1/2008 12:49:24 PM

dj- MOODY'S SAYS THAILAND ECONOMIC PROSPECTS WORSEN

The political crisis in Thailand has worsened the south-east Asian country's economic prospects, with Moody's Investors Service closely watching the developments for any ratings implications, a senior analyst at the ratings firm says.

Keene Little : 12/1/2008 12:45:41 PM

As a note on the low 10-year yield (and 30-year), it's the bond market reflecting fear of a deflationary environment (a legitimate fear).

Jane Fox : 12/1/2008 12:45:32 PM

Crude is down more than $4.00/bl today but not to new yearly lows - yet. I don?t think it will fall to new yearly lows or if it does the new lows will not have follow-through, the MACD divergence is just too strong. Link

Jeff Bailey : 12/1/2008 12:45:14 PM

QQQQ $27.50 -5.56% ...

Jeff Bailey : 12/1/2008 12:44:43 PM

SMH $15.78 -5.11% ...

Jeff Bailey : 12/1/2008 12:43:07 PM

10-year Yield ($TNX.X) down 14.5 bp at 2.812%. Sits on WKLY S1.

Jeff Bailey : 12/1/2008 12:42:05 PM

dj- CHINA MANUFACTURING PLUNGES TO RECORD LOWS

Two key gauges of manufacturing in China fall to record lows in November, signaling that economic growth will likely slow further in coming months before getting a boost from Beijing's pro-growth policies.

James Brown : 12/1/2008 12:37:49 PM

CNBC saying that the yield on the 10-year bond is down to 2.82%, which hasn't been this low since 1955.

Keene Little : 12/1/2008 12:37:35 PM

So it's now official, something we've all known for some time:

WASHINGTON (MarketWatch) -- The U.S. economy entered a recession in December 2007, a committee of economists at the private National Bureau of Economic Research said Monday. The economy reached a peak in December and has been declining since, according to the business cycle dating committee of the NBER. The committee does not judge a recession as two consecutive quarterly declines in gross domestic product; rather, it looks at four key monthly economic indicators, including employment, industrial output and sales. Employment peaked in December.

Jeff Bailey : 12/1/2008 12:33:56 PM

dj- UNITEDHEALTH BACKS EARNINGS OUTLOOK

Health-insurance giant backs its earnings outlook for 2008 and 2009, but sees 2009 revenue at the higher end of its initial forecast as the company deals with a weakened environment that could cause pricing pressures and enrollment losses.

UNH $21.41 +1.90% ... (see earlier)

Keene Little : 12/1/2008 12:28:04 PM

With multiple possibilities for what plays out this month and into the new year, I'll be continually watching for evidence for what pattern takes front and center in the line up of possibilities. This SPX 30-min chart shows just two--either a pullback over the next couple of days that then leads to another push higher or a drop down to a new low by mid month. I'm not showing the big sideways triangle idea but that's clearly another possibility. Link

For now I'm going to assume we'll see the drop continue down to 835-836 and find support for a bounce back up to correct today's decline. If it rallies back up into the close it could get back up to the downtrend line from September, near 866 by the end of the day. From there another equal leg down would have it dropping to about 808 and it would be decision time for the market--either continue lower or start the next rally leg.

These are clearly just guesses at the moment but would be typical EW/Fib moves so now I'll watch and test my thoughts on this each step of the way.

Jeff Bailey : 12/1/2008 12:25:34 PM

Spotlight Semiconductor HOLDRs (SMH) $15.86 -4.63% ... Daily Intervals with QRTRLY and new MONTHLY Pivot retracement Link

Note WKLY S1 $15.77. When broken, WKLY S2 in play.

Jeff Bailey : 12/1/2008 12:18:55 PM

5-year Treasury Yield ($FVX.X) down 12.0 bp at 1.824%

Jeff Bailey : 12/1/2008 12:18:12 PM

dj- Freddie $1B 5-Yr Reopening Sold To Yield 2.861%

Jane Fox : 12/1/2008 12:08:19 PM

VIX is making new daily highs again.

Jeff Bailey : 12/1/2008 12:08:01 PM

Pilgrim's Pride Files Chapter 11 ... Press Release Link

PPC $0.60 -47.82% ...

Jeff Bailey : 12/1/2008 11:46:16 AM

dj- GLOBAL CHIP SALES FALL 2.4%

Global semiconductor sales slip in October amid the worsening economy and continued price slump for memory products, as the Semicondutor Industry Association expects lower shipments for personal computers and cell phones next year.

SMH $15.94 -4.14% ... session low has been $15.80. (See Wednesday's Wrap) Link

Jeff Bailey : 12/1/2008 11:42:20 AM

dj- CITI FUND TO BUY SACYR'S ITINERE FOR EURO 7.89B

Highly indebted construction company Sacyr-Vallehermoso says it has agreed to sell highway operator Itinere to a Citigroup infrastructure fund for EUR7.89 billion, in one of the largest asset sales in Spain since the collapse of its real-estate market. Once the deal has gone through, Citi will sell several Itinere highways to other infrastructure operators.

Jeff Bailey : 12/1/2008 11:40:24 AM

dj- OPEC TO CUT DECEMBER OUTPUT

The Organization of Petroleum Exporting Countries will cut its December production by a 'good amount,' its secretary-general tells reporters. Any further cut will be decided at an upcoming meeting in Algeria on December 17.

Jeff Bailey : 12/1/2008 11:39:13 AM

dj- US HOLIDAY SHOPPING STARTS STRONG

The U.S. holiday shopping season gets off to a better-than-expected start, with a survey showing an average spend of $372.57 over the weekend, as retailers reel in cautious shoppers with massive discounts.

RLX.X 247.91 -5.64% ... WKLY Pivot= 250.56.

Jeff Bailey : 12/1/2008 11:37:06 AM

dj- JOHNSON & JOHNSON TO BUY MENTOR FOR $1.07B

J&J agrees to pay $31 a share for breast-implant maker Mentor a 92% premium to Friday's closing price. Deal could also give Allergan a big rival in another cosmetic-surgery area, Botox, as Mentor is awaiting word from the FDA for its wrinkle treatment. Mentor shares jump 90%.

JNJ $56.70 -3.20% ...

MNT $30.60 +89.47% ...

Keene Little : 12/1/2008 11:36:59 AM

With another new low coming it's possible to call this morning's leg down as completing. If you're short from Friday or this morning I think it's a good time to trail your stop closer--follow it lower with a stop just above each bounce high. The bullish divergences at the new lows support the idea that we've got a larger bounce coming (probably to correct this morning's decline).

Jeff Bailey : 12/1/2008 11:35:40 AM

dj- US CONSTRUCTION OUTLAYS LESS THAN EXPECTED

U.S. construction spending drops more than expected in October as the housing slump continues pulling down the building trade. Total spending declines 1.2% from September, when spending was revised to flat from the original report of a decline of 0.3%. Economists were expecting October spending to fall 1.1%.

Jane Fox : 12/1/2008 11:22:51 AM

The internals are very bearish. AD volume trajectory is telling us the bears are very much in control. Link

Jeff Bailey : 12/1/2008 11:19:38 AM

dj- Mortgage Insurers See Defaults Rise Again In October

Insured mortgage defaults rose again in October, but the number of loans brought up to date also increased, according to a report by Mortgage Insurance Companies of America.

The association of the largest mortgage insurers said Monday that 80,071 mortgages with insurance went into default last month, or became 60 days past due, up 4.3% from September. In April, one lender changed its default reporting, making figures before April not directly comparable to monthly figures since then.

Mortgage cures, or mortgages that are brought up to date, rose 4.4% in October to 43,211 and the highest level since June.

Meanwhile, applications for insurance continue to fall as home sales keep sliding. October's monthly decline was 11% to 55,085; that figure is just 30% of the number of applications received a year ago.

The statistics in the October report included data from AIG United Guaranty, a unit of American International Group (AIG); Genworth Mortgage Insurance Corp., a unit of Genworth Financial (GNW); Mortgage Guaranty Insurance Corp. (MTG); PMI Mortgage Insurance Co., a unit of PMI Group (PMI); and Republic Mortgage Insurance Co., a unit of Old Republic International (ORI).

Jeff Bailey : 12/1/2008 11:16:51 AM

dj- US To Sell $36 Bln In Reopened 4-week Bills Tuesday

Keene Little : 12/1/2008 11:15:58 AM

One of the reasons I'm still considering the possibility for a new annual low this month is the pattern in the banks. The BIX chart that I show each week in my newsletter is in a descending wedge pattern that calls for a new low to finish its decline. For the banks to do that without the broader market seems an unreasonable assumption. The big question of course is whether the banks will in fact put in a new low.

I didn't get a chance to update the charts in the newsletter last week (Thanksgiving) but this is the chart from November 20th (I haven't changed the price depiction but the new low should happen a little earlier than the end of the month and finish around 90): Link

I was looking for BIX to drop to 106.20 for two equal legs down from the November 4th high and it dropped to 102.82 the next day. It rallied stronger than I thought it would but it stopped on Friday just short of its downtrend line from September (the top of the wedge). If it does drop down to a new low this month it will be an outstanding setup to get long the banks for a good trade into early 2009 (for at least a double).

Keene Little : 12/1/2008 11:01:39 AM

A 38% retracement of last week's rally is at SPX 836.66, just above last Wednesday's low near 835 so that certainly makes for a good downside target for now. If we get a bounce back up to correct this morning's decline (whether from here or lower) and then start back down again we'll get a downside target based on two equal legs down. Additional downside targets are the Fib retracement levels of 50% and 62% (814.40 and 800.14).

There remains the possibility that we've now started the leg down to a new low (by mid December) so that's the risk if you're in a long position and holding on for more. Or we have started the large 4th wave correction which could see price consolidate between 750 and 900 until February. Or we'll get a pullback to correct last week's rally and then head higher to 1000. There are way too many possibilities at the moment to be thinking about holding any position for much more than a day. Credit spreads will work nicely if we're going to consolidate for a while but those are risky in this volatile market.

Jeff Bailey : 12/1/2008 10:48:13 AM

HMO.X 806.85 -3.19% ...

Jeff Bailey : 12/1/2008 10:47:20 AM

Unitedhealth Group (UNH) $22.07 +5.00% ... probes its 50-day SMA.

Jeff Bailey : 12/1/2008 10:44:37 AM

Ford Exploring Sale of Volvo Amid Auto Industry's Woes

Ford Motor (F) $2.89 +7.43% ...

Jeff Bailey : 12/1/2008 10:38:36 AM

iShares iBoxx High Yield (HYG) $64.44 -2.73% ...

Jeff Bailey : 12/1/2008 10:36:31 AM

BIX.X 132.88 -7.27% ... gets the trade at WKLY Pivot. Last equity-based index in Pivot Matrix to do so.

Jeff Bailey : 12/1/2008 10:30:43 AM

Pacholder High Yield Suspends Payment of Dividend on December 9, 2008 ... Press Release Link

Jeff Bailey : 12/1/2008 10:29:04 AM

NYSE NH/NL currently 12:26

NASDAQ NH/NL currently 2:30.

Jeff Bailey : 12/1/2008 10:27:32 AM

Pacholder High Yield (PHF) 2.81 -9.06% ... notable new 52-weeker for this closed-end junk bond fund.

Analysis: Negative signal from credit markets.

Equity indices vulnerable to recent lows.

Keene Little : 12/1/2008 10:25:43 AM

I had wondered in last night's post whether it was reasonable to expect SPX to sell off 60 points today (to reach its downside target of 835). It doesn't seem like such a stretch anymore. For the DOW it might be just another 500-600 point day in a string of many.

Jane Fox : 12/1/2008 10:21:12 AM

VIX is hovering at daily highs supporting Keene's observation that the market may continue lower.

Keene Little : 12/1/2008 10:19:38 AM

The consolidation near the low looks bearish--we should see the market continue lower.

Jane Fox : 12/1/2008 10:18:32 AM

OPEC is signaling Crude prices between $70-90 is reasonable and may be announcing production cuts when they met in Algeria December 17th. OPEC is blaming the decline in demand for Crude on US mismanagement of its economy and the resulting poor global economic conditions.

Jane Fox : 12/1/2008 10:14:50 AM

WASHINGTON (MarketWatch) -- Manufacturing activity in the United States declined at the fastest pace in 27 years in November, the Institute for Supply Management reported Monday. The ISM index fell to 36.2% in November from 38.9% in October. It's the lowest since late 1981. Economists were expecting the ISM index to fall to 37%. Readings under 50% indicate most firms reported worsening conditions. The new orders index fell to 27.9%, the lowest since 1980. The prices paid index fell to 25.5%.

Jeff Bailey : 12/1/2008 10:14:16 AM

US ISM: November Sees 'Rapid Rate of Contraction'

Mfg. Business Index 36.2 (consensus was 36.5) Vs. Oct 38.9
Prices Index 25.5 vs. Oct. 37.0
Employment Index 34.2 vs. Oct. 34.6
New Orders 27.9 vs. Oct. 32.2
Inventories 39.1 vs. Oct. 44.3
Production Index 31.5 vs. Oct. 34.1

Jane Fox : 12/1/2008 10:05:40 AM

Nov. ISM 36.2% lowest since 1981

Jane Fox : 12/1/2008 10:04:51 AM

Nov. ISM 36.2% vs. 37% expected

Jane Fox : 12/1/2008 10:02:59 AM

AD line is a -2261.

Jane Fox : 12/1/2008 10:00:18 AM

We have a huge MACD divergence on the Crude Oil chart so I think we have seen a temporary bottom here. This may be a very good spot to try a long with the Crude ETF USO with a stop below yearly lows. Link

Jeff Bailey : 12/1/2008 9:54:43 AM

Weekly*, Monthly*, Quarterly Index Pivot Matrix at this Link

Jane Fox : 12/1/2008 9:52:48 AM

I still don't have an AD line or volume but it isn't much needed right now because we can guess they are both pretty bearish. VIX continues to make new daily highs.

Jane Fox : 12/1/2008 9:41:03 AM

The VIX closed Friday at 55.50 and opened this morning at 60.47 telling us the bears are back in town. I have no AD line yet this morning.

Keene Little : 12/1/2008 9:39:47 AM

SPX has dropped hard right through its broken downtrend line from September so that line becomes resistance rather than support again, currently near 874.

Jane Fox : 12/1/2008 9:39:19 AM

Gloomy outlook for the unemployed I'm afraid and scary for the employed. So far more than a million jobs have been lost this year and the November report is expected to show another 350K more added to unemployment lines. The first time filings for state unemployment insurance is up more than 50% year over year. Business are letting employees go at a much higher rate than they are hiring them and once the holiday season is over we will see another decline.

The employment report out on Friday is expected to show the job losses are broad based across all industries and expectations are the unemployment rate will climb to 6.8% from its current level of 6.5%.

Keene Little : 12/1/2008 9:27:09 AM

I had liked the setup for a short play on Friday and recommended a put play. It looks like that will work out nicely this morning as we face a big gap down. Not knowing what kind of bounce back up we could get I'd keep my stop at Friday's high for now. Certainly don't let the option play turn into a loss (with any premium decay). The little rising wedge pattern looks like it might have been the correct pattern in which case we'll see a rather negative day today.

Jane Fox : 12/1/2008 9:25:41 AM

All major American markets we watch here in the monitor broke their respective previous day lows overnight. These charts show that the Russell 2000 (TF) has not yet but it is on a 20 minute delay so I'm not sure about that one. Link

Jane Fox : 12/1/2008 9:17:00 AM

We also have FOMC member Fisher speaking at 1:15 today, FED chairman Bernanke at 1:45. And Treasury Secretary Paulson at 3:00. All times are EST.

Jane Fox : 12/1/2008 9:15:19 AM

Good morning all. Today we have the 10:00 ISM Manufacturing Price release and Construction Spending. If you are a daytrader I would be stepping aside for both of these reports today.

Keene Little : 11/30/2008 10:37:23 PM

Monday's pivot table: Link

The market has moved too much too fast and that usually makes it vulnerable to a correction at a minimum. We've seen countless strong bear market rallies and we don't even know for sure if last week's low-volume holiday-induced rally was real or just short covering. So we're in a tricky spot here. The November 21st low certainly has the potential to be a low for the year and until proven otherwise I think that's the assumption we have to make for now. But it doesn't mean we won't see continued volatility which could include a test of that low.

For now, last week's rally is showing signs of fatigue when looking at the oscillator divergence on the 30 and 60-min charts. It's possible Friday's high was the ending move with a little throw-over above the top of a rising wedge pattern, as shown with the bold red lines on this SPX 30-min chart: Link

If the rising wedge pattern is the correct interpretation then we'll see a relatively quick decline (possibly by the end of the day on Monday) that retraces it--back down to 835. That would be a very negative day (-60 points) and at this point I'm not sure what would cause that kind of selloff.

The other possibility is that it's not a rising wedge pattern but instead we're simply in the 2nd leg up of an a-b-c bounce off the November 21st low. I show a small parallel up-channel and the pink price depiction shows only a small pullback on Monday before proceeding higher to a Fib projection at 914 or previous price level resistance near 917. From there we would probably get a larger pullback at a minimum to correct the rally.

If 917 doesn't hold back the bulls we could see the rally continue up to the next Fib projection near 963 (for two equal legs up from November 21st), shown in pink on this 60-min chart: Link . Another possibility for a larger pullback, shown in dark red, is for the broken downtrend line from September to first be tested, currently near 875, and then rally up to the 914-917 area before pulling back to correct the rally.

The main point is that there are several levels of support and resistance close by and we'll have to watch how price behaves around each. Trading is going to be difficult until the market makes its intentions a little clearer here. Until we get some clarity I suggest flat is a good position or trade lightly and quickly (that's going to be the mantra for a while so get used to it). There are good times to be aggressive in the market and there are times to be conservative (as in conserve your cash). We are in a very conservative period now as the market is expected to be quite whippy.

OI Technical Staff : 11/30/2008 9:59:59 PM

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

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Market Monitor Archives