Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
Jeff Bailey : 12/11/2008 9:46:51 PM

Some supply/demand internal damage done today with the broader BPSPX. Yesterday's 58.03% measure built from 11/21/08 8.45% inflection low, but edged back to 56.63% today. Net loss of 7 SPX components to reversing lower PnF sell signals.

BPALL the broadest actually rose to 39.37%. BPNYSE rose to 48.97%. BPOTC rose to 30.21%. BPOEX the narrower portion of SPX rose to 59, adding 1. BPNDX unchanged for a 2nd-straight session to 62%. BPDJIA lost 1 with bullish % -3.33% (each stock's PnF chart worth 3.33%) to 60.00.

Jeff Bailey : 12/11/2008 9:31:35 PM

Asian Markets off slightly at this hour.

Nikkei-225 -1.27% at 8,610. HangSeng -1.98% at 15,304.

Jeff Bailey : 12/11/2008 9:29:29 PM

VIX.X up a tad today and I would have thought a much larger move. Probably tomorrow, but unable to reclaim WKLY S1 today?

Jeff Bailey : 12/11/2008 9:28:23 PM

Closing U.S. Market Watch at this Link

Jeff Bailey : 12/11/2008 4:32:59 PM

OK, some very interesting events today and NEGATIVE ACTION.

See what happens AGAIN?

Less than 24-hours ago, maybe feeling "confident" the bottom was in.

Then today, some rain and notable declines.

Now today, some LINES IN THE SAND are drawn at the KEY LEVELS OF RESISTANCE noted by BEARS.

Now its BULLS that start to look over their shoulder a bit and they might wonder "was that the bottom?"

Today's notable selling was just that.

Sell, ask questions later! I KNOW WHERE THE NEAR-TERM resistance is! I can ALWAYS GET BACK ON BOARD ABOVE the RESISTANCE, or BACK AT THE RIGHT SHOULDER with a LOW RISK trade profile.

Jeff Bailey : 12/11/2008 4:28:44 PM

For me, to really "believe" that a h/s pattern (bottom, or top) OBJECTIVE is achievable, you REALLY DON'T want to see the neckline (ascending are stronger, descending weaker) VIOLATED BACK BELOW (for bottom pattern) or ABOVE (for top pattern). You see, you want ALL THE BEARS to TURN INTO BUYERS on the re-test of TREND.

Jeff Bailey : 12/11/2008 4:26:14 PM

Now, for the CYC.X, we might ask ourselves "why" did it stop where it did today on the LEFT chart? Why not just let it go to WKLY Pivot, the NEXT level of downside risk.

I wouldn't be surprised if there was something from the QUARTERLY or MONTHLY pivot retracement.

However, the CYC.X reverse h/s pattern still "in play"

Jeff Bailey : 12/11/2008 4:23:30 PM

CYC.X 60-minute interval montage. WKLY Pivot levels on left, reverse h/s pattern on right. Link

Jeff Bailey : 12/11/2008 4:18:19 PM

Fascinating ... indeed ... check it out!

Jeff Bailey : 12/11/2008 4:16:34 PM

CYC.X 457.52 -4.82% ... closes smack on its descending neckline and my reverse h/s pattern 38.2% retracement.

Jeff Bailey : 12/11/2008 4:09:22 PM

US Dollar Index (DXY) 04:00 tick was 83.74.

Those new to the market monitor, the DXY is a WEIGHTED basket of currencies. EURO is heaviest, Yen in #2 and Pound is #3.

Jeff Bailey : 12/11/2008 3:56:50 PM

QQQQ $29.19 -2.40% ... backfilled Monday's gap higher.

Jeff Bailey : 12/11/2008 3:47:17 PM

Oil traders that may be new to the market monitor. There has been a tie with HIGHER EURO equating to HIGHER OIL price (oil is priced in U.S. $).

When dollar WEAK against the euro it is somewhat "inflationary" as the $ purchase power declines.

Jeff Bailey : 12/11/2008 3:44:30 PM

GG $27.09 -0.55% ... off intra-day high of $29.43. Boy did I sell that long from $21-ish too soon.

GLD $80.50 +0.94% ... $805.00 spot.

Jeff Bailey : 12/11/2008 3:43:03 PM

This might also bring some concern regarding all the "bail out" ...

FXE +2.37%

FXY +1.07%

FXB +1.22% ...

That "selling U.S. Dollar" across the board and moving to euro, yen, pound.

Keene Little : 12/11/2008 3:41:01 PM

The DOW is now also close to hitting its uptrend line from November 21st--at round number support at 8500.

Jeff Bailey : 12/11/2008 3:36:38 PM

The thought process behing my "benchmark termination" is the rolling process of long and short positions at each termination. Right now, oil is in downward trend, and each roll, short (have been on the RightSide of the trade) defend the level of a roll, or they're "so short" that level just sticks.

What a BULL and BEAR is looking for is oil to "hold a level of support," but then start seeing some CLOSES on daily time frames ABOVE the PRIOR termination benchmark.

When that happens, then the INSTITUTIONAL computer building of positions. Say... $42.04, then $45.17, then $46.67 and so on.

OIX 580.91 +0.38% ... maybe what happens today is BUYERS just step back in OIL PRODUCERS, as oil itself couldn't progress above the KEY benchmark.

Keene Little : 12/11/2008 3:34:15 PM

This is the bullish setup as SPX dropped down to the bottom of its bull flag pattern. The upside potential is to the 943 area. The stop for now should be not much below 870 as the next support level is closer to 862. SPX 15-min chart: Link

Jeff Bailey : 12/11/2008 3:32:21 PM

USO Daily interval chart with my "trader's trick" and benchmarking past futures termination date/price level. No debt/equity, no price/earnings, pure inventory and supply/demand. Link

Keene Little : 12/11/2008 3:27:11 PM

NDX has also closed its gap at 1179.98.

Jeff Bailey : 12/11/2008 3:23:53 PM

All be darned ... look where USO found its high of the day!

Jeff Bailey : 12/11/2008 3:22:45 PM

Closing the difference

Jeff Bailey : 12/11/2008 3:22:31 PM

BIX.X 129.24 -8.63%
SPX 874.47 -2.75% ...

Jeff Bailey : 12/11/2008 3:18:04 PM

$29.08 -2.77% ...

Jeff Bailey : 12/11/2008 3:17:45 PM

MSFT $19.40 -5.7% ... trades its WKLY Pivot.

Where's the Q?

Jeff Bailey : 12/11/2008 3:17:16 PM

SNDK $9.73 -1.41% ... I legged out of bullish position from initial 12/04 entry at $8.35, out $9.24 and out $10.25.

Checking in on it after it did ring the bell today at its 60-minute interval reverse h/s objective.

Holding up pretty good right now.

From here, I will look to play the LARGER 120-minute interval pattern, or the DAILY interval . See, it may be in the RIGHT arm pit.

Jeff Bailey : 12/11/2008 3:12:52 PM

Tyson (TSN) $7.01 -4.10% ... eat less beef, pork and chicken? Let'm sell it, be a buyer at $5.00.

Keene Little : 12/11/2008 3:10:21 PM

If SPX drops right through 870 without much of a bounce then the next support level is the uptrend line from November 21st near 860.

Jeff Bailey : 12/11/2008 3:09:31 PM

This is how "fundamentals" do matter and what traders will do.

They look at a bank and place a metric on it.

Then if it rises, or falls, they've got other metrics on stocks in other groups.

If the bank metric falls 25%, then the metric on the other stocks tend to fall with them.

Keene Little : 12/11/2008 3:08:13 PM

The short term pattern for the decline from today's high would look better with at least one small consolidation and then a new low (accompanied with bullish divergences) before thinking about the long side.

Jeff Bailey : 12/11/2008 3:07:34 PM

Darned banks just "suck the life" out of things sometimes.

Jeff Bailey : 12/11/2008 3:07:08 PM

Trouble now ... XNG.X -1.71%
OIH -1.34%
OIX.X +0.97%

Keene Little : 12/11/2008 3:07:07 PM

SPX just closed Monday's gap at 878.18 and is now nearing the bottom of its bull flag pattern, currently just below 874.

Jeff Bailey : 12/11/2008 3:04:39 PM

Let's "jump overseas" real quick to developing markets ... Remember EEV $57.47 +2.86% ...

I demonstrated to a high level the other day how AVERAGING down in a LOSING trade usually isn't so smart.

OK, I cut the ENTIRE position at 12/10/08 at $58.00.

Not back to there yet, so I say ... "not as bearish as I thought on average down" ... don't get overly bearish other places.

Jeff Bailey : 12/11/2008 2:57:34 PM

Morgan Stanley cut numbers on MSFT. Target adjusted to $24. Rated "equal weight". Earnings estimates cut (don't see to what though)

Jeff Bailey : 12/11/2008 2:54:52 PM

There's got to be some kind of news there too.

Jeff Bailey : 12/11/2008 2:54:37 PM

Goood grrrravy ... look at the VOLUME in MSFT today.

Jeff Bailey : 12/11/2008 2:51:58 PM

MSFT $19.59 -4.94% ...

Jeff Bailey : 12/11/2008 2:51:43 PM

QQQQ $29.47 -1.47% ... slips below its WKLY R1. If you wanted a 2nd chance to buy a pullback, the it looks like we're going to get it.

Jeff Bailey : 12/11/2008 2:50:22 PM

IF short some type of financial and it takes out the recent highs to the upside, then PERHAPS the reinstatement of PHF dividend is a tie.

Jeff Bailey : 12/11/2008 2:49:35 PM

All a trader/investor will do with the PHF news is realize there may be some type of "recovery" in underlying asset prices the last couple of weeks.

Keene Little : 12/11/2008 2:48:17 PM

SPX should hold 885 if we've got one more leg up in a sideways b-wave before the stronger leg down tomorrow (to the 870-875 area). If 885 breaks then I'll be looking for the lower area sooner rather than later.

Jeff Bailey : 12/11/2008 2:48:07 PM

Pacholder High Yield (PHF) alert! $3.17 +18.28% ... Dividend reinstated. Press Release Link

Jeff Bailey : 12/11/2008 2:45:59 PM

02:39 PM Market Watch Link

Keene Little : 12/11/2008 2:42:55 PM

Speaking of corrective moves on the Gann Square of Nine Chart, 540 degrees up from the 741 low in November is 914. The December 8th high was just above 918 and SPX struggled with this 914 level for four days before pulling back.

One cycle (360 degrees) up from 741 is 854 so that should be strong support if SPX were to drop that low and then 2 cycles up from 741 (720 degrees) is 975 which is the same level as the projection from November 21st when looking for two equal legs up. So we'll keep all these Gann levels in mind should price approach any of them.

Jeff Bailey : 12/11/2008 2:40:18 PM

Bank Weakness has us on the alert! Link

Keene Little : 12/11/2008 2:31:30 PM

Another reason the 940-950 area will be tough resistance is because 943 is an important level on the Gann Square of Nine chart. A corrective move on this chart is considered one that moves 540 degrees around the wheel (1-1/2 cycles) and when we use the October 2002 low of 768 and move 540 degrees up we get 943. Combine this with a potential turn window of December 12-15 and we have a nice setup for a rally leg and then failure. We'll try to catch both swing trades (3 if we can get out of the current short play around 870-875).

Keene Little : 12/11/2008 2:19:10 PM

If this afternoon's decline is followed by another bounce back up to another lower high I can see what's playing out--the move down from Monday to Tuesday was wave-a, followed by a sideways triangle b-wave and then we'll get a c-wave down tomorrow. If it drops from here into the close then the c-wave will finish earlier. In either case once we get the next leg down we'll have the setup to get long.

The SPX 60-min chart shows the bull flag pattern within a potential rising wedge pattern for price action since the November 21st low: Link . If this is the correct interpretation there is no inverse H&S pattern with a 1050 upside target. The upside target would be closer to 940-950 on Monday, right where the downtrend line from October 14th is also located (which is the top of the potential large sideways triangle pattern that will play out into February).

Jeff Bailey : 12/11/2008 2:07:56 PM

Right now its like a rubber band being stretched. BIX.X pulling lower, ENERGY pulling higher.

Jeff Bailey : 12/11/2008 2:07:24 PM

Now ... SPX.X 60-minute chart. Pivot levels in place. Assess impact of financials and energy Link

Analysis stated: BIX.X weakness has me VERY cautious bull BELOW WKLY R1. RISK right now to MONTHLY Pivot.

Jeff Bailey : 12/11/2008 1:57:03 PM

Now, an SPX/SPY traders also understand ENERGY component weighting should BIX.X continue to weaken.

Jeff Bailey : 12/11/2008 1:56:20 PM

BIX.X ... 60-minute interval chart with QCharts' WKLY Pivot levels turned on. I've added a WKLY Pivot retracement. I also note WHERE SPX rallied to in respect to BIX.X. Link

Keene Little : 12/11/2008 1:48:07 PM

SPX hasn't broken below this morning's low yet but it came very close and the whole pattern continues to have me thinking we're going to get another leg down to finish this week's consolidation pattern (just below its 50-dma). So while I prefer the short side here it's only for a trade before I start looking to get long for what could be a nice run into opex week.

Jeff Bailey : 12/11/2008 1:46:14 PM

OK, here we have a "closer" next bull risk level.

Jeff Bailey : 12/11/2008 1:44:10 PM

Since I'm in a hurry, I'm going to slap a WEEKLY Pivot retracement from the QCharts' pivot levels. I could also use the Pivot Matrix Table levels.

Jeff Bailey : 12/11/2008 1:42:30 PM

See what we're doing? We're "zooming in" on our Guinea Pig of the day.

Jeff Bailey : 12/11/2008 1:41:32 PM

Now, I can go to a 60-minute interval chart with my QCharts, turn on the WKLY Pivot levels.

Jeff Bailey : 12/11/2008 1:40:37 PM

NDX/QQQQ traders ... you're paying attention too. While NDX/QQQQ does NOT have a bank in the bunch, we understand the implications if other majors start to decline.

NDX/QQQQ RESISTANCE still its QRTRLY S2.

Jeff Bailey : 12/11/2008 1:39:04 PM

BIX.X with major index benchmarks. I've now added the MONTHLY Pivot retracement.

IF trend doesn't hold, THEN next bull RISK to overlap at $123.50-ish. Link

Jeff Bailey : 12/11/2008 1:24:56 PM

OK , now you see the "overlap" support (near-term bull risk), but also the MONTHLY Pivot (near-term bull reward).

Jeff Bailey : 12/11/2008 1:19:23 PM

SPX/SPY traders are following this. As BANKS are a heavy weighted group.

Jeff Bailey : 12/11/2008 1:18:45 PM

Let's add a MONTHLY, see if there's more there.

Jeff Bailey : 12/11/2008 1:18:29 PM

BIX.X ... Daily interval with a QUARTERLY Pivot Retracement only. I now see something I didn't know what there Link

IF the MARKET IS ALL KNOWING, then maybe it KNEW of the WFC and that's why it (the market, institutional computers) provided SELLING RESISTANCE at QRTRLY 38.2%.

It is this type of observation years ago that had me starting to use RETRACEMENT from S2 to R2.

Why did it stop there?

On the QUARTERLY only, BULL RISK if TREND broken is to QRTRLY S1.

Jeff Bailey : 12/11/2008 1:12:33 PM

What I do is think ... WHAT's the next RISK level. What's the REWARD level.

Start with a Quarterly, then we'll work down to MONTHLY.

Keene Little : 12/11/2008 1:12:05 PM

Looking at the bounce off this morning's low there is a bullish way to view it (as a 1-2, 1-2 wave count to the upside) and it calls for a very strong rally this afternoon. Therefore if the buying kicks into gear, confirmed with a move above SPX 908, I'd be looking to get long. But if it drops back below 894, below the low near 11:30 AM, it would leave the bounce as just another correction.

Jeff Bailey : 12/11/2008 1:11:44 PM

OK ... let's try and "build" on last night's, this morning's PIVOT levels stuff.

Let's start with the BIX.X as it is in the "spotlight" today.

Let's take a MONTHLY Pivot Retracement on the BIX.X.

Jeff Bailey : 12/11/2008 1:04:34 PM

Index Pivot Matrix from earlier this week Link

Jeff Bailey : 12/11/2008 1:01:54 PM

Correction to earlier post alert! ... since deleted. BIX.X 132.90 -6.05% ... this would be NOVEMBER's MONTHLY S1, NOT DECEMBER'S.

Jeff Bailey : 12/11/2008 12:59:38 PM

BIX.X -6.49%
BKX.X -4.27%
XBD.X +0.14%
IUX.X +1.35%

Keene Little : 12/11/2008 12:58:30 PM

Price action this week this week has been uncharacteristicly slow. The price range is narrowing and that warns us we've got a big move coming (20-30 SPX points). If we do get another leg down within this week's consolidation pattern it could quickly be followed by a even bigger rally leg.

Jeff Bailey : 12/11/2008 12:58:11 PM

Hmmm ... UYG $5.91 -4.83% ... 200x financial bull. Not down as much as I would have thought.

Jeff Bailey : 12/11/2008 12:57:07 PM

This is probably viewed as a CRITICAL support area.

Jeff Bailey : 12/11/2008 1:00:47 PM

S&P Banks Index (BIX.X) 132.30 -6.46% ... testing extension of a downward trend from 09/19/09 high to 11/04/08 high (extension of that trend). Also testing short-term upward trend from 11/21/08 to 12/02/08.

Jeff Bailey : 12/11/2008 12:53:31 PM

WFC's Form 8-K filing Link

Jeff Bailey : 12/11/2008 12:50:16 PM

I've had internet connection issues today. While I can't be certain, I do think the FDCI loan for WFC has created some caution among bank bulls as to why they are taking the $6 billion loan.

$3 billion carries a fixed rate of 3.0%, while the other $3 billion carries a variable rate. The bonds WFC sold mature in 2011.

Jeff Bailey : 12/11/2008 12:46:32 PM

Patterson UTI Energy (PTEN) $11.59 +2.11% ... I think this is still the only "energy" name in the QQQQ $30.10 +0.66% and there isn't a bank in the bunch.

Jeff Bailey : 12/11/2008 12:45:29 PM

Anyhow, the strength in OIX +4.06%, OIH +2.71% and XNG.X +2.71% is offsetting BIX.X -6.70% and BKX.X -4.55% , with the S&P 500 (SPX.X) 898.96 -0.03% ... relatively unchanged.

Jeff Bailey : 12/11/2008 12:43:46 PM

US Oil Fund (USO) $38.87 +8.54% ... also strong and nearing its 11/20/08 December futures benchmark close of $39.55. If "history repeats" $39.55 would be viewed as resistance.

The 10/21/08 close was benchmark of the November futures termination at USO $58.77.

Jeff Bailey : 12/11/2008 12:41:12 PM

US Gasoline Fund (UGA) $21.69 +11.23% ...

Jeff Bailey : 12/11/2008 12:40:27 PM

Wells Fargo (WFC) $26.79 -8.22% ... notably weak today after the banker said it was selling $6 billion in debt under the government's FDIC backing.

Keene Little : 12/11/2008 12:29:35 PM

SPX had broken above its downtrend line from Monday but it's not doing a whole lot. The important level for a short play remains yesterday's high at 908.27 but even if that breaks I still don't like the long side. The whole price pattern looks corrective to the upside as well and that warns me of a potential move back down. Caution either way at the moment (SPX just broke back down below the trend line, currenly near 901, as I'm typing).

Jane Fox : 12/11/2008 12:26:13 PM

WASHINGTON (MarketWatch) - Stung by the loss of $2.81 trillion in their net wealth, U.S. households paid down their debts in the third quarter for the first time since at least 1952, the Federal Reserve reported Thursday. As of Sept. 30, households' total outstanding debt shrank at an annual rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report. It's the first decline in household debt ever recorded in the report. Households paid off more mortgage debt than they took on for the first time on record. Mortgage debt fell at a 2.4% annual rate to $10.54 trillion. Other consumer debts, such as credit cards and auto loans, increased at a 1.2% annual rate in the quarter to $2.6 trillion. Total U.S. domestic nonfinancial debt increased at a 7.2% annual rate, boosted by a postwar record 39.2% increase in debt taken on by the federal government.

Jeff Bailey : 12/11/2008 12:25:36 PM

test

Keene Little : 12/11/2008 12:20:25 PM

Just a few days ago I was remarking how reliable Comcast service has been. Bad mistake. I've lost the connection again--3 times this week and I don't when it will be back up. In the meantime I'm working to get charts back and onto my other computer with my backup internet (aircard).

Jane Fox : 12/11/2008 11:14:34 AM

Here is your Gold chart and as you can see it is up sharply today. Link

Jane Fox : 12/11/2008 11:13:26 AM

The US dollar index, DXY, has confirmed the head and shoulders giving us the go ahead to buy Gold. Link

Keene Little : 12/11/2008 10:50:09 AM

The bounce in SPX has so far failed to get above its downtrend line from Monday (top of a potential bull flag pattern). A drop back down to the bottom of the flag by this afternoon would be at 870-875.

I don't like the ending pattern to the downside yet so if it were to break out to the upside from here I'd have a tough time trusting the move (could turn into a larger choppy sideways consolidation pattern instead of a bull flag). But it would tell me to abandon the short side and wait for clarity. Flat would be my recommendation if that happens. Until then I remain short and waiting for another leg down to finish the consolidation pattern.

Jeff Bailey : 12/11/2008 10:41:44 AM

EIA: Weekly Nat. Gas Storage Table at this Link ... Draw of 67 Bcf.

Keene Little : 12/11/2008 10:07:20 AM

The market is rather directionless this morning and the only thing we can do is wait to see whether we'll break to the upside or downsided. I'm leaning to the downside this morning but will abandon the short side if SPX breaks its downtrend line from Monday, currently near 904.

Jane Fox : 12/11/2008 9:44:39 AM

AD line is a bearish -1073

Keene Little : 12/11/2008 9:42:22 AM

ES tagged 884.50 again right after the open and bounced again. Too many touches of that level--it will probably break. Techs (NQ) already broke the pre-market low.

Keene Little : 12/11/2008 9:25:14 AM

It was a bit whippy for equities in the overnight session after the European markets opened and futures have bounced off their overnight low made about 30 minutes ago. ES tagged the same level (884.50) as Tuesday's and Wednesday's lows. That's clearly a support level so if it breaks we can expect a quick flush. I'm still hoping we'll see SPX 875 in order to see if a long play sets up there. Bonds are rallying again but are up against some strong resistance and still threatening to roll over.

Jane Fox : 12/11/2008 9:21:37 AM

In a temporary lull from the nation's deepening recession, the number of homes entering into the foreclosure process was down 7 percent in November, the lowest level since June due to new state laws lengthened the foreclosure process.

However, the number of single residences threatened with foreclosure is still 28 % higher year over year and the months ahead were expected to be grim.

As job losses mount, increases in foreclosures will follow closely.

Jane Fox : 12/11/2008 9:09:28 AM

Here are your overnight charts. The DOW futures (YM) is the only market that broke its previous day lows - so far. What I find interesting is the support we are seeing from Tuesday's lows, yesterday's lows and overnight lows. S&P futures (ES) have not broken that support nor has the NDX futures (NQ). Link

Jane Fox : 12/11/2008 9:01:32 AM

WASHINGTON (MarketWatch) - The global economic slump is driving down the prices of traded goods and services at a record pace, the Labor Department reported Thursday.

Prices of goods and services imported into the United States plummeted a record 6.7% in November as imported crude oil prices fell a record 25.8%. It's not just petroleum prices that are falling: Prices of nonfuel imports fell a record 1.8%.

The prices that U.S. producers received for their exports also fell, dropping a record 3.2% in November. The monthly records on import and export prices go back 20 years.

In the past 12 months, import prices are down 4.4%, including a 29% drop in petroleum prices. It's the largest year-over-year decline in import prices since 2002.

Jane Fox : 12/11/2008 8:56:16 AM

WASHINGTON (MarketWatch) - The U.S. labor market weakened further last week, with the number of first-time filings for state unemployment benefits jumping by 58,000 to a 26-year high of 573,000, the Labor Department reported Thursday.

The number of people collecting unemployment benefits rose by 338,000 to 4.43 million, also the highest since late 1982. The 338,000 increase in the week ending Nov. 29 was the most since 1974.

The jobless claims report shows businesses are laying off workers at a rapid pace, and finding a replacement job is ever harder for those who've lost their job.

Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs.

Jeff Bailey : 12/11/2008 2:42:37 AM

nq09h with an observation that quarterly "roll" has started. Not to unlike a MONTHLY Pivot-type of retracement, BLUE would mark November's High/Low settles. Link

Even here you can see the IMPORTANCE of the NDX's QUARTERLY S2.

What I like about the pivot levels is there isn't any "where do I anchor" retracement at.

Pivot Levels are derived by high/low/close.

Still, it does NOT hurt to use conventional retracement. Try to find THE important levels of S and R that market participants appear to be trading off of.

Jeff Bailey : 12/11/2008 2:16:37 AM

es09h off 3.75, or -0.44% at 891.50.

Jeff Bailey : 12/11/2008 2:14:57 AM

ym09h up 6, or +0.06% at 8,698

Jeff Bailey : 12/11/2008 2:14:06 AM

nq09h off 3.25, or -0.26% at 1,215.76

Jeff Bailey : 12/11/2008 1:25:28 AM

MSFT's December "Max Pain" theory tabulation is currently $21.00.

I like to look for Levels? Option market makers need to manage their inventory too!

Jeff Bailey : 12/11/2008 1:18:40 AM

I come up with ... QS2=$21.41, $24.05, Piv= $26.27, $28.90, $31.13.

Well, we perhaps know something we didn't know yesterday. And perhaps what the BIGGEST can of baked beans might need to do going forward.

Jeff Bailey : 12/11/2008 1:13:49 AM

MSFT's July-September High/Low/Close was ... $28.50/$23.64/$26.68.

Where's that QUARTERLY S2 at?

Jeff Bailey : 12/11/2008 1:09:51 AM

MSFT VERY SIMILAR to NDX/QQQQ right now. At least the WEEKLY and MONTHLY.

Jeff Bailey : 12/11/2008 1:08:09 AM

MSFT MONTHLY Pivots using link at 12:43:00 should look like this Link

I and many other pivot traders like to anchor 100% retracement @ R2 and 0.00% retracement at S2.

Jeff Bailey : 12/11/2008 12:44:34 AM

Of the 100 cans of baked beans that make up the market cap weighted NDX.X, this is the BIGGEST can of baked bean. I've marked the MONTH of NOVEMBER's High/Low/Close Link

Here's a Link for a pivot calculator. Most use S2, S1, Pivot, R1, R2, but and S3 and R3 become "extremes" and can be handy.

Plug in MSFT's MONTHLY H/L/C and see what you come up with!

Jeff Bailey : 12/11/2008 12:27:50 AM

NDX.X now a 60-minute with WKLY Pivot levels (s2, s1, P, r1, r2) only. As if you were managing the inventory of baked beans ONLY on a WEEKLY basis. (day by day, week by week, MONTH by MONTH, QUARTER by QUARTER) Link

Now, see where on the WEEKLY the NDX does something it hasn't been able to do for quite some time?

POWERFUL Quarterly S2 (support 2 broken, should be RESISTANCE).

NDX currently ABOVE its MONTHLY Pivot (is inventory of baked beans running low for the MONTH?) PRICE too cheap for too long?.

Now a WEEKLY R2 trade. Are baked beans running low for the WEEK?

If so, then buyers may have to ORDER MORE for the rest of the MONTHLY R1, or QUARTERLY S1.

Jeff Bailey : 12/10/2008 11:40:28 PM

Email Question: ... I am a new subscriber to Market monitor and would like to know more about pivot points r1 r2 s1 s2 etc. what is meant by these terms and why are they important. also is there a resource where I can learn more about trading chart patterns?

Jeff's rather long reply ... Pivot levels are derived by a mathematical equation that utilizes a prior DAY'S (regular session high/low/close).

I believe, based on past observation and the understanding of how INSTITUTIONS manage their inventory, that they are VERY important.

S2 would be considered "support 2", S1 "support 1", the PIVOT is simply a midpoint of prior DAY's range, R1 "resistance 1" and R2 "resistance 2".

The DAILY pivot levels would be used for DAY TRADING ONLY.

The WEEKLY pivot levels are derived with the same mathematical formula, but here we use the PRIOR WEEK's regular session High/Low/Close. Close is usually a Friday unless Friday is a holiday.

Each weekend we can tabulate the NEXT WEEK's S2, S1, Pivot, R1 and R2.

Weekly pivot levels would most likely be utilized by "swing traders" that tend to hold a security/position longer than a day or two.

The MONTHLY pivot levels are derived with the same mathematical formula, but here we use the PRIOR MONTH'S regular session High/Low/Close. Close is the last trading day of the MONTH.

The QUARTERLY pivot levels are derived with the same mathematical formula, but here we use the PRIOR QUARTER's (Jan-Mar, Apr-June, July-Sep, Oct-Dec) regular session High/Low/Close.

One BASIC thought process is the IMPACT of TIME as it relates to POWER, or SIGNIFICANCE of the pivot levels.

Since a prior DAY is just "one day" out of roughly 260 trading days in a year (52 weeks x 5 days) then the DAILY Pivot LEVELS (s2-r2) would be considered "less powerful" than a WEEKLY. Still, the DAILY pivot levels put things in "context" to how a security traded the PRIOR day.

In the most BASIC form, a "pivot" is seen as somewhat "neutral", while a trade at either a S1, or R1 would be more "within the prior day/week/month/quarter range."

You will note that the mathematical formula has the S1 and R1 are often-times very CLOSE to matching the prior session (day, week, month, quarter) low and high.

IF a trader were to see an S1 actually tabulated ABOVE the prior day/week/month/quarter's actual PRICE low, this would only come from a STRONG CLOSE. It would then make sense that the R1 (on a strong close) be tabulated above the prior day/week/month/quarter's actual PRICE high.

The opposite would also be true. An S1 tabulated BELOW the prior day/week/month/quarter's actual PRICE low would only come from a WEAK CLOSE. It would then make sense that the R1 (on a weak close) be tabulated BELOW the prior day/week/month/quarter's actual PRICE high.

A WEEKLY set of pivot level (s2-R2) would likely have GREATER POWER, or significance than a DAILY as there are 5-days in a WEEK, yet 4-weeks in a MONTH, 52-weeks in a year.

You begin to see the CULMINATION of DAYS in a WEEK starting to build some PRICE action significance.

From the WEEKLY pivot levels, a trader can often-times pick up on patterns of repeatability. (i.e.. this security tends to trade S1-R1, then S1-Pivot, then Pivot-R1) Almost like a 3-step waltz. A "pattern of repeatability."

What becomes INFORMATIVE to a trader is when a security DOES SOMETHING IT USUALLY DOESN'T do! (i.e.. the security traded an R2, or an S2. It doesn't do that very often and now seems STRONGER, or WEAKER than usual).

What I've learned over the years is the IMPORTANCE of TIME/POWER.

Weekly PIVOT levels aren't always "enough."

Let's say a security FALLS in PRICE to a WKLY S2, but as it does, we KNOW that the security's MONTHLY R1 is at that same PRICE LEVEL.

MONTHLY R1, if already having been VIOLATED to the UPSIDE, should mean that any SUPPLY OF STOCK at that level was "exhuasted" by buyers, and there should be some type of SUPPORT where "R"esistance was broken.

Here we might look for the MORE POWERFUL in time (MONTHLY R1) to hold BUYERS of the security, while a WKLY S2 equates to "oversold" within a shorter period of time and "just a week."

Now, "why pivot levels" in the first place?

Let's simplify things a bit.

There are 500 stocks that make up the S&P 500 Index (SPX.X).

How could ANY ONE human manage an INVENTORY of 500 stocks and mantain "break even" or PROFITABILITY in their account?

This is where we see the PIVOT LEVELS as being INSTITUTIONAL in nature.

ONLY A COMPUTER could do such a task. By utilizing the mathematical formula for PIVOT levels.

INSTITUTIONS (Goldman Sachs, JP Morgan, UBS, etc) hold LONG and SHORT positions of stocks in their accounts, but they'll MANAGE THE INVENTORY of all these securities with a COMPUTER.

It becomes VERY similar to how a grocery store knows when it HAS TOO MANY cans of baked beans, or NEEDS TO ORDER MORE baked beans.

The only problem with the grocery store/baked beans analogy as it relates to STOCK inventory is that consumer aren't trying to sell their cans of baked beans back to the grocer. But lets pretend that was common.

Still, if a grocer has decided to buy 10,000 cans of baked beans to sell in a month, and the first week they only sell 200 cans, the grocer probably isn't going to order more baked beans next month. If anything, to get rid of the 9,800 remaining cans the grocer will likely LOWER PRICE as DEMAND is weak at that PRICE level.

However, if the grocer has 10,000 cans of baked beans at the beginning of a month, and he/she sells 6,000 cans the first WEEK, then the grocer will likely BUY MORE baked beans for next month, or RAISE PRICES on what they have left in stock, until the new shipment arrives.

Now, its getting rather late. I'll post your question in tomorrow's Market Monitor, with my above reply. Then we'll look at the NDX (see this evening's Market Wrap)

I'll start with ONLY the QUARTERLY and MONTHLY (dating back to October). Then I'll turn on QCharts' WKLY Pivot Levels.

Note that the NDX's WKLY R2 is almost an EXACT overlap with the NDX's QRTRLY S2.

NDX 60-minute interval chart (rather big, but I want to show Oct-current). Track INVENTORY based on the QUARTERLY and MONTHLY LEVELS. I'll turn on QCharts' WKLY Pivot Levels later, but I want to give traders the IMPACT of adding "smaller time frames." Just pretend the NDX/QQQQ is a box of 100 cans of baked beans.

Chart Link

Keene Little : 12/10/2008 10:07:09 PM

Thursday's pivot table: Link

The daily candles for the last two days look downright puny. As we head into opex week I'm wondering when we're going to see some "normal" volatility. The price consolidation over the past 3 days looks bullish and unless we see a sudden breakdown (below SPX 850 for starters) I'm looking to buy the pullback from Monday's high. The pattern would look best with one more drop tomorrow morning and I've got Fib projections now pointing at 875-879 for potential support. In between is Monday's gap close at 878.18. 15-min chart: Link

The little parallel down-channel on the 15-min chart is shown as a small channel on the 60-min chart: Link . It remains possible we'll see price chop sideways/down to the uptrend line from November 21st but I'm thinking it will bounce after just one more new low (assuming we get one Thursday morning). The upside price target remains 973-975 for now.

OI Technical Staff : 12/10/2008 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