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Keene Little : 3/6/2009 4:10:24 PM

The SPX 60-min chart with today's close shows us a break of the downtrend line from yesterday and that's a good setup for a continuation higher on Monday. But as shown in pink, there remains the possiblity for a quick jab lower Monday morning and then a reversal. That would finish a 5-wave count down from yesterday for the ending diagonal (descending wedge). But at this point I agree with Jim--way too risky to be short here--take your money and run and have a relaxing weekend. SPX 60-min chart: Link

Jim Brown : 3/6/2009 4:05:30 PM

That was a +165 point Dow bounce on the end of day short covering and it barely got back to positive territory.

Jim Brown : 3/6/2009 3:50:34 PM

If I was holding shorts this week I would be looking to get out before the weekend. You never can tell when the Treasury or the administration could announce some new plan that causes a +400 point spike at Monday's open. Profits are not profits until you close the position.

Keene Little : 3/6/2009 3:48:33 PM

Finally. This little short-covering spurt could develop some legs into the close. But SPX is now tagging its downtrend line from yesterday, at 678, so it needs to break and then hold as support.

Jim Brown : 3/6/2009 3:38:23 PM

Got a small buy program giving us a minor uptick back over 6500. This is probably a short covering program rather than somebody taking a new position.

Keene Little : 3/6/2009 3:34:24 PM

The downtrend lines since February 9th have been getting steeper and the descending wedge idea on the SPX 10-min chart is shown in perspective on the 60-min chart: Link . We have bullish divergences on all time frames but so far there's just no interest in buying so the sellers, even thought weakening, continue to hold the hill. The steepening trend lines shows us the decline has gone parabolic and we know how they end. When the downtrend line from yesterday, currently near 678, is broken we could see a fast recovery bounce. It might have to wait for Monday.

Jim Brown : 3/6/2009 3:31:21 PM

If we are going to have an end of day short covering rally they had better hurry.

Keene Little : 3/6/2009 3:20:25 PM

They're going to give it another try here--see if some buying can get the short covering to get some follow through.

Keene Little : 3/6/2009 2:56:25 PM

Using the highs since mid day we've now got a small descending wedge within a larger descending wedge from yesterday, as shown on the updated SPX 10-min chart: Link . Bullish divergences continue to hold but it hasn't meant much yet. I've also identified the 661 Gann number and wondering if that's where the market is headed today (and if so, will it hold?).

Jane Fox : 3/6/2009 2:32:04 PM

All markets are now under their respective ON lows. Link

Jane Fox : 3/6/2009 2:18:09 PM

The VIX is your friend today so as long as these two are in sync then you know the trend will continue. Of course you have to look at the AD line to see if it agrees. Link

Keene Little : 3/6/2009 2:08:34 PM

SPX did a tiny little throw-under below the bottom of the descending wedge pattern shown on the 10-min chart (1:14 PM) and has now broken above the steeper downtrend line from this morning's high. The next downtrend line, the more important one in my opinion, is the one from yesterday morning's high which is currently near 684. Between here and there we could see more of the same choppy price action and head lower again.

Keene Little : 3/6/2009 2:02:25 PM

Gold bounced off support at its broken downtrend line from March 2008 on, which was slightly above its 50-dma, and it's well within its up-channel from last October. This looks bullish for gold. I continue to believe it will head lower after the current bounce but obviously price is king and it takes a break below 890 to confirm a high is in (currently trading up near 945). GC, continous contract, daily chart: Link

Gold is of course a safe haven for many and during times when so many are declaring there's no bottom in sight for the stock market it's not surprising to see gold getting a bounce. There is also continuing fear that the Fed will cause a wicked inflationary problem soon. I had mentioned last week that I'm watching TIP, the Treasury Inflation-Protected Securities ETF, for signs from that part of the bond market as to what they think about inflation.

A rising TIP means investors are confident that inflation will rise and therefore owning TIPS vs. regular bonds is the smarter move. So a rising TIPS would confirm the inflation fears that gold bugs use to support their claim that buying gold is a good inflation hedge. After failing to follow through to the upside out of its sideways triangle pattern TIP fell back through it. It has since bounced back up to the the broken downtrend line from December and if it's to be a kiss goodbye it could also be a signal that inflation is not the problem (deflation is) and that would take away one of the arguments gold bulls have for buying the metal. TIP daily chart: Link

For now I'm comfortable sticking with my recommendation to short gold, silver and gold/silver stocks.

Jim Brown : 3/6/2009 2:02:14 PM

TrimTabs reported today that mutual fund outflows for the week ended on Wednesday saw withdrawals of $29.9 billion. They revised the outflows from the prior week to $18 billion. Link

Linda Piazza : 3/6/2009 2:01:37 PM

I step back into my old spot on the Market Monitor every once in a while to comment on the TED spread, doing so since early February when I began warning that it was testing a significant support level from which it had sometimes bounced, with the consequences for equities being dire when it did so. After a retest of the support zone, which I warned was typical for the TED spread, on 2/10, the spread has been bouncing and the consequence to equities (or concurrent event, as we can't assume a cause-effect relationship) has been dire. There are two significant longer-term trendlines to watch now to determine whether this bounce might be just a kiss-goodbye bounce to retest previous supporting trendlines that had been broken. Today, the TED spread appears to be testing one, with that trendline off 2/23/2007, 7/24/2007, 5/27/2008 and 8/14/2008 lows. Since Bloomberg's charting service doesn't allow one to draw trendlines, it's guesswork determining exactly where that rising trendline is, but it appears to be rather near today's intraday 110.99 high. The TED spread is currently 109.98, at least by the TED spread's delayed quotes. Another, intermediate-term former supporting trendline lies at about 1.45.

Here's the danger for bears, and one I began mentioning in early February when I first warned of a bounce. If this entire TED spread rise has been just a rise to retest former support and if that support is now resistance, this current kiss-goodbye test could result in a turn lower. Equities tend to move in opposition to the TED spread, but I wouldn't use it as a market-timing tool. I would, however, if in a lot of bearish equity positions, be aware of this in the background and examine at what point one wanted to begin locking in at least some partial profits. Use price action as your arbiter, but do be aware of this possibility. There's an opportunity risk, of course, when closing out profitable positions, with the risk being that you won't participate in further gains if markets crater further than they have already.

For bulls, the danger is that the former support will not be resistance and the TED spread will expand violently, as it has at other times over the last two years.

Jim Brown : 3/6/2009 1:54:02 PM

The markets have now given back the brief gains achieved after the Non-Farm Payrolls report came in better than expected. The Dow has declined to the low of the day with a loss of -78 points to 6512 and the Nasdaq has traded briefly below 1275.

The economy lost 651,000 jobs in February making it the fourth month of 600,000 job losses or more. The losses for January increased to 655,000 from 598,000 and December's number was revised up to 681,000 from 577,000. Over the last three months the economy has lost 1.987 million jobs and 3.6 million jobs since December 2007.

Those job losses are only in the salaried job market. The household employment losses are even worse. Household employment fell by 1.239 million jobs in February. That number is somewhat overstated because of a change in the way it was counted. This accounted for 400,000 of those 1,230,000 lost jobs but that is small comfort to those who are now unemployed. The number of unemployed household workers increased by over 4 million over the last 12 months.

The unemployment rate increased by 0.5% to 8.1% but that is just one more step on the way to 9% to as much as 10% according to some analysts. This is the highest level since 1992 and the magnitude of the current employment crisis is the worst since the late 1940s when the war machine shutdown and America had to retool and millions of workers were released from prvate service making war machines.

Payroll Chart Link

The consensus job loss number was 648,000 but there were many estimates in the 700-720K range with whisper numbers as high as a million jobs lost. The massive weekly unemployment claims at 630-650,000 a week suggested the overall job losses could have been a lot higher. The smaller than expected payroll number prompted a spike in the Dow to 6755 and a +158 point gain. That gain has been completely erased and the Dow is on the verge of breaking below 6500 as I write this commentary. The outlook for the close does not look good.

There is no support below our current level and without a sudden news event to produce a short squeeze the odds are good we could see a continued decline into the close. On Friday's we either sell off into the close as all longs run for cover to avoid some weekend news event or in cases where we are so severely oversold there is a rush to cover shorts going into the close. Shorts rush to take profits and avoid any weekend news events. That suggests the rest of the day will be strongly directional but we don't yet know the final direction.

Jane Fox : 3/6/2009 1:21:19 PM

Remember the bullish internals I posted earlier today. This is now showing a total change of heart. Link

Jane Fox : 3/6/2009 1:19:48 PM

Reading where the newsletter that has the best tract record as of February 1st is the Charles Allmon, Growth Stock Outlook., a newsletter that has been in cash since 1986, over 20 years. Ironically Allmon stopped selling subscriptions to his newsletter last September. I wonder who would pay for a newsletter that told you to be in cash. That is a very long term money manager.

Keene Little : 3/6/2009 1:15:22 PM

The SPX 10-min chart shows why I'm not interested in the downside for even a day trade. While we could certainly see the bottom fall out at any time that would be purely a guess at the moment. In the meantime it looks more likely that we're going to see prices resolve to the upside as price hammers out a potential bullish descending wedge with bullish divergence. SPX 10-min chart: Link

Keene Little : 3/6/2009 1:02:13 PM

The bear flag pattern was in fact a bear flag and the market is dropping lower again. It's the slow bleed kind of decline now where the buyers have simply disappeared and there continues to be more sellers but they're not aggressively selling.

Jane Fox : 3/6/2009 12:53:44 PM

Here is the May Crude contract and it has the same pattern as the front month, April and the same resistance just a tad higher. Link

Jane Fox : 3/6/2009 12:44:19 PM

MACD is just moving with price which tells me it agrees with the direction. I like to see some kind of divergence before I would say a bottom is in for the day. Link

Jane Fox : 3/6/2009 12:41:39 PM

AD line is now a bearish -1021. I didn't think the bulls would be able to sustain the rally. Too bad because too much bearish or too much bullishness is never good for anyone.

Keene Little : 3/6/2009 12:15:18 PM

So far it's looking like a little bear flag pattern off this morning's lows. That would of course suggest new lows are coming. SPX 661 just might be the next downside target if it breaks down again.

Keene Little : 3/6/2009 12:02:00 PM

As the market continues to make new lows day after day the VIX continues to stay at relatively low levels as compared to last fall. One explanation for the lower VIX level has to do with lower option volume as big money has largely exited positions and finds less of a need to buy put protection (and simply trading less while the market searches for its bottom). This may simply mean the VIX is not going to be that helpful in identifying a potential market low (unless we get a capitulation selloff in which case I suspect the VIX will suddenly jerk higher).

In early February, as the VIX was dropping towards support near 37, I had pointed out a bullish descending wedge which called for a rally out of it (which suggested a selloff in the stock market). We got the stock market selloff from the February 9th high but VIX has only bounced a little. And now it looks like it's forming a bear flag which suggests a drop in VIX is coming. VIX daily chart: Link

A drop in the VIX would of course mean a stock market rally. Bottom line is I don't think we can take the VIX level at face value but the patterns may still be telling us something so it bears watching. Keep an eye on the uptrend line for RSI--if it breaks down then we'll have our confirmation that the little bear-flag bounce has finished (which would be good confirmation that a stock market rally is underway).

Keene Little : 3/6/2009 10:57:36 AM

SPX is testing yesterday's low and bullish divergences are still present. It doesn't mean we can't go lower but it does mean selling momentum continues to wane, for now.

Jane Fox : 3/6/2009 10:23:34 AM

Keene mentioned earlier NDX is the weaker market today. Here are the ON charts showing the NDX futures (NQ) the only market that is trading below ON lows. Link

Jane Fox : 3/6/2009 10:22:07 AM

AD line has now fallen to below 0 and the bulls are running out of steam.

Keene Little : 3/6/2009 10:00:54 AM

NDX has been relatively weaker this morning and it's looking like the tech bulls are the first to fumble the ball. Its pattern (choppy sideways consolidation since mid day yesterday) looks like a bearish continuation pattern. SPX tagged its 677 downside target yesterday and got a nice spring off it into this morning's pop higher. That's the key level for now--break it and 661 would become the next downside target.

Jane Fox : 3/6/2009 9:53:57 AM

DOW is up +130 point and the S&P up +13.75

Jane Fox : 3/6/2009 9:49:52 AM

Go bulls go. Link

Keene Little : 3/6/2009 9:48:30 AM

A little pullback into the cash open and now rallying. That's a good sign. It was a good setup for a rally today so let's see if the bulls can keep from fumbling the ball.

Jane Fox : 3/6/2009 9:46:32 AM

OK now the bulls are making a stand. But will they be able to maintain it.

Jane Fox : 3/6/2009 9:42:12 AM

WE have a bullish AD line and the VIX is making new daily lows so we should be seeing new daily highs in the market soon.

Jane Fox : 3/6/2009 9:37:53 AM

The TRIN has been too unreliable when bullish.

Jane Fox : 3/6/2009 9:37:25 AM

TRIN is a very bullish 0.54 but from prior days when this internal has been very bullish and the markets were tanking, we know not to rely on it too much. I am starting to only watch the TRIN when it is bearish. If it is bearish then that is another indicator for me sync up but when it is bullish I will ignore it.

Jane Fox : 3/6/2009 9:34:15 AM

AD line is bullish but not overly so at +795.

Jane Fox : 3/6/2009 9:33:45 AM

Goldbugs have made a stand at the 50% fib retracement level. Of course we are all watching to see if this rally will end before it retests resistance at $1000 and, if so, does the subsequent lower swing high make the right shoulder of a head and shoulders top? Or does the swing high retrace make a high swing low and springboard up to break $1000 resistance.

I will be following this story and report as it unfolds. Link

Jane Fox : 3/6/2009 9:27:28 AM

Crude is making it very very clear where the sellers can overtake the buyers but each test of this resistance will make the sellers weaker and weaker and eventually the bulls will break through and have clear sailing all the way up to the next resistance at approximately $51/bl.

Not very much room for sailing but heh the Crude bulls will take whatever they can get. Link

Jane Fox : 3/6/2009 9:23:34 AM

The bears have been on a feast these last few weeks so the dismal numbers from the Bureau of Labor Statistics should have cratered the markets. Right? We they didn?t. Even though we were faced with more of the "world is going to hell in a handbasket" type of news the bulls said "Enough" and rallied. Now that leaves the question will they be able to sustain the rally into the intraday session? I truly don't think this little show of strength will have enough power to continue very far into the intraday session though. Link

Keene Little : 3/6/2009 9:23:33 AM

With job numbers out of the way (horrible but not worse than expected) equity futures tried to rally a bit but pulled back. We'll start the morning slightly positive. Bonds are selling off after rallying a little more early this morning. That could be a good sign for equity bulls.

Jane Fox : 3/6/2009 9:11:53 AM

WASHINGTON (MarketWatch) - The weakness in U.S. labor markets has gathered extraordinary momentum, wiping away more than 2.5 million jobs over the past four months alone, the Labor Department reported Friday.

The U.S. economy lost 651,000 jobs in February, the fourth month in a row where job losses were near or above 600,000.

The unemployment rate soared to 8.1%, the highest rate in over 25 years.

Job losses in February were close to expectations. But the government also revised job losses in the past two months down by 161,000 jobs.

Job losses in December, now pegged at 681,000, was the biggest monthly decline in jobs since 1949.

Average hourly earnings rose by 3 cents, or 0.2%, to $18.47 an hour, in line with expectations. Average wages have risen 3.6% in the past year.

According to the survey of business establishments, 660,000 jobs were lost in the private-sector in February. Goods-producing industries shed 276,000 jobs, while services lost 375,000.

Keene Little : 3/5/2009 11:58:56 PM

Friday's pivot table: Link

There are some pieces in place to call a bottom for now but that means the market will need to rally out of the gate on Friday (so a bullish reaction to the jobs number). If the market starts to rally we'll then get some clues as to what kind of bounce it will be (a week's worth and then head lower or a much stronger bounce that makes it look like a more important low is in). The SPX daily chart shows a bounce up to the 760-770 area, either quickly or in a choppy multi-week, before turning back lower. A break above 800 is needed to declare a more important low is in. Link

If the market sells off Friday keep an eye on SPX 661 for possible support (important Gann number). The 60-min chart shows how a 3-wave bounce into next week might play out: Link . I've been mentioning the bullish divergences showing up on the charts and you can see today's lower low is being met with higher lows on MACD and RSI.

OI Technical Staff : 3/5/2009 9:59:59 PM

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