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Keene Little : 3/9/2009 3:56:39 PM

No rally into the close but no breakdown either. That leaves us guessing for tomorrow. Either way it goes it looks like it could be a big move so be careful carrying anything overnight.

Keene Little : 3/9/2009 3:37:20 PM

For a change SPX is being helped by the financials today. But right about now (with less than 30 minutes to go) the bulls could use another short-covering rally into the close in order to save the day here.

Jane Fox : 3/9/2009 3:33:21 PM

NQ makes the first move below its ON lows followed by TF and it looks like YM is not far behind. Es is the only market to not fall below its ON ranges. Link

Keene Little : 3/9/2009 3:05:05 PM

Watching today's pullback from this morning's high has me thinking we're either about to rip to the downside or else the choppy pullback is just a correction to the rally off Friday's low which will be followed by another strong rally leg. A break above 685 would be bullish, confirmed with a break above 690, whereas a break below 670 would be bearish, especially if it breaks down hard from here and smashes through that level.

Jane Fox : 3/9/2009 2:45:13 PM

10. CNBC goes off the air. "The entire financial community has a love/hate relationship with the box in the corner of every trading room that is permanently turned to the network. The only certain bottom would be when so few people care that the network has to close."

Jane Fox : 3/9/2009 2:44:58 PM

9. Stock market favorites see 15%-to-20% declines. When standout companies -- such as Wal-Mart Stores Inc. (WMT)) and McDonald's Corp. (MCD) -- "get clobbered you know there is a bottom somewhere nearby," they said.

Jane Fox : 3/9/2009 2:44:27 PM

8. The market starts to rally on bad news. "In prior cycles, bad news turned into good market performance when it showed that [the] Fed had the economic reason to cut interest rates. In this market, the Fed is out of bullets, so bad news is bad. When the market can rally on bad news, it is a great sign that valuations finally reflect the current environment," the analysts said.

Jane Fox : 3/9/2009 2:44:12 PM

7. One million jobs lost in a month. Such a bad number could indicate a bottom, given the lagging nature of the employment count.

Jane Fox : 3/9/2009 2:43:59 PM

6. New York Stock Exchange daily volume drops to 1 billion shares for 30 days. "Sometimes you just need everyone to give up to make a bottom," the analysts reason.

Jane Fox : 3/9/2009 2:43:42 PM

5. The Dow Jones Industrial Average changes more than two names at the same time, and/or adds names to increase the overall number of stocks in the index. "There are some 'zombie stocks' in the index, to borrow a popular phrase. The Dow is price weighted, so small priced stocks are almost irrelevant to the performance of the index. By the time the senior editors of Dow Jones recognize they need to change some names in the index, it may be time to the market as a whole."

Jane Fox : 3/9/2009 2:43:18 PM

4. Gold at $2,000 an ounce. "Gold is the ultimate capital markets panic play. A quick double in the metal would be a strong contrarian indicator that it was time to buy stocks," the analysts said. "I'm not sure I want to live in a world where gold is $2,000 an ounce. It would mean something is tremendously wrong. From an equity standpoint, the best thing you can say about gold right now is that it hasn't broken out to record highs even in the face of uncertainty," said Colas.

Jane Fox : 3/9/2009 2:42:59 PM

3. The 100th day of a bankruptcy by General Motors Corp. (GM). The first few weeks of a Chapter 11 filing by the automaker would likely be chaotic, given auto industry's links to many parts of the economy. "After the initial problems, though, the market may have finally discounted the structural challenges of the U.S. economy," said Colas and Klachkin.

Jane Fox : 3/9/2009 2:42:33 PM

2. Timothy Geithner is replaced with Paul Volcker. Fairly or not, the market does not have a lot of confidence in Treasury Secretary Geithner, while former Federal Reserve chairman Volcker's "proven abilities in a crisis could play better with investors," the analysts said. Volcker currently heads the Economic Recovery Advisory Board under President Barack Obama.

Jane Fox : 3/9/2009 2:42:05 PM

Kate Gibson of MarketWatch wrote an article called the 10 headlines that could signal a market bottom. Here they are: (some of them are tongue in cheek)

1. A significant (more than 10%) one-to-two day drop in the market. The current orderly decline, while severe, is largely running in line with the deteriorating U.S. economy, said Colas and Klachkin. Therefore, an even sharper drop would position stocks as cheap, relative to their fundamentals. "Perhaps even cheap enough to make a bottom," the analysts said.

Keene Little : 3/9/2009 1:50:48 PM

We can actually move the key level to the upside down to this morning's high near 695. A bullish heads up would be a move above 690, to get above the mid-day bounce high, as that would leave a corrective 3-wave pullback from this morning's high.

Keene Little : 3/9/2009 1:47:00 PM

The hasn't been much of a change to the SPX 60-min chart. It still shows the possibility for another new low around 661 or we've put in the low for now and are at the beginning of a larger bounce that should last at least the week and take SPX back up at the 740 area. Updated SPX 60-min chart: Link

Keene Little : 3/9/2009 1:08:42 PM

If the market drops down a little further watch the SPX 676 area for support as that's where today's pullback would have two equal legs down. It would be a little more than a 62% retracement of the rally from Friday's low and should hold if there's going to be more upside.

Jane Fox : 3/9/2009 12:59:50 PM

LONDON (MarketWatch) -- Increased spending by governments around the world is more important in the short term than dealing with the global imbalances thought to be at the root of the global financial crisis, top White House economic adviser Lawrence Summers said in an interview with the Financial Times published Monday. "The old global imbalances agenda was more demand in China, less demand in America. Nobody thinks that is the right agenda now," Summers said. "There's no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda."

Jane Fox : 3/9/2009 12:54:04 PM

MACD is not giving us any clues that the bulls are building up strength to stage a rally. As a matter of fact, a MACD below 0 is telling you the bears have control. Link

Jane Fox : 3/9/2009 12:44:43 PM

The AD line has spent most of its day under 0. There is NO way the bulls will make any kind of headway as long as the AD line is below 0. Link

Keene Little : 3/9/2009 12:39:01 PM

While the techs are weak today, and somewhat of an albatross around the neck of the market, the banks are looking relatively strong. It's currently looking like the banks could see a pullback today after its bounce off Friday's low and that could coincide with a drop in NDX to a new low below Friday's. As long as the banks continue to hold up relatively well I think that will point towards a larger bounce this week.

Jane Fox : 3/9/2009 12:05:45 PM

Markets have gotten into that mean sideways chop which should not have surprised anyone. The AD line was telling us the bulls didn't have too much of a chance yet the VIX was telling us the bears didn't have the control either. Link

Keene Little : 3/9/2009 11:58:15 AM

NDX is threatening to break down and as long as the techs are weak I don't expect much from the broader market.

Keene Little : 3/9/2009 11:25:12 AM

The one thing to keep in mind this week is that we could have a very choppy and difficult trading environment. If we do get the 4th wave correction as I've had on my charts (4th wave in the move down from January) it will likely be filled with choppy price action and a few whipsaws thrown in for good measure. Trade carefully this week and take profits early and quickly if trading it. These corrections tend to be the time traders give back a lot of their trading profits.

Keene Little : 3/9/2009 10:56:09 AM

After tagging (and slightly breaking below) the bottoms of the two parallel down-channels from November and January the DOW also looks ready to bounce at least a little. The daily chart shows RSI has broken its downtrend line from the February high, retested it on Friday and is now trying to bounce higher. That's a good sign that the downtrend line for the DOW, currently just above 6800, will likely break as well. If it happens I'll then be watching for evidence that it's just a bounce with an expectation for a lower low into the end of March. DOW daily chart: Link

Jane Fox : 3/9/2009 10:51:15 AM

As I said last week, Crude is a much more exciting story and the one we probably should be long. Link

Jane Fox : 3/9/2009 10:35:53 AM

WE have a nice rally going on but the DOW is still only up +46 points.

Jane Fox : 3/9/2009 10:30:11 AM

Internals are looking good and I particularly like the bullish ratio BUT the AD line is still only +156, not good enough to convince me the bulls are in total control. Link

Keene Little : 3/9/2009 10:23:04 AM

While the bounce off Friday's low is now a sharp move higher, it is still just a 3-wave move that achieved equality (two equal legs up) at SPX 694.87. 700 is the brass ring for the bulls (and they can't drop it).

Jane Fox : 3/9/2009 10:13:32 AM

Crude bulls have finally been able to break $45.50 resistance and are on their way to $55 resistance. Link

Jane Fox : 3/9/2009 10:12:02 AM

I have not seen the bulls this strong for weeks.

Jane Fox : 3/9/2009 10:11:45 AM

VIX is making new daily lows supporting ES's new daily highs.

Jane Fox : 3/9/2009 10:09:50 AM

The probabilities of a sustained tradable rally when the AD line is below 0 are low.

Jane Fox : 3/9/2009 10:08:35 AM

We got a very nice rally out of the gate but the internals are still not to the point where I would venture a long position. I have been fooled too many times. This time may be different but I will sit aside and watch to see if it is.

Jane Fox : 3/9/2009 10:07:07 AM

AD line was able to get above 0 briefly but has now slipped back to -566.

Jane Fox : 3/9/2009 10:00:14 AM

LONDON (MarketWatch) -- Pharmaceutical giant Merck & Co., Inc on Monday said it will buy rival Schering-Plough for $41.1 billion in cash and shares to expand its presence in emerging markets and bolster its pipeline of potential new medicines.

Shares of Merck slid more than 10% in early trading Monday to $20.41 on the news. Schering-Plough was up nearly 12% at $19.68.

The two companies, which announced significant job cuts last fall, already are partners on the cholesterol drugs Zetia and Vytorin. But sales of the drugs fell more than 20% in the fourth quarter on concerns about their effectiveness.

Keene Little : 3/9/2009 9:57:28 AM

Bonds are selling off and equity bulls want to see that continue.

Jane Fox : 3/9/2009 9:57:21 AM

I don't think a rally to 750 is out of the question. Link

Keene Little : 3/9/2009 9:56:33 AM

The next tough resistance level, assuming the bulls can keep this going, is near SPX 699--last Thursday's high and the downtrend line from February 26th. Above 700 would tell me the bottom is in for now. Until that happens we could simply be in a choppy decline that will lead to a new low.

Jane Fox : 3/9/2009 9:55:23 AM

Gee the DOW is up +16 points.

Jane Fox : 3/9/2009 9:54:44 AM

It is usually the VIX following the AD line but so far today the AD line is following the VIX. This is very good news for all of us who are getting really tired of this bearishness.

Keene Little : 3/9/2009 9:53:37 AM

As for cash, SPX had broken the downtrend line from Thursday with that dash higher in the final 30 minutes on Friday. This morning it pulled back to that trend line (677) and held. It is now pushing to a new high above Friday's close. That's bullish price action.

Jane Fox : 3/9/2009 9:53:27 AM

AD line is climbing and has improved to -809. IF the bulls can actually turn this around today they are giving us a huge clue we may have found our temporary bottom and are in for a bear market rally.

Keene Little : 3/9/2009 9:52:00 AM

Two equal legs up in the bounce off the overnight low is at ES 684.25 so that's the first level to watch for potential resistance to this morning's jam higher. Needless to say it would be bullish if this morning's gaps are closed and held (ES 688.25).

Jane Fox : 3/9/2009 9:50:46 AM

It is hard to believe that the US dollar is considered a safe haven but the rest of the world views the US as being the one country that has the best tools to dig themselves out of this mess and will probably be one of the first to do so.

Jane Fox : 3/9/2009 9:46:55 AM

A weekend announcement the global economy will probably shrink in 2009 for the first time since WWII has increased demand for the US Dollar measured the DXY, the US dollar against a basket of six global counterparts.

Gold will not have much of a chance to rally as long as the greenback is in demand. Link

Jane Fox : 3/9/2009 9:40:31 AM

VIX is falling and S&P futures are climbing but the bearish AD line will put a stop to that shortly.

Jane Fox : 3/9/2009 9:39:58 AM

VIX closed at 49.33 and opened this morning at 51.25 and is now falling.

Jane Fox : 3/9/2009 9:39:00 AM

AD line opens at -1457. The scenario for months now if the AD line opens bearish there is very very little chance the bulls will be able to make it positive. So you have another day to sell the rallies.

Keene Little : 3/9/2009 9:31:32 AM

With the bulk of Friday's late-day rally having been given up in overnight trading the chances of getting the new low this morning look pretty good right now. If the selling continues after the bell I'll be watching to see if SPX works its way down towards 661. There's no guarantee of course that it will drop lower. And if it were to drop much below 660 I'd start thinking about a much more serious selloff in progress.

Jane Fox : 3/9/2009 9:27:59 AM

There are no major economic reports out today.

Jane Fox : 3/9/2009 9:25:41 AM

If the current two day rally ends here it will begin the formation of a right shoulder to a head and shoulders pattern and $900 becomes the neckline. The formation will not confirm until the neckline breaks but the Goldbugs are watching closely. Link

Jane Fox : 3/9/2009 9:19:40 AM

Crude's resistance at $45.50 is turning out to be harder to break through than I thought it would, which doesn't say much for the Crude bulls. In any case though the bulls are making a stand and even have the MACD above 0. Link

Jane Fox : 3/9/2009 9:16:49 AM

A series of lower lows and highs tell you the bears have control of the overnight session. So far 76.4% of Friday's session has been wiped out.

The one guarantee you have in the stock market is, "What goes down will eventually go up and vice versa." This is a guarantee, 100%. Of course the trick is determining when that will happen. This market is no different and eventually we will have a rally. Unfortunately we don't know when. Link

Keene Little : 3/9/2009 12:17:55 AM

Monday's pivot table: Link

Friday's candle was a long-legged doji which reflects indecision. Until the last 30 minutes it didn't look like much indecision--the bears were walking all over the bulls. But a nice short-covering rally in the final 30 minutes rallied the market back up to the flat line. SPX's low came within 5 points of an important Gann number at 661. The price pattern looks ready for at least a bounce this coming week.

As shown on the daily chart, I think we'll only get a relatively small rally before turning back down into a final low for the year by the end of March (dark red). The first resistance level will be the November low at 741 and the top of a parallel down-channel. The next resistance level will be near 768, the October 2002 low and top of a slightly wider down-channel. It takes a rally above 800 to suggest we've already seen the low for the year. SPX daily chart: Link

As shown on the 60-min chart below, the blast higher into the close broke the downtrend line from Thursday's high and that's a bullish signal (the first break of the steepening downtrend lines in a parabolic decline from February 9th). But I do see the possibility for one more minor low Monday morning before rallying so be careful of that. SPX 60-min chart: Link

Assuming we'll be able to get a 3-wave kind of correction to the upside this coming week SPX should be able to at least make it up to the 740 area. While nothing is a given in this market I like the setup for at least a bounce. Now all the bulls need to do is not be so afraid. But trade the bounce, don't fall in love with it--surprises continue to be to the downside and the financial sector could drop another load, er I mean shoe, and panic the market into a deep and capitulating low.

OI Technical Staff : 3/8/2009 10:59:59 PM

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