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Jane Fox : 3/11/2009 4:00:26 PM

Bear market rallies are usually fierce and forceful and usually last a little more than one day so the fact that the bulls were not able to make any gains today (DOW is up +12 points) is very disturbing for those of us who want a little respite from all the bearishness.

Keene Little : 3/11/2009 3:42:22 PM

Because we're in what I believe is a correction it will be difficult figuring out what shape it will take until it's well developed. We're only in the first leg of it so you'll have to bear with me while I play with some ideas for where it could go.

If we get another leg up from here and it achieves the same size as the first leg up from Friday afternoon to Monday morning we get an upside projection just above 741, the November low. That would create a clean 5-wave move up from Friday (looks better than calling yesterday's small consolidation the 4th wave pullback). That would lead to a pullback and then another rally leg into opex, shown in dark red on the 60-min chart: Link

If this afternoon's late-day bounce fails to make a new high and instead leads to another leg down tomorrow we could see it pull back to about 700 before rallying up to a target near 768, the October 2002 low (pink wave count). Both are setups for a turn back down into the end of the month to fit the larger pattern but one leg at a time until the pattern becomes clearer.

Keene Little : 3/11/2009 3:12:25 PM

SPX is trying to break its downtrend line now. If it can hold above 720 and continue higher it could carry some into the close. So far the retracement has been relatively shallow but that could be the way we'll see the rally develop.

Keene Little : 3/11/2009 3:05:17 PM

The latest bounce stopped at the downtrend line from this morning's high, currently near SPX 720.60. That's the line to watch if you're short today and drag your stop down along it. I would not take a day-trade short position home tonight (or a long position for that matter since we're in the middle of a correction and there's no telling where it will go).

Jane Fox : 3/11/2009 2:54:21 PM

The DOW is doing its impression of a traffic light; red, green, red, green.

James Brown : 3/11/2009 2:45:21 PM

Follow through on the rally is faltering
(today's intraday update)

Yesterday's market rally was impressive and the party continued this morning for about 30 minutes. Stocks shot higher at the open but quickly ran out of gas. The U.S. indices have been slipping toward unchanged for most of the session. Overseas markets were mixed. Profit taking in financials weighed down any rally attempts. The French CAC 40 rose 0.4%. The German DAX added 0.7%. The British FTSE lost 0.5%.

Asian markets were also a mixed bag. The Chinese Shanghai index lost 0.9% while the Hong Kong Hang Seng rallied 2.0%. Yesterday the Japanese NIKKEI fell to 26-year lows. Today the NIKKEI bounced 4.5% erasing most of its losses from the prior three sessions. The latest Chinese export numbers made headlines. China's exports in February plunged 25.7% from a year ago to $64.8 billion. With the world buying less and China making less the energy markets were worried about future demand for oil.

The weekly oil inventory reports came out today and late last night. The EIA announced that crude oil inventories rose by 700,000 barrels compared to an estimated decline of 1 million barrels. Analysts were expecting gasoline stockpiles to drop 1.2 million barrels but inventories showed a 3 million barrel decline. Crude oil futures plunged 5% trading back under $43.50 a barrel. The USO oil ETF is down 4.7% and the three-day trading activity in the USO looks like a failed rally at its 50-dma.

Chart of the USO:
Link

One commodity that is getting some attention today is gold. Gold futures were up over 1% and trading back above $900 an ounce. The GLD gold ETF is bouncing with a 1.4% gain and trading back above its 50-dma but still under what should now be resistance at $90.00 and the bottom of its bullish channel.

Chart of the GLD:
Link

Here's a quick look at the major indices:

Chart of the S&P 500:
Link

Chart of the NASDAQ:
Link

Chart of the DJIA:
Link

A quick check on the OptionInvestor.com play list reveals that Amazon.com (AMZN) is breaking out from its multi-week trading range. Today's rally (+3.1%) is a bullish breakout above its 200-dma and its trendline of lower highs. The stock has hit our new trigger to buy calls so the play is now open.

Chart of AMZN:
Link

Chinese Internet company Baidu Inc. (BIDU) has hit our first target. The stock traded to an intraday high if $172. Our first target to take profits was $169.00.

Our new play on oil company HES has been triggered with the stock's dip back toward $56.00.

Shares of AAPL continued to rally on Wednesday and the stock is up 5.4% to $93.50. This move hit our stop loss at $90.75. It looks like the rally in AAPL today was fueled by a new product. The company just announced a smaller 4-gigabyte iPod shuffle.

Jumping over to the PremierInvestor play list I see that the IYM has hit our first target to take profits at $31.45.

Keene Little : 3/11/2009 2:24:26 PM

Bonds have bolted higher from their mid day low so that could put some pressure on stocks this afternoon.

Jane Fox : 3/11/2009 2:22:43 PM

WASHINGTON (MarketWatch) - The U.S. federal government budget widened to $192.8 billion in February as tax receipts plunged to the lowest level in 14 years, the Treasury Department reported Wednesday.

It's the second largest monthly deficit on record, exceeded only by $237.2 billion gap in October when the Treasury funneled hundreds of billions of dollars to the troubled banking sector.

For the first five months of the fiscal year, the deficit has increased by a half trillion dollars to a record $764.5 billion. For the whole year, the White House estimates the deficit will total a record $1.75 trillion.

Compared with last February, the deficit grew by nearly 10% from $175.6 billion. February typically has the highest monthly deficit in any given year.

Jane Fox : 3/11/2009 2:21:48 PM

SAN FRANCISCO (MarketWatch) -- Short interest on the New York Stock Exchange and the Nasdaq rose during the final two weeks of February, a period when stocks in some of the country's largest companies fell sharply, the two stock exchanges said Tuesday.

The NYSE Group, Inc. said the number of short-selling positions not closed out -- or short interest -- rose to 14.624 billion in the two weeks ended Feb. 27, up 3% from 14.189 billion shares in the two weeks ended Feb. 13.

This was the highest level since the week ended Nov. 28, the NYSE said in an update to its Web site late Tuesday. Nasdaq OMX Group Inc. said short interest rose to 7.037 billion, up about 2% from 6.893 billion in the prior two weeks.

Keene Little : 3/11/2009 2:21:35 PM

If we assume for the moment that the bounce from 1:00-2:00 PM was the mid point of an a-b-c pullback from this morning's high, two equal legs down would be at SPX 708, nearly right on top of the 38% retracement so that's a good downside target and potential support for now.

Jane Fox : 3/11/2009 2:20:21 PM

I redrew the neckline to Gold's head and shoulders. There may be rules as to how to draw head and shoulder necklines but when the market talks to us this clearly I am listening. Link

Jane Fox : 3/11/2009 1:30:44 PM

A VIX climbing supports the deteriorating AD line. By the way I see I totally missed the comment I intended to post about the deteriorating internals and it was now time to step aside. Ya I know after the fact but please believe me I did make the post it just didn't get posted. Link

Jane Fox : 3/11/2009 1:28:23 PM

AD line falls to almost 83 is the warning the bulls fumbled the ball but the bears have not picked it up.

Keene Little : 3/11/2009 1:23:26 PM

The choppy decline continues and so far I don't see anything that tells me it won't continue to pull back. The first potential support for SPX is near 707 where it will have retraced 38% of the rally leg and is near yesterday's afternoon low.

It's possible we'll get a bigger bounce back up as part of the pullback correction so stay aware of whipsaw price action. It's also possible the pullback is going to end early and the rally continue--it's the way of this market when rallies start and they don't pull back much to let traders in (or shorts out), thereby forcing them to chase the market higher.

Jane Fox : 3/11/2009 1:11:43 PM

Internals were telling me early on to stand aside today and not take short or long positions and so far that has been a very prudent thing to do.

Keene Little : 3/11/2009 12:05:47 PM

So far we've got what looks like a corrective pullback and looks a little like a mini version of the corrective pullback we had on Monday. So far I don't see anything particularly bearish. The steep uptrend line from Monday has been broken so that suggests that leg up is finished and we should get some kind of larger correction. But a bounce back up to the broken trend line could even result in a new high for the day (and if it's met with bearish divergence it would be a good setup for a day-trade short).

Jane Fox : 3/11/2009 12:00:33 PM

I think the bulls were hoping for a little more follow-through than this (S&P up +4.36 and DOW up +22). Makes one wonder just how far this bear market rally is going to take us. Link

Jane Fox : 3/11/2009 11:58:41 AM

Gasoline supplies dropped by 3 million barrels in the week ended March 6, the Energy Information Administration reported. Analysts surveyed by Platts had expected a reduction of 1.2 million barrels.

Meanwhile, crude inventories rose by 700,000 million barrels, while analysts had expected a decline of 1 million barrels.

Keene Little : 3/11/2009 11:12:10 AM

We've got very steep uptrend lines from Monday afternoon, which is unsustainable. Once they break we should have our first clue that a larger pullback (in time if not price) has started. For SPX that trend line is currently near 725 and rising quickly.

Jane Fox : 3/11/2009 10:56:03 AM

VIX and ES are in sync today so divergences here should be noted. Link

Jane Fox : 3/11/2009 10:53:40 AM

Here are ON charts. NQ is the stronger market. Link

Jane Fox : 3/11/2009 10:51:11 AM

LONDON (MarketWatch) -- The number of completed U.S. foreclosures in February was 121,756, the highest monthly total since the crisis began, according to data from Foreclosures.com. The figure was a 67% increase from the 72,694 reported in January and was also well above the previous monthly high of 104,243 set last September. The number of pre-foreclosure filings also set a new monthly record, rising 24% to 207,703 in February from 166,860 in January.

Jane Fox : 3/11/2009 10:45:20 AM

If you are wondering about the comments I made yesterday concerning the MACD and when bearish MACD divergences are actually bullish these charts are an excellent example. See price moving sideways but the MACD is falling. Conventional technical analysis will tell you this is bearish but as you can see the bears were nowhere to be found. This is a bullish formation.

Now I have to admit I blew it yesterday because I made the incorrect determination that price was indeed moving upwards and not sideways so the falling MACD was bearish but when you look back at the charts you see that price was indeed moving sideways. Link

Jane Fox : 3/11/2009 10:40:41 AM

The internals are far from always right but they certainly help on deciding a direction. If you are the kind of trader that grabs only a few ticks here or there then you don't care about direction but if you want a little more than a few ticks then you do care and the internals are telling me the direction is upward.

Keene Little : 3/11/2009 10:40:49 AM

The techs continue to lead the way higher today and that has me looking at GOOG for some clues. Currently GOOG is running into resistance near 317 where it's hitting its broken uptrend line from November (potential kiss goodbye setup) and the top of its parallel down-channel since February. Above 330 would be bullish but for now I'd be careful if long GOOG (and by extension the techs and the rest of the market). GOOG daily chart: Link

Jane Fox : 3/11/2009 10:38:46 AM

The bulls are not as strong as they were yesterday but still strong so I would not be trying any short positions but keep my trades on the long side.

Keene Little : 3/11/2009 10:19:10 AM

The move up from Friday's low for SPX can also be counted as a 5-wave move and therefore, like the banks, I am expecting a pullback (which may be starting) that lasts perhaps into tomorrow and then a continuation higher into next week. Using this morning's high, a 38%-62% retracement gives us a pullback zone of SPX 692-707. The 50% retracement at 700 makes a good target for now as that would give us an upside target next week near 768, the October 2002 low, for two equal legs up from last Friday. This is obviously a very early call and are just some levels that make some sense at the moment.

For now, if the rally hasn't finished, I see upside potential to 736 where the 5th and 1st waves in the move up from Friday would be equal.

Jane Fox : 3/11/2009 10:04:32 AM

I am following the volume on the Crude May contract and will probably switch to that contract for my analysis once it overtakes the volume on the current front month, April. The contract officially switches 3 business days before the 25th calendar day of each month but if you trade Crude you switch contracts well before that so even though the front month does not rollover until March 20th the volume in May will exceed April's volume probably early next week.

Jane Fox : 3/11/2009 9:54:42 AM

So we have a buy the dips kind of day.

Keene Little : 3/11/2009 9:53:54 AM

Whether looking at BIX, BKX or XLF they all have reached or are very close to reaching their downtrend lines from February and could use a rest after the big rally off last Friday's lows. The good news for the bulls is that it looks like an impulsive rally (5-wave move) and that suggests a pullback (perhaps for about 2 days) will be followed by a continuation higher. Whether the broader market will follow their lead remains to be seen but so far it's looking good.

Jane Fox : 3/11/2009 9:53:38 AM

AD line has now improved and is in the bull's camp. Along with this the VIX is falling supporting the bullishness. Geesh did we just see the bears trying to fight back and the bulls were able to overcome them?

Jane Fox : 3/11/2009 9:50:11 AM

AD line is +1227

Jane Fox : 3/11/2009 9:50:00 AM

I know there are plenty of people out there who think NPR is a liberal radio station (I am not one who believes this) but I would like to direct you all to a program on NPR called This American Life, which I swear is not political. Last summer they did a piece on the housing crisis that helped me understand it all much better. They dumbed it down but sometimes you need that in order to understand the more complex issues.

This American Life has done another one on "Bad Banks" and explains in very easy to understand plain language what the banks are facing. It also helps you understand Mark to Market.

So even if you are a staunch Republican, I believe this program that is not political, will help you understand where the economy is currently.

It is a very very good program.

www.thisamericanlife.org

Jane Fox : 3/11/2009 9:41:18 AM

SAN FRANCISCO (MarketWatch) -- Bernard Madoff is expected to plead guilty to multiple criminal charges and faces up to 150 years in prison for allegedly masterminding a $50 billion Ponzi scheme, his lawyer and federal prosecutors said Tuesday.

Madoff was charged with 11 felony charges including securities fraud, money laundering, false statements, perjury and theft from an employee benefit plan, prosecutors said in a statement.

"It is anticipated that he will plead guilty on Thursday," Ira Sorkin, Madoff's lawyer, said in an interview Tuesday. "I have no comment beyond that."

Jane Fox : 3/11/2009 9:39:51 AM

So another session where I will be sitting on the sidelines until I see either the bulls make a move or the bears take over - again.

Jane Fox : 3/11/2009 9:38:59 AM

AD line is an anemic +250, not surprising considering the ON session.

Jane Fox : 3/11/2009 9:38:14 AM

Crude bulls were hoping the move above resistance would have been far enough that the required retracement would find the $45.50 resistance had turned to support but that doesn't look like what has happened. In any case the bulls still have control because of the pure and simple fact the chart shows a higher high and higher low. The MACD above 0 helps as well. Link

Jane Fox : 3/11/2009 9:33:18 AM

Today we have Assistant Treasury Sec Kashin speaking at 10:00ET

Crude Oil inventories out at 10:30

Treasury Sec Geithner speaking at 1:00

and 2:00 the Federal Budget will be released. I think I may go back to bed for that one.

Jane Fox : 3/11/2009 9:31:25 AM

Here are the overnight charts, not overly bullish but bullish all the same. Link

Keene Little : 3/11/2009 9:29:58 AM

Equity futures had dropped to a low near 5:00 AM and then shot higher by 18 ES points to a high near 6:00 AM. I'm not sure what caused that spike but I always view that kind of move suspiciously. The market will gap up this morning but the rally was starting to weaken yesterday afternoon and I'm not sure the gap up will hold. If it does hold and SPX can hold above 724 the next resistance level is not until 735 where it would close the gap left from February 27th.

Keene Little : 3/11/2009 12:17:23 AM

Wednesday's pivot table: Link

After Tuesday's big rally SPX was able to break its downtrend line from February 9th. The bulls want to see this trend line hold on a retest, which will be near 706 Wednesday morning. Hopefully it's not going to be a one-day wonder rally and will instead make it higher over the next few day, potentially into opex week next week. I'm showing on the 60-min chart two possibilities for a continuation higher but basically the difference is only timing of the choppy up and down sequence of moves and how high the bounce should get--either the 740 area by Friday/Monday or up to the 770 area by the end of next week. SPX 60-min chart: Link

The daily chart shows how this expected bounce fits into the larger pattern which calls for a 4th wave correction to be followed by another leg down into the end of the month (which would give us a clean 5-wave move down from January). The downside projection for now is 625. There remains the possibility for a longer-lasting bottom last Friday and any push higher than 770 would be a bullish heads up and above 800 would confirm we've already seen the low. SPX daily chart: Link

OI Technical Staff : 3/10/2009 9:59:59 PM

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