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Keene Little : 3/18/2009 4:10:54 PM

SPX also did battle with its 50-dma today at 803.88 with a high of 803.04.

Keene Little : 3/18/2009 4:08:54 PM

No surprise, SPX was parked right at its downtrend line from January, near 794. Gap n go tomorrow or retreat--we'll find out soon enough. FWIW, the wave count for the move up from March 6th counts as corrective again but as far as I'm concerned the bounce is too big to be a 4th wave correction (even though it hasn't overlapped the January 1st wave low). I don't think we'll head for a new low from here but will probably get a pullback to correct the rally and then head higher next week.

Keene Little : 3/18/2009 3:56:10 PM

Our dollar got spanked hard this afternoon and it was met with a big spike up in the price of gold. Interestingly, while oil rose as well it did not spike hard to the upside like the metals or even the commodities index, $CRX. USO is still struggling elow $30 (traded a high of 29.92).

Keene Little : 3/18/2009 3:51:41 PM

Today will be remembered when the Fed made the biggest protectionist move yet. By monetizing the debt we've just told the world we don't care about devaluing our dollar (hence the inflation worries) and this will result in a scramble among other countries to protect their currencies by devaluing them as well. This will result in the destruction of fiat currency and cause a massive global inflationary problem down the road. Way to go Bernanke. You and Greenspan will go down in history as the biggest bumblers of all time. The history books will not treat you kindly.

Keene Little : 3/18/2009 3:29:23 PM

After snagging a few stops above SPX 800 and a bunch above DOW 7400, the stock market is coming back down harder than just a normal correction that I would expect to see if we were going higher. Quite the moves in everything this afternoon--metals, currencies, bonds and stocks. BIG inflation fears out there right now. I think they're legitimate fears if not early (still have a big deflationary problem with the ongoing credit collapse).

Keene Little : 3/18/2009 2:47:51 PM

SPX shot up and tagged its downtrend line from January, just below 800. Whether that's it for the rally is anyone's guess in this environment but if you like to play the short side this is the place. Bearish divergences continue but we know how long that can go on. The uptrend line from March 9th is now near 780. SPX 60-min chart: Link

Keene Little : 3/18/2009 2:37:55 PM

TIP (the Treasury Inflation-Protected ETF) shot higher as well. The Fed has certainly sparked fears of a big inflation problem coming.

Keene Little : 3/18/2009 2:34:52 PM

Gold and silver are rallying hard off today's lows as well--they smell inflation.

Keene Little : 3/18/2009 2:28:56 PM

I'm scrambling a bit here and haven't heard the FOMC announcement but I'm guessing the Fed has said they will definitely be buying Treasuries (and it's a good thing that we will be monetizing the debt and causing a big inflation problem down the road?) and both the stock market and bond market liked the news (especially the bond market--the 30-year is up over 6 handles--huge move).

James Brown : 3/18/2009 2:06:44 PM

Stocks Pause Ahead of FOMC
(Intraday Update)

Wednesday marks the conclusion of another two-day FOMC meeting but expectations are for the Federal Reserve to leave interest rates alone. Waiting for the FOMC announcement and commentary, due to be released at 2:15 p.m. Eastern, is being used as a convenient excuse to take some profits in stocks. In reality the U.S. market is just seeing some minor profit taking after a huge six-day rally higher.

It isn't just the U.S. market that has paused. Asian markets still managed to post gains but they were mild. The Chinese Shanghai index rose 0.2%. The Hong Kong Hang Seng added 1.8%. The Japanese NIKKEI continued to extended its gains but at a mild pace with a 0.29% rise.

European markets were flat to down. Weighing on investor sentiment in Europe was the latest employment figures in Britain. The Office of National Statistics reported that England's jobless numbers surged over 138,000 in February, which is the fasted pace since they began keeping records in 1971. Unemployment has risen to 6.5% and topping the two million mark for the first time in years. The English FTSE index lost 1.2%. The French CAC 40 fell 0.25%. The German DAX gained 0.4%.

Back home in the states technology stocks were out performing thanks to some M&A news. The Wall Street Journal ran a story that IBM was in talks to buy Sun Microsystems (symbol: JAVA). The deal is expected to be valued around $6.5 billion in cash, which would value JAVA's stock price at 100% over Tuesday's close of $4.97. Shares of JAVA gapped open higher at $8.36 and they're currently trading +73% at $8.61. Shares of IBM fell on the news but have pared their losses. IBM is down 2.5% at $90.50.

Tech stocks were not the only big movers today. The banking sectors were still in rally mode. The BIX is up 4.6% and the BKX banking index is up 4.4%. The BIX is showing a little more strength with a breakout over its simple 50-dma and a rise over the late February high. The BKX has yet to push through similar levels of resistance. A few financial stocks making moves today are: Citigroup (C) +22% to $3.08. BAC +13.3% at $7.11 and pushing past its 50-dma. WFC +5% at $15.40. Goldman Sachs (GS) is up 1.7% and pushing higher past the $100.00 mark.

In other financial news the CEO of American International Group (AIG) was due to appear before a congressional committee. There has been a lot of press about how angry the country is over the recent bonuses AIG paid high-level employees. I sorry for the guy. Edward Libby came out of retirement several months ago to help direct a failing AIG. The company made these deals before the government's bailout. Mr. Libby felt that these bonuses were "distasteful" but AIG was legally bound to honor its contracts. Now the guy is going to be toasted on national T.V. while politicians make dramatic remarks to grandstand for their constituents back home. You can read all of Libby's prepared comments here.

A quick look at commodities shows more profit taking. Oil fell about 2.5% following yesterday's sharp rally. Gold also turned lower. I outlined the weakness in the GLD chart yesterday. Today the GLD is offer 2.8% and breaking down under its 50-dma.

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

Looking for movers on the OptionInvestor.com play list we see that Boeing (BA) is hitting some profit taking. The stock fell to its 10-dma this morning but has managed a bounce. BA is only down 3% at $33.41. CAT also showed some weakness this morning but bounced from yesterday's lows near $25.70 and its 10-dma. Oil stock HES is getting hammered with a 4.9% decline toward its 10-dma. Semiconductor stock XLNX is showing some strength today. The stock is up 3.9% and breaking out over its exponential 200-dma and above the $20.00 mark. Blackrock (BLK) did continue to rally and shares broke through resistance at their 50-dma and hit our stop loss in the process.

PremierInvestor is seeing a couple of movers. BXP is up 1.5%. INFY is up 2%. JEC is under performing with a 4.3% drop toward its rising 10-dma. YHOO is also hitting some profit taking with a 3.8% decline.

Jane Fox : 3/18/2009 1:26:08 PM

It has totally amazed me these last few weeks just how much energy the bulls have been able to muster. For months the scenario has been once the bears took hold it was game over but that is just not the case now. Even when the chips are down and the bears have the ball (how is that for a mixed metaphor) the bulls are able to pick themselves up and dust off and start fighting again.

Keene Little : 3/18/2009 1:05:25 PM

A retest of this morning's high for the DOW will also be a test of its downtrend line from January-February and right at the century mark of 7400. I'd bet there are a few stops just above that level so if resistance holds it will be a good short but beware the head-fake break to grab all those stops and give us a quick and short-lived flare up.

Jane Fox : 3/18/2009 12:53:39 PM

Markets broke their ON lows but have all recovered. Both the Russell 2000 (TF) and NDX (NQ) futures have even recovered enough to break their ON highs. Link

Keene Little : 3/18/2009 12:52:43 PM

Volume was very low yesterday but running slightly stronger today. So far we've got just a churning kind of day and the slightly higher volume could be a result of big money starting to liquidate some inventory into rallies, keeping prices so far in a doji kind of day.

Keene Little : 3/18/2009 12:46:08 PM

Trying to keep up with the developing wave count for the rally from March 9th has been a case of following it higher as it morphs from impulsive to corrective to impulsive and potentially back to corrective. But as mentioned earlier, I tend to throw out intraday wave counts during certain periods like opex weeks because I can't be certain about their reliability. This is especially true if the volume is lower than normal, as this rally has been.

But in my attempt to stick with the count here, the rally pattern from yesterday's low looks more corrective than impulsive and that has me leaning back towards a corrective count for the whole rally leg. I see the potential for SPX to be pushed up to a Fib projection near 793 (if it can get through 783) but it requires each pullback low to hold now (the last one being this morning's low at 765.64) otherwise it could mark the end of the rally.

As shown on the 30-min chart, a break below 750 would confirm the rally has finished and then we'll play it one leg at a time (so short term trades) until the larger picture clears up some. SPX 30-min chart: Link

Keene Little : 3/18/2009 12:23:21 PM

NDX is now approaching 1200 (high so far near 1197) and this has been a level that price has oscillated about since the October low, shown with the dotted horizontal line on its daily chart. It's also near the apex of the sideways triangle shown on its daily chart, which very often acts as support/resistance. The question here is whether it will be resistance to any further advance. And will opex settle around this 1200 (QQQQ 29.50) area, along with SPX either at 775 or 800? Max pain for QQQQ is 30 and for SPY it's 79. NDX daily chart: Link

Keene Little : 3/18/2009 12:08:03 PM

Gold and silver are getting hit hard to the downside today (down more than $30, -3.5%). Gold has now broken its uptrend line from November, where it bounced on March 11th and with the break below the March 10th low (891.10) it's a confirmed break. The wave pattern for the decline from February is a bearish setup for a strong move down from here. The next short-term support will be its 200-dma and broken downtrend line from July 2008, both near 850 (currently bouncing a little and trading near 890). Gold daily chart (GC): Link

Keene Little : 3/18/2009 11:15:13 AM

Citigroup shot higher this morning (up more than 25%) and the banking index looks to be giving the broader market a lift back up. But XLF (financial ETF) is now closing in on its 50-dma at 8.88 (this morning's high so far is 8.76) and C did tag its 50-dma at 3.27 (high so far is 3.36). The previous shelf of support for C, in January and February is around 3.30 as well and therefore I wouldn't be surprised if it's making its high for the week here. Pretty good triple off it March low.

Jane Fox : 3/18/2009 11:12:08 AM

BOSTON (MarketWatch) -- The Securities and Exchange Commission on Wednesday charged the auditors of Bernard Madoff's broker-dealer firm with securities fraud by representing they had performed legitimate audits. The SEC alleged that certified public accountant David Friehling and his firm purported to audit financial statements and disclosures of Madoff's firm, which was at the center of a gigantic Ponzi scheme. "I will ensure that we continue this investigation and hold accountable all those who helped to facilitate this massive fraud," said new SEC Chairman Mary Schapiro in a press release.

Keene Little : 3/18/2009 10:53:10 AM

Some interesting observations/thoughts from Jim that I thought I'd share:

Two quick questions (well, maybe quick)...

1) Do you think someone was playing games with yesterday's action? I like to monitor the SPY for volume because I think it gets rid of some of the noise of all these penny stocks on the markets. Anyway, yesterday's volume and the entire upswing has been horribly low. Many people expected a pull back yesterday and the market gave us anything but one. Do you think someone may have been pushing it up to shock the bears (or excite the bulls) only to have the wheels come off the wagon after opex. Maybe cash in those cheap calls they bought back on the 6th-9th? It seems lately in the market there are moves which everyone goes crazy over (the bottom is in, get on the train comments abound) and then bang, it's over and we hit new lows. As an aside, I am hoping for that minor new low to back up the truck on stocks. So, I am sort of hoping manipulation and a coming decline are the truth.

2) Do you put any value into what the futures do after hours? I vaguely recall a discussion between you and Jeff that after hours trading is all hedging and not speculation. I bring this up because there are so many mornings I wake up and went short the day before only to see futures up big. Then sure enough the day ends down, or vice versa. It seems (I didn't document this but solely from memory) that when the futures are relatively flat (up or down a few points near fair value) that those are the days the markets tank or launch through the roof. Is there any way you look at futures to gauge the day? Seems what the futures do prior to market open is only good for the first 30-60 minutes and then the day is up for grabs.

Do I think someone was playing games yesterday, on low volume? You bet I do. Each time it threatened to roll over we'd get a quick jab to the upside, just enough to knock the shorts out (and get a new high which called into question whether or not the resistance area (SPX 770-780) was going to hold or not). They keep doing that just enough to keep the bears away who are then afraid to short it when it really starts back down. It's a mind game.

As for overnight futures action I use it to give me a sense of how the start of the day might go but as you've observed, after the first 30 or 60 minutes about the only influence I've seen from the overnight futures is the high or low when it gets retested during RTH. I will look at the pattern of futures using all-hours vs. the cash indices to see if they agree and when they don't I watch more carefully for which could be more influential. I've often commented that I don't trust a sharp move in the few hours before the cash market opens--it invariably gets reversed hard. It's usually an attempt to create liquidity after the open so that big money can fade the direction of the futures into the open.

But you will always hear arguments as to whether the overnight price pattern should be used primarily or secondarily. Trader's choice. My work is primarily based on EW patterns which reflects herd behavior and therefore I want to use the biggest herd and that's during RTH.

Jane Fox : 3/18/2009 10:38:12 AM

VIX continues to make new daily highs and ES is following with new daily lows. AD line is also falling telling us the bears have the ball and are running with it.

Keene Little : 3/18/2009 10:36:34 AM

The TRAN broke its uptrend line from the March 9th low this morning, suggesting its rally leg has finished.

Keene Little : 3/18/2009 10:35:24 AM

Another thing I'm trying to stay cautious about, regarding the wave count of the current rally, is that the indexes may be experiencing a little more manipulation than usual and that screws up short-term wave counts (due to the "unnatural" movements in the market). This is a reason I like to watch other indexes that may not experience the same level of manipulation. The Transports index continues to be a good index to watch and its daily chart continues to support the idea of a 5-wave move down from January with just the final 5th wave to go: Link

Keene Little : 3/18/2009 10:22:43 AM

NDX retraced 62% of its decline from February this morning by tagging 1192.65.

Keene Little : 3/18/2009 10:21:34 AM

In the past few weeks I've been showing the NDX daily chart with a different wave count since January than the others. That's because NDX made a new high on February 9th but was the only major index to do so. That negated the possibility to call the move down from January the way I have the others (looking for an impulsive 5-wave move down with the possibility that the current rally is a 4th wave correction.

So instead, I've been showing a count on the NDX chart that is actually more bearish with the move down from February as only the 1st of a 5-wave move down to much lower lows, which makes the current rally a 2nd wave correction (and this fits better because it's such a sharp bounce). This count suggests the market will get hammered next week as the 3rd wave (of the larger 5th) gets underway. NDX daily chart: Link

But as shown on the daily chart, in pink, the bullish wave count calls for a strong rally leg up to a possible upside target of 1473 by mid April before turning back down (there is unfinished business to the downside so regardless when, we have not seen the bottom yet). The interesting thing about this projection for NDX is that it would fit the Fibonacci time sequence that's looking for a turn during the week of April 12th, which fits either scenario at the moment. NDX weekly chart: Link

What's been bothering me is the difference between the NDX and the others and now I'm wondering if the others aren't really more like NDX. That would suggest the February high was the end of the larger degree 4th wave for the others as well and that they too are in the same bearish wave count to the downside. I don't know which is the correct count yet but I wanted to present it for food for thought since a hard decline or rally would hurt if you're on the wrong side heading into April. Control your risk and manage your stops appropriately.

Jane Fox : 3/18/2009 10:13:26 AM

SAN FRANCISCO (MarketWatch) - Sun Microsystems Inc. saw its shares shoot up by more than 66% Wednesday following reports that it is in talks to be acquired by IBM Corp. for as much as $6.5 billion in a deal that would put hardware back at the core of Big Blue's operations and bolster its computer-server business, according to a published report.

Jane Fox : 3/18/2009 10:10:52 AM

VIX is back following the AD line and is making new daily highs so should be safe to dip your toes in the water and take a short.

Jane Fox : 3/18/2009 9:53:44 AM

Once Gold tags its support just under $900 it will be now or never for the Goldbugs. That support holds or the Goldbugs become Goldbears. Link

Jane Fox : 3/18/2009 9:49:54 AM

And once again the bulls seem to be overtaking the bears. VIX is falling and ES is following its lead with new daily highs. An AD line at -756 would convince me it is not time for a long position but I certainly would not be short.

Keene Little : 3/18/2009 9:49:35 AM

Techs are the first back into the green so the picture remains the same--follow the leaders (up or down).

Jane Fox : 3/18/2009 9:39:12 AM

AD line is a bearish -1168

Jane Fox : 3/18/2009 9:38:57 AM

Crude confirmed its bullish downward wedge when it broke through the upper trendline and also confirmed the bullish MACD divergence. Then it hit resistance at $45.50 but eventually broke through it as well. It didn?t use that resistance as support negating its importance from that point on and I removed it from the chart. Then it hit another level that I thought was going to be resistance but yesterday broke through that one as well. Now it is looking like Crude is building an upward channel. I don't particularly like channels because there is a good deal of subjectivity when you draw the upper and lower trendlines but I have tried and will keep this channel on the chart as a guideline until it is negated. Link

Keene Little : 3/18/2009 9:28:30 AM

Because it's opex week and considering the potential wave count for the move up from March 6th I wouldn't be surprised to see the market push higher, especially if we get only a small pullback. Pushing SPX up near 800 for expiration, or settling near 775, would not surprise me.

Jane Fox : 3/18/2009 9:27:24 AM

The bears ruled the overnight session because there is a pattern of lower lows and highs, at least for ES and YM. However both NQ and TF seem to be consolidating sideways from their previous day close and do not have lower lows and highs. We have seen quite a divergence from NQ and its large cap counterparts, ES and YM lately. Link

Keene Little : 3/18/2009 9:24:12 AM

Last night was quiet in bonds and equities settled lower but nothing of significance. Opex still rules so we'll need to see how the day progresses to help get a sense of direction for the stock market into the end of the week. We're due a pullback so that's what I'm expecting.

Jane Fox : 3/18/2009 9:06:56 AM

CHICAGO (MarketWatch) -- The volume of mortgage applications filed last week rose a seasonally adjusted 21.2% compared with the week before, driven by a surge in refinancing activity, the Mortgage Bankers Association said Wednesday.

Lower interest rates on fixed- and adjustable-rate mortgages attracted homowners as well as people seeking to buy homes.

Application volume for the week ended March 13 was up an unadjusted 31.2% from the same week in 2008, the Washington-based MBA said. Its weekly survey covers about half of all U.S. retail residential mortgage applications

Jane Fox : 3/18/2009 9:04:12 AM

WASHINGTON (MarketWatch) - With energy prices rising at the fastest rate in seven months, U.S. consumer prices increased a seasonally adjusted 0.4% in February, the Labor Department reported Wednesday.

The 0.4% gain in the consumer price index was the second increase in a row and the largest since July. In January, the CPI rose 0.3%.

Energy prices increased 3.3% in February, the government said, including an 8.3% gain in gasoline prices. Food prices fell 0.1%, the first decline in nearly three years.

Excluding food and energy prices, the core CPI increased 0.2% for the second month in a row, boosted by higher prices for new cars, clothes and cigarettes. Shelter prices - the biggest monthly expense for consumers -- were unchanged.

The February inflation and core inflation figures were a tenth of a percentage point higher than expected by economists surveyed by MarketWatch

Keene Little : 3/17/2009 11:38:31 PM

Wednesday's pivot table: Link

Keene Little : 3/17/2009 11:36:50 PM

After Monday's late-day decline it was looking like we had a clean ending of the rally from March 6th which meant it was set up to make a run down to a new low by the end of the month to complete a 5-wave decline from January and set us up with a real nice bullish opportunity. But Tuesday's new high above Monday's negated that potential, at least for now.

While we could see the market push higher over the next several weeks (after a pullback that's now due) we are unfortunately left with unfinished business for a market low. Whether it happens within a month or a few months, the bottom is not in yet and I was hoping we'd make a bottom sooner rather than later. The interim will likely be filled with a lot of choppy and whippy price action.

So I've updated the SPX 60-min chart to show what is now an impulsive wave count for the move up from March 6th. It could morph into a corrective count (shown in pink, calling for a high just under 800) that then leads to the new low but at this point an impulsive rally means we're due a pullback followed by another leg up, shown in dark red. Depending on how far it pulls back we could see SPX up to about 850 into early April. A drop below 700 would be a bearish heads up that something's wrong with the short-term bullish picture. SPX 60-min chart: Link

On Wednesday we should start a deeper pullback. If we get only a minor pullback and then another push higher (pink) then we're back to a potentially bearish wave count. A drop below 750 would say the leg up from March 6th has completed and then we'll take it one leg at a time from there. Notice the glaring bearish divergence at Tuesday's high vs. Monday's (typical for a 5th wave for the rally leg, which is the way I've currently got it counted).

OI Technical Staff : 3/17/2009 9:59:59 PM

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