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Keene Little : 3/19/2009 3:57:18 PM

The market looks to me like it's been held up today but the price pattern continues to look bearish for at least another leg down to the SPX 772 area before bouncing again. We're due a correction of the rally leg from the March low and a 38%-50% retracement would target 735-751. It's always difficult to figure out where European options, like those for SPX, will settle but today's pattern has me thinking we could see a gap down tomorrow.

Keene Little : 3/19/2009 3:38:56 PM

We've got some big round numbers coming into play today--7400 for the DOW, 1200 for NDX, 1500 for the NAZ and 8000 for the Wilshire 5000. It could be another day of pinning for opex tomorrow (quadruple witching this month).

Keene Little : 3/19/2009 2:39:46 PM

After the completion of the bounce near 2:00 PM it looks like a small impulsive move lower. It should be followed by a correction and then continue lower again. If the pattern is correct we will see new lows this afternoon. But SPY max pain is at 79 so I wouldn't be surprised to see it settle around that number today (which is a little above this morning's low at 78.72 and currently trading at 79.30).

James Brown : 3/19/2009 2:13:22 PM

Stocks Stall After Eight-day Run
(Intraday Update)

The S&P 500 index is stalling after a very impressive eight-day rally that has lifted the index more than 18%. The S&P 500 ran into potential resistance at the 800 level yesterday afternoon. This is a level that is now being bolstered by the descending 50-dma. After such an impressive two-week rally investors might be looking ahead to the weekend and planning to take profits.

Chart of the S&P 500:

Foreign markets were mostly higher as the rest of the world reacts to the FOMC's decision on Wednesday and the sharp rally in U.S. stocks Wednesday afternoon. The Chinese Shanghai composite was up 1.8%. The Hang Seng was up 0.1%. The Japanese NIKKEI under performed with a 0.3% loss. In Europe the English FTSE added 0.3%. The French CAC 40 rose 0.6%. The German DAX rallied 1.1%. Most markets were led by strength in commodities stocks thanks to the plunging U.S. dollar.

The FOMC's decision yesterday to print dollars and spend them buying U.S. Treasuries and mortgage-backed securities has cratered the U.S. dollar index, which is pushing commodities of all types higher. Gold, silver, copper, oil, grains, soybeans...they're all surging. Gold is really grabbing a lot of headlines with the sudden surge. The GLD has rallied from $88 yesterday to almost $95 today. Oil is back above $50 a barrel and it looks like it's going to close there. The USO oil ETF is up 4.5%, breaking out above the $30.00 mark, with new six-week highs.

Chart of the UUP (U.S.dollar):

Thursday did see some economic news. The Conference Board index of leading indicators fell 0.4% in February compared to expectations for a 0.6%. The weekly jobless claims number actually fell 12,000 to 646,000 people but continuing claims jumped 185,000. Economists like to look at the four-week moving average, which is above 654,000, the highest level in 25 years.

Overall the stock market is delivering a mixed performance. Financials, tech, drugs, and healthcare were all down. Commodity stocks in the oil and gold sector, plus cyclicals and transports were higher.

-Sector Movers- 
BKX banking index... -5.7%
BIX banking index... -6.3%
XBD broker-dealers.. -4.6%
OIX oil index....... +3.8%
OSX oil services.... +6.3%
XNG natural gas..... +5.4%
USO oil ETF......... +3.5%
XAU gold & silver... +5.8%
GLD gold ETF........ +1.2%
DRG drug index...... -2.6%
HMO healthcare...... -3.1%
IUX insurance....... -3.3%

Charts for the Major Market Indices:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 small cap index:

Looking for movers on the OptionInvestor.com play list I see that the failed rally in AMZN from yesterday continues today with the stock down 2.7%. REIT stock ARE is getting hammered with a 10% loss to $37.55. The big drop is due to news out that began last night after the market closed. ARE announced it would issue another 4.5 million shares of common stock. If that wasn't bad enough, before the market opened this morning, the company upped that to 7.0 million shares of stock to be sold at $38.25 a share. I am seriously surprised that the stock is not down further. ARE only has 32.3 million shares outstanding. 7 million shares of new stock is a 21.8% increase in the number of outstanding shares.

I have better news with BWLD. The stock is up 1.6% and shares hit our second target at $37.40 today. CAT is also out performing today. The stock is up 3.8% to $28.50. Our call play on HES is doing well. HES gapped open higher at $62.47 and has surged past the $65.00 level. The stock is up 8.5%. Our second target to exit HES was at $62.75. Our bullish play on MOS is also performing well. MOS is up 5.3% to $44.80. Meanwhile the rise in commodity stocks has lifted the steel sector and shares of SCHN gapped above our stop loss this morning closing the play.

Keene Little : 3/19/2009 1:46:09 PM

The bear flag consolidation continues and it continues to look like another leg down will follow. Beware the move out of the top of these kinds of consolidations though--a failed pattern can move quickly in the opposite direction.

Keene Little : 3/19/2009 1:01:42 PM

SPX is trying to hold support at its uptrend line from March 9th but so far looks more like an upward consolidation at support and gives me the impression it's going to break down. But again, this might be one of those days where there's going to be just enough buying to keep the bears back on their heels and playing defensively.

Jane Fox : 3/19/2009 12:49:19 PM

The bears have the ball this morning and it is even confirmed by the bearish TRIN. I don't think this will change much today. Link

Keene Little : 3/19/2009 11:52:24 AM

SPX has made it down to its uptrend line from March 9th, near 785. Two equal legs down is near 783. If there's going to be a recovery it will be from this area.

Keene Little : 3/19/2009 11:38:49 AM

If you're playing the short side today I'd follow a downtrend line from this morning's high with a stop. I don't trust moves during opex, especially today.

Keene Little : 3/19/2009 11:35:00 AM

ES is now testing its overnight low at 783.50 but the pattern to the downside today looks bearish.

Keene Little : 3/19/2009 10:54:12 AM

So far the bounce off this morning's low is just a 3-wave correction. Dropping to a new low should see some quick follow through to the downside and the first downside target would be near SPX 783 (if it drops from here) where the decline would have two equal legs. If it were to drop lower than that I'd look for a move down to the 775 area.

Jane Fox : 3/19/2009 10:53:37 AM

The AD line is climbing but the VIX is anything but bullish.

Jane Fox : 3/19/2009 10:49:47 AM

Here is the Commodity Index. Tagging the 38.20% retracement of the decline from 525 to March lows. Link

Jane Fox : 3/19/2009 10:46:30 AM

NEW YORK (MarketWatch) -- The dollar extended its sharp weakness against other major currencies Thursday, as the Federal Reserve's surprising decision to aggressively pump liquidity into the financial system continued to weigh on the greenback.

The dollar plunged Wednesday in the wake of the Fed's announcement that it would buy $300 billion worth of U.S. government debt in coming months. Link

Jane Fox : 3/19/2009 10:43:56 AM

TF is the first market to tag its ON lows. Link

Jane Fox : 3/19/2009 10:42:14 AM

AD line is recovering and is now back to +734.

Jane Fox : 3/19/2009 10:41:05 AM

The Russell 2000 hit a 61.80% retracement which is not quite to the January 12th swing low. Link

Jane Fox : 3/19/2009 10:33:58 AM

SAN FRANCISCO (MarketWatch) -- Freddie Mac said Thursday that its benchmark mortgage rate declined with bond yields and slower industrial production, falling once again below 5%. The 30-year fixed-rate mortgage averaged 4.98% with an average 0.7 point for the week ending March 19, down from last week when it averaged 5.03%. Last year, it averaged 5.87%. The average has not been lower since the week ending Jan. 15, when it hit an all-time low of 4.96%. "Long-term mortgages followed bond yields lower for the second week as reports of slower industrial production suggested that business spending might ease this year," said Frank Nothaft, Freddie Mac chief economist, in a statement. "Output at factories declined for the fourth consecutive month by 1.4% in February driven by declines in computers and machinery and experienced the largest 12-month drop since June 1975."

Jane Fox : 3/19/2009 10:19:45 AM

WASHINGTON (MarketWatch) - Manufacturing in the Philadelphia region contracted at a slower pace in March, but many of the details of the report were weak, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed diffusion index rose to negative 35.0 in March from negative 41.3 in February. Readings below zero indicate contraction. The index has been negative for 15 of the past 16 months. The improvement was slightly better than expected. Economists were expecting the index to inch higher to negative 39.0. The new orders index dropped nearly ten points to negative 40.7, its lowest reading since July 1980. The survey's current inventory index declined sharply to a record low negative 55.6 from negative 24.3. The employment index fell for the sixth straight month to a record low -52.0. For the fifth straight month, firms reported declines in prices paid for inputs and the prices received for their own manufactured goods.

Jane Fox : 3/19/2009 10:19:16 AM

WASHINGTON (MarketWatch) -- With losses in the financial and job markets taking their toll, the recession will continue in the near term, and a return to strong growth is unlikely until next year, the Conference Board said Thursday.

The index of leading economic indicators fell 0.4% in February, following a downwardly revised gain of 0.1% in January. The interest rate spread was the largest positive contributor in February, while initial claims for unemployment insurance were the largest negative contributor.

"Strengths and weaknesses were roughly balanced" in the index, said Ken Goldstein, economist at the Conference Board. "Financial market volatility remains strong, and the credit market freeze is relenting very slowly."

The index is designed to forecast economic activity six to nine months ahead. For February, six of the 10 indicators rose, and four fell.

Jane Fox : 3/19/2009 10:18:31 AM

There is something really bothering me on this chart of Gold. I use a fairly quick MACD so it should be following the price closely and as you can see it is not, heck the MACD is not even above 0. This is making me wonder if the little rally today is a head fake. Link

Keene Little : 3/19/2009 10:17:04 AM

The one big caution for today is that opex could skew things, especially if there's going to be an effort to hold SPX as close as possible to 800.

Keene Little : 3/19/2009 10:14:42 AM

ES now looks like it has a 5-wave move down from this morning's high which should be indicating to us that a high is in. Watch for support near 783.50 to hold (or above) and a correction to this morning's quick drop. That should then be followed by at least another leg down to a new low for the day.

Jane Fox : 3/19/2009 10:06:22 AM

AD line has now fallen to +387. I do believe the bears will take control today, they need to regain some of the territory the bulls have grabbed from them in the last few weeks.

Keene Little : 3/19/2009 9:59:15 AM

No real surprise here with the gap n crap. The overnight low for ES was 783.50 so that will be potential support for the pullback.

Jane Fox : 3/19/2009 9:57:33 AM

VIX is making new daily highs not supporting the bullish AD line. ES is following the VIX's lead to new daily lows.

Jane Fox : 3/19/2009 9:56:26 AM

AD line is a bullish +1143 but has been as high as +1500

Jane Fox : 3/19/2009 9:52:20 AM

Gold is up $60.

Jane Fox : 3/19/2009 9:51:48 AM

Crude is up $3.79 so far today breaking through resistance from the Jan 26th swing high.

Jane Fox : 3/19/2009 9:30:35 AM

Yesterday SPX reached a very important resistance, a 61.80% retracement of the decline from Jan 28th swing high to the March lows, support probably turned resistance from the Jan 20th swing low and a century number 800. Link

Keene Little : 3/19/2009 9:30:12 AM

ES is back up testing yesterday afternoon's high so it will obviously be important to the bulls to to not see a failed test.

Jane Fox : 3/19/2009 9:29:44 AM

Overnight all markets were able to challenge their previous day highs but only the Russell 2000 (TF) breached theirs, albeit briefly. I suspect the markets to take a break and retrace today and probably tomorrow. This 7 day rally is getting a tad old. Link

Keene Little : 3/19/2009 9:21:38 AM

Equity futures had pulled back for much of the overnight session but then ramped higher from their lows just past 4:00 AM with ES charging higher by almost 17 points. It's one of those ramp jobs that's hard to trust and makes me think we're definitely seeing a jam to the upside for opex (to perhaps get SPX to settle as close as possible to 800). But be careful at the opening for a potential gap n crap.

Jane Fox : 3/19/2009 9:21:29 AM

Yesterday you would have thought the Goldbugs were toast but lo and behold the entire bearish Head and Shoulders has been totally blown out of the water and Gold is up $59 today. A bearish pattern that is almost completed and then negated is quite bullish. Link

Jane Fox : 3/19/2009 9:19:13 AM

Crude is challenging its upper trendline and resistance from the January 26th swing high. This should be a very good spot for it to take a break and retrace back to at least the lower trendline. Since I am not a big fan of channels I put on a fib retracement and I see a 38.20% retracement could take this market back to the Feb 6th swing high. Link

Jane Fox : 3/19/2009 9:08:28 AM

WASHINGTON (MarketWatch) - The number of people collecting state unemployment benefits jumped by 185,000 to a record seasonally adjusted 5.47 million in the week ending March 7, while new claims dipped by 12,000 to 646,000 in the week ending March 14, the Labor Department reported Thursday.

The initial claims figure covers the same week that the government surveyed hundreds of thousands of businesses and households to collect information for the March unemployment report. Initial claims rose by 15,000, or 2.3%, in the March survey week compared with February.

The four-week average of new claims rose by 3,750 to 654,750, the highest level in 26 years. The four-week average is considered a better gauge of labor market conditions than the volatile weekly number because it smoothes out one-time distortions caused by holidays, bad weather or strikes

Keene Little : 3/18/2009 10:03:54 PM

Thursday's pivot table: Link

Bonds made their biggest move since 1987 as the Fed tries hard to keep yields low while they make an effort to monetize US debt. The stock market also shot out of the cannon after the FOMC announcement but SPX ran smack into resistance and closed at it today--its downtrend line from January and its 50-dma.

Whether there will be follow through to the upside on Thursday or the start of a larger pullback (or worse) remains to be seen. During the last highly inflationary period (the 1970s) it was not a good time to be invested in the stock market so Wednesday's post-FOMC reaction may have been just a knee-jerk by the shorts.

I've relabeled the wave count on the daily SPX chart to something that I think all the indices can agree with (unlike the difference between the NDX count I showed early Wednesday and the SPX count I've been showing). I'm going to get them all on the same count as I show on the SPX daily chart below.

The move down from November fits well as an ending diagonal (descending wedge) because each move down has been a 3-wave move instead of an impulsive 5-wave move. It's been driving me batty trying to figure out why the market has been reversing back up after each 3rd wave down. The new count makes much better sense of all that since an ending diagonal has only 3-wave moves with a total 5-wave count. SPX daily chart: Link

The rally leg from March 6th, labeled as the 4th wave bounce within the larger-degree ending diagonal 5th wave down from November, may have finished at today's high and we could get the last leg down as depicted in dark red (downside target still being 625-635).

A short-term bullish alternative is for a pullback and then new high (shown in pink) to perhaps the 850 area in April and then the final 5th wave down into May (which matches some cyclical selling pressure into May).

Regardless how this plays out from here we have some unfinished business to the downside and we have NOT seen the bottom yet, but we're close.

OI Technical Staff : 3/18/2009 9:59:59 PM

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