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Keene Little : 3/23/2009 4:40:12 PM

What does your priced target for the sox.x approximately equates to the SMH?

Doing the exact same analysis on SMH as I just did on SOX points to a high of 20.57 as early as March 27th and as late as April 6th.

Keene Little : 3/23/2009 4:36:08 PM

Playing with some trend channels and Fibs I'm showing on the SOX daily chart that it could rally up to the 257 area by early April and then reverse back down: Link . With the clean break of the downtrend lines from January now, on the broader averages as well, it's looking like the rally could make it a little higher over the next week or two (with some pullbacks along the way of course) before completing a slightly larger upside pattern.

Keene Little : 3/23/2009 4:41:54 PM

I've been looking over the semiconductor index (SOX) because I think it's a good proxy for techs which in turn is a good proxy for the blue chips. They're not directly correlated but bullishness in the techs, or lack thereof, can give us some clues for the broader market. The weekly chart supports the idea that we'll see a little higher for the SOX to finish an a-b-c correction from the November low. SOX weekly chart: Link

Two equal legs up from November would be just shy of 257 which also would have it tagging the top of its parallel down-channel from last year. You can see from the EW labels on the chart the need for a 5th wave down and a downside projection for it (where it would be equal to the 1st wave) is near 39 by the end of June (where it crosses the bottom of its down-channel). I have no idea if it will play out this way but it's certainly the potential. This bear market rally is to trade, not hold.

Jane Fox : 3/23/2009 4:12:46 PM

Who let the bulls out!!!!

Jane Fox : 3/23/2009 4:12:37 PM

DOW closes up 497 points GEESH!!!!

Keene Little : 3/23/2009 4:00:21 PM

SPX has also pushed up to its broken uptrend line from March 9th. There's no sign yet that the rally is going to fail anytime soon exept for the lack of strength behind what looks like a very strong rally (in points). Where's the volume? Why isn't the banking sector above last week's highs? SPX 60-min chart: Link

Jane Fox : 3/23/2009 3:55:10 PM

My goodness gracious the DOW is up 462 points.

Keene Little : 3/23/2009 3:37:08 PM

NDX continues to press up underneath its broken uptrend line from March 9th. If we find the market finishes near its highs today, with another one of these mini-capitulations into the close, I wouldn't be surprised to see a reversal back down tomorrow. So if you're long the market you may want to at least button up your stops and protect what you've got. NDX 60-min chart: Link

Keene Little : 3/23/2009 2:59:13 PM

Nice little short squeeze in the last hour. When the market has an agenda, which it showed that it had this morning, it's not wise to step in front of it hoping for a reversal. Too many did and how they're getting squeezed out. We're coming into the last hour so the squeeze needs to hold now.

James Brown : 3/23/2009 2:59:16 PM

Episode IV, A New Hope
(Intraday Update)

No, I'm not talking about the Star Wars film from 1977. I am referring to the U.S. Treasury's latest plan to save the financial system and attacking the problem of toxic, mortgage-backed securities, which have recently been renamed to "legacy securities". Last year Treasury Secretary Paulson tried to solve this problem more than once. This year our new Treasury Secretary Tim Geitner flopped on his first attempt to present a plan to the market back in February. I figure ongoing drama to buy these "legacy securities" and clear up bank balance sheets is probably around episode four.

Over the weekend the Treasury's new plan was put together and details, thus far, have powered a big rise in financials. For the more cynical traders out there this is probably just another short-squeeze. The headline today is that the treasury will use up to $100 billion in TARP funds to fuel financing to buy up to $1 trillion (with a T) in toxic debts from the banking system. The plan calls for both the government and the private sector to invest equal amounts of money but the FDIC would guarantee the debt. This gives both public and private investors upside should they sell the debt for a profit down the road but taxpayers almost all the downside.

This new plan, or new hope for a plan, sparked a massive global rally in stocks led by financials. Asian markets were up strongly. European markets were up. The U.S. markets raced toward last week's highs.

-- Major Market Movers --
Chinese Shanghai Composite +1.9%
Hong Kong Hang Seng....... +4.7%
Japanese NIKKEI 225 index. +3.3%

French CAC 40 index....... +2.8%
German DAX index.......... +2.6%
British FTSE 100 index.... +2.8%

S&P 500 index............. +5.1%
NASDAQ Composite.......... +4.5%
Dow Jones Industrial Avg.. +5.0%

The BIX and BKX banking indices are up 11.4% and 10.5% respectively. Shares of Citigroup (C) are up 15% to $3.00 while Bank of America (BAC) is up 17.4% to $7.25. J.P.Morgan (JPM) is up 14.6% to $26.50. International banking giant HSBC holdings (HBC) is up 14.5% to $30.00. Meanwhile Deutsche Bank (DB) is up 11.5% to $41.85 and breaking out over resistance to new four-month highs.

Another major headline this morning was the Existing Home Sales report for February. Economists were looking for a drop in the sales pace to a 4.45 million homes a year. Existing sales actually rose more than 5% to a 4.72 million unit pace. The ongoing plague of foreclosures and short-sales accounted for nearly half of current sales with these "distressed homes" going for nearly 20% under market. The National Association of Realtors said that February's 5% jump in existing home sales was the biggest percentage move in almost six years. Unfortunately the high-number of foreclosures has pushed the median home price to $165,000 a 15.5% drop from a year ago, this was the second highest year-over-year price decline on record.

In other news commodities were mixed. The early morning rally in the U.S. dollar has faded lower. Gold futures were initially down but have recovered to unchanged. Yet crude oil is a stand out. It could be hope that this new treasury plan will finally ignite some economic growth. Or it could just be more short covering but oil was up strong. The USO oil ETF is up about 3.3% to $31.78. Crude oil futures were over $53 a barrel. Potentially fanning the flames in the oil sector was news that Suncor Energy (SU) was buying Petro-Canada in a stock-for-stock deal worth about $18 billion. Petro-Canada's shareholders will receive 1.28 shares of Suncor for each shares of Petro-Canada. There has been a lot of expectation that the oil and energy sector would eventually see more M&A activity and today's news could renew investor speculation.

Let's look at charts for the U.S. markets. You can see that the S&P 500 has rallied above the 800 level and appears to be breaking out over its simple 50-dma. The intraday chart shows the S&P 500 testing last week's highs. The NASDAQ is breaking out over its 100-dma and rising past its highs from last week near 1500. The Dow Industrials are up 4.25% and just barely rising past last week's highs. The Industrials are nearing potential resistance at their simple 50-dma.

Chart of the S&P 500:
Link

Chart of the NASDAQ:
Link

Chart of the Dow Industrials:
Link

A quick check of the OptionInvestor.com play list reveals that AMZN is doing well. The stock is up 5.1% to $73.55. MOSAIC (MOS) is also up more than 5%. Some of our new bearish plays are obviously not doing so well considering the 4% market rally. BNI is nearing our stop. FSLR has hit our stop. PCP has hit our stop.

Jane Fox : 3/23/2009 2:55:07 PM

Markets are all now making new daily highs as is the AD line.

Keene Little : 3/23/2009 2:44:28 PM

The market is getting pushed back towards today's highs. There's clearly an effort to hold things up and keep the bears away. Follow-through tomorrow will be key and based on some of the signs I'm seeing in this rally I would not bet on it. But shorting today's rally is very tricky because of the apparent agenda to hold it up. The last hour might be interesting.

Jane Fox : 3/23/2009 2:27:03 PM

Here is another very good example of when price moves sideways and the MACD falls. Many technicians call this bearish but I see it as bullish. Of course you do really need the internals to confirm that determination as well, which they are today. Link

Keene Little : 3/23/2009 2:14:21 PM

A good test for the bulls today will be to hold the 50-dma on a closing basis, which means it will need to close at or above 795.59 (and this afternoon it looks like that's where it's trying to hold above).

Keene Little : 3/23/2009 1:28:50 PM

I might be mistaken but I assume the Geithner plan is to help the banks so I would have expected the banks to be leading the northbound parade. The fact that they're not is another caution sign hung over this rally.

Keene Little : 3/23/2009 1:26:51 PM

Linda mentioned the Trannies not able to test last week's highs and neither are the banks--the BIX is just now coming up to a 62% retracement of the drop from Thursday morning's high. So we don't have the transports or the banks following today's rally to marginal new highs that we're seeing in the broader averages. Might these more visible averages be getting some help from someone so that it looks like the market is happy with Geithner's plan? I'd be accused of being a conspiracy theorist if I proposed such a thing (wink).

Keene Little : 3/23/2009 1:10:12 PM

SPX 804 continues to act as resistance, bearish divergences continue to hold, volume is weak--what's to trust about this rally? Just don't argue with price.

Jane Fox : 3/23/2009 12:57:10 PM

Crude is not doing what I expected either this morning. I thought it needed a retracement back to the lower trendline before it continued this rally. Link

Jane Fox : 3/23/2009 12:51:53 PM

I see Linda and I are on the same page here.

Jane Fox : 3/23/2009 12:42:59 PM

This "X" means MACD and price have diverged - this is a bearish divergence and should be telling you to exit bullish positions and/or not to open any new bullish ones. The AD line and VIX are telling you to not open bearish positions however. Link

Linda Piazza : 3/23/2009 12:40:07 PM

Another divergence I'm noting this morning is that the TRAN, unlike the SPX, OEX and Dow, is not either closely testing or exceeding last week's high. That high for the TRAN was its 2689.80 high on 3/18. It's currently 2634.33 with a high today of 2641.03.

Again, this is not proof of anything except the need to do what you need to do anyway if in bullish trades: guard your profits. It's not a guarantee that prices on equity indices will roll over or that shorts will prevail. It's just another sign (like the warning the VIX offers) that not quite all the ducks are in a row. Not yet, at least.

Linda Piazza : 3/23/2009 12:26:26 PM

This is actually Linda, and not Keene's alter-ego. Smile. I wanted to sign in long enough to point out that the VIX this morning again hit its 200-sma and then bounced back above it, right up to the 200-ema, where it's now hovering. As the SPX hit its high of the day, the VIX was not concurrently hitting its low of the day. The VIX is not a great market-timing tool, but bulls obviously want the VIX to lose that 200-sma support and to do so for more than a single day. Last week, the VIX closed at the -sma on 3/17 and below it on 3/18, both actions occurring for the first time since early September, 2008. These averages are sometimes important for the VIX--just look at late 2007 through April, 2008, as many tests occurred. The VIX can of course drop through that MA support and that's what bulls want to see happen, but they should be aware that it could as easily bounce from it. My charts show that 200-sma at 41.14 as I type.

The TED spread has also been dropping, late last week confirming a head-and-shoulders on the daily chart and dropping through to its target near 100-101 (101.12 currently). There's potentially strong support in the 0.92-0.97 area, so equity bulls would like to see the TED spread below that, too, but should remain aware for the time being that, although the TED spread has been headed lower (generally bullish for equities) after a kiss-goodbye test of a former trendline, it hasn't yet confirmed by a drop through this or lower support.

So, these two indicators that I watch are showing that they're at key levels, primed for either bounces from areas from which they've bounced before (negative for equities) or to fall through that support. I don't see rally confirmation yet, but that can come. Bulls should remain protective of profits here, just in case the opposite occurs.

Keene Little : 3/23/2009 12:06:31 PM

NDX just tagged its broken uptrend line at 1236. SPX's line is still higher, now near 812. Bearish divergences continue against last week's highs and volume continues to run considerably lower than last week's. There may be an agenda to push the market higher today but it continues to look like it's not getting a lot of institutional participation.

Keene Little : 3/23/2009 12:03:23 PM

The DOW is now getting close to retesting its broken uptrend line from the March low, currently near 7620 or about 20 points higher.

Keene Little : 3/23/2009 11:23:24 AM

As Jane and I have both observed, the negative divergences on the oscillators are telling us (so far) to be cautious about trusting today's big rally. From a price standpoint it's a very strong rally but it seems to be lacking power behind it. Volume is running significantly lower than last Thursday's and Friday's volume, which of course were down days.

Jane Fox : 3/23/2009 11:10:31 AM

The only thing you have to look at so far today is the trajectory of the AD volume. That should be telling you this is not a market to fade. Link

Jane Fox : 3/23/2009 11:08:50 AM

I have overlayed my 8,18,6 MACD onto the daily SPX chart. The MACD has not made a swing high yet so it is hard to establish exactly where it will be but it certainly looks like we have a huge bullish divergence building here. Link

Jane Fox : 3/23/2009 11:03:35 AM

I was thinking the bulls would pull back to at least 750 before staging another run at 1-800-resistance but it looks like they weren?t listening to me. Link

Keene Little : 3/23/2009 10:41:09 AM

As the indexes test last week's highs, unless they can keep rallying and lift the oscillators higher, we're seeing some bearish divergences here. DOW 60-min chart: Link

Keene Little : 3/23/2009 10:23:52 AM

After breaking its uptrend line from March 9th the RUT is now back up for a possible retest of it near 417. NDX would retest its broken uptrend line near 1231, about 8 points higher. SPX would have further to go to reach its line near 807.

Jane Fox : 3/23/2009 10:18:31 AM

If the bears are able to overpower the bulls today and bring these internals even back to neutral that would be quite a coup, although, I truly don't think that will happen. Link

Jane Fox : 3/23/2009 10:15:02 AM

WASHINGTON (MarketWatch) - Sales of pre-owned homes rose 5.1% to a seasonally adjusted annual rate of 4.72 million in February, boosted by "deep price discounts," the National Association of Realtors reported Monday. It was the largest percentage gain since July 2003.

Sales are down 4.6% in the past year, the industry trade group reported. Sales increased in all four regions. Sales of foreclosed properties or short sales accounted for about 45% of sales, the real estate trade group said. Economists surveyed by MarketWatch were expecting a decline to a 4.45 million pace from January's 4.49 million annual rate.

The median sales price dropped 15.5% in the past year to $165,400. It's the second largest year-over-year price decline on record, after January's 17.5% drop.

Inventories of unsold homes on the market rose by 5.2% to 3.80 million, a 9.7 month supply at the February sales pace. Inventories, which are not seasonally adjusted, typically rise about 5% in February.

Keene Little : 3/23/2009 10:08:58 AM

ES is now nearing its pre-market high at 790.75 so watch to see if it holds as resistance.

Jane Fox : 3/23/2009 9:59:54 AM

... however, since the open the markets have gone nowhere but sideways. This is always the problem with a gap up or down, all the energy has already been used up.

Jane Fox : 3/23/2009 9:58:18 AM

DOW is up 152 points so far today.

Keene Little : 3/23/2009 9:42:37 AM

The downtrend line from January for SPX is now near 789 and its 50-dma is just under 796.

Jane Fox : 3/23/2009 9:39:33 AM

AD line is a very bullish +2098

Jane Fox : 3/23/2009 9:28:23 AM

The bulls have control of the overnight session but are losing a little of that control as we get nearer to the open. As you can see both ES and YM were able to break their previous day highs, NQ did as well but not very convincing and TF didn?t even tag its PDH. Link

Keene Little : 3/23/2009 9:25:26 AM

Equity futures rallied strong overnight to a high at 8:00 AM but have dropped fairly sharply from that high. Still, we've got a big gap up to start the day. Looking at ES all-hours shows it tagged its 50-dma again at this morning's high (790.75), marginally breaking its downtrend line from January in the process (as it did on Thursday and Friday), which is currently at 782 where ES is trading at the moment. That makes the pre-market high an important level for the bulls to break otherwise it continues to act as strong resistance.

Jane Fox : 3/23/2009 9:17:53 AM

Crude is consolidating at its January 26th swing high, which is obviously resistance. The most bullish scenario is to retrace back to support at the February 6th swing high and the bottom of the channel then try again. This would make a higher low and when resistance breaks (I do think it will break) you have a confirmation of the higher low and the trend is up Link

Jane Fox : 3/23/2009 9:11:02 AM

TEL AVIV (MarketWatch) -- Suncor Energy said it will acquire Petro-Canada for about $15 billion of stock, combining two major Canadian energy providers with particular strength in oil sands. In a statement on Monday, the Calgary, Alberta, (my home town) companies said that the terms of the transaction call for Petro-Canada (PCZ) holders to receive 1.28 Suncor shares for each of their shares.

Petro-Canada shares, of which nearly 485 million are outstanding, closed Friday on Wall Street at $24.01, so the deal values each share at $30.73. Suncor (SU) shares closed at $25.29. Both stocks are off more than 60% from their 52-week highs, reached last May.

Jane Fox : 3/23/2009 9:06:33 AM

LONDON (MarketWatch) -- The U.S. Treasury Department on Monday detailed a plan designed to help investors purchase $500 billion worth of toxic assets that remain on bank balance sheets. The program will use $75 billion to $100 billion in capital from the troubled asset relief program, or Tarp, and capital from private investors. Under the plan, the Treasury and private capital will provide equity financing and the Federal Deposit Insurance Corp. will provide a guarantee for debt financing issued by the public-private investment funds to fund asset purchases. "The goal of this program is to restart the market for legacy securities, allowing banks and other financial institutions to free up capital and stimulate the extension of new credit," the Treasury said in a news release.

Keene Little : 3/22/2009 10:40:03 PM

Monday's pivot table: Link

SPX smacked its head on resistance near 800 (previous price support, downtrend line from January, 50-dma) as it became overbought and it was really no surprise to see it start to pull back from there on Thursday and Friday. What must be a little disappointing to bulls is the fact that the post-FOMC rally was given up in less than a day and a half. Each time we see a Bernanke-induced rally it seems to be lasting less and less time.

I think the market has caught onto the fact that the Fed really is powerless to stop the deflationary spiral. The debt deleveraging process will need to continue and the Fed can fight it all it wants (spending our money to do so) but in reality the market will need to flush the wastes out. While I don't believe we've seen the low for the year I do think we're very close. Whether we make a new low in the next 2 weeks or next 2 months will be dependent on whether the post-FOMC highs hold this coming week.

On the daily SPX chart I've been showing a wave count that requires one more new low to finish the decline and set us up for a multi-month rally. This count requires the pullback that started on Thursday and Friday to continue. If we get a pullback, perhaps down to the SPX 750 area, that is then followed by a rally back above this past week's high near 803 we will likely see it push on up to the downtrend line from November (near 850). After that I'd be looking for a decline to a new low into May. SPX daily chart: Link

But if we continue down from here we should see a low around 635 for THE bottom for the year (it might be tested in a few months). It would make for a very good buying opportunity. There is the possibility for a severe crash-like decline (well below 500) but I don't see that in the cards at this time. I'll have a better feel for that potential once we make a new low (assuming we'll get it). Just stay aware of the possibility if you're long the market--don't let a big move go against you but instead get out and look for lower to get back in.

As the SPX 60-min chart shows, the downtrend line from January, near 787 Monday morning, should provide some clues. If it's tested and still holds as resistance it will be a good short play. If it breaks and then acts as support you might not have to wait for a break above 803 to know we've got higher highs coming which would be a good long play. SPX 60-min chart: Link

OI Technical Staff : 3/22/2009 9:59:59 PM

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