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Keene Little : 3/24/2009 2:48:13 PM

Bonds are suddenly taking off to the upside--big spike up in the past 20 minutes. If that's the beginning of an assett allocation program watch for a selloff in equities in the final hour.

Keene Little : 3/24/2009 2:19:23 PM

If the market manages to make one more minor new high watch for failure to short it. This is setting up now for at least a larger pullback (SPX 802) before heading higher again, or it will be the start of a much deeper correction of the rally from March 6th.

Keene Little : 3/24/2009 1:24:57 PM

The bulls are still showing their stuff as the DOW is the first to move back into the green. A minor new high (SPX 826) could set up a deeper pullback but from an up-channel perspective we could see SPX make it up to the 840 area so don't fight price.

James Brown : 3/24/2009 12:24:56 PM

Stocks See a Mild Pullback
(Intraday Update)

The U.S. markets dipped a little on Tuesday morning after Monday's big rally. It's normal to see some profit taking after such a big one-day move like the 500-point rally we saw yesterday. The profit taking thus far is actually pretty mild and shows some impressive relative strength in the market. The S&P 500 is down less than 7 points to 816. The NASDAQ composite is under performing with a 1.4% decline to 1531. The Dow Industrials are off about 50 points to 7725.

Overseas markets were mixed. The Asian exchanges displayed plenty of strength, probably as a reaction to yesterday's big rally here in the U.S. The Chinese Shanghai index was up 0.5%. The Hong Kong Hang Seng was up 3.4% marking a very strong five-day rally where the index has gone almost straight up. The Japanese NIKKEI was also very strong with a 3.3% gain following yesterday's big rally in Japan.

Some troubling economic data weighed on the European markets. Britain's latest CPI numbers revealed a 3.2% jump in inflation while the latest employment numbers showed another month of declines to mark an all-time high for unemployment. The French CAC 40 is only up about 0.2%. The German DAX is up close to 0.3%. The English FTSE was off 1.3%.

Here at home the news outlets were focused on Federal Reserve Chairman Ben Bernanke's and Treasury Secretary Tim Geitner's appearance before yet another Congressional committee. Congressional leaders grilled them over the AIG bonus scandal while Ben and Tim were there asking Congress for additional powers to handle the meltdown of non-bank financial firms.

Another story on the AIG bonus issued surfaced today. New York Attorney General Andrew Cuomo said that most of the AIG's biggest recipients of the $165 million on bonuses have agreed to return them. The Wall Street Journal reported that almost $50 million on bonuses have been returned so far.

A quick look at the markets and you might notice that the U.S. dollar is up slightly and that's putting pressure on commodities. The GLD gold ETF is down 1.4% and near $90.00. The USO oil ETF is off 1.9% and trading back toward $31.00. The only sectors that are not seeing any profit taking today are networking stocks, cyclicals, and the railroad stocks. Everything is else is off about 1% to 2.5% with the HMO healthcare index suffering the worst with a 3.7% decline.

Chart of the S&P 500:
Link

Chart of the NASDAQ:
Link

Chart of the Dow Industrials:
Link

Checking the OptionInvestor.com play list I see normal profit taking after yesterday's rally. There is nothing out of the ordinary although shares of CAT almost hit our first target at $29.90 this morning. I do see shares of Nordstrom (JWN) breaking out over resistance at $16.00. The stock has hit our entry point to buy calls. JWN has a lot of short interest and could see a short squeeze. MOS came close to hitting our first target under $46.00 this morning. Readers may want to take some money off the table here.

On PremierInvestor shares of STLD have broken higher and the stock hit our trigger to buy it. STLD is currently up 6.4% at $8.78.

Keene Little : 3/24/2009 12:13:04 PM

So far we have nothing more than just a little consolidation after yesterday's big ramp higher and that's bullish. In fact the market could get a decent pullback today and remain bullish. It really takes a break below 785 to suggest something a little more bearish is in progress. So while I'm expecting at least a pullback, either directly from here or from a little higher (about 826), I'm going to be looking at short-term moves to help identify what the larger pattern might be. And as long as the up-channel holds, as shown on the 60-min chart, the market remains bullish for now. Link

Keene Little : 3/24/2009 10:27:19 AM

The SPX up trendline from Friday is now near 813 so a break of it and this morning's low would be good confirmation that the leg up has completed. Of course I thought that after the up trendline from March 9th last Thursday was broken. Then the Geithner rally proved the rally wasn't over yet. But a break to a new daily low would be the first heads up that at least the leg up from Friday has completed. Then the lower support levels will come into play.

Jane Fox : 3/24/2009 10:16:24 AM

Well it has turned out the AD line is taking a back seat to the VIX and it looks like the bulls are taking control again. I wouldn't be thinking about going long just yet though the AD line is still a bearish -1095

Keene Little : 3/24/2009 10:02:28 AM

So far SPX 810 is holding (up trendline from Friday afternoon) so that becomes an important level this morning--if that breaks then the next support level, as Jane just pointed out, would be near 800 which has clearly acted as support and resistance this year. Then the up trendline from March 9th near 785 and climbing.

If the market is able to keep the rally going from here I see some Fib correlation around 826 for a potential high.

Jane Fox : 3/24/2009 9:55:18 AM

If the monster rally we had yesterday was more than just short covering any retracement "should" find support at the January 20th swing low blue trendline. Link

Jane Fox : 3/24/2009 9:53:20 AM

VIX is hovering at daily lows. Nope just spiked upward. AD line is making new daily lows. I think this will be one of those days when the VIX takes the back seat to the AD line.

Jane Fox : 3/24/2009 9:51:57 AM

I see Bernanke is testifying at 10:00 today.

Jane Fox : 3/24/2009 9:51:01 AM

My goodness the TRIN is 2.43. It is bearish out there this morning but I didn't think that bearish.

Jane Fox : 3/24/2009 9:45:37 AM

Gold is down over $30.00 this morning . Link

Jane Fox : 3/24/2009 9:44:48 AM

Crude seems to be taking a breather today and is staying nicely in the upward channel. Link

Jane Fox : 3/24/2009 9:43:09 AM

The overnight session was mostly a consolidation at yesterday's highs but the lower lows and highs show the bears did show up. Link

Keene Little : 3/24/2009 9:40:30 AM

If SPX 810 (apporximately) holds I see the possibility for another push higher to finish the rally leg from Friday afternoon which in turn should be the last leg up to complete the rally from March 6th. Either from here or another minor new high we are due a larger pullback at a minimum to corrrect the rally.

Jane Fox : 3/24/2009 9:39:30 AM

Good morning all. I'm not sure how long I will be here today. My husband has had the stomach flu for 4 days now and I seem to have developed a few symtoms myself.

AD line is a bearish -1618.

Keene Little : 3/24/2009 9:31:31 AM

No real surprise to see equity futures down this morning and it's looking like we'll see them open close to their pre-market lows. First potential support level for a small pullback will be near SPX 810 and then down at its broken uptrend line from January near 785. If it gets that low today we should have a pretty clear picture of the pullback pattern to help determine whether it will be a good buying opportunity or not.

Keene Little : 3/24/2009 12:18:59 AM

Tuesday's pivot table: Link

Monday's strong rally convincingly broke some tough resistance levels and even though there was much lower volume behind Monday's rally you wouldn't know it by looking at prices. Just stay aware that there may not be strong institutional participation and that's always to be preferred in a bullish move. And as for the strength of the rally and whether or not it means bullish things ahead of us, keep in mind it has been observed in the past that 300+ point rallies have occurred only during bear markets. There are no such rallies in a bull market.

For SPX the down trendline, 50-dma and previous price support, all located near 800, were broken on Monday. That increases the likelihood that we'll see the rally continue up to the next resistance level near 870 where the move up from November's low would achieve two equal legs and it would hit its down trendline from November. But that bullish scenario means a pullback, which could easily start on Tuesday, needs to hold above Friday's low.

As shown in dark red on the daily chart, a move up to 870 could set up a reversal for the move back down to a new low in May (no, we haven't seen THE low yet), with a downside target near the 1996 low of 606. For now a bearish heads up would be a move back below its broken down trendline from January, currently near 785. That line should hold as support, if it gets retested, before continuing higher. A break below Friday's low near 766 would spell trouble for the rally and below 700 would say we're heading for the new low sooner rather than later. SPX daily chart: Link

I've shown the Wilshire 5000 index several times recently because it shows a picture of volume that is not supporting the current rally (but don't argue with price--it's simply a warning at this point). You can see on the chart how Monday's volume was low as compared to down days: Link . And the advance/decline line has been declining while the rally has been progressing off the March low. These are not market timing signals as much as they're warnings to not trust the rally. Link

Lastly, we've seen countless times in the past when we have these mini-capitulation rallies, with big points and closes near their highs, it's been common to see reversals the next day. Rallies like we had on Monday have oftentimes been good times to cover long positions. Geithner got his rally so there might be a little less effort to hold the market up on Tuesday. Just a theory.

OI Technical Staff : 3/23/2009 9:59:59 PM

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