Market Discussion

[guitarman]

Hi All
Thought this was an interesting short term analysis.
I'm with David thought that low volume means folks are holding their shares.
Best
GMan

http://investmentpostcards.wordpress.com/2007/08/27/temporary-stock-market-bounce-or-sustainable-rally/

[Ramsburg]

Just a quick update:

Today's session was ugly and not nice to watch, but given the recent big pullback and taking in consideration the current volatility in play, this wasn't completely out of context. Apparently the motivation for today's sell-off was the Fed Minutes, which didn't brought anything new, just the same fears that pushed the markets down some weeks ago.

From a technical perspective, the recent breakout was washed away from the charts and the SPX is once again trading below the 1460 reference level and the ema-200. I guess climbing 110 points in 7 sessions without breathing was not sustainable... I was expecting a little sell-off before watching the breakout of 1460 last week, instead we have now this bigger sell-off :-(
The current layout is still compatible with an inverted H&S pattern (assuming a second shoulder is done during the next 20 points down from this spot). It's difficult to draw short term supports with this volatility, but despite the short term, the «big picture» is still intact at this point.

Regards,

[tokyopua]

The action yesterday filled some gaps to the downside on the major indices (there was one in the $NDX) and left some gaps to the upside which should at least fill so that much upside should be baked in.  Volume yesterday was half that of the other most recent big down day (per CNBC report) so it also may not be so significant.

My take is there was panic from the Fed minutes, but I totally expected there would be no cutting bias since there had been none in the last statement and then suddenly they were cutting the discount rate out of nowhere a few days later as if they suddenty realized there was a bigger problem than inflation. 

[kslifka]

Well I don't think were done with the down turn quite yet.  I feel like we're in no man's land right now.  I feel we at least have to test or come close to the lows of mid-August...and there is still a possibility of hitting the 5-year trend-line.   which on the Nasdaq stands around 2200.

Also I don't see this debt thing going away anytime soon.  When financials are hurting in a capitalistic society...I sense problems.

However, I think the positive growth from Asia and South America will eventually turn the markets much higher.  We just need to get through this credit mess right now.  I would like to see another capitulation day......and that will be the day to jump in to these high growth stocks.  Otherwise, right now...I'm selling into strength and buying in extreme weakness.

[BigSully1]

$900M dollar bet.



http://www.moneymorning.com/2007/08/29/this-900-million-bet-has-global-traders-talking%e2%80%a6/

[Ramsburg]

Well I don't think were done with the down turn quite yet.  I feel like we're in no man's land right now. 

I agree kslifka... and untill we see the market breaking new highs... or new relative lows, we'll stay in doubt

Volume yesterday was half that of the other most recent big down day (per CNBC report) so it also may not be so significant.

Thats true, and yesterday was the same volume again

$900M dollar bet.
http://www.moneymorning.com/2007/08/29/this-900-million-bet-has-global-traders-talking%e2%80%a6/

Hi BigSully1,
I don't remember seeing anything like that in options.... thanks for sharing, this is important information.

Quick Chart Update:
Yesterday’s candle was an indication of strength; the SPX has quickly recovered all of Tuesday’s losses (actually, the SPY closed above the body of Tuesday’s candle).
The index closed above 1460, but this isn’t a reference anymore, the resistance stands now at 1479 points and we can introduce a new short term support at 1432.

Regards,

[BigSully1]

$900M dollar bet.



http://www.moneymorning.com/2007/08/29/this-900-million-bet-has-global-traders-talking%e2%80%a6/

Also read link at bottom of article. China insists it won\t drop dollars.

[Garoh]

Hi
i'll share you you my idea about the market action ..

this is a short term technical analysis for Nasdaq :

On the 15 minutes chart Nasdaq is at a downtrend line pointing to about 2563 this will work a a resistance to take the nasdaq to 2540 .. in case we break this resistance this will lead us to 2580 however if it fails ! this means we'er going to see 2520 today ...

This will help you for knowing the market direction in those cases ....

I wish you all best luck

[bourbonstreet_crawdaddy]

Interesting Article - Looks like a setup for a strong rally!

http://www.businessweek.com/investor/content/aug2007/pi20070813_329324.htm

Can Stocks Hold the Line?
The S&P 500's ability to hold support around 1430 in this volatile environment would be a victory for the bulls

From Standard & Poor's Equity <ResearchFear>, relief, and panic sum up the wild swings in emotions we saw last week as price volatility on a daily basis soared. August is often the slowest trading month of the year but not in 2007. We have seen record volume on the Nasdaq while NYSE came very close to setting a record. Let's hope September and October, which have typically been tricky months for the market, turn out differently this time.

The retest of the Aug. 3 closing low of 1433 and the intraday low of 1427 on Monday, Aug. 6, was something I have been talking about, but it occurred way faster than we anticipated. It only took a week to make a round trip back to those levels as the intraday low on Friday, Aug. 10, was 1431.42. We are by no means out of the woods yet, but holding support in this kind of environment is a victory for the bulls.

If the 1430 area does hold, as we expect, then we would like to see a strong rally develop and take out the recent closing high up at 1497. This would complete a very compact double bottom reversal formation, and it would suggest to us that the worst is finally over. Even if the S&P 500 does hold around 1430 and rallies, we would still expect more testing sometime in later August or September.

We hate to use the word "if" so many times but in this volatile market, but in this case it's appropriate. If the 1430 zone does not represent a floor for the S&P 500, the next area of chart support sits in the 1364 to 1410 range. This zone represents the base the "500" put in back in February. There are other pieces of technical support in that range, so it makes it that much more important.

Long-term trendline support, off the highs over the past couple of years, sits at 1428, very close to Monday's intraday low. A 61.8% retracement of the rally off the March lows, targets the 1437 level. The 65-week exponential moving average lies at 1412 and this average has done a good job of acting like a floor for the "500" during the bull market.

Another piece of potential support within the zone of chart support outlined above is the 80-week exponential average, and that lies at 1391.

If this zone of support is taken out, there is long-term trendline support, off the lows of the past couple of years, at 1330. The top of the next zone of chart support sits in the 1325 area.

The quick rally that occurred during the week, if you can still remember, ran out of steam right in an area of thick, technical resistance. The S&P 500 finished Wednesday at 1497.49, and had an intraday high of 1503.89. Chart resistance begins in the 1490 zone, from the double bottom in June, and extends up to the all-time high of 1553. A 50% retracement of the recent decline targeted the 1493 level while a 61.8% retracement is up at 1507.23. In addition, both the 65-day exponential moving average and the 50-day exponential average sit just below 1500.

We suspect the recent price volatility has shaken even some of the most grizzled Wall Street veterans. In the last 13 trade days (ending Thursday), the S&P 500 has fallen 1.98% or more on four different occasions. Since July 12, the index has also rallied at least 1.9% on two days. Since the major bear market lows in October 2002 and March 2003, moves of this magnitude have been pretty rare. These wild price swings often occur near a major low, but there have been times (2000) when they occurred near a price high. The marketplace had gotten used to low price volatility over the last four years and we are paying for that calm right now.

Market sentiment (emotions) has been on a roller coaster of late, and fortunately in our view, has swung back to the bearish side very quickly. This sets the market up for a potentially powerful reversal to the upside. One of the most dramatic moves in market sentiment can be witnessed by the sea change in the Investor's Intelligence poll. In the last two weeks, bearish sentiment has jumped to 31.5% from 18%. The increase of 13.5 percentage points in just two weeks is the biggest move since February 1990, just as the market was starting a pretty good rally. Bullish sentiment has dropped to 43.8% from 53.9% over the last two weeks. The spread between bulls and bears is at its narrowest point since the correction in the summer of 2006.

Option investors have been getting defensive in a hurry as put/call ratios have spiked higher. The 10-day equity-only put/call ratio has moved from 0.54 in the middle of July to a recent high of 0.78. The peak in this ratio was 0.82 during March's bottom and 0.74 last summer. The CBOE total put/call ratio has jumped from 0.89 in the middle of July to 1.25 on August 6. The peak in March, which was an all-time high, was 1.31 while the high last summer was 1.21.

The ISE Sentiment Index, which only measures opening long transactions by investors, has fallen from a recent high of 186 in early July all the way to 51 on Aug. 7. This is the lowest reading, and most pessimistic, since data started back in October 2002.

Internally, the market is showing signs of a major washout, in our view, and at levels that have been close to intermediate-term bottoms. NYSE new lows/issues traded has soared to 23.5% on July 26, and hit 19% on August 6. The July figure was the highest since May 2004. New lows have traced out one positive divergence, a positive in our view, as this is often seen near market lows.

The market often times looks the ugliest near intermediate- and long-term lows. It can also look bad when standing at the precipice. While we think the market is trying to hammer out a low, we would remain cautious until we get price confirmation.

GLTAL

Bourbon   

[guitarman]

$900M dollar bet.



http://www.moneymorning.com/2007/08/29/this-900-million-bet-has-global-traders-talking%e2%80%a6/



Got this response from my inside connection at Goldman Sachs.

"It is most likely a hedge for a portfolio or a large cover call trade. It is not likely that anyone will bet that the market is going to drop that much, it is too risky for everyone involved.
More and more in the industry managers buy into the premium of these options. So they average out the cost of the stocks and sell the options to cover the call. Particularly with a three week option that far into the money
I hope this helps,

Best
GMan

[Ramsburg]

Quick Update:
Yesterday session didn’t have much action compared to the regular volatility we’ve been watching lately.  During the session there was a lot of small ups and downs, showing indecision, probably because Bernanke’s speech today.

Technically speaking, I’m still looking to the 1479 level as the main upside barrier for short term quickly followed by 1490. If we watch a close above these levels, the overall technical layout will be much better, taking in consideration that the down swing would be broken to the upside and also because there is a sort of Inverted H&S pattern in play. For the downside, 1432 remains as the nearest support level, but anything its possible today, especially with a lot of ears on Bernanke’s words (personally I don’t think he’s going to give many clues at this point), the SPX futures are up 15 points, but that means absolutely nothing

Regards,

[BigSully1]

Market analysis

http://thechartpatterntrader.blogspot.com

One thing as the narrator says, be very careful next week when volume should return to the market. Will likely be some games played and fakeouts.

[BigSully1]

$900M dollar bet.



http://www.moneymorning.com/2007/08/29/this-900-million-bet-has-global-traders-talking%e2%80%a6/

Also read link at bottom of article. China insists it won\t drop dollars.

Is China quietly dumping US treasuries? Very worrisome. I think I'm going to resist buying anymore stocks for now for next couple weeks and instead consider increased hedging. Be cautious folks.

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=OFUSXC05QVVI1QFIQMFSFGGAVCBQ0IV0?xml=/money/2007/09/05/bcnchina105.xml

[mbaugh]

This report is a must read:

http://trentland.com/strats/djia0907.pdf

[mbaugh]

I sold all my holdings today. Just don't feel right with the markets.  I'd rather buy back alittle higher if the dust settles and everything turns out okay.  My only holding now is QID.
I believe this credit issue is bigger since its only keeps getting worse by the week.

Good Luck fellow members!