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Market analysis and futures trades.

Friday, September 05, 2008
Closing hour:

Bulls survive one last unsuccessful attempt by bears to push the markets to new lows and we have another bounce, with ES and YM already in the green. Financials and semis were green most of the day.  All morning gaps are closed, but still remain a problem for NQ and ER. NDX is at 1772, a close above 1761 does the job. 

PM udpate:

Thr turnaround ran into some trouble once we got past the 1Pm turn noise. It will be important for bulls to hold on to initial overnight lows (prior to data) at 1760.25 for NQ. Bonds are still negative as is the VIX. It seems a bid in oil off 105, now at 106.30,  sparked some selling. Let's see if this was just a false alarm. As long as NDX can close the day above the July lows, bulls can have some hope for Monday.
ER 711 keeps on being a fulcrum.

Noon update:

NQ is holding up, in fact the March lows was at the 50 month MA, right now at 1732, but it seems to be front-run. Bonds are turning red. This is the best noon opening bulls have had in three days. Next resistance is NQ 1765.25, July lows. Support will be 1757.75 and 1760.25.
Please note that when I use longer term moving averages with futures, I look at the continuous contract in order to get an accurate representation. The reason I prefer analyzing futures is because they lead the market, as one can often see when using pivots. It's the all hours number that counts, not the cash. Folks who trade futures full time are very aware of this and this is what sets our site apart from most others.
Remember that bottoms, even intermediate ones, are formed when bad news is finally bought.

Morning update (2):

Shades of a turnaround? NQ is back above 1749 while bonds drop. The two year is slightly negative. SPX is back above 1225. This is an opening to create a short squeeze, if that is the plan. Bulls can't fumble here. Watch 1760.25 on any bounce above 1749. The VIX is 14% above its 10 dma, another extreme.

Morning update (2);

NQ 200 weekly MA right here at 1749. If we lose that, we could see the February lows. AD lines are very negative, there are no buyers in sight. I still don't want to touch it short down here, NQ is now 8% away from its 20 dma. At least not until we see how the turn goes. Hedge fund mania.
The one problem I see for bulls is the refusal of ISE equity to drop below 140 for very long. Are there too many dip buyers? Will we be putting in the lows this month and not next? Many questions not answered yet. One thing for sure: if SPX loses the July lows, we should see 1160/1170. But we should get some kind of rally before that.

Morning update:

Oil drops to 105, holding overnight lows for NQ, but small caps are breaking down. The bond bid has not stalled. although we are slightly off the highs. Not much hope yet for a turnaround other than the fact that we are very stretched and in need of some kind or corrective bounce. The short side is still the easy scalp, but I would be cautious after the 1PM turn.

Open:

Watch NQ obvious resistance at 1765.25. For ES, the number is 1235. Again, ER 711 needs to hold.

Pre-open:

Sept. 5 (Bloomberg) -- The U.S. lost more jobs than forecast in August and the unemployment rate climbed to a five- year high, heightening the risk that the economic slowdown will worsen.

Payrolls fell by 84,000 in August, and revisions added another 58,000 to job losses for the prior two months, the Labor Department said today in Washington. The jobless rate jumped to 6.1 percent, matching the level of September 2003, from 5.7 percent the prior month.

It was less than the 100K some were worried about, but the data is troubling.

So much for the July low double bottom on NDX, although we could now face the prospect of an additional rate cut according to some, but I find that unlikely. Watching yields, they are now at 3.57%. Mortgage rates are falling, that help is definitely needed. We will keep watching the HGX development.

ER bounced off its 50 dma at 711. That will need to hold for any hope of not seeing SPX hit the July lows today. support wil be at 1225.50.

NSM did not do that bad, it came within its own forecast, but analyst had made the bar a little higher in terms of revenue.

NQ overnight update

Thursday, September 04, 2008

Overnight session:

NQ does the deed and drops the July lows (1765.25). On the daily chart, you can see that we found support at 76.4% Mar/Jun (1761.75). We are also 7% away from the 20 dma (green line), usually a strong buy signal, even if only for a corrective rally. Another striking number is the current low of 1760.25, exactly 5 points below the July low, which is where thousands of traders put stops (5 points for NQ is the same as 2 ES points, a classic). We will see if that number holds, but as you know this is precisely the kind of clue I look for. Note ER (recent darling) getting very close to its 50 dma (711).
The confirmation that the Feds will most likely not raise rates anytime soon has sparked a rush to bonds the past few days, draining equities. But the tide can turn very quickly and tomorrow's pre-open news will either confirm today's selling or confuse traders even more. Right now, I would respect the double bottom off July if it holds overnight.

NQ traders also note that NSM reports before the open. Last quarter, they put out a solid forecast. The stock is at multi-month lows with 2 to 1 puts over calls at the 20 strike.

Close:

Bears win the toss, as NYSE makes new lows for the year. NDX is now only 13 points away from its July lows (1761). Someone wants to get near that before tomorrow's data.
ADP had -33K today, everyone is looking for -100K tomorrow on the actual. Maybe, maybe not. 

Closing hour:

NQ gets back above 1787.75 and we could get that short squeeze in the final hour. Resistance will be 1792, 1796 and 1803.75. It will all depend on holding 1787.75 on a 3mn.
ISE equity is at 163, too much optimism so again, any bounce is just a trade. It's strange to see that ISE with such massive negativity in today's press. Remember that cash is also a position. Hedge funds are playing big size futures contracts on the short side to try and get some money back after the summer. They are desperate, but note that we have gone nowhere the past to hours, up or down. Something will have to give. TRINNQ has dropped to 2.97 from the 4.65 high, while we stay flat.


PM update:

Just a very small bounce off weeklyS3 for NQ and the selling comes back (stops!). SPX 1239 needs to hold now. Nasdaq Trin is at 4.64, an extreme (highest read of the year, in fact since early 2003, see chart) and at this point it makes me out of any shorts. Hogs get slaughtered. There will be plenty of time to reload.
Bulls get it back above 1787.75 and we could even see a short squeeze given such a high TRINNQ reading. We can get worse on those TRIN's, especially in a bear market, but it does not all happen in one day.

Kumar puts out a buy on INTC and AMD: link. Very few analysts have the courage to do so in a downfall (Morgan Stanley downgraded chips today right when SMH hit January lows: useless. He should read our blog when we went short the second week of August).

If you are short right now, be careful: we could get another Hank move pre-open. Bill Gross is calling for it: link.

PM update (2):

We hit NQ weekly S3 (1789), I expect some kind of bump here, good for a scalp long. The Q's were only at 75% volume. Longs are scalps only please, but a trade up to 1803.75 is feasible. Any long trade should be quick and with very tight stops. This is a very bearish day, but a little overdone on the 60mn.
COMP 2284 will also be important to hold at the close.
The July lows are almost a ceratinty at this point, the question is when.

PM update:

ES and NQ close those pre-FOMC August gaps (1249 and 1811.75) and have not been able to regain them so far. NQ is getting very close to monthly S1 (1792.50), ES is right under it (1248). Oil has fallen back under 108 and this is hurting energy. There is basically not a single sector in the green except bonds and strangely enough the dollar. The yield on the ten year has fallen to 3.65%, losing the 3.684% level. ADVDEC lines are very neagtive (-2200). The only hope for bulls left is that non-farm payrolls tomorrow come up better (not as worse) than expected. SPX will need to get back above 1246.25 at the close.
The confluence weekly S3 at 1789 and monthly S1 at 1792.50 could be supportive after the 1PM turn (QQQQ 44?), since we have been selling non-stop since the open.

Overnight session:

NQ barely holds on to its weekly S2. Remember that if we make new lows, there is a gap to close at 1811.75. But for now, bulls hang in there.
ADP report at 8:15, unemployment claims at 8:30, ISM at 10, NAT gas at 10:35 and oil inventories at 11. It is going to be a busy day. Fasten your seatbelts.

Sept. 4 (Bloomberg) -- The European Central Bank kept interest rates at a seven-year high to fight inflation even as the euro-region economy teeters on the brink of a recession.

Could this put in a floor on the Euro?

TNX update

Wednesday, September 03, 2008

TNX (ten year note yield) is right above key support at 3.684% (61.8% Mar/Jun). It will be interesting to see if bonds keep a bid at this level.

Close:

Bulls hold the line and pull off a Doji close on SPX and above 45 for QQQQ. Weekly s2 held up for NDX.

Clsoing hour:

Not much of a bounce, but TNX is now getting very close to 36.85 support. VIX and VXN are negative and Nasdaq AD lines in the black but no one wants to make any big bets ahead of non-farm payrolls. An NQ close above 1837.50 would be helpful for bulls (76.4%). The loss of the July trendline is weighing on sentiment.


Sept. 3 (Bloomberg) -- Business across most of the U.S. was ``slow'' last month, while almost all Federal Reserve districts reported pressure to raise prices because of higher commodity costs, the central bank said in its regional economic survey.

Consumer spending was ``slow'' in most of the 12 Fed districts as the housing market ``weakened or remained soft,'' the Fed said in its Beige Book report, published two weeks before policy makers meet to decide on interest rates. A ``general pullback in hiring'' helped keep wage increases ``moderate,'' the Fed said today.


PM update (2):

Initial reaction to the Fed Beige book is negative, but lows are holding. Watch 3.7% on the ten year.  ADVDEC line are still not anything alarming so I would give bulls the edge going forward if the Q's can hold 45.

PM update:

Bears can't push NQ/QQQQ/NDX much below weekly S2's and we hold these levels ahead of the Beige report at 2. The AD lines do not support a collapse scenario and in fact would suggest a turnaround at the close.

Noon update:

The selling takes on speed with NDX, pushing NQ down to confluence weekly S2 and daily S1 (1825/1828).  Given that ADVDEC lines on the Nasdaq are only down -131, it seems more like a final stop run then the beginning of something much more serious. Bulls better hope we get a bounce down here or some panic could set in. ES tagged 1265.50, right above its weekly S1. TNX is at 3.7%. 

Morning update (2):

Another choppy day, with Banking, Retail, Housing up and Semis and oil down. The bond bid has increased a little pushing a roadblock on any bounce so far. TNX could be headed for 3.685% if today's yield low does not hold. ADVDEC lines are not suggesting a bigger sell-off, so this market could head higher at the close. But with NDX now below 1842, bulls have their work cut out for them. Nevertheless, being short here is only for quick hands, especillay with the COMP holding the 50 dma at 2334 and VIX stalling at upper bands. Fed help from the beige book at 2?

Morning update:

WASHINGTON (MarketWatch) -- Businesses stepped up their demand in July for capital equipment, the Commerce Department reported Wednesday. Core capital equipment orders rose 2.5%, the government said. Overall new orders rose 1.3% in July, compared with 1% expected by economists surveyed by MarketWatch. Orders for durable goods rose 1.3% in July, while orders for nondurable goods rose 1.2%

Not mentioned is the output from refiners, but nevertheless we get a bump. Watch weekly S1 at 1851.50 for NQ and 1276 for ES. Bonds slightly on the bid side, except for the two year. NQ 1846 must hold on any drop. Resistance will be 1859 and 1870 for NQ.

Pre-open:

NQ does a flush down to 1836.25, 76.4% Jun/Jul and manages to get back above 1846. ES is back to trading above 1272 after hitting 1268.50. Bonds are at par, oil is below 109, so this drop feels a little out of synch. If we are to really sell-off today, ES has a gap at 1249/1259 and NQ 1811.75/1828.75. 
Factory orders at 10, Fed beige book at 2.

Tuesday, September 02, 2008

SAN FRANCISCO (MarketWatch) -- Semiconductor sales in the Asia-Pacific region jumped in July, outpacing other regions and the overall market, according to the Semiconductor Industry Association.

With NDX holding 1842.25 (61.8% Jul/Aug, 1846 for NQ), this news could set up a bounce tomorrow if oil can manage to stay at or below 110. However, the move back up above the trendline needs to be quick and on volume. Resistance will be 1867/1869.

Another note on Septembers: no one seems to recall that the month was up in 2004, 2005, 2006 and 2007...I don't expect it to be so this year, but it's another reason to shut off the general media.

Google "Chrome", pretty fast: link.

Closing hour:

We make new lows, but ES holds 1272, its 50 dma and NQ 1846, 61.8%. Financials are still green as is housing and retail. Semis are down. Watch NQ 1851.50 and ES 1276 on any bounce. Bonds have a bid, pushing TNX below 3.77% support.
If ES and NQ hold the above lows, I would have a bullish swing trade bias for the week. If the levels don't hold, we could see NQ 1828 overnight or tomorrow.
Lost of press out there on the bearish month of September. That could be, but this market likes to thwart conventional thinking, so don't read the general press and shut off CNBC.
My guess is we could rally the next few days, just to confuse everyone, then probably head lower. Last year saw a solid September rally, but only after a first week sell-off. Opposite pattern this year?

PM update:

They drive NQ all the way down to the trendline off July's low (1855) and a hair above weekly S1 (1851.50). I expect his level to hold, if not bulls are in real trouble.

Morning update:

ISM data under 50, which is quite bearish and the bid dries up. NDX/QQQQ found resistance at their 20 dma's. Watch 200 dma (1902)on a pullback.

Pre-open:

Oil drops 7.5% and NQ closes Friday's gap. Everything seems to be lined up for a bullish day. We await ISM and construction spending at 10.

Monday, September 01, 2008
LONDON (MarketWatch) -- The beleaguered British pound accelerated its recent fall, plunging to its lowest level against the U.S. dollar since April 2006 after U.K. Chancellor of the Exchequer said the economic environment is the most difficult in 60 years.

The dollar rise has been about other currencies falling back to earth more than any intrinsic bullishness. Currencies trade in pairs.


Monday's overnight session:

Gustav did not drive oil prices higher and the NQ open is positive, holding the key 1874 level. Weekly pivot is 1886. ES support is 1282.
Watch ZN (chart) as it has been holding 200 dma support and now back above 50% 2008. The key to any sustainable equity rally will have to be a drop in bond appetite.

Overnight session:

Gustav did not drive oil prices higher and the NQ open is positive, holding the key 1874 level. Weekly pivot is 1886. ES support is 1282. A better sense of direction will come when bonds open.

Sept. 1 (Bloomberg) -- Crude oil fell, reversing earlier gains, after Hurricane Gustav weakened, easing concern of widespread damage to drilling rigs and refineries.

Gustav has been downgraded to a Category 2 storm, the second-weakest of the five levels of hurricane strength, the National Hurricane Center in Miami said in its latest advisory. Preparations for the storm closed 96 percent of offshore oil production and about 10 percent of U.S. refining capacity.

Equity futures are stll in the red, althouh nothing dramatic, and bonds have a slight bid.