AheadoftheNews.com: June 2007

Friday, June 29, 2007

PM update 2:
The markets are slowly falling apart on the tenacious oil bid and also some terrorist fears out of London. NQ needs to hold 1952/1954. Techs are still the strongest sector.

The dollar loses its 50 dma for the first time since early June. That is a potential trend change for the greenback. If gold holds 650/651, it's a buy.

PM update:
ISEE hit an intraday read of 197, that is getting in the danger zone. The closing number is what matters, but keep in mind that if we do get to 200 or more on Monday, you want out of this market. For now, trade it and don't love it too much.

Noon update:
With inflation readings cooling off a little, markets get the extra boost they needed, although end of quarter dressing pretty much guaranteed this move. YM blew past weekly pivot at 13596, but has since relinquished most of its gains with the rise in crude above 70. It's a good day to see what stocks funds want to keep in their portfolio, so adjust accordingly. Many traders are taking on some shorts going into next week, but I think we could get one more pre-4th of July rally if the iphone is a blow out success.
The key is for COMP to hold 2604 or so at the close.

Thursday, June 28, 2007

If you like simplicity, you'll love this chart of the Nasdaq. Back above trendline and at 10 dma, support was at 50 dma. 2605 needs to hold on close short term.

Close:
Failed rally after lots of chop, but more indecision than outright selling. NQ does hold weekly pivot at the close (1953.75). It's impossible to predict what will happen next, but the COMP is back above 2600 and bulls will take comfort in that.

Traders will note once again how we are bound by the VIX. Today's reversal at highs was right at VIX weekly pivot (15.02). In fact, we had a picture perfect move from weekly R2 to weekly pivot in two trading days, corresponding to precise lows and highs for the overall markets.

PM update:
Traders are waiting to see if the Feds take the word "elevated" out of their inflation language. Watch bonds on the announcement and the 51 level on TNX.

Noon update:
As if on cue, oil drops 70 and NQ makes a new high. It looks like they want to hold the 10 day moving averages. SPX is now back above its 50 dma at 1508.65. Awaiting the Feds now.

Great new idea from T-mobile: link.

Morning update:
After some minor opening moves, we are stuck in the usual pre Fed chop. Oil is above 70 and that could be a problem for bulls if it doesn't lose that level. NQ is trading between weeky pivot at 1953.75 and overnight highs at 1960.50, with lots of noise around yesterday's high at 1956.75.

Wednesday, June 27, 2007

VIX weekly R2 was all the bears got, it was downhill from there and uphill for equities. Pretty clear chart.

PM update 2:
Shorts are getting squeezed. That excessive VIX was a warning sign for shorts and now bulls take it back. NQ needs a close above 1941.50 to make a bullish engulfing candle. Resistance is yesterday's high at 1948.50. If NDX cash closes above 1921, that would aslo help the bull case. Watch SPX 1500.
It looks like we are getting the end of quarter dressing after all.

PM update:

NQ 60 mn all hours does a postive cross, 1935 needs to hold for confirm.

Mid-morning update:
NQ manages to hold 1929.50 and is now trying to keep support at 1932.50, confluence daily pivot and weekly S1. It's up to techs to hold things together as the DOW looks weak.

Open:
Bulls hold the fort. VIX hits weekly R2 at 18.85 and they decided that was steep enough for now. Watch that level as well as pivot support at 18.
NQ needs to hold 50 dma at 1929.50 once it clears it. The day should belong to the bulls, but we will have whipsaws. We had an opening drop and reversal to the upside and that is the pattern bulls wanted to see today.
The DOW is the weak link thanks to CAT, but semis are ahead and that is giving the tech sector a boost. Still a long day to go, but the VIX is due for a reversal to the mean. All bullish bets are off it the VIX starts climbing again.

Pre-open:
NQ finds overnight support right above weekly S2 at 1918. Resistance will be 1923 and 1927. The Yen is still climbing and yields have dropped to 5.03% on the durable goods numbers.

Overnight:
The Yen keeps a strong bid. NQ is losing 50 ema support and we should see weekly S2 at 1917, which is also confluence daily S1. That would also put NDX/QQQQ at their 50 day ema. The VIX burst out of the envelope and is approaching the levels we saw in late February/early March, which did produce a couple of short lived, but powerful bounces. The best bet for bulls is a morning sell-off followed by a reversal and some buying at the close. Otherwise, more pain.

Keep in mind that we have durable goods pre-open and oil inventories after the open. It's going to be eventful.

Tuesday, June 26, 2007

Close:
Some nasty selling right after the cash close brings YM down to test 13400. NQ is struggling to hold 1927. Bulls are on the precipice and it shows in the VIX as fear mounts. ORCL is most likely the cause.

We could be setting up for a QQQQ test of 50 day ema at 46.50 at the open tomorrow, watch NQ 1922/1923 overnight support.

Closing hour:
NQ makes new lows but holds 50 day ema at 1923. YM (chart) holds trendline support off June 8th low and yesterday's low. That makes 13413 a must hold. ADVDEC lines are not that bad and we are seeing a third day of selling on declining volume which is normally a positive divergence. It's scary down here, but we still have three more trading days in June and due for a short squeeze. NQ needs to hold yesterday's low of 1927. Bulls are not out of the woods until NQ closes a 5 mn candle above 1932.50.
A lot of this is JPY noise, so watch the Yen.

Noon update:

VIX is getting stretched on the upside which is good news for bulls if they expect a decent rally. We are at upper band resistance and have been for three trading days. We are due for a volatility drop and a market rally.

Morning update:
Lots of volatility, mostly around a large JPY bid, but as the morning progressed the Yen dropped and gave a floor to stocks. It's almost as if the 10 AM news did not matter. The carry trade is at stake. YM held 50 day exponential moving average (13440), and that will be your line in the sand in terms of support. Add NQ 1932.50, weekly S1 and you have your parameters. It all depends on the Yen not getting back to the levels it had at the open. YM resistance will be 13550, 5 DMA.
Gold lost key support at 651 (see yesterday's post) and is in the doghouse.
Keep in mind that we have ORCL after the close.

June 26 (Bloomberg) -- The yen rebounded from close to a record low against the euro after Japan's Finance Minister Koji Omi said it's important investors realize the risk of one-way bets against the currency.
Japan's yen rose against all of the 16 most-active currencies after Omi told reporters today in Tokyo ``disorderly moves of foreign exchange rates are undesirable.'' The remarks were aimed at discouraging investors who borrow yen to buy higher-yielding assets in so-called carry trades.

Time to buy some Yen?

Monday, June 25, 2007

I have been watching gold with some interest. Depsite all the beatings, it is making higher lows and the bear flag is about to get negated. Everyone is fixated on the 200 dma at 656.50 (and I agree, it is potentially bearish), but if it can keep attacking 654 like this (61.8%) and hold current trendline at 651, we might have seen the lows. Let's face it, gold bears just can't get it to lose 650 and they have been trying for two weeks. After all, the dollar is down, yields have dropped and oil is at 69. All bets are off on a move below 651. It's been coiling for some time so the breakout/breakdown will be quite strong.

Here is an interesting chart: NQ (Nasdaq 100) monthly continuous futures contract. Note that we stalled this month right at the 200 monthly exponential moving average. This is not relevant to the cash index, but very often, computers are programed with esoteric stuff like this, hence the current top we formed around 1972.

In fact, that same NQ continous contract gives us a very clean channel to work with (daily chart).

Big day tomorrow with consumer confidence and new home sales at 10. The best way to position yourself beforehand is to either buy support or sell resistance, whichever comes first. Once in, you lower your stops and add either a buy stop or sell stop in order to catch any contrary move to your position. The tone for the rest of the week could be set.

Even though it looked scary, it was a very orderly pullback for NDX, finding support right at 61.8% June and trendline off March lows. The close was at 50%, 1912.55. Managers know what they must defend this week if they want their bonuses.

NQ does indeed hold 1927 and we get a pretty strong move off lows. Bulls needed that. QQQQ is back above 47. The DOW gets a close above its 50 dma but SPX is feeling some heat, closing below 1500.

Closing hour:
Nasty reversal and NQ goes all the way down to test its 50 dma at 1927. That needs to hold. Oil jumped back above 69, spooking everyone. Eventually, some stocks that need to be in portfolios will be bought, so if short you should book profits.

Oil takes a hit. As you can see on the chart, it found resistance at the March high pop (70) and will need to hold 67.25, 20 dma, or we could easily see 65, test of trendline.

Mid-morning:
COMP manages to stay above the key 2580 level and NQ holds weekly S1, so bulls have a chance if they can prevent another attack on Thursday's lows.
Home sales came out and pushed yields down even further.

Once we bounce, bulls would want to see SPX hold 1506, 50 dma.

Open:
Traders push NQ down near weekly S1, which is a must hold at 1932.50. I actually like catching that level at the beginning of the week if it does hold.
Keep in mind home sales at 10. Bulls need Goldilocks.

Pre-open:
Yields are down as traders expect weaker numbers on existing home sales at 10. Watch NQ 1953.50, 50% of Friday and weekly pivot.

Sunday, June 24, 2007

The percentage of bears moved below 19 last week, and that is getting awfully low. Odds favor a correction once we are done with end of quarter noise, although the percentage of bulls has not reached the peak of 2006. We are not in true bullish froth yet, but bears are definitely getting scarce. However, as you can see on the bear chart, the 2003 rally reached the same percentage low around June/July but the rally continued while bear sentiment rose. No one ever said it was easy. The prudent course is to avoid committing too much to the long side, but an all out short signal would have higher odds if we had more bulls. Another reason to day trade this mess and keep a cash reserve. Let price decide.

SMH (semi-conductor holders) is in an interesting spot. The weekly chart is bullish, with a broad triangle setting up a potential upside breakout of a magnitude that could suprise many. The question is when. We could easily pull back to the 10 weekly at 37.25 before attacking resistance again, currently at 38.80, April 2006 high. There is initial support at 37.90, 76.4% 2006, and if that holds, bulls could charge sooner than later. The week ended with a Doji, so anything could happen. There is fear building out there and many want to get out before the summer doldrums, but keep in mind this week is end of quarter window dressing. Play this week day by day and watch the semi-conductors.

Friday, June 22, 2007

Morning update:
This is definitely a lousy day to trade once we got the opening gap close. Traders are being whipped around by TNX moves between 51.65 and 52.05. NQ support is holding after an initial bear attempt to break NQ weekly pivot, but so far it failed. Things could change through lunch and at the close, the internals are bearish, but day traders are probably relegated to quick scalps for now. I would put SPX 1512.50 on the radar as must hold. The bias today is sell the rallies, with all bearish bets off above NQ 1965.

Open:
TNX jumps up to 5.2% but NQ holds 10 day ema at 1955. This is a day with no news and hedge funds can easily manipulate it for end of quarter adjustments. Be careful as direction could be treacherous after the initial selling. This could be a tough day to trade. An NQ drop below 1957.25 after 10 AM would put sellers firmly in the driver's seat.
Watch SPX 1512.50, yesterday's open, for overall market support.

Pre-open:
Yields jump back up to 5.2% and futures stay in the red. Watch NQ 1951.75 key support.
The dollar is down, giving support to gold above 654. An interesting situation since higher yields would normally boost the greenback.

June 22 (Bloomberg) -- China's shares fell the most in almost three weeks on speculation the government will raise interest rates to tame a stock-market boom and cool the economy.

June 22 (Bloomberg) -- German business confidence fell more than economists forecast in June after a rebound in oil prices and higher borrowing costs raised concern growth in Europe's largest economy may have peaked.

These two events are giving US futures a pretty serious hit. No follow-through on yesterday's ralyl would be a negative. YM loses weekly pivot, NQ still above it. Bonds have a slight bid and oil is down.

Thursday, June 21, 2007

ISEE barely moved up on this bounce, still at a relatively low 125. That means we have few believers in this rally.

PM update:
NQ stalls at R1, 1967.75. Yields are back above 5.15%, creating some concern. Nevertheless, bulls managed quite a turn around today. SPX at 20 DMA (1520).

June 21 (Bloomberg) -- Merrill Lynch & Co. backed away from a threat to dump about $850 million of securities it seized from Bear Stearns Cos. hedge funds, according to a person with knowledge of the firm's plans.

That just put a floor on the markets today.

NVDA lit a fire under the semis and bears are not going to get much traction there. New 2007 highs for SMH.

Noon update:

Techs are still the only green. INTC 5 mn chart shows the clear battle at pivot, with support at S1 and resistance at R1. Pretty clean picture of the tech sector today.

Morning update:
Strength in the semi conductor sector (Asia gave us a hint last night) is holding up the markets, especially NDX/QQQQ. NQ is above weekly pivot at 1951.75 and that is support going into lunch. INTC is bullish above 24.09. Financials are weak which makes for choppy trading. If you like the long side, pick stocks in the semi-conductor sector. They might want them in their end of quarter portfolios.
If the overall momentum has shifted to selling rallies, we should find resistance at 5 dma for NQ, currently 1962. A close above puts bulls back in charge.

Open:
Stocks are in the red with NQ weekly pivot resistance at 1951.75. Leading indicators coming at 10. NQ is holding 20 dma at 1943.75. A drop belwo could set up a test of QQQQ 47 and SPX 1500, which is 50 day ema. A move above NQ 1951.75 will get some buyers.

Pre-open:
Oil jumps back up to 69.90. Yields are also moving up, so bears still hold the reins. Resistance will be Tuesday's lows for equity futures.

Overnight:
No carry trade unwinding as the Yen keeps dropping. That could mean support, at least in Asia. We will see how US reacts tomorrow. Jobless claims pre-open. It's all about rates, oil and the Hamptons now.

Wednesday, June 20, 2007

Not a pretty close. COMP still has 20 dma support at 2590, right below, but the warning signs I have been writing about in recent posts are now flashing bright red. Be careful and don't be a hero. I have had COMP 2645 as a target, today's high of 2635 is close enough to take very seriously. We still have end of quarter window dressing coming up as well as the iphone release. But bears are getting bolder and bulls a little more scarce every day.

Closing minutes:
SPX finds some support at 10 DMA, 1515, but bears are definitely in control. NQ closed the Friday gap and some, the question is how much support will the COMP find at 2602, right above its gap close of 2599.

PM update:
Bulls fumble even with a chip rally and we should hit some weekly pivots (NQ 1952, ES 1536). NQ still has that Friday gap to fill at 1951. Resistance will be 1964 once we breakdown. Bulls get it back above 1968.

Open:
Gap and crap on all indices, NQ support is yesterday's low at 1957. A break below will set up 1951.75 very quickly and 1944. If we hold 1957/1958, we could go up and test the overnight highs at 1975. Watch the 1964 level.
ES resistance is now at 1549. Oil inventories at 10:30.

Tuesday, June 19, 2007

Overnight:
Watch the Yen as BOJ releases minutes from last month. JPY/USD September futures and the 0.008200 seems to be an issue.

YM traders take note of the huge stock buyback announcement by HD after the close.

Negative RSI divergences have not been reliable indicators recently. However, this month traders should note that QQQQ is forming a negative divergence on both RSI and OBV. That is a first since the March rally started.

Closing hour:
Bulls are undaunted by 69+ oil and mount a rally in the closing hour. ES Friday gap close seems to have triggered a round of buying interest, although you can feel the tension. Some Yen buying indicates risk aversion and hedging.
If NDX/QQQQ do not make new highs today, we will have the first lower high and lower low in five days. Watch NQ 1969.50 overnight high resistance in the closing hour.

VIX (chart) finds consistent support at the 200 day exponential moving average since May and that is when we kick in these sell programs. We could be putting in a top soon.

PM update:

August oil hit 69.95 (July ceased trading today, high was 69.50) and markets felt the pressure. As you can see on this 60 mn NQ chart, we still have that gap to close from Friday and weekly pivot right next to it at 1952.

Morning update:
ES pretty much closed its gap (1539.75) at 1540.50. YM as well, NQ is the only one that didn't drop as low and held 5 DMA at 1957.75, now support. Keep in mind that weekly pivot for NQ is at 1951.75. Note that QQQQ found support at 47.50. I am a little weary of this bounce since we haven't even tested weekly pivots.
The Yen is on a bid, which is not surprising given that traders have been almost pricing in a BOJ rate cut as opposed to an expected hike later this year. That is a monster short squeeze waiting to happen and today was a small taste of it.
Yields have dropped enough to hold the fort in equities, at least so far.

June 19 (Bloomberg) -- Housing starts in the U.S. fell in May, signaling the slump in home construction will continue to depress growth.

Tug of war between the yield drop bulls and the economy bears. NQ and ES still have those Friday gaps to close, 1950.75 and 1539.75. If you trade YM, the same gap close is 13689.The Yen caught a bid, putting pressure on bulls.

Monday, June 18, 2007

Bears win the close after the ridiculous AAPL bid kept techs slightly higher most of the day. NQ drops 1964 after-hours, we could get a gap close at 1951/1953 by tomorrow, although there is a YHOO bid. ES gap close is not far at 1539.75, although 1542 is pretty strong support.
Housing starts pre-open will dictate market direction.

Closing hour:
Oil is above 69 and that is just too much to mount a decent rally. AAPL gets a huge boost on some minor battery news, we are in the theater of the absurd. This market needs to close the Friday gaps below.

PM update:

NQ 1964 holds so far, some stall at 50%.

Morning update:
NQ holds on to the key 1964 level, although watch gap open from Friday at 1968.25. ES still has that gap, with close at 1539.75. It can go either way, tomorrow we have some important housing numbers. But bulls are holding the for as long as yields don't catch a bid.
August gold is having a bit of a struggle with its 10 dma at 660.50, but should not sell-off as long as equities hold their own.
This is the calm before the storm (tomorrow's housing numbers).

Overnight:
Watch out for M&A Monday if short. Nevertheless, ES and NQ have gaps to fill (1539.75 and 1950.75) if things turn tomorrow.

Sunday, June 17, 2007

It's that time again when we have to look at the Nasdaq monthly chart as we enter multi-year record territory. As you know, I have been expecting a test of 2645, 38.2% 2000/2002. We are very close, one strong day and it's done. There is nothing bearish on the monthly chart, not even a negative RSI divergence. That does not mean we keep climbing higher, it just means the chart looks bullish. Overbought, but that means nothing for traders. The only question is how the month ends: Doji (indecision), at highs (bullish) or the first red candle in four months? Time will tell. If we should break out above 2645, the next long term area of resistance is 2798.89, Feb 2001 high (dotted line) should 2645 hold on pullbacks. Failure at 2645 could set up a weak summer and a possible correction to 2328, major support.

Friday, June 15, 2007

They bought some puts at the close, VNX moves up from a low of 14.70 to 15.94 and VIX 12.58 to 13.94. No irrational exuberance yet, overall put to call still above 1.

VXN (Nasdaq volatility) is getting into my caution zone.

Intraday:
After hitting highs, we are now doing the usual frozen opex action. Note that INTC has moved up to 24.20 resistance. It will be intersting to see if it can crack that next week or that was it.
VNX is at the lows of the year, or close enough to raise some caution flags. Puts wil be getting very cheap soon and probably good insurance going into the summer. I still have that COMP target of 2645.

NQ hits a higher high. We have consumer sentiment at 10.

June 15 (Bloomberg) -- A measure of consumer prices in the U.S. rose less than forecast in May, bearing out the Federal Reserve's view that broader inflation pressures would moderate as the economy cooled.

We're off to the races again. Resistance is NQ 1967. Yields drop below 5.2%. Even gold is up on the weaker dollar.
Remember that this is OpEx Friday.

June 15 (Bloomberg) -- The Bank of Japan kept interest rates unchanged for a fifth meeting as it awaits more evidence on the economy's strength after consumer prices fell for a third month.
``The Bank of Japan is still nailing down the impact of the February rate hike,'' said Seiji Shiraishi, chief economist at HSBC Securities Japan in Tokyo. ``But some board members will probably dissent from the majority view in July and call for a rate hike, and the central bank will take action in August.''
The yen traded at 123.02 per dollar at 1:04 p.m. in Tokyo from 122.98 before the announcement. Bonds extended gains, sending the yield on Japan's 10-year bond down 3.5 basis points to 1.92 percent.
Since last month, Fukui has indicated that he's concerned Japan's interest rates, the lowest among major economies, could lead to ``inefficient'' investment that hurts future growth.

I think we wcould very well get a BOJ hike in August and that the yen is grossly undervalued. JPY shorts will get squeezed any day and that will be a rough scene for equities.

Overnight: Forex traders watch USD/JPY 123 possible resistance. For JPY September globex traders, watch 0.00828 equivalent. Otherwise, S1 at 0.008215 could be in play and we are back above 123. There has been a slight leveling off with support at 0.008220 building the past 12 hours, but that can change. Keep in mind that higher oil also hurts the Yen, so don't only focus on US yields. For now, shorting the Yen is still the trend.

Thursday, June 14, 2007

Big move for INTC. Now in the January 2006 gap, which is support at 22.87. Gap close is 25.54. It could be a double top from last month, or a big move up. Take your pick, but INTC bulls are finally seeing some light at the end of the tunnel. My guess is that the stock is considered cheap on a relatively basis and a safe, highly liquid place to park money. SPX is up 8% and you have to wonder how much more gas the overall market has left in the tank.

All of a sudden, Cramer likes Intel. Better late than never, after bashing it for two weeks and giving buyers a good price. It was hard holding on after all his minions started selling it, but funds don't agree with him a