AheadoftheNews.com

Market analysis and futures trades.

Friday, August 31, 2007
SPX doesn't get a close above 1480, but it is a bullish close for the month, 20 points above the July low.

Just a thought, but don't you find it interesting that ES jumped 20 points in a few minutes (YM 80 points!), right around 11PM? Do you think someone was tipped off about the Bush announcement that came hours later? Since this is the most corrupt group of folks we have seen in some time, that would not surprise me. I have been doing for a long time and what I see going on in the overnight session the past four years is very different than say eight years ago. Enjoy the weekend and always rememember to follow the money, even if it seems outrageous.


If bulls mean business, the inverted head and shoulder for SPX has an initial target of 1504, followed by 1520 and 1533. But first, they will need a close above the neckline at 1480. Conservative traders should wait for that trigger. Failure at 1480 will set up 1450/1455.

Call it the Bush rally or the Bernanke rally, but it's real, even though volume is light. AD lines are very bullish and the VIX is at lows. NQ should retest overnight highs. The volume is a concern, so I would not trust this for very long. Watch bonds and the 1987 level for NQ.
In any case, the bull/bear ratio told us that a big short squeeze was coming, I guess today qualifies.

Thursday, August 30, 2007
ES 1467.50 and YM 13326 are still the big numbers for bulls to re-conquer on a closing basis. Techs are hot, don't fight that train for now. Not much more to say, this is buy support/sell resistance trading.

PM update (2):
YM just can't hold the key 13326 level and with a growing bond bid, bears take over again. What a crap day to trade, you might consider going to the beach. If you must trade, do small lots and small moves.

PM update:
More volatility but the bias is bullish now. ES is back above 1467.50, after an earlier dip. NQ is holding R1. Watch VIX 24.42 resistance. The two red flags are a bond bid and TRIN above 1. This is why you are better off scalping.

Morning update:
Initial selling on some financial downgrades, but NQ went up and closed the gap at 1961 and never looked back. Support is 1973, 1977 and 1980. ES is hovering between 1967.50 and 1971 resistance. Watch YM 13326. Bonds still have a bid, so it could stay volatile. Scalpers only today.

Wednesday, August 29, 2007
In the must read column, from Mynianville: link.

"...no one is talking about it yet, but I think the market will soon begin to realize that the credit card lenders have in essence become the consumer lenders of last resort. As consumers have been shut out of the mortgage and home equity world, the last available credit is plastic. One statistic that I have found very troubling is the degree to which credit card balance growth is running ahead of retail sales growth - a key sign that the consumer is stretched. In normal times, you would expect aggregate credit card balance growth to run about in line with GDP and retail sales growth. This year it is running almost 2.5 times that. Clearly consumers are using their cards for far more than purchases. And my guess is that for many Americans their credit cards have become the latest, but potentially last, source of financing available.

Because of the oversized credit card balance growth, however, I think the market is missing what is really happening within card issuer portfolios – particularly loss and delinquency data. Today, no one seems to be very concerned about the increases in reported losses and delinquencies. However, when you start to normalize these statistics for the enormous balance growth we’ve seen, the increases in both are quite dramatic."


YM (DOW futures) is up against that trendline again. August curse. Watch 13326 overnight for any changes in that pattern.

Bull/Bear ratios are starting to indicate am extreme in bearish sentiment and we could be set for an upside surprise in September. However, this month is not over and a lot will depend on SPX 1457 in the next two trading days.

ISEE still has plenty of pessimism in it as well.

COMP closes its August 27th gap (2561) and holds above at 2563. Bullish engulfing candles for techs (NQ/QQQQ/COMP) but not quite for SPX and ES, although SPX does a solid close above its 200 dma. Big day for bulls on slightly higher volume than yesterday. Resistance is pretty solid at ES 1469/1471. For NQ it's 1961.25 and 1972. Support is 1952.75. Bonds sold and that is all bulls needed. However, it's not like they were really dumping them so watch ZN overnight.
Lots of news pre-open tomorrow, this is still a day to day market.

PM Update:
Watch bonds. When ZN bids, we invariably get pullbacks. NQ lost 1933, support below is 1930, 1926 and 1922. Internals are still bullish, although banks have gone red. Trade it. don't love it.

Noon update:
Next resistance above 1447.75 is 1453.50 and 1459. COMP resistance is 2533, 2543 and gap close from Monday at 2561. NQ support is 1933, 20 dma.

Open update:
We get the push up but the bond bid stalls ES at 38.2% of the entire correction (1447.75). Financials are down, but techs are strong. Watch those gaps and remember that we are still potentially in a bear market (SPX 10 month ma?).

Good story by Todd Harrison, the only worthwhile read at the awful (from a trader's perspective) CBS MW site.

Open:
Nice bid overnight thanks to Seagate raising its forecast and the absence of any economic news today. Watch NQ 1920, 10 dma. Bonds are still bidding (careful) so opening gaps should get at least a partial close.

Oil inventories at 10:30.

Tuesday, August 28, 2007
Meltdown. All gaps from the 22nd are closed and the COMP finishes under its 200 dma. It has a gap to close around 2450. This is not a pretty picture. Everyone is down, except the dollar, bonds and the Yen. NQ lost weekly S1 at 1910.75, next support is 1899/1900, monthly R1.

Note that ES (SPX futures) found support at last week's lows (1434.50). First we double top at 1483.75, now we double bottom at 1434.50? I'm not crazy about that set up, but it's there for now.

Morning update:
I guess JP was right about astrology...:) NQ drops key support at 1940.50 and is now trading in the 22nd gap (1919.50/1932.75). ES has done the same. August 22nd gap close is at 1450.25. Keep in mind that ES has now two unfilled gaps above, so mind your step.
NDX and QQQ are trading below their respective 20 dma's (1926.77 and 47.40). SPX is struggling to hold 1450. NQ S3 is at 1921.50, gap close 1919.50, 10 dma 1917, you get the picture.
Remember that we have the Fed minutes at 2 PM.

Overnight:
Bears keep on charging and NQ tags 1941, right above weekly S1. Weekly S1 for ES is 1451, now trading at 1463. Germany's consumer confidence drops, US is due at 10.
JP Morgan used to say that millionaires do not believe in astrology, but billionaires do. Full lunar eclipse as I type, for those who buy such stuff.

Monday, August 27, 2007
As we approach the end of the month, watch the 10 month exponential moving average for SPX, now at 1443.50. A monthly close below that level would pretty much confirm that we are in a bear market. Do not count bulls out until this event occurs, whether this month or the next.

Hedge funds cronies have been appearing on CNBC, trying to convince the average investor that all is fine, the bull is back. These guys know they face massive redemptions at the end of the quarter and they need a rally to hold. They try and prop up futures during low volume lunch trading, or in the wee hours of the night. If you are short, beware of their tactics until we are done with this quarter. This is desperation alley for some of these morons that kept on putting on low volatility carry trades like the party was never going to end. They are about to get their heads handed on a platter by the real big guns who are getting very uncomfortable with their state pension plans stuck in this no man's land. Bonds get a bid everytime yields move up a little as they quietly rotate out of stocks without causing too many ripples.
I have no idea where we go from here, but it's obvious that we are not getting the same magnitude of selling we had a few weeks ago. It will come back, I'm sure, but for now, keep shorting down days, buying up days and cashing in as fast as you can because low volume trading can be quite treacherous.
ES needs to hold 1967.50, or it could easily drop to 1959/1961. NQ looks stronger after hours, so if you really want to be long, stick with techs. Just be mindful of that gap at 1910 that will ge filled one of these days. QQQQ 48 is gone, next support is 47.66 and 47.41. The calendar is loaded tomorrow. Consumer confidence and 10:00 and FOMC minutes at 2:00. Watch out for those Tuesday reversals.

Close:
Summer trading, but eventually the bearish internals gave us new lows. ES lost 1470.50 and looks headed for 1467.50 soon.

PM update:
ES 1470.50 did indeed hold and we could be headed for an NQ gap close at 1469.50 if 1460 holds. Internals are still bearish, so expect selling at resistance. Monday's are usually not good reversal days once the trend is set.

Morning update:
Bulls lose daily pivots and it looks like we might get that test of weekly pivots. Note that ISEE traded above 200 all morning and that is telling you there was way too much optimism at the open. This is still low volume summer trading so take your chips when they come.
Note that 1470.50 for ES is 50% of the correction and they might hold that ahead of weekly pivots. Expect at least a reactionary bounce. If it holds and internals improve, 1470.50 might be all bears get, at least through lunch.

Aug. 27 (Bloomberg) -- Sales of previously owned homes in the U.S. fell in July for a fifth consecutive month, adding to the inventory of unsold properties and showing the housing slump that triggered a collapse in credit markets will drag on.

NQ drops to daily pivot (1956.50) and holds so far. Gaps have not been closed (ES 1483.50 and NQ 1969.50). Watch weekly pivots on any sell-off (ES 1467.50 and NQ 1940.25), although NQ has key support a little earlier at 1945.75.

Sunday, August 26, 2007
YM (DOW futures), unlike ES and NQ, did not crack the downward trendline resistance on Friday. Should we pull higher, 13508 could be next. Failure (now at 13410) would trigger a test of support at 13326 and 13315, June low. Weekly pivot is at 13283. Note that DOW cash has pulled above resistance, so this YM chart is to adjusted accordingly.

ES resistance is 1493, 61.8% and 1503 50 dma. Weekly pivot is, surprise, 1467.50, 50% March/July.

Saturday, August 25, 2007

The dollar is very much in the news these days and it should be. We once again tested the key 80/81 level, an event that occurred in 1998, 2004 and this year. The monthly chart over those nine years tells us that there is a concerted effort to hold this level. Triple bottoms rarely hold, but this is a currency so stay tuned.

A look at the TNX (10 year treasury note) monthly chart also shows yields at key support. The channel held up this month, but 45.75 is now the line in the sand. A break of that level could set up a test of 4% in the coming twelve months.

NEW YORK (AP) -- Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.
Borrowers' withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples' minds, according to a survey of 258 members conducted by the National Association of Business Economics.

Have we put in a bottom? The chart of NDX looks bullish ever since that key reversal seven trading days ago. Note the close above 1957.60, 50 dma and the strong bounce off the 20 dma at 1928.55. Nevertheless, we are bumping up against stiff resistance, namely the June 2001 highs of 1963.83 and 61.8% retrace of the current correction at 1964.72. Volume has been uninspiring. We need to see what happens at 1965. Failure will set up a retrace to 1910, midway rally gap fill ( as oppose to a runaway gap from a bottom) and 38.2%. V bottoms snaps are powerful, hence the big rally of the past week, but don't count your chips yet, we haven't even taken out the August highs. I still prefer trading this day to day.
The July new home sales number was most likely a last hurrah before the credit crunch and tightening lending standards. It will be interesting to see if existing home sales on Monday corroborate Friday's data.
COT shows that commercials were long ES, NQ and ER the past week and non-commercials were mostly short, hence the squeeze. This is still a heads up for shorts. We will see if next week's data changes, but so far the big guys have not panicked and stayed net long.

Friday, August 24, 2007
NEW YORK (MarketWatch) -- The Federal Reserve has agreed to lift requirements on how much Citigroup Inc. and Bank of America Corp. can lend to its broker affiliates as part of the banks' decision to borrow from the Fed's discount window earlier this week.

Next week's calendar starts with existing home sales on Monday.

Closing hour:
NDX and QQQQ both hit their 50 dma's on a late day push (1957.50 and 48.14). It was a solid day for the bulls, riding on some dubious housing data, but they will take it. Traders decided to get a head start on the Labor day rally and not worry about Friday. There is also some hope for merger news on Monday morning. We are getting overextended on the daily, so this could be premature fanfare.
Bulls want NDX to close above 1957.50. Keep in mind that NQ has its 50 dma at 1973 and 61.8% at 1977.
Volume for QQQQ was pathetic today, the lowest of the week.

A jump in new home sales gives equities a boost, but financials and semis are still down. A mixed day and not one to trade, especially on a summer Friday. The Yen catches a light bid, bonds are now selling. ES resistance is 1470.50, NQ 1945.75. Dreams of a rate cut are slowly fading.

Thursday, August 23, 2007

Some bond and Yen selling kept the damage under control, but bulls know they are on thin ice. ES is sticking to 1467.50 resistance, NQ 20 dma at 1938 and SMH (semis) battling with its own 20 dma at 37.35 (chart). Shorts are getting aggressive once again as witnessed by ISEE closing numbers. This is still a day to day trading environment.


PM update:

ES resistance held and we lose 1467.50 support. Now holding 1458, 20 dma, although we have a gap to close at 1450.25. This is putting SPX right back at its 200 dma. The VIX says lower lows, but AD lines are not that bad, so watch for those squeezes.

The VIX is bouncing off lower bands and looks headed for 27 again (chart).

Wednesday, August 22, 2007
Bullish breakout as ES closes above 50% March/July (1467.50, continous contract). This support level along with NQ 1945 is what bulls need to hold. Bonds sold off as did the Yen. Even financials joined the party, although they lagged most of the day. Keep an eye on the TRAN (transports) which faces a key test at 4960. The DOW stalled right at its 20 dma (13248). COMP could be headed for 2601 if 2540 holds. I expect bears to mount a pretty strong attack there. We are getting overbought after six up days and there are still lots of folks who want to lighten up on rallies.
The dollar continues its scary drop, giving gold a bid. Watch out for oil, which looks headed for a test of 67.50/68.
Overnight resistance for ES will be 1480 and support 1470.50, 50% July/August correction.

Morning update:
ES support is now 200 dma continuous contract at 1462.50. NQ is finding resistance in the 1940 area (see previous post), but it looks like the coil of the past few days has now clearly broken to the upside. Nevertheless, this is still summer trading so watch your step, especially with rallies that get an early start. Bonds are still the ones to watch, any hint of a bid and the bulls could stall. Jobless claims on deck tomorrow.
I'll check in later as I only have occasional online access where I am.

Overnight:
Merger talks (more) and we get a bid right into key resistance for ES (1462.50). NQ looks headed for its 20 dma at 1941, which is also right below 50% retrace of the correction (1945.75). Bonds are now selling and that is helping bulls. The trend is fickle these days so keep on trading it, not holding it.

Toll Brothers dented the enthusiasm a little: link. ES is stalling right at R1. As usual, Europe is bidding, let's see if US markets follow through.

Tuesday, August 21, 2007
Noon update:
Choppy day but bulls prevail. ES resistance above 1459 is solid at 1462.50, 20 and 200 dma. Financials are up as are techs, but bonds still have a bid.

Monday, August 20, 2007
Aug. 20 (Bloomberg) -- Yields on U.S. Treasury bills fell the most in two decades on demand for the safest securities amid concern over a widening credit crunch.

Another bad day to trade unless you are scalping. It will be difficult for bulls to gain any traction as long as bonds find a bid and financials are in the red (watch MER). ES is still has clear resistance at its 200 dma and until we get a close above, bears will always be lurking (SPX 1454.40). The one positive for bulls is a COMP close above 2501, but that is looking like a Doji now.

Sunday, August 19, 2007
The DOW close on Thursday left a hammer right at the 200 dma. No looking back on Friday (unless you traded overnight futures) after the Fed decision. Where do we go from here? Resistance will be a confluence of various key levels: 10 dma at 13220, 38.2% of the March rally at 13227 and the big prize, June lows at 13259.86. Whether or not we put in a bottom (temporary or otherwise), there is a pretty good chance we will do some backing and filling. Watch the above levels, especially on a closing basis.

I am on vacation until Thursday, so I won't be posting charts. However, I will still trade and offer occasional insight. Trade light and trade tight the rest of the month.

Friday, August 17, 2007
Bull/Bear ratio getting there, but not quite as bad as 2002 and even 2006. That could be telling us a lasting bottom is not quite in yet. If playing the long side, day trade it, don't love it.

COMP ends the day at 2505, the DOW above 13K and bulls hold the fort, although SPX finished below its 200 dma (1454). Mixed bag, once again.
The VIX closed way off its lows of 25.23, at 30. We will find out soon enough if that is an op-ex Friday read, or a big red flag. In any case, a good day to close all positions and start fresh on Monday.

Noon update:

ES just can't get back above 1461, 200 dma after closing the gap at 1425. It's not a good day to trade now that the initial moves are out of the way. If you must scalp, ES has multiple set ups between 1425 and 1443 with 1433, yesterday's high, a fulcrum. Watch NQ 1855, must hold. Hopefully, you bagged some nice change, so don't push your luck. I mentioned yesterday COMP 2500 as a target, we are trading at 2486 after hitting a high of 2524. Bulls need a close above 2500.61, or bears will start attacking again next week.

Pre-open (3):

Full text of the Feds decision: link.

As mentioned earlier. ES 1470 is resistance, support will be 1436, 1414 and 1400. For NQ (NDX), resistance is 1914, 38.2% retrace and 1929, 10 dma. Support is 1885, 1875 and 1860, 200 dma continuous contract. Gap closes are: ES 1424.50, YM 12944, NQ 1856.50 and ER 774.50.

How about that VIX chart I posted yesterday? Nothing like a shooting star to put you at ease in a bias. Just remember: don't get greedy. Take the money or at the very least raise your stops to a nice profit level.

It looks like the ES 200 dma at 1461.75 (continuous contract) is holding things back, with that 20 dma just above at 1471 adding another layer of resistance.

Pre-open (2):
Aug. 17 (Bloomberg) -- The Federal Reserve, in an unscheduled meeting, cut the discount rate to 5.75 percent from 6.25 percent, noting market conditions have deteriorated since it last met Aug. 7.
``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward, '' the central bank's Federal Open Market Committee said in a statement. ``The downside risks have increased appreciably.''
The FOMC left the overnight federal funds target rate unchanged at 5.25 percent.


Huge initial jump with ES hitting 1470, its 20 dma and pulling back sharply from that level. After the first reaction, we could get some worries, but this news should put in a floor for now. Hogs get slaughered and shorts that were pushing too hard (or dreaming of Armageddon) are getting squeezed. What else is new. We just saw buy signals yesterday and ignored the noise. Use this rally to raise your stops and book profits. Take the money and run. Do not take anything for granted, this is still op-ex. ES 1470 and YM 13261 should be resistance.

Pre-open:
Futures stay above the Asian lows and are mounting a comeback.

HPQ comments :
"I'm not an economist. We saw steady growth across all of our segments," CEO Mark Hurd said on a conference call, when asked about the potential impact to the company if consumer spending slows.
"We don't have any data that would indicate any change in demand in any market or segment, so I'll just leave it at that," he added.


The markets are looking for an excuse to stop the bleeding and this could be it.

Aug. 17 (Bloomberg) -- The European Central Bank should scrap plans to raise interest rates in September as markets around the world plunge, economists said.

Europe is trying to rally the markets after the Asia sell-off. ES held 1400, YM is back above 12800. NQ needs to regain 1847.50.

Overnight:
The Yen bid is pushing futures down. NQ needs to hold weekly S1 at 1847.50, or we could be facing more selling pressure. ES rallied much harder thanks to financials, we will need to see if there is any follow-through tomorrow. This is still a market where it is wise to book profits when you have them. Note that NQ is more than 5% below its 20 dma, which is an extreme to say the least. Normally, a 3.5% deviation brings on a reversal to the mean. There is tremendous fear out there, exacerbated by option adjustements.

Thursday, August 16, 2007

How long this rally lasts will depend on the wall of worry. If we see too much optimism, we could head back down. For now, play this day by day. Resistance will be COMP 2500, 200 dma, where swing longs should book profits. For NQ, that would be around 1885/1891. The closing bounce received confirmation from a VIX shooting star (see chart). It's option expiration week, so it's a little hard to gauge, but nevertheless what bulls wanted to see.
The Yen is on a strong bid overnight and that is a negative but bonds are selling. Mixed signals.

HPQ is up after hours on earnings. Barton Biggs interview: video.

Huge reversal at the close with SPX finishing up 4.57 at 1411.27, off a low of 1370. MER is up 2.5% and that was a clue early on. As I wrote earlier, you needed to shut off the TV and have courage. That does not mean we are going much higher, just that the swing trade long was there. I noted all the signals, no need to repeat myself.

Closing hour:
Selling comes back. Options on SPX expire today (not tomorrow like everyone else) and that is exacerbating the swings, but once we are done with that, we should stabilize.

It cracks me up that the same guys that were crying for a 10% correction and how it would be healthy for the markets are now coming telling everyone to bail at -12%. What did they think? That we would get a 10% correction without bad news? The usual nonsense. Turn off the TV and start buying.

PM Update (3):
Big reversal as the DOW wipes out over 200 points in losses. If it can close above 12735, bulls will get control back. Watch NQ 1845 support. This could be a key reversal day. It's still too early to tell, but when the buying happens after the 2 PM turn, it is usually institutional. Financials and small cap futures are still up and that is normally bullish.
Both the Nasdaq and SPX have corrected 12% from highs, the DOW almost 11%. Keep the big picture in focus and turn off the TV.

Notable stocks in the green: TXN, MER, WMT, AXP, NSM. Old timers never stay short a day that has mother Merryl up (MER).

PM update (2):
NQ comes very close to daily S3 and we have a bounce. That will need to hold (1810). Banks are still up. Bulls are not out of the woods yet, but NQ had a -60 point day and that is an extreme to say the least. It has gotten a little absurd, as if we were going to get a 20% correction in three weeks in August. I can see that over three months (as in 1998), but not now. 12% is plenty.

PM update:
Support breaks and it is getting scary, but again that is when you have to gather some courage. BIX (banking) is still green. SPX has now corrected almost 12%. The DOW has dropped 1000 points in seven days. NYSE hit the 20 month moving average. We might be in a bear market, but bear market rallies can blow your socks off and it is coming. Don't forget that option expiration week is exacerbating the selling as put sellers cover by shorting. But it eventually wears off.

Aug. 16 (Bloomberg) -- Manufacturing in the Philadelphia region unexpectedly stalled in August, as orders and sales cooled.

I don't understand why the Feds are not lowering rates. That guy Poole is creating havoc on the markets and should keep his mouth shut.

Noon update:
QQQQ 45.03 gets hit, but they bounce it right back up above NQ 1947.50. It's treacherous, but banking is still up and the SOX is only marginally down. ADVDEC lines have dropped from -2265 to -1707. SPX december 2000 high at 1389 seems to be supportive. Bulls would like the DOW to get back above 12735, 61.8% of the entire March rally. VIX came very close to weekly R2 (36). Volume is low for such a sell-off, at least for now. Stocks like CSCO and GOOG are actually on sale. It sure looks like time to do some selective buying. The deadline for quarterly fund redemptions closed yesterday.

Sprint is going to spend 5 billion on wimax: link, that should help stocks like INTC.

Morning update:
We get a flush lower, with QQQQ tagging 45.12. SPX has support at 1389, December 2000 high. TRIN-NQ hit a high of 5.61. NYSE year lows are at 730, year highs at 8. We are definitely getting a little carried away. NQ 1844 held and weekly S2 at 1847.50 seems to be supportive going into the lunch hour. ER is actually green as are banks. Time to think long or at the very least cover shorts. When there is blood on the streets...

Open:
QQQQ hits my target of 45.35 (45.36) and NDX 1845, both 200 dma's. This could be time to start nibbling at swing longs, just use caution. NQ 1844 must hold on any drop.

Wednesday, August 15, 2007
Aug. 15 (Bloomberg) -- Federal Reserve Bank of St. Louis President William Poole said there's no sign that the subprime- mortgage rout is harming the broader economy and suggested an interest-rate cut isn't yet needed.

This guy is not helping matters. Part of the same old gang that has been singing the same old song for over a year now.

Exclusive video of the herd getting excited last month over DOW 14K: video.

The morning rally did not last (what else is new) and the DOW drops to within 2 points of its 200 dma (12832.70). Needless to say, that needs to hold. BPNDX (see my posting this weekend) is approaching the March lows. NDX 1845 is not far either and we should see NQ 1850/1860 soon. Keep in mind that SPX 1400 will be a 10% correction from highs. If short, you might want to lighten up.

Closing hour:
Sell-off, but we are approaching my DOW target of 12850. NDX 200 dma is at 1845, so that is still 20 points lower. For QQQQ, the 200 dma is at 45.35.

PM update:
Still looks like a QQQQ 47 pin. Up or down, we always seem to get a trade around there this week. This is opex trading at its worst so be careful.

One extra word of caution: do not trade market orders with ECBOT (YM), the fills are terrible in a fast market. Stick to Globex, unless you are using limit orders. It still amazes me how lousy an exchange ECBOT is.

Morning update:
We got a test of overnight lows, then a run up to ES pivot (1441, also 38.2% of the week), and now it's chop but with a slightly bullish bias thanks to financials. ES needs to hold overnight highs of 1435. I had a feeling we would get a rally today after a lower low, the question will be how high they take it. SOX is down and that is holding things back. But it's a definite plus to have BIX and XLF up. VIX support is 27.09 and 25.89 if we rally further.

Aug. 15 (Bloomberg) -- Consumer prices in the U.S. rose 0.1 percent in July, the smallest gain in eight months, after gasoline declined and food increases moderated.
The increase in the cost of living was as forecast and followed a 0.2 percent advance in June, the Labor Department said today in Washington. Core prices, which exclude food and energy, climbed 0.2 percent and were up 2.2 percent from a year earlier.


Watch ES 1432.25 resistance. Support is between 1418.50 and 1422. NQ did tag 1898, 200 ema futures chart. Chips are down pre-market thanks to AMAT.

Tuesday, August 14, 2007
Here is the SPX daily chart for July/October 1998 (LTCM forced liquidation, element missing so far is Russia default). Observe the chart similarities, although back then, we did not lose the 200 dma until later in the month. This time around, we come into option expiration week under the 200 dma. Note how they shorted it during the September bounce. I suspect we are doing that ahead of schedule. In case you are feeling a compelling urge to bottom fish, let me remind you that top to bottom, the drop was 20%. So far, we have only corrected 8%.

Part of the problem:

"If investors want to get their money out of a fund by the end of the third quarter, a 45-day redemption notice period would mean that withdrawal requests need to be in by the middle of this week.
Sentinel Management Group Inc., a firm that manages cash for institutional investors including hedge funds, roiled markets on Tuesday after telling clients that it will halt redemptions to avoid selling securities at deep discounts.
Some of the hedge fund managers who are worried about possible redemption requests from their clients could be contacting Sentinel to ask for their cash back."
Link.

I would caution traders about Wednesday, especially if you are short (although tonight looks hard down and I have been trading it short: NQ 1898 anyone?). Normally, Op-Ex Wednesdays are up, but this week started with two down days. Maybe one more low overnight. If we rally tomorrow, it might only be a one day event, so don't get all excited.

For those traders who use Qcharts, note that the feed disruption for Globex (ES, NQ, MR) on 8/13 can be filled if you use the following servers: cc-10.sc8 and cc-11.sc8.
The problem did not happen with the 6.0 beta, with e-signal feed, but unfortunately that version is not quite ready in my experience.