AheadoftheNews.com

Overnight:

Non-farm payrolls tomorrow will be a key market mover pre-open. Since the heavy selling started on last month's news, this data will be critical. Any good news will send futures flying, any disappointment will only excarbate the negativity surrounding GOOG.

Levels of support for ES: 1369.50, 1366, 1350.25, 1345 and 1328/1331. Resistance is 1379.50, 1382.50, 1384.75 and 1387.25.

After-hours:

GOOG is getting clobbered, another reason to stay away from the 2007 high flyers. This is a stock pickers market and you should not trade it like last year.
As far as ES is concerned, as long as it closes above 1369.50, bulls are still on. Still a problem with the 20 dma, though.

We have been in a bear market ever since SPX closed below its 10 month MA in December. That does not mean we can't rally back up to the 20 month MA, now at 1425, which is also the old bull market trendline, lost in early January. Traders need to be cautious about making broad assumptions at this point. How much bad news has the market discounted? Are the rate cuts ending soon? Today was a perfect example of how Mr Market can clobber those trading the headlines. Trade this day by day and don't get stuck in a bias. Follow the money. If it wants to buy this market, don't argue.

Ex-Fed under Reagan, Paul Volcker, endorses Obama: link.

Closing hour:

If ES can hold 1369.50 at the close (50% January), it would be bullish, regardless of 20 dma noise. It is starting to look like a stealth rally that could lead us to 1420/1430. ISE is still down at 132, and that is the perfect set up for a short squeeze.

Noon update:

It looks like bulls are hitting the gas pedal. That low VIX was telling. Now all they need to do is hold ES 1350.25. This could be one of those post Fed days, where support is tested. When it holds, they start buying. We will see how the day ends, but this is a welcome turn around. We are deeply oversold on the weekly and monthly and with rates down at 3%, markets might start to look forward. One big plus for bulls: the wall of worry is definitely present.

ES resistance is the 20 dma, now at 1377. Only when we get a close above that level will bulls be more secure. COMP is still finding resistance at the ex bull market trendline, now at 2377.

Morning update:

ES is framed by the 1/22 high of 1331.50 and the 1/29 open at 1353. The bias is bearish, although one should note the drop in the VIX. We might still be in a range awaiting tomorrow's ISM and consumer sentiment.
Financals are slightly higher as they always get a pop from rate cuts. Same with housing and retail. But semis are down. Not a good day to trade.

This is also the last day of the month, everyone tossing away the embarrassing stocks. It will be interesting to see how they treat the start of February. Stocks are getting awfully cheap. We have a 3% rate, my feeling is we could actually rally out of this. Watch those support levels. All bets are off if ES breaks 1328.

Rubin on the cuts: link.

Good earnings comments from Zacks: link.

Open:

Jan. 30 (Bloomberg) -- The U.S. economy weakened more than forecast in the fourth quarter as housing sank deeper into recession and consumer spending cooled.
Economic growth slowed to an annual rate of 0.6 percent in October through December, half the rate forecast, following a 4.9 percent pace the previous three months, the Commerce Department said today in Washington. Residential construction dropped by the most in 26 years.

This is going to help the rate cut cause.

The first sign of real trouble for bulls would be an ES break of 1345.50. NQ has double bottomed at 1796.50, so that one is pretty obvious. Semis are up today so there seems to be an interest in techs. Look for initial NQ support at 1814.75, followed by 1808.75.

Don't fight the upside if ES moves above 1370, regardless of your bias. We could see 1421 if that happens.

Jan. 30 (Bloomberg) -- The Federal Reserve may lower interest rates for the second time in nine days and indicate a readiness to go further if the economy deteriorates.
The Federal Open Market Committee, ending a two-day meeting today, will probably follow the Jan. 22 emergency reduction with a half-point cut in its benchmark rate, according to 48 of 85 economists surveyed by Bloomberg News. Such a move would bring the rate to 3 percent.

Long ES above 1370, short below 1312. Not much help, I know, but it pretty much boils down to that.

I don't know about you, but I am getting awfully nervous about this herd mentality sticking to the belief that the Feds will cut 50 basis points. Congress is going to pass a stimulus package, the Feds already cut 75 basis points a week ago and we still have some key inflatonary data going forward.

ES is still in that broad range and for now refuses to relinquish 10 dma support. Massive sell stops are parket at 1309 and buy stops at 1370.

Morning update:

The tech lag finally caught up with the rest of the markets. The durable goods news has also reduced rate cut expectations, so down we go. Overnight lows should be tested. NQ must hold 1791 if we 1796.50 is lost.
It's not anything dramatic at this stage, just more chop. ES is still in that very broad range and I don't think it will break out of it before the Feds. If ES does move past 1370, we could see a huge rally up to 1420, where brick wall resistance lies.

Open:

Jan. 29 (Bloomberg) -- Orders for U.S. durable goods rose more than forecast in December, indicating business investment is holding up even as other parts of the economy weaken.
The 5.2 percent increase in appetite for computers, aircraft and other items made to last several years was the biggest since July, the Commerce Department said today in Washington. The 0.5 percent gain in November was also greater than previously reported. Excluding transportation, demand rose 2.6 percent.

Ths bodes well for the jobs report next week. We could even have an upward revision from the last disaster.

Watch ES 1369.50 resistance. Support at 1350/1352 held overnight.
Semis are up, but a little weak. Keep watching NQ and techs.

For the first time in 19 trading days, ES closes above its 10 day moving average. That was a bit of a surprise and could set up a run to 1421 if we can hold that level. The only problem for now is the lag in NDX, still struggling with the 5 dma. That will have to change if bulls want to hold on to gains. A wall of worry is sufficiently present to give some kind of support, but techs need to be on board.

Closing hour:

ES pops up to the 1350/1352 area of resistance outlined this morning. I doubt bulls get past that ahead of the State of the Union and more economic data.

Morning update:

Jan. 28 (Bloomberg) -- Purchases of new homes in the U.S. fell to a 12-year low in December, capping the biggest annual decline on record.

ES held the support levels overnight that where mapped out yesterday (1309/1312). Bonds got bought on the above news, but there seems to be TNX yield support at 3.55%, which could hold up equities. ES also held 50% of the day at 1323, so we might be stuck in some pretty broad range trading ahead of the Feds. A break of 1323 would set up 1320.25 and possibly a test of those overnight lows. But for now, it seems bulls are stemming the bleeding.
Initial resistance will be 1335, followed by 1339.50. Very strong resistance exists in the 1350/1352 area.

Corning Inc. posted an 11% rise in fourth-quarter net income despite year-earlier gains as demand for its liquid-crystal display glass remains strong and without any significant impact from the slowing U.S. economy.
The company also projected first-quarter results above analysts' expectations, helping send shares to $23.64 in premarket trading from Friday's closing price of $22.37.

PM update:

CAT fine tunes its story and gets negative on the US. NQ loses support and is now doing a key retest of 1804. ES at 5 dma (1333). Financials are also taking a turn for the worst. Stick with select tech companies that reported well so far and don't have a dire outlook. They will shine when we hold a rally a little better, probably in February.

Morning update:

All gaps are closed and then some. NQ loses 1839 and heads straight down to the 5 dma. Volume picked up on the drop. ES will need to hold 1345. AD lines are still positive, but TRIN's well above 1. Whipsaws will be frequent as the end of month approaches. Definitely some window dressing, no one wants to look stupid.

Open:

Watch ES 1369.25, 50% January. Support will be NQ 1839, last week's low.

DAVOS, Switzerland (MarketWatch) -- Citing strong growth in emerging economies and expectations for no worse than a mild U.S. downturn, the chief executive of Caterpillar Inc. says he's escaped the economic gloom enveloping the annual meeting of the World Economic Forum.
"I think I'm considerably more optimistic than the mood here in Davos," CEO James Owens said Friday.

Is most of the bad news priced? Short term, it sure looks that way.

MSFT delivers and NQ shoots up after hours, closing the 1848.75 gap. Next resistance is 1867 and 1888. ES is parked right at its 10 dma (1362.25).
If ES can move past that, we have 1382, 1403 and 1421 as resistance. the 2006 trendline retest would sit right near 50% at 1421, which could be the ultimate challenge ahead of the Feds.
One of last year's dogs, BRCM, also came through. That is a stock I like for 2008, with a huge gap to close at 40. A story for the second half.

PM Update:

More chop.

An unbelievable story is unfolding:

LONDON/PARIS (Reuters) - Societe Generale's shock disclosure of a fraud that lost it $7 billion has left investors wondering about a link between the fiasco and Monday's European stock market rout.

The sharp fall, which was followed by an emergency U.S. rate cut, came as SocGen tried to close out positions built up by one of its traders.

Noon update:

Techs have taken the lead. That could be due in part to rising yields, which have made XLF drop. As long as NQ can keep holding on to 1804, bulls should keep it together. Bears tried hard earlier, but could not get lower than 1798.50. The 5 dma is still resistance, though. It's a choppy low vol. day. The VIX drop from highs is sharp and maybe a little too much too fast. ISE equity is also optimistic at 191. Everyone buying calls today, bulls want more of a wall of worry.
MSFT will make or break this rally after the close.

Bernanke is getting heat for his 75 cut. That might set up a no cut or only 25 cut next week. We still have more economic data to sift through.

Morning update:

ES 1355 got sold again and NQ failed after a 5 dma overthrow to 1834. I was a little concerned with the bid ask volume on NQ and it has proven to be a problem as we pull back from highs. Expect more chop today, the best trade might be behind us.
NQ 1804 needs to hold or we will head to 1782.75.

Open:

NQ 1804 holds (weekly S1) and we are running up to the 5 dma and overnight highs. ES is attacking weekly pivot at 1355. AD lines are nicely positive, Nasdaq 4 to 1 up volume so there is a good chance we will close the NQ gap at 1848.75, or thereabouts if the 5 dma holds once we get up there. My only caveat is that the volume at ask versus bid is not climbing as fast as the AD lines. Some caution is warranted.

Pre-open:

The 5 dma is still acting as resistance for NQ (currently 1825). ES is actually finding support there (1333) and resistance at its weekly pivot (1355). It is not usually healthy to have NDX lag, but small caps have taken the lead, so we have mitigating factors. In fact, ER (RUT future) is trading above its 10 dma (696.80).
Should NQ breakout, it has a gap to close at 1848.75 which could be heavy resistance ahead of MSFT earnings. If you are long from yesterday's lows, you should raise your stop to just under the Tuesday gap open (1750.50).

Solid rally at the close. They just had to take NDX/QQQQ down to that bull market trendline and the COMP to the psychological 2000 number before turning on the after-burners. The yield on the ten year dropped to 3.28%, and that also helped. After inflation, it leaves very little return and that is when stocks get bought.
It's amazing how no one in the media has caught on to the fact that the Nasdaq 100 never lost the longer term trendline in this sell-off. That is one thing we charted several times on this site. It's also why I spend an inordinate amount of time on that index and its future, NQ. It is the chart to watch at all times.
We are still in a bear market, but the rallies can carry some punch. Bulls need to recapture the NQ 5 dma at 1839, but it's nice to see ES (SPX futures) close above its 5 dma for the first time in six sessions. Resistance will be 1355 and 1367. Support is 1338 and 1324. Must hold is 1309.25.
NQ needs to hold Tuesday's close of 1801 and above all, its low of 1744.25. Weekly S1 at 1804 is your interim marker.

Closing hour:

Looks like bulls pulled it off. NDX/QQQQ long term bull market trendline held after we closed that small QQQQ 2006 gap.
Bulls need NQ to close above 1744, but you can see the bid. The mood is changing.

The selling had reached absurd levels and we now have one heck of a wall of worry in front of us.

PM update (2):

COMP 2202, NQ 1698. 38.2% of the entire bull for NDX is 1687.63. The COMP has now dropped 30% from its highs. The value buyers will start waking up. As far as I can tell, there are no bread lines in the streets. What are we going to do here? Price in WW3, a terrorist attack and the great depression all in one month? Wall street is acting like a cry baby and every reporter wants to make sure they called the end of the world (probably the same crowd that told you to buy in 2000). Ridiculous.

Now Cramer is asking the Feds for 1.5%. Get real. as if Bernanke will even come close to making the Greenspan mistake. 3%, yes, but 1.5%? Aren't these the same folks that criticized Greenspan for 1%?

PM update:

QQQQ does indeed go down and close that Nov 2006 gap at 41.94 (41.93, a penny off). Bears are getting really carried away as if the great depression was on its way. In any case, watch 1723 as we enter the lunch chop. The close will tell the story. ES is showing remarkable relative strength, so this is really an AAPL sell-off. That stock is just going back down to fair value.

NDX 1700 was not hit and it could be the deciding factor. NDX tends to be more reliable than QQQQ. So a little overlap below 41.93 is possible.

AAPL is probably responsible for 1.5% of the NQ drop, that's who much weight it carries.

Noon update:

NQ does the lower low and bounces back above 1723. QQQQ hits that 2006 gap open, the close is a little lower, but we are getting picky at this point. A solid bear market rally should take NQ back to 1900/1950. The problem is AAPL, moving below 131. That stock carries a lot of weight in NDX. ES is still above 1283.

I have been mentioning NQ 1717 for days, it would be ironic if it turns out to be the low, although there is risk to 41.90 for QQQQ. That trendline is a KEY battle for bulls. They just cannot lose it at the close.

Morning update (2):

Bear attack as we head into lunch. Watch NQ 1744. A break of that sets up a test of overnight lows. AD lines are only -316, so I'm not sure that scenario will unfold. But bulls are definitely keeping an eye on 1744. If we do test overnight, it could be a classic case of slightly new low doing the trick. Watch for bullish divergences.

Morning update:

Bulls are holding the line and not attacking the overnight lows anymore. It could be European money coming our way. After all, we have the rate cuts, they don't. It's too early to give an all clear, but that bid is relentless in the face of huge selling pressures. Someone is holding the fort, especially with ES. Gap close is 1309.25.
SMH, XLF, BIX, RLX, HGX are all up (semis, banks, retail, housing).
Small caps are up, once again. This is normally a bullish divergence.
Watch NQ 1758 on any pullback from the ES gap close. The bears can come back anytime, so careful if long.

NQ hitting that bull market trendline and bouncing could have done the trick. I was looking at 1717/1718, but they took 1723.

Open:

There is a battle going on at 1744.50, yesterday's NQ low. ES needs to hold 1274, followed by 1262/1264. Resistance is 1283. Overnight lows for NQ were not hit so far and Q's found support at 42.50. The VIX has not made new daily highs and neither has VXN, although we are up there. AD lines are bad, but not as bad as yesterday. If NQ bounces, watch 1758.

Pre-open:

Trichet won't cut rates in Europe and we have a problem.

NQ went down to 1723 and that is getting close to the bull market trendline which I expect QQQQ/NDX to hit at the cash. The trendline for QQQQ is around 41.70, although we have a gap to close at 41.93 (10/06). For NDX, that would be 1697/1702. It could be a target and it could be a great trade. ES is not making new lows so far.

AAPL has a gap to close at 131.77.

AAPL guides lower, a tactic CFO's use these days in order to beat what will be a difficult quarter. No one in his right mind is going to make unreasonable forecasts. It just reinforces my inclination to stay away from last year's high flyers. The only ones that will guide higher, if they can back it up, are stocks that have already low expectations built in (case in point: TXN).

NYSE did that close above 8652, but it looks like NQ could retest the lows and maybe even hit that trendline at 1715/1720. That would put the Q's around 42 and NDX 1700. It's not certain, but maybe that was the plan all along. After all, NDX is the only major index to have not tested the longer term bull market trendline. Maybe its time has come if it loses 61.8% 2006/2007 at 1750.

ES traders will have to monitor that 1274 level overnight (see Monday's charts).

Closing hour:

I have rarely seen such skepticism, both from e-mails I receive and the overall media. I consider that to be healthy for the markets. We are working on a short to medium term bottom and there are some stocks that are getting so attractive that at this stage, you have to start moving away from the herd and do some buying. Be selective and mostly stick with last year's laggards. They will do better than the 2007 high flyers. Be a stock picker for now.

Overall confirmation is still not present, I would like to see NYSE move back above 8650. Futures traders will note that ES closed the gap, but NQ did not, so there is still work to do on the broader markets. But small caps are up, do not ignore that development if short. I would have preferred to see NQ hit that trendline, now at 1718. In fact, it would coincide with NDX 1700, so we are getting close. So patience if trading futures, but incremental buying of select stocks.

PM update:

ES holds on to the 1300 level. Support below that is 1274. The closing hour will tell the tale. The VIX spiked up to August levels (3750) and has since backed off. Nevertheless, showing some support at 30.
Financials are doing well, they are buying the 2007 losers.

NYSE close above 8652 would be bullish (may 2006 high).

Jan. 22 (Bloomberg) -- The Bush administration today left the door open for a stimulus package larger than the $150 billion plan the president already has outlined to avert a recession.

Morning update:

We hold overnight lows. We should get a test of NQ overnight highs at 1820.25. Resistance above is 1839, 1848.75 and 1849.50. Bulls regain actual control above 1850. For now, we could still have a closing sell-off. Note that NYSE saw a 10 to 1 down volume open.
It could be capitulative, but I would not trust any rally that does not clear NQ 1849. Bernanke panicked, but the markets want more. An additional 50 basis might be wished for when the Feds meet.

Pre-open:

Fed cuts .75, but the initial bounce needs to hold ES 1274. Overnight lows took ES limit down to 1255.50 (overnight rules has a limit of 70 points). NQ dropped below weekly S2 of 1758, but rebounded. Resistance is still 1804. Watch that gap when we open (1849.50).

Circuit breakers will kick in at DOW 10890 (10% drop).

Overnight session (2):

NQ holds weekly S2 (1758), while ES still finds resistance at 1273/1274. The entire media is taking up a crash, it even came up in the CNN Democratic debate. Clinton had the only smart answer: "I don't know what the markets will do tomorrow".

If NQ moves up, watch for resictance at 1804. Gap close would be much higher, at 1849.50.

Europe will open in a couple of hours, that will be the big test.

Early overnight session:

ES key fib continuous contract is 38.2% 2002/2007 is 1273.70 (chart). Looks like they just sold it at 1272.75. Bulls need it back.


Interestingly enough, the 38.2% level for nq is 1697, which is not far from the long term bull market trendline, currently at 1717.

By the way, the June 2006 low for ES is 1226, that would be the same percentage drop as NQ hitting the trendline. Hence, I would call ES 1225/1230 exteremly strong support on any crash scenario.

Circuit breakers: link.

The futures collapse of Sunday night/Monday morning took YM below the previous all time high for the DOW of 11750, but did hold the 11500 open (02/2000). We will see how the markets treat those two numbers on Tuesday (11500 and 11750).

The one area to flee immediately on any rally should be commodities, including oil and gold. The dollar will become the world's safe haven, regardless of where Bernanke cuts. The EUR/USD short is something I have been discussing on this blog for weeks, 2008 is the time for that trade to really take off.
Cash will be king, for those who want to keep it simple.

Trichet is worried, and that will break the Euro's rise: link.

Closing hour (futures only):

No relief. The Feds will need to intervene in a meaningful way before their meeting or we will have a black Tuesday at the cash open. I'm not even sure it would help at this point, but it needs to be done and quickly.

Market crashes are a rare occasion, and even more rare at the start of the year. The good news is that markets invariably rally, and rally big, within a month of such events. But that will be small consolation to the millions who are seeing their portfolios collapse.

Bear market rules apply: oversold is dangerous and overbought should be sold. I still think the upcoming short squeeze will be massive, the equity put to call ratio on equities is just too pessimistic. Just don't fall too much in love with it when it happens.

Open (futures only today):

Oversold in a bear market can get extremely dangerous and today's open proves it. European markets are falling apart in a way not seen since 9/11.

NQ has hit weekly S2 before the open and found some support there (1758). ES has now put in a 20% correction from last year's high. SPX cash would be around 1240/1250 if it was open.

We are gearing up for a possible stock market crash tomorrow if things do not improve by the Globex close today. Futures are the only hedge traders can put on today and they are piling on short.

The idiots who abolished the uptick rule in July are going to find out very quickly why it was put in place by the generation of '29.

He is all over the place with obnoxious ads, but Ken Fisher is one of the most accurate market forecasters out there, a dangerous business indeed. Here is his latest column at Forbes: link. Always worth a read (written two weeks ahead of printing, hence the 1/28/08 date).

RIYADH, Saudi Arabia (AP) — Energy Secretary Samuel Bodman told Saudi Arabia's oil minister Saturday that OPEC should increase oil output.
His visit to Saudi Arabia — which has the world's largest supply of oil — come just before a Feb. 1 meeting of the Organization of Petroleum Exporting Countries meeting in Austria in which the oil cartel could consider increasing oil production if it deems it necessary.

It also comes less than a week after President Bush raised the same concerns in Saudi Arabia. Bush said oil prices were very high and "tough on our economy."

The White House said Wednesday that Saudi Arabia's King Abdullah told Bush that he was worried about the affect of high oil prices on the world economy — but there was no commitment from the king about increasing oil output.

This groveling to the Saudis is truly pathetic. This administration saved many Saudi family members from scrutiny by flying them out of the US the day of 9/11. Saudis keep financing Al-Quaeda and 41% of all foreign fighters coming into Iraq are Saudis. And we have to beg them to increase oil output?

I am 100% in agreement with Cramer on the Bernanke fiasco, but I think there are many others out there who share the blame. We are facing a grave crisis and politicians on both sides need to act now. They should not even have the weekend off.

The charts are nasty. The DOW dropped the trendline, although one could squint and opine that it did bounce a little at the close to kiss it. SPX closed right at the May 2006 high, after tagging the 200 weekly ema and finding support at the May 2001 high (1315). The COMP sold off right at resistance and also found support at its May 2001 high (2328). Seems like May 2001 is a big deal. If you were trading back then, you will remember that it was the last hurrah for bulls before they completely collapsed. Price has memory, let's hope these levels hold (SPX 1315 and COMP 2328).

It's not easy to make a bullish case, in fact, it's downright impossible. But option data suggests that the crowd is piling on short and we all know how Mr Market loves to punish the herd when the pen is full.
Third day in a row of CBOE equity put to call at 1. Again, these are pessimistic numbers rarely seen, let alone several days in a row.

COT shows commercials increasing their NDX, full and e-mini, net longs while non-commercials increasing their short bets. In other words, stick with techs for the long side.

PM update:

A brief test of DOW 12K (12037.77) and we are back at 12150. Not a healthy market, but the day is far from over. There was good news from GE, IBM, AMD and gaming companies. Sprint is hitting SPX pretty hard, but that stock has been on the skids for some time. Note that they are buying mobile/wireless and their chips (BRCM, TXN, RIMM). AAPl is getting too cheap to pass up.

It's almost impossible to gauge market direction during Friday op-ex, so I recommend sitting this one out.

Noon update:

Alarm bells went off as DOW loses the trendline.
Bush failed to give enough for the markets and the sell-off resumes. We are back to fading Bush speeches, arguably the most incompetent CEO our country ever produced. Why he did not act decisively during the holidays to stem 90+ oil is beyond me. All he had to do was announce some Strategic Oil Reserve release and we would have dropped 20 points and had a better consumer during Christmas. It's amazing how the markets have been selling his speeches since 2001, except for a brief honeymoon at the beginning of this ruinous war. We are headed for a 70's, post Vietnam economy.
Bernanke is too slow, Bush too tight with the wrong people and Paulson is desperately trying to juggle both. If we rally, and I am confident we will soon, it will be in spite of this gang.

This is still option expiration week for most of the market, so I'm not sure in the end that we will lose DOW 12150. Bulls sure hope not.

Open:

Markets bounce back now that we are done with the SPX option saga. It could still be choppy due to the rest of the markets expirations, but the stage could be set for a rally next week. As long as the DOW holds that 12150 level, bulls should start building an edge. The one problem today could be the COMP. It needs to get back above its trendline, now around 2380. These opex Fridays are not great trading days and should be avoided altogether, so I will update after the close.

Semis, retail and housing are up, financials and banking are down.
The volume buying is concentrated in tech per TrinNQ.

NEW YORK (Reuters) - Consumers' mood brightened in early January, but was still significantly less optimistic than a year earlier, a report showed on Friday.

The Reuters/University of Michigan Surveys of Consumers index of confidence rose to 80.5 from December's 75.5, topping economists' median forecast for a reading of 74.5.

Overall, the data were consistent with personal spending growth of 2 percent in 2008, starting with about a 1 percent growth rate in the first quarter and rising through the rest of the year, the survey reported.

The DOW manages a close right above the 2003 trendline (chart), but the COMP lost it. Note that SMH (semis) and RLX (retail)have not made new lows. This closing drop is mostly related to the expiring SPX options.

SPX, DOW and COMP have all corrected about 15% ( a little more for the COMP and a little less for the DOW, right on the money for SPX).

Don't be suprised to see an ES bid once the cash closes and we are done with the SPX opex cycle.

ISE equity at 71, CBOE equity another day at 1. We have never had two days in a row at 1 without a major rally around the corner. I would love to know what commercials are doing, but I bet they switched net long today. They sure pushed the envelope on this one and surprised me, but that is not going to deter me from hitting the long button. We could have a crash, anything is possible, so some of you might want to wait for confirmation, but usually a crash needs more optimism going in. You can go down further on oversold, but you can't if everyone is already short.

Closing hour:

SPX loses 1440, next support is 1335.82 and 1327.10. Everybody is puking. That DOW trendline is very close now (12150). This is when I love to buy, but that's me.
This is what happens when 71K SPX 1350 short puts get hustled and need to cover. Usually by shorting ES.
NQ bounces off weekly S2 (1847) or close.

Closing hour and a half:

Watch that DOW 2003 trendline at 12150 should it get really nasty. COMP is losing it, although the May 2006 high of 2352.56 is not far. Once we are done today with all those SPX put sellers covering, we should stabilize. Right now, they are scrambling before today's expiration. The smart sellers rolled-over earlier to Feb.

I like that Q Feb bull call spread 46/48 at .79 now.

PM update:

Some selling after Bernanke fails to inspire. Note that we have 100% projection December for SPX at 1347.73. If that holds, we could bounce. Again, I'm not sure the short side is the place to be at this point. In fact, I'm dead set against it. Either stay in cash or dip some toes long.

Look how hard they sold the EUR/USD when it briefly hit 1.49. Now in the 1.46 range, a huge drop in two days. Has gold topped out? Very possible if it can't get back above 892 quickly.

My trade: long QQQQ Feb 47 calls now at $1.02. More conservative would buy a bull call spread, 46/47, now asking .45 (buy 46, sell 47). The 46/48 is at .80, not sure it's worth it since the outright 47 is at 1. It's going to be a little scary, but I think it's time to put some money to work.

Morning update:

ISE equity is now at extreme levels, 22, 27 and 29 the past hour. That means almost 5 puts sold for every call. These are equity readings, meaning the speculative retail crowd is almost 100% short. CBOE equity confirms this with a read of .95. In fact yesterday we saw 1.05 on a closing basis! I strongly recommend short positions get exited. We might get another drop due to SPX options expiring today, but bears are on borrowed time short term.

Here is the link for CBOE put to call since 2003, if you want to get an idea what 1.05 equity p/c means. You can count on one hand such pessmistic occasions. You will need Excel: link.

An intelligent look at the Mac Air: link.

I agree with the writers, all the complaints are silly: it's not meant to be a desktop replacement, in fact not a single notebook of any size makes a true desktop replacement. The function of notebooks is mobility and Apple is on the right track.

Morning update:

It's the Bernanke show. Any tough words out of him and we will sell some more. Since he is an academic in an ivory tower, I wouldn't be suprised.
ISE equity call to put opens with a 98 read, followed by 18. Everyone is short or buying puts. That is not to say we go up, but it does mean that when we do start going back up it will be V shaped.
It's also opex week, so anything goes. Watch that COMP trendline.

Retail and semis are up, banks and housing down. That spells chop.

SPX options expire today, so lots of spreads being rolled over or covered.