Market Remains Mixed Since Wednesday's Rally

Good morning! Over the past two trading days the action has been very typical of the type of activity one would expect following such a monumental rally as that which took place on Wednesday. The range narrowed as anticipated, and volume was also slightly lighter overall. The upside in the morning was a bit more than I had been looking for, but the strong opening gap merely served as stronger exhaustion to help turn the market around and pull it back into the 15 minute trading range from the previous session.

The afterhours buying had begun in the late evening in the futures market with a sharp upside spike into 20:00 ET, but the spark of buying was short-lived and the market congested into the early hours of the next morning. At about 3:30 am ET the bulls once again materialized and the indices slowly climbed higher ahead of the open. By the time the opening bell had rung the Dow was back at previous daily highs, while the Nasdaq Composite and S&P 500 also hit price resistance on the daily time frame.

Extreme gaps, such as the one on Friday morning which take place in the direction of the trend heading into the gap, have a very difficult time sustaining themselves and are more readily prone to failure. Often the highs are made within the first 15 minutes of trading, just as they were this time around. The tech-heavy Nasdaq had the most difficult time holding onto gains out of the open. Dell Inc. (DELL) had not faired well on earnings and a diminished forecast. The outcome was a significant gap lower into the open, while August's lows serving as price resistance after the Dow dropped under that level into the open to establish a new 6-month low in the process. This offset some of the gains attributed to the hope that continued indications of a weakening economy will leave to a Fed rate cut this month.



After moving lower into 10:00 ET, the indices congested for about half an hour before the selling resumed around 10:45 ET. The trend was steady as the S&Ps and Dow made their way into the previous 15 minute highs and 15 minute 20 period simple moving average support. These hit at the 11:15 ET reversal period, but the market had a difficult time rounding off at the support and only managed to pull slowly higher into the 5 minute 20 sma before again breaking lower out of a 5 minute bear flag at noon. This took the Nasdaq back into Thursday's lows and slightly lower lows on the 5 minute time frames created a form of double bottom which trapped sellers.



Despite the reversal pattern, the momentum was unable to shift intraday. The upside remained substantially weaker than the downside within the early afternoon trading. This created more of a strong range along support than anything else before the indices gave way to selling at the 15:00 ET reversal period, increasing in momentum into the 15:00 ET one. The lower end of that 15 minute trading range in the Nasdaq we have been looking at held as support in that index, while the gap closure in the S&Ps and Dow served as support in those markets. The S&Ps and Dow, which had held up rather well compared to the Nasdaq, built up momentum for a strong push higher into the close, leading to gains in those two indices, while the Nasdaq closed lower.



The Dow Jones Industrial Average ($INDU) rose 59.99 points on Friday, closing higher by 0.5% at 13,371.7. For the week as a whole it rose 2.9%, although it remained 4% under the closing prices from the end of the previous month. 2/3 of the Dow's components posted gains on Friday with JP Morgan Chase Co. (JPM) as was one of the strongest. It closed higher by 4.5%. The S&P 500 ($SPX) rose 11.42 points, or 0.8%. It closed at 1,481.14 with a gain of 2.7% on the week and a loss of 4.3% on the month. The Nasdaq Composite lost 7.17 points, or -0.3%. It was trading at 2,660.96 into the bell. It had risen 2.4% throughout the course of the week, but had a rather extreme loss of 6.9% on the month as a whole.

In Friday's morning column I had made a reference to the late afternoon action in the indices as a whole and compared it to the daily time frames. The follow-through on it had been the choppier upside into Thursday's close. While the momentum is slightly stronger on this setup on the daily than on the 5 minute version, I am still expecting a very similar follow through with a great deal of the more choppy daily sessions with stronger overlap from one day to the next in terms of the index prices. I am also watching for a slightly higher high in the S&Ps and Dow on the weekly time frame to continue to create the conditions that would be favorable for a stronger price reversal and correction into the early half of 2008. We are still a number of week out, however, so we shall have to wait to see how this continues to play out as the market tries to pull higher into that upper trend channel resistance on those larger time frames.

Key Earnings Announcements This Week:

Monday, Dec. 3:
After: CPWM, ISLE, PVH, SHRP

Tuesday, Dec. 4:
Before: CRMT, AZO, LDR, LAYN, SAFM
After: CHS, PSS, CPRT, GES, PLAB, NX, WIND

Wednesday, Dec. 5:
Before: BTH, DSW
After: CWST, CASY, CMTL, DDMX, GEF, NOVL

Thursday, Dec. 6:
Before: ALOG, CMN, CHINA, FLE, FLOW, GIL, HRB, HSOA, KFY, MDZ, MEI, MOV, PTMK, SMA, TTEC, TOL, TTC, UTIW
After: AVAV, CHP, CAE, CMOS, CUB, ESL, HRLY, KKD, LQDT, NSM, OPTM, RVI, SWHC, SORC, SNPS, UNCA, PAY

Friday, Dec. 7:
Before: HITK, KWD

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Economic Reports and Events This Week

Monday, December 3, 2007
10:00a.m. Nov ISM Manufacturing Business Index. Previous: 50.9.

Tuesday, December 4, 2007
7:45a.m. ICSC Chain Store Sales Index For Dec 1.
8:55a.m. Redbook Retail Sales Index For Dec 1.
5:00p.m. ABC/Wash Post Consumer Conf For Dec 2.

Wednesday, December 5, 2007
7:30a.m. Nov Challenger Layoffs. Previous: -12.0%.
8:30a.m. 3Q Revised Productivity. Previous: +4.9%.
8:30a.m. 3Q Revised Unit Labor Costs. Previous: -0.2%.
10:00a.m. Oct Factory Orders. Previous: +0.2%.
10:00a.m. Oct Pending Home Sales.
10:00a.m. Nov ISM Non-Manufacturing Business Index. Previous: 55.8.

Thursday, December 6, 2007
8:30a.m. Initial Jobless Claims For Dec 1 Week.
10:00a.m. DJ-BTMU Business Barometer For Nov 17.

Friday, December 7, 2007
8:30a.m. Nov Nonfarm Payrolls. Previous: +166K.
8:30a.m. Nov Unemployment Rate. Previous: 4.7%.
10:00a.m. Mid-Dec Reuters/U Of Mich Sentiment Index. Previous: 76.1.
3:00p.m. Oct Consumer Credit. Previous: +$3.7B.

Market Takes a Breather, but Remains Bullish Short-term

Good morning! After Wednesday's stellar performance, the market took the day to catch its breathe on Thursday. You can think of market rallies much the same way you would a person who has taken up running. They can go for longer distances without a rest if they set a steady pace to begin with, but if they decide to sprint, they will become more easily exhausted and will either need to slow down more quickly or stop for a bit to recover. On Wednesday the market was at full sprint in the morning, slowed the pace somewhat into the afternoon and then decided to sit on the bench for awhile going into the next day.

Volume was the lightest of the week in Thursday's session, and the indices overall chopped around quite a bit on the 5 and 15 minute charts, but a number of opportunities still presented themselves intraday in individual issues, as well as the market itself for those who either went for the very minor scalps or else held through the chop on the moves off the larger 15 minute support and resistance levels.

Among the best-trending stocks on the upside on Thursday were top names such as Apple Inc. (AAPL), First Solar Inc. (FSLR), Nucor Corp. (NUE), and Biogen Idec Inc. (BIIB). Zoltek Cos Inc. (ZOLT) and MGI Parma Inc. (MOGN) were also huge movers. Leading stocks on the downside were Lehman Bros (LEH), CIT Group (CIT), Aeropostale (ARO), Jo-Ann Stores Inc. (JAS), Wynn Resorts Ltd (WYNN), and F5 Networks Inc. (FFIV).



Despite the handful of market movers, the overall market's exhaustion made itself apparent almost immediately into the open. After gapping slightly lower, the morning gap filled within the first 15 minutes of the session. When the 9:15 ET reversal period hit, the Nasdaq Composite ($COMPX) was also running into resistance. It was hitting Wednesday's highs, while the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) were at their 5 minute 20 simple moving average resistance levels. The market turned quickly at that point, heading back to the congestion from mid-day on Wednesday before again flipping over into the 10:15 ET reversal period.



After 10:15 ET the indices climbed steadily back into the highs of the trading range that were established the previous afternoon. The buying was choppy with a lot of overlap from one bar to the next on the 5 minute time frame until the last leg up at 11:30 ET. Mid-day, beginning at this time, was really the only time where the action was smoother in the indices. The market rounded off a bit at highs at noon and then a solid price decline began off the upper resistance zone. The 5 minute 20 sma served as support and volume declined as the market reacted to this support level before giving way to a second wave of selling into 13:00 ET.

The momentum began to slow again into 13:00 ET and the choppy market action returned once more. Even though the market reacted to the 13:00 ET reversal period, the bounce was short-lived. The market chopped lower into 13:45 ET and the lower end of the trading range on the 15 minute time frame before moving higher into a third test of the range's highs at the 15:00 ET reversal period. This last leg of upside was the most choppy move of the day on the 5 minute time frame. The overlap was very pronounced from one bar to the next and it was more difficult to time setups in the indices themselves. The 15:00 ET reversal period did hold well, but the choppy trading also held and the market accomplished very little in the final hour of trading.



The market managed to close higher on Thursday, but barely. The Dow climbed 22.3 points to close at 13,311.7. The S&P 500 rose only 0.7 point and closed at 1,469.73. The Nasdaq Composite gained 5.22 points. It ended the day at 2,668.13. I expect that the range will widen somewhat on Friday's session, but that we will again see a lot of overlap in prices on the 15 minute time frame. Volume is also likely to be lighter than on Thursday. Heading into next week, however, I expect the upside to resume, but on a much more muted scale than on Wednesday. It is highly probable that the action we saw on Thursday afternoon on the 5 minute time frame is going to repeat itself on the daily time frame in the indices going into the end of the year.

Market Finally Launches a Strong Recovery

Good morning! We've been watching the markets for a short-term recovery over the last couple of weeks, but the indices had a difficult time getting off the ground. On Wednesday, however, that upside finally materialized to follow through on the rounded lows on the 60-minute charts. We didn't get another correction intraday like I had been watching for, but the market broke higher out of the range ahead of the opening bell and this created a very clean break in the daily downtrend channel from the last several weeks.

After gapping higher, the market continued to rally throughout the remainder of the day with a solid uptrend on decent volume. The upside follow through was so monumental in this recent market volatility that the Dow Jones Industrial Average ($DJI) actually managed to post its largest percentage gain of the year to date. This translated as a 331 point move, or 2.6%. The Dow closed at 13,289.5 with all 30 Dow components showing positive closing prices. Citigroup (C) gained 6.5%, while American International Group (AIG) rose 5.9%, and Bank of America (BAC) climbed 4.5%.

The S&P 500 ($SPX) rose by an even larger percentage than the Dow. By the closing bell it had gained 40.79 points, or 2.9%. It closed at 1,469.02. The Nasdaq Composite, however, usurped both by climbing 82.11 points, or 3.2%. It closed at 2,662.91. This was the second largest gain of the year in the Nasdaq, following the tech rally on November 13th. Adding fuel to the fire in Wednesday's rally was the Federal Reserve's Beige Book, which highlighted slowing economic growth. This raised hopes that the Fed will go ahead with further rates cuts next month. At the same time, crude-oil futures continued to fall on Wednesday. January delivery dropped $3.8 to $90.62/barrel on the NYSE.



Following the gap, the market congested for about 15 minutes and then broke to new intraday highs. The continuation paused heading into the 10:00 am ET housing data, but displayed very little reaction overall to the news that sales of existing homes fell by 1.2% in October, while the supply of homes on the market hit 22-year highs. The market had also shrugged off the premarket durable goods data, which revealed that orders for U.S.-made durable goods had fallen yet again in October.



The most rapid move intraday on Wednesday took place out of the 10:15 ET reversal period. The market continued to move sharply higher until the 10:45 ET reversal period hit. The indices then fell into a nice consolidation over noon with a solid bullish bias thanks to moderate downside on declining volume and 5 minute 20 simple moving average support. Although the breakout was fairly solid, the pace was a great deal more lax than in the morning as the bulls continued to push into the afternoon. The 5 minute 20 sma zone held in the S&P 500 and Dow until the final 30 minutes of trading. The Nasdaq had established most of its gains in the morning, so it broke the 5 minute 20 sma when it pulled back out of the 14:00 ET reversal period, but it still held the earlier breakout level as support and made new highs out of the 15:00 ET reversal period before it also corrected more strongly just prior to the close.



I do not expect the market to be able to maintain this momentum on the upside for long, but I am still leaning for that retest of the previous highs zone. Should the S&Ps and Dow establish a very slightly higher high, then the door will be wide open for a much larger correction off highs into the early half of 2008.

Market Recovers Partial Losses

Good morning! After a choppy session, the indices managed to post modest gains by the end of the day on Tuesday. The Dow Jones Industrial Average ($DJI) recovered 215 points (+1.7%) out of the 240 points it shed the previous day to close at 12,958.44. Citigroup (C) was one of the top gainers following a cash infusion from the Abu Dhabi Investment Authority. It rose by 1.7% (+0.52) to match the overall Dow's performance. JP Morgan Chase & Co. (JPM) faired even better, however, rallying 4.67% (+1.89). Other key gainers in the Dow included Merck & Co. (MRK) (+1.35, +2.34%), American Express Co. (AXP) (+2.08, +3.88%), and Altria Group, Inc. (MO) (+1.91, +2.67%).

In addition to the Dow, the S&P 500 and Nasdaq Composite also did rather well on Tuesday. The S&Ps ($SPX) rose 21.01 points, or 1.5% during the session. The oil sector was a bit of a drag on the S&Ps, despite upgrades by Bear Stearns on BP (BP), Chevron (CVX), and Marathon Oil (MRO). The slight gains in BP and CVX, however, were still better than the oil sector as a whole. Crude futures dropped $3.28 to $94.42/barrel. The Nasdaq ($COMPX) rallied 39.81 points, or 1.6%.



The morning began on Tuesday with a decent upside gap into the opening bell. Continued upside followed, but the momentum waned into the 10:00 ET consumer confidence data. When the report was released the reaction was quite swift. U.S. consumer confidence had fallen in November to 87.3 off the previous level of 95.2. This was significantly less than the 90.2 level that had been anticipated. In other news, homes prices fell 4.5% nationally over the past year according to Standard & Poor. Even cities which had held up well earlier in the year gave way over the past couple of months.



Although the market was disappointed by the data, after about 15 minute of selling the indices began to turn around and regain the earlier upside momentum. Prices climbed into 11:00 ET when some initial resistance hit at the 15 minute 20 simple moving average in the S&P 500 and previous highs in the Nasdaq Composite. The indices diverged a bit over mid-day following this initial upside. All three indices tested these highs once again soon after 11:30 ET, but the S&P 500 and Nasdaq only broke them by a few ticks, creating a reversal pattern, while the Dow made a stronger higher high with a nice bull flag on the 5 minute time frame. The 5 minute 20 sma then held as support on the Dow for another bull flag out of 12:30 ET, while the weaker S&Ps and Nasdaq broke their 5 minute 20 sma support and the morning highs served as resistance into the 13:00 ET reversal zone. The indices then realigned as the market rounded off at highs and gave way to strong selling into 14:00 ET.



After reversing from the highs of the day and breaking the 5 minute 20 sma, that support level became resistance and held as the market formed a 5 minute bear flag into 14:30 ET. The declining volume and slower momentum into the 5 minute 20 were some of the key ingredients for the mid-afternoon continuation to the downside which took place at 14:30. The earlier congestion from the morning, however, held as support and the indices slowly began to roll over into the final hour of trading, regaining upside momentum once again as the closing bell approached. The recovery was strong enough at the end to lead to a close just shy of the day's highs despite having look rather dismal only 90 minutes earlier.

While the market had pulled back some afterhours, the indices are still holding up decently into Wednesday's premarket trading. I am leaning for more upside now on the 60 minute charts due to rounding lows on that time frame, but it will be easy to continue to swing back and forth within a range for another day. In order to confirm the upside bias I would like to see some slower selling or congestion zone on the 60 min. The weekly charts are at support, but the difference in time frames leaves the market open for a lot of wiggle room at this support until the momentum turns higher on the smaller time frames.

Reality Sets in as Holiday Euphoria Fades

Good morning! The market took a fall on Monday as the Thanksgiving holiday trading faded into the background. Volume was lighter than the average in recent weeks, but the bears were undeterred. The Dow Jones Industrial Average ($DJI) lost 237.44 points (-1.8%) to close at 12,743.44. Citigroup Inc. (C) (-1.00, -3.1%) and JP Morgan Case & Co (JPM) (-1.49, -3.5%) were among the hardest hit within the index. The S&P 500 ($SPX) had a more difficult time, however, than even the Dow. It fell 2.3%, or 33.48 points, to close at 1,407. The Nasdaq Composite ($COMPX) came close. It shed 55.61 points (-2.1%) and ended the session at 2,541.

Top gainers on Monday included NTRI, SINA, SNDA, SOHU, and SKIL in the Nasdaq and RIG, VIP, GME, ART, DE, and OSG on the NYSE. James River Coal Co. (JRCC) also had a very strong session after reaching shipping agreements for coal at an average prices of $54.76, which was much higher than expected several months ago. Top Nasdaq losers were ISIL, GOOG, BIDZ, DRYS, ACAS, SHLD, IDCC, and JRJC. The main NYSE losers were EEM, EWZ, GS, CIT, PBR, VMW, PRU, and LVS.

In other markets, the 10-year Treasury bond rallied 1 17/32 to 103 18/32 with a yield of 3.816%. Gold futures rose $1.80 to $826.50/ounce, while crude-oil futures fell 48 cents to $97.70/barrel after record highs in the prior session. They had been down as much as $1.68/barrel earlier in the session. Meanwhile, the euro continued onward to new record highs as the dollar fell to $1.4864 against the euro. Intraday it reached $1.4885 per euro.



Monday's session did not begin on such a dim note. The indices were actually still trading higher as the day began and they continued to climb early on. Between 10:00 am ET and 10:15 ET that buying began to roll over. The selling then began to kick in more quickly than the buying in the S&Ps and Dow after the Dow closed its Wednesday morning gap. The 5 minute 20 sma was a bit of support, but the downside was fairly steady into the 11:15 ET reversal period. At this point the indices were back at support from congestion in the previous week and the 5 minute 200 simple moving average intraday in the S&Ps, Dow, and Nasdaq Composite.



The momentum continued to turn over as the day progressed. The upside off the late morning support was very gradual. It picked up a little bit once a shallow Phoenix along the 5 minute 20 sma broke higher, but volume failed to confirm the move. When the 13:00 ET reversal period hit, the bears once again returned. The afternoon selling stalled at the 5 minute 20 sma and again at the 5 minute 200 sma, but the downside pressure continued to build and the market broke sharply lower into the last hour of trading with a free fall in the final 10 minutes of intraday trading.



Monday's downside holds off any correction off support at the moment. It leaves the door open for even more selling this week as Monday's breakdown follows through. The 100 week simple moving average and prior weekly lows from August are the upcoming support zones. The harder they hit, the slower the correction off the support will likely be. Any rapid upside will be difficult unless the momentum rounds off at lows with slower selling beforehand.

Key Earnings Announcements This Week:

Monday:
Before: SKIL
After: CTRN, DCI

Tuesday:
Before: ACM, AEO, JTX, SHMR, SPLS, TLB, TECD
During: THO
After: ADI, CENT, DBRN, LTON, MRVL, PBY, SMTC, SNDA, LNUX, UTI, VRGY

Wednesday:
Before: ARO, BECN, BWS, CBRL, DLTR, NRGY, IGLD, SCMR
After: ATW, CWTR, JAS, MW, SIGM, TIVO, WEDC

Thursday:
Before: AMWD, STST, BZH, BONT, BF.B, CMRG, CTR, CONN, DLM, DSGX, FLOW, FRED, GMTN, GCO, HNZ, HSOA, LULU, MESA, NUHC, SBH, SHLD, SFD, SOLF, SMRT, SMA, TTEC, TIF, VIP, WMG, WTSLA
During: LDR
After: AXCA, BRCD, CPWM, DLIA, DELL, JCG, LTRE, MENT, NINE, RSTO, SEAC, UNCA, ZUMZ

Friday:
Before: BIG, KIRK
During: VLCCF

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Economic Reports and Events This Week

Monday, November 26, 2007
8:30a.m. Oct Chicago Fed Natl Activity Index. Previous: -0.45.

Tuesday, November 27, 2007
7:45a.m. ICSC Chain Store Sales Index For Nov 24.
8:55a.m. Redbook Retail Sales Index For Nov 24.
10:00a.m. Nov Conference Board Consumer Confidence. Previous: 95.6.
10:00a.m. Nov Richmond Fed Manufacturing Index. Previous: -5.
10:30a.m. Nov Dallas Fed Mfg Production Index. Previous: 10.6.
5:00p.m. ABC/Wash Post Consumer Conf.

Wednesday, November 28, 2007
8:30a.m. Oct Durable Goods Orders. Previous: -1.7%.
10:00a.m. Oct Existing Home Sales. Previous: -8.0%.

Thursday, November 29, 2007
8:30a.m. Initial Jobless Claims For Nov 24 Wk.
8:30a.m. 3Q Prelim GDP. Previous: +3.9%.
8:30a.m. 3Q Prelim Corporate Profits.
10:00a.m. Oct New Home Sales. Previous: +4.8%.
10:00a.m. Oct Help-Wanted Index. Previous: 24.
10:00a.m. DJ-BTMU Business Barometer.

Friday, November 30, 2007
8:30a.m. Oct Personal Income.
8:30a.m. Oct Personal Spending.
9:45a.m. Nov Chicago PMI. Previous: 49.7.
10:00a.m. Oct Construction Spending. Previous: +0.3%.

Market Sees Glimmer of Light with Holiday Complacency

Good morning! Over the past couple of weeks we have been watching for the market to at least show some modest enthusiasm for a bounce since the indices have fallen into some fairly strong support on the monthly time frames. On Friday it finally took a chance, although the risks were low with market participants growing complacent on holiday leftovers.

After gapping modestly higher into Friday's open on the shortened trading session, the market stalled and pulled back. Volume did not increase at all on the selling, however, and this relieved the bulls who then began to cautiously position themselves for a Black Friday shopping spree. While many were out taking advantage of the early morning retail sales at their local department stores, those more inclined to look for a great deal in the market instead of at the market were beginning to gain encouragement.



At about 10:00 am ET the bulls began to really take over. The buying picked up at 10:15 ET and after that the corrections were on light volume and at a more modest downside pace than compared to the upside. This created a second buy setup on the 5 minute time frame in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) out of the 10:45 ET correction period and into the one at 11:00. It culminated in a strong breakout higher in those two indices.

The Nasdaq Composite ($COMPX) significantly lagged the other two indices throughout the morning, beginning with greater weakness out of the open. The 15 minute 20 simple moving average held the congestion, however, and it managed to round off at lows intraday so that it was also breaking higher when the Dow and S&Ps formed another bull flag on the 5 minute time frame heading into 11:30 ET. This late morning rally was the strongest one of the session up until that point. It took the S&Ps into Tuesday's highs and the Nasdaq past its morning highs, allowing it greater upside potential into the afternoon.



The rolls did change to some degree with the afternoon session. The Nasdaq gained a stronger lead and a strong final push higher took place shortly after noon. This moved the Nasdaq into its 15 minute 200 sma resistance, which held well at 12:30 ET, and it closed the S&P's gap from Tuesday's close into Wednesday's open. This resistance also corresponded to Wednesday's highs in the Dow Jones Ind. Ave., so it made it very difficult for the market to continue higher into the final half hour since all three of the major indices were running smack into strong resistance on the 15 minute time frame. The result was a very choppy end to the session. The market held the 5 minute 20 sma as support and the 15 minute resistance for the highs into the early close at 1:00 ET.

While volume was light throughout the session, the retailers performed well. The market was hopeful that Black Friday's holiday sales would provide a nice economic boost and many of the stocks which had been very beaten down in this sector had strong showings into the weekend. Circuit City (CC) was one of the strongest, rallying 19.5% for a gain of $1.06. Home Depot Inc. (HD) added 3.2%, or $0.90. J.C. Penney Co. (JCP) rose 3.1% (+$1.23), while Wal-Mart Stores (WMT) added 1.9% (+$0.87). I find it very difficult to become too excited about these gains given the larger picture though. Sure, many of these could use an upside correction on the monthly time frames at some point, but other than perhaps for daytrading, I'll be staying clear of them for the time being.



In the market as a whole, the Dow gained 181.84 points on Friday to end the session at 12,980.88. The S&P 500 rose 23.93 points (+1.7%) and closed at 1,440. The Nasdaq Composite climbed 34.45 points (+1.3%). It closed at 2,596. The market has a lot on its plate in terms of economic data in this coming week. Existing-home sales and durable-goods orders are just two to watch out for on Tuesday and then Wednesday, respectfully. There is a strong debate as to whether or not the Fed will again slash rates in its December meeting, but at this point I still consider it rather a moot point, since I am continuing to lean towards the likelihood of a larger market correction on the monthly time frame into the new year regardless of the Fed's decision. I will only be looking for the market to bounce on the daily and weekly time frames, so any buying I'll be doing over the next few weeks will be aimed at the short-term only.

Market Whips Around into the Holiday

Good morning! I hope you are having a wonderful trading week so far! I just got back from the Las Vegas Online Trading Expo where I've been getting a ton of exercise walking back and forth from the hotel to the conference center for the past week. (Oy! My feet still hurt!) It was wonderful meeting so many of you there! The industry has certainly changed a great deal over the years! The forex and options markets have been gaining in popularity over the past year or so and held a heavy presence at this fall's exhibition. With more and more professionals taking advantage of their new-found ability to trade in the "off-hours" thanks to the nearly 24-hour markets of the emini futures and forex, this trend is likely to continue into the foreseeable futures. I'm personally a fan or trading the ES (EMini S&P 500) afterhours and had some fun winning one of the FX trading competitions at the expo. (I scored a new mouse, which was perfect since mine has been on the fritz lately!)

Speaking of the index EMinis, let's take a look at the current market action as we head into the holiday trading. Volume and volatility were both quite heavy in Tuesday's trading. On the New York Stock Exchange the declining issues narrowly outnumbered the advancers with 4.74 billion shares exchanging hands, up strongly from the 4.01 shares traded on Monday. The Dow Jones Industrial Average ($DJI) closed higher by 51.70 points (+0.4%) after trading within nearly a 270-point range. It ended the day at 13,010.1. The S&P 500 ($SPX) climbed 6.43 points (+0.5%). It ended the session at 1,439.7. The Nasdaq Composite ($COMPX) did not hold up quite as well. It managed to gain 3.43 points, but that only amounted to a 0.1% increase in price before it closed at 2,596.81. The Russell 2000 fell 1.00 (-0.13%) and closed at 749.33.



The major news events of the session centered around mortgage-related concerns and the FOMC minutes, which came out at 2:00 pm ET. Freddie Mac (FRE) was particularly hard-hit, falling nearly 29% after reporting a $2 billion quarterly loss and announcing that it might cut its Q4 dividend. Other mortgage investors also felt the heat. Countrywide continued to slide on a downgrade, losing 2.7% on Tuesday to close at $10.28.

In other markets, the euro has once again hit a new high this week, breaking out of a two week trading range. Crude-oil futures rose to new record highs with January delivery at $98.03/barrel, while gold also followed in quick pursuit. Government bonds also rose on predictions of a slowing economy into the new year. The yield on the 10-yr Treasury note (which moves inversely to its price) fell to 4.05%, while the 10-yr yield rose to 4.09%.



From a technical perspective the market is still running smack into support on the daily time frame from congestion levels back in August and early September. The market attempted to climb early in Tuesday's session, but each new high was made on lighter volume and with easing momentum. By the 11:15 ET reversal period the highs had rounded off enough into resistance from previous highs and congestion on the 15 minute charts that the bear were able to begin to regain a foothold.

The initial reversal was nothing spectacular as the indices pulled back into their 5 minute 20 simple moving averages intraday, but after hugging that support on light volume, which displays a lack of willing bullish participants, the market began to pick up speed, selling off into opening lows into 12:00 ET. Choppier selling into the early afternoon was then followed by another strong downside push into 13:00 ET. This took the Dow and S&Ps to new lows on the month, but brought the Nasdaq into its third test of lows on the same time frame.



The market held the 13:30 ET support zone pretty well to begin with. The market pulled higher into 14:00 ET, but the buying quickly waned ahead of the 14:00 FOMC minutes and the pace of the buying also decreased significantly, turning the reversal into a bear flag. The market then broke lower after the Fed failed to given any stronger clues as to whether or not it would decrease lending rates yet again in the December meeting set to take place just a couple of weeks from now. The market flushed lower, but as it turned out, the larger daily support zone held and the market rounded off at the lows. The Dow and S&Ps both popped into the 5 minute 20 sma and then gently slid lower along the resistance to form Phoenix buy setups. Meanwhile, the Nasdaq established a very slightly lower to to create a double bottom trap pattern called a 2B. The market followed through by takng back a huge chunk of the day's losses in the final 30 minutes of trading.

After taking a look at the indices today, I am not inclined to change my opinion from a few weeks ago as to how the current price action is likely to play out. The market is still poised for a third bounce higher on the daily and weekly Dow and S&P 500. There is also a very strong chance for a much more substantial breakdown on the weekly time frame. So far nothing has yet to chance my opinion on this matter, although I continue to monitor it closely. Don't forget to expect trading to become very light on Wednesday afternoon and continue into Friday due to the Thanksgiving holiday. This means it will be very important to not fall into a trap of boredom and "trading just to trade!"







Economic Reports and Events This Week


Monday, November 19, 2007
Nov NAHB Housing Market Index: 19. Previous: 19, revised.

Tuesday, November 20, 2007
ICSC-UBS Chain Store Sales For Nov. 17: +0.8%. Previous: -0.5%.
Oct Housing Starts: +3.0%. Expected: +1.4%. Previous: -11.4, revised%.
Redbook Retail Sales Index For Nov 17: +0.3%. Previous: +0.3%.
FOMC Minutes.
ABC/Wash Post Consumer Conf For Nov 18: -19. Previous: -17.

Wednesday, November 21, 2007
7:00a.m. MBA Mortgage Application Survey Refinancing Index. Previous: +6.4%.
8:30a.m. Initial Jobless Claims For Nov 17 Week. Expected: -11K. Previous: +20K.
10:00a.m. Nov Conference Board Leading Indicators. Previous: +0.3%.
10:00a.m. End-Nov Reuters/U Of Mich Sentiment Index. Expected: 75.0. Previous: 80.9.
10:00a.m. DJ-BTMU Business Barometer For Nov 3. -0.1%.

Thursday, November 22, 2007
There are no economic indicators scheduled today.

Friday, November 23, 2007
There are no economic indicators scheduled today.

Key Earnings Announcements This Week:
Wednesday:
Before: AND, CHRS, DE, MESA, NUHC, PDCO, POSS, SHMR, SOLF, BKE, TSL
During: GPS
After: CSC, JCG

Thursday: -

Friday:
Before: WATG

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Market Turns Higher, but is it Sustainable?

Good morning! On Tuesday the Dow closed with its largest single-day gain in two months after having just closed under its 200 day simple moving average for the first time since July 2006. Over the last couple of days I'd been expecting very slightly lower lows and more overlap from day to day before the market headed higher. The Dow ($DJI) managed this, but it is a bit difficult to see without dropping down to the 60 minute time frame. The Nasdaq Composite ($COMPX) also slowed its downside since Thursday, but the the market bounced more quickly than I had anticipated heading into the day.

Originally, I had been looking for upside and then another swing lower on the 30-60 minute charts on Tuesday with room for slightly lower lows. Instead, the indices gapped strongly higher and then fell into congestion along the 15 minute 20 simple moving average intraday. As the market congested, it still edged higher, creating a very difficult market for many pattern-focused traders.

It often frustrates many traders when on the strongest trend days, they are more likely to lose money. The main reason for this, of course, is that trend days that just creep higher are the exception rather than the norm and if you keep trying to time reversals or waiting for flags on the 5 minute times frames, which work well on most trading days, you'll just get chopped up. This is where it becomes very important to step back and focus on the larger intraday time frames like I suggested yesterday, such as a 15 to 30 minute chart. This way you don't get too lost in the smaller time frame chop.



If you take a look at my charts for today's column, what you will notice right away is that I've highlighted very few patterns and price levels. After congesting with a slight upside bias out of the open, the indices stalled just after 11:30 ET as the Nasdaq ran into price resistance from previous highs and lows on the 15 minute time frame. The correction was a form of a two-wave pullback which found support at the 5 minute 20 sma to begin with before breaking lower into the 15 minute 20 sma around 13:00 ET.



Up until 13:00 ET, the typical market reversal periods were not leading to very decent reactionary price moves. Even at the 13:00 ET one the Dow and S&Ps lagged a bit and established their pivot lows a few minutes later, although the Nasdaq Composite did hold the reversal period well. As this time period hit, so did the 15 minute support zone and the market was able to once again break to the upside intraday. The S&Ps led the way after having the most difficult time making new highs in the morning. Financial shares boosted the index and gold and oil also turned back around to favor afternoon buying. The Nasdaq, which lacks many companies in these sectors, became the laggard and hit and held resistance at the 14:00 ET reversal period while the rest of the market was running past Monday's highs.

From about 14:00 ET to 15:00 ET the market once again became congested. As in the morning, the congestion in the S&Ps and Dow had a slight upward slant to them, which would have made them less obvious breakout candidates. The Nasdaq, on the other hand, formed a strong ascending triangle right into the 5 minute 20 sma. After a third and more gradual pullback within that range, the highs broke. The move took the S&Ps past Friday and Monday's highs and in the final hour of trading all three of the major indices came back into price resistance on the larger 60 minute time frames from several previous sessions. The Dow ($DJI) closed higher by 319.5 points (+2.5%), while the S&P 500 ($SPX) gained 41.87 points (+2.9%) and the Nasdaq Composite ($COMPX) rose 89.52 points (+3.5%) on Tuesday.



Despite the strong showing on Tuesday, I do not expect the buying to be able to continue well into Wednesday. Volume should be slightly lighter than the last several days with higher odds of an inside range bar forming within Tuesday's price range. If we do see higher highs, then I am expecting them to be very minor. This congestion is then likely to continue into the weekend, and probably into next week as well. Should the congestion hold Tuesday and Wednesday highs during that time, then the market will continue to favor a third test of highs on the weekly time frame.



Online Trading Expo in Las Vegas

I will be out of town attending the Online Trading Expo in Las Vegas later this week, so I will not be writing this column from Wednesday night through Monday night. I return home on Monday, so the column will resume on Tuesday evening. For those of you attending, I'll be speaking for the expo at 8 a.m. Vegas time on Sunday and for Real Tick at 10:15 a.m. Sunday. I hope to see you there!





Economic Reports and Events This Week


Monday, November 12, 2007
There are no economic indicators scheduled today.

Tuesday, November 13, 2007
7:45a.m. ICSC Chain Store Sales Index For Nov. 13. Previous: +1.0%.
8:55a.m. Redbook Retail Sales Index For Nov. 10. Previous: -0.4%.
2:00p.m. Federal Budget. Previous: +111.56.
3:00p.m. Sep Pending Home Sales Index. Previous: -6.5%.
5:00p.m. ABC/Wash Post Consumer Conf For Nov. 13. Previous: -15.

Wednesday, November 14, 2007
7:00a.m. MBA Mortgage Refinancing Index. Previous: -3.2%.
8:30a.m. Oct Producer Price Index. Previous: +1.2%.
8:30a.m. Oct PPI, Ex-Food & Energy. Previous: +0.1%.
8:30a.m. Oct Retail & Food Sales. Previous: +0.6%.
8:30a.m. Oct Retail & Food Sales, Ex-Autos. Previous: +0.4%.
10:00a.m. Sep Business Inventories. Previous: +0.1%.
10:30a.m. Crude Inventories

Thursday, November 15, 2007
8:30a.m. Initial Jobless Claims For Nov 10 Week. Previous: -13K.
8:30a.m. Oct Consumer Price Index. Previous: +0.3%.
8:30a.m. Oct CPI, Ex-Food & Energy. Previous: +0.2%.
8:30a.m. Nov NY Fed Manufacturing Index. Previous: 28.75.
10:00a.m. DJ-BTMU Business Barometer For Nov. 15. Previous: +0.4%.
12:00p.m. Nov Philadelphia Fed Business Index. 7. Previous: 6.8.

Friday, November 16, 2007
9:00a.m. Sep Treasury International Capital Flows. Previous: -$85.5B.
9:15a.m. Oct Industrial Production. Previous: +0.1%.
9:15a.m. Oct Capacity Utilization. Previous: 82.1%.

Key Earnings Announcements This Week:
Monday:
Before: BX, DISH, HEW, NSSC, NVAX, TSN
After: JOBS, BOBE, CNK, ESE, HINT, LINE, OWW, FACE

Tuesday:
Before: GTLS, ERJ, FIG, FOSL, GILT, HD, IAG, NAFC, PPC, SCHS, TJX, USBE, WMT
During: LNY, RAME
After: CNTF, IMOS, DIET, EXM, GUID, LZB, OMPI, OCNW, STEC, XFML

Wednesday:
Before: APU, MT, ARM, CSIQ, DAKT, DWSN, DSX, ESLT, GIGM, M, MSTH, VIVO, PCS, NUAN, UGI
After: ANST, AMAT, CHIC, HSOA, LDG, NTAP, PETM, RAH, TTEK, WGOV

Thursday:
Before: BIG, CTR, CHINA, CPA, DKS, DHT, FCSX, GMTN, GSOL, GMCR, GBE, HP, HB, JCP, KIRK, MMS, NWY, NJR, PTRY, SHLD, SHMR, SCVL, SOLF, SSI, SMRT, SPH, STP, BKE, TDG, TWB, TYC, VSE, WTSLA, ZOLL
After: A, ADSK, STV, CHRD, DDS, DITC, DHOM, EXLS, FL, HMIN, DISK, PODD, INTU, SJM, KSS, MSCC, MTSC, CRM, SINA, SBUX, SNS, TOA, NCTY, UNCA, VRGY, VIMC, WEDC

Friday:
Before: ANN, QXM

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Stock Prices Continue to Slide

Good morning! The market continued its downward spiral on Monday to kick off the new week with a 55.2 point loss (-0.4%) in the Dow Jones Industrial Average ($DJI), a 14.52 point loss (-1%) in the S&P 500 ($SPX), and a 43.81 point loss (-1.7%) in the tech-heavy Nasdaq Composite ($COMPX). On a positive note, the U.S. dollar managed to post some gains on Monday after hitting record lows against the euro only a few days prior. This resulted in falling prices in gold. The front month contract on gold futures fell $27.00 to $807.70 an ounce. Crude-oil futures, which rallied into, but could not break the $100/barrel mark last week, closed lower as well. They lost $1.70/barrel and ended the session at $94.62.

In securities, ETrade Financial Corp. (ETFC) was the largest percentage loser. It fell by 58.7% (-$5.04) to close at $3.55 after announcing that it was the target of an informal inquiry by the Securities and Exchange Commission regarding its loan on security portfolios. They also stepped back their earnings forecast.

Although not quite close to the percentage shed by ETFC, another top loser was Apple Inc. (AAPL), which has been massacred in the last couple of trading days. After nearly hitting $200 a week ago, AAPL has lost nearly 1/4 of its value in the last 4 sessions. It went from highs of $192.68 on Wednesday to a low of $150.63 on Monday and closed at $153.76. It still has room for more downside as well as it tests the $140-$150 price support zone more securely.

On the opposite side, the financial sectors continued to experience a bit of a reprieve from the recent selling. These include banking and broker/dealers. The moves were not extreme, however, and most still turned over off intraday highs, giving back a lot of their gains before the close even though they still managed to hold onto some of those gains. Goldman Sachs (GS) rose $3.38/share to close at $214.71. Citigroup Inc. (C) rose $0.47/share and closed at $35.06.



In yesterday's commentary I laid out two scenarios for the market on Monday. On the one hand, the indices were coming into some initial support, particularly the S&Ps and Dow. The intraday time frames, however, were still favoring further selling and the Nasdaq had a lot of room to keep heading lower. The two possibilities I laid out were hence as follows:"...another gap down, followed by a strong bounce and then slower selling into the afternoon would make it easier for the market to hold the current support zone and turn higher. On the other hand, an even open or even a gap higher into the open, followed by slower upside in the morning can more easily be followed by more downside."

Given that the market opened within a few ticks of Friday's close, the stage was set for scenario number two. Within a few minutes of the opening bell the market began to pull higher, but the indices were still feeling the pressure of the stronger-than-average selloff into Friday's close, making any rapid recovery difficult. A retest of the lows zone into 10:15 ET helped slow the downside momentum a little bit, leading to another move off the lows. The selling was still on the stronger side, however, so this helped keep the buyers in check and the momentum on the move higher was on the slow side overall. This confirmed the expectations brought about by an even opening price in the indices and continued to create favor for another round of selling into the afternoon.



The morning's upside first began to turn around off the 11:15 ET reversal period highs. The market then corrected into the 12:00 ET reversal period. After hitting support, the indices began to show some greater divergence. The Nasdaq had a tough time letting go of the support zone, while the Dow managed to move into new highs intraday. Resistance held as the Dow hit Friday morning's highs. The volume had been much lighter on this upside move, displaying a lack of conviction on the part of the bulls.



By 13:00 ET the market was again heading back into the morning's lows. The Nasdaq hit them first at that 13:00 ET reversal period and a small correction into the 5 minute 20 sma resistance led to even stronger downside. An extremely sloppy bear flag on the 15 minute charts came next, but since the market rounded off somewhat at the start of this flag, unless a trader had already been looking out for further selling, the pop higher into 14:30 ET could have been a bit deceptive. As that 15 minute 20 sma and previous 5 minute highs and lows hit for resistance, however, the sellers returned in full force. The market fell sharply in the final hour of trading, leading to the closing bell ringing as the market was in the process of making new intraday lows.

Since the close, the index futures have been gradually making their way higher. There is still plenty of time before the open for this slow climb to reverse, but this just goes towards our expectations that the daily selling would begin to slow as compared to the initial selloff last week and that we will begin to see more overlap from one day to the next even on new daily lows. Use a great deal of extra caution right now since the increased volatility in the indices will continue to make it difficult to keep stops as tight as usual. To compensate, I'd recommend sticking to the larger intraday time frames for identifying support and resistance and only taking positions which favor those larger price levels as opposed to merely focusing on smaller time frames such as a 5 minute chart for a setup. These smaller time frames can still be used for timing though.



Online Trading Expo in Las Vegas

I will be out of town attending the Online Trading Expo in Las Vegas later this week, so I will not be writing this column from Wednesday night through Monday night. I return home on Monday, so the column will resume on Tuesday evening. For those of you attending, I'll be speaking for the expo at 8 a.m. Vegas time on Sunday and for Real Tick at 10:15 a.m. Sunday. I hope to see you there!

FREE Online Classes with Toni Hansen

Beginning in December, I will begin holding FREE hour-long online trading and investing classes on the 1st and 3rd Thursday of each month at 4:15 ET. The chatroom is text only, so you can easily save the log for future reference.

I will kick off my class series with a two month study of support and resistance. Support and resistance levels are key areas of price development where directional move in a security is likely to react, either by stalling for awhile, reversing, or even breaking out. In this series I will explore some of the most influential forms of support and resistance, delving into how to weigh one level against another for a better understanding of which levels will lead to the greatest reactions in terms of price.

It is quite simple to look at a chart after the fact and say, “Yes! That is why XYZ stalled at that level or reversed at that price.” How to do so in advance is quite another issue altogether. My goal is to help you improve your own abilities so that you may apply that knowledge to FUTURE price moves.


December 6, 2007 4:15 ET
Utilizing Support and Resistance Levels – Part 1
Applying basic price levels to identify support and resistance levels.

December 20, 2007 4:15 ET
Utilizing Support and Resistance Levels – Part 2
Applying trend lines and channel analysis to identify support and resistance levels.

January 3, 2007 4:15 ET
Utilizing Support and Resistance Levels – Part 3
Applying moving averages for identifying support and resistance levels.

January 17, 2007 4:15 ET
Utilizing Support and Resistance Levels – Part 4
Applying Fibonacci levels to identify support and resistance levels (focus on EMini trading).


Accessing the online class:
There are two popular ways to access my online trading room. They are listed below:


IceChat:
This is a free IRC chat platform.

1) Go to icechat.net
2) Go to downloads on right side menu
3) Install IceChat 7
4) When IceChat is loaded and pops up on right side then click favorite servers. At the bottom click "add new" then add "othernet.org"
5) Once connected to server, then on right side bottom click "favorite channels”. On the bottom click "add”. Then add "mainstreet#". Then click "join".

It takes a couple of minutes for the chat room to come up after you join, but then you should see in dialog box welcome and info. During this process you will be prompted to give screen name and sign off message, so input what you would like to appear.


mIRC:
mIRC is an IRC chat platform which is free for 30 days, but then requires a one-time registration fee. You can access the room via mIRC by following the instructions at http://www.tradingfrommainstreet.com/roomsetup.html


While the classes provided online are going to be a huge step in the right direction, if you would wish to learn more of the intricacies of price development and market timing, my in depth online trading course at http://www.swingtrader.net with about 10 hours of audio/video instruction and over 400 pages of text is going to be one of the best investments I can recommend to further your career.


Have a wonderful day and I'll see you in class!
All my best,
Toni Hansen

Economic Woes Hit Techs Hard

Good morning! The stress felt by the financial sector slid into technology on Wednesday and then accelerated into Thursday after Cisco (CSCO) announced a lower-than-expected revenue forecast. The downside then continued into the weekend, beginning with a hearty downside gap into the open after heavy premarket selling kicked in around 5:00 a.m. ET. By the end of the day the Dow Jones Industrial Average ($DJI) had fallen 223.55 points (-1.7%) and closed at 13,042.74. The cumulative loss for the week was 4.1%. The S&P 500 ($SPX) lost 21.07 points on Friday (-1.4%). It closed at 1,453, which amounted to a loss of 3.7% on the week. The Nasdaq Composite ($COMPX), which had held up so well in recent weeks, was the hardest hit. It fell 68.06 points (-2.5%) on Friday, which added up to a staggering 6.5% drop on the week overall.

The S&Ps managed to fair a bit better than the rest of the market thanks to a bit of a reprieve in the down-trodden financial sector. Despite a great deal of weakness in recent months, particularly this past month, many of them managed to close higher on Friday. They had become very exhausted with extreme volume into support on the monthly time frames. American International Group (AIG) was one of the strongest on Friday, gaining 1.9% (1.06 points). Morgan Stanley (MS) also climbed, adding 1% (+0.52 point), while Wachovia (WB) gained 0.9% (+0.35). Granted, these gains seem minor compared to many typical intraday gainers, but given the extent of the market's downward slide, these gains were quite remarkable.

A few other stocks that managed nice gains on Friday were PriceLine (PCLN), Cephalon Inc. (CEPH), Brightpoint (CELL), Hutchinson Technology Inc. (HTCH), and Middleby Corp. (MIDD). All of these gapped higher and rallied on earnings. The overall market, however, was not that lucky. Some of the hardest hit were Mirant Corp (MIR), International business Machs (IBM), MetroPCs communications Inc. (PCS), Apple Inc. (AAPL), Research in Motion Ltd. (RIMM), Allscripts Healthcare Solution (MDRX), Amazon (AMZN), JA Solar Holdings (JASO), and Google Inc. (GOOG). Notice that out of the top Nasdaq losers, nearly every one of them had recently made new 52-week highs. As the top gainers, you may recall my comment about a week ago, whereby this also meant they would have the most room to fall... and fall they did...



After the large gap lower into the open, the market had a difficult time deciding quite what to do next. The indices had already sold off for two days in a row and most of the larger gaps in the indices themselves attempt to fill on the day of the gap. After so many extreme ups and downs, however, the bulls were less than enthusiastic about trying yet another rally after the one from the previous afternoon was so mercilessly crushed.

Volume remained high out of the open, but the market had a difficult time getting off the ground. Instead the indices fell into a choppy range out of the open. The S&Ps attempted to move higher at 10:00 ET, but the 5 minute 20 simple moving average in the indices held as resistance intraday and the market headed lower into 11:15 ET. This led to new lows on the week, but only by a hair. The very slightly lower lows created 2B reversal patterns in the S&Ps and Nasdaq. The 5 minute 20 sma served as resistance for a few minutes once again, but it broke at about 11:45 ET, taking the indices back to the upper end of the day's trading range.

The momentum then shifted back and forth well into the afternoon. The morning's highs and lows held as support and resistance until 14:00 ET. This is a major reversal period in the market, particularly if a range has been in play up until that point. Volume had dropped into the reversal period and the momentum had again shifted with slower downside as the volume declined. This increased favor for an upside breakout and the market pivoted off the lower end of the range in the Dow and Nasdaq at this 14:00 ET reversal period, taking the indices first back into the upper end of the range and then to new intraday highs.



The S&P 500, with help from the financials, was the only one of the three major indices to close their morning gap zone, coming within about a point of absolute closure. The Russell 2000, however, also came close and performed in a manner very similar to the S&P 500 throughout the session.

Once that resistance level from the gap hit, the market again began to roll over. They indices retested the highs, but at a more gradual pace and without any volume confirmation. This created a 2T form of double top whereby the prior highs broke by only a couple of ticks max before reversing again. The selling immediately turned into panic as market players who had hoped for a rally into the weekend began to trip over each other when the rally failed to confirm in order to get out before the closing bell.



Despite the market hitting strong support levels on the daily charts on Thursday and into Friday, the fact that the indices did not round off at that support leaves the market open for even more downside in the week ahead. I expect the momentum on any further selling to be slower than this past week and likely with more overlap in price from one day to the next. The move has the potential to try to mimic mid-May's activity in the Nasdaq, but the S&Ps and Dow should now continue to hold up a bit better compared to the Nasdaq. It would not take much to bring the Nasdaq back to the 2500 level. 12800 is the Dow's next major daily support, while 1400 is price support in the S&P 500.

I am not going to rule out the possibility of a bounce still off the current support, but to see any strong upside I'd like the market to round off at the support with some slightly lower lows. Otherwise upside will also be more choppy with a lot of overlap from one day to the next to begin with. The Dow and S&Ps would be able to move off this support more easily than the Nasdaq.

While these two scenarios of further selling or a rally seem to leave me hedged, the reason is that momentum on the smaller time frames is still pointing south, but all it will take is a shift intraday to turn it back over since the daily support in the S&Ps and Dow is rather significant. For instance, another gap down, followed by a strong bounce and then slower selling into the afternoon would make it easier for the market to hold the current support zone and turn higher. On the other hand, an even open or even a gap higher into the open, followed by slower upside in the morning can more easily be followed by more downside. So, it is that momentum change intraday that I'll be keeping a close eye on.



Online Trading Expo in Las Vegas

I will be out of town attending the Online Trading Expo in Las Vegas later this week, so I will not be writing this column from Wednesday night through Monday night. I return home on Monday, so the column will resume on Tuesday evening. For those of you attending, I'll be speaking for the expo at 8 a.m. Vegas time on Sunday and for Real Tick at 10:15 a.m. Sunday. I hope to see you there!

Economic Reports Due Out This Week

Monday, November 12, 2007
There are no economic indicators scheduled today.

Tuesday, November 13, 2007
7:45a.m. ICSC Chain Store Sales Index For Nov. 13. Previous: +1.0%.
8:55a.m. Redbook Retail Sales Index For Nov. 10. Previous: -0.4%.
2:00p.m. Federal Budget. Previous: +111.56.
3:00p.m. Sep Pending Home Sales Index. Previous: -6.5%.
5:00p.m. ABC/Wash Post Consumer Conf For Nov. 13. Previous: -15.

Wednesday, November 14, 2007
7:00a.m. MBA Mortgage Refinancing Index. Previous: -3.2%.
8:30a.m. Oct Producer Price Index. Previous: +1.2%.
8:30a.m. Oct PPI, Ex-Food & Energy. Previous: +0.1%.
8:30a.m. Oct Retail & Food Sales. Previous: +0.6%.
8:30a.m. Oct Retail & Food Sales, Ex-Autos. Previous: +0.4%.
10:00a.m. Sep Business Inventories. Previous: +0.1%.
10:30a.m. Crude Inventories

Thursday, November 15, 2007
8:30a.m. Initial Jobless Claims For Nov 10 Week. Previous: -13K.
8:30a.m. Oct Consumer Price Index. Previous: +0.3%.
8:30a.m. Oct CPI, Ex-Food & Energy. Previous: +0.2%.
8:30a.m. Nov NY Fed Manufacturing Index. Previous: 28.75.
10:00a.m. DJ-BTMU Business Barometer For Nov. 15. Previous: +0.4%.
12:00p.m. Nov Philadelphia Fed Business Index. 7. Previous: 6.8.

Friday, November 16, 2007
9:00a.m. Sep Treasury International Capital Flows. Previous: -$85.5B.
9:15a.m. Oct Industrial Production. Previous: +0.1%.
9:15a.m. Oct Capacity Utilization. Previous: 82.1%.

Earnings Announcements This Week

Monday:
Before: BX, DISH, HEW, NSSC, NVAX, TSN
After: JOBS, BOBE, CNK, ESE, HINT, LINE, OWW, FACE

Tuesday:
Before: GTLS, ERJ, FIG, FOSL, GILT, HD, IAG, NAFC, PPC, SCHS, TJX, USBE, WMT
During: LNY, RAME
After: CNTF, IMOS, DIET, EXM, GUID, LZB, OMPI, OCNW, STEC, XFML

Wednesday:
Before: APU, MT, ARM, CSIQ, DAKT, DWSN, DSX, ESLT, GIGM, M, MSTH, VIVO, PCS, NUAN, UGI
After: ANST, AMAT, CHIC, HSOA, LDG, NTAP, PETM, RAH, TTEK, WGOV

Thursday:
Before: BIG, CTR, CHINA, CPA, DKS, DHT, FCSX, GMTN, GSOL, GMCR, GBE, HP, HB, JCP, KIRK, MMS, NWY, NJR, PTRY, SHLD, SHMR, SCVL, SOLF, SSI, SMRT, SPH, STP, BKE, TDG, TWB, TYC, VSE, WTSLA, ZOLL
After: A, ADSK, STV, CHRD, DDS, DITC, DHOM, EXLS, FL, HMIN, DISK, PODD, INTU, SJM, KSS, MSCC, MTSC, CRM, SINA, SBUX, SNS, TOA, NCTY, UNCA, VRGY, VIMC, WEDC

Friday:
Before: ANN, QXM

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Market Extends Selloff

Good morning! The market continued to lose ground on Thursday with Wednesday's breakdown continuing into the new session. Although the Dow Jones Industrial Average ($DJI), S&P 500 ($SPX), and Nasdaq Composite ($COMPX) all closed lower, the closing prices were a vast improvement given the day's lows made earlier in the afternoon. By the end of the day the Dow posted a 33.73 point loss (-0.2%). International Business Machs. (IBM) was one the main losers, down 4.5% by the end of the day, while American International Group, Inc. (AIG) continued to fall another 3.3% on the day.

The S&P 500 held up a hair better than the Dow, posting a loss of 0.85 point (-0.1%). The Nasdaq Composite, on the other hand, was extremely hard-hit. Led by declining technology shares, the Nasdaq posted a loss of 52.76 points (-1.9%) by the end of the day. Cisco (CSCO) alone fell 9.5% following earnings the evening before. GOOG, RIMM and AAPL all lost more than 5% of their market value on Thursday.



From a technical standpoint, the continued downside the market experienced on Thursday was expected based upon the activity of the last couple of weeks. It didn't stray much from what I had laid out as a scenario several weeks ago. It was still not a pretty picture though. The volume in the market was the highest it had been since we were at the comparable price development back in mid-August. This meant that it could have been a very difficult day for those not skilled in order execution since prices moved very quickly.



The market began the day by selling off. This extended the downside from the previous afternoon. A 15 minute bear flag then formed to mark the second major correction on this time frame intraday since Wednesday's reversal. The flag had two waves of upside, typical of a continuation pattern forming. Then at around 11:15 ET the indices broke lower. The selling was volatile, but steady. The S&Ps hit our target in the 1460 zone perfectly and the S&Ps also found support from the August congestion we have been watching. In both cases, as well as in the 15 minute Nasdaq and S&Ps, the mid-day move lower nearly equaled previous selling.

The downtrend channel broke just after 13:00 ET. Volatility remained highs as the market attempted to pull higher off early afternoon lows. The 5 minute 20 simple moving average served as resistance and at 14:00 ET the market pivoted and corrected somewhat while holding the 5 minute 20 sma resistance zone. Volume declined on this correction, indicating a greater bullish sentiment into the final hour of trading. The market began to rapidly move higher into the 15:00 ET correction period. The Nasdaq lagged, but the S&P 500 and Dow Jones Ind. Ave. both came closed to positing gains, but ended up holding the 30 minute 20 simple moving average resistance intraday instead.



Volume is likely to remain high on Friday. It is also probable that the indices will continue to correct off Thursday's lows. I have been watching for the potential for the market to set up a third wave of buying in the S&Ps and Dow to slightly higher highs. That is going to now depend upon how the market continues to react to the current support level. As long as the upside momentum is strong, the scenario will hold.

Market Gives Way to Continued Downside

Good morning! Triangle or immediate continuation? That was the question posed over the past couple of days. As the market opened on Wednesday it was obvious that the market had made its choice. In order to hold a triangle pattern and pull back up into the 20 day simple moving average before falling again, the indices needed to have continued higher on Wednesday morning. Instead, the afterhours selling that we had our eyes on heading into midnight on Tuesday picked up strongly in premarket trading.

At about 4:00 am ET the market plummeted after a top official in China urged the country to diversify its foreign-currency holding, such as the euro, which had risen to $1.4730. After the rapid descent, the index futures held a range into the open. The action was extremely close to what occurred in Monday's premarket trading. The initial outcome was also the same. The market consolidated into the early afternoon with gradual upside on Monday, but on Wednesday this gradual upside correction did not take as long. Previous 15 minute highs served as Nasdaq ($COMPX) resistance, while the 5 and 15 minute 20 simple moving average held as resistance in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) on Thursday, leading to a more rapid onset of the breakdown out of the pattern than before.



In contrast to Monday's afternoon selloff, the action on Wednesday was also much more extreme. The 10:15 ET reversal period held and the market began to fall off the intraday resistance. At first it seemed harmless enough, until one stepped back and looked at the 30 minute time frame and noticed that the momentum within the week's trading range had once again shifted in favor of the bears. The 10:15 ET breakdown was earlier than was ideal compared to the extent of the gap, however, and the market fell into another range heading into noon to compensate. Volume declined as the bulls backed off and the bears waited.



At the 12:00 ET reversal period the dam broke and the selling resumed. It was still somewhat hesitant at first, but another congestion level into 13:00 ET was rewarded by a strong downside flush at 13:15 ET. This took the Dow to new lows on the week and brought the Nasdaq Composite into support at Tuesday's lows before attempting to correct again on the 15 minute time frame and not merely on the 5. The 5 minute 20 sma served as initial resistance, but the market congested along that resistance to form a Phoenix buy setup out of the 14:00 ET reversal period. This took the indices back to the 15 minute 20 sma resistance. These two-wave corrections are typical within a larger downtrend and the selling resumed into 15:00 ET, but retraced slightly before it completely fell apart in the final 45 minutes of trading.



At the time of the closing bell, the Dow had fallen another 360.9 points (-2.6%). Every single one of the companies which comprise the index saw their stock's value decline. The index closed at 13,300.02. American International Group (AIG) was among the hardest hit ahead of its afterhours earnings report. It fell 6.7% on the day. General Motors (GM) came in close with a 6.1% decline following third-quarter losses. American Express (AXP) lost 5.5%.

The S&Ps and Nasdaq also suffered heavy losses. The S&P 500 fell 44.65 points (-2.9%) on Wednesday. It closed at 1,475.62. The Nasdaq Composite lost 76.42 points (-2.7%). It ended the session at 2,748.76. Volume was again on the heavy side with almost 1.7 billion shares exchanged on the NYSE and 2.7 billion on the Nasdaq. In the NYSE the decliners exceeded advancers by 3 to 1, while on the Nasdaq the declining stocks outpaced the advancing ones by more than 5 to 1. The selling did not end there. The market continued to fall in afterhours trading as well. This leaves the door wide open for a retracement in the Dow back to the 13,000 level with the market easily testing the price congestion from August and early summer.

Market Pulls Higher while Crude Oil Hits Record Highs

Good morning! The roller coaster ride of the past several trading days continued on Tuesday, but the market overall managed to close with some solid gains. The Dow Jones Industrial Average ($DJI) added 117.54 points (+0.9%) on Tuesday and closed at 13,660.9. American Intl Group (AIG) was the strongest of the Dow's 30 index components, posting a $2.52 gain to close at $62.05. Exxon Mobil Corp. (XOM) came in a close second in terms of percentage gains and led in terms of price, adding $2.72 to close at $90.38. Citigroup Inc. (C) weighed down the index, falling $0.82 to close at $35.08. The result was that the Dow was the weakest of the three major indices and both the S&P 500 ($SPX) and Nasdaq Composite ($COMPX) experienced larger percentage gains on the day. The S&P 500 rose 18.10 points (+1.2%) and closed at 1,520.27, while the Nasdaq Composite rose 30 points (+1.1%) and closed at 2,825.18.

Volume was strong on Tuesday, but somewhat lighter than on last Friday and this Monday. Volume on the New York Stock Exchange fell just short of 1.5 billion shares. Advancers beat out decliners by close to 2 to 1. On the Nasdaq about 2.5 billion shares were traded. Advancing stocks came out ahead of declining ones by about 4 to 3.

One the main news events for the day was the record close in crude oil. XOM soared, as did the rest of the energy related sectors, as oil prices rallied. They made a new all-time high of $97.10 a barrel and closed at $96.70 a barrel. The Energy Department's Energy Information Administration will release this past week's U.S. crude oil inventory report on Wednesday at 10:30 ET. Declining imports, particularly from Mexico as a result of strong storm activity in recent months, has contributed to low inventories. In the previous week crude oil inventories fell to their lowest levels in two years. Wednesday's data is likely to reflect that impact even more with a continued decline, while demand has increased in part to colder temperatures and economic growth.

The euro also hit record highs since its debut in January 1999. At one point it hit $1.4571 intraday, leading to yet further weakness for the U.S. dollar. On Thursday the European Central Bank announces its interest rate decision, which is expected to remain at 4%.



Let's now take a look at the market from a technical standpoint. The session began on Tuesday with a modest gap higher into the open following some premarket buying heading into about 7:00 am ET. The market managed to hold up into the open for the first 45 minutes of the day, but when the 10:15 ET correction period hit the bears took over and the indices began yet another sharp intraday decline. This has been very typical over the last couple of trading days, but this time the market did not make it back into the prior lows and instead the Nasdaq found support at Monday's opening prices while the S&P 500 and Dow Jones Ind. Ave. hit support at their 15 minute 20 simple moving averages and the middle of the congestion from the prior two days of trading.



By 11:00 ET the market was attempting the reversal off lows. The initial ascent was rather slow as the indices moved on choppy trading into the zone from the previous day's close. The S&P 500 made it to its 5 minute 20 sma resistance zone, but the Dow and Nasdaq fell a bit short before they began to pull lower. The market kept an equal distance from the 5 minute 20 sma as it corrected off that zone, however, and this made it possible to break higher on increasing momentum. The initial pop only took the market into the moving average. A minor correction along the moving average itself into noon then allowed it to break through it.

After hitting some earlier congestion and the equal move zone compared to the initial upside, the market corrected for a second time with a pullback on light volume into the 13:00 ET reversal period. The indices moved steadily out of this bull flag and into a strong test of the morning highs. I had initially been expecting a little more of a pullback at 13:30 ET when the market had established another comparable move and began to slow at the S&Ps's morning highs, but the high at the time held and broke slightly higher into the same resistance zone for the Dow and Nasdaq before pulling back with a larger correction into the 14:00 ET reversal period.



Intraday the market action had been pretty choppy throughout the day into 14:00 ET. There was a great deal of overlap again in prices from one bar to the next on the 5 and 15 minutes charts and at 14:00 ET that chop became even more pronounced as the market formed a larger 15 minute congestion zone. Volume again dropped off somewhat and the 15 minute 20 sma held as support, leading to a break higher out of the 15:00 ET reversal period. This was the most pronounced upside move of the entire session and it continued strongly into the final 30 minutes of trading.

This late day breakout took the indices out of the trading range that had been in place since Friday and it also means that the market now has a bit higher odds of forming a daily triangle instead of an immediate continuation lower as had taken place back in August. We will need to see the buying hold into Wednesday, however, for this to show greater confimation and currently the market is pulling back afterhours.

Market Takes Investors for a Ride

Good morning! The new week kicked off with a bit of a roller coaster ride for market participants on Monday. The morning began with a sharp turn lower following earlier weakness into the day. At 2:00 am ET the index futures began to tumble. The downside gained momentum into 3:00 am ET on falling prices overseas, but then stabilized somewhat into the opening bell. A sharp flush lower at 9:30 ET took the market into the zone of Friday's low and strong price support.

Wider-than-average gaps such as this in the overall market have a decent tendency to fill on the morning of the gap and the market made a nice show out of the attempt. Buying hit within minutes of the bell and, although the indices fell into a bit of a range into 10:00 ET, the market popped following the Institute for Supply Management's nonmanufacturing index. The ISM data exceeded expectations, showing a stronger growth in the U.S. economy than had been expected. The ISM index rose from 54.8% in September to 55.8%.



After pulling back some at intraday highs, the market put in a third wave of buying into the 10:45 ET reversal period. The 10:45 ET highs closed the gap zone in the Nasdaq Composite. Although they did not hit Friday's close exactly, it was still enough to serve as strong resistance and the market rolled over.

The reversal was very slow to begin with. The S&P 500 and Dow Jones Ind. Ave. even went on to retest the morning highs just before noon before they were able to turn over better. From about 12:30 ET to 13:00 ET the market based along mid-day lows and then broke lower soon thereafter. The initial break was comparable to testing the water in your shower or bathtub. The bears put their hand in and yanked it out quickly, but when they realized that the the temperature was just right they all dived in and the market began to sell off very sharply into 14:00 ET.



In order to slow the momentum on the selloff, the market pulled higher out of 14:00 ET. The correction only lasted about 15 minutes, but another wave of downside allowed the indices to begin to roll over at the day's lows. A 2B reversal pattern, consisting of a second slightly lower low on declining momentum, brought the S&Ps and Dow off the lows and the Nasdaq had its own ace up its sleeve when it hit Friday's lows for very strong price support.

The reaction off the afternoon support, while anticipated in terms of its likelihood to occur in some form or another, went beyond what I had been expecting and the indices very quickly shot higher off the lows. The 5 minute 20 sma zone stalled the bulls briefly, but a second and even stronger move took place soon after 15:00 ET. The highs hit the upper end of the morning congestion, creating a second correction and then a third waves of buying into 15:00 ET. This last surge brought the market to the upper end of the daily from Friday as well. As these stronger price levels hit, the market again found itself without solid footing and it slipped slightly lower into the close.



I am still leaning towards continued selling with the 20 day sma serving as resistance in the indices. At the closing bell the Dow ($DJI) has lost 51.70 points (-0.4%) and closed at 13,543.4. Citigroup led the decliners in this index and lost 1.83 points, or 4.8%. The rest of the financial sector remained weak as well thanks to a slew of broker downgrades. The S&P 500 ($SPX) lost 7.38 points and closed at 1,502.17, while the Nasdaq Composite ($COMPX) fell 15.20 points and closed at 2795.18.

Market Takes Investors for a Ride

Good morning! The new week kicked off with a bit of a roller coaster ride for market participants on Monday. The morning began with a sharp turn lower following earlier weakness into the day. At 2:00 am ET the index futures began to tumble. The downside gained momentum into 3:00 am ET on falling prices overseas, but then stabilized somewhat into the opening bell. A sharp flush lower at 9:30 ET took the market into the zone of Friday's low and strong price support.

Wider-than-average gaps such as this in the overall market have a decent tendency to fill on the morning of the gap and the market made a nice show out of the attempt. Buying hit within minutes of the bell and, although the indices fell into a bit of a range into 10:00 ET, the market popped following the Institute for Supply Management's nonmanufacturing index. The ISM data exceeded expectations, showing a stronger growth in the U.S. economy than had been expected. The ISM index rose from 54.8% in September to 55.8%.



After pulling back some at intraday highs, the market put in a third wave of buying into the 10:45 ET reversal period. The 10:45 ET highs closed the gap zone in the Nasdaq Composite. Although they did not hit Friday's close exactly, it was still enough to serve as strong resistance and the market rolled over.

The reversal was very slow to begin with. The S&P 500 and Dow Jones Ind. Ave. even went on to retest the morning highs just before noon before they were able to turn over better. From about 12:30 ET to 13:00 ET the market based along mid-day lows and then broke lower soon thereafter. The initial break was comparable to testing the water in your shower or bathtub. The bears put their hand in and yanked it out quickly, but when they realized that the the temperature was just right they all dived in and the market began to sell off very sharply into 14:00 ET.



In order to slow the momentum on the selloff, the market pulled higher out of 14:00 ET. The correction only lasted about 15 minutes, but another wave of downside allowed the indices to begin to roll over at the day's lows. A 2B reversal pattern, consisting of a second slightly lower low on declining momentum, brought the S&Ps and Dow off the lows and the Nasdaq had its own ace up its sleeve when it hit Friday's lows for very strong price support.

The reaction off the afternoon support, while anticipated in terms of its likelihood to occur in some form or another, went beyond what I had been expecting and the indices very quickly shot higher off the lows. The 5 minute 20 sma zone stalled the bulls briefly, but a second and even stronger move took place soon after 15:00 ET. The highs hit the upper end of the morning congestion, creating a second correction and then a third waves of buying into 15:00 ET. This last surge brought the market to the upper end of the daily from Friday as well. As these stronger price levels hit, the market again found itself without solid footing and it slipped slightly lower into the close.



I am still leaning towards continued selling with the 20 day sma serving as resistance in the indices. At the closing bell the Dow ($DJI) has lost 51.70 points (-0.4%) and closed at 13,543.4. Citigroup led the decliners in this index and lost 1.83 points, or 4.8%. The rest of the financial sector remained weak as well thanks to a slew of broker downgrades. The S&P 500 ($SPX) lost 7.38 points and closed at 1,502.17, while the Nasdaq Composite ($COMPX) fell 15.20 points and closed at 2795.18.

Market Recovers Following Morning Selloff Led by the Financials

Good morning! The market gave in to a second wave of selling on the daily time frame since the October 11th highs on Thursday. That bias continued into Friday morning with continued downside after a minor gap higher into the open. The financial sector was particularly burdened. In the broker/dealers, Merrill Lynch & Co Inc. (MER) saw its worst intraday decline since February after breaking lower on October 19th out of a multi-month base near 52-week lows. At one point MER was down about $8, but it managed to recoup some of its losses to close down $4.91 (-7.9%). Morgan Stanley (MS) also had a tough day. It fell $3.52 (-5.64%) on Friday after already getting hit hard the day before. Goldman Sachs Group Inc. (GS), which had just hit new highs two days earlier, shed $10.61 (-4.42%). The banks failed to hold up also, with a -7.5% loss in Washington Mutual Inc. (WM) leading the decliners. Only a couple stocks in this sector managed to post gains.

Despite these damages, th