A Measured Move

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Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

We have talked about the price and time relationships that have occurred in the stock indices. Simply, the Dow has retraced slightly more than 50 percent of the October 2007 to March 2009 decline where the S&P 500 has fallen just shy. Last week we pointed out that on the 17th of November the half way mark was reached on the basis of time. That means that the length of time spent on the upward move since the March low has come to 50 percent of the amount of time spent from the October 2007 peak to the March 2009 low.

Yesterday on CNBC, Robert Prechter pointed out that basis closing levels yesterday, November 23, was 50 percent in time value measured from the high close to low close. And he added that the Dow Industrials high of yesterday the 23rd reached the price where the first major leg of this rally from the March low to the June high equals the second leg advance from the July correction low to the November 23 high. We calculated this to be a price of 10495.10 for the Dow Industrials and the high registered yesterday shows 10495.60.

Mr. Prechter and others have shown that there has been a divergence in that the Dow was the only major index to post a new high above the November 16 highs. (In the case of the Dow the previous high was Nov. 17). Some analysts will suggest this may be a red flag, but this form of divergence has occurred before during the course of this upswing so time will tell.

We are not recommending buying or selling. We believe though that this is potentially significant information to be aware of as market participants.


Good Trading

Jeff
CB&S

A Hint Of Trouble Ahead

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We must admit we are somewhat surprised but more so impressed with the performance of Gold this week. Even as the US Dollar held its recent lows and even on days of Dollar strength the price of Gold maintained its daily trend performance.

The last leg up from the October 28 low has been a steep upswing and while the Dollar came in strongly bid this morning and stayed higher for the day all day, Gold was able to make an impressive rally adding $8.50 or more to the previous close by the end of its day.

We are wondering if something is in the wind. Gold continued strong late week but the stock indices were making signs that a correction is at hand. And what we also find rather curious is that 3 month T-Bills fell to a negative yield according to sources. What we fear this may mean is fear itself. Are the markets about to reenter a BEAR phase much like was seen during 2008. There are inklings of this. Some of the financial media was actually heard discussing deflation today. Several if not many of our nation’s states are in deep budgetary crisis. Tax revenues are falling off a cliff and the Municipal Bond market may be ready for a new rude awakening.

The chances that there is something to be made from all this we believe are better than fifty fifty. We could be in for rocky times. Fortunately there is a way to approach such times that futures contracts provide. First of all there is a myriad of products. But also there is the liquidity and the ease of entering and maintaining short positions afforded by the futures markets. This we believe is a rarely heralded blessing.

Good trading to all.


Jeff
CB&S

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Conflicting Signals In The S&P

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Here’s a look at the S&P today. The daily chart of the cash S&P 500 is used to illustrate a new set of Fibonacci extension targets activated today. The .618 is approximately 113000 and the .750 is approximately 114000.

The weekly chart above shows the major downtrend line formed across the intraweek highs from the week of October 8, 20007 and May 19, 2008. It also shows the Fibonacci retracement levels where it is currently very near the .500 mark of approximately 112100. (A note to add here is that on the daily chart that downtrend line is shown to be broken slightly today).

So there could be a bit of a fight to be waged at these levels. To negate the extension targets the cash S&P 500 needs to get back below 108450 or so particularly on a closing basis.

Fed Chairman Bernanke’s speech this morning, which initially caused a reactive sell-off, ended up fueling the bullish fire of the day.

On CNBC this afternoon, though, Meredith Whitney voiced her opinion of which one of the highlights was that she “hasn’t been this bearish in a year.” We recall rather well how she nailed her forecast on the banks some time ago.

Until further notice, however, the major stock indices continue their upward push with traders and or investors seemingly chasing perceived value.

Good trading to all

Jeff
CB&S

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Price And Time In The Dow

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We don’t like to be too repetitive with our blogs but this is something we found intriguing enough to go along with what we covered in just our last blog Wednesday.

We talked then about the Dow Jones Industrials reaching just ticks through the 50 pct retracement of the entire down move from October 11 2007 to March 6 2009. What we discovered later is that there is also a Fibonacci 50 pct time sequence that was likely satisfied at the same time. If the down move from Oct. 11 2007 is 512 days and the recovery from the March 6 2009 low to this week’s November 11 high equals 250 days we find that ratio to be 48.8 pct. That seems close enough for government work to us to make mention of.

Down Move	10/11/07	03/06/09	512
Up Move	3/6/2009	11/11/09	250
Total Move	10/11/07	11/11/09	762
Retracement % Days of Total Move			32.81%
Retracement % Days of Up Move/Down Move			48.83%

This might be something to be aware of when considering market positions. The combination may help determine when market moves are due to come to an end. Nothing is perfect but this could be a powerful weapon to add to the arsenal.

Good trading to all.

Jeff
CB&S

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Key Fibonacci Resistance Reached In Dow Jones Industrials

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We thought this was definitely worth showing this morning.

The chart above is a weekly Dow Jones Industrials – CASH. The significance we find is that today’s high is virtually right at the 50 pct retracement from the October 2007 peak to the March 2009 low.

The high posted intraday was made October 11, 2007 at 14,198.10 according to our data. The low was made March 6, 2009 at 6,470. The difference between the two is 7,728.10. Half of that difference equals 3,864.06 which when added to the 6,470 low makes 10,334.05 the 50 pct retracement level following our method of division, subtraction and addition. Today’s high as of the time we are preparing this has been 10,342.

We thought you’d all want to know.

This could be an important milestone reached and may turn into a likely spot from which a correction begins. We strongly suggest to watch for additional signals such as a reversal. We also strongly suggest watching and keying off of the U.S. Dollar. It too is trying to reverse to the upside as we are typing. Perhaps today’s closes will tell us all much more.


Good trading to all

Jeff
CB&S

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

How to look at tomorrow's Dollar trade

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The U.S. Dollar which has been blamed for just about everything imaginable but for our purposes it has been for commodity prices and stock prices rising. We were going to say most notably Gold but we just couldn’t really justify this in our minds. Along the course of the way it has been crude oil and it’s by products, grains, soft commodities and of course the precious metals. It hasn’t hurt the stock indices either to have the lower trending Dollar.

The chart shows the continuing downward slope of the Dollar Index. Today’s low in this cash index at 74930 is but one tick below the previous low of 74940 made October 21. Coincidentally, that is the same day of the previous highs in the major stock indices prior to the Dow Jones Industrials breaking through with its sharp rise today.

Trending along with the price chart of the U.S. Dollar has been its 50 day moving average noting that for many months any rally has stopped at or near it. Likely this market will need a few closes above the 50 day ma to attract more serious buying interest.

One other note of potential significance is that the way we have constructed the Fibonacci extension on the chart we find that the target was virtually right at today’s low.

Looking at what tomorrow may bring and reasons why it may not be comfortable for short positions we find that 1.) A one tick rule with today's low one point below the previous low; 2.) The Fibonacci extension target being satisfied; 3.) Tomorrow is Tuesday.

Good trading all

Jeff
CB&S
Division of MF Global Inc.

312 261-7380

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Unemployment Report Trading Day

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The monthly unemployment figure were released this morning at 7:30 AM 9cst). The unemployment rate was the key surprise as it was reported to have risen to 10.2 pct. We don’t recall seeing any estimates above 10.0 pct. The non-farm payroll number was within the range of estimates at 190,000. There was a downward revision from the previous month.

The market went in to the report on the heels of a rally. It surprised us that with what appeared to be strong momentum that the S&P 500 was unable to trade through the .618 Fibonacci retracement level formed using the October 21 high and Nov. 2 low. (As illustrated in the chart). It has also stopped at the March / July uptrend which has posed resistance as a return to trend. However, the S&P has crossed back above its 50 day moving average closing above both Thursday and Friday.

The market did sell off after the release of the report but held and after trading quietly for a good part of the session was able to muster a rally not quite back to the highs of the day going in to the close. We believe this sets up another interesting and potentially volatile week beginning Monday. Possibly even Sunday night.

Good trading all

Jeff
CB&S

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Sizing Up The Bear S&P Argument

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The above chart is of the daily cash S&P 500. After spending virtually the entire day trading higher it ran out of steam after making a new high by a very small amount with an hour and a half left in the session. The last half hour particularly saw the steam come out. That being said, there were a few intriguing points that we wanted to point out.

There has been a 70 point decline off the October 21 high of 1101.36 to 1029.38. The .500 Fibonacci retracement comes to 1065.37. Today’s high was 106100. The .618 Fib retracement is 1073.86.

The 50 day moving average was at 105335 according to the display on our chart. Even though the S&P traded back above that level today it was unable to close above it. There are now 4 consecutive daily closes below the 50 day moving average and five out of the last six sessions have ended beneath it.

The trend line that marks the entire upward move from the March 2009 lows has now seen five of the last six sessions close below it. Today’s rally high came to within approximately five points of the trend line which likely poses some significant resistance as a return to trend line.

Finally, one of our clients versed in candlestickese pointed out to us that today’s daily bar is a falling star and that as one would imagine, a bearish not bullish event.

Good trading to all

Jeff
CB&S
Division of MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Gold: How High Is High

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This must be a hot topic today and to leave it uncovered would be foolish even though we suspect everyone has asked everyone what sparked the gold rally of Tuesday November 3.

It is especially fetching in that it did it all on its own, meaning without the aid of a drop in the U.S. Dollar. The prime reason we have found cited for the move is the Central Bank of India’s reported purchase of 200 tons of Gold from the IMF. Analysts consider this a clear sign of demand as central banks around the world replace some portion of U.S currency holdings with Gold.

Other incidentals included talk that the Gold companies such as Anglo American would be liquidating their hedge books, but likely over a period of time lasting well into 2010 according to what we have read.

Our chart included above shows the next Fibonacci extension targets. The .750 level is approximately 109150.

Final note on this is to be cautious with new or additional purchases at lofty levels such as these. We have seen it before where when things look most bullish the high price is made.

Good trading to all

Jeff
CB&S Division
MF Global Inc.

312 281-7380

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.