Traders Take Their Profits

Earnings Season will start to wind down a bit after this week, but the tail end of the hot period is still pushing the market. APA, CELG, CL, DOW, IP, MRO, PG, and XOM are all up pre-market after reporting earnings this morning. The SPY (market) is set to gap up exactly to resistance right at yesterday's high (almost to the penny).

The economic reports were actually worse than expected if you account for one revision, but analysts are writing them up as positive because it fits the flow of the buying this morning. Initial Jobless Claims came in at 631k vs. 640k but last week was revised up to 645k vs. 640k, and continuing claims has now reached a new record high of 6.27m vs. 6.20m expected. Personal Income reported at -0.3% vs. -0.2%, which is being called "mostly in-line with expecations" but is actually not, it's a miss, and it's defenitely a miss when you put it in context with the Employment Cost Index which reported 0.3% vs 0.5%. What Personal Income and the ECI are telling us is exactly what we are seeing with the jobs situation, which is that businesses are cutting wages and cutting jobs and people have almost no pricing power for raises and promotions. In other words (and this is obvious of course), this is an employers market and not an employees market.

Here is a long term chart of the SPY:
(click on image to enlarge)

The bigger picture view of the market should give you some perspective. The V-Bottom has been extreme, but not wildly out of whack with the overall chart. The issue with the V-Bottom is that some of it appears to be manufactured by economic news that is not bullish, or indicative of an economic stabilizing, let alone recovery. However, as I always state, go with the charts because the game of trading is to move with the fund managers no matter where they take you. Don't fight the tape, don't go against the charts.

At this point in the trend, and with this large a gap right to resistance (25 gaps in 27 trading days), I would be a seller of much of any call positions I held overnight (if I held any overnight). I would not be a buyer right out of the gate. I'm impressing the point on you because I speculate that a lot of Fast Money will try to take advantage of the big gap and take profits right out of the gate. If the market comes back a little (wiggles) in an orderly fashion, there may be an opportunity for another intra-day leg up and another push into the 88.50 - 89.00 area. The long term charts are suggesting the V-Bottom is getting near the end of it's move, so I doubt the gap today will lead to a 5-7 day push all the way to 92.50 - 93.00. If the gap leads to anything significant over the next couple of trading days, the Dow 8,300 - 8,375 is a more likely target.

Look for a gap right out of the gate today, a pullback off some immediate profit-taking, perhaps another push into the highs or a little beyond, and then more profit-taking as the market starts to exhaust itself off the trend a bit. The market is still in an uptrend, and until it makes a lower low or lower high, it hasn't changed the trend.

7:38 am MT: There's the immediate profit-taking I speculated about pre-market. If the SPY can hold the 88.00 area or so it might take another shot at the morning highs at the top of the gap, perhaps a little beyond.

7:41 am MT: Traders decided that five minutes was enough and it's off to the races. The second leg up did exceed the gap highs.

7:42 am MT: If you have any more call positions after taking profits right at the open, this is an opportunity to sell some more and be out of most of what you started with.

If the SPY (market) puts in a nice Bull Flag on the 10m charts or so after this current push, then look for another leg up to test the highs or a little beyond again. We will probably see a second push, perhaps a third push after this current first push beyond the top of the gap. Then look for things to get exhausted and consolidate through much of the middle of the day.

7:48 am MT: There's some more sharp profit-taking. That's probably it for a bit, the reach is done for the "right out of the gate move." Now watch for an orderly consolidation on the 10m charts or so, if we get that kind of price action we may get the second leg up. If we don't then the market will be in profit-taking mode for a while.

1:20 pm MT: The SPY had three legs up on the 5m chart this morning and tapped out right in the 89.00 (89.02) area I thought would be the max for the morning. Since then traders have been steadily taking profits, which was another thing I speculated was coming, especially when you view the extreme V-Bottom trend from the bigger picture.

There is a Head and Shoulders forming in the SPY 15m charts similar to one that formed last week.

Here is a long term chart of the SPY:
(click on image to enlarge)

The yellow highlighted area is the support zone/neckline for the Head and Shoulders. A break through the zone would probably mean a move back down to the previous support zone/neckline in the 85.50 - 85.75 area. The last Head and Shoulders had a gap breakdown on April 28th that came right back and reacquired the zone.

The current price action will be a big temptation for any fund managers that want to manipulate the technical charts. The reason is that there are really two issues: one is keeping the Head and Shoulders from confirming today, and two is that a confirmation of the Head and Shoulders would create a failed breakout and selling day on the daily charts. My speculation is that the same traders who have tried to prevent any "bad" technical signals for the past several weeks (whenever they can) will do so again today. The setup is exactly right, a market that was supposed to be bullish (although I warned you that in my experience we were ripe for profit-taking), and supposed to break out, and supposed to grab headlines, is now right in the breakeven area of the day. So right before the close (10 minutes - 0 minutes), it will be interesting if we get a round of buying to make sure the market finishes in the green like it's "supposed to."

I don't bring this kind of stuff up just to get all "conspiracy theory" freaky on you. I bring it up because I'm always studying current patterns and current behavior on the market to help me with my trading. So, for instance, if you played puts in the last couple of hours (which I did not), and you were thinking about holding right into the close, and the market was hanging around just below breakeven in the last 15 minutes or so, and you were thinking "I'll ride this for some selling right into the close and squeeze out some more profits before I sell", then you may want to re-think that and instead think about locking down before any "price massaging" hits in the last 10 minutes or so.

1:56 pm MT: Right here is where you might be tempted to take a put right into the close, and right in this area is where I would expect the technical "proppers" to come in and prop.

2:00 pm MT: I don't know how many of you spotted that, but there it was, just like I said it was going to happen.

It looks like the proppers weren't able to quite get the Dow and SPX indexes themselves into the green right at the end, but they attempted to do so with the ETF's (which is where you would expect the propping anyway). They missed on the DIA by ten cents, but it wasn't for a lack of trying. They were able to get the SPY back into the green by three cents. The SPY was also the ETF they were able to prop the last time I showed you this trick.

Here is a 1m chart of the SPY:
(click on image to enlarge)

You can see yesterday's close at the far left of the chart before the gap, and you can see the Hammer and push into the close at the far right of the chart. The push, which came just as it looked like the SPY would finish in the red and sell on the close, was enough to get the SPY into the green by three cents.

Here is a closer view of the close on the 1m chart of the SPY:
(click on image to enlarge)

The second to last bar is the 1:59 pm MT candle. The candle was red and selling down in the 87.20's all the way up to the last 15 seconds or so before the close. The selling volume bar was tracking over 1.5m - 2.0m shares at the time. All of the sudden a buyer(s) came in with about 200k - 500k and presto, a red day became a green day by three cents. The next bar, which is the last candle of the day (2:00 pm MT) had the most volume as traders bought and sold market on close orders. But the market on close had already been pushed into the green, so the market on close orders were basically offsetting each other, which you can see in the candle (a Spinning Top with long shadows indicating a standoff right at the close at the already established closing area from the candle before).

So, as before, I can't prove technical manipulation, but the timing and evidence is pretty overwhelming in the favor of someone propping the market again.

They weren't able to accomplish it across the board. The major indeces, especially the Dow and SPX are starting to form Ascent Block type patterns (which, of course, the proppers were trying to avoid). It means that despite the little games here and there, the general consensus is still a V-Bottom trend that may be starting to exhaust itself a bit and is seeing some profit-taking at both the highs of yesterday and today.

Here is a daily chart of the SPX showing the Ascent Block forming:
(click on image to enlarge)

The economically logical scenario is a Rounding Top and a roll back down to 825 - 830, and then another drop into the 770 - 780 area. But these haven't been logical times. There is a lot of emotion amongst a large group of fund managers. For that matter, there is a lot of emotion amongst areas of the general public. So I'm not focused on what's logical. I just keep reading the charts day to day. A drop below the 865 - 870 area would probably open the door to more consolidation down into the 845 - 850 area. A move back above 880 and the market will probably try to go and test 890 again. I'm just taking it one short move at a time and keeping an eye on the big picture all the while.

Fed Day Tips to the Bulls

Pre-market futures are up strongly on the combination of a worse than expected GDP report (-6.1% vs. -4.75), a weakening dollar that is leading to higher oil prices, BHI and HES beating earnings in the energy sector in part because of higher oil prices the past six weeks, an analyst upgrade of banks the same day it was confirmed by the Fed that at least 6 of 19 banks (including BAC and C) will have to sell preferred shares in order to raise capital to cushion against losses, the speculation that Treasury Secretary Geithner (Mr. "the banks have more capital than they need") plans to "finance" (i.e. add to the national debt, weaken the dollar, and run up oil prices - see above) the purchase of $1 trillion (additional $1 trillion??) in illiqued assets from banks, and the afterglow of the most meaningless, most easily manipulated (short term) economic report of all economic reports (consumer confidence beat expectations yesterday).

There you have it. There's all the good news. Hey, I don't make this stuff up, I just report it.....sometimes I even comment on it.....And guess what? The SPY (market) is going to gap up about .70 cents or so in about 15 minutes. The futures came back a little on the GDP report from +.95 to about +.70, so there appears to be at least a few fund managers still left in America who know how to decipher the news, however, the market is still set to gap up and attempt another run at the 86.50 - 87.50 resistance area.

By the way, that brings the Asteroid Shower - hmm, hmmm, I mean the SPY chart up to 24 gaps in 26 trading days.....but who's counting?.....

Here is a chart of the SPY:
(click on image to enlarge)

Here is a chart of the Dow:
(click on image to enlarge)

Let me reference the Dow since I already talked about the resistance zone for the SPY. The Dow is in a Rectangle (potential continuation pattern) that could also be a Rounding Top (reversal pattern). We will know what it finally decides to be after it confirms one way or the other. It looks like traders are consolidating the market in a Rectangle type of behavior because they are hanging around expecting more "good news." I speculate that the combination of the gap up this morning, and the Fed rate decision at 12:15 pm MT is an indication that many fundies would love to have even the tiniest reason to break the market out and go on another nice uptrend. It will be interesting to see if the Fed says something (whether it's fundamentally sound or not) that acts as a catalyst for the fundies to break out of the Rectangle. The bulls seem to be hanging around hoping for just such an occurance.

The gap up this morning will probably lead to at least an attempt at testing yesterday's highs in the 8,100 area. But the market will then probably go into "quiet" mode ahead of the Fed. I'm not looking for much more than a gap, a test of the 8,075 - 8,100 area on the Dow, and then some consolidating and "quieting" ahead of the Fed. Then, as usual, the market will get volatile right after the announcement. That means there might be a few individual stock trading opportunities this morning, but don't look for a huge amount of activity or momentum for about another five hours. However, keep a small eye on things early, and then watch closely after the Fed, because traders really are acting like they want to break the Rectangle to the upside. We shall see.....

7:35 am MT: The market came right out and ran to 8,090 just as speculated. Now we'll see how the wiggle forms and if traders will keep pinging around the 8,100 area or a little higher as the wait/hope/get excited for the Fed to say anything that will light the dry brush and explode the market through the Rectangle and off to 8,300 - 8,350. This is where I remind myself over and over and over again that technical analysis isn't about what is fundamentally real or economically logical. But technical analysis is telling me the truth about what fund managers are buying and selling. And the charts are telling me the truth is that fund managers are buyers, and they are potentially even stronger buyers in the coming weeks. So I lay aside my opinion, I put reality in a sealed box, and I watch support and resistance to see what fund managers are doing, and where they might take the market.

8:35 am MT: The market has had a good run this morning ahead of the Fed. This 8,150 - 8,200 area on the Dow is a resistance zone so this is probably the first area of longer intra-day consolidation. It may even be the peak ahead of the Fed.

The bulls keep pushing against the top of the Rectangle and acting like they are just chomping to break out. So the speculation from this morning has been correct, and fund managers are buying and positioning as if they expect/hope for something from Benny and the Feds that will validate their opinion and open the way for a breakout and run up to the 8,300 - 8,350 area.

12:50 pm MT: The Fed announced.....nothing! And anybody with functioning neurons was expecting.....nothing! So the market did the token pop thing right after the Fed, and now it's doing the token drop thing right after the pop, which is bringing it back into the resistance zone.

I'm always a little careful not to consider the first 1-2 moves right after the Fed to mean anything, even if it's a breakout like we just had on the major indices.

Here is a daily chart of the SPX showing the little intra-day breakout so far:
(click on image to enlarge)

Here is a 5m chart of the SPX showing the drop right back into the resistance zone:
(click on image to enlarge)

You can see the pop and drop right after the Fed. The market broke resistance for five minutes, which sucked in all the breakout day traders, and then it punished them for their ignorance by flopping right back into the resistance zone.

We'll see if the market can hold, form up a bit, and close near the highs of the day. If it does, there will probably be some bullish carry-through tomorrow. If the SPX drops back below 869 - 871 then we will probably get a Shooting Star and the whole Fed experience will be a buy the rumor sell the news thing by the fund managers. I'm leaning about 55/45 that it's a buy the rumor sell the news thing, but I want to see how this forms up in the next 20m or so, we shall see.....

1:08 pm MT: There's the second little peak through resistance. I have a feeling the fund managers are about to say "boo!" again and send the breakout day traders to failure number two.

1:09 pm MT: Yep, the Big Money just handed the breakout day traders their head again.....Happy Halloween Ichabod Crane!

Alright.....all fun and games aside, this is an important time to watch and see if price action will hold tight and build over the next 15m or so, or if it weakens and starts heading towards 871.

1:13 pm MT: There's a messy Bear Flag forming on the 5m charts, so I'm still holding with my 55/45 speculation of another drop down from here, but it's pretty close. I drop below 875 probably sends the SPX to the 871 area, but again, price action is hanging in the balance. I'm just watching right now, not trying to play all this gyrating. I want to know what the mood may be for tomorrow or the next couple of days based on how traders are treating the Fed announcement right now - which has obviously been part of their bullish upswing playbook all along (the clue was the mini-breakout right after the Fed).

1:46 pm MT: As I speculated (55/45 probability), the market rolled down off the 5m Bear Flag, breached 875 in a straight line and then tested the 869 - 871 support area (869.48), before throwing a Hammer on the 5m charts. The brief bounce after the 5m Hammer was another sloppy Bear Flag and then another collapse. Now it's likely that we will get a Shooting Star on the daily charts as I speculated.....Buy the rumor, sell the news.....

2:03 pm MT: Market Wrap: The market almost threw a Shooting Star, but some money came into the market in the last ten minutes to prevent that from happening. Today will go down as more of an accumulation day on the technical charts instead of a Shooting Star because of the buyer(s) in the last ten minutes before the close. Who says you can't manipulate a market? Look how easy that was. I realize it could have been real buying, I'm just pointing out how easy it would be to manipulate the charts on the close if you had a lot of money and you knew what you were doing.

What this means is that even if we get bearish news from earnings tonight and tomorrow morning, all the technical traders will be in more of a mindset to buy the dip - even if it's another gap down (sound familiar?). Like I said early in the day, trade what's on the charts regardless of whatever else is happening in the world. Many of you followed that instruction and made some nice profits on calls today.

And Another Day Another Gap

That makes 23 out of the last 25 trading days.....that's not very many.....

The market gaps a little just about every day, but gaps of around .75% - 1.00% or greater on the market are more significant, and the majority of the time lead to moves in the direction of the gap. Not all gaps are breakaway or continuation gaps (which continue in the direction of the trend), some are exhaustion gaps, which reverse the trend. The only gaps that aren't significant are common gaps, and they are usually around .25% - .50% or so on the market (a little different for stocks depending on volatility). The market rarely opens exactly where it closes, but it usually opens in the relative vicinity of the close, unless of course there is news.....so an extremely gappy market is indicative of an extremely newsy market.....

To put that in perspective, the SPY (market) will gap .10 cents - .30 cents all the time, in fact, it rarely doesn't. But what it also doesnt' do is gap .50 cents - 1.00 dollar all the time. If you go back and count gaps of around .50 cents or higher, you will see 23 out of the past 25 trading days we have had somewhat significant to significant gaps. It's not just absurd, it's way beyond absurd. And it's indicative of an extremely newsy market. A market that is not only getting its share of meaningful news, but a whole bunch of "manufactured" news manipulation on top of it. You cannot have 23 gaps in 25 days without a bunch of news hokey pokey going on.

I could keep talking about this, but let me just give you give you a visual, because after all, a picture is worth a thousand words (or maybe it's been a thousand news bogeys.....).

Here is a chart of the SPY for the past month or so:
(click on image to enlarge)

I'm pretty sure that's not an actual chart of the market. I think I'm looking at a picture of the huge asteroid shower Han Solo had to fly through in the Millenium Falcon before almost being eaten by a giant space worm.....

Just like Han Solo had to stay on his toes (or handles or whatever) and be extremely nimble in order to avoid getting pulverized by a massive asteroid, we have to stay nimble in order to navigate our way through this newsy, gappy, messy, manipulated market.

The market driving news du jour is the banks again (surprise). And it's a continuation of the Geithner theme (they have capital.....no they don't.....yes they do.....no, just kidding......yes......no......yes! I'll test them and show you.....oh, wait a minute, I guess they don't......but it's my job to artificially prop up the stock market so the government doesn't look bad so just pretend they do.....).

By the way, I get the swine flu as a serious threat to turn into a global pandemic, and I already stated yesterday that my thoughts and hopes go out to all those suffering and fighting to stop the disease. But the media is trying to use this as a headline excuse over the fact that BAC and C are selling off because they will need to raise capital after the early results of the "stress" test (the capital that Geithner said they had more than they needed only last Tuesday). I'll leave it up to you to figure out why the media is saying that our U.S. markets are gapping down and selling this morning on the swine flu, and not the fact that the banks don't have enough money.....

7:36 am MT: The SPY gapped beyond yesterday's 85.50 tipping point. Eventually the breach of 85.50 will probably lead to a test of the 83.00 - 84.00 area, but not (of course) until the Googly-Eyes throw down a couple shots of kool-aid and get on their wobbly horses and push the market back up towards the gap - because their playbook tells them to buy every dip no matter what the real fundamentals are. So be patient, and wait for the clearest signals today, a nimble trader may have an opportunity this morning, but start with small feelers on the best signals rather then charging in full bore.

Here is the current 15m chart of the SPY:
(click on image to enlarge)

The 85.50 area should be resistance on the SPY, and the 83.75 - 84.00 area should be the next support. Just keep your hands close to the pilot's handles because it's another asteroid hurtling through space.....

If the market runs past 85.50, or it keeps pinging up off of 84.75 - 85.00, then price action will be tipping itself of as another goofy grinder day. It looks like the 85.25 area is the first gas out point intra-day, so we'll see if the market Bear Flags a little in the 85.25 area and then rolls over and makes new lows as it heads towards the 83.75 - 84.00 area.

7:51 am MT: There's the token double move on the 5m charts and the push beyond the gas out point by the Googly-Eyes. They are nothing if not persistent these days.....That means the 85.40 - 85.50 area is the next gas out area for a Bear Flag. If this goes too far beyond 85.50 before a confirmed rollover on the 10m - 15m charts, then just like yesterday, be very selective about any puts. It's still a Bear Flag on the 10m charts, so as always, we shall see.....

8:02 am MT: And there's our token blast beyond resistance. So this a re-do of yesterday. We'll see if we get a wide rolling price action like yesterday. The market went pretty parabolic intra-day just now, which appears to be coinciding with the utterly meaningless Consumer Confidence report (the public's perception can be easily manipulated by the media, it happens all the time, so a one month reading is not nearly as important as the 3-6 month moving average). My speculation is that the market will keep trying to push and hold the lows of today, just like it did yesterday, and that we may see some rolling up and rolling down just like yesterday. But don't expect the fundies to just give up and walk away today, any rollover will probably only come after a couple of tests, just like yesterday.

8:07 am MT: This 85.75 - 86.00 area looks like the first Googly-Eye peak, just like the 87.00 area was yesterday after the "dip" buying. Again, the bulls have come to life enough that bearish puts will be something you want to be patient with. If the market forms a Bull Flag on the 5m - 10m charts right here and holds the 85.50 area, then it may make another push (or test) of the 86.00 area before it decides whether it will repeat the rolldown action of yesterday.

11:55 am MT: The SPY (market) did Bull Flag on the 10m charts back to the 85.50 - 85.60 area and then bounce back to test the 86.00 - 86.25 area. Now we are in a sideways consolidation that will either continue or reverse.

If the SPY breaks above 86.25 then we will probably get a momentum afternoon as the market makes a push to test 87.00. If the SPY breaks below 86.50 then we will probably get a test of the 84.75 - 85.50 lows.

The price action can be frustrating, which is why it's better to play individual stocks and sectors over the major market index ETF's. The daily chart price action on the markets continues to be gappy and choppy the past couple of weeks.

Here is the current 15m chart of the SPY showing a Triangle forming intra-day, which is usually a continuation pattern:
(click on image to enlarge)

If you are playing individual stocks then only keep a slight watch on the market to see if it reverses or continues right here, and put that in the context of your trade. Otherwise, don't get too involved with the market indexes, we are getting another fickle-trader day at best, and a price manipulation day at worst. In other words, in other lifetimes, with other.....well I won't say the second part.....but in most other market conditions the Triangle would be a continuation by about a 70/30 odds. In this market it's a 50/50 toss of the coin.....well, I'll give it 55/45.....

12:22 pm MT: The market internals are not telling us much today, but there could be a mini clue coming up. If the advancers and volume both break to new highs right now, then expect the SPY to follow and the Triangle to be a continuation pattern, at least for a little while this afternoon.

12:23 pm MT: Ok, there it goes, continuation pattern. That means you can stay with any individual stocks you may have been playing calls on a little longer. It also means to not bother with puts unless we get a major reversal intra-day.

The best case scenario is an upswing on the 15m charts to 87.00, but I don't think it will go that far (perhaps 86.50 - 86.75). However, any individual stocks you are playing calls on could outperform the market if they are strong today, especially if the market holds the Triangle. A collapse back down below 86.15 is a red flag, and a drop below 86.00 means it was a failed signal.

12:50 pm MT: The strongest areas today, by far, have been REIT's and Insurance. There have been some nice individual perfomers like HCN, but the big issue with REIT's is that most of them don't have good spreads on the options. So if you didn't do much trading today, just like yesterday, it's understandable. This is about the time to check out mentally from the day and give it a rest if you haven't been trading anything. Especially since it doesn't look like we will see much momentum into the close. The intra-day continuation is starting to collapse a bit back into the grind.

Another Day Another Gap

If only the market would gap a little.....then we might finally see some whipsaws and volatility day to day.....

The Bulls are really grousing today, which is weird as usual because they got themselves too high off too little and now they appear to be getting themselves too low off too little. The banks stress test will require banks to raise more capital by converting preferred stock held by the TARP, I kid you not.....that's how it's being reported.....It's not owned by the government anymore, it's not even owned by the treasury, it's owned by the TARP.....Anyhoooooo, the TARP will probably convert preferred stock, which will raise capital at the banks but lowered the common share price, thus putting some pressure on financials this morning.

In addition to the stress test "bad news", ok.....wait.....sorry but I have to rant about the Bulls (Googly-Eye Bulls anyway) for a moment......I thought everything was amazing with the banks!?? Didn't the banks tell you for the past six weeks that everything was groovy and hunky dory and you just bought it without even blinking! Didn't Treasury Sectretary Geithner just tell you last Tuesday that the banks are flush with capital! And now all of a sudden they don't have enough capital, and you keep believing everything those folks tell you without even questioning for one tiny moment! Sheesh!

And now.....a quick rant about our political "leaders".....Didn't Treasury Sectretary Geithner just tell us last Tuesday that the banks are flush with capital! And now all of a sudden they don't have enough capital! Remember, last Tuesday started the current rally back to the highs of the extreme trend. Tuesday itself was a 20 point 2.5% move, and the SPX rallied another 20 points on top of that to reach the highs. Now all of a sudden last Tuesday is gone, puff, just like that, it's magic! So when I said Geithner was playing tit for tat with Jim Owens, CEO of CAT (remember the whole exchange between Owens and the president over job hiring earlier in the year, and remember Owens comments after earnings on Tuesday?), if any of you doubted me about the bold tit for tat comment......how about now? Last Tuesday, according to Geithner, the "vast majority of U.S. banks had more capital than needed." And now.....less than a week later??!

Oh, and by the way, there's a flu outbreak that has the commodities market roiled, which is putting some extra jitters in the stock market. Now there's a real issue to be dealt with. I hope some people get their priorities correct because this is about human life. I'm very grateful to all those who are hustling and working around the clock to try and stop the outbreak from turning into a pandemic.

The market, and many stocks are set to gap down and then run down to the bottom of the Rectangle patterns I pointed out last week. So that's that.

The SPX is about to give up about 1/3 of the Geithner-manufactured upswing in the gap down this morning. I speculate that the SPX will test the 850 area today or tomorrow, and a drop below the 850 area would open the door for a move to the 830 - 835 area.

Here is a chart of the SPX:
(click on image to enlarge)

Here is a chart of the Dow just after the open:
(click on image to enlarge)

The Dow is a little easier to read right now. I speculate the Dow is headed for a test of 7,950 - 7,970. A drop below those areas will open the door for a move to the bottom of the Rectangle in the 7,800 area. By the way, keep one eye on the highs of the day (the close of Friday), because a sharp move back above those areas means we probably just got bogarted again. Any stops on puts should be in those areas, and then trail down if the market runs down.

7:38 am MT: The SPY wiggled back into the gap a little. The SPY (market) will probably wiggle a little more and then roll down some more. If it tests the 86.00 area and then rolls down to new lows, then bring your put stops to just above the wiggle high in the 86.00 area. Keep trailing it down if the market keeps moving down.

7:42 am MT: The wiggle is done, this is where the market should make new lows intra-day. If it doesn't, keep an eye on 86.00, the SPY and the Googly-Eyes may try to push the market beyond that point and go test the 86.50 area.

7:46 am MT: The Bulls are trying one more push in the 86.00 to low 86's area. The key to this first wiggle in the 5m - 10m charts is a confirmed rollover. It still looks like a Bear Flag into the gap (it's easier to see on the 10m charts now), so I'm not bullish on the day. I'm really not bullish unless we get a news bogey, then I have to be bullish whether I like it or not.....and I'll know if we got bogarted if the SPY pops hard through 86.75 and heads towards 87.25.

7:53 am MT: The SPY is pushing beyond 86, so if the market doesn't confirm a rollover on the 10m charts between 86.25 - 86.50, and instead blasts towards 86.75, then this will be more of a rolling, grinding price action on the day with support in the 85.75 - 86.00 area and resistance in the 86.75 - 87.00 area (possibly as high as 87.25). I really don't want a grinder, so a rollover before 86.50 would be nice.....

8:00 am MT: Just an overall thought on the day, as the SPY gets ready to roll over. The wiggle back we just got was a little too strong for a market that looked like an easy sell-off intra-day. It tells me that there are still too many Googly-Eyes out there buying any dip they can get their hands on. So if you do puts on the intra-day rollover, then watch the 85.75 area as a potential support. The market has to prove it's downward momentum to me again after this sharp wiggle back. There is still a put possibility, especially if the rollover comes before 86.50, but don't take a huge position. Cherry pick a little.

Also, realize that drops to new lows are opportunities to sell part of your put positions, not buy a "breakout." I think breakout trading is off the table today. Take the swings and use breakouts to scale out a little in case the Googly-Eyes are in dippy mode (what they think is crafty buying of breaks to new lows just when breakout traders are shorting).

8:06 am MT: This is the best chance for a put right now. If this doesn't work right here, then it gets tougher as the day goes along.

The SPY is putting in a Bearish Engulfing on the 10m charts. This means that about 86.40 on the SPY is your drop dead area for puts. A move above that area and it means the Googly-Eyes have way too much control of the markets and puts get tougher throughout the day.

The Bearish Engulfing and rollover look good. Now it's a matter of whether or not the market can make new lows. If it can't, and the SPY confirms a bullish bounce on the 10m charts then take the small profits on the puts and walk, and look for the next good setup - if we get one.

I hung around here longer than I was expecting, but all the action was happening right now so I wanted to talk you through the setup.

I am conducting some tests of the new service this morning (hey, I should call it a "stress test", then maybe I can get some TARP money too), so I will be doing that for a few hours and checking in here from time to time during the day.

12:10 pm MT: The SPY (market) pushed back up towards 87.00 and turned into the Rolling Grind I warned of at 7:53 am. So far, support is the 85.75 area and resistance is the 86.75 - 87.00 area, just as speculated.

The price action looks like it will tail off and fade enough that today will finish as a down day, but some fund managers are still starstruck and buying every dip they see, not matter how technically lethal it looks.

Overall, the market continues to put in a consolidation pattern on the daily charts. But the consolidation is very loose, has a tremendous amount of gaps, and a lot of Crazy Tails, which are reaches to intra-day highs and lows day to day that create longer wicks on the candlesticks than would normally be there in a more rational market.

Here is a 60m chart of the SPY showing a current tipping point at 85.50:
(click on image to enlarge)

The SPY may fade through 85.50, which would open the door for a possible move to the 83.00 - 84.00 area. However, with traders in a moody, and perhaps irrational behavior right now, there's no sense in speculating on anything other than a small position if you are playing the fade. The market is temporarily trapped in a range on the intra-day charts (85.50 - 87.00), which is inside a range on the daily charts (83.00 - 87.00). So a confirmed bullish bounce on the 30m - 60m charts on 85.50 would probably lead to a move back up towards the 87.00 area.

This day turned into a Rolling Grinder about 8:15 am - 8:30 am MT this morning, and that was that. About 1/3 or the time there's not much there in a trading day, and today looks like one of those days.

I usually check out mentally from a day like this about 60m - 90m before the close so I'm not wasting my energy. Also, if I throw a few feeler trades at the market early, and end up with a couple of scratches, and then I see the price action go into goofy grinder mode, then same thing, I usually check out mentally and don't try to waste brainpower on irrational or random price behavior. I'll walk away and wait for clearer technical signals instead of trying to make something out of nothing. As a trader, I have to always show up, and I'll throw little feelers out on days that could turn into momentum days so I can build position as the momentum picks up, but if it all fizzles out, then I don't try to force things. I scratch the trades, walk away after some effort and no reward, and get myself ready for a new day. Keep these kind of days shorter so you have the energy and enthusiasm for when it really matters - the 1/3 of the time when you get a better trading day.

Bulls Get Everything They Want

Most of the key earnings reports from last night and this morning are being received positively. Stocks like AMZN, MSFT, SLB, AMGN, and BNI are all up pre-market. In addition, the Durable Orders report came out better than expected at -0.8% vs. -1.5% consensus. Pre-market futures are up a bit on the "bullish" data.

The Durable Orders report also revised down last month's data (here we go again) to show a February number of 2.1% vs. the orignal 3.4% reported. The fundies are ignoring revisions and all there implications these days, so if they only want the good news, then there was enough of it this morning to propel the Dow towards a resistance test in the Rectangle I wrote about on the market wrap yesterday.

I speculate that the bulls will feed off the data and make a push towards resistance this morning and early afternoon. There may be some afternoon profit-taking just ahead of the weekend, so be aware of your trades if it gets late in the day and the market is still fighting with resistance.

Here is a chart of the Dow showing the Rectangle (if it breaks to the upside) or Rounding Top (if it breaks to the downside):
(click on image to enlarge)

For all their googly, giddy exuberance these days, the fundies are not as excited about today as the data shows they should be. So keep that in the back of you minds as you position size, there isn't a good reason to get extremely loaded up. A breakout of 8,200 on the Dow (if it happens) would be a reason to take on bigger positions on successful moves and tests beyond the breakout. I smell some trepidation and butterflies with the fundies this morning. It may have to do with the bank stress test, which is a ridiculous assumption by them (even if it's a real concern). They bought everything the banks and government sold them all the way up to Geithner's comments on Tuesday about "more capital than needed." So it seems silly that they would guzzle the kool-aid by the barrels for six weeks and then all of the sudden be concerned about the kool-aid, but emotional reasoning (lack of) is what it is.....

For now, I am assuming at least a modest push towards resistance because the technicals show the move. But I'm also aware that there is a little bit of a news/enthusiasm divergence that shouldn't be there. A drop below 7,925 - 7,950 and the market is probably headed back to 7,800. It would be somewhat significant if the market did drop because the Bulls got everything they could possibly want this morning and they have every reason to buy - at least based on their rationale for the past 6 weeks.....So selling when most news is in their favor would be a bit of a change from what they have been doing the past month and a half.

I will be gone again for much of the day putting together the last stages of the new service. I will check in from time to time as my schedule permits.

9:04 am MT: The Dow pushed to the 8,100 area (about 8,070) and is running into a little resistance. The first wave of buying looks like it will peak out in the 8,065 - 8,070 area on the 5m charts, so this is probably the end of the first intra-day push.

9:06 am MT: The Dow (market) just rolled over on the 5m charts, so the push is done, as I speculated.

The best case scenario for the Bulls is an Ascending Triangle on the 5m - 10m charts (of the Dow) and an eventual break above 8,070 with a run into the 8,100 area or a little beyond. A drop below 8,000 - 8,010 and the market will probably consolidate for awhile until the next move. A drop below 7,925 - 7,950 and the market is probably headed towards 7,800.

I speculate that the bullishness will persist a little longer, so there is still a chance for an Ascending Triangle (or Rectangle) right here on about the 5m - 10m charts, and one more push towards the 8,100 (or a little beyond) resistance area on the daily charts.

9:40 am MT: It was an Ascending Triangle variant on the 5m charts that formed as speculated. The Ascending Triangle popped and ran to a little over 8,080 (on the Dow). The market is starting to get a little weary, so this pop is a chance to lock some partial profits on any short swings from this morning. You should lock down 1/3 of your calls in this 8,080 - 8,085 area, then bring your stops up to the 8,040 area. Take another 1/3 out in the 8,100 - 8,120 area, and save the rest in case the market runs to 8,175 - 8,190.

I must away again, so I will check back later.

10:30 am MT: The price action on the Dow (market) acts like it wants to make one more little push to 8,100 - 8,110. If it does happen, you will want to be out of most of your calls from this morning and then watching to see how the market forms itself for the next wave of price action. You're stops should be in the 8,065 area or so, but be ready to get back in for a late push if the market Bull Flags on the 15m or 30m charts in the 8,050 - 8,060 area. The ideal scenario is a nice Bull Flag right now on the 15m charts that holds 8,070 - 8,075 and we get one more solid pop into the 8,100 - 8,120 area. We'll see how this goes.....

10:39 am MT: There's the first little push I was speculating, this could take the Dow to 8,100 on the nose, and then it's a matter of how much more it can squeeze out after that.

At this point, if you're trying to preserve profits from this morning, you should snug your stops all the way up to just below 8,080.

I must away again.....

More Earnings but Little Excitement

Earnings reports continue to come piling in to the market, but for all the data, there is very little movement. Pre-market futures are up slightly, but well below the area of concentrated selling yesterday.

If the SPY (market) pushes back towards the 86.00, and the pre-market futures are indicating more like 84.75 so 86.00 is still a long ways off, then expect the same selling as yesterday.

Traders look like they want to digest for a little while. The knee-jerk reaction by some fundies has been calmed down a bit this morning, and the market appears to be much more contemplative over the vast amount of data it is currently having to process.

Look for the contemplation and consolidation to continue, and then throughout the day a general consensus start to form. It doesn't appear that the Bulls have a lot of traction to spin their wheels yet. That could build throughout the morning, but right now their are few signs of enough bullishness to push the market back to the recent highs. If the market decides it's finally time to consolidate the trend, then look for the 82.50 - 83.00 area on the SPY as a first support area.

2:45 pm MT: Market Wrap: It doesn't look like I missed much today. I have two general thoughts on the day, and one overall thought on the daily charts. The two thoughts on the day are: One, the Dow seems to be driving support lately right in the 7,800 area (7,750 - 7,800). And two, the market was headed for another selling day until the last 20 minutes when somebody or somebodies put a quick bid under price to get it back into the green.

The overall thought is that the Dow is forming a small, flat Rectangle that will either be a Rounding Top reversal if it breaks below 7,700 or a Rectangle continuation if it breaks above 8,200. With enough traders reading out of the old business cycle playbook of buy the market on low interest rates because 6m - 9m after the lows in rates we will get the next bull market, there is a decent probability that the move is to the upside. It only adds fuel to the fire that we have some government leadership that will say anything at any time in order to prop up the markets. The longer the Dow stays in the Rectangle and holds the 7,800 area, the more likely the trend continues instead of retracing. I am growing more and more of the mindset that the only thing that will bring economic reality to the markets over the long term is an implosion so huge that even government leaders won't be able to spin the news as positive. I don't want an implosion. So I'm guessing/hoping that if we don't get a healthy consolidation of the trend right now, at least I want the consolidation to flatten in a Rectangle long enough for the economy to prove that it's back on track. I'm still concerned that the lack of energy policy, the higher taxes on small business owners (higher tax bracket individuals), higher corporate and capital gains taxes (on the horizon), and the socialization of key economic sectors (financial, healthcare, auto) will not lead to a new, long-term, strong bull market. We may see some fits and starts, and some trending here and there, but it starting to feel more like the 1970's than the 1980's. In other words, I want to be at the beginning of a long bullish cycle for the next 5-10 years, but we may be in the earlier stages of a long flat cylcle of at least several years.

For now, the Rectangle on the Dow is the defining price action, and the best clue to the next move, despite the fact that the SPX is getting more attention because of financials. I speculate that the Dow is being treated as more of a "business cycle barometer" right now, and the SPX is being treated as more of a "financial sector as it relates to the rest of the economy barometer."

So whatever the belief structure of the sum total of fundies is (right or wrong) about the business cycle, interst rate cycle, and economic recovery, it's probably getting reflected a little better in the Dow - and with a little less volatility. Eventually we'll see what resolves, but for now 7,750 - 7,800 is support and 8,100 - 8,200 is resistance.

Reality Brings the Market Back Down

The first two extremely heavy days of earnings season have done nothing to inspire the bulls, and the market is set to gap down again. Couple that with the first day of earnings this week when BAC failed to inspire and the market has reacted negatively to all three days of the first heavy week of earnings season (so far). Normally, these three days of trading would have been fairly easy. Monday, of course, was great for puts. Tuesday should have seen at least a little follow through despite the normal consolidation jostling. And today would have been puts again as the SPX completed its journey to 815 and decided if 780 - 790 was the next target. You can see why I get so cranky when we get government news manipulation. Yesterday was a total throwaway day because of Geithner instead of a nice put trade follow-through. And if my comments about his news manipulation weren't enough to reveal it for what it was, traders are completely proving my point loud and clear this morning as the SPY is set to gap down and give up almost half the move from yesterday right at the open. There is still 20m to go before the open, but it looks like door number two from my market wrap yesterday, which is a "gap or push down through the 840 - 845 on the SPX" and a probable test of the 825 - 830 area.

I don't have to remind you to stay on the alert for another news bogey.....but trade the technicals, which are support and resistance.....and outside of a bogey, the probabilities are down, at least for the morning. If we get another manipulation moment, I'm going to try really, really hard not to grind my teeth as I write about it, especially since I'm going to the dentist tomorrow. Here is a re-cap of the more pronounced reactions to key earnings up to now (pre-market):

GILD +4.83%, SNDK +8.17%, YHOO +2.50%, T +2.57%, BA +4.64%, IR +9.38%, NOC +1.09%

ALTR -3.02%, COF -9.30%, NSC -8.22%, CAL -1.67%, FCX -3.02%, KMB -1.90%, MS -8.15%, WFC -4.52%

In addition: AMD, CREE, and STX are down, so chips will see some pressure.

The Naz is a mixed, with internets up in reaction to YHOO, but chips down. Cyclicals are mixed as well. The top two headlines this morning are (surprise) MS and WFC, just as I predicted yesterday. Overall the earnings don't appear to be any better or worse than yesterday, which means that they haven't been horrible, just not indicative of a V-bottom. This goes back to my two speculations: One is that traders were foolishly pricing in fantastic, amazing V-Bottom economic-recovery earnings. Two is that traders have overly fixated on anything with the word financial in front of it as they scream up the charts on financials (one month long news bogey gauntlet of financial sector), scream back down the charts on financials (BAC on Monday), scream back up the charts on financials (Geithner's "bank capital" news tit-for-tat yesterday), and scream back down the charts on financials (MS and WFC not reporting this morning that the economy is stronger than it's ever been in the entire history of the United States and the universe.....).

Here is the SPX chart again from yesterday's wrap:
(click on image to enlarge)

The SPY is set to gap down about a full point, which means the SPX is probably going to open in the 840 - 843 area. The SPX has a decent probability of going and testing the 825 - 830 area, especially if we don't get news manipulation, and the Googley-Eyes don't keep drinking that kool-aid.

I have been pulling double-duty for three weeks now as I give you constant market updates throughout the day. But today, and the next two days, I will be making my final push to get the new service ready. So there will be less updates today, although I will be around and post occasionally. I need to go into crunch-time mode and blast this thing out the doors so we can all enjoy the next level of service.

1:00 pm MT: I just checked back in on the market action and the news. This was another interesting day to say the least. I was most intrigued by the price spike that started on the 7:50 am MT / 9:50 am ET 5m candle. It came exactly on the next candle after the confirmed rollover from the gap test out of the gate. It appears as though the bulls jumped in on the bearish signal and bought, and that probably set the short on fire and led to the big intra-day spike that has carried the day.

My thoughts on the market overall are that the bulls are headed back for a test of the 870 highs on the SPX right now, rather than the 815 - 820 lows. The rounding over price action is still intact, but it's actually spreading out into a Broadening Pattern as the SPX just came off a lower low and could head back to at least an equal high. Broadening Patterns are always indicative of conflicted stocks or a conflicted market. Traders don't just go out and sell to lower lows and then buy to higher highs because they have nothing better to do, that's way too much money at risk to just mess around. So I have to assume that the Shorts / Bulls are still reacting to the Geithner news bogey from yesterday, because traders are not getting the earnings reports that they like. This has to be a short term phenomenon where traders believe the news that government leaders are giving them about the economic "recovery" trumps the actual news they are getting from the companies they are investing in.

For now, it's bullish, and a combination of rounding and broadening at the top. This is the kind of price action to stay nimble. I always stay on my toes during earnings season, but now the market is reacting to news outside of earnings as well, which means I want to stay on my tip-toes.

1:20 pm MT: The double sell at 86.25 on the SPY, with a failed bullish bounce on the 5m charts just a couple of minutes ago, means the market is probably gassed out at 86.25 on the day. The Bulls pushed back, and the Shorts have been on the run, but my speculation is that the low 86's is probably our ceiling on the day.

1:42 pm MT: That was that.....the failed signal was just what I thought, the end of the buying.

I think there is some "technical" manipulation going on, and I'll tell you exactly how to spot the probability that there is manipulation. You see, I know that failed signals happen all the time, but my experience will red-flag some of the failed signals over others. I have pointed out two failed signals today, one that made sense in the context of earnings, resistance, and economic reality as revealed by the actual earnings and economic data. The one that made sense was the one I just pointed out at 1:15 pm MT / 3:15 pm ET (these are all 5m candles), and it led to sharp selling, which is still going on.

The one that didn't make sense was the bullish reversal off the bearish bounce on the 7:50 am MT / 9:50 am ET candle. I wrote about it above and said all you can do when the market gets like this is stay nimble.

Now I'm going to see if I get more confirmation of the technical manipulation right on the close. The key is that the selling just took the market from being in the green most of the day (after the first hour) to being in the red. The concern for a fundie who knows how other traders might interpret technicals is that the day could finish in the red - and on above average volume, which will be interpreted as a selling or distribution day to any other traders looking at a chart. Someone wanting to manipulate the chart can come in and buy right before or at the close and push the market just into the green (or black) and turn a distribution day into an accumulation day on the charts with one cleverly placed order.

1:58 pm MT: The reason I'm on the watch for additional manipulation is that if the day finishes in the red, it means that the Bigger Money is coming in and telling us that all these games by other fund managers are meaningless to them, and they are net sellers right now regardless of the news manipulation, technical manipulation, or the Googly-Eyes.

2:00 pm MT: I don't know if many of you just caught that, but some trader/fund manager put in a buy-on-close order on the SPY at 85.11, which was just above the close of yesterday at 85.06. So there was someone out there in traderville that did exactly what I was warning you of in real time right into when it happened. You can see the instantaneous order on the 1m charts (look at the high of the 1m candle) right on the close (the 2:00 pm MT / 4:00 pm ET). Someone tried to close the market in the green, even though the market was actually at 84.54 at the bell. They tried to close it all the way up at 85.11 in order to get it in the green. Much of the time these data outliers are quote errors from the exchanges, or some trading desk order entry worker about to lose their job for messing up. But the proximaty and duration of the quote, as I was watching it in real time, leads me to believe that there is a very good probability that someone was trying to technically manipulate the charts. Now, obviously I can't prove that they were trying to manipulate the market, but why put in an order at the close that is .55 above the market, and just in the green, on a higher volume day, on a day that saw an "interesting" failed signal in the morning that went completely against the earnings data and market reaction?.....

Here is a 1m chart of the SPY showing the probable attempted technical manipulation right at the close:
(click on image to enlarge)

The key takeaway from today is that the really big money came in and sold the market pretty sharply, right into the close. There were enough sell-on-close orders by the Big Money that it overwhelmed whoever was trying to manipulate the charts right at the close. Today is now technically a distribution day, which is a down day on higher than average volume. It's exactly what the Googly-Eyes didn't want, and if the market is down on earnings tomorrow morning, for a fourth day in a row, we may finally get the test of the next support level down.

8:20 pm MT: Here is a list of the key earnings after the close: AAPL, EBAY, KNX, LRCX, NVLS, STLD, and XLNX. Here is a list of the key earnings tomorrow before the open: BG, CME, COP, DHR, DO, EMC, FITB, HSY, NOV, NUE, OXY, PNC, POT, RTN, RS, and UNP. There are a few other companies with similar size and impact as some of the above, but this is pretty representational group. Energy stocks will be on the move tomorrow with this many stocks in that sector reporting tomorrow morning. Tech will get some action as well with AAPL and the chips. And financials will see some action with the regional banks. But the heaviest new area of reporting is energy and commodities/basic materials, so look for some volatility in those sectors tomorrow.

I will open a post in the morning with a brief writeup, and then I will be working on the new stuff. I may post from time to time during the day, but Thursday and Friday are crunch time for me.

Earnings Don't Inspire the Bulls but the Bogart Does

A majority of the key earnings from last night and this morning are beating expectations. However, pre-market futures are still down and the SPY is set to gap down to a lower low around the 83.00 area. The DIA is set to gap down through the previous low that it breached yesterday and open at the second previous low in the upper 77's.

The fact that traders are taking profits on a number of earnings hits and not earnings misses (IBM is a good example of a company that beat earnings and beat guidance but is still down pre-market about 2.50%) indicates to me what I speculated last week and reported yesterday. I think traders overshot on the uptrend by quite a ways. Fund managers were pricing in a V-Bottom economic recovery that just wasn't there and now they're disappointed that earnings reports aren't "wildy beating expectations." I know, I know, you and I could have guessed it so why didn't the so called Smart Money? Well, like I commented yesterday, sometimes people reason with their emotions rather than their brains.

Look for a little pop sometime early this morning, possibly shortly after the open. It would be ideal to get a nice intra-day Bear Flag in order to enter some puts. Today might not see as much downward momentum as yesterday, especially if traders fight a bit around support levels. However, the mood is dampened a bit and I expect some more profit taking and consolidating.

Here is a re-cap of the key earnings at the open (these will fluctuate quite a bit, but you will get the general tone):

TXN +2.19%, AKS +1.07%, COH +10.15%, DAL +0.59%, LMT +0.60%, UTX +1.34%, UNH +1.38%

IBM -2.42%, CAT -5.35%, KO -1.15%, DD -2.92%, MRK -4.12%, NTRS -7.16%, SGP -0.41%, UAUA -0.17%, USB -0.60%

7:36 am MT: The market did pop a little right off the gap as I speculated. A test of the 83.25 - 83.50 area on the SPY would be somewhat ideal for a put entry, but this morning has the feel of a gyrating and popping market, so this isn't a grab bag entry type of morning like yesterday, it's a scale in and add if the patterns form up correctly type of morning.

7:40 am MT: This is getting close to a scale in area, but again, go very lightly, there's some consolidating and popping and gyrating off of yesterday's momentum day that has to go on. Traders are a little conflicted right now.

Many companies reported better than expected results, but too many Googly-Eyed fund managers were dreaming of amazing, spectacular V-Bottom recovery type of results. So the earnings weren't horrible, they just weren't deserving of a once in a lifetime type of trend. And there are still a huge amount of earnings to be reported. In general, though, I think fundies are speculating the earnings season will show the economy holding a bit and grinding along a bottom, but not a huge, snap-back recovery. I know all of this should be common sense to pretty much anyone who opens their eyes and actually looks around a bit, but fund managers got excited and away the market went, so it is what it is.....the market is set to compress a bit off the V-Bottom, and the compression is being caused by some reality coming from earnings season. Like I said, we still have a huge amount of reports to come out, so I'm still taking this day to day and short swing to short swing, but the general tone is a damper on the exuberance.

7:48 am MT: There's a Tweezer Top on the 5m charts of the SPY and it's trying to roll over. Normally this would be an easy put, but I still think there will be a bit of chop-fighting this morning. So I stand by the scale in lightly and see how this forms on higher time frames.

7:51 am MT: Yeah, I thought so, traders are chop-fighting and the SPY is pushing back through the Tweezer Top. I smelled a gap and pop, which is what we're getting. It's just as I stated a couple minutes ago and all morning, let this form up a bit on the higher time frames, at least the 10m - 15m charts. I think somewhere between 83.00 - 84.00 on the 15m charts is the first target formation for a little more robust entry, but it might overshoot a bit. Be a little patient with this one, when the fundies are conflicted and there is soooooo much data to process the chop-fighting can take a bit of energy.

It's like someone trying to get through the snow or mud. Some people, when they're driving in snow, realize they should gear down and ease into the momentum in order to keep from spinning out and fish-tailing. But many fundies aren't like that, they're like the people you watch pound on the gas and furiously spin the tires like they will somehow, through the sheer force of their will, zoom right over the slipper, icy snow with complete safety and traction. When you watch those people drive in those conditions you'll see them spin and gyrate and fishtail and rev their engines to about 6000 rpm's as they slosh and grind and swing and slowly push forward. It's like a cartoon, the legs are going at a million miles per hour, but the body is only going at about 2 miles per hour.

8:02 am MT: There's the first substantial rollover. The low 83's is the first scale in area, we'll see if the 83.00 - 84.00 area holds as resistance on the day.

8:26 am MT: The price action that is forming is acting like it wants to try and pop again. This dovetails right in to what I've been saying this morning. You want to scale in lightly to participate with puts in case we get another sell-off, but you want to step lightly on the gas because traders are still chop-fighting a bit and might try to push a couple of times. I think we will see some push and sell, push and sell, push and sell, until traders either toss in the towel and let the market drop to the next support or they hang around a bit by the end of the day "hoping" that the next round of earnings is "amazing" (which of course, is unlikely).

Here is a daily chart of the SPY showing the potential support target if we get there today:
(click on image to enlarge)

Here is a daily chart of the DIA showing the stock at the second previous low already:
(click on image to enlarge)

The DIA (and Dow) are driving the floor on the market this morning because it's already at a support level. But the SPY (where more sectors and a broader market is represented) is driving the resistance because it's still floating above support. So traders are trying to decide if they will hold support on the DIA, or if the SPY hanging in no-man's land is too precarious and the market needs to sell until the SPY (SPX) finds support. That's the battle today, we'll see how it goes. Overall, as I stated earlier, the exuberance for the market has been dampened quite a bit.

11:57 am MT: The SPY (market) did pop again as I speculated on the last posting. At this point, the weight of the move is starting to slow and round a bit. The price action is easier to spot on the 15m or 30m charts, it may topple over now from the weight of the intra-day move.

Here is a 15m chart of the SPY showing the pop I speculated and now the toppling/rounding action I'm anticipating:
(click on image to enlarge)

Here is a 30m chart of the SPY showing a bit of grinding and Bull Flagging with the toppling:
(click on image to enlarge)

Just like this morning's battle between the DIA support and the SPY no-man's land (that the DIA support won, which was part of the pop), there is a battle between a Bull Flag on the 30m charts and a Rounding Top on the 15m charts. I speculated the market would pop or push a bit more this morning, now I speculate the pushing will topple a bit with some selling. However, this isn't a momentum day like yesterday, so expect more chop-fighting and spinning. There is way too much elbowing to get in position for the next round of earnings for any group of traders to completely toss in the towel. Today will probably end as more of a consolidation day or even pushback day against the momentum day yesterday.

12:14 pm MT: If the topple is going to happen (on the SPY 15m charts) then it's starting right here.

12:18 pm MT: Price action continues to act like a chop-fight. A drop down from about 84.00 to 83.60 or so in a straight line on a 15m candle would probably send the market on a journey down to the 83.00 - 83.25 area, which would give a trader more than a dollar on a SPY put from the Rouding Top. If it hangs around and chop fights and holds flat in the 83.75 - 84.00 area than this is headed for more pushing and elbowing between 84.00 - 84.50. The next battle is on.....

12:32 pm MT: The market did pop back into a chop-fight between 84.00 - 84.50. Eventually I speculate this will run out of gas a bit and topple, but it may not come until the last hour or so, and there will still be elbowing at the end of the day. This is most likely not going to be a strong continuation of yesterday's move. The bullish fundies want more "evidence" during the next 1-2 days of earnings.

I was just checking my updates and it looks like the White House played a tit-for-tat game with the market a short while ago. So we got a news bogey, which is pushing financials more than they should be moving right now, nothing like a little news manipulation of the markets, and I guess enough fund managers keep buying into this.....stuff.....

I stated yesterday that political "leaders" would most likely not bogart the market for cheap points and vote harvesting for several more days, but it looks like Jim Owens, CEO of CAT baited them into a response. Owens was critical of the president and the "stimulus" plan, stating that the U.S. plan was taking less effective measures than approved in China (they have a zero capital gains tax). Of course, CAT does a huge amount of business in China now, so Owens would have a clear view of the actions being taken in that country to prop up the sagging economy.

Well....criticism like Owens dished out is always going to be met with an immediate and defensive response by the current government, it's part of their M.O. So Treasury Secretary Geithner was marched to the podium to announce that the "vast majority of U.S. banks have more capital than needed." That was like a warm peach cobbler with fresh vanilla ice cream to the souls of the Googly-Eyes, and up went the financials, and up went the market.

Now, I don't need to tell you that capital is not the key issue with the banks right now. Go back to the review on C and BAC I did. It's not about whether or not we may have found an economic bottom, it's about whether we may be sitting on the bottom like flounder sucking up dirt for the next 5 years - that's the issue! So what if the banks have capital, if we don't have an energy policy, if we don't have a job creation policy based on strengthening small business owners through lower taxes, and strengthening large businesses through lowering capital gains taxes (which China has already done). So what if the banks have money but they still have to write off bad loans because the unemployment rate is projected to go to 10% by the end of the year. So what if the banks have capital and they keep taking ownership of homes that people walk away from because they're losing their jobs. So what if the banks have money while the rest of the country sucks up dirt along the economic ditch and then the government pulls out a giant bulldozer and piles so much dirty debt on top of the ditch that not only will we be sucking dirt but our kids and grand kids will be sucking dirt for years to come. And the bulldozer was probably a Caterpillar paid for by taxpayer money.....

Ok, I'm done ranting.....

12:57 pm MT: I'm still standing by my speculation that this topples a bit towards the end of the day, but the news bogey put a little bit of a whammy in there. The price action is still what it is, and it accounted for the bogart even when I didn't know the bogart was there. So probably a bit of gassing out soon, some toppling, and then some more pushing and chop-fighting into the close. Wow, this just gets crazy some days! There was way too much data to process with earnings today anyway, and then Geithner had to go and tit-for-tat bogart the market with more news. These are strange days.....

1:12 pm MT: This is done, the news bogey worked, the Googly-Eyes are drinking the kool-aid. So I'm standing back off this day and watching for the next reaction to earnings. This bogart is enough to take all the downward momentum out of the market, even if we get mediocre to bad earnings the next couple of days. We may see some moody, volatile day to day action as the economic reality fund managers sell and the hope and change fund managers buy. Today will now probably end as a strong pushback day, we are already within breathing distance of the gap from yesterday, as incredible as that sounds. The whipsaw action is indicative of a very newsy market condition.

Just so everyone out there understands, I'm all for a bullish economy, and a bullish market. But I want it to be from real, long-term, viable solutions and fundamentals, and not because of news manipulation. I don't want to load up on a bunch of bullish plays only to see the market come crashing to the ground because the foundation was built on sand.....

3:00 pm MT: Market Wrap: When things get really newsy and complicated, it becomes even more critical to stand back and simplify from the madness. I am going to reference the SPX and not the SPY. I would prefer the latter, but the SPY has a data error yesterday on the Prophet charts, and data errors bother my analysis. I want the SPX over the Dow because the news madness is going on in financials, and the SPX is more representational and therefore likely to be the market driver whether we like it or not.

The market closed strong, probably on short-term short covering, googly-eye buying, and some real buying. The move today is not reflective of a strong change in economic fundamentals. It's pure speculation and reaction to the tit-for-tat news bogey. When you get a day like this juxtapositioned right in the middle of earnings season, you might as well toss it out. Volume wasn't even average on the SPY or the DIA today. Earnings are coming in hot and heavy this afternoon, and will continue hot and heavy tomorrow morning. When the market digests all the real (and not manufactured) news, traders will pick a direction.

Here is a chart of the SPX:
(click on image to enlarge)

If traders gap or push the SPX (market) up through 850 - 855 tomorrow morning in reaction to the numerous earnings reports, then the price action is probably headed back towards a test of the 865 - 870 area, and perhaps as far as 875 although it would take terrific news to get it that far.

If traders gap or push the SPX down through the 840 - 845 area tomorrow morning in reaction to earnings, then price action is probably headed back towards a test of the 825 - 830 area. If the market heads down that far, then eventually the price action will probably take it down to the 810 - 815 area.

The SPX is still in a Rounding Top formation, but the more news bogeys we get the more "complex" the topping action will be. Eventually the trend will consolidate.....Even once-in-a-lifetime, strongest in over 70 years, V-Bottom Bottle Rocket, news-manipulated trends need to consolidate. So the rounding consolidation fits the theme for the aggregate market and news environment. If earnings come out disappointing (and that's a relative term because it's based on expectation - logical or not), and there are no news bogeys, then the consolidation will happen quicker and sharper. If earnings are mediocre to decent, and there are lots of news bogeys, then the price action will be more complex.

However, like I said, simplify. Tomorrow can be pretty straightforward. Either we go through to the upside and test that direction, or we go through to the downside and we test that direction. And there's plenty enough movement in there to do a nice short swing.

Here is a list of the key earnings after the close: ALTR, COF, GILD, NSC, SNDK, YHOO. In addition, the aggregate of AMD, ALTR, CREE, CYMI, SNDK, and STX will move semiconductor stocks and to an extent the computer boxes. YHOO will be a big mover in internets, and GILD and ILMN (and GENZ tomorrow before the open) will be movers in biotechs. So tomorrow will have a chips and tech theme, among other things.

Here is a list of the key earnings tomorrow, before the open: ATI, MO, T, BA, CAL, FCX, GENZ, IR, KMB, MCD, MS, NOC, WLP, WFC. There are a number of Dow/Cyclical stocks in this group as well as metals, which will be looked at in the cyclical context. So you will probably hear the words tech and cyclicals thrown around alot tomorrow.

I speculate that MS and WFC (banks/used-to-be-brokers) will probably hog too much of the headlines, especially in our current environment, and especially after today's news bogey. Expect WFC to say something that really gets the hearts of the Googly-Eyes palpitating and twitterpated. So financials shouldn't be the headline tomorrow, but I won't be surprised if the media fixates on MS and WFC in order to peddle as much news as possible. Whatever the sum total of the earnings reports, we'll have an idea about 20m - 30m before the open, just like today, and then it's a simply a matter of picking either the bullish or bearish targets.