AheadoftheNews Blog

COMP did a pretty bearish close and it looks like more downside on Monday. I will recap over the weekend. But basically, the SOX once again is a non-participant.

BERLIN (Reuters) - European Union foreign policy chief Javier Solana said on Thursday he had failed to reach a deal with the chief Iranian negotiator on Tehran's nuclear ambitions, but said they would hold another round of talks soon

November crude has support at 62.35, 62.20 and 62.

DOW all time high is not far away (11,750.28), as you all know unless you live in a cave. 100% projection August is 11,771.50 and it could be in the cards soon if we hold 11700 tomorrow. Don't underestimate the appeal of round numbers, though. DOW 11,800 would not surprise me (11,803 is 100% projection July). A notch in the bear camp however was the low volume and weak breadth of today's action. It's not a done deal yet, as they say.
The COMP closed the May gap and looks headed for 2289, 61.8% 2006 should all go well one more day for the bulls. But end of quarter days can be tricky and there could be a hit if funds choose to hedge ahead of the first week of October. I would view a failure of COMP to hold above 2272.70 on a 60 mn candle closing basis as the end of this rally, or at the very least a sign that a decent pullback is in the wings. Nasdaq overnight futures are up 4 as I type, and that is a good sign if it holds.

Sept. 28 (Bloomberg) -- The euro rose after European Central Bank council member Axel Weber said it's too early to be sure lower oil prices will curb inflation in the dozen euro nations and the ECB needs to raise interest rates further.

COMP closes the May gap and backs off a little. If it gets past 2272 again tomorrow, next step is probably 2289. Gold found a nice footing along with oil and that sector is waking up again. December Gold has resistance at 610, 61.8% retrace June/July, but with all the skeptics out there, we could blast past that to 617/620.
Lots of window dressing as funds keep up indices that feel like they want to go down. It's the same every end of September, you just have to figure out when it starts and stops.
If the DOW does the "all time high" hit of 11750 (let's get it over with so we don't have to hear the press ad nauseum), the end of the journey could be at 11803, 100% projection August. But it's not a done deal yet. They would love to pull it off and get more retail money in the markets, since everyone is pretty skittish these days. The durable goods order is another bearish sign after the Philly numbers. Yes, I know, the surpise home sales. I don't buy that for now. The real hit in housing has not started yet and there is plenty of inventory out there. Don't count too much on that sector rebound. The VIX rose on today's modest move up and that usually indicates a pullback of sorts. It's not a matter of if, but when. For now, I'm targeting NQ 1693 as a short entry if we get a break above 1683 tomorrow. Thursdays can be strong reversal days, so mind your step and don't trust the open.

The COMP has two minefields above: May gap close at 2272.72 and 61.8% projection August at 2283. Keep an eye on these numbers. Above that, there is a possible push to 2290, 76.4% 2006, but that should be at the very least a resting place if not a pretty strong pullback. This is all of course if we get above 2265, which is gap open May.

NQ tags 61.8% projection August at 1677.75. That is resistance for techs going forward.

Early bearish semi-conductor news and tape evaporated at the close when funds steped in to put sidelined cash to work. It's hard to tell how long this could last, but look no further once again than to the semis for any clues. Throwing all their money at big caps is fine and dandy, but it shows an underlying nervousness as smaller cap stocks are being snubbed, including many semi names that ran up. How many funds can pile on to INTC and TXN. ES has resistance at 1348/1350 and NQ at 1680. Call resistance for QQQQ starts at 41 and there is some fib projections pointing to an possible upside move to 41.50. Trade with care and don't get married.

Volcker is back and he is warning about inflation.

Whether or not it is window dressing, the technical picture has become more bullish. I still don't like semis lagging so much, so I will remain cautious and only daytrade the long side. But there is a buildup in puts at QQQQ 40 strike that is alleviating a lot of the bearish set up going into October. Too many bears are piling on to this rally and traders should respect that big change below us. NQ weekly R2 is 1693, which would correpond to about QQQQ 41.50, and they might very well be gunning for it.
I like accumulating gold, especially now that oil is basing. I will stick to daytrades, long and short, for equities.

Some Fed talk was a good excuse to start the window dressing saga (see link). If the Feds think the economy is strong, then why are yields still dropping? ZB (30 year) rallies some more and that is strange indeed. Could be a nice ZB short setting up if Feds do not lower rates this year. Weekly chart shows key resistance at 200 weekly ema, just a few ticks away.

Here is the ES setup. As you can see, 5 DMA and ex-wedge support will be resistance between 1330/1332.

Keep a close watch on NQ (NDX e-mini futures). We are sitting right at the 10 DMA (1643), in fact we closed below and it was resistance in the last hour of trading on Friday. NQ is back in the wedge and it will have to clear 1647 to get out of it again and out of trouble. Since it also is the weekly pivot, you can bet there will be some volume at that level.
Of course, I don't need to remind you to keep an eye on the semis. SMH broke down below the 20 dma and flunked the trendline support test, which is not surprising since it was part of a bearish ascending wedge I have repeatedly warned about. Immediate resistance is confluence July high and 38.2% at 33.45. Above that, bulls desperately need to reclaim the 20 DMA at 33.83. The downside potential is a quick drop to the 50 dma at 32.31 which could very well be an attractive long entry. But be patient and let it come to you. The last few days of the quarter could see some portfolio shuffling as funds do the ritual window dressing dance, all designed to make you believe your money was in the right place. Since they all chased techs, I expect then to try and hold them up. But they might be thwarted by some earnings warnings. It's going to be interesting and fun for traders who can play support/resistance without getting married either way.
The only fundamental play I like is gold. The dollar is under increasing pressure and buyers from India have started hitting the market as the see that time is running out for ECB to do more selling. They need gold for the season and if they think we saw the lows, there could be a stampede. Support is crystal clear at 590 for the December contract. A drop to 580 would be bearish and could signal new lows. But for now, bullish momentum is back. Let's see how long it lasts.

Intrady update 2:

Don't say I did not warn you about the semis. ES finding support right at the wedge, now must hold (1326). SMH hit July highs and bounced a little, but it has broken down under its wedge.

Intraday update:

It looks like QQQQ found resistance at 50% projection August (40.68) which also happens to be NDX 2006 open (1654.50). Bulls better get it together and fast. The semis are still lagging and that is a continuing red flag.

Intraday update:
QQQQ has upside risk to 41.03 on a breakout. It could cap this rally. 61.8% projection from August and a heavy load of calls at that strike.

Is the long awaited hedge fund debacle creeping up on us? If so, the VIX is still very complacent and I would recommend caution in the markets as we move forward, even if some guy is screaming buy, buy, buy on TV and the radio. Forget him, be safe. Trade it, don't love it.

NEW YORK (MarketWatch) -- Investors were assessing Wall Street banks' exposure to the high flying hedge fund industry Tuesday, a day after a Connecticut-based hedge fund said it lost billions of dollars.
Amaranth Advisors on Monday said it suffered huge losses of more than $5 billion, or more than half of the fund's $9.25 billion in assets. Though fallout from Amaranth did not appear to be causing panic in other markets, reports from institutional investors of direct losses from Amaranth began trickling in Monday.

VXN closed above 10 day ema for the first time since last Tuesday and looks headed for 20. This increases the odds of a pullback for equities. NQ target on a mild correction is 1631/1633.

I want to love this rally, but SMH and semis still can't get out of bed. 200 day ema at 34.27 is support and needs to hold, but more importantly, bulls need a close above 35 to give credence to the QQQQ rally. This could still be construed as positive consolidation, so bears should mind their step as well.

IMF sparked a rally last week, now it is tempering that sentiment.

Sept. 19 (Bloomberg) -- International Monetary Fund Managing Director Rodrigo de Rato said global economic growth may be peaking, prodding policy makers to reach agreement on a new trade deal or risk a deeper slowdown.

The ``global growth cycle may be turning'' lower, de Rato said in a speech before the IMF board of governors meeting today in Singapore. ``The best hope for continued high growth lies in further increases in international trade,'' he said. ``If this does not materialize, prospects are for lower growth.''

The IMF last week projected global output to rise 5.1 percent this year and 4.9 percent in 2007, with both forecasts higher than its April estimates. A shortness of skilled labor is diminishing further expansion prospects, he said.

De Rato also cited barriers to trade, higher energy prices and economic imbalances, such as the record U.S. trade deficit as risks to global growth.

Marc Faber is brilliant. Listen to this Bloomberg interview: Link

Gold catching a nice bid overnight, now at 590 resistance.

Sept. 18 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke is stepping up his push for an inflation target at a time when hitting it might damage the U.S. economy.

Bernanke, long a proponent of setting a numerical goal for inflation, has penciled in an in-depth discussion of the Fed's communications strategy, including targets, for next month's Federal Open Market Committee meeting. With targeting enthusiast Frederic Mishkin joining the FOMC, Fed-watchers including former Governor Laurence Meyer say the central bank might agree to shift strategy by mid-2007.

A move toward targeting, perhaps starting with regular publication of inflation reports, would answer criticism that Bernanke's Fed has been blasé about mounting price pressures. The risk is it might also lead central bankers to raise interest rates high enough to push the economy, which they already expect to be weak next year, into a recession.

Let's pull out to NDX monthly. This is the big test for bulls going forward. The 10 monthly MA sits at 1630 along with the 200 dma. We closed two points above and that is very good news. It is now critical for bulls to hold this level. There is no strong reason to think they won't, but the SOX needs to join the "above 200 DMA" party. The media keeps saying the advance is broad based along with the semis, but they obviously have not looked at a chart of SMH or the SOX. The relative performance is what counts, not the fact that it just went up. I know I keep rehashing that story, but unless something has changed from 15 years of NDX history, I will take notice.
It's the same for the TRAN (Transportation index). That one also sits below its 200 DMA. I hope the bulls pull it off, so far so good, but set your alarms at NDX 1630.
Overall, I think hedge funds are chasing performance while they still can, i.e before earnings and the election. ES has monthly R2 sitting right at 1350, which would be about SPX 1340. If ES 1320 holds (and it must), they will certainly shoot for it. Conspiracy theorist would add that "they" will try to keep equities up and oil down until the elections. Call it the Bernanke Put.

SAN FRANCISCO (MarketWatch) -- Moody's Investors Service on Friday placed ratings of Freescale Semiconductor Inc. on review for possible downgrade after news that a private equity consortium is buying out the company for $17.6 billion. Moody's said its review will focus on the operating strategy of the company under new ownership and the proposed financing and capital structure arising from this acquisition. The agency added that the ratings could be subject to a multi-notch downgrade depending on the level of debt incurred in the transaction.

I am getting interested in gold ahead of the FOMC meeting. The market has fully priced in a no rate hike announcement and it's pretty obvious they will oblige. But inflation is still here and there could be some comments to that effect and that would make gold interesting. If the Feds are perceived as being soft on inflation, then gold will resume its place as a hedge. The stagflation scenario is still very much in contention. There is little doubt that at some point, you want to be back in gold and aggressively so. We have one more week of ECB inventory clearance, but I think traders will start putting on more gold positions as that day approaches (9/26). The problem for now, aside from the drop in oil, has been the dollar rally and the desire of European central bankers to try and stem the rise of the Euro to protect their exports and that has been a one two punch against gold. So there is still downside risk and any long position should be carefully monitored. As you know, I had profiled December gold to possibly hit a low of 577 where it would find support and it did. Let's see if it holds going forward. If it doesn't, next support is 568, followed by 560. If 560 support breaks, it's straight down to 539 which I would buy like there is no tomorrow. Resistance is 587/590. But let's give 577 a chance until proven otherwise.

QQQQ backs off from confluence 61.8% 2006 and 38.2% projection August (40.35) and closes at 40.11, a hair above the 200 dma. Next upside target above 40.35 would be 40.68. These new highs keep getting made with bearish divergences on the daily charts and without the relative performance of SMH (still under 200 dma) and SOX. In fact, the new gains were mostly made on the heels of the software sector, with the GSO finding resistance right at 2004 highs (chart).

Intraday update:
Looks like a key reversal day for oil and gold IF oil closes at or above 63. December gold hit my target of 577 and never looked back. October oil did the same at 62. If they hold on to these gains at the close, we could have seen the bottom there.
As for equities, ES broke down at the top of the wedge and could be headed for a test of 1320, if 1329 does not hold on Monday. QQQQ needs to hold 40.08 at the close. SMH (semis) still stuck under June highs. Needs a close above 35 to confirm overall tech bullishness. Right now at 34.40.
Today is quad witching so don't expect big moves after 2 PM.

Typical quad witching Thursday. The markets shuffled around a lot, feeding your broker, but basically nothing has changed except that QQQQ hit its 200 dma and backed off. SMH (semi holders) still can't get out of bed and above June highs. One bullish development is the COMP holding on to the 200 dma. MSFT provided support with the Zune annoucement, but you have to wonder about that one (are you really going to give that to your kid instead of an ipod? Good luck). ADBE after hours is cranking and that could provide a boost tomorrow if the economic numbers cooperate.
The real answers as to whether we are headed higher or not will be answered before the open when the CPI numbers come out. An increase of +.2% in the core reading is priced in, a move of +3% is not and will bring about a correction. Even gold is pricing in the goldilocks outcome by selling off some more. Next support in the metal is at 577. A weak dollar could not provide support and you have to start thinking that ECB officials are responsible for this indiscriminate bloodbath which is getting less grounded in reality as the days go by. That inventory clearance ends on the 26th, their deadline.
All in all, bulls hold on to their rally, which is good news. The option pinning process is in full swing and it is hard to make a clear call at this point, but bulls have the edge and could blow past resistance next week if all goes according to plan. That is a big if.

"...This year caps the strongest four-year period of global expansion since the early 1970s..."

Given that he 70's was a distastrous period for the markets, I don't quite know how to feel about this one.

Sept. 14 (Bloomberg) -- The International Monetary Fund raised its forecast for global economic growth while warning that inflation, oil prices and the U.S. housing slowdown threaten the strongest expansion in three decades.

The world's economy will expand 5.1 percent this year and 4.9 percent in 2007, the fund, comprising 184 nations, said today in Singapore. Both forecasts are 0.2 percentage point higher than the April predictions. Growth was 4.9 percent in 2005.

Rising borrowing costs pose a risk to growth as central banks seek to quell inflation, the fund said. The U.S., Europe and Asia have raised interest rates as higher energy costs and falling unemployment prompted companies to raise prices. This year caps the strongest four-year period of global expansion since the early 1970s, the IMF said

Here is the chart of QQQQ. As you can see, we made a new high but with a bearish divergence, although we did do a surpise break out of the wedge. The Q's look headed for confluence 61.8% 2006 and 38.2% projection August at 40.35, but again, with all those calls out there, it should be a short lived move if it does occur. Right now, looks like an overnight pump job on NQ futures, they will try and run some stops. The media is focused on COMP 200 dma, but again, the SOX needs to join the party.

The missing ingredient in today's tech rally has been the SOX. This could change tomorrow but until it does, exercize caution and watch SMH 34.90 resistance (June high and 50% 2006). A close above sets up tech bulls for a move to NDX/QQQQ 200 dma. It must be noted though that today's action saw new monthly highs with bearish divergences for COMP, NDX and QQQQ. This is option expiration week and QQQQ has lots of call resistance at the 40 strike. It should hold techs back into Friday, but a push by hedge funds could force some naked call writers to cover en masse. Stay tuned to the SOX and SMH for confirmation. NDX tagged 23.6% projection August at 1626 before retreating slightly. 200 dma is right above at 1630.

December gold held on to the 586 level and closed right below today's pivot. It is tempting to call a bottom, but we could very well see one more push down. The number to watch is 590.90, must hold support. If we do get another push, I suspect it will be to 577, 50% projection July H/L. ECB will be done selling reserves by September 26th, removing what has been constant selling pressure on rallies. Should we close above 604/605 in the coming days, the bulls would make a strong statement, although real resistance starts at 615. Today's candle is encouraging. Many skeptics out there and that will help. A long play is valid, just be disciplined with your stops.

The VIX is right back down in that channel it was in mid-April to early May. There is no fear when there should be plenty.

Gold loses 586 support and conservative traders should step aside as there is risk to 582 and 577. More aggressive traders can play the whipsaws as the low was made with a bullish divergence and could very well hold, especially if oil catches a bid.

December gold tags 38.2% projection July at 586.30 in the overnight session. Monthly S2 is at 586.70, adds up to a trade. I posted that set up on Monday, here it is (erroneously labeled it a 61.8%). Scalped a few in between, but that was the one to wait for. Aggressive traders only. Could that be it for the slide short term? We will see, but it has enough correlation. Stops should be tight as risk is to 582. Resistance is 591.80. Silver is getting more respect as it holds on to the 200 dma (Dec contract). Central bank dumping of gold must be the difference. Dollar bid not helping. Again, watch out for Friday CPI.

Same scenario for QQQQ, still in the wedge and a bearish divergence on the new high. I like a short here, but keep it tight. They might make a run for 200 dma at 40.10. But you can see where R is, so place your stops accordingly.

Nice rally, but SMH backs off from June highs and stay withing the wedge with a bearish divergence (see chart). Hard to tell what will happen here, but NQ also closed below the August trendline resistance. The VIX is in lala land again, and that strikes me as dangerous especially this time of year and ahead of Friday. Nevertheless, the bulls have the reins, so if short use caution. If long, remember that this is opex week and everything can turn on a dime.

Intraday update:

NDX is bumping right up against the downward trendline resistance since April high at 1598. Critical day for bulls and bears. NQ did not quite close the gap at 1623.50 from last week, but came close. It seems doubtful we will get past all this resistance without the Friday CPI data, but one never knows during quadruple witching.

TS Gordon should become a hurricane by Wednesday, but the path should be the same as Florence, for now. That can always change. In any case, it's given a light boost to oil after-hours. Gold has taken off and cracked through 604 resistance. Next resistance is 610, if 604 holds.

New Apple touch screen wonder device patent revealed
By Stan Beer
Monday, 11 September 2006

The statement "It's Showtime" on September 13 takes on a whole new dimension with the revelation that Apple has had a patent under wraps for a new hand-held multifunction device since March this year. From the description filed with the US Patents Office, the new touch screen device can do everything but sing Jingle Bells - and it may even be able to do that.


According to the patent application, Apple's new wonder gadget is a hand-held electronic device with a multi-touch input surface that includes two or more of the following device functionalities: PDA, mobile phone, music player, camera, video player, game player, handtop computer, Internet terminal, GPS receiver, and remote control.

Apple outlines in its patent application problems facing the design of multifunction devices such as phone PDA combos because the inputs of one function interfere with the inputs of the other and there is just not enough room for all the separate input buttons.

As Apple says in its patent application: "it is a challenge to design a merged device with limited input devices without adversely affecting the dedicated inputs for each device. As will be appreciated, it is preferable, not to overload the hand-held devices with a large number of input mechanisms as this tends to confuse the user and take up valuable space, i.e., "real estate."

"In the case of hand-held devices, space is at a premium because of their small size. At some point there is not enough space on the device to house all the necessary buttons and switches, etc. This is especially true when considering that all these devices need a display that typically takes up a large amount of space on its own.

"To increase the number of input devices beyond some level, designers would have to decrease the size of the display. However, this will often leave a negative impression on the user because the user typically desires the largest display possible. Alternatively, to accommodate more input devices designers may opt to increase the size of the device. This, too, will often leave a negative impression on a user because it would make one-handed operations difficult, and at some point, the size of the device becomes so large that it is no longer considered a hand-held device.

"Therefore what is needed in the art is an improved user interface that works for multi-functional hand-held devices."

Apple appears to have come up with the answer in the form of a handheld device that is largely all screen: "by eliminating physical buttons, keys, or switches from a front surface of an electronic device, additional surface area becomes available for a larger display. Ultimately this strategy would allow a substantially full screen display."

From the description as outlined in the particularly detailed patent application, Apple has made a serious attempt to create the ultimate user friendly navigation system for a multifunction device. Users will be able to select devices from a touch screen GUI main menu, flip between devices using a virtual on screen scrolling wheel or call up the device required by voice activation.

From the description given, the GUI on the screen of each function is divided into an area containing touch sensitive input controls and the output viewer. The controls themselves, according to the patent application, will not only be touch sensitive but also force sensitive, meaning they'll do different things based on how hard you press them.

What it all boils down to is that Apple appears to have come up with a universal device that is all screen, which presents different GUIs containing different controls depending on what function you want to use it for. If you choose it to be a phone, you'll get a screen that allows you to dial numbers and send SMS messages. If you choose it to be a handheld computer, you'll get a screen divided into a qwerty keyboard and computer GUI. If you choose it to be a remote control for your home entertainment center, you'll get a GUI with virtual buttons that look like the buttons on a remote control device.

It appears to be an ambitious project, but if any company is capable of successfully creating such a usable device then it is likely to be Apple.

Much of the hype about September 13 has until recently assumed that it is all about Apple unveiling its movie download plans. However, in a couple of days the world will find out if it's really about a good deal more

I posted an NYSE chart on Saturday and the daily got some technical action today with a clear hit of 50 DMA. It's interesting to note that other indices have not gone down to test that MA and I find that troubling. This means that only a few select stocks are holding this market up, while the broader basket is getting hit. Careful out there the next few days.

Gold has a little further to drop and I'm targeting the 586/587 area for the December contract. 61.8% projection July H/L as well as confluence S1 and monthly S2. Resistance is crystal clear at 604. I know that we could eventually go even further, but keep in mind at some point the hedge play going into Friday's CPI.

VIENNA, Austria (AP) -- OPEC is not inclined to tinker with production, oil ministers signaled Sunday on the eve of a key cartel meeting, contending there is plenty of crude to satisfy world demand...
But with prices tumbling to five-month lows, the 11-nation Organization of Petroleum Exporting Countries will take a hard look at what its chief, Edmund Daukoru, calls "the fear factors": pipeline problems and political unrest that give global markets the jitters...
"It's time to see whether we need a good, fresh outlook," Daukoru, who doubles as Nigeria's oil minister, told reporters Sunday. "We have to look very, very carefully at what's going on with prices."

OPEC, which meets about 40 percent of the world's demand for crude, wants to see whether prices are in a free fall or are merely reacting to the cessation of hostilities in Lebanon and reported progress in talks between Iran and Western powers trying to contain its suspect nuclear program.

Qatar's oil minister, Abdullah bin Hamad al-Attiyah, said he doesn't expect a reduction in output, but he added that OPEC members won't hesitate to curb production "if we feel the market needs a cut."

Unofficially, there was talk of drawing up an action plan if prices dip below $60 a barrel -- a level which could prompt the cartel, now pumping at close to capacity, to start tightening its taps.

We could get a washout low in oil and gold very soon. The 65 level is considered by many the low end of the range for Opec. QM has a must hold at 64.50, but some buyers could step in at 65.175, weekly S1. That same equation for gold would be 604.40 (December contract).

Sept. 11 (Bloomberg) -- Gold in Asia fell below $600 an ounce to its lowest in 10 weeks, matching a decline in crude oil prices, after Iranian and European negotiators reported progress in talks on a nuclear dispute.

note: The media gold quotes are usually immediate delivery prices.

Gold is on my radar these days. If 613.50 does not hold (December contract), there is immediate risk to 610, weekly S1 and confluence 61.8%. Below that a small panic sell-off to 586/590 area. Price will find support at various levels (604.40/605.50) as traders hedge into the CPI numbers on Friday. We also have oil inventories on Wednesday. I am hoping for one last QM (October)push to 64/65 area and if it occurs before the IEA numbers, I would buy it along with gold. For now, weakness in oil and strength in the dollar is a one two punch against gold. Conservative traders that want to be long gold might want to wait for EUR/USD to trade up along with oil. As a reminder, the QM October contract will cease trading on September 20th.

This week, as in every three months, we add the equity futures expiration to the mix and that creates a lot of push and pull as hedge funds try to get the best price for switching out of September and into December contracts. If you are a big fund holding long futures positions, you try to sell September high (overhead resistance) and buy December low (support)and avoid as much as possible getting hit with to much premium by rotating at the same time (ES December carries an 11 point premium at this point). A lot of that activity occurred last week, which is why we had that rapid sell-off, but prices seemed to stabilize. Options might figure a little more prominently now, and QQQQ has overhead resistance at 39 and support at 38. Not an easy week to trade, but you have to think like them and understand the flow. Sell resistance and buy support.

Let's pan out to the NYSE weekly chart, an important barometer of overall health. We are sitting slightly above 61.8% 2006 (8291.27). Below that, next support is confluence 10 and 20 weekly MA at 8217/8220 and further down, 50% 2006 at 8176. That is the absolute line in the sand for this bull market as it also sits near the 2003 trendline, which is not about to hold up the markets a second time. Watch 8290 level in the immediate future.

The dollar bids so gold is down. At some point, it will be imperitave you buy gold if we are headed for a period of stagflation. I am waiting to see if 616 holds. If not, then the next buy is 605. The chart is ambivalent, we are sitting in a triangle formation that could be bullish. On the other hand, we have repeated throwbacks at 50 dma. September is usually a very bullish month for gold. In any case, watch 616 today, it is a key number. I doubt we will hold it short term, but you never know.

Oil is getting pretty oversold on the daily and my fingers are itching to pull the trigger. Nevertheless, I would regard another failure at 67 to lead to one last significant washout low. Since 67 is a full 76.4% retrace of 2006, bulls should worry short term. Watch the fib projections off August (see chart) and take your pick. Resistance is solid at 68.55, 200 ema. Ultimately, though, you want to get back in oil.

Per my comment Wednesday, NQ did indeed fall down to 1560/1565 area and is now trying to find a base there at weekly S1. SMH still has not regained the 33.45 area and until it does, techs will be on the defensive. ES lost channel support and 20 dma at 1299. All markets now have precise resistance at their respective 10 day moving averages.

Gold took a hit on the higher dollar and lower oil. Currently, the December contract is stifled by 50% June/July at 625.50. Short below, long above, pretty clear. Downside target if any bounce fails will be 605 area, as I doubt 616 would hold this time around. That said, September is usually bullish for gold and there might be some pre 9/11 buying as traders hedge into the weekend. If you want to take it long, your stop should not be lower than 621. You should also be aware of a wall or resistance between 630 and 633, which is not far away.

ES has channel support a little lower around 1298 which also happens to be the 20 day moving average. Add the 200 day ema at 1300 and 61.8% 2006 at 1299.25 and you can see where bulls need to hold the line (1298/1300).

SMH lost 33.45 support discussed earlier and the selling intensified. Look at 20 day moving averages to get hit by most indices if current support does not hold. NQ should get a push down to 1560/1565 before stabilizing.

Florence could turn into a major hurricane, but models do not project a course towards the Gulf and the oil rigs. Oil bulls might have to rely on tomorrow's inventories.

SMH (semiconductor holders) is having a rough time with its 200 ema at 34.30. Nevertheless, it found support today just above July 3rd high of 33.43, and that still keeps the rally alive.
INTC expectations was to cut 20K jobs, they only cut 10K and that might be a drag on the stock tomorrow and semis in general. We wait and see. SMH breakout above 34.30 is bullish for techs and breakdown below 33.50 signals the end of the August rally.

NQ closes the July 3rd gap at 1601.75 and pushes up to weekly R1. That bearish ascending wedge (see 30 mn chart)is getting pretty narrow with a possible upside close to June 30 high of 1611.25. Resistance above that on a breakout is 1620, but I'm not so sure we will get that far. QQQQ hits 39.48, close to my upside target for this rally. SMH (semiconductors) has not confirmed the new QQQQ high, so I would start thinking defense at this point. NDX found resistance at 50% 2006, 1604.15, but settled close enough to allow for one possible push higher. Watch NQ 1606.50, weekly R1. ES stalled at 76.4% 2006. ER has not yet closed the July gap (736.50). We could forge ahead, but at this point, odds favor the short side, or at the very least a conservative approach if long. My take is not as bearish medium term. I think we could pullback up to mid-September and actually maybe even enjoy a rally as the month closes. For now, patience is warranted.

COT (Commitment of Traders, see link below) from last week shows large traders short the Canadian dollar and long the Yen. Small traders are doing the opposite. This is directly related to the drop in oil and tells you that we could have more downside in crude. The Canadian dollar/ Japanese Yen is an alternate play for crude oil, Canada being a producer and Japan having no oil whatsoever.

The immediate trading picture will be the July 3rd gap for NQ which is not yet closed (1601.75). If that gap gets closed and we don't correct lower than 1590, it will set up an attack on 1620/1625 (see my earlier NQ post). ER is in the same predicament, July gap 3rd close is 736.50. It's interesting to see how far back techs are lagging from the broader market. I am bullish on techs for next year, but for now, use them as your guiding light as to the general health of this market short term.

Another key area to keep an eye on is the semiconductor group. A chart of SMH shows the importance of the 34.30 area. Support is 33.60. Needless to say, bulls need to get above 34.30 quickly and stay there. If they do that, next level of resistance will be 34.90, June high. The semis will tell you early on if this summer rally is about to come to an end. The last two days of trading last week saw some diverging weakness there, bulls do not want to see that continue. Watch the relative performance of SMH once we get past the usual buying of uneventful post-labor days.

Another reason to raise the caution flag: the VIX. Along with VXN, it looks like it is about to reverse course. The lower envelopes have been hit more times than I care to remember. This does not mean it can't head lower, just that equities are not ready for bad news.

The day after Labor day is usually bullish and the crowd will chase it. The market has had an interesting pattern the past months of doing the exact opposite calendar-wise as last year. Will it be the same for September?
QQQQ has put support building at the 39 strike and call resistance at 40. NQ 50% 2006 is 1620.50, weekly R2 is 1622.50 and monthly R1 is 1622.50. That puts a lot of confluence in the 39.50 area for QQQQ where I expect this rally to find real resistance. If bulls can push above that, they will get to the 200 dma at 40.17. QQQQ is building a bearish wedge on this ascent accompanied by a slight bearish divergence on RSI and a MACD historigram pointing to a cross soon. NQ's chart has more of a triangle set up which is bullish. However, the media is starting to feel all cozy about the rally and that always puts me on guard. I called for an up August and played it, but I am far more cautious this month. That doesn't mean I expect a complete breakdown, that is not in the cards at this point, but we should get a pause soon.
There is some storm development in the Atlantic (tropical depression 6) which could bring us a hurricane by next week. Watch 68.60 on the downside and 71.30 above. Pivot is 69.625. The daily is still oversold and oil bulls can get dangerous once again, but they will first have to get out of the bear flag pattern exhibited since mid-August. A break above 71.50 would do the job. Unlikely for now.