Stock Tiger Stalking Stocks™ For Monday October 13, 2008 You may subscribe to this newsletter free - subscribe Past 5 days Dow Nasdaq Close Friday Dow -128.00 at 8451.19, Nasdaq +4.39 at 1649.51, S&P -10.70 at 899.22 Rally 1000!  We have such a volatile market. A ton of forced liquidations on top of large buy and sell programs and short term traders trying to buy the lows and short the highs. On Friday the Dow had two big rallies. On the cash chart the first was in the second 5 minutes of trading and resulted in a move of 784 points from the low. It then dropped back 695 and moved up 917 points again. From the day's low to its high was 1007 points. It was well into the positive side after the second rally but lost its advantage in the lat half hour of trading. With the Dow closing down 128 points it was the eight consecutive loss for the index. The S&P 500 also lost on the day but the Nasdaq posted a gain. Here is a 5-minute chart of the Dow and the two very large point moves. Each one was very fast and made some futures traders very happy while others were stopped out in a hurry or scrambled to close or reverse their positions. On a Dow E-mini contract the margin required is $300-$500 at Global Futures and each point movement pays $5 so the full daily move from low to high was over $5,000. I bet no one was so lucky as to buy the low and sell the high or vise-versa but the wide range does present opportunity. The hammer candle after the first 10 minutes of trading suggested a buy the first time and the break above the range between 2:15 and 3:15 at about 8280 a typical break out buy.   This shows the second rally of the day on a 3-minute chart. The green line is Support 1, the orange is Support 2 and the red line is Thursday's low while the top white line is the daily Pivot. The failure to break above the Pivot was  a signal to take profits and to some to also place a failure short. This chart does not show the end of the day as it is only to show how the Pivot was resistance. You also see how the Support 1 became resistance earlier. If you are interested in futures you can set up a simulated account using live data for free on the link.         For Friday the S&P 500 came up from an earlier  loss of 7.3% to a  loss of 1.2%. This has been the worst week for the S&P 500 since December of 1987. It has fallen in the past 8 days about the same as it did during the crash of 1987. Trading volume on the NYSE was the third heaviest on record, with 2.95 billion shares exchanging hands. Eight of the ten economic sectors had a loss but small caps did well as the Russell 2000 ended with a 23 point gain up  4.7%. Mike Burk reported that on Friday there were 2901 new lows on the NYSE, about 88% of the 3306 issues traded. For the week here are the major indices The credit market is a huge problem but not just for getting loans to build buildings or expand one's business. We were reading about how much of international trade is based on Letters of Credit so that when a company ships a product to a buyer, as an example, they know that the buyer has funds to pay. In the past if your bank received a letter of credit from another bank showing that your customer was credit worthy, your bank was willing to loan you money for the term between when you needed to ship and when you would receive payment. Now some banks are not relying on Letters of Credit as their trust is so low. If this were to grow, trade would slow drastically. The tightness of the credit market is shown with the TED spread to some degree and some are calling it the "new VIX". The TED spread, ($TED at stockcharts) which is the difference between what banks charge each other for three-month dollar loans (three-month Libor) and what the government pays (three-month T-Bill) rose 40 basis points to 4.64%. For comparison, the TED spread averaged 0.36% in 2006. This week the VIX which we call the fear indicator was at the highest level ever. To try and ease fears in its county and to attract outside money Ireland guaranteed all deposits in its banking institutions. In doing so five billion euros poured in over the last week. One by one, European governments may have to guarantee their deposits to keep money from leaving their institutions. The USA may have to so so as well to keep money from going to other countries. In reality however a country's guarantee is only as good as the ability of the country to pay. Iceland was giving too-good-to-believe rates over the past years and money poured into their banks. Now that those banks cannot pay the government had to take control and borrowed from Russia. At the moment Icelanders have some guarantees but not all foreigners. Yet the Ireland guarantee is so far working Ireland. About Ireland I red, " There are six Irish banks, holding assets of $576 billion. That works out to three times Ireland's gross domestic product, or about $200,000 for every working person in the country.  Yet depositors flooded them with money in just a few days." So I guess they are not using Iceland as an example. In reality Ireland could probably not pay all if they needed to as they do not have enough money and likely could not borrow enough so hope that the new depositors do not withdraw their funds. Back in the USA this graph shows the rise in delinquencies of construction loans. John Mauldin writes, "Over 16% of loans made for condominium construction are now delinquent. Loans made for single-family home construction are only slightly more than 12% overdue. But that masks a much bigger problem. Single-family loans account for 86% of all for-sale residential construction loans outstanding." Jobless claims report was a decline of those claiming unemployment benefits to 478,000 from the previous week's revised figure of 498,000. At the same time, the report showed that the less volatile four-week moving average rose to 482,500 from the previous week's revised average of 474,250. The report also showed an increase in continuing claims in the week ended September 27th, which rose to 3.659 million from the preceding week's revised level of 3.603 million. With the increase, continuing claims rose to their highest level since June of 2003.   For the week the top and bottom sectors: And a look at a month. Insurance down 80% - seems like an oxymoron. What we find if we listened to the congress investigation into AIG is that the insurance company kept selling swaps which they knew did not have the intrinsic value that people thought yet they kept doing it for years. Those who are supposed to help guard against losses actually were the ones responsible for them. It is also really a shame that the congress has to use their time to do all of this investigation as they should be doing things to help the population. Of course they also could have prevented this in the first place if they had not been bought with contributions from the banks and brokerages etc to begin with. Will be interesting to see if anyone actually goes to jail over the multi trillion dollar ponzi scheme. About the current market Dennis Gartman of the Gartman Letter wrote, "We have lived through what we have considered to be periods of chaos previously. 9/11 was obviously chaotic; the weeks of the Russian/Emerging market/Long Term Capital Management collapse was chaotic; the assassination attempt upon President Reagan was chaotic; the weeks and months of the Watergate and the Clinton Impeachment goings-on were chaotic; the final weeks of the massive bear market of the  summer of '74 was chaotic, as were those final days in the summer of '82 when the stock market made its last final low. We recall the Friday, the Saturday and then the Monday of Paul Volcker's Saturday Night Massacre when monetary policy was stood upon its head and the capital markets were shaken to the very core; that was chaos of the first order. We have lived through them all, and we have traded through them all, and what we are seeing now, and trading through now, and trying to make sense of now makes them all seem like quiet, lazy, rainy Sunday afternoons around a game board. What we are seeing now is unlike anything we have ever...EVER...seen in the thirty +years we have been doing this. What we are seeing now is something we wish never to see again."  This graph shows the first year of each major Dow correction since 1900. This one is the worst. The past couple of weeks we wish and hope the long-only funds are able and did buy some of the short funds and ETF.s. CNBC used to have a man on from time to time John Bogle who founded the Vanguard fund. He had one plan - buy and hold. He said over and over that you cannot time the market. I understand that there is free speech but outrageous to say that. The Vanguard US Growth is down 35% this year, 7.7% for 3 years and 2% for 5 years. The problem is that people own funds like that and are not advised that the market broke a 26-year and and a 21-year major trend line earlier this year and should at a very minimum buy some protection with options or a short fund or from one of the many reverse ETFs. There are a lot of people who have living costs or pensions based on stock holdings and have been severely hurt because they did not have the knowledge of the severity of the economic situation or did not know what they could do to turn it to their advantage. Their elected officials let this bubble happen and in fact encouraged it. Note how the SEC and Fed said recently that they would absolutely stop naked short selling yet if you look at the current SHO list you find stocks that have been on it for 330 days - not the 3 days that they have as a grace period. Again this year for the US elections no one is on the presidential ballot who has solid ideas on the economy. After the poor statistics of the long side of the market we see here the 52 week's performance of the top UltraShort ETFs. Some people had or have some stocks that they kept due to factors such a taxes or dependence on dividends or in 401ks which are somehow restricted. In those cases simply having added some of these to help keep your portfolio at least even in these times helped. Owning them as a main investment however really has paid well. This was an extremely volatile week and on Friday we saw TWM - Russell 2000 short go from being up over 16% to being negative to closing up 12%. The top and bottom industries for the week. Not many gainers.   The Soyuz TMA-13 spacecraft launched Sunday bound for  the International Space Station. It is easy to forget that crews are living up there all the time. On  this mission the professional astronauts will supervise the start-up of new life support equipment for the ISS. This should enable the full-time occupancy of the orbiting outpost to be increased from three to six crew members in May. Google co-founder Sergey Brin, considering going into space on a private flight, made a visit to Russia's Baikonur cosmodrome on Saturday to wish good luck to a fellow space tourist. The Google billionaire has put down a $5 million deposit to book a flight into space with space tourism company Space Adventures but has not said if he would definitely go. On this mission Richard Garriott, a U.S. computer game developer and Brin's friend, will be going and has paid $30 million for the trip. He will stay until October 23. This Value Line weekly we showed last week but it now shows the 17% fall for the week and now below the trend line trading channel. The lines are the low for the 4-year cycles. This does not mean the absolute price low for the 4 years but the cycle low which calendar wise is due about the 4th quarter of 2010. Here is our multi index chart to see where they stand compared to each other and their relationship to their Bollinger bands. We will  not show many charts under daily time frames this week as even daily  are not so useful in such a volatile environment. The S&P 500 and the Dow are under the Bollinger bands the most  at the Friday close. Last week we mentioned that those who count Elliot waves have various counts. In this one the bottom being worked on now could be the completion of this and when a move up starts would then be an A-B-C. In this case the move up from 2003 to 2007 could be a major wave 1 and this current pullback a 2. The 1-5 could also be labeled A-E. Regardless of the labeling we closed just under the last support before testing the 2003 low. Intra-day the Dow hit 7882. This is only 466 points away from the 2003 low and in the current volatile market that could take maybe 20 minutes to achieve. The Dow monthly shows just how fast the index gave up 6 years worth of gains once its long term trend line and 50-month EMA was broken. This is a closer view of the same chart where you see the parallel channel and the Friday close still inside. It is below the 200-month EMA but the month is not finished yet. It went down to the 50% retrace from the 1987 low and has held so far. If it can't hold here the next support is a test of the 2002 lows. I would expect that it will hold at least the yellow line for now and until after a substantial rally. The RSI is under 30 and stochastics under 20 so moves above  would be bullish. As yet there is no MACD positive divergence. A few month ago it was a possibility that the Utilities  would bounce off the triangle bottom and then go up to break out. Instead they broke down, rallied back up the fell to the 200-week EMA. This weeks action was shattering as it dropped 21%. The Nasdaq dropped on through the 62% retrace while not looking back and almost to the slight support from late 2002 at the lower dotted line. The top market cap stocks in the Nasdaq are the Nasdaq 100 and they also made it almost to a possible support. The indicators are oversold. We have marked the apex of the triangle to watch in 2009 as often it can mark a turning point. This ratio chart compares the Nasdaq 100 to the S&P 500 and it shows that the Nasdaq 100 has been outperforming the S&P lately. It has stopped at the moving averages but still this may be a bullish sigh as often the Nasdaq 100 will lead the way ahead of an uptrend - even if it is a short one. The three indicators have also all become bullish. The VIX is in totally uncharted territory. It has no roof or some say it is in blue sky. The RSI is at 82 so some fear relief is expected. This does not mean that things in general have improved but that some may take a break from selling to contemplate really what stocks should be worth while pricing in all that we know. Over the last week or so the market has been controlled by a lot by panic but also forced selling as funds and banks sell to raise money. I do not know when this will let up but it will at some point. The market is about price discovery and part of this is letting prices go up to see if it attracts buyers. If it doesn't then the prices are too high still. Remember that most investors do not want the lowest prices, they want what they feel are the safest prices. A "safe price" (bad environment to talk of it) is established by testing of a price level over time and establishing  support. When people see a stock run up 20 or 25% on good volume and also see new buying on pullbacks they become interested again. The top indicator TRIX is not so fast to respond but as the VIX pulls back it will have a crossover and may confirm the lessoning of what we call fear. The Nasdaq Summation Index is at the lowest level this year and right now the 5-day EMA is not even close so we would have to see some strong market action to see a crossover here. The Nasdaq McClellan Oscillator also at an extreme way lower than former bounce points. The percentage of stocks on the NYSE now trading over their 50-and EMA is 1.1% - the lowest ever. If you were to look at the bullish percentage charts or point and figure charts of the major indices you would also see record lows. I think if they could start the presidential race all over again we would have totally different candidates. This goes for the house and senate also as they were supposed to be minding the store but instead let major brokerage firms, insurance companies and banks sell paper that is actually not worth the paper it was printed on. The buyers did not know this as they trusted the firms. We do not know how well this advance decline ratio chart will hold up at support but we will soon see. The Russell 2000 weekly chart having broken the neckline of the head and shoulders pattern did fall to its measured move and recovered quite a bit on Friday. You can look left and see the support around 400 also. With these charts if we do get a bounce this week , look to the higher level of Fibonacci numbers for resistance. The monthly Russell 2000 shows the bounce off he 200-month EMA and close just below the 62% retrace. You see that we had the initial down candle a year ago followed by three months making a bear flag then 4 months down followed by  a 3-month bear flag then one month down and a two-month bear flag. We cannot have a green candle this month unless we were to get a move back over the 50-day EMA. The S&P 400 Mid Caps not only completed their measured move but over did it by almost 80 points. It closed with a hammer on very high volume Friday suggesting a rally Monday or Tuesday. These are not normal times though  so news can change things. RSI and stochastics have yet to confirm an up move prediction. The longer view of the mid caps and the close at support and the lower support at the next dotted line. Indicators are oversold. The commodities ETF GSG fell to the 62% retrace then added about 5%. It is just below the trend line and if it recover in a day or two the breach is not serious. If it falls much more it could be a very long recovery for commodities. Oil is almost at the 50% retrace with support at $80. While oil ran hard from 2002 to its peak the stock market had an excellent rally. Now that oil has pulled back about 40% the market has also.   The US oil fund USO is at the 50% retrace and although oil is near what looks like support this cart suggests that either the price  has to go even lower or time has to pass as the lower trend line in time will meet up. Stochastics and RSI still are pointing down and MACD has just now had a negative crossover on the monthly chart.   Gold pulled back again on Friday and then recovered some. The 50-day and 200-day are quite close and often volatility happens at that time. Gold looks to be still in an uptrend but it is non committal. Gold stocks are also not in a good way. We put a couple on the watch list for a day or two but there seems no buyers yet to enter that area except for a few South African gold stocks that went up a week ago. Noticed the the housing ETF XHB is basically in the same range all year. Of course it took a big fall starting in 2006 but interesting that it is for this year not yet making new lows. The US dollar continues to rise perhaps more to do with the weakening of other currencies. It shows some negative divergence but it did close slightly over the 200-week EMA. A pullback could come at any time gut the net resistance is a the levels on the left or at the 62% retrace of the decline near 84. The longer term dollar view nearing the 50-month EMA which is resistance at 83.60. Check the Earnings Calendar on all overnight holds. Weekly economic calendar from briefing.com. When any of you sign up for a new stockcharts.com account there is a space to put in a referral name on that form. If you enter  stocktiger@stocktiger.com they give us credit. Thanks! Last weeks winners These are some of last weeks winners. We had an amazing week as 17 picks hit their trade points and many more gapped under them but then moved through them for possible entries anyway. Many continued to gain day after day. It is good to lock in partial profit as they move, especially if they gap in your favor. These need no comments but some of the shorts may become bounce plays short term if you like that type of trade. You will see a few that made pretty significant moves up from the Friday intra-day lows. Our entries of course were at the lines. Over 68% gain for the week!   Over 60% gain for the week! Over 60% gain for the week!     3 days of gains 2 days of gains 5 days of gains These next 13 charts  are Ultra charts for the long side so you buy these if you think the sector or index they represent is going up. We will get a bounce at some point and these are popular as it does not place your full investment into  one stock. If the charts have Fibonacci lines remember that they are drawn as if the Friday low is the current trading low and will not be valid if we see lower lows. On a good rally the next level up on Fibonacci could be a watch point for a target. DIG  (the chart says what sector they represent on the top left - this is for Oil and Gas) SAA   PST  This is not like the others as it is actually a short on the7-10 year bond. As the bond falls this goes up. If interest rates for the bond goes up the bond prices go down so in effect this goes up as rates rise. At stockcharts $TNX is the symbol for the 10-year bond yield. IEF is the fund that this ETF is short. SSO  UWM  MVV   DDM   RTH   USD  Not to confuse with the dollar - this is the semiconductor ETF. UYG  UYM  PHO  DXO  New additions to the watch list. Remember that we add many stocks to it each trading day. We have several long side entries but remember we are still in a hard downtrend so these are fighting that trend - use caution on them but if we get a market turn it may be to their advantage. CLDN  Over $10.00 CHNG  Natural gas Over $3.10 or $3.25 DVN  This was a huge mover on Friday up 48% but momentum player may be interested to watch for possible entries. ABMD  Over $13.26 G  Over $8.50 RVSN  Over $5.02 IDEV  Over $2.10 HNT  Over $17.50 CMA  Short under $20.00 of it turns back down KGC Gold Short under $12.00 sees close possible support     Feed the Eyes Photograph by Alexander Perlin     Photograph by Viktorrr 78     Photograph by Uncle Yankel   That's a full lid for today - will see you during the week. We have published a donation page for the ease of you giving to a charity of your choice. If you have benefited from our site we encourage you to share with a charity. We have a few recommendations who all use a high percentage of the donations for the actual program use. If you have some we should add please send us a note. Donation Page Check the Earnings Calendar on all overnight holds. Check the current message board also for other good stock candidates as there are several there right now. If you use StockTiger mail you can access your account using simply my.stocktiger.com . If you would like a free StockTiger.com email address that uses the Google Gmail spam filter and you can check your mail from anywhere. Send me (ST) a personal message from the message board.  Include your First and Last names and the name you want to use. Your address will be (your choice)@stocktiger.com Best regards, Stocktiger.com