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Futures are "decimally" lower

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The NYSE goes decimal today so it's goodbye to fractions (7/8) and hello decimal! The NASDAQ Composite along with AMEX still will be quoting in fractions. S&P futures are off 2 points, NASDAQ futures are down 25 and Dow futures are lower by 2 points. Fair Value for today is $8.32 and buy programs are set at $10.18 and selling set at $6.26. According to HL Camp & Company, program trading averaged 25.4% of the NYSE volume from January 8 to January 12. If you're a day trader, you might want to jump over to www.programtrading.com to see a list of market makers that are pretty active and keep an eye out for them in some of the NASDAQ stocks you're trading.

Chrysler set to cut 20% of workforce

Daimler Chrysler (NYSE:DCX) will announce today, plans to cut 20% or nearly 25,000 jobs at its ailing U.S. car unit. This announcement is expected to take place at 8:30 a.m. Detroit time.

Convergent Communications to lay off 22% of workforce

In part of its new 2001 business strategy, Convergent Communications (NASDAQ:CONV) said it would issue pink slips to its already fleeing workforce in an effort to be profitable by year's end. Also part of the plan is for the company to increase its data-specific sales force and centralize customer order management. CONV is a broadband networking company and subscribers should understand what kind of equipment these types of companies use in their networks. A lot of it comes from Cisco Systems (NASDAQ:CSCO) and other similar suppliers.

Convergent Communications Chart - last eleven months.

Companies that buy networking equipment with charts like those above have Wall Street wondering if they're going to be around to provide future growth for many network equipment companies. We've seen one casualty in the group in the form of ICG Communications (NASDAQ:ICGX). This is something I talked about at last fall's Option Investor Workshop.

Reprint from Friday's 04:30 IndexSkybox.com commentary

The following is a reprint of an update I wrote for Indexskybox.com on Friday. It has relevance for many readers and I'll be using these levels going forward.

I missed it by "that much!"

Remember the show "Get Smart?" Maxwell Smart was the main character and often times he said "You missed me by that much." Well today, I missed a couple of things my "that much" and now it's time to adjust my thinking by "that much".

NASDAQ Composite index chart - 60-minute interval.

I can't say I did anything wrong in my technical analysis, but now I think I see what the market is doing as it's related to the NASDAQ Composite (COMPX). Remember our horizontal pink line at 2,725 that I had as support this morning and the past several days? Notice how it is very close to retracement bracket level taken from the highs of December 11th to the lows of January 3rd? Wow that looked real good. What I failed to plan on was the market "splitting the difference" between the 50% and 61.8% retracement levels. While that turned out to be a 39-point difference and had me doing some shorting, those 39 points cost me $250 bucks. Let's see... 39 divided by 2,700 is a 1.4% miss on a support level. "I missed it by that much". Good thing we didn't bet the farm and were watching bond yields! The thick blue horizontal level NOW BECOMES OUR WATER LINE ON THE NASDAQ! As long as we're above it we're looking long, when we're below it we're looking short. This should keep us out of trouble for the next couple of weeks or so.

How the heck did he come up with this thick blue line?

Great question! All I'm doing is asking why? While I don't really need to know the answer, I can say this. At 10-year (TNX.X) bond yield 52.00 (5.2%) the market sold bonds today. Then turned right around and bought NASDAQ Composite (COMPX) stocks. Now look what I'm doing!

10-year Treasury Bond YIELD Chart - 60-minute interval.

Now that we've picked today's "low yield" and "low NASDAQ" we have two levels on our chart that make some sense and give us insight into what the market was thinking today. Time will tell if this holds water, but at least we have two levels to be monitoring. We can also use our "thick pink lines" to now understand a "yield range" for the 10-year yield and understand how that range could affect a trading range in the NASDAQ Composite.

Now think about this!

Can't we start doing some of the same things above with NASDAQ stocks we're trading in? We've certainly seen how yields and the NASDAQ Composite are interrelated. When you find stocks that are acting just like the above, that is called correlation. When you find stocks that seem to be acting on their own, it usually a case of deviation.

Now, take a second and go back and look at today's 12:30 update!

Sometimes I have a mind like a steel trap and things get burned into my mind (what's left of it). Notice at 12:30 when I commented that the 10-year yield was rising and that might be a sign the market believes in a 50-basis point move and potential strength in stocks? Now look at the NASDAQ Composite chart at 12:30. The NASDAQ just looked like it was sitting there, but "smart money" today may have been buying at that level 2,708 and with the NASDAQ closing at 2,781 today, I'm not taking some notes. Next week I'm planning on taking some names! If the bond market is giving us this much of a "heads up" we need to be taking better advantage of it than I did today. We'll start with some small bets, and when we start getting some success, we'll start making bigger bets. I love this stuff! Have a great weekend!

Jeff Bailey
Staff Analyst

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