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NBC employee contracts Anthrax Virus

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Stocks have turned markedly lower after a press release by General Electric (NYSE:GE) that one of its NBC employees contracted the Anthrax virus in New York City. The employee works at the NBC News offices in Rockefeller Center in New York City. The bacteria found was on the skin, and not the respiratory version discovered in Florida.

Swiss Franc Dec. 2001 futures - 60-minute interval

Today's action in the Swiss Franc (sf01z) is fascinating in that it shows just how quickly the market is able to react to news and cast a vote based on it perception of that news. Now we can follow things here and begin making some firm statements as it relates to a trading/investing scenario. For instance... a trader that feels today's Anthrax discovery in New York will become very negative longer-term will then perhaps watch the Swiss Franc futures. A belief that negativity toward stocks will be the overriding factor must then believe his/her belief will be confirmed with the Swiss Franc getting back above the 80.9% retracement level of 0.622. As you can see, right now we're smack dab in the middle of the range from 0.605 to 0.622. We can follow things from here (like we're doing in the market monitor on OptionInvestor.com) to measure MARKET psychology with the Swiss Franc. I've marked the above chart with two "inflection" points. The first is the action on September 11th when the terrorist attacks occurred. Then the contract's recent high on September 21st (Dow Industrials traded low of 8,063 that morning). If you were to flip the above chart of the Swiss Franc upside down, you'd have a chart of the Dow Industrials!

Dow Industrials Chart - 60-minute interval

Turn the Swiss Franc futures chart upside down and you've got the Dow Industrials chart. Look at the striking similarity in the Dow. What I've done here is used retracement to give me some levels to correlate against as it relates to the Swiss Franc. For instance. On September 21st, the Swiss Franc hit a high vs. US$, so I anchor bottom of retracement on Dow Industrials at Dow's low on Sept. 21st. Then take correlation of Swiss Franc at its 80.9% retracement (resistance for Swiss Franc) and "fit" 80.9% retracement as support on the Dow Indu at 8,500. The result is 61.8%, 50% 38.2%. A trader doing this would then perhaps begin trading a scenario.... "Should the Swiss Franc rise to 80.9% retracement, then the Dow Indu could fall to its 80.9% retracement of 8,500. It's a scenario and we now have some levels to be monitoring and trading from. At the same time, a break below 61.8% retracement in the Swiss Franc, could have the Dow Industrial rallying above 38.2% retracement of 9,478. Excellent scenario I think where risk/reward levels can be realized and then traded/measured against.

Jeff Bailey
Senior Market Technician
Option Investor

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