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  Jeff Bailey   2/14/02,  5:23:57 PM
Qualcomm (QCOM) $40.32 -3.77% ... yesterday we talked about how a trader may have taken that stock from the bullish side on the break above the "inside day." During the session, I mentioned that this may be one stock a short-term trader would look to sell early or not give much room to, despite a 1% gain.

The "reason" or thought behind that was the "telecom" association that I have put on QCOM and perhaps other market participants. Last comments I made on QCOM were yesterday at 03:40:36 PM EST with stock at $41.99. Link

  Jeff Bailey   2/14/02,  5:18:56 PM
"Rolling over paper" this was term used in 11:34 market monitor. What Qwest (Q) had to do today was to access its bank credit facility in order to pay off expiring short-term notes (usually just 90-day notes). These "notes" are also called "paper," as it is very short-term in nature.

When Qwest (Q) accessed its credit facility, the thought becomes "are they hurting that bad that the bond market isn't even interested in investing in their 90-day notes/paper because even that is too risky?"

Then the accountants go to work, and first place they start looking is the telecom sector.

If you have ever wondered why we stress SECTOR ANALYSIS so much, it is partially because of this. Much like a detective, the first place accountants or traders/investors begin drawing conclusions are from places close to home or within the same sector. I Qwest is going to have to draw down its bank credit to pay off current and future short-term paper and potentially incurr greater interest costs, then that leads to the "speculation" that others in the group may also have to do the same.

The "rolling over paper" is simply this... when some 90-day paper "matures" or needs to be paid back to the lender (banks, you or I), a company that doesn't want to pull down cash reserves may just "roll it over" into a new 90-day note. For Qwest, they weren't able to do this, so they had to go to their bank credit and pay that debt off. Now they owe the bank and at a higher rate of interest.

  Austin Passamonte   2/14/02,  3:49:04 PM
For readers who frequently ask what charting service I use, the I find best one for intraday trades is Qcharts by quote.com

Like all technology they have their moments, but I've yet to discover a live, streaming chart service that offers more features for the price.

My level of service is intermediate package with live feeds from the NYSE, AMEX, NASDAQ and CME e-minis... total monthly price is around $90 or so. I could not trade intraday without a similar service package from some live chart vendor and don't believe anyone else can, either.

  Austin Passamonte   2/14/02,  3:24:09 PM
A day trader's session here for sure. Intraday charts finally broke down around 1:30pm as the S&P traded near 1122.00 area. The subesquent drop from there has been good for almost 9 index points at the low and price action may fall further into the bell.

It was easy to get stopped out numerous times this morning as many traders did trying to catch the turn in a rising market. But once all 60/30/10/5/1 minute charts turned decidedly bearish in sequence, it was relatively easy.

Waiting for that breakdown to happen AND giving up several points off the high is the hard part for any of us. The evil greed in me is alive & well, too. I desperately want to enter my trades too early on both ends just like everyone else. But the memories (plural) of losing money on less than ideal entries helps quell emotion and let discipline prevail.

On any given day it is 51% discipline/49% emotion that struggles the endless battle inside me as my trading platform stares me in the mouse. Am I alone in this? I think not.

  Jeff Bailey   2/14/02,  2:44:51 PM
Dow Industrials breadth showing 19 stocks in the green, with 11 in the red, while Dow dips red here. Losses found in AT&T (T) -3%, Merck (MRK) -2.12%, Johnson&Johnson (JNJ) -1.45% and Du Pont (DD) -1.06%.

  Jeff Bailey   2/14/02,  2:26:55 PM
Qwest (Q) $7.46 -13.15% ... stock continues to come under selling pressure. S&P cuts debt rating to BBB from BBB+ with outlook as negative.

  Austin Passamonte   2/14/02,  2:19:28 PM
Notice that the Dow is up +35 and the NDX up +3 but SPX and OEX are negative. Typical expiration jostling going on, and short-term traders who play this type of whipsaw action better be nimble, use high-risk capital only and be ready to endure plenty of turbulence along the way!

  Jeff Bailey   2/14/02,  2:16:44 PM
Celestica (CLS) $38.72 -0.48% ... question from subscriber if I'm still bearish on CLS, despite more bullish comments on the QQQ.

Yes, still bearish on CLS. However, stock seems to be finding some support in here. Need to get some type of break below that bullish support trend to really get the needed move I/we have been looking for.

This company does a lot of OEM work for some telecom and telecom related companys and with them looking very weak, am thinking it should catch up with CLS at some point.

Point/Figure chart shows "bearish triangle" and spread-triple bottom sell signal. Link

  Jeff Bailey   2/14/02,  1:57:20 PM
Relative Strength of MSFT versus the $GSO.X is rather nuetral, which hints that both are very much in unison right now. Would read the chart as "RS of MSFT vs. the SPX is buy, but in column of O's". Would be negative if reading reaches 33, but back to bullish at 37. Current RS is 35.56.

  Jeff Bailey   2/14/02,  1:51:54 PM
Technical Similarity can be found between the GSTI Software Index (GSO.X) Link and shares of Microsoft (MSFT) Link

Note the position of the 200-day MA's. I'm thinking that bears most likely waiting at that 200-day and may also be bulls near-term targets.

  Jeff Bailey   2/14/02,  1:46:33 PM
Microsoft (MSFT) I got an excellent question yesterday from subscriber if I ever tried to "forecast" price action on the p/f chart. Yes, I do this all the time.

As I look at the MSFT p/f chart Link?

My crystal ball is broken, but a more conservative thought would be.... It could rally to $65 and right where it broke the triple-bottom. That also correlates well with the 200-day moving average. At that point, could get a 3-box reversal back lower to $62 or even back down to $59. But what that would do is then set up a potential "buy signal" at $66, thus a lower level where the stock could give a "buy signal" and contribute to the bullish percent.

With that in mind, is it also a possible bullish trade near-term for 1/4 or 1/2 position and assessing risk to $58, which would be a sell signal? That question is for the subscriber to answer on their own.

  Jeff Bailey   2/14/02,  1:38:06 PM
Microsoft (MSFT) $62.84 +1.66% ... how did bears like my "inside day" short in shares of MSFT at $60.01 that was immediately stopped out at $60.86? I'm thinking I got suckered in on that one.

Hmmmm...... NASDAQ-100 stock that has good relative strength vs. the NASDAQ-100. Here's the RS chart of MSFT vs. the NASDAQ-100 Link

We would read this as "buy signal and column of X" while this stock has declined, would think it was due to broader NASDAQ-100 action and market removing some risk. Now perception looks to be turning more bullish from a lower level of bullish %, so MSFT a viable long candidate.

  Jeff Bailey   2/14/02,  1:31:00 PM
11:00 Update The "reason" we want any bullish traders in the QQQ to PROCEED WITH CAUTION is also dictated by the broader S&P500 Bullish % Link currently in a "bull correction" status at 56.60%. It would take a reading of 60% to get this market into "bull confirmed" status.

  Austin Passamonte   2/14/02,  1:11:52 PM
Readers Write: "Dear Austin: Is there any possibility that the VIX is trending low simply because nobody is buying ANYTHING, including puts, in this unpredictable market? Thanks. [DL]"

We see strange things take place during expiration week, but the VIX goes lower when traders buy calls/sell puts and higher when traders buy puts/sell calls. Today's move higher in the VIX suggests traders are skewed toward buying puts and selling calls. Whether that is unwinding of Feb contract positions or the masses selling this little pop, we cannot readily say.

  Austin Passamonte   2/14/02,  1:06:36 PM
Readers Write: "I feel your pain.I spent a couple years teaching adults math to complete their GED. That was tough but at least 50% of 100 is always 50 and they didn't try to justify to me why it might be otherwise. I hope all of you guys @OI realize that there are some of us out there who are learning and profiting through your guidance. Thanks [KR]"

KR, I love my fellow peers/pupils in the Window here but sometimes we have to stiffen our words of warning a bit. I've had emails all week from traders trying to short this market since Monday morning and have gotten carved up in little chunks numerous times since.

We want to sell failed rallies every chance there is, but first they have to fail, right? We need to see markets moving down in weekly/daily charts for assurance. Selling tops and buying bottoms is a huge, huge temptation via the emotional greed in humans but trying to time turns results in more capital lost than made by a wide margin!

  Eric Utley   2/14/02,  12:39:32 PM
Integrated Device Tech (NASDAQ:IDTI) completed its bullish triangle today, the one we pointed out yesterday. Remember Micron (NYSE:MU) from a few days ago? Now, take into account that the SOX.X is past resistance, the NDX.X is in bull alert, and IDTI completed a bullish triangle.

  Jeff Bailey   2/14/02,  12:35:07 PM
My thinking is that some of my deeper cyclical plays in the account like PD and AL are panning out and gains continue to build there. Can perhaps take on some risk in the more uncertain tech area.

The valentine fairy knows that Citigroup (NYSE:C) isn't working in my favor and for whatever reason, the darned thing won't break down when given every opportunity. My thinking is stock should have gotten hammered on the break of $45, but she didn't.

  Jeff Bailey   2/14/02,  12:31:40 PM
QQQ thinking If I can't buy the QQQ at bullish support $35 Link

I'm not throwing caution to the wind with 1/4 or 1/2 positions, but establishing some exposure. What if the NASDAQ-100 bullish% moves to the 70% level?

  Eric Utley   2/14/02,  12:27:03 PM
Away from tech, there are two sectors I'm watching closely as they relate to the broader market: Brokers (XBD.X) and Banks (BIX.X or BKX.X). Specifically, the XBD.X and BIX.X are at critical resistance levels. Take a look at these two charts, first of the XBD.X and second of the BIX.X:



I think that if these two financial sectors can clear their immediate overhead congestion, then the market will see another leg higher in this rally.

  Jeff Bailey   2/14/02,  12:24:40 PM
NASDAQ-100 Trust (QQQ) $37.49 +1.46%... Will take this bugger to the bull side here (1/2 or 1/4 positions only), stop $36.50 on the underlying. Market internals looking strong. I'm thinking potential rally to the $39.20 near-term.


I have retracement on bar chart from $51 to $27.41, which puts 38.2% just below at $36.42 and 50% up at $39.20. This also correlates with rounding lower 50-day at $39.42 and 200-day at $39.86.

  Eric Utley   2/14/02,  12:23:14 PM
Tech Developments The Semiconductor Sector (SOX.X) broke past the 570.00 level that we were talking about yesterday. I think that move adds some conviction to the bullish side today.

More importantly, and as Jeff Bailey pointed out earlier, the Nasdaq-100 Bullish Percent ($BPNDX) flipped to Bull Alert yesterday.

  Jeff Bailey   2/14/02,  12:19:37 PM
Proud of Subscribers! It's these comments that make my job worth doing!....

Jeff... I think I'm onto this "inside day thing." When I look at a point/figure chart, I can imagine how the varous columns of X's and O's actually give me the perspective of a much longer-term "inside interval." Is this kind of what the "inside day" does on a shorter-term basis? Actually giving very short-term "buy" and "sell" signals like a point/figure chart?

Exactly! I think that is a great analogy and very much a short-term type of supply/demand shift that a short-term trader is trying to capture.

Look at the p/f chart of TYC and see if you don't see some of the "inside" columns that ended up generating sell signals. Link

  Austin Passamonte   2/14/02,  12:13:28 PM
My last post on shorting this market today: readers still pour on the email justifying all kinds of reasons why this rally won't/can't last, etc. I agree, so what should a trader do about it? Get short right now and not miss the tip-top high? Readers have been trying that on their own since Monday and getting slain in the process. How many tops can a trader afford to buy before the market turns?

Markets are at a crux right now and type-A traders who can barely stand to sit in cash want to do something. They always want to be "in the action". I'm not one of those any longer and prefer to wait for clear & easy market moves to take chunks from the middle of.

I agree that this rally looks suspect, but judging from the VIX that assessment is widespread. Note how every little dip today immediately results in larger spikes higher in price action. That is not a market I will even consider shorting... I will only short a falling market each time it pauses or pops up to fail.

And I hope you do the same!

  Jeff Bailey   2/14/02,  12:06:35 PM
Tyco Intl. (TYC) $27.76 -3.94% ... getting some e-mails from traders that did trade bearish in stock yesterday on break below the "inside day" and wondering what now?

This is fear of mine. I want everyone to understand that you had better know what to do (manage this type of trade) before going off and just running trades.

The inside day discipline would "say".... move stop down to just above previous session's high. Right now, that is just above the $31.25 (yesterday's high) level.

True... the stock is trading $27.79 here and a long way from your stop (based on a short-term trade scenario) so trader can remove further risk by lowering stop to break-even or picking another level. Heck... could even lock in gain at market.

Trader could even pull up a 5-minute (any time frame for that matter) and say to themselves .... "this stock should not trade above its 50-pd moving average, and if it does, I will close the trade there." This would have the trader lowering a stop to $28.60 perhaps. 5-minute interval chart Link

  Jeff Bailey   2/14/02,  11:41:28 AM
Tenet Healthcare (THC) $61.75 -3.12% ... stock under some selling pressure this morning after Wachovia Securities downgraded to "buy" from "strong buy."

According to firm, news out of THC indicates that several insiders have sold significant portions of THC stock. Believes if management is selling, then shareholders should also take profits. Wachovia remains positive on the stock and positive on prospects for operations and earnings.

  Jeff Bailey   2/14/02,  11:34:01 AM
Sprint Corp. (FON) $13.96 -4.96% ... stock under some selling pressure after Salomon Smith Barney saying it believes FON may be next company to replace its commercial paper.

Salomon also saying it believes Qwest's (NYSE:Q) decision this morning (see 09:49) to replace commercial paper will add about $100-$150 million in interest costs.

  Austin Passamonte   2/14/02,  11:33:01 AM
Numerous readers ask why I don't give trade entry/exit instructions in MM during the day, and others wonder if this is a place to short.

#1 - This is not designed nor priced to be a live day trading session. The stuff I and educated former IS readers attempt these days is not fit for translation thru this forum.

#2 - Readers want to short this rally worse than air, and that's not changed since Monday. Those who have tried since then already bought numerous tops and have been repeatedly stopped out. Just because intraday chart signals are near overbought extreme does not mean the next market move is down. I see chart signals still pointing straight up in the air and nothing at all bearish about D/60/30 charts that indicate put plays are high-odds entry at this hour or before.

  Austin Passamonte   2/14/02,  11:08:46 AM
Readers Write: "Austin, Please explain (if there is an explanation) why indexes moving up and so is the VIX. Thanks, [JM]"

Easy explantion: put buyers are loading up in the face of this rally and/or unwinding Feb to March option contracts. When markets rise and VIX rises as well, it usually suggests players are shorting the rally and adding fuel to a short squeeze setup. But this being cessation of trading for Feb SPX, NDX, DJX and XEO option contracts (among others) it could merely be expiration skew.

  Austin Passamonte   2/14/02,  11:03:00 AM
Indexes are trading a rather narrow range here so far today. Other than the quick pop off morning lows within tick chart signals, there has been little to play with any conviction. So far I've traded the downside from pre-market for slight gain, upside pop for modest gain and a third attempt short that lost a bit of ground into the last buy-program pop.

Think I'll wait until past the lunchtime lull to see what intraday scalps position for the close. If this is to be an explosive session either way I think it will be on a squeeze higher, and probably in the final two hours of live action.

Just a w.a.g. on my part.

  Jeff Bailey   2/14/02,  11:01:01 AM
Dow Industrials (INDU) $10,032 ... yesterday we noted potential powerful triple-top at $9,950 and today we see nice move above the $10,000 mark. Will see some technical resistance come into play at $10,077 with rounding lower 200-day moving average and downward trend anchored from 05/21/01 high and attached to 01/04/02 close. Extension of that trend right at the 200-day MA.

So... aggressive bull that bought February DJX.X calls will want to sell the strength as Feb. expires and don't want to risk gains. PAY YOURSELF FOR THE WORK YOU DID AND THAT WHICH THE BEARS WOULDN'T BELIEVE! The Feb. $99 DJX.X calls (DJVBU) are bid $1.15 and that's about 64% higher than yesterday's $99.40 action.

  Jeff Bailey   2/14/02,  10:53:09 AM
Juniper Networks (JNPR) $11.48 -11.76% ... stock under selling pressure after a Dell'Oro research report highlighted this morning by SG Cowen. The report notes that JNPR lost 5% to 27% market share in the core router category, marking the third consecutive quarter that company's share has decreased. The decline comes at the hands of Cisco's (CSCO) introduction of its OC-192 routers in early 2001, which leveled the playing field between JNPR and CSCO.

Juniper Chart - Link

  Austin Passamonte   2/14/02,  10:44:25 AM
Readers Write: "SPT-BE" [SPX Feb 1125 Call] double in 25min... whoo hooo! Now I can take the rest of the day off! Educated gunslinging LOL "KM"

Buying that dip on 10/5/1 minute charts this morning caught a furious pop but traders who did so had a brief window to enter as the drop & pop spun on a dime and sailed higher from there.

No telling where the markets go next intraday, as intraday charts signals continue to squiggle sideways.

  Jeff Bailey   2/14/02,  10:41:12 AM
NASDAQ-100 Bullish % ($BPNDX) has reversed into Bull Alert status and now has some internal strengthening/stability taking place. This too is a near-term sign that bearish traders need to be cinching down some stops, especially in some technology stocks. Link

  Jeff Bailey   2/14/02,  10:38:56 AM
North American Telecom Index (XTC.X) $647.02 -1.4% .... set a new 52-week low today and nearing bearish vertical count price objective of $640. Would be lowering some stops in this group to protect bearish gains. Link

  Austin Passamonte   2/14/02,  10:16:09 AM
Further clarification of the last post: short-term traders right now can attempt downside plays as 60/30/10/5 minute charts go overbought extreme, but do not be surprised if price action moves down just a little and then pops right back up.

If/when daily chart signals go bearish (not just poised to do so) then short-term downside plays could work with better results. That situation could happen in a day or three the way things look.

Longer term plays, which the majority of OI readers focus on may not go anywhere at all if daily charts turn bearish and weekly charts remain bullish or oversold. Bottom line? Might not be such easy trading either way in the near term.

We are at a pivot point in the markets and no "sure thing" exists right now as selling rallies did the past few weeks. This picture changes on a daily basis which frustrates the heck out of most traders who just want time to let their inner emotion make peace with a trend either way. When emotions are tossed around due to market volatility, traders get frustrated, angry and tend to make big mistakes in their accounts at a time of human weakness.

  Austin Passamonte   2/14/02,  10:06:17 AM
Two observations to keep in mind: long-term chart signals are bullish, but daily-chart stochastic values are nearing overbought extreme and VIX levels are low.

Breaking that down to tradable terms, we begin by watching weekly chart price strength (oscillator) values. If weekly charts are moving in bullish fashion, that is the basis for our bias.

During the time it takes weekly chart signals to progress from one extreme zone (oversold/overbought) to the opposite, daily chart signals usually make the same cycle several times. That is natural, as daily chart time frames operate within weekly chart on a one-fifth basis.

When both weekly and daily chart signals move in unison either way, strong directional moves occur. When they move opposite each other, that is usually a period of market consolidation with price action going nowhere of consequence.

Intraday charts cycle up & down many times within each oversold/overbought cycle of the bigger charts. This measure of price strength across all time frames tells us probability of strong market moves versus sideways consolidation.

With chart signals mixing up and volatility readings low, I would view any rally right now as temporary and tenuous. Not that it will end today or tomorrow, just don't fall in love with the upside even though it appears that's the direction to play right now.

  Jeff Bailey   2/14/02,  10:02:33 AM
Apache Corp. (APA) getting upside alert at $51.15 which is new relative high. Stock continues to trade rather strong and looking good for bulls. Support should start getting firm at $47.50. Link

  Jeff Bailey   2/14/02,  10:01:16 AM
Treasuries seeing some buying across the board and 10-year YIELD ($TNX.X) back below the 5% level at 4.971%. Just like stocks... Treasuries have been up,down,up,down in rangebound action lately.

  Jeff Bailey   2/14/02,  9:59:41 AM
Sector Strength has energy showing some gains with Oil Service (OSX.X) +2%. Gold/Silver (XAU.X) +1.27% and Airlines (XAL.X) +0.64%.

  Jeff Bailey   2/14/02,  9:58:09 AM
Sector Weakness has both the Banking Index (BIX.X) -0.91% and (BKX.X) -1.14% lower, Telecom (XTC.X) -1.46%, and Networking (NWX.X) -1.08%.

  Austin Passamonte   2/14/02,  9:53:48 AM
Market action on intraday charts remain overbought across the board. Long-term charts are bullish. What to do?

Hazarding put plays against this "trend" can profit nicely or blow up in a trader's face. Waiting for intraday charts to go oversold and turn bullish in harmony with longer-term charts is the high-odds move, but we haven't seen that happen the past couple of sessions.

I'd say that shorting the market right at this opening bell for quick gains was a good move, but that scalp will probably need to be lifted within the first hour of action.

  Jeff Bailey   2/14/02,  9:50:17 AM
Citigroup (C) $44.95 -0.9% ... I still like this one as a short/put and targeting the $40 level near-term. Would follow stock short with stop just above $45.35.

  Jeff Bailey   2/14/02,  9:49:08 AM
Qwest Communications (Q) $7.75 -9.7% ... stock getting hit after company was not able to roll $750 million in commercial paper, forcing it to pull down $1.1 billion in bank credit lines. Qwest (Q) has roughly $3.2 billion in commercial paper and $4.1 billion in credit lines, so it could replace all outstanding commercial paper with its bank credit.

  Jeff Bailey   2/14/02,  9:40:23 AM
RJ Reynolds (RJR) $62.60 .... stock not yet open for trading. NY Post saying it feels RJR could be acquisition target due to its large hoard of cash. The company announced recently that it would use part of its $1.9 billion in cash to buy back $1 billion worth of stock, however this would reduce the number of shares outstanding an acquirerer would need to purchase and would not use up the cash fast enough. NY Post thinks acquirers are Philip Morris (NYSE:MO), British American Tobacco, Loews, Rothmans, or Carl Icahn.

  Jeff Bailey   2/14/02,  9:35:32 AM
Stocks seeing some Downside action in pre-market trading ...

Sinclair Broadcasting (SBGI) $10.57 ... stock tading lower at $10 after earnings.

PacifiCare Health (PHSY) $18.09 ... lower at $16.40 after missing estimates by 2 cents.

Incyte Genomics (INCY) $14.98 ... trading lower at $13.70 after downgrade by Alex Brown.

Human Genome Sciences (HGSI) $27.85 ... $26.80 after company lowered full year's guidance.

  Jeff Bailey   2/14/02,  9:30:57 AM
Stocks seeing some Upside action in pre-market.

Deltek Systems (DLTK) $6.05 ... trading $6.50 on earnings.

Sirius Satellite Radio (SIRI) $7.04 ... bid higher at $7.45 after announcing launch of service in 4 cities.

Whole Foods Market (WFMI) $37.86 ... jumping to $40.35 after upgrade and earnings report.

  Austin Passamonte   2/14/02,  9:18:25 AM
Great Valentine's Day Morning!

Guess I spent a little too much time cruising the news-based sites to catch up on my favorite soap opera, "As The Market Turns". Right now I'm expecting higher prices on Friday's close than today's open, but I will not simply buy calls and hold based solely upon that.

Intraday charts have yet to release from overbought extreme and setup a clear swing trade entry. Any pullback to support as depicted in Swing Trade Gameplan section charts should be the event we're looking for.

Traders who just have to be in the market could probably buy calls soon after the open and hold from there. Not my preference, but I believe that would make money. At the very least I'd wait until 10/5 min setup charts go oversold extreme before buying calls this morning!

  Jeff Bailey   2/14/02,  8:48:34 AM
Happy Valentine's Day!


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