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  Jeff Bailey   3/5/02,  5:02:14 PM
Amazon.com (AMZN) $15.97 -3.09% ... stock seeing some selling pressure in after-hours at $15.39 after company announced that CFO Warren Jenson intends to resign later this year. Mr. Jenson will stay on for several months to help assist AMZN in recruiting his successor. Mr. Jenson has been with AMZN since September 1999.

Point/figure chart has been bullish for AMZN since breakout at $14.50 of "bullish triangle." Current vertical count is bullish to $28. First sign of trouble would be trade at $12. Link

  Jeff Bailey   3/5/02,  4:57:50 PM
McData (MCDT) $15.93 -12% ... stock trading lower in after-hours at $13.85 after storage maker lowers guidance and cites the continuing cautious approach to IT storage and related infrastructure spending in early months of 2002. MCDT lowers Q1 forecast to a loss of $-0.02 to $-0.04 a share, on revenues of $73-$78 million versus prior guidance of $0.00 to $0.02 a share earnings on revenues of $85-$95 million. Link

Point/figure has been bearish and bearish vertical count of $16 was recently exceeded.

  Jeff Bailey   3/5/02,  3:41:53 PM
Medtronic (MDT) $44.87 -0.59% ... off worst levels of session ($43.38) after company announces FDA approval of the Marquis DR dual-chamber implantable cardioverter-defibrillator (ICD).

point/figure chart remains longer-term bullish with vertical count bullish to $80. I like this one as longer-term bullish play. Link

Trader may want to see if stock can close back above 200-day MA of $45.58.

  Austin Passamonte   3/5/02,  3:10:55 PM
Traders watching those daily charts see defined Tweezer Top bearish candle formations growing longer, and nervous bulls who bought the top yesterday & today darn well see them too!!!

  Austin Passamonte   3/5/02,  2:56:46 PM
If the Dow closes below 10,400; SPX below 1035 and OEX below 575 it would be clear indication to double down on those 100% risk capital put plays. Tweezer Top bearish reversal formation in the daily charts would be a powerful negative right here. With over an hour to go I personally don't expect such a market collapse (or anything even close) but if it happens we're poised to react, now aren't we?

  Austin Passamonte   3/5/02,  2:52:47 PM
(Answering a block of email questions in one fell swoop): Once again, just like last Friday we have price action within intraday charts coiling into wedges right below recent resistance and overall at relative highs. This coiled action usually breaks out in the direction from whence it was entered once the consolidation or "resting" phase is done.

However, we have daily chart signals pinned in overbought extreme and intraday chart signals looking weak. What does all this mean versus bullish percent, etc? Means we have markets that might flutter sideways in up & down fashion within new, higher ranges for awhile.

Quickly as readings can go from bearish to bullish they can likewise be reversed. Quickly as charts go from oversold to overbought they can be reversed. Lasting trend moves seldom (if ever) BEGIN with huge rallies or declines without necessary backing & filling to solidify excessive moves.

Shorts began covering, momentum players chased the lingering ones out and blew up all the indexes in two days. Where the base is filled from here for higher ground remains to be seen. This is still a trader's market, possibly in both directions by all the evidence I see.

And thankfully, we are traders!

  Jeff Bailey   3/5/02,  2:37:43 PM
Charles Schwab (SCH) $15 +2.38% ... bulls may want to take a look at the April $15's (SCHDC) $1.05.

near-term, could see rally to bearish resistance at $16.50. Target by or before APRIL expiration would be $18.50 and not bad little gain if found. Link

Yesterday's buy signal at $14.50 and today's added X gives vertical count of $20.50.

1/2 positions only and need relative strength vs. group to kick positive vs. sectors.

Bar charts shows stock breaking above longer-term 200-day MA today and could have bears looking to cover, thus providing some near-term "buy side" bias. Link

  Jeff Bailey   3/5/02,  2:10:14 PM
Semiconductor HOLDRS (SMH) bear needs to have tight stop though. We will note that relative strength chart of SMH did give "buy signal" today at 41.00 vs. S&P 500 (SPX.X). If we were to see a 42.00 relative strength reading, then no doubt we don't want to be short. Link

As it stands now, we might say this security is stronger vs. the market than it has been since August (red 8) of of 2001.

  Jeff Bailey   3/5/02,  2:06:42 PM
Semiconductor HOLDRS $47.80 +1.83% ... I have retracement from $54.37 to $22.74. This has 80.9% at $48.32 (right at today's high) and 61.8% at $42.28. Trader short this as of last night needs to keep a rather tight stop and $49 would be ideal.

Point/figure of SMH would show spread-double top at $49. Link

Can see potential "bear trap" that took place at $40 on spread-triple bottom, but that also came right at past support. Right now we may be at near-term upper end of range, so I'm thinking trader that "got short this sector" last night was looking at risk/reward bearish trade, with tight stop at $49.

  Eric Utley   3/5/02,  1:15:34 PM
In my mind, the biggest development this week was the Nasdaq-100 Bullish Percent ($BPNDX) reversal into bull confirmed Link yesterday. And reverse it did. The addition of 23 percent to the NDX bullish percent chart is one of the biggest one-day rises in recent history. The one-week rally in early February had the NDX reversed into Bull Alert from its Bear Confirmed condition. The subsequent sell-off into the end of February set-up the reversal necessary to generate the Bull Confirmed market in which the NDX trades today.

Because of its large one-day pop, there was a lot of upside risk removed from the NDX in only one day. Nevertheless, I completely abandoned my bearish stance on tech stocks after the reversal yesterday and am now operating from a bullish bias on tech stocks, which is the way I've been trading today. Shorts will trade nervous and longs will trade with confidence so long as the NDX is in Bull Confirmed, which results in a market dynamic in which demand outstrips supply. Finally, yesterday's reversal in the NDX brought the trifecta of major averages into Bull Confirmed, the other two are obviously the Dow and SPX. Now if only that Ten-Year Yield (TNX.X) would print 5.050%...

Viva vega, Austin. Is that a place in Greece?

  Austin Passamonte   3/5/02,  1:03:43 PM
Readers Write: "Hi, I'm short this index at the close last night..giving me a few jitters now..suddenly I am feeling as if I gambled rather than traded.. please advice / comment your thoughts on SOX index. [A]"

I get dozens of these requests each day and I'm sure the other OI contributers get even more. Key point here is the reader suffering from trader's remorse. I profiled the SOX index in weekend Index Wrap and SMH last night there as well. I see no signs of bearish proof and cannot make a case for going long or short this index right now. The fact that it's up 20% means nothing as it could tack on another +10% from here.

The real question here is why would one decide to enter last nigh, how long is the expected time-frame of this trade, where is the exit point if we're wrong and how much capital is at risk?

Those are all unemotional decisions that should be made before pulling the trigger, although heaven knows I've taken hundreds of trades based on "gut feeling" alone before. We won't dwell on how most of them turned out for me, but it's a fine line between trading and outright gambling indeed.

  Austin Passamonte   3/5/02,  12:56:27 PM
VIX and sister volatility indexes continue to implode here today, which tells us plenty of call buyers/put sellers are active on this dip. Currently below 22.00, the VIX can remain low for weeks on end as indexes move incrementally higher. But I've never in my career seen a case where distant-month calls or LEAPS were a good idea at these levels. Matter of fact, if the VIX touches or breaks below 20.00 I'll personally load up on puts with excess time value remaining and let them ride for the inevitable market drop and vega expansion from there.

  Austin Passamonte   3/5/02,  12:52:09 PM
Intraday chart signals cycled all the way down from overbought extreme to nearly oversold and look to turn bullish again this hour. Price action moved essentially sideways while these short-term overbought conditions worked off, and I would not be surprised to see a pop higher and green close today as well.

Choppy, volatile session as feared and tough to trade for most either direction.

  Mark Phillips   3/5/02,  12:39:43 PM
You've just got to love our readers!

Reader email just came in, informing me that $VOLDQ is the ADVDECV indicator for the NASDAQ on eSignal.

Thanks, Bulldog!

  Austin Passamonte   3/5/02,  12:35:59 PM
Jeff notes how he was "very wrong" the markets on a few apparently weak stocks at the time. Get in line Jeff... that one forms behind me! I logged no fewer than 18 long plays in Sector Share model last Monday and whittled that list down from almost 30. Each night I screen all tradable sectors for new longs or shorts and a ton of them appeared viable. Shouldn't that have been a cue to get long? Yes, but we're not alone. Most traders I know on both sides of the newsletter and public side were taken by surprise by this bear market rally which roared up from nowhere.

The only traders who really caught this ride are those who play the "always in" game going long or short at specific pivot points. That allows one to catch every big move and plenty of little losses as well. It is a losing proposition when playing options and their wide bid/ask spreads, time decay and slippage on stopped trades but works well in vehicles without these inherent limitations.

Only thing for option traders flat or light this market to do is wait for our next setup and go from there, willing to switch opinions on a moment's notice!

  Jeff Bailey   3/5/02,  12:03:22 PM
Very wrong In recent bearish trades, I was "very wrong" on MSFT, MXIM and MRVL near-term. Can't sit and frustrate over these three. Stuck with stops and now time to play the trend. I "dislike" MRVL enough to stay away.

Don't get the feeling that I think "it's only money." Not the case. I hate losing money. But when I'm wrong to a rather "great extent" I'll turn on a dime to hit the bullish side. I simply underestimated the bullishness of the MARKET and perhaps software, semiconductor sectors.

Feel I got "caught" just before massive short covering in telecom.

  Austin Passamonte   3/5/02,  12:00:50 PM
After two large-range sessions we can expect a day or two of digestion on those gains. Looks to be a choppy session so far and who knows what into the close? I'd get long calls if/when 60/30 min chart signals go oversold later this afternoon, which they might. However, I will not use stops on any March contract option plays between now and next Friday as whipsaw action takes them out too easily. 100% risk capital only is what I'm buying mine with from here while looking for larger gains than that before expiration!

  Jeff Bailey   3/5/02,  11:59:03 AM
Software According to Dorsey/Wright and Assoc., software sector is "bull confirmed" at 40%.

  Jeff Bailey   3/5/02,  11:48:22 AM
Rational Software (RATL) $20.80 +2.5% ... on bar chart, looking at MACD and correlating against September lows when MACD crossed above signal from below zero. The 200-day MA and current retracement of $21.14 are the near-term hurdles for bulls potential success. Link

Microsoft (MSFT) $63.19 -0.22% ... trading today as we might have thought as stock not as strong on relative strength as RATL. Test for MSFT is both the rolling 200-day MA and 50-day MA at $64. Together with RATL very good stocks to monitor for software strength. Link

  Jeff Bailey   3/5/02,  11:40:27 AM
Rational Software (RATL) $20.93 +3.25% ... would hold this one if long from Friday in market monitor (see Link 01:58).

Today's trade at $21 puts stock on early buy signal after successful test of bullish support. Would look for move above retracement of $21.14 and 200-day of $21.73 for bullishness to near-term target of retracement at $25.17. Link

I have retracement on RATL from $8.10 to $29.21, which has 50% at $18.65, 61.8% just ahead at $21.14 and 80.9% at $25.17. Today's trade at $21, now has bullish vertical count of $27.50.

Bull in RATL now actually wants to see sector bellwether Microsoft (MSFT) trade bullish.

  Austin Passamonte   3/5/02,  11:13:52 AM
Readers ask what a "blow off top" is. That event happens when markets have risen for days and the last batch of buyers come in off the sidelines to grab the top while the last batch of shorts capitulate & cover.

Once these two camps are long(flat) and no one else is left to keep buying, how can price action go higher? It cannot. The exact reverse scenario is true of a blowoff bottom and both are usually marked by heavy volume and failure the same day or next.

This does not mean the current rally is dead & gone by any means, but Monday's heavy volume came from players chasing the market higher. Today's irrational spike came from shorts covering furiously in fear. It will take strong buying later today and/or later this week to confirm the new bear-market rally is anything more than just that.

  Mark Phillips   3/5/02,  11:13:10 AM
On my last post, $VOLD applies to eSignal. Sorry for the confusion.

  Austin Passamonte   3/5/02,  11:07:46 AM
Any bets on whether the Dow and S&Ps post some really big "Tweezer Top" bearish reversal candle patterns today? That would be a red candle of nearly the same to equal or greater length than yesterday's white or green candle was. When a big bullish candle at relative highs is erased the next day by a big bearish candle, lower prices from there are high-odds.

The Dow would have to shed -200 index points by the close for this, which I don't think is very likely but certainly possible.

Only time will tell!

  Mark Phillips   3/5/02,  11:05:38 AM
Good Morning All!

Interesting action in the ADVDECV indicators on both the NYSE and NASDAQ this morning. Strongly positive at the open, with a sharp reversal shortly after 10am. Since then they have meandered sideways, and if I had to hazard a guess, I would say weakness prevails this morning, especialy with intraday lows in both price and the breadth indicators being hit right now.

To handle a bucket of email in one fell swoop, I utilize QCharts for my charting service and have no experience with other programs such as TradeStation, eSignal, TC2000 etc. I don't know what symbols these programs use for displaying the ADV/DEC volume, if available at all. One reader has pointed out in the past that $VOLD is the ADVDECV indicator for the NYSE, but I have no way to confirm this. If using a program other than QCharts, I would recommend contacting the provider of that software to inquire as to which symbols might provide the appropriate indicators.

  Austin Passamonte   3/5/02,  10:42:21 AM
Taking a cue from Mark Phillips excellent Traders Corner article last night, the NYSE AV/DC measure went decidedly negative at 10:15am this morning, once the S&P dropped 5 index points off its high.

Keep in mind that in order for this study to reflect price action advancing or declining it must first do so in the market. Hence, it must naturally lag the actual price action of futures markets where we see price changes occur first. An excellent little confirmation tool I personally like much better than tick or trin studies and thank "Rocket Man" for sharing it with us!

  Austin Passamonte   3/5/02,  10:37:35 AM
Note that all 60/30 min index charts are posting bearish "megaphone" or expanding wedge patterns. When consolidation coil it is a sign of gathering strength. When consolidations expand it is a sign of blowing off strength. When found at relative highs in a market it suggests a blow-off top is likely to be in for now.

  Jeff Bailey   3/5/02,  10:37:25 AM
Home Depot (HD) $47.82 -4% ... After downgrade by Goldman Sachs on HD and LOW. Key level to be looking for support is near $47 for HD. This is 200-day moving average and also 50% retracement (retracement from $34.85 to $59).

This stock is a Dow component and putting some pressure on Dow Industrials (INDU) 10,510 -0.7%.

  Austin Passamonte   3/5/02,  10:35:48 AM
After the short-covering rally cleared out all those resting stops, intraday chart signals are just now flashing bearish reversal confirmation patterns. Traders who hit the "sell" button once that irrational spike failed to hold are poised for downside action ahead. I added the second 1/2 of my DJX March 103 puts from yesterday and will sit on them at least until all 60/30 minute chart signals go buried in oversold extreme or they expire worthless, whichever should come first.

  Jeff Bailey   3/5/02,  10:33:25 AM
Semiconductor bullish percent according to Dorsey/Wright and Associates is "bull alert" at 48%.

  Jeff Bailey   3/5/02,  10:29:48 AM
Applied Materials (AMAT) $50.75 +1.4% ... stock we've been bullish on from p/f chart. Looking strong again today after yesterday's "triple-top" at $49. Link

  Austin Passamonte   3/5/02,  10:27:50 AM
Readers Write: "Morning Austin! I am wondering... When you give entry guidelines like you do in the Swing Trader, etc., is it best for one to wait for stochastic confirmation (either the 60, 30, or whichever) to "roll" down or up before entering? Example: last night you suggested OEX below 586. We would want to see the 60 and 30 roll down below 80 before entering, right? Thanks, [S]"

When building Gameplan suggestions on the night prior to a session's action we have limited facts to work with, especially with index plays. Seldom do the markets cooperate in delivering ideal short-term entry setups at 4:00pm EST that hold thru 9:30am the following day. We can easily do that in low beta models like Sector Share but much more of a challenge in Swing Trade or similar short-term models.

Individual traders who can pick or pass on specific entries in real time as evidence & facts all come together are at a distinct advantage during times like these, for sure. One example is waiting for clear price action failure before entry. We can only "guess" and "suppose" where points of action will be the following day while compiling instructions the night before, and one of the myriad scenarios that need to happen before high-odds setups occur is the one "S" mentions here.

So much for those methodical market days in Jan/Feb we knew were too good to be true!

  Jeff Bailey   3/5/02,  10:24:13 AM
Phelps Dodge (PD) $39.70 +0.55% ... breaking to new relative highs. Copper futures up fractionally at $0.73/lb and both trading pretty much in unison. PD bull likes the fact that PD moves to new relative high without copper and gives some confirmation that stock was indeed lagging the move in copper price. Near-term target from retracement is $40.60 level.

  Jeff Bailey   3/5/02,  10:21:12 AM
Watching 10-year YIELD ($TNX.X) here after ISM non-mfg. data. YIELD pegged at 5.044% and this is/was yesterday's high. Move above this level could spur further bullishness for stocks. Is bond market "sold" by recent strong economic data? Yesterday's action is looking like bond market is getting more nervous (willing to sell the Treasury) with regard to economic growth and most likely thinking rate cuts have run their limits. Link

  Austin Passamonte   3/5/02,  10:20:40 AM
Looks like the S&P 500 popped ten index points in seven minute's time. Either that was the mother of all asset allocation shifts or another buy program kicked out a whole bunch of nervous shorts in domino effect... one of the two. Very tumultuous times right now as shorts continued to get taken out while longs may further struggle for a bit before pulling back a tad soon.

  Eric Utley   3/5/02,  10:08:06 AM
ISM Index comes in with a big upside surprise: 58.7.

  Jeff Bailey   3/5/02,  10:07:04 AM
SanDisk (SNDK) $20.20 +10.30% ... I have had retracement from $29.64 to $9.01 (will note this morning's upgrade from Morgan Stanley and price target of $30 is similar to top of our retracement). This puts 50% at $19.32, 61.8% at $21.75.

  Jeff Bailey   3/5/02,  10:04:05 AM
MANAGE YOUR ACCOUNT If haveing shorted MRVL and you've got some SNDK long, then manage your account. First task is to work off losses.

Best way is to not simply sell a winner, but understand where a winner can still be sold to work down loss.

For example... if $1,000 put into short on MRVL at $34 and stopped at $37, then down 8.8%.

If long $1,000 of SNDK as bull at $16.50, then would raise stop in SNDK to $18.15 to try and assure profitable net in account.

  Eric Utley   3/5/02,  10:01:46 AM
ISM Index non-manufacturing (services) due out in a few minutes. Market is expecting a reading of 51.2 percent, better than January's 49.6 reading.

  Jeff Bailey   3/5/02,  9:59:42 AM
Marvell Technology (MRVL) $38.55 +0.81% .... Traders short/put this stocks should have stopped out at minimum yesterday of $37-$38 as stock gave "buy signal" and now breaks downward trend. Not interested in this one as I deem it "too risky" and I don't like sector association for bullish trade. Link

  Jeff Bailey   3/5/02,  9:56:38 AM
CNF Inc. (CNF) $33.36 -0.56% ... I still like this one as hold if trader has calls past March expiration. MACD just turning higher and edging above zero. Strong volume yesterday on upward move. Link

  Jeff Bailey   3/5/02,  9:52:47 AM
Dow Jones Transportation Average (TRAN) 2,999.58 -1.64% .... yesterday and today, this index hit my near-term bullish target of 3,000. Short-term traders may look to sell some strength in group in their long positions. Those with options past March can hold firm, but pullback to 2,800 not out of question. Would expect support to begin firming in the 2,720-2,800 range. Link

  Austin Passamonte   3/5/02,  9:51:45 AM
Great Morning!

For obvious reasons we have all daily and intraday charts topped out and/or pinned in overbought extreme zones. Most traders I talk to or read about are all expressing relative shock over the market's performance these past two sessions and are trying to make sense of it all. Is the rally for real, or just another of the many extended bear-market pops that all failed with no exceptions in the past two years.

Traders haven't forgotten how a "new baby bull" was called for each & every other time with no exception based on what seemed to be valid reasons at the time. Hindsight (and lost money) eventually proved all of the others to be false, mere bull traps set by the bears. Will this be the real deal? That's what everyone on the street now wonders and emotions are torn.

With a VIX near 22 and all longer-term charts soon topping out in overbought extreme after this V-shaped moonshot I'm not prepared to buy & hold anything long with reckless abandon. I too have heard the "market is turning" story clucked by Chicken Littles on Wall Street since April 2000.

  Jeff Bailey   3/5/02,  9:42:00 AM
SanDisk (SNDK) $20.13 +9.87% ... stock trading strong after UPGRADE by Morgan Stanley to "outperform" from "neutral." Firm saying March quarter seem to be tracking ahead of cautious expectations; raises estimates for Q1 2002, and 2003; price target $30. Link

SNDK is stock we pointed out as bullish last week on break at $16.50 as "bullish triangle." Would hold here for longer-term if holding options beyond March expiration. Shorter-term trader can lock in profits or target $21-$22 near-term.


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