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  Jeff Bailey   3/6/02,  11:23:45 PM
General Electric (GE) Tomorrow morning will discuss this stock. Look at this point/figure. Look at triple-top buy signal back in April (red 4) and what happened after GE traded $43. Now look at what trade at $42 would do (triple-top). Remember.... "red 4" was April of last year. Link

Relative strength chart of General Electric versus S&P 500 Index (SPX.X) Link again... "red 4" was April of last year.

Adding GE to bullish watch list on trade at $42.

 
 
  Eric Utley   3/6/02,  4:13:12 PM
If you're a day trader, using these triangles can be favorable for a few ticks. Take this RIMM move, which is more than an isolated case, into the close. A few thousand of the underlying flipped for a quick grand or two could've made for a nice day. I'm loving the 4-to-1 margin now offered to day traders, which allows trader types to leverage the moves like RIMM made into the close.

Pattern recognition can be applied to so many different time frames and used in many different methodolgies, don't limit yourself, that's all. Just a thought. And, as the kids say, peace out.

 
 
  Jeff Bailey   3/6/02,  4:01:01 PM
Economic data has tomorrow's jobless data being closely watched. While the economic numbers at the industrial level are improving, focus still on the consumer level and bulls will want some type of number to show further declines in the unemployement lines. With stocks having made some nice moves higher, bulls will want to see some people being put back to work and not just a "leveling out" of unemployed.

 
 
  Eric Utley   3/6/02,  4:00:21 PM
I've taken a small position in Research In Motion (NASDAQ:RIMM) in the underlying with about a 50/50 risk view. My downside is defined to a retracement at $24.50, while my upside is defined at $30.50, which is the current vertical count and retracement level. Such a risk profile is uncharacteristic of my style, but I think the bullish triangle increases my probabilty, which is why I'm willing to give up some risk to the downside in favor of better odds.

 
 
  Jeff Bailey   3/6/02,  3:58:32 PM
S&P 500 Index (SPX.X) 1,162.85 +1.45% ... 1,170 has been the resistance level and past commentary has had the 1,175 level from retracement as "key resistance." Today's trading has this index breaking above 200-day moving average and this will lift the spirit and perhaps the fight in bulls. Link

 
 
  Eric Utley   3/6/02,  3:54:53 PM
Research In Motion (NASDAQ:RIMM) broke that $27 level Link to give the bullish triangle breakout.

 
 
  Jeff Bailey   3/6/02,  3:48:04 PM
"Smack daddy! World Wrestling Federation (WWF) $15.75 +6.41% breaking to new 52-week high. Broke bearish resitance not long ago at $13.50. Vertical count is bullish to $18.50 Link

 
 
  Jeff Bailey   3/6/02,  3:32:24 PM
Green across the board in all sectors, except the Semiconductor Index (SOX.X), which is down fractionally -0.77%.

 
 
  Austin Passamonte   3/6/02,  3:30:52 PM
Last night's Index Wrap section posted 60/30 minute charts showing bullish wedges in the Dow and neutral wedges in the S&P indexes. Measuring targets from these patterns uses price span on the wide end of each wedge tacked onto the breakout point. The SPX wedge spanned 1142 to 1158 or 16 index points. Add that to a breakout near 1150 and we have an upside target of 1166... almost there!

Dow wedges spanned from 10,500 to 10,600 or 100 index points, and a break above 10,475 already has achieved the 10,575 upside target.

What does this mean long-term? Nothing, except that we have near-term points of resistance measured that exhausts the relative energy of these current consolidations.

Good way for short-term traders to play is upside breaks on 10/5 min charts intraday and short resistance targets with longer term holding periods in mind... at least a few sessions ahead for potential shorts in a strongly trending market.

 
 
  Jeff Bailey   3/6/02,  3:30:14 PM
Calpine (CPN) noting that the Jan03 $17.50 calls (OLBAQ) rather active today with volume of 1,404, open interest was 1,476.

 
 
  Jeff Bailey   3/6/02,  3:28:07 PM
Calpine (CPN) $10.90 +19.12% ... subscriber wondering if it is time to "get long" Calpine?

Stock did give "bear signal reversed" pattern with trade at $9.50 yesterday. Link

I "classify" Calpine as an "electric utility" and according to Dorsey/Wright and Assoc., this group is "bull confirmed" at 54% bullish. This is positive for CPN.

Relative strength for Calpine vs. Utility Index (UTY.X) is bearish on longer-term basis, but just today did give "buy signal." Link

Aggressive bull might find attractive, but would trade calls light and buy plenty of time.

 
 
  Austin Passamonte   3/6/02,  3:14:45 PM
Oversold or overbought markets can remain pinned in extreme zones for days or weeks on end as a trend continues. I'm scared to trade the upside in buy & hold fashion right now with all charts looking toppy, but scalping intraday dips on tick charts works between the bells.

Market sentiment is definitely to the buy side right now as falling VIX proves buyers are loading up on calls or selling puts. Trying to sell every top best be done using light amounts of capital at best, likewise buying dips with index options to hold over several sessions.

These are times when stock picking favors index plays for calls when holding periods span several days or more. Indexes are clearly extended and impossible to measure upside reward to risk, but individual issues always exist to let one do so in safer fashion during such times.

 
 
  Eric Utley   3/6/02,  3:00:38 PM
I've been having some success trading bullish triangle patterns in this market. Two that come to mind recently are Honeywell (NYSE:HON) and SanDisk (NASDAQ:SNDK). Both stocks broke from their triangles big time. A stock that I'm watching today is Research In Motion (NASDAQ:RIMM) for a print at $27 would have it breaking from a bullish triangle.

My favorite way to play these triangles is by anticipating the breakout, which requires adopting a bias ahead of time and entering on the last reversal lower in the triangle.

I only recently ran across this RIMM pattern and, as such, have not established a position. If the market were a little less short-term overbought, I'd be all over this RIMM, but I'd like to see a little downside risk removed. It's a strong stock, above its bearish resistance line, holding up very well relative to tech. Its performance Link relative to the NDX is obviously impressive. It's one to keep on the radar with the possibility of a bullish triangle Link

 
 
  Austin Passamonte   3/6/02,  2:49:42 PM
Traders market today where buying the dips on each intraday chart oversold extreme results in small gains while trading around put plays taken near resistance with time-frame of several days to a week attempt to catch any subsequent drop.

Beige Book couldn't help shorts press the market down, so their covering and new buying pushes indexes toward new recent highs. The Dow players badly want to close that index above 10,600 soon for confirmation of strength. Looks like Friday will be a key point in the market once more while we dink & dunk our way thru today and Thursday.

 
 
  Jeff Bailey   3/6/02,  2:36:14 PM
Genentech (DNA) $49.29 +0.57% Link ... Traders citing Bloomberg are saying that DNA has kept as much as $573 million of real estate obligations off its balance sheet las year in the form of synthetic leases. According to the company's most recent 10-K, five of the company's operating leases are set up this way.

 
 
  Jeff Bailey   3/6/02,  2:29:59 PM
Beige Book link is Link

 
 
  Jeff Bailey   3/6/02,  2:27:03 PM
Beige Book ... won't quote it all, but report shows some sign of economic firming. Not much improvement, but not any weaker.

Labor markets slack in most districts, with business suspending bonuses, freezing wages, or skipping annual salary increases. This has wage pressures "subdued" or "largely nonexistent."

Retail showed some signs of improvement vs. year ago comparisons. Home furnishings strong in Cleveland, Richmond, Atlanta, St. Louis. Motor vehicle sales solid in Philadelphia, St. Louis, Dallas and San Francisco, but are down from rapid pace of late last year.

 
 
  Jeff Bailey   3/6/02,  2:20:55 PM
Riverstone Networks (RSTN) $5.69 +13.6% ... up on "rumor" of take over speculation. Link

Needs something to bring some buyers to the table.

 
 
  Jeff Bailey   3/6/02,  2:12:56 PM
Natural Gas Index (XNG.X) 184.72 +1.28% ... getting a boost here after American Gas Association reports a 132 billion cubic feet drawdown in gas inventories. Link

Stock we've liked from bullish side with oil/natural gas exposure production is Apache Corp. (APA) $54.20 +0.59% Link

 
 
  Jeff Bailey   3/6/02,  2:08:49 PM
Beige Book link will be to Fed site if you want to read. Link

 
 
  Jeff Bailey   3/6/02,  2:07:44 PM
Beige Book due out any moment and could have impact on market.

 
 
  Jeff Bailey   3/6/02,  1:57:49 PM
General Electric (GE) $41.29 +1.92% ... interesting technicals here. Stock trading right up to still trending lower 200-day MA of $41.40 Link

Also interesting is stock would give "triple-top" buy signal with trade at $42. Lots of bears short this one on their scenario of "economic" weakness that may trigger long on a break above $42. Link

 
 
  Austin Passamonte   3/6/02,  1:51:21 PM
We may have gotten lucky and hit those put play entries right at the session highs, barring any late-day surge. In any event I plan on personally holding mine into Friday's session unless they should happen to double their purchase price beforehand, in which case I'd have some "tough" decisions to make! [grin]

 
 
  Jeff Bailey   3/6/02,  1:40:11 PM
Rational Software (RATL) $20.52 -2.19% ... was bullish on "Rat-tail" yesterday and think today is just a rest for stock. Did trade right up to a rounding 50-day MA of $21.28 and that is "hurdle" near-term. Link

While RATL looks to be a stronger stock in software space, not getting any help today from GSO.X $169 -0.2% or Microsoft (MSFT) $62.89 -0.3% where we see similar technicals as it relates to the 50-day MA. Link

P/F chart looks stronger for RATL than MSFT at this point and my thinking is that demand will win out on RATL.

 
 
  Austin Passamonte   3/6/02,  1:14:02 PM
All D/60/30 minute time frame index charts are now in overbought extreme as the Dow & NDX trade just below recent highs while both S&Ps trade slightly above. I'll test some March OEX 580 puts or SPX 1125 puts right here using 100% risk capital, no stops whatsoever and a holding period into Friday after the INTC news or expiration next week if the index fails to pull back.

With all charts overbought and VIX below 22 right now this is a "buy & hold" calculated risk with seven trading sessions remaining to be right. Using 100% risk capital on the entire purchase I'm looking for that or greater in return with my edge being downward pressure built into current market price action.

Long bear-put debit spreads would work just as well if purchased for 1/4 to 1/2 intrinsic value to negate theta decay and offer 1-1 to 1-4 leverage maximum gain.

If I'm wrong, maximum risk to loss is already pre-defined at the purchase with no other guesswork or negative surprises possible.

 
 
  Eric Utley   3/6/02,  1:10:50 PM
Yestereday, UBS Warburg cuts its investment rating on three airlines: Delta (NYSE:DAL), Southwest (NYSE:LUV), and AMR (NYSE:AMR). The downgrade was of the valuation variety. UBS said that prices were ahead of fundamentals. The cut caused a pretty steep drop-off in the group, noting the pullback in the Airline Index (XAL.X).

Today, the XAL is higher by 4.73 percent. It seems that the market doesn't agree with the over valuation thesis just yet. I agree with the market. The downgrade at this point in the cycle was stupid.

 
 
  Eric Utley   3/6/02,  1:03:32 PM
I recently wrote about the component supplier versus service provider divergence in the wireless space. We looked at RF Micro's (NASDAQ:RFMD) rally in the face of further deterioration among service providers. Today, we're seeing the relative performance gap narrow as the service providers play catch-up. Take a look at the pops in some of the providers today:

Sprint PCS (NYSE:PCS) 15.81 percent, Nextel (NASDAQ:NXTL) +13.86 percent, AT&T Wireless (NYSE:AWE) +10.52 percent.

Meanwhile, RF Micro is higher by a mere 1.51 percent. That's catch-up and confirmation on the part of service providers.

 
 
  Jeff Bailey   3/6/02,  12:58:22 PM
Small cap biotech bulls take a look at Peregrine Pharma (PPHM) $2.43 +4.29%. Decent bullish trade at market here, stop jut under $2.20 and targeting $3.00 near-term.

 
 
  Jeff Bailey   3/6/02,  12:42:52 PM
Biotech HOLDRS (BBH) $124 +3.18% ... getting upside alert here and this is break of bearish resistance and "quadruple-top buy signal." Link

Bullish technicals here. Vertical count now turns bullish to $142.

 
 
  Jeff Bailey   3/6/02,  12:38:27 PM
Microsoft (MSFT) $63.16 +0.18% ... subscriber looking for potential short based off of 50-day MA as resistance.

I took my shot at $58 and felt best to move to sidelines in short at $63. Here's what I'd be "careful" of if looking short here.

Similar technicals on daily chart found now as was the technicals in mid-October as stock rallied to 50-day MA, did pull back, but then jumped higher and went on nice 2-3 month bullish run. Notice similar position of MACD on daily chart now as to mid-October. Link

With recent buy signal, I've not lost my more exteme bearishness toward stock as I don't really have a longer-term bearish target to have me thinking that there will be other market participants "doubting" the stock.

Is it worth a stop now placed above the 200-day MA of $64.15 to potentially get a decline back to $60?

 
 
  Austin Passamonte   3/6/02,  12:36:20 PM
Ahhh... CNBC is profiling stock prices in March 2000 versus yesterday's close. Really makes me wistful to relive the good ol' days and I for sure do not mean 1999! If we could just short our way down the ladder thru 2000 from March to New Year's Eve one more time we'd all be retired, sitting on absolutely vulgar levels of personal wealth!!!

Wistful wishes...

 
 
  Eric Utley   3/6/02,  12:30:52 PM
The Ten-Year Yield (TNX.X) just printed 5.050% to give the new buy signal Link , reversing that bearish triangle that was traced about two weeks ago. I'm using the breakout in yield to increase my bullish conviction on stocks.

 
 
  Jeff Bailey   3/6/02,  12:29:26 PM
Sony Corp. (SNE) $53.01 +5.38% ... getting upside alert at retracement level of $52.87 38.2%. Long way to go, but first "hurdle" being navigated here.

 
 
  Austin Passamonte   3/6/02,  12:18:34 PM
We hear plenty of media talk about how this rally seems to have legs, economy is turning etc, but no one should ignore the VIX at 21.50 level right now.

I've heard talk that volatility always trends lower at this time of the year, etc and that is true. In March 2001 it touched the 23 area and March 2000 the 20 area. Not long after the markets totally collapsed each year, the first from all-time highs and the second was promised to be an ultimate, years-long bottom.

Just some cautious observations from a history student!

 
 
  Jeff Bailey   3/6/02,  11:59:29 AM
Copper "Hoppers" noting that March Copper futures (hg02h) are up 1.2% at $0.744/lb. Couple of days ago we thought PD was good trade for bulls with copper at $0.71/lb and looking like it would move higher from upward trend.

 
 
  Jeff Bailey   3/6/02,  11:57:19 AM
Phelps Dodge (PD) $40.68 +5.52% ... making a nice move today and breaking to new relative highs. Been mentioning this one for weeks. I have a retracement level righ in here at $40.60, which was near-term target from $34 level.

Today's trade at $40 is break of downard trend on p/f chart and also double-top buy signal. Link

 
 
  Jeff Bailey   3/6/02,  11:49:44 AM
Securities Broker/Dealer Index (XBD.X) 520.19 +0.8% ... adding marginally to yesterday's gains. MACD on daily just getting above zero level and this should bode well over next couple of weeks in my book. Link

Yesterday we thought Charles Schwab (SCH) $15.23 -0.39% might be attractive long for April $15 calls (SCHDC) at $1.05. Not doing much today and bid $1.15. (see yesterday's market monitor Link 02:37).

 
 
  Jeff Bailey   3/6/02,  11:35:07 AM
Defense Index (DFX.X) $189.70 +1.6% ... this may be interesting. Vertical count from first column of X since inception was/is bullish count to $196 on $2 box scale. Link and that's pretty close to "fitted retracement" at 80.9% of $201.04.

 
 
  Jeff Bailey   3/6/02,  11:31:02 AM
Defense Index (DFX.X) $189.67 +1.58% ... is rather "young" index so not much historical data. I've taken a retracement bracket and "fit" it to the chart. Interesting retracement from $214.50 to $144.24, which has 19.1% at $157, then 38.2% of $171.06, 50% at $179.34, 61.8% at 187.63 (just recently broken to upside) and up at $201.04 is 80.9% retracement.

All this does is give us some levels to monitor, but does seem to be some levels where resistance/support has been found. If the MARKET is trading this retracement then we should be too.

 
 
  Jeff Bailey   3/6/02,  11:26:40 AM
Defense stocks Both defense indexes breaking to new highs today and have been trading strong. Good sign near-term for our lottery play in Rockwell Collins (NYSE:COL).

Here's the Philadelphia Stock Exchange Defense Index ($DFX.X) chart since inception on 11/02/01. Link

 
 
  Austin Passamonte   3/6/02,  11:01:09 AM
There she goes!!! I thought the indexes would just churn around until later this afternoon, but the Dow broke out of its bull-pennant formations and lifted the S&Ps above their neutral wedges as depicted in last night's Index Wrap. By the same token NDX/QQQ pulled lower via the SOX struggles below its bear-flag patterns examined last night as well.

I really hate trading these mixed markets as it mutes S&P indexes action due to bi-polar effect. Right now it looks like we are a day or so away from overbought charts across the spectrum and that would move me to action with options if/when the setup occurs.

 
 
  Jeff Bailey   3/6/02,  10:51:55 AM
Dow Breadth is positive with 26 up and just 4 down. Weakest is Hewlett Packard (HWP) -2.18%, with marginal weakness is IBM, INTC and MSFT. Hmmmmm.... 4 computer-related tech stocks.

Strength in Alcoa (AA) +2.5%, JP Morgan (JPM) +4.2%, McDonalds (MCD) 3.4%, Merck (MRK) +1.9%.

 
 
  Jeff Bailey   3/6/02,  10:45:36 AM
Rockwell Collins (COL) $23.50 +1.9% ... stock really not doing much for past 5-6 sessions. Just hanging around at upper consolidation. Link

 
 
  Jeff Bailey   3/6/02,  10:41:00 AM
Adelphia Communications (ADLAC) $23.54 -1.05% ... I'm still monitoring this one, and little has changed in my mind. Stock still bearish on p/f chart with vertical count of $4. Link

The Jan03 $20 puts (OFYMD) that I profiled on 2/15/02 at $4.90 are bid $3.10.

On bar chart, I have retracement from $32.71 to $18.76, and that has 50% at $25.73, which is also where rounding lower 50-day MA is at, 61.8% retracement right here at $24.08, and 80.9% retracement at $21.42.

Stock has not traded below a previous day's low since recent bottom, except for 02/26/02 and 4-cent a share violation of previous day low. MACD still trending higher, but below zero. Bear wants to see stock trade sideways near this retracement, then begin rolling over. Link

 
 
  Jeff Bailey   3/6/02,  10:29:56 AM
Sector Weakness has Semiconductor Index (SOX.X) -3.25%, Internet (INX.X) -3.4%, Software (GSO.X) -2.24%, Fiber Optic (FOP.X) -2.6% and Oil Service (OSX.X) -2.4%.

Sector Strength found in Biotech (BTK.X) +2%, Airlines (XAL.X) +2%, Wireless (YLS.X) +1.9%, N. American Telecom (XTC.X) +1.3%

 
 
  Austin Passamonte   3/6/02,  10:26:39 AM
From yesterday until now we've watched the indexes persistently chop sideways just below SPX 1146 and just above 1154 areas over and over again. This consolidation has yet to break higher or lower as Dow & NDX indexes remain split each day, one up while the other's down. Considering Fri/Mon covered a week's worth of distance if not more, we can expect markets to digest these changes before the next directional break occurs again.

I see more mixed charts than clarity right now, and will save my sizeable bets until later this session if not later this week accordingly.

 
 
  Jeff Bailey   3/6/02,  10:11:23 AM
Marvell Tech (MRVL) $37.63 -1.82% ... stock just sitting here and hasn't triggered "inside day" setup yet. I have retracement from $45.18 to $8.87, this has 19.1% at $38.24 (current levels), 38.2% at $31.31. Thinking some near-term "sell bias" from market makers at current level and looking to use "inside day" to help with any type of trade.

 
 
  Jeff Bailey   3/6/02,  10:07:25 AM
Factory Orders up 1.6% and that was pretty muchinline with consensus looking for 1.5% gain.

 
 
  Jeff Bailey   3/6/02,  10:03:45 AM
Economic Data Due out at 10:00 AM (3-minutes) is factory orders. Consensus looking for 1.5%.

 
 
  Jeff Bailey   3/6/02,  10:00:22 AM
QLogic (QLGC) $45.12 -5.46% ... stock down in "sympathy" with last night's earnings warning from McData (MCDT) $11.65 -26.8%.

QLGC chart Link

McData Chart Link

 
 
  Jeff Bailey   3/6/02,  9:55:30 AM
Semiconductor Index (SOX.X) 599.49 -2.32% ... yesterday we discussed reader e-mail from subscriber that had bought puts on SOX near close on Monday. Was nervous yesterday. As such, would keep a stop just above yesterday's high at this point. Technical target right now would be both the 200-day and 50-day MA's at/near 546. Link

 
 
  Jeff Bailey   3/6/02,  9:51:33 AM
Japan Index ($JPN.X) $120.10 -0.02% ... recently gave quadruple-top buy signal at $118 and hint that Merrill may be onto something here. Bullish vertical count of $162. Link

Relative strength of JPN vs. the U.S's S&P 500 (SPX) still weak, but close to reversing into column of "X." As such, not selling all U.S. securities and putting everything in Japan. Link

 
 
  Jeff Bailey   3/6/02,  9:40:26 AM
Sony Corp (SNE) $51.90 +3.18% ... getting upside alert on SNE on move above $51. 1/2 position looks good for October $50 calls (SNEJJ) offered $7.40, or underlying stock. (see 09:00 EST Intraday Update) Link

 
 
  Jeff Bailey   3/6/02,  9:34:44 AM
ImClone Systems (IMCL) $23.82 ... stock active at $28.50 (+19.7%) in pre-market after IMCL and Bristol-Myers Squibb (BMY) revise terms of Erbitux agreement. Link

 
 
  Jeff Bailey   3/6/02,  9:30:49 AM
Marvell Tech (MRVL) $38.33 .... aggressive bears looking for a short-term trade to begin with may have their eye on shares of MRVL this morning. Stock gave an "inside day" setup yesterday. With stock futures a bit weak this morning, might be a trade here on break of yesterday's low at $37.24, stop $39.25. Link

After reporting earnings last week, stock jumped higher and volume has calmed down a bit. Thinking stock might give traders a bit of a pullback near-term.

 
 
  Austin Passamonte   3/6/02,  9:03:42 AM
As noted in last night's Index Wrap, I'm uncertain about market direction for the next two sessions via intraday chart conflicts. When that happens I like to broaden my picture to a wider view. I've spent the past 45 minutes scanning most of the S&P 500 components and all iShare/HOLDR/SPDR basket share index sectors using weekly-daily chart signals.

What I found is the same thing anyone else can see: old economy issues, cyclicals, etc are all banging resistance and chart signals are in overbought extreme. Technology issues are still coming up from oversold and look to have more upside potential but should top out in overbought soon.

With respect for the VIX now below 22 and what have been vertical markets without basing, I'll look to buy index puts on any further rallies that pop toward recent highs. I expect to see at least one solid upside pop in the next two sessions and if it fails to break Monday highs I'll load the boat with SPX and/or OEX puts... most likely SPX March 1125s / OEX March 570s this week and hold into next using 100% risk capital and no stops.

 
 
  Austin Passamonte   3/6/02,  8:11:10 AM
Great Morning!

After the dog kicked me a few times with restless paws as she slept, I decided to get out of bed and catch up on market & world news now that I'm awake. Not much of great interest that harkens a big move either way at the open, and GLOBEX futures have tracked a dead-straight line since 4:15pm on Tuesday.

We can bet that Friday will be a very active day as most of them have been lately. After INTC and SUNW give their latest w.a.g. for business past & present it should clear the path for momentum up or down into the weekend.

Today and Thursday are anyone's guess and either could be large-range sessions too, but mixed charts across different indexes suggest sideways rotation or chop is the most likely fate from evidence seen right now.

 
 

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