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  Jeff Bailey   3/12/02,  8:23:35 PM
Adelphia Communications (ADLAC) $24.26 -2.37% ... stock did NOT close below $24. Was jumping around the Internet and found this news item today. Wasn't aware of this, but interesting. Link

  Jeff Bailey   3/12/02,  6:29:12 PM
Retails and Autos Tomorrow we get some economic data from Retail Sales. Consensus is looking for retails sales as a total to rise 0.8%. Retail sales excluding autos is expected to rise 0.5%.

Interesting chart in retail sector is Kohls (KSS) $69.19 +1.09% today. Trade at $70 on stronger than expected retail number could be bullish candidate. Vertical count is bullish to $85 Link and relative strength has been strong as noted in past comments. Link will note current RS is 59.36 and would be back in column of X on calculation of 60, which may take place on a trade at $70.

Should auto sales portion come in strong, then will be keeping an eye on DaimlerChrysler (NYSE:DCX) $43.92 -0.27% Link .

  Jeff Bailey   3/12/02,  5:16:08 PM
Earthlink (ELNK) $10.58 +9.18% ... forged an agreement earlier today with AT&T Broadband that allows ELNK to offer high-speed cable Internet service via AT&T's broadband network.

Stock gave a p/f double-top buy signal today at $10 and pretty good volume today of 10.7 million shares. P/f chart now has bullish vertical count of $19 and there's some room to bearish resistance of $15. I've turned the "volume" on and looks a bit like "book end" volume on that leg down from $15-$11 and volume pretty equal here on leg up in current column.

Relative strength chart vs CBOE Internet Index (INX.X) Link is "buy and column of X" after today's action and my be a stock for aggressive bull to take partial position in with volume getting some attention today.

  Jeff Bailey   3/12/02,  3:56:08 PM
Vivus (VVUS) $9.40 +21.4% (see 01:54)... would snug a stop at break-even. I've taken a "fitted" retracement from $11.25 to $2.96, with the $11.25 level coming from the bullish vertical count from point/figure chart. This has 61.8% at $8.07, 80.9% right here at $9.64. May want to sell some strength into close and lock a nice gain.

  Austin Passamonte   3/12/02,  3:48:46 PM
Nasdaq 100 and SMH are posting what look to be bearish island reversal sessions on the gap-down that couldn't fill. Today's gap should be filled with a close above it by tomorrow or Thursday at latest. If this fails to happen, get even shorter these issues!

Friday I bought some Q Mar 38 puts and SMH Mar 47.5 puts that are faring very well today indeed. From the looks of these near-term charts (especially daily) I'm really torn about taking them off the table or letting them ride into the next few sessions ahead.

Emotional battles inside us all that we traders face!

  Austin Passamonte   3/12/02,  3:41:58 PM
Pretty flat session when we back out the morning gap open. At least for a Triple-Witch week, that is! Looks to me like we're probably one or two sessions away from another good downside entry setup. Scalping a handful of S&P points doesn't make us rich but hey, it's practically free money sometimes. Makes sitting thru sessions like this with one eye on the charts worth something, anyways.

  Austin Passamonte   3/12/02,  3:38:16 PM
While I sit here waiting to cash out of this afternoon's short and see how much reaches the register, let me add a tad to the excellent analysis Eric gave on the VIX falling earlier today.

I've noticed a pattern predictable as sunrise that only appears on average twice a year: VIX falls to low 20s area and everyone get obsessed with it. Markets bounce around and even spike considerably higher, then the masses lose interest in the VIX near 20 and explain it away as insignificant. Soon we'll hear the same old mantra about how a strong rally can emerge even when the VIX is low and it'll move higher from there into the rally.

That's possible, but I for one have never seen it happen in my career! I've lost thousands of dollars fading the VIX (low and high) and made thousands of dollars following it. But not on an instant basis... the cycle from 21.50 to 28+ could take weeks or months from now. But one thing is very, very high odds from here: when the VIX touches 30 once again (trust me, it will) the major indexes will not be trading at current levels or recent highs at that time.

OTM puts with time value remaining on buy & hold basis right now have miniscule vega built in. They can do some wonderful things when markets fall and VIX rises!

  Leigh Stevens   3/12/02,  3:20:38 PM
Call/Put (C/P) Indicator referred to earlier at Link is not found elsewhere as it's a custom indicator that I create by daily manual input of the CBOE volume figures daily into my TradeStation app. It is different than the common put/call ratio, cause: 1) I take out the daily index options volumes and 2) I divide the equities daily call volume by the daily put volume, rather than work with a fractional number, as in the PUT/call ratio. Look for a daily update of this chart, once I get completely set up. C/P is flashing a cautionary signal only. Worth watching these numbers in coming days to see if traders get extremely bullish, especially given recent third attempt at SPX chart resistance just over 1170. A close over 1170-1175, in the SPX would be a bullish breakout and suggest another up leg however as long as it then holds as support on subsequent pullbacks.

  Eric Utley   3/12/02,  3:09:58 PM
The Nokia/Lucent/Microsoft trifecta is unfolding here in big cap tech as we enter the last hour of trading. Nokia's lowered sales guidance made trouble for wireless, Lucent's failure reinforced the terrible state of telecom, and The Axe's pooh-poohing of Softee sealed the deal. Meanwhile, the deep cyclicals and energy shares trade well. That's how you spell bifurcation.

The Nasdaq-100 (NDX.X) broke from its 20-point intraday range just recently and looks weak going into the close. Kudos to Mr. Passamonte who was shorting the "overbought" intraday pops.

  Austin Passamonte   3/12/02,  3:02:19 PM
Per the 2:30:15pm comment, we managed to short the high tick for this part of the session at 1167.25 in the S&P. Keeping a tight trailed stop has certain gainslocked in from here with zero possibility for loss, but hoping for downside follow thru and solid payout by the closing bell.

Time will tell from here!

  Jeff Bailey   3/12/02,  2:49:52 PM
Phelps Dodge (PD) $41.68 +1.52% ... breaking to new relative high. Move much above $42 could have stock making break for retracement at $45. (retracement from $49.79 to $25.74) has 50% at $37.76, 61.8% at $40.60 (found support here last four sessions) and 80.9% at $45.19.

  Leigh Stevens   3/12/02,  2:46:52 PM
Call/Put Indicator that I use to guage market sentiment and a near-term overbought market situation is well out of bullish territory. You can take a look at this indicator at Link

  Jeff Bailey   3/12/02,  2:39:57 PM
Adelphia (ADLAC) $24.19 -2.65% ... not much has changed here. 60-minute chart shows stock hugging that 50-pd MA and MACD edging below zero level Link and 30-minute shows 50-pd starting to round a bit up at $24.78 Link

  Jeff Bailey   3/12/02,  2:33:49 PM
Good correlation found between HMO Index (HMO.X) Link and Oxford Health (OHP) Link

Even MACD on the daily looking very similar.

OHP has been outperforming the HMO.X since early January (after red 1) and depicted by the relative strength chart. Link

  Austin Passamonte   3/12/02,  2:30:45 PM
We simply do not have directional conviction in the market today either way. We knew the dip buyers would continue to press upwards and most of the morning gaps (outside of tech) have indeed been filled. I'm trying a downside play right here but will keep it on a short leash for today.

We are now in the classic 2:00pm afternoon market move period and I expect to get stopped out or run well into the black in a hurry... just not sure which it will be quite yet!

No high odds entry setups exist right now.

  Eric Utley   3/12/02,  2:23:45 PM
We're about two points into the Research In Motion (NASDAQ:RIMM) trade I profiled down at $27. The stock isn't moving as fast as I'd like; hey, I respect the time value of capital. Nevertheless, I'm looking for a print up in the $30.50 area and taking protective measures against downside risk in here.

  Jeff Bailey   3/12/02,  2:19:46 PM
Dow Industrials (INDU) 10,632 +0.19% ... breadth getting more positive and now stands 15 up, 15 down. Very different than earlier this morning. Intl. Business Machines (IBM) $108.70 +3.28% Link extending earlier gains, with Alocal (AA)+1.6% Link , McDonald's (MCD) +1.57% Link , Minnesota Mining (MMM) +1.4% Link and Procter Gamble (PG) +1% Link daily gainers.

  Eric Utley   3/12/02,  2:17:44 PM
The little ramp-a-roony here in the Dow is from IBM, MMM, and PG -- each high dollar stocks. Also, we're seeing a pullback in bonds. The Ten-Year Yield (TNX.X) recently ticked to its intraday high.

This market is very impressive in light of the tech/telecom warnings and overseas weakness -- the market away from tech and telecom, that is.

  Jeff Bailey   3/12/02,  2:09:11 PM
Treasury bonds earlier this morning we noted that the 30-year ($TYX.X) YIELD had edged green, now seeing 10-year YIELD ($TNX.X) edge higher at 5.321%. Still some willing sellers in the 10-year ($TNX.X) despite today's earning's warnings from telecom.

Maybe its just the telecom and telecom equipment sectors that have such a long way to go before some cash finds them (earnings and institutional investors).

  Jeff Bailey   3/12/02,  2:01:28 PM
Tech Data (TECD) $47.33 -7.5% ... stock under some selling pressure in past hour. Trader talk is that a tier one firm saying it believes TECD will make its current quarter, but expects management to guide down -5%-10% contraction going forward versus the -3% decline currently projected; firm suggesting investors take profits at current levels and sees the shares more attractive in low to mid $40's. Link

  Jeff Bailey   3/12/02,  1:54:09 PM
Vivus (VVUS) $8.43 +9.67% ... stock breaking out of pennant formation Link after Dow Jones reports that stock is being accumulated by institutional investors and that company is expected to release positive news soon. Rumor in market is that Pfizer (PFE) is considered potential bidder for company.

  Austin Passamonte   3/12/02,  1:50:06 PM
We still have a market full of buyers here... those who are dumping MSFT are probably fleeing into IBM for relative "safety". With a VIX still near 21.50 and weekly/daily charts on the verge of turning quite bearish I'd be shocked to see a full-blown rally take out recent highs and hold above there to continue on.

Trading the upside intraday is fun, but I'll pass on holding over the close for now. Key today will be how the NDX closes; can the bulls keep pushing tha thing higher or will MSFT/INTC keep the reality lid on today?

  Eric Utley   3/12/02,  1:43:54 PM
I've received a reader question concerning the drop in the CBOE Volatility Index (VIX.X) in light of the sell-off in stocks today. The VIX opened above 23 this morning, but ticked lower as the NYSE names clawed higher. Separately, the Nasdaq-100 Volatility Index (VXN.X) traded higher in light of the 2.4 percent drop in the NDX cash.

I think that the drop in the VIX is a sign of complacency. But what does that mean?

Sentiment indicators, that is investor psychology, can trump all else in the short-term. That's why, in my mind, trading off of sentiment indicators alone is a difficult approach to the market. To short stocks based alone on a low reading in the VIX is too loose of an approach for me. The VIX is part of a bigger picture and I incorporate it as such.

To answer the reader question directly, the VIX does reveal complacency in the options market. But it's been doing so since the first of March. Meanwhile, the S&P 100 (SPX.X) is higher by about 13 points since the first of March.

  Eric Utley   3/12/02,  1:11:50 PM
I'm watching the descending trend line in the Ten-Year Yield (TNX.X) today. You can make it out on this weekly chart Link of the TNX.X. I consider last week's advance a test of that line and would conclude a breakout above that trend line only after an advance past 5.400% currently.

In the last two days, the TNX.X has gyrated around that trend line. The failure to breakdown and pullback is, in my opinion, lending a bid to stocks and minimizing today's sell-off so far. Strengthening in bonds/pullback in yields from here would pressure stocks. Conversely, a breakout in the TNX.X above 5.400% would allow stocks to advance another leg higher.

  Jeff Bailey   3/12/02,  12:33:29 PM
Celestica (CLS) $38.87 -4% .... I have retracement from $48.02 to $23.02, which has 19.1% at $43.24, 38.2% at $38.47 (stock is just above) and 50% at $35.52.

Recent little rally from $32 came right up to bearish resistance at $42 (correlates with 19.1% retracement) and 3-box reversal lower today. Link

Relative strength of CLS vs. SPX still rather weak and would read "sell signal, column of X" Link

Stock still a good short candidate in my book, easy stop just above $43.25 and target $33.

  Jeff Bailey   3/12/02,  12:26:43 PM
SanDisk (SNDK) $20.09 -0.12% ... As mentioned, I have retracement from $29.64 to $9.01. This has 50% retracement at $19.32. Hmmm, today's low was $19.33. Also has 61.8% retracement at $21.75 and that was near-term high from bullish move of $16.50 and bullish triangle Link

Short-term trader snugs a stop under retracement support of $19.32 to protect gains from $16.50. Pretty easy isn't it?

  Austin Passamonte   3/12/02,  12:13:34 PM
All index chart signals are mixed across various time frames. Longer-term charts are turning bearish while intraday charts attempt to turn bullish. This type of incongruence usually means sideways chop, but if a directional break is likely it cannot be preguessed with high-odds accuracy.

I know that many traders just buy calls or puts on sheer "feel" of the market but I have never seen any rich veterans emerge from this approach. Right now I'm content to chip away with the occasional quick scalp while building a long put position each time indexes reach resistance and look to roll over from there.

  Austin Passamonte   3/12/02,  11:21:23 AM
All indexes moving sideways & flat after the initial gap-down open, but 10/5 minute chart's price action is forming clear little bear-flag patterns. I'm still looking for put plays as option trades on the next 10/5 min chart signal's cycle up to overbought extreme and subsequent failure from there. Longer term charts are weak to bearish, and any lasting rally that couldn't grab & hold the last few sessions will have it far tougher from here right now.

Momentum players can be expected to buy the dips, but I'll happily sell the rallies along with big boys in the CME pits ahead of & behind me!

  Jeff Bailey   3/12/02,  11:11:04 AM
Adelphia Communications (ADLAC) $23.95 -3.58% ... breaking to session low. Often I will set an alert just under prior session low to get a feel for things. Looking good here for bears.

  Jeff Bailey   3/12/02,  10:59:58 AM
Treasury action 30-year ($TYX.X) YIELD edging higher at 5.726%. Not seeing a rush into the longest end of Treasury market despite some warnings from telecom today. This is near-term positive sign for stocks.

  Jeff Bailey   3/12/02,  10:55:57 AM
Oil Service Index (OSX.X) 98.81 +0.02% edging green now. Stock we've noted in past for group as bullish is BJ Services (BJS) $33.05 +0.6%. Link

  Eric Utley   3/12/02,  10:55:03 AM
Following up on my ealrier comments concerning the bond market, Treasuries are coming off of their highs further. The benchmark Ten-Year Yield (TNX.X) is now at its high of the day, cushioning the sell-off in stocks thus far. The short-end of the curve is seeing selling as the 13-Week Yield (IRX.X) trades at 1.800% for the first time since late November.

  Eric Utley   3/12/02,  10:51:09 AM
Our friend Oxford Health (NYSE:OHP) is leading that bid in the HMOs. First Health (NASDAQ:FHCC) and WellPoint (NYSE:WLP) trade well too.

  Jeff Bailey   3/12/02,  10:50:35 AM
Oxford Health (OHP) $39.53 +0.94% still very strong and recent pullpack came to rising 50-day MA. MACD on daily starting to curl around and looks like she may be getting ready for another leg higher. Link

Back in January profiled the August calls and plenty of time still for those to pan out. May be the bullish call play of the year for me.

  Jeff Bailey   3/12/02,  10:48:08 AM
HMO Index (HMO.X) 487 +0.23% ... edging green here. Other than Gold/Silver Index (XAU.X) 64.51 +0.28% these two sectors only ones I show green.

  Jeff Bailey   3/12/02,  10:42:40 AM
Adelphia Communications (ADLAC) short-term trader can perhaps use the 30-min Link and 60-minute Link charts and benchmark off the 50-pd MA to get a feel for stock's near-term historical action.

Goal by session's end is for stock to close below $24.

  Jeff Bailey   3/12/02,  10:38:28 AM
General Electric (GE) $40.85 -0.7% ... bulls still waiting for a trade at $42. On 60-minute interval here too we see action at the 50-pd MA. Link

  Jeff Bailey   3/12/02,  10:30:28 AM
60-minute charts Seeing some interesting action on the 60-minute charts at the 50-pd MA in Adelphia (ADLAC) Link and Rockwell Collins (COL) Link

Noting that 60-min chart of SPX yet to test. Link

While Networking Index (NWX.X) has violated it's 50-pd. Link

  Austin Passamonte   3/12/02,  10:20:18 AM
It's a mild but dreary morning here just 40ish miles north of GLW factory in Corning, NY. But a lot brighter financial future at my house than theirs!

All D/60/30 minute chart signals on the indexes are in the early stages of a bearish roll, as we expected since last week. Glad I began building that scale of May put options... up nicely this morning but not even close to where they will be when the VIX reaches higher 20s ahead.

My plan will be to short every overbought pop in the 10/5/1 minute chart signals and hold puts far longer than calls. Recent three sessions are witness to why I'm willing to play the upside intraday but zero interest in holding index longs over any close right now.

  Eric Utley   3/12/02,  10:17:47 AM
Away from technology, I'm finding pockets of strength in Biotech, more specifically the most beaten up stocks in that group, such as ImClone (NASDAQ:IMCL), Sepracor (NASDAQ:SEPR), and Andrx (NASDAQ:ADRX).

  Eric Utley   3/12/02,  10:14:23 AM
Networking (NWX.X) and Wireless (YLS.X) leading the way lower in the technology space. The NWX is off by more than 6 percent and YLS off by more than 4 percent. The Lucent (NYSE:LU) and Nokia (NYSE:NOK) revelations are obviously at play in the two sectors. Despite the warnings, however, the selling is contained thus far.

  Jeff Bailey   3/12/02,  10:01:41 AM
Adelphia Communications (ADLAC) $24.00 -3.09% ... getting downside alert here at retracement support of $24.08. Have this one as short/put candidate. Will look short/put here on 1/2 position. Link

I have retracement from $32.71 to $18.76, which has 50% at $25.73 (stop just above there), 61.8% at $24.08 (current levels) and 80.9% at $21.42.

  Eric Utley   3/12/02,  10:00:17 AM
Nokia (NYSE:NOK) Link said this moring that its earnings would meet or possibly top previous guidance, while sales would come in at the lower end. (The bottom-line can be managed, the top-line cannot.) Shares are lower by more than 6 percent following the guidance.

There are two things I find interesting about Nokia's remarks. First, wireless showed an up-tick in the fourth-quarter. As Nokia revealed, however, business has since deteriorated. Second, the recent ramp in the component suppliers goes against what Nokia said. That could spell trouble for some of these companies.

  Jeff Bailey   3/12/02,  10:00:15 AM
Dow Breadth negative with 26 down for 4 up. Declines in Boeing (BA) -2%, Hewlett Packard (HWP) -2.28%, JP Morgan (JPM) -2.45% and Microsoft (MSFT) -2.71%.

  Jeff Bailey   3/12/02,  9:56:46 AM
Loral Space (LOR) $2.50 +10% ... Link up on speculation of takeover candidate in aerospace/defense sector. Dow Jones reporting that CEO Bernard Schwartz hinted at a conference yesterday that a merger with Lockheed Martin's (LMT) satellite manufacturing business might be a possibility. Predicting some consolidation among the world's five satellite manufacturers, Schwartz said that "onf of the three in the U.S. will be merged into one of the other two." Article reports that Boeing is an unlikely merger candidate due to antitrust issues.

  Eric Utley   3/12/02,  9:54:21 AM
One thing that sticks out to me this a.m. is the rally in Treasuries. Ten-Year Yield (TNX.X) is down to 5.279%. Treasuries haven't seen any meaningful rally in the last seven sessions. How harsh today's sell-off is in stocks, I think, will be offered by the action in the bond market.

  Jeff Bailey   3/12/02,  9:42:17 AM
Sector Weakness across the board in early trading. Combined Telecom (IXTCX) -5.1%, Fiber Optic (FOP.X) -6%, Wireless Telecom (YLS.X) -4%, Disk Drive (DDX.X) -4.6%, Networking (NWX.X) -4.6%, Software (GSO.X) -2.6%, Semiconductor (SOX.X) -2.7%.

  Eric Utley   3/12/02,  9:41:53 AM
Japan finished 2.6 percent lower overnight as measured by the drop in the Nikkei. The Japanese market, dare I suggest, contributed to the rally in U.S. markets recently. The Nikkei is better by about 23 percent in the last four weeks, one of its best months in years.

Tech and telecom shares led the sell-off in Asian markets. We'll see whether or not U.S. markets can shrug off the weakness in Asian markets or if the pattern of tracking continues.

  Jeff Bailey   3/12/02,  9:37:40 AM
Restaurants DB Alex Brown believes that the restaurant group's recent period of outperformance may be about to end, as valuations are near cyclical peaks and restaurant stocks tend to lag the market in the 5 months after a recession has ended. Firm downgrading Brinker Intl. (EAT) $32.56 Link and Darden (DRI) $38.80 Link to "market perform" from "buy" on valuations. Firm sees valuations in fast food more attractive and maintains "strong buy" on McDonald's (MCD) Link and "buy" rating on Tricon Global (YUM) Link and Wendy's (WEN) Link .

  Jeff Bailey   3/12/02,  9:28:15 AM
Kroger (KR) $22.55 ... reports earnings of $0.47, which was inline with consensus. Link

  Jeff Bailey   3/12/02,  9:25:17 AM
Gadzooks (GADZ) $16.83 ... stock trading unchanged in pre-market after reporting earnings of $0.43, which beat consensus by a penny.

  Austin Passamonte   3/12/02,  8:15:37 AM
Great Morning!

Ahhh... civilized market hours! Can actually sleep until 7:00am, wake up & enjoy a leisurely breakfast before cruising the market news sites (and sports) with two full hours before the bell to go.

With slightly less than that span left before 9:30am market time, we see pre-market futures lower by a considerable margin. Looks like LU warned to say the telecom business is still dead... tell us something we don't know! How many times in here have we talked about shorting most of the telecom & fiber pigs destined for bankruptcy to zero? That hasn't changed one whit, while this latest bear-market rally only serves to pump them up a bit so we actually have something to short in the near future!

Ditto for wireless per NOKIA in the news. On another note, MSFT looks to be the biggest drag of all down -$2 in the premarket right now. Rumors they will guide lower are probably true. Their overhyped X-box underperforms as we expected and software sales follow computers and chips, which are the next high-odds short setting up beautifully for us.

Not long ago I ordered two new Dell computers online and they were GIVING the Pentium 4 2.0 gig chips away as a bonus... shaved $200 off the cost of each box! What does that say about high-end chip demands?

As for computer sales, I had two towers built that could probably run NASA they are so feature loaded and delivery time was said to be no more than three weeks ahead. Five days later they were both on my porch from the factory. Sound like Dell's backlogged with orders to you? Not!

On the road this weekend I read in a newspaper financial section that when combined, the market caps of MSFT, INTC and DELL exceed annual PC sales by nearly 8,000%. In other words, if only these three behemoths controlled all computer chips, software and manufacture (which they obviously don't) it would take their market caps e


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