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  Jeff Bailey   3/20/02,  4:05:28 PM
Observation the 10-year YIELD ($TNX.X) close at 5.397% today and this is very close to the 5.396% YIELD close of 03/14/01.

If we take same observation and move to S&P 500 Index (SPX.X), we see current trading at 1,152, and note 03/14/01 close was 1,153.

Earlier today, subscriber made note to me that Treasury has tended to "lead" stocks by two days.

This is good observation that we can test. If YIELD falls tomorrow and SPX breaks near-term support at 1,150, then we could see lower action ahead.

Would want one or two short/put in the account just in case that would take place.

My bets here have been ADLAC and CLS on the more bearish side of things.

More bullish bets are getting to be toward the consumer/retail side of things, or even toward the HMO stocks that are less sensitive to interest rate/Treasury YIELD action.

 
 
  Jeff Bailey   3/20/02,  3:57:07 PM
Emulex (EMLX) $28.71 +0.87 ... bearish vertical count is $17, but note the bullish support trend and how it may have come into play today. Link

Interesting perhaps too is for bar chartist to take a regression channel (2 std deviations) from the 01/10/02 high and pull her down this recent decline. See how stock traded bottom of that regression on Monday, then bounced?

Upper part of that regression channel is up near $34 and on p/f chart we could imagine a potential rally back up into that area.

Most likely just some short-covering, but a couple of levels of support at $27.

 
 
  Jeff Bailey   3/20/02,  3:51:44 PM
Brocade Communications (BRCD) $23.09 +3.12% ... if bearish, be careful with some of these technicals or at least be cognizant that stock has achieved a bearish vertical count of $22 recently. Link

We're carrying this one as short from $26.90 on PremierInvestor.com and have decent % gain. Ready to close out with tight stop just above at $24.21, but I'm not trying to get "cute" with it.

 
 
  Jeff Bailey   3/20/02,  3:41:34 PM
Adelphia Comm. (ADLAC) $21.85 -3% ... This stock finally broke below 22. Any more thoughts on it?

Not really. Real test is what we observed on 03/14/02 and trade at $21.40.

I've had retracement from $32.71 to $18.76, and that has the 80.9% retracement level at $21.42. This is/was a level we thought market maker might be squaring some inventory. Need a break of that level to have market maker(s) playing some defense and protecting to $18.76. If $18.76 get's broken, then we "worry" about that bearish vertical count of $4.

Short-term trader (bear) now pretty comfortable with a stop just above the $23 level, or 61.8% retracement of $24.08. Those subscribers that put/short the stock on break at $24 can move stop to break-even.

 
 
  Leigh Stevens   3/20/02,  3:39:23 PM
Trading strategy. Several of the talking heads on CBNC today have stated a similar conviction about this being a "stock-pickers" market, given the market being spooked by the prospect of higher rates after the big housing starts number and the Fed being more inclined to tighten than ease. The truth of the comment about the market rewarding good picks, is evident in the less than robust advance-decline figures which show a selective advance only. NYSE net advance-decline figures (advances minus declines) from the two prior days are anemic at +379 and +311. There is mention from Mark and Austin of the less than robust advancing volume figures -- advancing volume, or willingness to buy on up ticks, being a key study in my work. Fortunately, you take advantage of some superb stock picking by our guys AND index traders can simply be more selective and wait for the moves to the low or high end of trading ranges, etc. The watchword is to trade more selectively. As you are not concerned about how many times you trade (only your broker cares for sure about this), you need only be concerned about your profits for the year. If you took action on 1-2 outstanding ideas a month, this would be outstanding for your end-of-year bottom line.

 
 
  Mark Phillips   3/20/02,  3:02:43 PM
I'd have to agree with you Austin, the TRIN doesn't hold the same appeal for me -- mainly because it is less reliable than the action in the ADVDECV indicators. But I like to pay attention to it because when it lines up in agreement with those breadth indicators, it gives us one more vote in the most likely direction. If there is one thing I love in a trade, it is entering when several indicators give me the green light at the same time.

First up is support/resistance and chart patterns, then oscillators, and then ADVDECV. If the TRIN confirms, then it is just icing on the cake. YUM!

 
 
  Leigh Stevens   3/20/02,  3:02:41 PM
Index Support & Resistance levels to watch: S&P 500 (SPX/INX) - 1160 short-term support gave way and should now be near-resistance. 1150-1151 is next lower SPX chart support. 1135 is implied support based on it being a 38% retracement of recent upswing. S&P 100 (OEX) - Support: 586 gave way, 583-584 zone is holding so far; 576 is the 38% retracement and 570 is 50%. A downside objective based on the top formation, looks like to 565-570 zone. Dow 30 (INDU) - 10,525 near support has given way slightly intraday, but Dow is trying to hold this area right now. However, anticipate a test of 10,475-10,480 next, the low end of recent trading range; 10,310 is the 38% retracement level and I anticipate a minimum retracement of at least this amount. QQQ - 36.50-36.75 doesn't look like it will hold as support, so next downside target is 35 area where the Q's would retrace 50% of the recent advance.

 
 
  Jeff Bailey   3/20/02,  2:58:37 PM
Shoot CNBC talking about Winnebago (WGO)... trying to do a write-up for the 03:00 Update. May be aggressive bear's put play.

 
 
  Jeff Bailey   3/20/02,  2:51:19 PM
Remember! These mortgage loan originators will "hedge" their portfolios by shorting Treasuries if the see fit. They will short in order to lock in spreads between where they loaned a 15-year or 30-year mortgage against the Treasury market, which in the end determines mortgage rates.

I do think last years announcement by the Treasury to discontinue offering 30-year Treasuries poses a new obsticle/hurdle for hedging 30-year mortgages and does present new risk longer-term.

How would you hedge a 30-year loan, if all you could hedge with is 10-year maturities?

 
 
  Jeff Bailey   3/20/02,  2:45:35 PM
Freddie Mac (FRE) $63.92 -1% ... point/figure looks bearish. Recent trade at $62 was triple-bottom sell and recent rally to $65 was "optimum short" with stop at $67. Bearish vertical count is $55. Link

 
 
  Austin Passamonte   3/20/02,  2:43:31 PM
Well Mark, I'm not at all a big fan of TRIN and will never follow it myself again, but that ADV/DEC study sure is one that will find prominence on my charts... looks like a winner to me!

 
 
  Austin Passamonte   3/20/02,  2:41:45 PM
Wish I'd bought SMH puts instead of calls, but that wasn't how it looked at the time. Short the S&Ps on a lower-high failure and bearish 60/30/10/5/1 min charts near 1:30pm has washed the put's loss and a tad. First play today was a winner, second a loser and third looking good from here. Dumping the mistakes in a hurry is key to success for me... if it's not moving in our favor it is likely moving against!
 
 
  Mark Phillips   3/20/02,  2:41:36 PM
See how the breadth indicators could have kept you out of a losing bullish play today? Neither of the ADVDECV indicators was showing any bullish indications despite several attempts to get price action moving to the upside.

Then as the selling really got started around 1:30, both ADVDECV indicators broke to new lows for the day, leading the way for price action to follow.

As an additional confirmation, we can see the TRIN (5-minute line chart) has been gradually working higher since the middle of the lunch hour, indicating that we ought to be favoring the downside for trades this afternoon.

Remember that the TRIN moves inversely to the ADVDECV lines and the price charts. A rising TRIN corresponds to a falling market.

 
 
  Jeff Bailey   3/20/02,  2:39:24 PM
Jeff: I was doing an overlay on the tnx vs fre/fnm...nice inverse relationship...institutions have been "holding up" these stocks...looks like the writing's on the wall...curious if you folks have an opinion thanks (no position)...yet

This is something we talked about late last year as potential "threat" to FNM and FRE. Higher Treasury YIELDS in the 10-year and 30-year making mortgage rates go higher, and pehraps stemming demand for new home purchases.

We were indeed playing the "inverse relationship" and using a higher YIELD to short/put FNM or FRE.

The "risk" to a bear in FNM or FRE is .... "will the economy/consumer confidence be robust enough to keep demand strong for new mortgages?" That's the big question.

Unfortunatley, I don't have the answer or at least the crystal ball to tell me.

What a trader needs to do is look back to late 1998 and early 1999 to understand how a strong economy can still spur bullishness in FNM or FRE going forward. In 1998 - early 2000, Treasury YIELDS moved higher, but it was due to the MARKETS perception that stocks and economy offered much more attractive risk/reward profiles than Treasury bonds

The robust growth and soaring consumer confidence also had consumers buying homes like they were going out of style.

I do think there is greater risk in FNM and FRE today than in 1999 as YIELDS were low for quite awhile and there was ample time for investors to lock in some very low mortgage rates.

 
 
  Eric Utley   3/20/02,  2:39:08 PM
Reader request concerning Merck (NYSE:MRK):

Short-term support is clearly Link at the 57.00 level.

My observation reveals a stock unable to break its bearish resistance line and one that is not only under performing the broader market Link , but also its sector Link . Both of which reinforce the slowing growth of this giant pharma. If I had to have an opinion, it would be of the bearish variety.

 
 
  Eric Utley   3/20/02,  2:34:49 PM
The same thesis that I've been using in CVTX can be applied to Research In Motion (NASDAQ:RIMM). It was a short covering based premise -- I don't like the business, not one bit. But trading is about managing risk while monitoring the supply/demand dynamic. In RIMM, I expected an excess demand situation because of its high short interest. The recent weakness in stocks (supply), however, has eased the fears of the shorts that remain in RIMM. The stock needs demand on a macro level to trade which, if it comes, should cause the stock to out perform because of the micro demand (short covering) that will follow. But like CVTX, what's the need to cover with the NDX lower by 2.75 percent?

 
 
  Eric Utley   3/20/02,  2:27:50 PM
With the step forward in the CERN/MCK trade, we've taken a step back today in CV Therapeutics (NASDAQ:CVTX). The short covering held the stock up pretty well yesterday following the Fed's announcement, but is not doing so today. Clearly this stock is tied to the Biotech (BTK.X) arena, which is lower today after its recent ramp. I still believe that CVTX is a good candidate for a bullish trade, but needs the BTK.X to participate. Otherwise, why would a short be nervous? If there's adequate supply coming from sector selling, then what's the rush to cover?

 
 
  Austin Passamonte   3/20/02,  2:19:50 PM
One of these days I'm going to make some money from the long side again, but not today. We had favorable setup for a bounce before it rolled over in rapid fashion. Shorting lower highs two - three times a day is paying much better than trying to buy higher lows right now!

 
 
  Austin Passamonte   3/20/02,  2:13:48 PM
Looks like intraday chart signals called this latest plunge just before it began. We must always remain alert from 1:00pm to 2:00pm EST as this is a prime market reversal or continuation hour. In other words, afternoon price action breaks are most common within this time frame.

Best trade entries arrive from 8:15am to 11:30am and then from 1:00pm to 3:00pm each day, with low-odds noise in the stretch between. Most of my losers come from pushing trades in the lunchtime lull while most winners enter within the two periods noted above.

 
 
  Eric Utley   3/20/02,  2:08:16 PM
We're really seeing that performance gap converge between McKesson (NYSE:MCK) and Cerner (NASDAQ:CERN) today. CERN's up about another $1 while MCK is lower by about $1.50. In the last four days, we've seen CERN play catch-up to the tune of about 19 percent, while MCK is higher by about 3.5 percent. The net result is a trade better by about 15 percent through today's session. That's not a bad move for a hedged trade (small risk) in only four days. I'm looking to scale out of those two positions on further divergence.

 
 
  Austin Passamonte   3/20/02,  1:52:59 PM
I'm moving stops on SHM Apr calls from -50% up to -25% as price action in the futures markets just broke down from bear flag patterns and look to retest session lows. Also, 30-min chart stochastic values in the SMH zoomed from oversold to nearly overbought while price action went dead sideways, a very bearish signal.

Daily charts in the Dow and S&Ps are looking poised for bearish failure and we could see selling intensify into the close. Intraday charts are oversold but show no signs of turning higher in bullish fashion this minute. I will crowd long stops and play shorts in the face of this, as one side will soon prevail in a tradable way.

 
 
  Mark Phillips   3/20/02,  1:37:02 PM
There's an interesting bifurcation (Eric's favorite word) in the broad markets so far today. While all the broad indices are in the red, what is catching my attention is the action in my favorite breadth indicators, which show the ratio of advancing volume vs. declining volume for the NYSE (ADVDECV.NY) and NASDAQ (ADVDECV.NQ).

While the gap down open has both of these indicators ticking along in negative territory since the open, the one for the NYSE seems to have found a floor along with price. On the other hand, breadth on the NASDAQ has continued to worsen throughout the session and is currently resting at the day's lows (roughly -415 million). That means that there have been more than 415 million more shares trading on declining issues on the NASDAQ today than those shares trading on advancing issues.

Even though each failed rally attempt on the NASDAQ Comp price chart has come at a higher low, the ADVDECV line is showing a series of lower highs and lower lows. Simply put, the internals on the NASDAQ are not healthy. I would be very careful in trying to game bullish plays in the various tech sectors until we start to see this bearish trend reverse itself.

I continue to believe that the best bullish bets remain in the "old economy" names that reside on the NYSE -- there we can see that dip-buying remains a favored pastime of traders. And the reason why is that is where the relative strength is.

 
 
  Austin Passamonte   3/20/02,  1:07:16 PM
Want proof that the bubble is still partially inflated? Today's gap down move has been met with a FALLING VIX reading as well! Dipsters are loading up on calls/unloading puts as evident by this measure, evidence that fear simply does not exist in the equity world right now.

 
 
  Austin Passamonte   3/20/02,  1:04:03 PM
SMH was at 46.28 when my previous post was entered, and are now creeeeping higher from there. Bubbleonians love their chips and will not flee this group quite yet. I prefer it to the QQQ as it has more exaggerated moves and offers greater gain (or loss) than the Qs respectively. Both are fine for tech plays, but I like the volatile ones best!

 
 
  Austin Passamonte   3/20/02,  1:01:09 PM
Keep in mind we are still in the Land of Dipsters right now and gap-down opens like this resemble strong buy opportunities. I suggested option traders wait for calls on a bounce instead of puts "in the hole" because almost every gap-open move has been reversed intraday the past month. This one is looking to be no different, although too early to tell.

The downside was good to me from pre-bell to shortly after... now we'll gently test the upside and trust those bullish 60/30 min charts!

 
 
  Austin Passamonte   3/20/02,  12:51:34 PM
Session lows have held and 60/30 min chart signals are turning bullish right now. I'll try long plays and for options will take SMH April 47.5 strike calls as daily chart signals look more "bull friendly" than S&Ps and bid/ask spread is somewhat tighter. QQQ would be my very close second choice for call play attempts today. I'll just buy right now and set -50% stops to hold into the afternoon or next sessions unless stopped out first.

 
 
  Austin Passamonte   3/20/02,  12:47:57 PM
Too frequently in the past I've chided CNBC for the duds they trot out portraying expert market analysis. Now let me give the other side of that coin and tell you who I drop everything to listen to when aritime is given, in no particular order:

Hank Greenberg. He's the best research analyst in our profession and is always the first to flag shady companies. He recently warned all who would listen about Enron, Tyco and ACLN among a host of others. When Herb raises the red flag, I'm looking to short those symbols!

Bill Gross (PIMCO). Largest bond-fund manager in the world, Bill cannot afford to have false bias about debt or equity world and its inverse relationship.

John Bollinger. Savvy market veteran, excellent market timer.

Ralph Bloch (Raymond James). Crotchety old analyst who is an excellent technician and calls tops & bottoms with incredible accuracy. Art Cashin. Unparalleled humor and 30+ years as a floor trader specialist. More fun than substance, but totally honest & unbiased.

There are probably a few more, but names escape me this hour.

 
 
  Jeff Bailey   3/20/02,  12:35:19 PM
Treasury YIELDS now starting to get more green and at session highs. 10-year YIELD ($TNX.X) at 5.384% and nearing recent relative highs set last week.

Would be somewhat "surprised" if we saw a YIELD much above the 5.5% level near-term, but need to monitor things here.

May be very important for bears to monitor bearish vertical counts in stocks they are short/put as cash frees up from Treasury market.

IRA/401k investors may want to keep close eye on their corporate bond funds as they may well be attracting a lot of capital and bullish.

 
 
  Jeff Bailey   3/20/02,  12:25:48 PM
General Electric (GE) $39.29 -1.5% ... may now become more "obvious" what MARKET was thinking when us bulls for GE never got that trade at $42 for the triple-top buy signal. As such, rather obvious short/put with stop at $42. Stock hasn't been able to trade $42 and bears will begin getting more conviction. Link

 
 
  Jeff Bailey   3/20/02,  12:22:11 PM
General Electric (GE) $39.25 -1.62% ... An article about GE by PIMCOs fund manager Bill Gross is getting a lot of play today. Gross is focussed primarily on the fact that GE Capital has commercial paper outstanding which is three times the size of their bank credit lines, and that this exposes the company to the "mercurial opinions" of analysts and managers. Gross says that as a result PIMCO will own no GE commercial paper for the foreseeable future.

My opinion is that Bill Gross is one fund manager that really has had a very good sense of the bond and debt markets. I'm listening and taking notes here.

 
 
  Austin Passamonte   3/20/02,  12:09:37 PM
BMY short? Please don't rub it in, Jeff... I have that short play notation still asterisked right here on my desk in front of me! [painful grin]

 
 
  Austin Passamonte   3/20/02,  12:08:15 PM
Short-term tick charts are now poised in overbought extreme and turning bearish from there. This suggests another test of session lows coming soon. If higher or equal lows hold, upside plays on 60/30 chart signals could be our fate this afternoon. A break to new session lows suggests continuation down.

Index option traders must make decisions less nimble than others due to wide bid/ask spreads on the line. Right now I'd play the QQQ or SMH either way as price action dictates due to narrowest b/a spread during these uncertain times. I would look for call plays on the next beginning bounce as puts would be shorting into the hole right here.

Lower highs and bullish 60/30 min chart signals are good for call plays held into Thursday or Friday ahead. I'd use -50% stops and light capital incase of further gap-against market moves!

 
 
  Jeff Bailey   3/20/02,  12:01:19 PM
Bristol Myers Squibb (BMY) $41.30 -15% ... stock resumed trading. If short/put, would cover here on weakness and move on.

 
 
  Jeff Bailey   3/20/02,  11:55:27 AM
Flextronics (FLEX) $17.25 +1.65% ... similar business as Celestica (CLS).

I do see a "blurb" that contract mfgs getting a bid from Jabil Circuit's (JBL) $23.10 +11.2% earnings.

Contract mfgs are FLEX, SLR, SANM and CLS.

 
 
  Jeff Bailey   3/20/02,  11:47:20 AM
Celestica (CLS) $36.48 +1.48% ... stock just trading "inside day" right now. Yesterday's trading was also an "inside day." May have gotten some short covering on stronger-than-expected book-to-bill number.

I still have retracement from $48.02 to $23.02, which has 38.2% just above at $38.47, 50% just below at $35.52 and 61.8% at $32.57 (this is my ultimate trading target for bears).

Keeping an eye on MACD and noting it is turning lower after a "rally" just below zero level. Need MACD to cross back below signal and get stock to break the $35.50 level for trade to play out as planned. Link

"Nervous" bear can place stop just above yesterday's high of $37.40.

 
 
  Austin Passamonte   3/20/02,  11:45:34 AM
Interesting note from Herb Greenberg this morning on GE. Bill Gross of PIMCO, the largest bond-fund manager in the world today notes that PIMCO will no longer own GE bonds. You can read it for yourself at www.pimco.com but the gist of it is, Bill believes GE has been playing smoke & mirrors earning performance for years. I have no idea if this is true, but Gross is the bigest player in that game and I for one wouldn't fade his picks!

As Churchill said decades ago, in the end truth prevails. Time will exonerate or condemn plenty of companies large & small in the weeks and months ahead. Please be prepared for that reality!

 
 
  Austin Passamonte   3/20/02,  11:38:30 AM
On yesterday's list of symbols I posted via scanning the SPX, only three of them (all shorts) were aligned across weekly, daily, hourly and thirty-minute chart signals in unison. Care to guess which of these three was the clearest short of all?

BMY. It had so many classic short signs I don't know where to begin. Overbought stochastics just turned bearish. Gap down move on high volume coiled up. Inside day suggesting another break was due, and odds are it would exit the coil in continuation of the drop. Gap near $46 waiting to be filled. Etc.

But I merely placed a "star" next to the symbol as a hot put play and went about my day without acting on this info. Have you ever made such a mistake of inaction in your trading career before? I have!

 
 
  Jeff Bailey   3/20/02,  11:31:53 AM
Oxford Health (OHP) $41.36 +0.43% ... edging to a new 52-week high and seeing the HMO.X edge into positive territory. Get the feeling there's still some institutitional bulls doing some window dressing before the end of the first quarter.

May also be seeing some institutional bears locking in some gains on beaten down Lucent (LU) +4.65% and Nortel (NT) +1.10%.

 
 
  Austin Passamonte   3/20/02,  11:27:04 AM
Option traders I know are very frustrated right now with persistent intraday chop, gap-open moves and no tradable trend in the indexes right now. It is a very selective market right now where a small minority of stocks are moving in directional fashion.

Most of the market action lately occurs outside of 9:30am to 4:00pm and does not allow cash market trades much room for success. A bunch of traders bought calls on the dip & bounce Tuesday expecting post-FOMC bullish reaction. That would have been my guess, but I went into that bell flat because it's only a guess, nothing more.

I covered today's short for solid gain and am flat with no plans to change that soon. All charts looking bearish right now but lunchtime lull bounce is likely so we'll see what happens next. I have no idea which direction (if any) I'll play next, in full reactionary mode to what develops ahead.

 
 
  Jeff Bailey   3/20/02,  10:54:29 AM
Du Pont (DD) $49.55 +0.93% ... stock battling with psychological resistance of $50 after giving spread-triple-top at $49 yesterday. Link

Recently we noted near-term bullishness develop in fellow "chemical" stock Neogen (NASDAQ:NEOG) Link at $15.71 from bar chart. P/F of NEOG not nearly as bullish looking as that of DuPont (DD), but has given "low pole" warning and may be sign a bottom is forming and potential longer-term reversal taking place.

 
 
  Austin Passamonte   3/20/02,  10:47:21 AM
Small S&P sell programs are kicking in with some force this morning. Waves of selling volume flash past on the Time & Sales screen to show what's leading cash indexes down right now... program selling at the CME.

 
 
  Jeff Bailey   3/20/02,  10:43:32 AM
Bristol Myers Squibb (BMY) $48.65 ... still halted. CNBC reporting large block for sale when trading resumed of approx. 400,000 shares +.

P/F chart of BMY is bearish with vertical count of $40, dating back to September (long column of O after red 9) Link

 
 
  Leigh Stevens   3/20/02,  10:31:39 AM
ON THIS DAY in 1967 fashion model, Twiggy, arrived in the United States for a one-week stay. She quickly became the most sought-after subject of photographers due to her very skinny-yet-wholesome good looks and the shortest dresses ever seen up to that time. I met Twiggy in later years when she had filled out more and she was lovely. If your profits are slim this year, you too can hope to bulk up before the year is out. Index Support & Resistance levels to watch: S&P 500 (SPX/INX) - 1160 is key short-term support. If this gives way most likely next lower chart support is 1150-1151. 1135 which may seem quite far down, is only a 38% retracement of the recent upswing. S&P 100 (OEX) - 586 area is first likely support area, then 583. 576 is the 38% retracement and 570 is 50%. Dow 30 (INDU) - 10,525 is a near support, then 10,475-10,480 is key as low end of recent trading range in the Dow; 10,310 is the 38% retracement level. QQQ - Gap lower this am on the intraday charts suggests 36.50-36.75 near support won't hold. Next stop is 35 area where the Q's would retrace 50% of the recent advance.

 
 
  Jeff Bailey   3/20/02,  10:28:40 AM
NVIDIA (NVDA) $48.35 -6.48% ... volume picking up to downside as stock breaks below 200-day moving average. Link

P/F chart has been bearish with vertical count of $42 Link

 
 
  Jeff Bailey   3/20/02,  10:15:08 AM
Bristol Myers Squibb (BMY) $48.65 ... Trading halted Link ahead of data from company's Vanlev congestive heart failure drug study, which will be presented today at the American College of Oncology meeting in Atlanta. BMY will announce results of a study called Octave that examined a problem of facial and neck swelling in some patients, and Overture study of roughly 4,000 patients suffering from congestive heart failure. Merck (NYSE:MRK) Link produces a drug called Vasotec, which is an antihypertensive that is the standard of care.

 
 
  Austin Passamonte   3/20/02,  10:12:50 AM
Another gap-down session that locked out option traders. Need a bounce for puts but it will be a bit before charts post signs of bullish reversal for calls. Most of today's market move happened long before 9:30am arrived, so option traders must merely watch & wait for now.

 
 
  Jeff Bailey   3/20/02,  10:10:45 AM
Treasury bonds rather quiet this morning, with YIELDS mixed. 5-year YIELD ($FVX.X) up fractional at 4.716%, while 10-year ($TNX.X) 5.317% and 30-year ($TYX.X) 5.745% both down fractional.

 
 
  Austin Passamonte   3/20/02,  10:06:48 AM
I agree with Leigh in that we're due for a drop to lower support before momentum players bid into earnings season and funds dress their quarterly windows with sheep's fleece.

And Jeff points out an interesting observation as well. How many more companies like VRSN with phony math embedded in their earnings for months or years are due to come clean the next few earnings cycles? What will their "honest" outlook be when stripped of these obscene fiscal charades? What will that do to stock prices of any companies sliding by on smoke & mirrors right now down the road?

Points to ponder...

 
 
  Jeff Bailey   3/20/02,  9:57:03 AM
Cardinal Health (CAH) $68.75 -1/15% ... I've got a bullish eye on this one on any pullback near $66. Would then follow with stop of $63 and target $72 for a trade, or $80 longer-term. Link

Would start with 1/2 position, then add to full on break above $70.25.

Stock's relative strength is "buy, and column of X," which is strong RS. Link

 
 
  Jeff Bailey   3/20/02,  9:51:52 AM
Sector Strength is marginal with Gold/Silver (XAU.X) +0.21% and Health Provider (RXH.X) +0.1%.

 
 
  Jeff Bailey   3/20/02,  9:51:02 AM
Sector Weakness across the board, with greatest weakness found in Airline Index (XAL.X) -3.3%, Networking (NWX.X) -2.4%, Semiconductor (SOX.X) -2.3%, Fiber Optic (FOP.X) -1.9% and Oil Service (OSX.X) -1.96%.

 
 
  Leigh Stevens   3/20/02,  9:50:53 AM
It's showtime! The downward deflection of the S&P Indexes, as well as the Dow Jones average, from resistance implied by several prior daily and hourly highs has generated bearish downside crossovers in various momentum oscillators this morning. As Austin indicates, bullish sentiment got ahead of what the market can give us at this time. There is adequate supply or stock for sale at recent highs, especially in Nasdaq. Put/call readings, for all options exchanges, according to Q-charts, indicated heavy call buying on 3/12, suggesting a overbought situation for the following week. The Stevens CBOE equities call to put ratio was 1.75 yesterday which is not close to what I consider a "sell signal". Bullishness is not what I consider extreme, to the point where it becomes a contrary indicator. I would wait to buy pullbacks, and consider this to be a "normal" correction. I think it a matter of time, rather than a question mark, as to whether the S&P indexes will get thru recent highs.

 
 
  Austin Passamonte   3/20/02,  9:45:24 AM
We've got daily chart signals on the verge of making a bearish touch or "kiss" as one would expect right now. Don't be surprised to see buyers step in and test every dip here, but conditions are ripe for at least a modest pullback (if not more) from Tuesday highs.

As noted in the pre-market, my index/sector/SPX scan yesterday found mixed charts and more shorts than longs. It looked like techs were poised to break higher, but another downgrade on INTC and weakness in various sectors there negated that.

By the time options trading opened at 9:30am the ideal downside entries were blown away. All intraday timeframe chart signals are bearish and any failed pop to overbought 10/5 charts is a downside entry I'd take if not already short from earlier this morning.

 
 
  Jeff Bailey   3/20/02,  9:37:48 AM
Merrill says fab water shortage at the Taiwan Science Park fab in Hsinchu may put TSM Link and UMC Link at risk if Taiwanese government can't resolve a water shortage there. Both TSM and UMC consume nearly 60% of the fab's water, followed by DRAM Link (20%) and other IDM's (2%).

 
 
  Jeff Bailey   3/20/02,  9:31:48 AM
Forest Labs (FRX) $84.10 ... after setting another 52-week high yesterday, company announces that Lexapro significantly reduced anxiety in patients with generalized anxiety disorder when compared to placebo. Link

 
 
  Jeff Bailey   3/20/02,  9:28:55 AM
VeriSign (VRSN) $29.13 ... stock trading down -7.3% at $27.00 in pre-market after SunTrust believes stock likely to come under selling pressure as investors digest key points from VRSN 10-K filed last night. Firm estimates that combination of revenue from reciprocal arrangements and from related parties accounted from approx. 1/4 of company's yr/yr increases of $321.2 million in pro forma revenue and about 13 percentage points of co's 49% annual growth in 2001. Firm also estimates that co's purchase of its headquarters accounts for approx. $0.06-$0.07 of projected 2002 earnings of $0.95. Firm believes that each of the issues highlighted are likely to result in a lower on-the-surface P/E multiple for VRSN than might be expected. Link

 
 
  Austin Passamonte   3/20/02,  9:12:58 AM
Pre-market futures continue to ebb lower on the back of bullish housing market data. That was not what indices were looking for today, as traders used to a Fed doing nothing but whacking interest rates the past fourteen months are now posturing the other direction.

Now that the Fed's totally and completely powerless (have been for months) and traders realize it, bulls NEED the economic recovery to match old times. Nothing short of late '90s growth will suffice and you & I both know that's what the masses secretly, inwardly expect.

Forget what people say and watch what they do: most stocks are being bid to the moon in anticipation of an economic recovery strong enough to support these prices. Right or right? How many times have we been told the market is a forward-looking entity six to eight months out? There must be a year 2002 economic recovery of late '90s proportions and no relapse along the way to keep major indexes at current levels or higher, plain & simple.

 
 
  Austin Passamonte   3/20/02,  8:18:33 AM
I personally subscribe to a fair number of market timing or "advisory" services as do most of you. What serious traders with too much idle time don't? Three things strike me as glaring right now:

#1: Most are very bullish at this time.
#2: Most are not listing any potential plays as common mantra is markets are mixed or non-descript. Part of this is the limited scope of symbols most services watch, which are the usual tech selections.
#3: An increasing number are grasping new theories (straws) about why the VIX is this low and how it will be wrong this time, etc.

Folks, we hear that lame VIX story every single time it reaches extreme readings and sticks there. Don't buy it, and we'll debunk that theory using historical chart evidence in tonight's Market Wrap.

Also keep in mind that a sentiment indicator exists that measures newsletter advisories' bullish or bearish percent. Newsletters are proven to be a strong contrarian indicator, precisely because of the number of traders they influence on a cumulative basis in the same tired stocks. Right now that reading is pinned in too bullish readings, which of course is bearish.

That being said, I like our chances with Eric & Jeff's stock picks using the methods they apply. Other than that, markets are setting up a myriad of technical signs screaming of imminent downside risk ahead and they grow stronger every day. Investors banking on extended upside beware!

 
 
  Austin Passamonte   3/20/02,  8:06:41 AM
Great Morning!

My eyes are still bleary from scanning so many stock, sector and index charts on Tuesday. And the conclusion? Indecision. Lately we've seen FOMC weeks have a bullish bias after the news is known. Overseas indicies were down solidly overnight and GLOBEX futures dropped from overnight highs around 4:00am EST.

IF we see a big breakout to the upside soon, it will probably be another one or two-day rally where everything moves violently or not at all these days. The methodical markets all too easy to trade at the start of this year are absent for now. This is definitely a stock picker's or intraday trader's market right now.

 
 

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