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  Austin Passamonte   3/25/02,  4:11:25 PM
"Greedy Austin" is inwardly chastising "Trader Austin" for covering too soon today and leaving 4 index points gain on the table. But we feared a short squeeze into the close when in actuality it was a long squeeze selloff that tanked into the bell.

May DJX 104 puts accumulated over the past three weeks are lovin' these markets for sure. Please tell us again what all those low VIX / broad market rally theories that were flying around are again? Considering the Dow has coughed up -400 index points off the recent high and looks to give back plenty more ahead, I'd say short the VIX at 20 level is still alive & very well indeed... would you agree?

  Eric Utley   3/25/02,  4:07:51 PM
A nearly 3 percent decline in the NDX following the reversal in its bullish percent data last Friday. It's pretty cool that bullish percent indicator!

  Eric Utley   3/25/02,  4:06:00 PM
Not much rise in the VIX today in light of the broad sell-off...not much volume...not a lot of fear.

  Eric Utley   3/25/02,  4:02:37 PM
The SOX.X finally broke below that 575 level right here. I would expect follow-through tomorrow.

  Eric Utley   3/25/02,  3:49:55 PM
FYI A few readers chiming in that Brocade is in fact holding an investor meeting today...doesn't change my position as necessary risk management steps have already been taken on my part.

  Eric Utley   3/25/02,  3:45:16 PM
Independent of probabilities, right here in the SOX, using the 575 level as a mental stop, is the best place to try a bullish trade in the stronger stocks in the group. Risk is so, so easy to manage with a mental stop at 575.

  Eric Utley   3/25/02,  3:42:46 PM
Notice how the SOX ticked within 0.10 points from the 575 level just now. That's not saying the level will hold, just that it's an important level in terms of risk and watched by others. 20 minutes to see if it breaks...

  Austin Passamonte   3/25/02,  3:37:26 PM
I've covered my 2nd short at 1137 from 1144 and will exit the market today with +8 and +7 S&P index points to the good. Very methodical markets today allowed for easy trading... a session I'll need to keep in mind for some sure-to-be rocky roads up ahead!

After a string of winning plays I tend to get cocky and try hitting half-baked (what'd you think I'd say?) entries, giving back some gains and kicking myself for not being mnore patient. You ever fall prey to that human weakness, or am I alone? [huge grin]. Need to be careful on my entries now: "Greedy Austin" is my biggest adversary in the markets this week.

  Austin Passamonte   3/25/02,  3:28:25 PM
Wheeeee!!!!! Short from 1144 S&P and it's bleeding red once again as sell programs kick in... the color of money!!!

LOVE these methodical sessions like this.

  Leigh Stevens   3/25/02,  3:24:38 PM
Market Update: S&P 500 or SPX dropped below the 21-day (1146.9) which I key off from as a kind of a midpoint of the likely high/low range, as well as dropping under the 200-day avg. (1143.5). Typically, a break of the 200-day average brings in some institutional selling. While it will not likely be a straight line decline, it's more likely now that my downside S&P target to the 1120-1125 area will be realized.

  Eric Utley   3/25/02,  3:17:23 PM
I'm seeing a bit of a pop here in a few of the data storage component makers including Brocade (NASDAQ:BRCD). I'm not sure what's going on. A few readers have mentioned an analyst meeting, but I was unable to confirm such an event on the company's Web site. Nevertheless, I'm not too concerned with the pop after taking some gains off the table earlier today. Still have plenty of room to the upside to manage risk on remaining position.

  Austin Passamonte   3/25/02,  3:15:57 PM
I played today as most sessions go lately: take an opening trade in the early range... wait for lunchtime lull to clear and see what the afternoon brings.

Short the S&P from 1151 to 1142 and then short again near 1:30pm at 1144 got kind of spooky as price action dipped & popped back up against me to entry, but all's well from here. Stops set just inside entry to cover all costs and assure me no worse than breakeven on the second play, which we'll hold towards the bell and see what happens from here.

As for Eric's pending SOX short: me too. Let that one pop a bit and we'll step on the SMH in a hurry!

  Eric Utley   3/25/02,  2:26:56 PM
Among cyclical sectors, I'm noticing paper stocks (FPP.X) slipping into positive territory. Strength in Georgia Pacific (NYSE:GP), Abitibi (NYSE:ABY), Boise Cascade (NYSE:BCC), Plum Creek (NYSE:PCL), and Bowater (NYSE:BOW).

  Eric Utley   3/25/02,  2:24:07 PM
I think that the brokers (XBD.X) are at an actionable point Link . Depending on your market bias, you can either buy the strong at support here at 515, or look to short the weak near resistance at 535 or on a breakdown below 510. After finding a sector set-up such as the XBD, all you need to do is some relative strength work on the components of the index, finding the strong and weak.

  Eric Utley   3/25/02,  1:34:21 PM
I'm watching the SOX.X closely here at its triple-bottom Link at 580. Depending on your trading style and market bias, you could either buy strong chip stocks (Read:Cap Equipment) here with a mental stop in the SOX.X at 575.00 or wait for a breakdown to short or wait for the next rally to short. What am I'm doing? Waiting for the rally to short. At 595, I like the upside risk ahead of a potential breakdown.

  Austin Passamonte   3/25/02,  1:17:36 PM
Awright Utley... enough front-running my market thoughts! Even though we are currently some 20 miles apart, Eric & I are watching and thinking the same. But he's younger, faster & smarter so I'm late to the post each time. Maybe I'll post something about meats & grains commodity futures relationship going into the summer. Perhaps I'll win the race to post on that one!

  Eric Utley   3/25/02,  1:14:54 PM
Were you just peaking over my shoulder, Austin? Go-go-go-go-go fe-fe-fe-fe-fe...

  Austin Passamonte   3/25/02,  1:13:05 PM
Dow has broken last week's low and XAU takes out its 70 area upside. VIX has "spiked" all the way up to 20.49 at this posting! When it gets to 28+ I'll think about unloading my DJX put scale... massive intrinsic value AND vega appreciation by then. We only get a VIX reading to 20 level twice a year on average, and it has never failed to be a huge money-maker for long put plays yet.

  Eric Utley   3/25/02,  1:13:03 PM
As the kids would say, this move in gold is off the hook. The Gold and Silver Index (XAU.X) is better by more than 3 percent today, trading above the 70.00 level for the first time since FEBRUARY 2000. I was expecting a bit more downside through last week, which was obviously WRONG!

I'm wondering how much of the move is related to end-of-quarter positioning, performance chasers, et cetera. Or, if there's more to read into this move. I'm thinking the implications of this rally in gold, in conjunction with the sell-off in Treasuries, is not a good thing for stocks in general.

I find the disconnect between the flight to gold/weak Treasuries and the low levels of fear (VIX.X) somewhat perplexing. There has to, yes has to, be a convergence of the lack of fear in one segment of the market and the abundance of fear in the other.

  Leigh Stevens   3/25/02,  1:02:53 PM
Support & Resistance Levels - Indexes

Dow Industrials (INDU): Near resistance is in the 10,475-10,480 area. Key near support is 10,300-10,310. Below this area, 10,200 is support implied by a 50% retracement of the 2/20-3/19 rally.

QQQ: Near resistance - 37-37.10. Support: 35.80 area may offer near support, the point where the Q's retrace 62% of the recent advance. Next lower chart support looks like $35. If 35.00 gives way, my anticipation then is for a "round-trip" back to 33.75, the 2/28 rally starting point.

  Leigh Stevens   3/25/02,  12:43:45 PM
Support & Resistance Levels - Indexes

S&P 500 (SPX): Hourly rally peak on Friday failed in the area of prior support in the 1150-1155 area -- support (once broken) "becomes" resistance. SPX's next downswing is underway. 1135 is implied support based on it being a 38% retracement of the 2/22 - 3/11 advance. Best chart support is apparent in the 1120-1125 area. This will be critical downside test, if index gets there. Near resistance: 1145.

S&P 100 (OEX): Key overhead resistance is at 583 in an area of some key prior hourly lows (support "becomes" resistance) and at the Friday rally peak.

  Austin Passamonte   3/25/02,  12:42:22 PM
"Lookin' gooood" for the shorts off the open as price action gave us a flat bell and gentle break below support today. No wild gap-open moves that waste so much potential profits... just play the trend & go.

  Austin Passamonte   3/25/02,  12:37:02 PM
Ned Riley, that eternal raging bull is spouting on CNBC how Elan disappointed "everyone". Either Neddie has some gerbils in his pocket to use such inclusionary verbiage or he means to include us in that stock's debacle. Leave me out of that loop, Neds... I was short to the gills the day that dog stopped hunting and you were pale as my background screen here when your portfolio crushed -24% for the entire PORTFOLIO in one fell swoop!

And they keep trotting him out as an expert, now plugging telecom sector? Land Sakes Alive!!! Where's John Bollinger after opining on CNBC that major indexes may have posted relative highs for the next decade or so? Does that view run counter to unbiased journalism rules?

  Eric Utley   3/25/02,  12:34:03 PM
Hey Austin, Neddie is on the tube admitting to his wrong ways with Elan. Have to admire his honesty, not his stock picking, though. His color looks a little better today.

  Austin Passamonte   3/25/02,  12:26:52 PM
Gold Fever Eric... that Outdoor Channel show's theme song is playing in my head!!!

XAU threatening to break above 70 level of resistance on its recent pivot from support. Who ever thought precious metal stocks would be the mo-mo plays while CSCO, ORCL and similar last century's has-beens would be idle in the swamp? Yet here it is...

Makes me want to head for Nome, Alaska to mine my 1oz of the raw "yella metal" per day myself! Or we could make several times that much money trading from home, minus the far North atmosphere of course.

  Austin Passamonte   3/25/02,  12:21:33 PM
Dow is now confirming lower levels ahead. Weekly chart has posted a very clear bearish "Evening Star" candle patter over the last three weeks. Our first 1/5th the week's candle (1/4th this week) is threatening to break below last week's lows for icing on the grilled steak. I'm in no hurry to unload DJX May 104 puts opened -250 Dow points ago from the looks of weekly-chart bearish reversal stochastics and evening star candle pattern!

  Leigh Stevens   3/25/02,  12:14:33 PM
Market Indexes to watch and key support levels

Pertinent to whether this market is consolidating here for a next leg up, a key is to watch the averages and indexes that have been leading the market and have moved to new highs for the year. Once an average goes to a new high, this new high remains "valid" technically, as long as the old peak holds as support; i.e., (prior) resistance "becomes" support.

Key Dow Industrial (INDU or DJIA) level is at its prior early-Jan. peak in the 10,280 - 10,300 area. As long as the DJIA holds above this level, a basically bullish bias is warranted technically for the NYSE.

Even more pertinent to the NYSE is the New York Stock Exchange Financial Index (Q-Charts sym: $NY.F) -- the fimancial stocks tend to lead the overall market. The Financial Index (last at 606.5) needs to hold the 599-600 level on a closing basis (where this index topped out several times in January) to retain a bullish bias on the NYSE & S&P market segments.

The Transports (DJ Transportation Average > Q-charts sym: $TRAN) bare watching and should hold 2835 on a closing basis. With a Friday close at 2852 and an intraday low of 2808, the Dow Transports are close to their January top -- this area should now offer support in order to warrant an overall bullish outlook.

Ever notice how some of the talking heads on CNBC and other financial media outlets say, how such and stock has "a good looking chart" -- what makies the chart look "good" is often not clear or explained. Well, the above charts would look good or OK, with successful tests of the areas mentioned as support.

  Austin Passamonte   3/25/02,  12:03:43 PM
Pick your vehicle... it's all good:
SPX Apr 1150 puts from 20.00 to 24.90; up +24.5% this morning. E-mini futures short from 1151.00 to 1143.00 (currently) are up $400 on $3,000 "cost" or +13.33% this morning.

QQQ Apr 37 puts from 1.40 to 1.80 or +28.57% on contract cost. E-mini Nasdaq-100 contracts +$600 per contract on $4,000 "cost" or +15.0% gain on cost.

Two primary ways to make money in the markets are small gains on large account balances or large gains on small account balances. Intraday moves like this really don't help the small trader with one - three contracts. Big players trading 20 to 50 contracts can move in & out for substantial gains with lower blended execution costs.

My personal preference would always be to enter plays on Monday and exit on Thursday, but we can only take profits from what the market offers. Lately that has not favored buy & hold anything for indexes. Individual stocks are another story, but that's a greater degree of difficulty than what indexes and sectors require.

  Austin Passamonte   3/25/02,  11:51:33 AM
Not to expound on the obvious, but the early break below S&P 1151.00 and Nazz-100 1480.00 were easy pivots to short and guaranteed to win nicely from here. When weekly and daily chart signals are moving in one direction and 60/30 min charts join them, simply following that trend with the right entries is next best thing to free money. It's the periods of mixed signals in between when we struggle so much, a lesson in there about picking our times to play heavily and others to sit out and enjoy life away from the markets.

Now is not the time to sit idly by!

  Leigh Stevens   3/25/02,  11:40:15 AM
ON THIS DATE in 1894, Jacob Coxey began leading an "army" of unemployed people on a march from Ohio to Washington, D.C., to demand help from the Federal Government, thereby demonstrating that there is nothing new under the sun. We still look to the fed. govt. for setting things right, especially King Fed. Reading the Stock Trader's almanac January notes does not fill one with confidence, as the so-called "January effect" is not with us, unlike the force. Every down January, in terms of the S&P, has without exception, preceded a new or extended bear market. Will this be the exception year? There are always exceptions, but year to date is not hugely encouraging to the bulls. As pointed out here, the S&P 500 index is up only 0.62 through Friday. No wonder the pundits are saying this is a trader's market!

  Austin Passamonte   3/25/02,  11:17:04 AM
Speaking of purely technical trades, Eric... what else is there? Traders who try to logic & reason their way thru the markets never seem to enjoy long, successful careers in our profession that I've seen.

But speaking from the fundamental side, is there actually a human being out there who still thinks the housing/financing sectors can maintain their parabolic trends? "The trend is your friend until the end" is also an old saying and upside trends for housing are soon to be toast.

The 1999 Bubble caused many to buy/build second and third luxury homes with all those tech stock profits. 2001 saw the value crowd buying, building and refinancing at a torrid pace partially to mostly due to low interest rates. Now that techs are dead and interest rates very much alive, the dynamics of this over-extended sector have spun 180 degrees. Spinsters who try to claim that new paradigm equals old housing sector -performance are deluded, lying or both. We saw an artificial move in real estate to exaggerated highs and all business runs in cycles. Simple as that.

  Eric Utley   3/25/02,  11:16:03 AM
With the exception of a few isolated trades, my primary strategy this week and beyond is going to be to short/buy puts into any decent upside move in the tech sector. The Brocade trade is a perfect example of what I'm looking for.

I have several reasons for the bias. First, the Nasdaq-100 Bullish Percent Link reversed from the 70 percent level last Friday. Second, the sentiment indicators are flashing bearish signals; the VIX below 20, and investor intelligence numbers. Third, the IT environment is worsening. Fourth, it's that time of year again.

  Austin Passamonte   3/25/02,  11:09:23 AM
"The trend is your friend" goes the ageless Wall Street cliche'. Couldn't be more applicable than today, where the first hint of price failure offered yet another high-odds intraday (or longer) short. S&Ps and NDX formed tight, sideways coils since Friday and the early break below S&P 1151.00 and Nazz-100 1480.00 were easy pivots to short.

Intraday traders watching W/D/60/30 min chart signals see all of the major indexes still weak to bearish, so the bias is down. We prepare to play either direction as price action breaks defined trend lines of support or resistance, but price strength as measured by stochastic values give us bias as to where the trend lies.

Shorts on breaks below short-term support and trail stops to entry or better as market action permits. Looking favorable from here for easy downside gains today... just how we want to begin the week!

  Eric Utley   3/25/02,  11:09:14 AM
The same reason I shorted Brocade last Friday was the same reason I didn't buy into KLA-Tencor's (NASDAQ:KLAC) move. In Brocade, I was betting that the stock would fail at resistance, which it did, while the KLAC move would've been a bet on a very short-term rally, induced by short covering. Had BRCD broken above $27 retracement, I would've been one of the shorts covering to push it higher. In KLAC, we never got the action point that I listed at $68. It was a purely technical trade, and is still alive Link , based on the short covering thesis and end of quarter mark-up.

  Eric Utley   3/25/02,  11:05:12 AM
For those following the Brocade (NASDAQ:BRCD) trade, I'm putting in a bid to bring in partial positions from last Friday's short. I've seen a decent move in a day-and-a-half, plus I see the potential for a neutral triangle with a print at $24 Link . While my expectation is for a breakdown from the triangle and lower prices, I respect the possibility for a bullish triangle as well. That's why I'm using this weekness to book partial gains while keeping a small short position on. A breakdown from the triangle would most likely cause me to build on my short position, while my existing position put on above $26 gives me some breathing room.

  Eric Utley   3/25/02,  10:28:31 AM
David Faber reporing that Solly cut estimates on Emc Corp. (NYSE:EMC), stock trading lower by 2.5 percent. That explains the weakness we're seeing in the component suppliers such as Brocade.

  Eric Utley   3/25/02,  10:19:32 AM
We're seeing more movement now from the housing numbers. $DJUSHB now lower by about 1.85 percent. Leading to the downside include Centex (NYSE:CTX), Pulte Homes (NYSE:PHM), Beazer Homes (NYSE:BZH), and Toll Brothers (NYSE:TOL).

  Eric Utley   3/25/02,  10:13:43 AM
I wrote about a short/put in Brocade (NASDAQ:BRCD) last week, the stock is working lower again this morning to the tune of about 4 percent. I see quite a rollover in the broader hardware space this morning after a slighly higher opening. For BRCD, short-term support is at $24 and again at $23.50.

  Eric Utley   3/25/02,  10:11:02 AM
Existing home sales come in at 5.88 million annual rate, higher than expected. Housing stocks ($DJUSHB) not doing much in response to the number, sitting just off of this morning's low. Still worth watching as the day progresses. Bond market not too active after data release.

  Eric Utley   3/25/02,  10:08:48 AM
In techland, I'm seeing a buying effort in the chips, specifically the equipment makers. The trio of Applied Materials (NASDAQ:AMAT), Novellus (NASDAQ:NVLS), and KLA-Tencor (NASDAQ:KLAC) are the ones to watch. The key resistance level Link in the SOX is at 610.

  Eric Utley   3/25/02,  10:05:09 AM
February existing home sales due out momentarily. Consensus expects 5.56 million. Watch those housing ($DJUSHB) stocks...

  Eric Utley   3/25/02,  10:02:02 AM
I'm noticing more weakness in the Transports ($TRAN) this morning. Average is now lower by about 0.65 percent. This could just be a routine pullback in the group after its big run, but you really have to be bullish on this group if you're bullish on the economy. In other words, its weakness is worth watching as it relates to the rest of the economy and market.

  Austin Passamonte   3/25/02,  9:57:02 AM
Quiet day in the indexes here so far. We can expect dupsters to buy every dip in widespread hope of prices ramping into the quarter's close and "earnings" (if that's what they call 'em in new math era) season outperforms. I'll continue to buy & hold DJX May 104 puts on any failure at resistance as been done for weeks now, with seven full weeks still left until expiration.

But that doesn't mean we ignore the upside: each apparant rally is a short-term trade opportunity that could grow into much more at any time. Too many traders fall into the trap of feeling they need to be bullish or bearish and nothing else. To hold long puts while trading the upside is a contradiction of conviction, opinion and emotion.

Trading both sides during different time frames is absolutely no different than long call LEAPS and short, near-month calls written as calendar spreads. Bullish long-term, bearish short term. This is just an analogy of course, as I'd be buying 2003 put LEAPS and writing near-term puts against them on every dip myself!

  Austin Passamonte   3/25/02,  9:31:49 AM
S&P futures perked up a tiny tad heading into this open, but it's a rather catalyst-devoid morning right now. Seasonally, this week on the calendar (and last week) have brutalized bulls the past two years. we'll see if a trifecta is in store, but all longer-term charts are looking weak to very bearish right now.

  Austin Passamonte   3/25/02,  9:14:31 AM
Great Morning!

As reported by Jeff bailey in here at 11:00pm Friday night, the S&P 500 index is up +$0.62 for the past three months since New Year's Day. How's that buy & hold approach working for non-traders? How many hapless souls bought IBM, MSFT, CSCO, INTC, GE and a host of other "blue chip" stocks like these near or at the recent highs? Too many still believe in buying breakouts and recent highs for buy & hold investments when in fact that dated tactic may continue to fail for years to come. Buy support and sell resistance

Looking like a flat to slightly lower open, and daily charts for Dow and NDX posted inside days last Friday. If price action tests Friday highs and fails, short that resistance. If it breaks below Friday lows, we will probably see considerable retracement ahead. Pretty simple from here, as plotted in the weekend Index Wrap.


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