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  Eric Utley   4/12/02,  3:23:24 PM
The short covering in tech kind of fell apart here in the last 15 mintues. Meanwhile, the S&P (SPX.X) spent the day in a 10 point range...Yawn. It's been a hectic week, so I guess a calm Friday was in the works. Have a peaceful weekend, I'm signing off for the day.

  Eric Utley   4/12/02,  2:17:06 PM
The tape acts like shorts are bringing in stock ahead of the weekend. In tech, I could foresee the NDX up at 1365 to 1385 maybe today or next Monday.

  Eric Utley   4/12/02,  1:49:47 PM
Sticking with the big story of the day in oil, I'm looking into some alternative energy stocks for potential shorts/puts. Rising oil prices have the tendency to lend bids to some of the alternative energy stocks, such as fuel cell manufacturers. Falling oil prices usually pressure these stocks, because if oil is cheap, what's the need for an alternative source, especially when it's so far away from commercialization (read: fuel cells)?

In Ballard Power (NASDAQ:BLDP), I see the potential for a head and shoulders top Link , although the neckline is kind of funky. But the stock is close to its bullish support line Link at $28.

FuelCell Energy (NASDAQ:FCEL) is another worth a look at its quad-bottom Link at $15.50. This stock would be a gift at $17.50, but I have the feeling that it won't be up there anytime soon.

Another stock to watch is AstroPower (NASDAQ:APWR) -- the company makes solar power generation systems. The stock's within an inside day today, but being bid near its 200-dma. I like this one short/put on a break below the $38.25 level with downside Link to the $34 mark.

  Eric Utley   4/12/02,  1:18:22 PM
Watch ICOS (NASDAQ:ICOS) here Link on short covering. The BTK.X is building steam, but isn't at a real actionable point until Link the 484 level.

  Eric Utley   4/12/02,  1:11:35 PM
The Transports ($TRAN) are ticking to day highs. The Airlines (XAL.X) are better by nearly 3 percent. The XAL.X is approaching short term resistance Link with a break coming on a print at 104. Southwest (NYSE:LUV) would make a nice trade coming out of its short term base Link if the XAL.X exceeds the 104 level going into next week. I'd use an action point at either $18.25 or $19.75 Link depending on your trading style.

  Eric Utley   4/12/02,  12:21:20 PM
Jet Blue (NASDAQ:JBLU) opens for trading, debuting with a 55 percent pop.

  Eric Utley   4/12/02,  12:07:49 PM
The HMO Index (HMO.X) is pulling back today, lower by about 0.56 percent so far. I've thought that this group was due for a pullback over the last few days, but I've been early. A pullback here in the group wouldn't be a cause for concern, only a routine part of the process. Short term traders, though, need to take defensive steps to protect profits. I believe OI still has a decent gain in Tenet (NYSE:THC). A tight stop there will help defend gains.

  Eric Utley   4/12/02,  11:53:32 AM
!@#*, I can't believe I didn't see this pattern Link in Smith International (NYSE:SII) earlier. The stock is a component of the OSX, and has been topping out at the $69 level. How obvious was that short (twice) at $69 after the first sell signal? $1 stop, $5 downside, come on Mr. Utley!

This is one to watch for establishing a put play on the OSX. I'm eyeing the May 60s, but not today. With the OSX near its bullish support line Link , I'm not real excited about the risk/reward right here in SII. What I want to see is the OSX rebound from the bullish support line sometime next week. I hope such a move would take SII back up to $64, where I'd look to slide into some of those May puts. I like the reversal in relative strength Link versus the OSX. I can foresee downside between $55 to $56 before that May paper expires.

My fear is that the OSX will continue straight lower, in which case I'll watch profits go by. My hope is that today's move is the first step in digesting the political developments, followed by a reaction, followed by another leg lower.

  Eric Utley   4/12/02,  11:44:42 AM
The Transports ($TRAN) are getting a pop off of the pullback in energy prices. The $TRAN is higher by 1.27 percent. The Airlines (XAL.X) are up by 1.85 percent.

  Eric Utley   4/12/02,  11:32:14 AM
The Oil Service (OSX.X) group is really coming apart here from the developments in Venezuela. The OSX.X is lower by nearly 5 percent, approaching its bullish support line at 92: Link

I'll watch how the OSX behaves near its bullish support, as the first test usually results in a rebound. But there's a significant shift going on here in the energy sector, which changes some things.

From what I've read about this Chavez, he wasn't the most conducive to capitalism. Apparently, there's the potential for Venezuela to adopt a more American-friendly energy policy with Chavez ousted. That would mean that America would rely less on OPEC oil; also, prices would move more freely in a more efficient market. In other words, there would be less price manipulation.

Spot prices in the crude market are below the $25 per barrel level for the first time since early March. That's what's pressuring the equities today, and why we need to start looking bearish in here.

  Eric Utley   4/12/02,  11:21:15 AM
I'm seeing defensive positioning continuing in Treasuries and Gold. The TNX.X is now at its day low at 5.173%, and the XAU.X is at its day high. This risk-averse posturing doesn't bode well for stocks in the short run.

  Eric Utley   4/12/02,  11:19:21 AM
Semiconductors (SOX.X) slipping into negative territory now. I noticed earlier that Intel (NASDAQ:INTC) was trading heavy. That stock is now weighing on the group, shares lower by 2 percent. I want to see a blow-off rally in this group before pressing shorts/puts, but I just might not get it.

In the SOX.X, I'm watching support between 540 and 550. If we get a break below that level, I think that the SOX will work back down to the 500 level through May. As such, half position shorts may be appropriate, which would sacrifice some risk for opportunity. I'd like to get full short positions on a two or three day rally.

  Leigh Stevens   4/12/02,  11:04:49 AM
University of Michigan consumer sentiment index released earlier, if you didn't see it, fell to 94.4 in early April from 95.7 in March. This figure was below consensus at 96.8. Nevertheless, a reading of 94 is above recent months and retraces only part of the big 5 point gain in March. As the consumer goes, so goes the ecomomy, especially now when business spending is so anemic.

  Eric Utley   4/12/02,  11:03:08 AM
This 10-year Treasury is catching a bid here, money moving into bonds. TNX.X trading at 5.177% -- its one-month low. The entire yield curve is rallying, lead by the 5-year.

  Eric Utley   4/12/02,  11:01:16 AM
This Juniper (NASDAQ:JNPR) is really coming in after the morning pop. I keep looking at these Nortels, Lucents, Cienas, and the Telecom Index (XTC.X), and thinking to myself that there are more telecom-related stocks heading to single digits. It's only a matter of when, not if.

  Leigh Stevens   4/12/02,  10:54:25 AM
Index Update: Like Eric am less bearish on the Indexes, as we appear to have reached the low end of possible trading ranges in the Indexes -- which, broadly, looks like 1100 are on the downside in SPX - 1170 area on upside. Dow (INDU) broad range looks like 10,000-10,100 area on low end, 10,600 on the high, which could extend to as high as 11,000 area if 10,600 was exceeded - this level is top of broad weekly chart downtrend channel. QQQ projected range over coming weeks looks like low 30's area on downside, 50-51 area on upside -- I'm holding a long QQQ position waiting to see if we have a double bottom here

Before taking out anything more than a trade on the long side, we need to get thru more of the earnings announcement season. Also, as with the late-Feb./early-March bottom, there was a successful retest of the low, before a multiweek advance occurred.

  Eric Utley   4/12/02,  10:29:38 AM
Int'l Game Tech (NYSE:IGT) is lower today after rolling from the $60 level yesterday. I've got a retracement at $57, which will be the first short term test for this bearish profile. There's the potenial for a double-bottom Link at $57 too.

  Eric Utley   4/12/02,  10:26:11 AM
We're seeing a big reversal in Treasuries and Gold. Both were weaker earlier, but now both are trading higher. The 10-year Yield (TNX.X) is now lower to 5.190%, and the XAU.X is now in positive territory, higher by 0.21 percent.

Strength in bonds tells me that the market isn't worried about inflation; juxtaposed against strength in gold, it tells me that the market is worried about something else.

  Eric Utley   4/12/02,  10:21:34 AM
IBM (NYSE:IBM) is higher by about 3 percent after the SEC announced no findings of irregularity, but the stock is more than $1 off of its highs this morning. Sure, the SEC's announcement may be a reason to cover your shorts, but the real problem with Beam is not the SEC as we learned Monday. Its business, well, it stinks.

  Eric Utley   4/12/02,  10:14:21 AM
Per my earlier post concerning the Nasdaq-100 (NDX.X) bullish percent, I haven't dropped my bearish stance on tech by any means. But I have adapted to a more precise approach. I want easy risk management in new bearish positions.

Take the Semiconductor Sector (SOX.X), for example. I'd love to get short this group up around 580 to 585 Link for what I hope are obvious reasons. It would be very easy to set a tight stop up around those levels.

  Eric Utley   4/12/02,  10:11:10 AM
The Brokers (XBD.X) are bouncing back today after yesterday's whacking. The XBD.X is better by more than 1 percent now, but no where near even a reversal: Link

Brokers leading the rebound include some of the stocks we've been highlighting, such as Morgan (NYSE:MWD) +2.30% and Goldman (NYSE:GS) +1.36%. The short-term move may be over, that is the XBD could rally for a couple of days. But going out a few weeks, I still think there's more downside in this group.

  Eric Utley   4/12/02,  10:01:37 AM
Juniper (NASDAQ:JNPR) is a stock that I've been bearish on. The company reported a blah-blah quarter last night. It wasn't bad enough for a blow-up in the stock, but it certainly wasn't a good quarter. Nevertheless, the stock is higher by about 4 percent this morning on what looks like short covering to me, which is what I've been doing since late yesterday. On remaining positions, I'm willing to give up some room to the upside, but not all of it since shorting up around $12. I'm taking stops down on remaining positions below my breakeven, thus preserving gains on any further ramp higher.

  Eric Utley   4/12/02,  9:57:48 AM
The Nasdaq-100 Bullish Percent ($BPNDX) moved closer to its February lows yesterday. The index shed only 1 stock yesterday, which was surprising given the weakness in tech. The divergence revealed some internal strength.

While the relative value of the $BPNDX is no reason to get bullish on tech, it is a reason to maybe be less bearish. There is a difference, and it's all about risk management. The way I'm positioning is through lowering tight stops on open bearish plays, and even scaling out of positions in some cases. Just keeping my risk in check.

  Eric Utley   4/12/02,  9:53:37 AM
Concentrated weakness this a.m. in the energy complex. The group is being led lower by the Oil Service (OSX.X) shares. The index is lower by 2 percent. Elsewhere, the embattled telecom segment is going from positive to negative, and gold equities are lower.

  Eric Utley   4/12/02,  9:51:32 AM
Preliminary consumer sentiment at 94.4, down from March's 95.7, and below estimates. The market dipped ahead of the number, but not reacting negatively after the release.

  Leigh Stevens   4/12/02,  9:50:49 AM
Index Update: DJX - Support looks like 10,100 - 10,150. 10,100 is the low end of the hourly chart downtrend channel. This was and is an area to get long for those wanting to play a bounce. Upside resistance implied by the upper line of the hourly downtrend channel is at 10,350 and an area to take out new DJX put positions, assuming that there is this much of an rebound. Potential buyers, this one included, are getting less likely to try to play a bounce when the path of least resistance is still down and it's easier to sell rallies.

Dow Transports (TRAN) is up a percent and coninues to advance, propelled by a strong recovery in the Airline sector. This index at 2824 is back above an important technical support at 2800.

  Eric Utley   4/12/02,  9:41:51 AM
In the early going, I'm noticing that yesterday's hardest hit sectors are leading today, especially in technology. The Internets (INX.X) are better by 2 percent, Opticals (FOP.X) are up by 1.6 percent, and Software (GSO.X) is up by 1.72 percent. Definitely some short covering going on this morning.

  Eric Utley   4/12/02,  9:37:09 AM
April's preliminary consumer sentiment numbers are due out in the next ten mintues. The number is expected to be 96.9. Over dinner last night, Jeff and I were talking about the recent correlation between the Nasdaq and consumer sentiment. Through this morning, the Nasdaq-100 (NDX.X) is lower by about 7.5 percent for April. Let's keep that in mind going into this number...

  Leigh Stevens   4/12/02,  9:34:11 AM
The PPI increase, while higher than some expectations -- estimates were for up .6 percent. However, in year-over-year terms, wholesale prices actually fell 1.4%.

IBM is rebounding substantially (+$3), after the extreme selling pressure of yesterday. The Justice Dept. issued a statement that they completed an inquiry into accounting practices there, without taking any action. In other words, they came, they saw and they went away.

  Eric Utley   4/12/02,  9:34:07 AM
Jeff Bailey is on a well-deserved vaction today through Monday. I will be filling in for Jeff, so please direct your questions to me today and Monday.

  Leigh Stevens   4/12/02,  9:27:44 AM
U.S. Retail Sales increased slightly in March, but rose at a slower pace than the prior month, as auto sales eased. Retail sales rose 0.2%, following a revised 0.2 percent increase in Feb, as reported by the Commerce Dept. this morning. This figure was better than expectations, which was for a decline in March.

  Leigh Stevens   4/12/02,  9:22:29 AM
March PPI surged 1 percent on the jump in oil prices. This is the biggest increase in 14 months, as reported by the Labor Dept. this morning. The Producer Price Index had this increase on the backs of a rise of 5.5% in energy prices -- that broke down into a 21 percent gain in gasoline and a 19 percent jump in heating oil prices. Outside of energy, so-called "core" prices increased just 0.1 percent. This jump in the PPI is not likely to affect the market overly much, especially with the resignation of Chavez in Venezuela, who was a proponent of rising prices and using oil as a political weapon in his vendetta against the U.S. As well, there is hope that Colin Powell's mission to the MidEAst will calm the waters there, which should allow the risk or "war" premium for oil to ease.

  Leigh Stevens   4/12/02,  9:12:48 AM
Good Morning! The Market is due higher -- Dow futures +60, NAS futures +15, S&P +6. Predictable, once the IBM pressue was off and market is pretty oversold now on a short-term basis. We favor the DJX calls for this bounce. 10,100-10,200 is proving to be a decent support area.


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