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  Jeff Bailey   4/23/02,  7:42:49 PM
Homebuilder bulls! I think tomorrow's "economic number" in Housing Starts is most likely "baked into the cake" based on recent strong earnings from the group. Going forward, it may well be the May 16th release of Housing Starts and Building Permits number (current estimates not given) that drive things.

Options trader notes that May 16th is day before option expiration of May 17th.

This information/thinking may have an options/stock trader in the group willing to sell some bullish targets near-term and looking for new entry points for a trade into the May 16th building permits numbers, which is the more "forward looking" numbers.

My "best guess" so far based on market action is that some of the earnings/comments from homebuilders reporting have been stronger-than expected (we see this from earnings), but the MARKET reaction so far has been bullish and hints that some numbers are perhaps being revised higher, by both stock analysts and even some economists.

  Jeff Bailey   4/23/02,  5:34:59 PM
Short interest climbed to record levels. The Wall Street Journal reported that the level of short selling rose to a record on the NYSE this month, driven by hedge-fund selling. Short interest increased by 3% to 6.84 billion shares. Stocks experiencing the largest increases in shares shorted were (in order) LU, NT, HWP, PFE, GE, KO, CA, CNC, XOM, GPS, MO, LOR, HD and PEP.

Interesting that the two "biggest" are two that have been crushed and trade below $5. Bears are ruthless and disregard price.

Not sure about bear's thoughts on KO Link , XOM Link or PEP Link . May be stocks to look for bullish entry points near support on pullbacks.

  Jeff Bailey   4/23/02,  5:24:39 PM
Hmmmm.... kind of similar to what we saw earlier in Computer Associates (CA) $19.03 -1.65% as it relates to the 50-day perhaps coming into play. Link

One difference perhaps worth noting is that if we were to imagine CA ever breaking above bearish resistance trend (red +), then current bullish support trend would be taken at a 45-degree trend from the bottom, which would currently reside at $18 and may be part of reason why stock has been holding the 04/18/02 relative low of $18.24. Link

Today was "inside day" and tomorrow could be interesting trading day for the stock.

  Jeff Bailey   4/23/02,  5:18:16 PM
Tyco Intl. (TYC) $26.69 -4.84% ... mentioned TYC yesterday as "rumor" circulated regarding another SEC investigation that company later dismissed.

Stock's continued weakness today hints that defenders are starting to be hard to come by. Trade at $25 would be triple-bottom sell and have vertical count turning bearish to $14. Link

Bar chart shows 50-day certainly serving as resistance several sessions ago and bearish trader understands that potential rally to $30 not out of the question if stock has been pressure lower on "rumor." As such, still looks defensive and bears may pick on this stock if they think they can drive it lower. Link

  Leigh Stevens   4/23/02,  5:17:17 PM
Subscriber NOTE: "I have just ordered your book, Essential Technical Analysis from Barnes and Noble. Am looking forward to being able to see the things you see. Glad that you have joined the team. I am not going to just read it but study and take notes....I need improvement!"

RESPONSE: I always figure I can improve - really! Re my book, I'm not blowing my horn, but could explain my goal: As it turned out, it was a year of my life to put this together. But why I did it - I knew I would not write the best book written on technical analysis, as that has been done already, but it's a hard read. I aimed for "ETA" being the most useful and practical for someone who had no background in technical analysis -- nothing is assumed, I hope, beyond that the reader would know the basics of buying and selling stocks and probably has followed the Stock Market to some degree.

  Jeff Bailey   4/23/02,  5:09:42 PM
Hutchinson Technology (HTCH) $22.79 -1.8% ... DDX.X component getting hit to the downside at $21.00 after reporting earnings of $0.03 a share, 4-cent below consensus estimates. Company said sales declined 4.4% to $91.5 million. For Q3, HTCH giving broad unclear guidance for earnings of $0.00-$0.10 a share, with consensus at $0.08. Link

  Leigh Stevens   4/23/02,  5:04:49 PM
Subscriber QUESTION (edited): "I've not written to you before, so I'd like to say welcome! Over the last few years, I've noticed a stochastic behavior that to date has me a bit befuddled; am hoping you can shed some light on it. [Just for background, I'm a QCharts user, and watch Bollinger Bands for reference,stochastics, Fibonacci retracements, and basic chart patterns. Like Austin, et al have taught, I seek stochastic direction alignment on multiple time-frames for entries.] When the Bollinger-bands are tight (close together), the stochastics oscillate, but do not always indicate a proper entry. EXMPLE: assume some index just popped upwards, and consolidates in a bull flag. Weekly & daily stochastics are pointed up on an extremely high angle; 60 & 30 min angle slightly upward, enough to indicate calls; 10 & 5 min stochs oscillate between oversold & overbought repeatedly, while price action stays at roughly the same point. What to do? While in the pattern, B-bands are tight, and oscillators oscillate - the 10 & 5 could have aligned for entry several times within the pattern, but the pattern could still fail. Have you noticed false entries even with proper stochastics alignment, or am I just missing something?"

  Leigh Stevens   4/23/02,  5:04:04 PM
RESPONSE: Well, what you describe is fairly complex and you sound more sophisticated in these indicators and in technical patterns. However, there are a few things I could point out.

Flag breakouts are pretty reliable patterns & I don't necessarily look for ANY stochastic confirmation. I can see momentum, I don't have to look at the stochastics.

The other thing is that if you use very low LENGTH numbers, you are, by the nature of the formula, going to get a lot of movement back & forth between high & low. We need only remember that stochastics looks at the current bar relative to the high and low over the course of X number of bars or periods. If you are set to as low as 5 (a length more suitable to monthly charts or floor traders on intraday charts), there is going to quickly come a stochastic extreme -- even if the current tick moves only a little above or below the highest high or lowest low, it will move within the 0 to 100 range fairly quickly even though not much has happened.

Stochastics and RSI are "normalized" oscillators, which means that its range always has to be between 0 & 100. You might find it worthwhile to also use MACD which measures the difference between two smoothed moving averages. If there is little price movement, it will tend to stay above or below zero and you can disregard upside crossovers above 0 and downside, below 0. Use MACD along with stochastics, to cut down on the "noise".

Oscillators are a lagging indicator always, whereas flags and other patterns are more predictive for projected price targets. I look at patterns mostly and use momentum oscillators as confirming type indicators for possible shifts in momentum and especially for divergences.

  Jeff Bailey   4/23/02,  3:57:45 PM
QCOM actually, it looks like QCOM thought came "after the close" at 07:26:40, but subscriber smelled out the rat. Link

  Leigh Stevens   4/23/02,  3:55:31 PM
Index closes: Technical damage is most apparent in the the S&P 100 and the Nasdaq as all indices have gone to new lows. Only exception is the DJX which is barely holding above its prior intraday or prior hourly lows. I suspect this break leads to still more follow through to the downside. The break of the S&P 500 (SPX) of 1100 will be seen as especially bearish --the coup de grace will be the Dow closing under 10,000 which now seems in the works this week. It looks like we are now looking at the Feb. lows in the 1080 area in SPX and 9600 in the Dow. as a next general area where buying interest would be most likely to come in again. They get overdone on the upside, and overdone on the downside.

  Jeff Bailey   4/23/02,  3:51:57 PM
New China Homes, Ltd. (NEWC) $0.65 +14% ... who says a rising tide can't lift all boats?

  Jeff Bailey   4/23/02,  3:49:47 PM
QUALCOMM (QCOM) $31.99 -8.7% ... stock under pressure today. Not "just because its telecom," but the Korea Herald is reporting that April CDMA handset sales in Korea are expected to fall sharply from March due to a governement crackdown on illegal hanset subsidies. Samsung said to be predicting a decline from 1.6 million units in March to 1.0 million units in April. LG also said to have been quoted in the article stating that sales have virtually stopped in the past few weeks due to the government's stiff penalties against carriers.

Yesterday I think I highlighted QCOM as bearish on a break at $34 and ooooo she looks weak today. Bearish vertical count of $25 looks in play longer-term. Link

  Leigh Stevens   4/23/02,  3:45:45 PM
Subscriber QUESTION: "I'm watching MSFT for accumulating a large position in the 55 '03 leap with a view to selling calls and eventually paying for the leap. I held off the trigger when it hit 55 even though someone (probably Gates' broker!) is supporting 55 with a big checkbook. I feel it could breakdown to 50 and that's where I'd want to load the truck. Your insights would be appreciated."

RESPONSE: This becomes a bit of a no brainer, as today's decisive break below the recent consolidation lows just under $55, sets up a likely re-test of the cluster of Sept. lows in the $50 area - at that time, there were a couple of intraday lows that took MSFT into the 47-48 area. Today's break establishes downside momentum, so would anticipate this continuing until that prior low is tested. I don't think buyers will step in to support the stock when they have one eye on that prior price & trend reversal area.

  Jeff Bailey   4/23/02,  3:39:45 PM
Jeff, The PI site has recommended CA as a short from about $19.15. The stock has been moving up in contrast to the software index. I am holding this stock short from $18.95 (currently $19.53). What are your thoughts on this play and stock? Is it likely to explode upward in a tech rally?

Computer Assoc. (CA) $19.06 -1.34% ... any stock can "explode upward" in a tech rally, so answer is yes, this stock can explode upward in a tech rally.

With that said, I think the proper thing to do is lower stop just above yesterday's high. Stock looks very close to potentially revisiting the $14 lows as p/f chart shows new vertical count of $14. Stock had a nice little run back higher and now MACD on daily is rather nice setup for a break lower, but need to see a move back below the recent congestion low of $18.24. 50-day is your resistance and MACD back below signal.

While CA was not one of "my picks" for the site, I sure wouldn't want to be holding long right now. Link

  Jeff Bailey   4/23/02,  3:29:08 PM
Jeff: Nice trade from yesterday in CLS. Looks weak today. FLEX not as weak. Should I be looking to lock in gains or hang on?

Hmmmm... depends how "short/put" your account is, but retracement from $48.02 to $23.02 has 61.8% of $32.57 really looking like good resistance from here, so stop can go just above there. Then if recent lows are taken out at $29.60, bear is targeting the 80.9% retracement of $27.79. P/F chart shows vertical count of $22 and that's enough downside I think to hang in there.

Hey.... I won't say anything bad if you're booking 5% gains on a daily trade basis.

  Jeff Bailey   4/23/02,  3:19:46 PM
Cardinal Health (CAH) $70.16 -3.89% ... stock just sitting here. Almost like institutions just sitting some bids and not much else. Getting a feel for order flow and liquidity.

  Jeff Bailey   4/23/02,  3:17:30 PM
CBOE Internet Index (INX.X) $95.44 -4.21% ... breaking to a relative low again here today and looks to threaten the September lows. Just an observation of a "slow bleed" lower and part of technology looking weak that puts pressure on bulls. Link

  Jeff Bailey   4/23/02,  2:21:35 PM
GSTI Software Index (GSO.X) $137.61 -2.26% ... breaks to new 52-week lows today. Recent rally of 04/16/02 came right to mid-point of regression channel at/near $150. Lower end of regression channel below at $130.

  Jeff Bailey   4/23/02,  2:19:32 PM
SAP Aktiengesell (SAP) $33.98 -0.29% is also an option, but the NASDAQ listed stocks more likely to see market makers playing defensive as they note MSFT weakness.

  Leigh Stevens   4/23/02,  2:17:45 PM
Subscriber NOTE: "I've been enjoying your commentary, particularly when sprinkled with nuggets like Art Cashin stories...I run CNBC on mute a lot while trading but guaranteed I'll hit the play button if Art appears! But what DOES he write on that scratchpad???? ALSO, I've been accumulating XAU May65 Puts but today's close implies they should be closed, according to your analysis. My instinct says stay the course but I'd be interested in your reasonings beyond oil,currency and turmoil.

RESPONSE: I agree on the XAU puts that if you are inclined to, stay the course, with a possible better "stop" as a close in nearby gold futures above prior highs in $307-309 range -- or, you can risk the value of the put. I felt that because there might be fundamental factors less known to me, relating to supply and demand factors, especially supply that might cause gold futures to take out the apparent double top. To be prudent in my recommendation, I determined a stop out point equal to a new high close on XAU (above 72.33) and we got that last night with XAU close at 72.71 which I must have overlooked. Thanks for noting this.

Art Cashin being an old time floor broker may be noting prices on the board, as he has an order book to look after. Or, he may be doodling!

  Jeff Bailey   4/23/02,  2:16:25 PM
Kronos Inc. (KRON) $40.05 -1.35% ... might be good bear opportunity short-term. Watch for a break below yesterday's low of $39.55, then short with target of $35.75, If short, then would use today's high of $41.43 and trader's stop. Stock is flirting with 200-day MA and bulls might just pull the plug near-term should MSFT pull the GSO.X lower. Link

  Jeff Bailey   4/23/02,  2:13:49 PM
Microsoft (MSFT) $53.77 -3.4% ... getting downside alert here at 38.2% retracement. Will have bulls playing defense to 19.1% at $47.63. I have had retracement set from $73.64 to $41.50, which has 50% at $57.57 (recently serving as resistance) 38.2% at $53.77 (served as support on day after earnings). Will note upward trend on bar chart also right in here so bears need to be cautious right now. Tough trade either way. Might simply use weakness to look for other software stocks that could get drug lower should weakness in MSFT continue.

  Leigh Stevens   4/23/02,  2:04:24 PM
Subscriber question: "you said on MM to set the length on stochastics to 21. what is 21 (days, months, hours?) what is its significance?

RESPONSE: I usually or always refer to a LENGTH as a function of what time frame I am looking at. I use 21 most often for hourly charts, as I find 21 to be significant for showing both momentum and overbought and oversold areas appropriate to the 2-3 price swings, a duration useful for options trading or futures -- especially when the market is going back and forth a lot.

For Daily charts I tend to set length at 14, for weekly, 8 or 13 -- for monthly, 8.

  Jeff Bailey   4/23/02,  1:59:31 PM
ho, ho, ho Compaq (CPQ) $10.00 -6.7% ... getting downside alert here at 50% retracement. Day-trader can lock in gain here from 10:38:34 or 10:40:59 observations. Decent little 5% gain in not too long of time. Heck... we'd have to sit in the 10-year for a year to get 5.165%.

  Jeff Bailey   4/23/02,  1:50:33 PM
Jeff: I'm looking to get into nvda puts, but I also feel that the nasdaq is oversold and there could be a rally in the next couple of days. Do you think that nvda could prosper from the rally and maybe get puts at top of rally? Thanx for your opinion.

Will discuss NVDA technicals in the 03:00 Update, but I'd be looking for a rally to short at this point. I think stock is technically in "no man's land" and a toughy here.

I have retracement as conventional at $71.74 to $23.88. This has 50% up at $47.81, 61.8% at $42.16 and 80.9% at $33.02. With NVDA trading $36.78, she's right in between 61.8% and 80.9% retracement, so no help there with 50/50 risk reward.

Regression channel from the January high as mid-point of regression serving as resistance right now and this was really the case 4 sessions ago when NVDA traded right on the mod-point. MACD on Daily is trying to round higher, thus thinking we might get a "pop" to $42 for better short/put opportunity.

Still... stock looks put short here, with 1/2 position. I'm eyeballing that volume spike from 04/10/02 and range that day was $41.40-$35.60. If I were institution that stepped in from the long side that day on the drop, I'd be looking for the doors at $35 as vertical count of $42 has been exceeded and we're left to wonder where the bottom might be. Current level of support from retracement is 80.9% at $33. I think stock finding support here from the early October consolidation before powerful move higher and bears most likely covering at current levels. Link

I'm always cautious of short/put trades when MACD on daily is this low.

  Leigh Stevens   4/23/02,  1:31:07 PM
Index Update: - All indices our either back either to their recent prior lows (SPX, OEX, & DXJ) or are making new hourly lows for this move (COMP, NDX and QQQ)-- these were also the ones that I thought did not yet have bullish price patterns. The S&P & Dow on earlier bullish stochastic crossover, looked like it would get something going on the upside. WRONG! A good reminder not to take oversold readings and crossovers as gospel. We need to see now whether prior lows hold up on any re-test of these areas and if we get a double bottom or otherwise see bullish price and volume activity before suggesting a bullish play.

  Leigh Stevens   4/23/02,  1:21:13 PM
Subscriber NOTE: "Hi Leigh, time for a continuation of our bull/bear debate. You've been making reference to the fact that new highs vs. new lows shows building internal strength in the market. I was alerted to a tidbit of information about this model that I thought I'd pass along. Bernie Shaffer has shown in his work that it's an accurate oscillator showing overbought and oversold. It shows that we're currently overbought and the downside could be more significant here than you are suggesting."

RESPONSE: Thanks. I find this "indicator" valuable too, altho its not one I use as a primary indicator. I have found that when new highs minus new lows are expanding or holding up, it’s a decent confirming type model for some further upside. For example, new Nasdaq highs minus lows hit a peak of +220 on 4/16, then fell to +102 yesterday -- new highs minus new lows on NYSE hit +323 on 4/10 and fell to 147 yesterday.

When Nasdaq New Highs- New Lows gets into +200 to +300 range, there has been a tendency for corrections to follow, which we have gotten of course. A good reading for a significant bottom has been -100 or a greater negative. Price is my principal guidelines. If the indices are at the low end of trading range, then this is what I trade off from until the lows are violated. This can happen here no doubt. One more shot down or a retest of the Feb. lows would set up for a more major bottom -- new highs - new lows would probably also line up then with a "typical" bottom. VIX would probably rise also and get more bullish than indicated currently. Agree we are not oversold on the basis of these 2 indicators.

  Jeff Bailey   4/23/02,  12:37:41 PM
Jeff, What are your thoughts on IGT after their earnings report this morning? With the stock up $3 today it has been well received on the street. Where do we go from here? Look forward to your thoughts.

I'm using today and next couple as "observation" days. We had IGT listed as a bearish trade on PI, but I was mentioning to our playwriters that the stock was just edging down along that lower end of regression and to have tight stop. For option trader that bought some time, we're looking at today's volume.

I do think IGT is under a longer-term distribution as end of cycle is most likely near. Other Casino operators showing some good numbers, but most may have already spent on new slot machines, etc.

As technicals go, stock found ready sellers at $60 and we shall see how strong today's earnings are at the $60 level again. One has to wonder why stock is down at $58 after trading $70+ back in December. Was January the longer-term "tax gain sell" when longer-term bulls left the stock? I think so and now some shorter-term bulls looking for the exits if long above $65. Link

P/F chart will perhaps tell the longer-term. Trend still bullish so bears are very early right now. Link

  Jeff Bailey   4/23/02,  11:35:42 AM
Open mind? Some trader's thinking.... "hey Cisco (CSCO) $14.58 -1.95% bulls, what you doing today with Toll Bros. (TOL) $29.25 +4.83% making a move? Nice short-term trading for bulls if you've got an open mind and not thinking that "technology" is the only way to make money in short-term bullish trades.

  Jeff Bailey   4/23/02,  11:32:20 AM
Interesting reply from a subscriber regarding my "top picks" for healthcare stocks

Jeff: I appreciate your comments.......I thought maybe you scanned a few alrdy or had a few in mind. I will check out healthcare definetly.....I am just looking for a few good stocks to put away for my son for college.Time horizon about 13 years....How do you like that for long term hold??Take Care and as always continue to enjoy your daily comments...all the best

Wow! that is long-term. I imagine that we will trade the healthcare sector probably 13-times in various cycles between now and then!

  Jeff Bailey   4/23/02,  11:18:42 AM
Jeff, On your comment about shorting CPQ @10.54, I have question about how many stock of cpq one should short?

This is something I've discussed a number of times and why it is so important for you (the subscriber/trader) to have a detailed and outlined trading discipline.

Go back and read your trading discipline that you wrote before you started trading. What does it say? Does it say "You will not risk more than $xxxx.xx in any one trade? Or does is say nothing and therefor you have no risk profile for your account and are going to get blown up?

I can't answer these types of questions. A trader with a $10,000 account will answer one way, while a trader with a $1,000,000 account will answer it another way. I will sometimes say full or 1/2 position, but that is only to guide you as it relates to your stated trading discipline.

  Leigh Stevens   4/23/02,  11:16:11 AM
Economic tea leaves: Traders are looking for some clues to what's next in the economy. Looking at the rear view mirrow of Q1 earnings, they already know they are not great. Now, it's sort of "what's next"?.

Tomorrow's (Wed.) Durable Goods report, New Home sales and the Fed Beige book report will be watched closely. Of the 3, traders will be looking especially at durable goods and new home sales for signs of an economic pickup or holding at a good level in the case of new homes sales. The Fed beige book provides more of a backdrop report and some possible insight into the Fed's thinking on the economic trends, but Greenspan has given the important indications already regarding their inclination NOT to raise rates anytime soon.

  Leigh Stevens   4/23/02,  11:05:04 AM
Index Update: Stochastic/hourly charts update - NDX and QQQ The Nasdaq Indexes started rallying in the final hour of trading yesterday, pulled back a bit today, continuing to "base" -- in the NDX, this sideways or "basing" activity has been with hourly lows at and above the 1340 area; there may be another bout of weakness ahead however, as chart pattern still suggests indicision. A move above resistance at 1363 is needed to suggest some upside follow through, say up to re-test a significant resistance overhang in 1380 area. Bullish upside crossover on hourly stochastic has occurred. I'm more cautious on this one, than on the S&P 100; QQQ has same pattern as NDX and sideways move over the past few hours, followed by a little lift in last 1-2 hours of trading, has also generated an upside bullish crossover. I'm cautious on this one too. Maybe one more shot down, say to 33, would set up a tradable rally.

  Leigh Stevens   4/23/02,  10:53:51 AM
Index Update: Buy "Signals" - SPX has completed about 5 hours of basing, with lows in the 1105-1106 area and the hourly stochastic (21) is now on a bullish crossover buy "signal"; S&P 100 (OEX) has based in the 548-549 area and is also on a crossover buy signal in the same hourly stochastic model; DJX also based in 101 area and is also now on a buy signal; for short-term traders, it may be time to exit puts, some or all and look to buy these index calls around current levels, or on any minor weakness over the next 1-2 hours.

  Jeff Bailey   4/23/02,  10:46:22 AM
Toll Brothers (TOL) $28.70 +2.86% ... was stock I mentioned bullish yesterday on the break higher of $28. Nice little gain underway for bulls here and first hurdle is from "fitted" retracement of $29.22 with upper end of trending higher regression channel at/near $30 as good target to sell some strength for short-term bull.

see yesterday's 03:00 Update for retracement. Link

  Jeff Bailey   4/23/02,  10:42:46 AM
Dow Jones US Home Construction Index (DJUSHB) 380 +2.63% ... breaking to new 52-week highs here. Look out.

  Jeff Bailey   4/23/02,  10:40:59 AM
Compaq Computer (CPQ) $10.57 -1.58% ... 60-minute interval chart shows the 50-pd MA at $10.54 too. May need a break of $10.53, but looks weak.

  Jeff Bailey   4/23/02,  10:38:34 AM
Compaq Computer (CPQ) $10.54 -1.39% ... looks short here. I have had retracement from $12.35 to $7.66. Break of 61.8% at $10.55 looks bearish and targets of 50% $10.05 and 38.2% $9.45 are in play. Stop just above yesterday's high.

  Jeff Bailey   4/23/02,  10:30:33 AM
Service Corp. (SRV) $4.11 -1.2% ... stock "popped" at the open to a high of $4.34, pretty close to our bullish trader's target of $4.50 from Friday. This also came just below the mid-point of lower trending regression channel. Yesterday thought it best for trader to sell 1/2 position for gain near $4.00. Can snug a mental stop up under the $3.97 level here this morning and look to sell strength at $4.49 if it happens.

  Jeff Bailey   4/23/02,  10:25:51 AM
Disk Drive Index (DDX.X) $106.03 +1.3% ... building a little "handle" here Link and looking strong relative to broader technology. Names we've mentioned recent past that look strong in the group are Western Digitial (WDC) Link $7.24 +1.4% and yesterday we mentioned SanDisk (SNDK) Link $19.36 -0.15% for straddle/strangle trade.

  Jeff Bailey   4/23/02,  10:17:12 AM
North American Telecom Index (XTC.X) 564 +2.06% ... leads sector gainers today. Anytime I see one of the "weakest" sectors outperforming, this hints to me of short-covering rally right now, in sector and perhaps broader market too. Bulls need to be careful and stick only with those stocks above trend and good bullish vertical counts that exhibit strong relative strength.

  Jeff Bailey   4/23/02,  10:12:51 AM
Intl. Game Technology (IGT) $56.92 +5.07% ... stock getting a bounce from lower end of downward regression after reporting Q2 earnings of $0.81 per share, which was 2-cent better than consensus of $0.79. Revenues rose 69.6% year/year to $530.4 million, which included the revenues of recenlty acquired Anchor Gaming (previously NASDAQ:SLOT).

  Jeff Bailey   4/23/02,  10:04:57 AM
Cardinal Health (CAH) $69.95 -4.16% .... I like the stock bullish right in here and still like a longer-term call play in the shares. On Friday, stock broke firmly above downward trend and got nice follow through yesterday. Stock dealing with overhead supply from last summer right now. In time, I feel she will eath through it. Should have good support building in the $68-$69 area. Link

Point/figure remains bullish with vertical count of $89. Today's trade at $70 enough for a 3-box pullback and good place for institutions to be sitting some bids and accumulating. Link

  Jeff Bailey   4/23/02,  9:53:05 AM
Freddie and Fannie Both FNM and FRE under some early morning selling pressure after the Wall Street Journal reports that Fed Chairman Greenspan has stepped up his criticism of the implicit government support of mortgage agencies Fannie Mae (FNM) Link and Freddie Mac (FRE) Link . In a speech last night, Greenspan said that governement support for mortgage agencies, such as FNM and FRE, may be leading investors to underestimate the risk of dealing in securities of such agencies. Greenspan believes that the perception of government sponsorship could encourage investor's to apply less vigorously some of the risk controls that they apply to manage their over-the-counter derivatives exposure.

As I have discussed in prior commentary, the "derivatives" discussed are the various hedges that FNM and FRE will put on in the Treasury markets to hedge loans originated. The term "hedge" should not necessarily be used in assocation with "Enron" as has been the case in recent months. Enron did not know what they were doing and some have even said that they didn't even try and hedge their risks. Enron like some, thought that prices would always come back.

  Leigh Stevens   4/23/02,  9:50:59 AM
Index Update: The little rebound we had on the close in the NAS indexes was short-lived. The best that the bulls can hope for this morning, looks like stabilization and to go sideways for a while. When fear and loathing hits the market, the next day often finds some residual selling the next day -- not everyone watches Market Monitor all day, or CNBC or tunes to their favorite market web site all day. So, they have to watch the evening news and decide if they hate the latest sector or stock to disappoint and want to sell the next morning. The indexes are getting near PRIOR LOWS in SPX -> 1100; OEX -> 546; DJX -> 100.6; COMP -> 1724 -- NOT SO CLOSE relative to current 1755 trade; NAS 100 (NDX) -> 1322; QQQ -> 32.88. Hard to predict if the sellers will pause and some buyers come in these areas, if and when reached.

  Jeff Bailey   4/23/02,  9:42:53 AM
Centex Corp. (CTX) $55.28 +0.5% ... interesting stock to watch near-term for sense of homebuilders strength/weakness. Stock looks strong for rebound on p/f chart (see 09:27), but currently battling with a rolling 50-day MA. If stock can clear the 03/25/02 relative high of $56.08, then stock could work its way back to uppwer end of regression channel near $62. Link

Lots of these "homebuilders" have very nice regression channels if taken from the September lows. Many just sticking their heads above the mid-point of regression.

  Leigh Stevens   4/23/02,  9:39:32 AM
ON THIS DAY in 1348, King Edward III of England established the Order of the Garter, which did God knows what. This same date in 1564 is thought to be the birthdate of William Shakespeare - while also a best guess, he was supposed to have died on this same day, 52 years later. In honor of the great Bard and the Order of the Garter too, take your spouse or significant other, to a poetry reading, or a play or give them a knight to remember.

  Jeff Bailey   4/23/02,  9:38:05 AM
Electronic Data Systems (EDS) indicating $49.51 .... I've taken a retracement bracket that is "fitted" from $71.88 to $42.54. This ties in nicely with 50% at $57.21 (served as support in January, February and March) then when broken, stock fell just below 61.8% of $53.74 (recently served as resistance) and now has 80.9% at $48.14 (near-term bearish target) and 100% down at $42.54 (a result of fitting). Link

  Jeff Bailey   4/23/02,  9:32:57 AM
Electronic Data Systems (EDS) $51.30 ... Lehman Bros. downgrades to "buy" from "strong buy" based on last night's mixed earnings report. A number of other analysts also coming out with cautious comments on the stock. USB Piper Jaffray cuts FY02 estimates, and believes that the convergence of revenue growth, cash flow concerns, and overall industry slump will likely lead to further volatility near-term.

UBS Warburg cuts rev/EPS estimates and expects the stock to be range bound in the $45-$50 range.

Bear Sterns believes that cash returns on large contract in EDS' backlog may be sub-par looking forward.

P/F chart of EDS "says" stock is below trend and current bearish vertical count of $32 should have bulls cautious. Link

  Leigh Stevens   4/23/02,  9:28:14 AM
It's Showtime! Good morning to all our Subscribers and wishing you a great day. The market went out with a little rebound in the Nasdaq: Compositie, Nas 100 and QQQ and these indexes were all oversold, as was the S&P. Only the Dow was not and it has been relatively weak in comparison. Every dog has its day. The tech wreck may be over at an area preceived to have value. It does appear that we are again at the low end of a trading range. However, if the Dow does not hold 10K, all bets are off. Absent that, suggest buying as long as prior lows are not taken out in any major way. Time to put some put profits in the bank.

  Jeff Bailey   4/23/02,  9:27:00 AM
Centex (CTX) $55.00 ... reported Q4 net of $1.85 a share, 5-cents better than consensus. Revenues rose 13% to $2.26 billion versus consensus looking for $2.18 billion. Link

  Jeff Bailey   4/23/02,  9:23:51 AM
Cardinal Health (CAH) $73.00 ... reports Q3 earnings of $0.71, which is 1-penny better than consensus; revenues rose 11.7% year/year to $11.54 billion versus the 11.81 billion consensus. Company says it is on track to deliver June quarter growth of 20% or more; which would indicate EPS of $0.70 or higher versus the $0.73 consensus. Link

  Jeff Bailey   4/23/02,  9:19:00 AM
Verizon (VZ) $40.00 ... company reports Q1 earnings of $0.72 a share, in line with consensus. For 2002, company sees EPS of $3.12-$3.17 (consensus $3.17); capital expenditures projected at $14-$15 billion, which is below previous guidance of $15-$16 billion; sees reveneu growth of 0-1%. Link

  Jeff Bailey   4/23/02,  8:52:54 AM
Good Morning! Stock futures look mixed to lower this morning. S&P futures (sp02m) currently down 0.20 points at 1,108.10


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