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  Leigh Stevens   4/26/02,  4:04:37 PM
Subscriber NOTE: "Please give us your settings for MACD or provide a link to your chart."

RESPONSE I, along with most traders, use the default settings in TradeStation or Q-Charts, as suggested by the fellow who invented MACD, Gerald Appel -- these are Fast Length 12, Slow Length 26 and MACD Length 9. 26 and 12 refer to moving averages that are exponentially smoothed. Unlike, say stochastics where its quite common to change "length" (also, RSI); e.g., 5, 8, 10, 13-14, 18, 21, etc.

  Jim Brown   4/26/02,  4:04:09 PM
Ugly! Very ugly! The markets all closed below support and at the lows of the day. For bulls it was very dismal but for traders it was a great day.

Want to know how to capture profits from days like this? Then be sure to tune in beginning Tuesday May-7th when I will begin hosting the swing trading session on the Market Monitor and I will focus on intraday trades on the SPX/OEX/QQQ.

Remember that date - Tuesday May-7th.

I will post an article describing the methods I will use and how we will profit from these moves in the Sunday May-5th newsletter. Don't miss it!

  Leigh Stevens   4/26/02,  3:57:58 PM
Subscriber question: "Leigh...at these levels, is there a likely bounce that could be scalped w/a quick call at the current level, or is it just too bleak and we should use any minor lift to buy more puts???"

RESPONSE: I don't see any conclusive sign of a bottom, so best plays continue to be puts unless you can trade the occasional bounces, but reversals come so fast, that it becomes necessary to watch the market all day long to exit quickly -- I have responsibilities to keep close watch on the market but even I have trouble being a day trader.

  Jeff Bailey   4/26/02,  3:57:17 PM
Cisco Systems (CSCO) $14.03 -3.9% .... looks like bears are going to try and get her to close below $14.00 into the close. If so, could have bulls pulling the plug Monday morning.

  Leigh Stevens   4/26/02,  3:42:22 PM
Subscriber NOTE: "I know the S&P is the "professionals" index but how about some mandatory coverage of the naz in any index wrap Thanks"

Yes, you are right and I have been working toward recapping the Nasdaq 100 (NDX) "Naz" nightly -- it took me a while to devise a format so I can go thru the charts quickly, nightly on my Index Trader wrap, but you will see this going forward.

  Jeff Bailey   4/26/02,  3:32:21 PM
Trigon Health (TGH) $83.56 +1.75% ... new 52-week high today. Bulls and bears would love another opportunity at $75. Bulls to buy, bears to cover some losses.

  Leigh Stevens   4/26/02,  3:31:31 PM
Subscriber QUESTION: "made a little money on TXU - a great company - but wonder if this run is out of steam? - there were recent Merrill downgrades"

RESPONSE: I can't make a fundamental assessment of the company or mother merrill's wisdom or lack of it in regards to its downgrade. What I do see is that recent top occurred with a pronounced RSI/price divergence as the Relative Strength Index peaked at a lower high, versus the higher high in the stock above $56. TXU then suffered a downside reversal from the top end of well-defined uptrend channel that it had been in. Today's weakness broke below the low end of that channel on the daily chart - last at 54.19. Some support may be found at 53.20 at 50-day mov. avg. TXU looks like it will continue to correct. "Normal" correction is it retraces 38-50 percent of prior upswing, suggesting pullback to 50-52 area. Technical support, for other reasons, should be seen at 50.

  Jeff Bailey   4/26/02,  3:23:35 PM
Macromedia (MACR) $21.98 +1.47% ... day trader from earlier today getting stopped out at break-even. Thinking broader market action unfolding just too strong a current to trade against.

  Leigh Stevens   4/26/02,  3:14:31 PM
Subscriber QUESTION: "Hi what do you think about pullback in XAL and LUV?

RESPONSE: The Airline sector index ($XAL.X) has broken its Nov.-Feb.-Apr. up trendline when it broke 100.5 the other day, suggesting it could have another down leg. I would have to focus now on the prior downswing low of significance at 84 area, as a possible target and support. Southwest Airlines (LUV), is however, bucking this weak trend in the sector by at least holding above its prior technical support int he $18 area. LUV acutally could decline to 17.25 and, as long as it doesn't dip below this level, especially on a closing basis, remains in an uptrend. I am holding calls on the stock (last at 18.5) but will exit if LUV breaks 17.25 however.

  Leigh Stevens   4/26/02,  2:49:51 PM
Subscriber Question: "Could you profit in PVN as risk/reward play?"

RESPONSE: Regarding Providian Financial (PVN), it looks like it has built a minor top by repeated reversals from the 8-8.5 area recently. Therefore, best risk to reward looks like it was shorting the stock in that area, with a buy stop just over 8.5 and an objective for a retracement back to the $6 area, where stock appears to have support based on that being an area of consolidation buying and then an upside price gap. Alternativly, you can wait for a pullback of that degree and buy the stock.

  Jeff Bailey   4/26/02,  2:26:04 PM
Jeff: Would you continue to hold Intl. Game Technology (NYSE:IGT) $60.31 +0.81% Jan03 $55 puts?

Yes I would. I have downward regression channel which has uppwer end at $63 and lower end (served as support) at $54. Near-term supply at $62. Lots of time until January.

  Jeff Bailey   4/26/02,  2:17:06 PM
Tyco Intl (TYC) $19.97 -3.7% .... I'd be looking to lock in gains. "Fitted" retracement from $59.99 to $9.56, has 38.2% at $28.82, 19.1% at $19.19 (was tested earlier today). Very similar perhaps to VRSN trade where a nice gain and potential target has been achieved.

  Jeff Bailey   4/26/02,  2:10:43 PM
Treasury Watch interesting and perhaps meaningfull to note that we're not seeing a "rush" to bonds today. 10-year YIELD ($TNX.X) didn't come close to yesterday's lows. Link

As a bear in some trades, this has me a little edge and not willing to give up much ground in stocks I'm short.

  Jeff Bailey   4/26/02,  2:02:01 PM
Transports and Cyclicals Both sectors showing marginal gains today. I think shorter-term bears (regardless of where you're trading) needs to be congnizant of this.

In my opinion, it does hint that there are MARKET participants willing to bid the stronger groups based on economic prosperity. If nothing else, it is where money continues to stick.

If the get further bullish, smarter bears may begin stepping up their short covering "early" and locking in some gains.

  Leigh Stevens   4/26/02,  1:37:29 PM
Subscriber QUESTION: "I've read one commentary on QQQ and looked at your chart of it. I thought a bear flag had formed on the daily chart. Your 60m chart shows the break of the channel that comprises the channel of the flag. I am still learning about charting patterns. Could you tell me why it would not be a valid pattern? "

RESPONSE: It's hard to comment on a chart pattern without seeing it at the time and how you're drawing it. I do look for "confirmation" of patterns by seeing if I also see the same pattern in DIFFERENT time frames. A flag is a good example: if I see one on a weekly chart, a switch to daily chart view should show same pattern, only "bigger". If I see a flag pattern on daily, same pattern should be on the hourly chart. You have to use some interpretation. Use "best fit" trendline; e.g., you may have 1 spike above or below an hourly chart flag outline, but the cluster of highs or lows is predominately defining a "line" of support or resistance. ALSO, patterns "fail" and the outline you are seeing shifts and changes -- poof, its no longer there!

  Leigh Stevens   4/26/02,  1:16:47 PM
That sinking feeling - Indexes - We continue to slide lower here and the hourly chart patterns (formation of bear flags yesterday) continue to rule. We are heading toward down the lower hourly downtrend channel lines now on NDX, QQQ (weakest), COMP, OEX, SPX, and slowly, the DJX -- with the Dow, there is still buying support coming in on dips under 10,000 and as we apprach the 200-day moving average at 9933.

To review area I see as next objectives -- or downside targets: SPX - 1080 at Feb. low; then, if exceeded, 1075; OEX - 530; DJX - 99-98.5 area; COMP -1660 area; NDX - 1250; QQQ - 31-31.25

  Leigh Stevens   4/26/02,  1:09:00 PM
Subscriber QUESTION: "Please advise what percentage envelope line you use for the QQQ and if a 21 day MA is suitable?"

RESPONSE: I've found over the years that a 21-day moving average is the best single average to use with indexes. With all of them, I start with 3-4 percent envelope bands (S&P & DJIA), and expand them to the point where they tend to intersect or touch the extreme highs and lows -- this basically means that they re set, and adjusted from time to time, based on recent weeks/months volatility. With the Q's, the "best fit" on the upper and lower envelope lines has been running at 8 percent.

  Jeff Bailey   4/26/02,  12:37:42 PM
Jeff, The brokers got hit yesterday and some rebounded today. What do you think of shorts today on gs, mer, leh, mwd etc

I liked 'em yesterday as short/puts and this morning's action hasn't changed my mind. I've looked at JPM and MER in detail. Think MER is "tail" and JPM is "head" of the snake. I've liked (bearish) JPM Link for some time as it was just below bearish resistance and offered nice tight stop for shorting.

Won't comment on others at this time, but review previous notes on JPM and MER, make some technical associations and go from there.

  Jeff Bailey   4/26/02,  12:26:35 PM
Cisco Systems (CSCO) $14.27 -2% ... would be aggressive short with the stock here. AMCC sinking to near 52-week lows. CSCO has the potential if guidance isn't positive.

  Jeff Bailey   4/26/02,  12:24:58 PM
Semiconductor Index (SOX.X) 518 -3.6% ... $500 "easy target" for bears here. Link

  Leigh Stevens   4/26/02,  12:24:19 PM
The Amex Utilities Holders Trust (UTH), just mentioned, which has been relatively weaker than the Dow Utility Index ($UTIL) has Dynergy (DYN) as one of its holdings, unlike UTIL. Dynergy, of course, has gotten creamed over past 2 sessions -- the recent sharp break taking the stock from the $27 area down to 16 today.

  Jeff Bailey   4/26/02,  12:22:23 PM
Fiber Optic Index (FOP.X) 75.14 -3.48% .... another 52-week and all-time low here. Link

Not long ago, we "rolled down" retracement and fitted. Has 100% down at $67.54 as bear's target.

  Leigh Stevens   4/26/02,  12:19:20 PM
Sector Update: Utilities - Dow Utility average ($UTIL) has fallen sharply today, after breaking its 200-day moving average yesterday. Last at 301.8, it has key support in the 297- 298 area. Along with UTIL, the Utilities Holders Trust (UTH) has broken even more sharply, gapping down yesterday, then falling under technical support at 93.7 -- last at 93.2. UTH s 50-day moving average at 92.8 is the next level where support might form. A Sector Trader suggestion a while back suggested buying UTH at 95.25, with a stop at 91.00 -- will suggest raising stops to 92.00, to keep risk to about 3%.

  Jeff Bailey   4/26/02,  12:19:00 PM
Snake scenario in play in the Utilities .... can see how DYN is tail of the snake Link and "sector association" has the head of the snake in TXU Link almost "looking back" to see what's coming out the tail end. (grin).

  Jeff Bailey   4/26/02,  12:13:54 PM
Utility HOLDRS (AMEX:UTH) $93.20 -1.9% ... seeing weakness today, most likely due to Dynegy (DYN) $15.95 -16% ... Link.

Trader of the HOLDRS that was long the UTH, most likely shorted/put the weaker DYN yesterday as it was weak stocks really breaking down. Thus a bit of a hedge and doing OK.

If not, then taking some notes about how to perhaps hedge HOLDRS in the future.

  Jeff Bailey   4/26/02,  12:05:32 PM
Barrick Gold (ABX) $20.00 +2.46% .... cold get squeezed here. No overhead supply. Link

  Jeff Bailey   4/26/02,  12:04:01 PM
Straddle traders should now start to be seeing some "premium inflation" come into your trades as VIX.X (volatility) starts to rise. Link

For Sandisk (SNDK) straddle, would be monitoring for $15, perhaps $13 on downside of straddle to close out puts. At that level, Calls pretty much worthless, but straddle trader that traded June left with some time for "rally back" to then play the call side. Hang in there, things looking better for straddle traders as MARKET gets more jittery and looking to hedge risk.

  Jeff Bailey   4/26/02,  11:38:49 AM
Cendant (CD) $18.46 -1.49% ... see how stock trades with "lid" at $19? I have retracement from $21.54 to $8.12. This has 19.1% serving as resistance. Link

If we take trend from the September low to the January 30 pullback, extension of trend ties in with the 200-day MA (pretty close). Under current market conditions, not surprised by a pullback to $17.

P/F still bullish. Link

I will note, in past, I've hear Mario Gabelli on CNBC and he was big bull back before I/we were at $15 in November of last year. A couple of times I heard him say he thought CD fully valued at $22-$23. I think he's selling and taking profits in here, thus the lid at $20.

Just my thoughts. I like/respect Mario. Hey, he was wrong on Adelphia, but he was right on CD.

  Jeff Bailey   4/26/02,  11:29:26 AM
VeriSign (VRSN) $10.09 -44% ... Jeff: Nice trade on VRSN from Wednesday! I know vertical count is lower, but wanted to say thanks

You're welcome! Yes, In 11:00 Update, I'm saying bears with puts lock in gains here. Stock sitting right at lower end of regression channel. Link

  Leigh Stevens   4/26/02,  11:26:02 AM
Index Update: Dow (INDU) - Again trading under 10K and looks poised to pierce its 200-day moving average at 9933. A close under this key average would get wide notice among stock traders, and would be last average to roll over to the downside in this way - all other indices have been trading under the their 200-day averages; e.g., S&P 500, since the beginning of the month. Along with this possible technical negative, if the Dow closes at or under where it is now, the weekly MACD (Moving Average Convergence Divergence), which is one moving average crossing below a slower one, is on a sell signal. MACD is coming down from the kind of high level or overbought reading that suggests that DJIA would have to fall some distance before it is in an oversold area again, like it was at the fall bottom. The MACD actually never gave a "sell signal" on the Jan. downswing. It is now however. Stay tuned!

  Jeff Bailey   4/26/02,  11:24:07 AM
Hi Jeff, What's your opinion on DGX as a put play. My view is that has tried to break 90 but just get the MO to get past it. Is this a classic rollover spot. It looks like it on a 60 Min chart. What say you..?

I say "demand in control" and would consider a put play as a lottery play only. Link

Looks capable of what the HMO.X did when demand took control. Link

I wonder if this trader played VRSN Link or DYN Link

I pefer to try and trade WITH the trend, not against it.

  Jeff Bailey   4/26/02,  10:58:54 AM
Biotech Index (BTK.X) $10 box is bearish and gives trader's bearish vertical count of $360. Link

  Leigh Stevens   4/26/02,  10:57:22 AM
Index Update: Indices are starting to break down below the low end of the bearish flag patterns that I highlighted last night at Link . Downside targets at the low end of the hourly downtrend channels are looking like next possible lower objectives: SPX - to 1080 at Feb. low; then, if exceeded, 1075; OEX - to 530; DJX - to 99-98.5 area; COMP - to 1660 area; NDX - to 1250 area; QQQ - to 31-31.25

  Jeff Bailey   4/26/02,  10:56:06 AM
Wondering if that "goofy" girl on the DYN commercial just a minute ago owns some DYN stock?

  Jeff Bailey   4/26/02,  10:53:05 AM
Biotechnology Index (BTK.X) 424 -3.6% ... leading sector decliner and approaching the September lows of $410. Sharp break or action below those lows could dictate action for broader NASDAQ and specifically the NASDAQ-100 (NDX.X). Link

  Jeff Bailey   4/26/02,  10:41:02 AM
DJ US Home Contstuction Index (DJUSHB) $374.93 -1.5% ... will note technicals have the index finding resistance at the mid-point of upward regression on Wednesday and trading sideway. Short-term bull in group understands and following trades with tight stops just under yesterday's lows perhaps. As it relates to the index. Lower end of upward regression at $360. Link

  Jeff Bailey   4/26/02,  10:37:13 AM
Kronos (KRON) $39.49 -0.72% ... yesterday was "inside day" and today's trade at $39.24 was break lower. Day-trader action point was triggered and looking for a response. Bear would like to se a break of Wednesday's low $38.83 to perhaps trigger further weakness. Link

  Jeff Bailey   4/26/02,  10:25:11 AM
QuadraMed (QMDC) $6.04 -34% ... reported earnings last night and leading % loser on the session. May want to research the fundamentals. On first glance I don't see anything "alarming" and guidance seemed "OK."

Stock got hit on downwgrade this morning. My thinking is that the stock is not heavily followed by institutions and thus the weakness. Gave "bearish triangle" today. May be a short candidate on any rally back near the apex of the triangle near $8. Stock still in upward trend, but BIG gap lower has me suspicious that MARKET may "know" something that company either doesn't know about or isn't saying. Link

  Jeff Bailey   4/26/02,  10:15:56 AM
Day Trader "Bear" eyeballing SYMC $36.10 +0.47% ; on 60-minute chart, looking for some type of weakness. See's rolling 50-pd at $36.56 (resistance) and rolling 200-pd at $38.24 (resistance). Just monitoring for any action at these shorter-term MA's on 60-minute chart. MACD on this timeframe trending higher, but just below zero level. If we see some stalling out of stock and MACD begins to roll under the zero level, move in for a short with nice tight stop above $38.00. Volume about average (based on visual of 60-minute)

  Jeff Bailey   4/26/02,  10:10:58 AM
Morning "Rally" Fading a bit. Day trader in MACR aware of this, raises stop to break-even. Swing trader "comfortable" with this. Retracement from $27.17 to $11.48 has 50% at $19.32, 38.2% at $21.17 and 19.1% at $24.17. My "swing-trader's target" near-term would be the $25-$26 range. Bullish trend from bar chart taken from the 02/20/02 low attached to Wednesday's low is trend swing-trader playing. Good early volume in first 50-minutes at 545,000 shows some interest in the stock.

  Jeff Bailey   4/26/02,  10:01:58 AM
Consumer Sentiment Univ. of Michigan consumer sentiment index was revised to 93. for all of April, down slightly from the 94.5 preliminary April reading; most likely won't have much impact on trading.

  Jeff Bailey   4/26/02,  9:56:11 AM
Dynegy (DYN) $16.86 -12% ... mentioned this one yesterday as short/put. Goldman downgrade (and many more) this morning may say it all. Link just like p/f chart did yesterday. Current bearish count growing and I think now $0.00. Trader's short/put from yesterday's profile can move stops to break-even. First trade target for bears comes from "fitted" retracement at $13.09. (see yesterday's 01:00 for chart) Link

  Leigh Stevens   4/26/02,  9:55:39 AM
ON THIS DAY in recent history, in 1986, the Chernobyl nuclear plant blew its stack and laid waste to a big patch of surrounding countryside. Going back a little further, ON THIS DAY in 1607, English colonists, including Captain John Smith, came ashore at Cape Henry, Virginia and started the first permanent English settlement in the Americas. To honor this event, round up an Englishman or woman to drink a toast and sing God Save the Queen, followed by America the Beautiful!

  Jeff Bailey   4/26/02,  9:52:25 AM
SAP and KRON both slightly in negative territory and most likely due to PSFT comments about flat industry. Institutions have a decision, do I hold, or is it time to move on to some other names and look at stocks again in a couple of quarters?

Answer me! I've put my hard earned money with your mutual fund and I'm looking for growth! Is it there?

  Jeff Bailey   4/26/02,  9:50:46 AM
Symantec (SYMC) $36.00 +0.08% .... I'd have a watchfull eye on this one and tinted somewhat bearish. Stock reported "strong numbers" yesterday, but didn't respond like I thought it might. Now repsonding much today either to upside despite broader market gains. In my bood, this is DIVERGENCE with the past and may hint of some changes.

I have retracement from $42.42 to $17.32 (conventional retracement from the last high to last low) and the 80.9% retracement at $37.63 acting suspiciously like resistance. 61.8% below at $32.83 hasn't been tested yet and bear's target. Will also note the rounding 50-day at $38.05, serves as good stop for aggressive bear. Would like to get an "inside day" for setup and will be using today as an observation day for stock. Link

  Leigh Stevens   4/26/02,  9:45:47 AM
Wall Street Journal (WSJ) has articles on: 1.) growing estimates of the size of the 2002 deficit -- shortfall may be double previous round of estimates, based on less robust individual tax collections -- checks in mail?!

2.) Possible stalling 2002 recovery, as existing home sales dropped last month (-8.3%) and a drop in new durable-goods orders in March, among other factors. Help out -- take the kids to DisneyWorld!

3.) Oil-cutoff talk started by THEIR favorite newspaper, uptown rival NY Times, was debunked -- WSJ concedes that talk rattled the market, but the Saudis will shoot themselves in the foot if they go as far as to employ the oil weapon. Foot in their mouth at Times or just good journalism?

  Jeff Bailey   4/26/02,  9:37:56 AM
Day Traders I'd take MACR bullish ATM here $22.02, stop $21 and target $24. Link

I have retracement from $11.48 to $27.17, has 38.2% at $21.17, 19.1% at $24.17.

  Jeff Bailey   4/26/02,  9:36:17 AM
Overture Services (OVER) $35.22 +37% ... mentioned this one yesterday in volatile trading and rocketing higher this morning. Last night reported Q1 earnings of $0.48, beating estimates of $0.33. Then gave guidance that was higher than consensus. Link

If by some chance a trader has a straddle/strangle from the large triangle pattern, would close for gains if May expiration.

  Jeff Bailey   4/26/02,  9:30:44 AM
PeopleSoft (PSFT) $21.89 ... stock edging higher at $22.49 after reporting Q1 earnings last night of $0.14 a share on revenue of $483 million. Company says it expects Q2 results to be flat versus Q1. Company said it believes marketplace demand will be flat for Q2 with potential for a pickup in the second half of the year; expects deal closure rate across the industry in Q2 to be comparable to Q1.

I think traders will be using the above with SAP and KRON too.

  Leigh Stevens   4/26/02,  9:30:21 AM
The GDP report may not fully resolve the question of how fast the US economy is rebounding. The single-biggest factor pushing up GDP in Q1 was a sharp slowdown in the rate at which firms cut inventories of unsold goods. Firms have cut their inventories for 5 quarters but in Q1 they did so at a much slower rate than previously. Production can rise when companies rely less on existing inventories to meet demand.

Consumer spending grew 3.5%. An 8% fall off in spending on durable goods such as cars was offset by an 8.4% surge in purchases of nondurable goods, no doubt reflected in the strong performance of consumer nondurables stocks like PG and KO year-to-date. The gain in nondurable goods was the biggest since an 8.9 jump in the second quarter of 1975.

Meanwhile, Corporate spending on new plants and equipment fell, altho drop in Q1 was smaller than those of other recent quarters - sharp declines in purchases of computers and other business investments has been a big drag on the economy.

  Jeff Bailey   4/26/02,  9:25:42 AM
At 09:45 AM EST The final April consumer sentiment number will be released. Economists are looking for a reading of 94.6.

  Jeff Bailey   4/26/02,  9:20:00 AM
GDP ... The GDP growth reported earlier shows that inventories contributed more than half of the Q1 GDP increase, which many will concede is temporary. Consumers continue to carry the economy, with spending up a healthy 3.5% in Q1, with business still showing hisitency to spend as investment there fell -5.7%.

This has economists/traders/investors understanding that unless business investment turns the corner, the inventory rebuild will fizzle and the recovery is likely to be sluggish.

  Leigh Stevens   4/26/02,  9:11:36 AM
Good Morning -- Pre-Showtime! Morning influences are first and foremost GDP report for Q1, showing the economy growing at a 5.8% rate, versus 5% expected. This lift may give the market a lift.

Goldman Sachs issued a technical report that market is oversold and they are definitely expecting a rally today. No kidding. Reversal to the upside in SPX and DJIA set up a minor upside reversal -- candlestick was a "hammer" as in hammering out a bottom.

Disney's (DIS) earnings were better than expected - Q2 profit was $259 million or 13 cents a share. This was 3 cents more than consensus. Not bad for the Mouse! Kiddies were coming to Disney parks in greater numbers.

S&P futures are trading higher, a bit above fair value numbers right now suggesting a bit of bullish sentiment coming in here. DJ futures are moving up a bit in the pre-opening count down. Stay tuned.


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