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  Jeff Bailey   4/29/02,  5:00:48 PM
Correction! to this afternoon's 03:00 intraday update. As posted earlier today in the 09:00 Update, NVDA's CFO (not CEO as in 03:00 Update) Christine B. Hoberg, is taking a leave of absence.

  Leigh Stevens   4/29/02,  4:21:38 PM
Subscriber NOTE: "I enjoy the daily history piece and since the market isn't doing much at the moment, I thought that I would pass on a bit on New Orleans as today was the day in 1862 that New Orleans fell to Union Forces. By the way, the locals down here are still sore about that (observation of a transplanted Northerner)."

RESPONSE: ON THIS DAY in 1862... as above. New Orleans always felt like such a lovely & different world than anywhere else in the U.S. that maybe the north didn't really ever "take it over", except in name only.

  Leigh Stevens   4/29/02,  4:16:19 PM
Subscriber NOTE: "Good afternoon - just been noticing that the OEX look's like it should go to 520. I have a trendline atached from 12/04 low 558.16 to 01/30/02 low 546.13 and it runs right at 520 on chart. Would like to know your thought's on it?"

RESPONSE: Well, the hourly downtrend line of current channel extends to 520 by the end of the day tomorrow (TUES). The lower daily chart trendline I would draw starts from the intraday low at 568, and cuts slightly above the 1/30 low and touches intraday lows of the following week (2/5, 2/6 & 2/'7) -- this line comes in around 514. Of course, when we are talking about trendlines, the lower line of a possible downtrend channel, does not have the same significance as an upside penetration of the down trendline off the 3/18 peak -- this trendline intersects at 555 currently. That said, looks like 515-555 might be the range in the near-term. Off the weekly chart however, OEX looks like it could retreat to the 500 area.

  Leigh Stevens   4/29/02,  3:33:34 PM
Index TRADING update: Notice that we are back showing downward momentum (on "sell signals") in the 5-hour hourly stochastics in the indices. This is a quick reversal of the upward momentum showing for a time this afternoon, demonstrating that trade JUST off from stochastics, when the "signal" is contrary or against the dominent trend is risky. However, the price channel lines at the bottoms of these hourly downtrend channles are reasonable places to take some put profits on Indexes -- in all but DJX, which is not at bottom of its channel yet.

Prices in the final hour of trade are at or near what are likely to be optimal levels to take some profits on puts. This idea is for those looking to re-short on a rally and/or to those inclined to reverse to the long side and watch market action closely, given the risk in a countertrend trade in a decline like this. A short-covering or bargain hunting type rally appears due in SPX, OEX, NDX and QQQ.

A problem, from a trading and risk standpoint (risk is higher) is that the lowest entry may occur tonight, as there is not likely to be much buying to lift them tonight. Not that the "news" will necessarily be better tomorow, but tomorrow, as they say, is another day.

  Jeff Bailey   4/29/02,  3:26:33 PM
Subscriber e-mail says New slogan for this market.... "Killing'em softly"

It has sure been a "slow bleed" lately hasn't it.

Homebuilders as depicted by the DJUSHB 378 +2% finding some cash.

  Jeff Bailey   4/29/02,  3:22:53 PM
SBC Communications (SBC) $30.54 -2.73% .... stock traded new 52-week low at $30.38 and continues to look weak. Option traders still holding 1/2 position put from $34 in good shape. Will note from retracement of $47.34-$26.54 that stock sits right at the 80.9% retracement level.

Conservative bear can lower stop to just above Friday's high or lock in gain at current levels if this is your desired target. MACD on daily interval of -1.667 (on q-charts) getting close to the -1.68 level of 10/31/01. Just looking for a "reason" for bears to lock in some handsome percentage gains on their puts. Bearish vertical count is $26 and getting closer.

  Leigh Stevens   4/29/02,  3:16:42 PM
Index Update: - We also have the Nasdaq indices at or near the low end of their hourly downtrend price channels. These areas are - + or - a point or two to allow for slight variations in how the lines can be drawn or are drawn: Nasdaq Composite ($COMPX) - in my charts last night had low end of channel at 1045, but in this final hour of trading, its more like 1640-1641, around lows of session; Nasdaq 100 (NDX) -low end of hourly (downtrend) channel is 1235 currently, above the lows, but below where it was last; QQQ - low end of channel is 30.7, not far from low of day, and a bit below where it's trading currently.

  Jeff Bailey   4/29/02,  3:16:26 PM
North American Telecom Index (XTC.X) 534 -4.52% .. got downside alert at 533.61 at new 52-week low. "Fitted" retracement from $862-$443 has 80.9% at 523 and lower regression has mid-point at/near $507. Would think psychological at $500 also target for bears.

  Jeff Bailey   4/29/02,  3:08:54 PM
NVIDIA (NVDA) will be covered in the 03:00 EST intraday update.

  Leigh Stevens   4/29/02,  3:04:25 PM
Indexes Update: - The indexes have, for the most part, gotten down to the low end of their hourly downtrend channels as shown in the charts in yesterday's Index Trader at Link In the case of SPX, I went back to the drawing board and revised the channel to the "widest" possible, based on the last 30-days hourly price history.

To run down these Index price areas, where downside momentum may slow, with the possibility of an upside turnaround -- more likely tomorrow (Tues)-- they are: SPX > 1064-1065 area currently, near intraday low; OEX > 527 is low end of channel, also around intraday low so far; DJX low end of channel is at 98, so DJX low at 98.45 is not quite there.

Of course, in a sell off like this, price levels can break below these area, but rebound back above them, relatively soon. Or, of course, they can just keep going -- this would be more unusual considering how the hourly channels have tended to define the areas of highs and lows within the trend.

  Leigh Stevens   4/29/02,  2:50:27 PM
Index Update: Selling pressure continues strong, with the NYSE TRIN hitting a high of nearly 2.00 recently. Nasdaq TRIN or the Arms Index (symbol: TRIN.NQ) is not quite as extreme, in 1.20-1.30 area recently. Any TRIN reading at or above 1.50 indicates heavy selling relative to buying. The TRIN, or properly called the ARMS index, after inventor Richard Arms, looks at advancing stocks relative to declining stocks at any given moment, also taking into account advancing volume versus declinining volume at the time of the calculation. NYSE advances-declines has been running in the -500 area, Nasdaq -900. NYSE declining volume is more than twice upside volume. Not quite as extreme on Nasdaq, which is why Nasdaq TRIN is not running as extreme as on the NYSE.

  Jeff Bailey   4/29/02,  1:41:27 PM
Jeff, Have you noticed CIEN today? Down 5.2%. Took this one short on your comments last week at about $1 higher than the last sale. Where was your downside target?

P/F chart is bearish to $0.50 (column of O from $16.50 to $9.00). Link a trade at $7.00, would be triple-bottom and action point for next leg lower.

Interesting .... before I looked at p/f chart and vertical count, I took "fitted" retracement from the 01/07/02 high of $17.30, then "fit" the 61.8% at the 03/11/02 high (wanted to honor that as "key" reversal point. That resulted in a 38.2% retracement of $7.03, pretty darned close to the 02/22/02 low of $7.13 and today's low of $7.05.

50% at $8.99 also ties in very well to 04/17 rally high. This has me thinking that market makers are sitting support here and squaring inventories. However, should order flow be negative, a break at $7.00 then has next level at $3.86, or 19.1% retracement.

As such, from this retracement, bearish trader currently assessing risk to $8.99 and targeting $3.86. Option trader also understands that "risk" is about $2.00 and will use this understanding in any option trades.

For instance... the Jan $7.50 puts (VCBMU) are offered $2.10 currently. This would be about the same amount of risk as a short in the underlying stock.

Why would anyone buy January puts? A longer-term options trader that understands the dynamics of "tax loss selling" of losing stocks near the end of the year, perhaps makes a correlation between CIEN and end of year tax loss selling. In CIEN, this may have been very obvious for action from Sept.-Oct time frame last year.

  Jeff Bailey   4/29/02,  12:19:46 PM
WorldCom (WCOM) $2.86 -12% ... sinking to another 52-week low today. I have retracement from $15.90 to $0.00. Very good "fit" and has 19.1% at $3.03. If short/put, can lower stop to $3.05. Bearish vertical count is N/A or $0.00. Link

Is she going there? $0 that is? I don't know, but until money starts hitting the bottom line, most likely cuts IT spending.

  Jeff Bailey   4/29/02,  12:04:07 PM
Does this look like a good short to you? Where would you place a stop? Thanks.

Yes, but 1/2 positions only. Reason being is that according to Dorsey/Wright and Assoc, sector bullish percent for biotech is "bear confirmed" at 28%, so it is "oversold" and could see some short covering. First sign of strength for AMGN is trade at $60. Link Vertical count is bearish to $44 currently.

For sector, Biotech Index (BTK.X) also shares a vertical count to 360, so hints some downside still to go. Link

Relative strength of AMGN versus BTK.X tells us that AMGN is not necessarily the "cause" of BTK.X weakness, but perhaps the "head of the snake" turning back to see what all the weaker stocks are doing. Link

  Leigh Stevens   4/29/02,  11:48:20 AM
The minor rebound in the Semiconductor Index ($SOX.X), last at 521.8, should be seen in terms of this group beginning to get oversold on the daily charts. However, SOX on Friday fell under its 200-day moving average (at 537.2) and has not yet tested key technical support, which I guage as in the 500 area, the area of the late-Jan. and Feb. lows. By the way, on a weekly basis the SOX is far from oversold, so either the SOX goes sideways or lower to get down to an oversold reading again -- last time SOX got fully oversold was at the late-Sept. bottom when SOX got as low as 344 and a weekly close of 374.

  Jeff Bailey   4/29/02,  11:46:17 AM
Combined Telecom (IXTCX) 140 -1.48% ... sinking to yet another 52-week low. This is what networking bear wants to see. Yes, NWX.X has achieved bearish vertical count on $10 box, but bear in sector perhaps understands that many networkers dependent on the tececom service providers to IT spending. Our thinking has been (since October of 2000) that networkers would be under pressure until telecom service stocks turn around.

  Jeff Bailey   4/29/02,  11:41:28 AM
Good morning, Jeff!.......Just wondering if you would tighten stops here on dyn?.....c

With "fitted" retracement from $32 to $8.07, 61.8% is at $17.21 and 80.9% at $12.64. Trader that really needs a gain for his/her account can establish a stop just above today's high of $15.45, say $15.55.

Trader that is doing good this month for gains can stick with a stop just above the $17.21 level (say $17.26) and target lower prices.

The key is to simply not let a nice gain be too severely eroded on some type of short-covering rally. I still think lower, much lower, but key is to control your risk. Bearish count is N/A or $0.00.

  Leigh Stevens   4/29/02,  11:37:34 AM
SECTOR UPDATE: - The strong get stonger - Healthcare stocks, as reflected by the (Morgan Stanley) Healthcare Index ($HMO.X), are up again today a group, with HMO up about 2%. Surprisingly, the Semiconductor Index ($SOX.X) has the second best gain today, followed by the Airline Index ($XAL.X) and QQQ. The top Nasdaq 100 gainers are Nvidia Corp. (NVDA) +14.9%, Charter Communications (CHTR)+9.5%, Veritas Software (VRTS) +5.9%, PeopleSoft (PSFT) +5.3% and Vitesse Semiconductor (VTSS) +4%.

  Jeff Bailey   4/29/02,  11:31:11 AM
Hey Jeff, What do you think about MVSN? I was thinking short on a roll over near 23, but I'm starting to wonder if we won't see 16 sooner than 23.

Then later

Jeff, I don't believe it. Earlier this morning I was asking you about MVSN, didn't know if I wanted to step in short today because I was looking for a little bounce closer to resistance. Now, of course the sucker is down almost 10%. AUGHHHHHHHH! Well maybe there is still a little downside left?!

Oh my! Stock broke a triple-bottom at $22 on Friday (short?). Bearish vertical count is $15. Link

I have retracment from $39.76 to $22.70. This $22.70 would be current stop for shorting and not that good risk/reward now to bearish count of $15 is my thought.

Sounds like subscriber smelled a "rat," but may not have had the conviction to trade. That's OK. Take some notes on the pattern and sector association. Then remember today. In future, act on similar observations. Good eye. Don't let this get you down. Lots of future opportunity.

  Leigh Stevens   4/29/02,  11:15:06 AM
Speaking to the seeming "mystery" of why the market fell on Friday after a seemingly bullish 5.8% jump in GDP, this morning's Wall Street Journal (WSJ) has front page analysis of what there was not to like about the report. Not that you haven't heard this from OI already. Namely, that more than 1/2 the growth came from businesses increasing production to rebuild inventories draw down so much last year - this suggests a temporary production boost only. We're still waiting for corporate America to open up their checkbooks and buy new hardware, software and to expand capacity by setting up new facilities, etc. However, business spending fell 5.7% in Q1. Consumer spending, about 2/3rds. of GDP, is not likely to expand further given present household debt levels, so its the 1/3 of GDP that business activity accounts for, that is the hope for a strong revival of economic growth and this is not happening yet.

  Jeff Bailey   4/29/02,  10:22:55 AM
Celestica (CLS) $27.79 -2% .... getting downside alert here at 80.9% retracement (retracement from $48.02 to $23.02). This was target of mine from profiled June $35 puts (CLSRG) of $3.40. Can lock in gains here, or lower stop to just above today's high.

  Leigh Stevens   4/29/02,  10:18:43 AM
Index Update: NDX/QQQ - The Nasdaq 100, as reflected in NDX and the Naz tracking stock, QQQ, got the most oversold of the indices and both are near the low end of their hourly downtrend channels, especially appartent in the Q's. Depending on how you draw the line, the lower support trendline intersects around 30.8, versus an intraday low so far today at 31.1. Pretty close. Just the little lift off that low has generated an upside crossover on the 5-hour stochastic. Probably not any significant buy-type "signal" yet, but the indexes may be close to temporary bottoms, so traders are watching the technical tea leaves closely.

  Jeff Bailey   4/29/02,  10:10:52 AM
Maxim Integrated (MXIM) $49.85 +3.4% ... reported earnings this morning of $66.7 million or $0.19 a share, which was in line with estimeates. Sales fell to $258 million, compared with $397.8 million year-ago. Company said there were signs of increased business ahead: "Although our outlook for the fiber and telecom markets remains conservative, we have seen quarter-over-quarter bookings growth in the third quarter."

CSFB ups to "buy" from "hold" following Q3 report.

I have retracement from $61.44 to $32.20 (conventional retracment). This has 61.8% at $50.27 and 50% at $46.82. 200-day MA right in here at $50.00. Good place for stop for those with puts, is just above Friday's high of $50.71. Link

  Jeff Bailey   4/29/02,  10:04:01 AM
Today's acquisition in the HMO's Now has some bears in trouble. If they "thought" Trigon (TGH) was "overpriced" before today, then they were wrong (based on today's price action). Any other "overpriced" stocks in the group?

Still holding those Oxford Health (OHP) August calls from $37? Stock might be perceived as "cheap" on valuation with today's TGH acquisition.

  Jeff Bailey   4/29/02,  9:59:17 AM
Trigon Healthcare (TGH) $97.50 +15.25% ... those holding calls in TGH from past commentary. I'd be a seller today. Sell the good news, pay yourself for the "good fortune." While target was $118 from bullish count and longer-term calls, this stock with today's "buy out" news has stock greatly exceeding expectations for this short time. Downside from here not worth that to target. Link

  Jeff Bailey   4/29/02,  9:49:57 AM
Question had me looking for an answer. Subscriber asked me a question regarding vertical counts. His question was regarding the Networking Index (NWX.X) Link and how this index has exceeded its bearish vertical count of $280 (on $5 box scales used by Dorsey/Wright).

His question was then.... how can I use the p/f chart to help understand further downside?

Years ago I asked myself the same question. The answer? Change scale!!! Look at the $10 box of the NWX.X Link . Remember, when we increase the scale/box size, we're removing noise. Interesting. The bearish vertical count from the $10 box hints at $220 as the bearish vertical count.

Hey! We're at $213.66 right here. Alert to bears!

Just a coincidence? Maybe, maybe not. Using the $10 box, we see it "called a temporary bottom" back in July of last year at $310. In July, the NWX.X reached the $310 level, then achieved a "buy signal" at $350, only to then get crushed lower in September.

However, there is perhaps some past history to have bears on the alert that this index and group of stocks may have collectively reached a near-term bottom. Good strategy would be to be true to your stops.

A trader short/put 5 different "network" type stocks, needs to manage the account. If 3 are holding good profits, then perhaps protect some of those and take them or snug a tight stop. Then hold the ones you see as weakest or still some good downside left that have the best risk/reward left in them.

  Leigh Stevens   4/29/02,  9:46:19 AM
Sentiment readings in the market are not all that bullish yet as the daily put volume has not quite risen to the levels that we typically see at intermediate-term lows. As Eric Utley highlighted in his Market Sentiment piece for the week at Link the CBOE Market Volatility Index (VIX.X) is starting to show signs of increased "fear". This attitude becomes especially apparent when VIX gets up toward 30 -- we closed the week at 24.6 which was an increase of 1.5. Eric also noted that the 5-day Arms Index (TRIN) was 1.53 and that extreme readings above 1.53 are bullish -- again, in a contrarian sense, as this shows heavy selling on heavy volume. These signals don't occur often and tend to be EARLY. On 4/11-4/15 the 10-day mov.avg. of TRIN was above 1.5. How early are these signals for a bottom? - on average, readings on a 10-day moving average basis can precede a significant bottom by UP TO 20 trading days or 1 calendar month.

  Leigh Stevens   4/29/02,  9:22:23 AM
It's nearly showtime! ON THIS DAY in 1429, Joan of Arc entered the besieged city of Orleans to lead a victory over the English. Talk about faith-based iniatives! In honor of this triump, take a frenchman, or woman to lunch, to a french bistro of course.

The market is due higher and a rebound is due to begin in the next 1-2 days. Hourly and daily oscillators are fully oversold and the Indexes are nearly at the low end of their hourly downtrend channels per my weekly write-up on the indexes at Link

  Jeff Bailey   4/29/02,  9:16:50 AM
Trigon Healthcare (TGH) $84.25 is being acquired by Anthem (NSYE:ATH) $70.70 at a 25% premium or approximately $4 billion in cash/stock. Terms of the deal call for TGH holders to receive $30.00 in cash and 1.062 shares of Anthm common stock, bringing the per share value of the deal to roughly $105.10.


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