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  Jeff Bailey   5/8/02,  10:55:42 PM
Macromedia (MACR) $21.70 +9.26% .... is a stock I profiled as bullish on April 25th and the June $22.50 calls (MRQFU) near $1.90. Stock has held tough gets a strong bounce from it's 50-day MA. P/F still has the spread-triple-top of $21 in play with a bullish vertical count of $34.50. Original target for trade was near $28. Link

  Jeff Bailey   5/8/02,  10:40:07 PM
High Pole Warnings ... somebody asked me a question today in an e-mail regarding a stock I had mentioned as bullish, but trader was hesitant to pull the trigger due to the p/f chart showing a "high pole warning."

A "high pole warning" is just that... a "warning" of a potential longer-term reversal of fortune for a stock. I don't "ignore" high pole warnings, but they are not the OVERRIDING determiner of a trade either. For instance, we can look back over some charts and uncover multiple "high pole warnings."

A good example is Storage Tech's (NYSE:STK) p/f chart. There have been 3 different high pole warnings on its chart. Link

To qualify for a high pole warning, the p/f chart must have exceeded a previous column of X's by at least 3-boxes. Following the rise in X's, the stock must pull back at least 50% of that last up-thrust on the chart. The "thought" behind this formation is that there must be something wrong with the supply/demand relationship if the stock gives up 50% or more of the last move up.

While STK has given 3 different high pole warnings, the stock's chart has not generated a sell signal since giving a buy signal at $11.00 in January (red 1) of 2001.

  Jim Brown   5/8/02,  7:15:19 PM
Swing Trade Signals - Wrap What is this? Link

The day was not kind to traders who were not already long. The short position initiated yesterday was stopped out at the open after being four points in the money at the close. The S&P gapped up to 1055 on the opening tick and then 1061 at 9:32. The stop loss was set at 1059.

The S&P ran up +22 points in the first eleven minutes of trading. Going long after such a huge gain on an earnings announcement that was less than stellar provided me with numerous hang-ups. What would happen after the shorts covered. The funnymentals (grin) had not changed and even Cisco admitted their orders were slowing. Still the shorts continued to power the markets higher as hedge funds and institutions booked profits. Even with today's gain the S&P only recovered four days of losses and finished at the same level as last Thursday.

Some days you just can't win. We watched as the +22 point gain from the first few minutes turned into nearly a +40 point gain at the close. The expected sell off never came and traders holding positions until the end decided to buy at any price rather than be caught holding at the open on Thursday.

The three recommended put signals on the DJX, SPX and QQQ were never triggered and those recommendations are now cancelled. We will evaluate the market conditions at the open and possibly reinstate those plays with different execution levels. By sitting on the sidelines and waiting patiently for our entry point we did not make any money but we also did not lose any. Tomorrow is another day.

The SPX closed exactly at resistance of 1088 and only four points below the next resistance level of 1092. It will take another major move to rocket past those levels.

See you at 7:15 am !

  Leigh Stevens   5/8/02,  3:53:18 PM
Index update: Nasdaq - I didn't finish with these indices: Above near resistance at 1694 in COMP, piercing it leads to a possible next objective to 1725 area; above near resistacne at 1288 in NDX, assuming a move through this area, next potential objective and resistance is in 1315 area; in QQQ, assuming near resistance is taken out at 32-32.1, next target (& possible resistance) looks like 32.7, possibly up to around 33.3

  Jeff Bailey   5/8/02,  3:51:48 PM
Dow Industrials (INDU) ... the 10,150 level will most likely be watch quite closely. A trade at that level would be a double-top buy singnal and get the vertical count back to bullish. Today's high of 10,148.95 was close, but no cigar. Bearish count of 9,800 still holds. Funny though, relative lows have been 9,808. Link

  Leigh Stevens   5/8/02,  3:45:03 PM
Index Update: S&P/DJX - As with Nas, SPX next key resistance is not far overhead, at 1090; above here we are looking at 1105-1107 as next resistance and a possible next upside objective; OEX near resistance is 340-341; then, 545-547; DJX -near resistance now at 101.7; then, 102.5.

  Leigh Stevens   5/8/02,  3:38:45 PM
Index Update: Nasdaq - We got the hourly chart breakouts that I was discussing at 2:25 pm. Now, COMP has resistance not far overhead at 1694; NDX resistance at 1288; QQQ, next resistance is at 32-32.1.

  Jim Brown   5/8/02,  3:38:28 PM
The end of day pain threshold has been broken. Traders who could not believe their charts at the open and delayed covering their shorts all day finally decided that the awaited sell off was not going to occur. They are biting the bullet and paying whatever they have to pay to get out of those shorts. This covering climax could carry over to the morning open as traders who work during the day come home to a shorting disaster. Tomorrow is a new day and it is highly possible it will have a different outcome.

  Jeff Bailey   5/8/02,  3:29:57 PM
Dow Industrials (INDU) 10,136 +3% ... watch it here.... 60-minute shows the 200-pd right here at 10,141. If broken to upside could see strong move into the close.

  Jeff Bailey   5/8/02,  3:27:30 PM
Jeff, June S&P future is trading 21 points lower than cash. Does this mean market is heading lower ? Many thanks for your good work.

I don't think so. Yesterday afternoon, futures closed below cash. Where are we now? May hint that there are still some active bears in the SPX futures markets though.

  Jeff Bailey   5/8/02,  3:22:37 PM
Applied Materials (AMAT) $25.23 +13% ... amazing how stock sits just under the 200-pd MA on 60-minute chart. There's a seller right here. Short-term bull should take their gains, you've got a nice move and would look to book some gains, especially in the underlying stock.

  Jeff Bailey   5/8/02,  3:17:05 PM
Dow Breadth building to best levels of the session. 28 up and 2 down. MO -1% and MCD -1.3%. Perhaps MO sensitive to the higher Treasury YIELD today as MO carries larger dividend YIELD. MCD has been on a roll and a little profit taking.

  Jeff Bailey   5/8/02,  2:41:51 PM
Sony (SNE) $55.00 +4.46% ... stock has treated bulls rather well since first profile at $51. Bulls have not had to take much heat. 50-day serving as support and stock performing a little better than the S&P 500 (SPX.X) 1,085 +3.4% today. Link

  Jeff Bailey   5/8/02,  2:38:08 PM
5-year Treasury ($FVX.X) YIELD up at 4.567% and breaking above its 50-day. If this is correlative with things to come in the Dow Industrials, then equity bears may have some competition as cash is freed up from Treasuries. Link

Dow Indusrtrials (INDU) looks kind of similar. Link

check out those MACD's

  Leigh Stevens   5/8/02,  2:29:33 PM
DXJ - CORRECTION - I did it again, re my 2:03 post, DJX needs to hold 100.8 (not 110.8) to keep its bullish hourly price consolidation going. I don't usually get tongue tied on numbers. My couple of slips today may have something to do with our new puppy keeping me awake half the night. I thought human babies were bad!

  Jeff Bailey   5/8/02,  2:27:19 PM
Bears... I'm looking at some technicals where a stock rallies to a level of resistance and where MACD is vulnerable to rolling over. For instance.... IGT Link

and Kronos (KRON) Link are technicals I'm watching closely as an observation day today.

Yes, I profiled IGT as a short/put on yesterday's break below the 50-day. Not getting crushed today. Not yet at least. I do like that the stock is up just 0.54% while SPX is up 3.08%. May hint that MARKET doesn't see the stock a bargain.

  Leigh Stevens   5/8/02,  2:25:48 PM
Index Update: Nasdaq indices - COMP, NDX and QQQ appear to be stalled are resistance implied by the upper line of their hourly downtrend channels. However, bullish breakout points would be a 3pm or 4pm close over today's highs at: COMP > 1678; NDX > 1266; In QQQ, breakout looks like it would be a 3 or 4pm close over 31.7.

  Leigh Stevens   5/8/02,  2:12:25 PM
Index Update: SPX and OEX, have not rolled over and now appear to also be consolidating for another spurt higher. Based on bullish 30/60 min. flag pattern, next upside potential is to around 1105 -- however, SPX needs to hold 1080 to sugget this kind of further upside. OEX may be consoldiating for a move to 545, where there is resistance -- this assumes OEX will hold at or above 535.

  Jim Brown   5/8/02,  2:09:12 PM
Swing Trade Entry Point Alert

The Dow has dropped back below 10100 and could be ready to give up more ground. Let's short (buy puts) on the DJX if the Dow trades below 10075. The stop loss will be 10150 (101.50 on the DJX). This is a high risk play but using May options the cost is minimal.

  Leigh Stevens   5/8/02,  2:03:03 PM
Index Update: DXJ - another bullish consolidation. Dow now looking like it is tracing out another bull flag consolidation on the hourly charts, around the 101 area; so, while hourly stochastics are overbought and on bearish sell "signal", based on chief determinent, price action, looks like DJX could be setting up for another upswing with a target to maybe 103. However, hourly close below 100.8 would negate the flag projection.

  Jim Brown   5/8/02,  1:45:24 PM
Swing Trade Entry Point Alert

The QQQ began weakening around 12:45 but firmed at $31.20. With a +100 point gain on the Nasdaq not likely to stand without some profit taking we may want to try some puts on the QQQ. Our entry point will be a trade under $31.10 with a stop loss of $31.75. The May-$30 puts are only about $.45 cents.

  Leigh Stevens   5/8/02,  1:34:55 PM
Index Update: COMP - The Nas Composite appears to also be faltering at its upper hourly trend channel line and the 5 & 21-hour stochastics are crossing over to downside. If the COMP can't take out the intraday high at 1677.62, looks like this is an area to play for a short-term downswing. Unlikely, even if this is a bottom that its just going to up, up and away. Ditto on OEX and QQQ as far as their technical picture here. QQQ has gotten quite close to my projected resistance at 31.7 - intraday high is 31.51. If there is a decisive further advance taking out 32 on an hourly closing basis, then this would be a breakout move.

  Leigh Stevens   5/8/02,  1:22:08 PM
Index Update: SPX rally could be faltering not far under resistance area I talked about earlier for 1090. Intraday high so far is 1085. A bit more trading will tell. Often if the market is going to correct it will occur around 1pm. I noticed this with indexes years ago. Why? I have no idea. OEX upside momentum is slowing and maybe rolling over in resistance area I highlighted last night on the hourly downtrend channel at 535-537, a bit under suggested resistance I talked about earlier today at 545. Hard to get those pencils thin enough! Any brave bears out there? - recent highs look like a place to step up to the plate, but RISKING little - as this is a potential play on slowing momentum only and a short-term pullback. 21-hour stochastic is now into overbought area and rolling over, preceeded by 5-hour model.

  Leigh Stevens   5/8/02,  1:10:09 PM
Subscriber QUESTION: "Regarding a spike up to 31.7 the other day, what could this be attributed too? This set a alert to my phone, plus noticed the spike on my online broker charts?

RESPONSE: Assume you are talking about a bad tick. For example, there is a non-electronic trade entry made at 31.70, when the last trade was 28.70. The source of bad ticks is usually human error, such as keyboard entry being off by one-two digits.

  Jim Brown   5/8/02,  12:54:15 PM
Swing Trade Signals For those who like to play the DJX a likely PUT entry point, should the markets roll over, would be 10075 for aggressive traders and 9975 for a conservative trader. The Dow fell back to 9982 twice in early trading only to rally again. In midday trading that level rose to 10089. A drop below 10100 should be your alert signal.

  Jim Brown   5/8/02,  12:51:17 PM
Swing Trade Signals (What is this?) Link

Did you see that? The Dow just posted the first lower relative high for any index today. The high for the day was 10138 at 12:12. The last surge only hit 10133 at 12:40. I know it is not much but a confirmation of a new relative low would indicate a weakening of the rally. The last relative low was 10112 at 12:22. A dip below that would be the first confirmation and a continuing dip below 10100, the 12:00 low would be a secondary confirmation. This is "straw grasping" in its highest form but we are always looking for that leading indicator.

  Jim Brown   5/8/02,  12:51:03 PM
Swing Trade Entry Point Alert (What is this?) Link

The markets continue to push higher but trees do not grow to the sky. Even if this is the start of the new bull market there are a lot of gaps to be filled. I am looking at entering a new SPX put position if the SPX trades at 1078.75. This is slightly below the midday low of of 1079.28 at 11:44. This is an aggressive play considering the bullish sentiment. If triggered the initial stop loss will be at 1085 which is just above the high of the day.

  Leigh Stevens   5/8/02,  12:37:59 PM
Subscriber QUESTION: "Leigh,If you set up fibonacci retracements from September low to January high, isn't the 25% level at about 1565 and a possible area of support?"

RESPONSE: Have to assume you are talking about the (Nasdaq) Composite. However, the 25 percent retracement comes in at 1917. Retracements of a prior UP move is measured from Low to High and not the reverse. You are talking about the 75 percent retracement.

However, this is a significant level and thanks for reminding me of that. 25, 50, 75 retracements were considered important by W.D. Gann, who was no slouch when it comes to market numbers.

Anyway, the 75 percent retracement of the Sept. low to the January high is 1560 according to my measurements -- 1560 was the low this week on the Nas Composite (COMP)! Thanks for bringing this to my attention.

  Jeff Bailey   5/8/02,  12:28:10 PM
Johnson & Johnson (NYSE:JNJ) $60.61 +0.31% ... stock is on my list as potential bullish candidate. Looking for an "inside day" type setup. P/F hints that longer-term stock is higher. Link

  Jeff Bailey   5/8/02,  12:25:48 PM
NYSE Composite (NYA.X) 577 +2.10% ... level to monitor in "true market" is the 580-585 level, right at the 200-day MA. For rally in broader stocks to continue, I think NYSE needs to confirm above the 200-day. Link

Should be some 1,2 and 3-lettered stocks to be looking at with good bullish trade setups and correlate against a NYSE break above 585.

  Leigh Stevens   5/8/02,  12:25:08 PM
Subscriber QUESTION (from 4/6): "Market tanking and Vix is up .19 to 23.42. Not much fear here. Where do you think the indexes might be when and if the VIX hits 30?"

RESPONSE: Per my Index Trader column last night at Link I suggested that VIX buy/bottom indication might come in starting with a daily close over 27. However, with VIX at 27 or 30, what price level on S&P? -- my crystal ball doesn't extend that far. I can't find a correlation between price and VIX level.

By the way, Nasdaq 100 volatility, as measured by VXN, seems to get significant as "signal" of the start of, or "confirmation" of, bottoming action in the Nasdaq 100, with closing readings at/above 60 (today: VXN is at 47.2, down from 50.1 close yesterday).

Maybe VXN reading above 50 yesterday was pretty significant after all!

  Jeff Bailey   5/8/02,  12:22:19 PM
Dow Industrials (INDU) 10,138 +2.8% ... breaking above downward trend at 10,075 today and now targeting the rolling 50-day MA. Trader monitor for strength as they are/should be the CYC.X (see 11:00 Update) and the Transports (TRAN). Link

  Jeff Bailey   5/8/02,  12:13:44 PM
Semiconductor Index (SOX.X) 521.64 +10.95% ... will be monitoring the 530 level for near-term resistance. This is from 38.2% retracement (retr. from $638 to $354). Also at/near the 530 level is the 200-day MA. Link

Bears wondering where the heck this bounce came from. Point/figure chartist looks at chart and has to wonder if bullish support really was in play. Link

Index Components all green... LSI +17%, ALTR +14%, NSM +14%, AMAT +13.5%, LSCC +13%, XLNX +13%, TXN +12.5%, NVLS +12.2%, LLTC +12%, INTC +10%, RMBS +9%, KLAC +9%, TER +7%, MOT +7.4%, MU +7% and AMD bringing up the rear +6.8%.

  Jeff Bailey   5/8/02,  12:06:22 PM
Dynegy (DYN) $9.95 -18% ... Jeff: Still holding remaining 1/2 position put and feel like this has been too good a gift. Where would you place a stop? Are you still targeting $0.00?

Hmmm... not sure that I was ever targeting $0.00, but the bearish vertical count is $0.00 or N/A. However, I do have "fitted retracement" from $32 to $8.07, which gives us 80.9% at $12.64. Yesterday's close was $12.26. Would place remaining stop at $12.75. Link

  Jim Brown   5/8/02,  12:02:14 PM
Dead stop? It appears the short covering ran into new bearish selling at Dow 10100 which is strong resistance. Could be just the lunch time lull but time will tell. Numerous buy programs today from institutions and hedge funds covering their shorts. Volume has been decent but not as strong as traders would like. Advancers are only beating decliners 2:1 on the Nasdaq and less than that on the NYSE. Also, not as strong as traders would like.

  Leigh Stevens   5/8/02,  11:43:46 AM
Index Update: COMP - CORRECTION - My 11:16 am Market Monitor post had the WRONG number as first layer of anticipated Nas Composite resistance -- I indicated 1073 -- should be 1673 of course. Ditto, the reference to 1094 - 1095 - should read 1694-1695. Time for another cup of coffee!

  Jeff Bailey   5/8/02,  11:35:07 AM
Jeff, Can today's actions be a Bear Capitulation !!

No, not "capitulation," but perhaps "realization." As mentioned in this weekend's wrap, the NASDAQ-100 Bullish % at 20% was a level of low risk and an alert to bears. All that Cisco's (CSCO) earnings did was affirm and then unleash the higher level of risk that bears were holding. Capitulation? No. When the QQQ reaches the $45 level, that's when we might start seeing some "bear capitulation."

  Leigh Stevens   5/8/02,  11:32:45 AM
In the front page of the the Wall Street Journal today, there are articles on the top Fed inflation "hawk", J. Alfred Broaddus, who is now more concerned about fighting deflation, which has plagued Japan for the past decade; also, on the right front column, is an interesting article on the "productivity leap" in the U.S. -- good for the economy, not necessarily great for job creation.

  Jim Brown   5/8/02,  11:28:24 AM
The Dow just hit 10100 which is strong resistance. We will now get to see how strong this rally really is. A breakout over 10100 would be a very good sign but another breakdown here would likely sour investor sentiment again.

  Leigh Stevens   5/8/02,  11:27:30 AM
ON THIS DAY in 1541, Hernando de Soto discovered the Mississippi River which he called the Rio de Espiritu Santo -- wow, I don't know which name is more of mouthful! Also, ON THIS DAY, in 1794, the U.S.Post Office was established. To treat our friends in the postal service, now on the "front lines" of the terror war, leave some cookies and milk or other such treat like twinkies, in your OPEN mail box today.

  Jeff Bailey   5/8/02,  11:25:31 AM
Overture (OVER) $18.27 +2.62% ... traders short/put from $23-$22 can snug a stop just above today's high of $19.39 or $20. Stock isn't participating and shorts don't look to concerned. Link

  Leigh Stevens   5/8/02,  11:16:36 AM
Index Update: Nasdaq Composite (COMP) - 1673, at the top end of a pretty well-defined downtrend channel looks like significant resistance. 1694-1695 is even tougher resistance in my estimation. Somewhere between these levels, if reached, will likely be the top of this first rally. I say "first" rally, given the daily chart upside momentum showing now on the 14-day stochastic. I wouldn't necessarily expect this rally to die immediately, even though the difference in the fundamental outlook for overall earnings is not really different than yesterday. Technical/short-covering/oversold rallies can carry some distance if trader "sentiment" is bearish enough. Bears don't throw in the towel at first -- if the rally continues, some bears are peeled off the pack and contribute to a second round of short-covering.

  Leigh Stevens   5/8/02,  11:01:41 AM
Index Update: SPX & OEX - Also have broken out above resistance, with subsequent "minumum" upside objectives based on their bull flag patterns. SPX projects to the 1090 area and OEX to around 545. Both these areas, if reached, offer decent put play potential in my estimation. In this situation, where some bullish surprises may still be in store, I favor selling rallies, rather than shorting breakdowns. But, its worth noting that a drop below 530 in OEX and below 1069 in SPX, "negates" the bull flag idea; i.e, that pattern "fails" in its common predictive significance.

  Jim Brown   5/8/02,  10:55:11 AM
Swing Trade Signals (What is this?) Link

The Nasdaq has exploded out of the opening range and it appears the shorts are starting to run for cover. The other indexes are being dragged along in sympathy. Volatility is collapsing with the VIX at 23.59, the VXN at 47.50 and the TRIN at .47. The TRIN is a measure of overbought/oversold conditions and is showing an increasingly overbought indication.

Type A traders are wringing their hands as the surge over the last 10 min looks like the train is leaving the station without them. It is critical that we do not allow our emotions to rule our trading. I would love to have been long at the open but if you remember the conditions at yesterday's close were exactly opposite. This market can turn on a dime and economic conditions did not change overnight just because Cisco CEO Chambers was gushing about his quarter on CNBC.

If this rally has legs we will have many more trade opportunities in our future. Short covering rallies tend to be violent and short. Watching them from the sidelines produces extreme anxiety. Going long at the top produces losses. Anxiety, while frustrating, does not cost any money.

  Leigh Stevens   5/8/02,  10:51:36 AM
Index Update: Nas 100 - NDX has reached first resistance in the 1240 area, at the top end of my more narrowly drawn hourly downtrend channel -- NDX looks like it could continue to move above 1240 - if so, next resistance looks like 1265, at the top end of the more widely drawn hourly downtrend channel. This 1265 area more or less corresponds with expected QQQ resistance around 31.75-32 -- bears looking for a play, could short or take out puts in this area,if reached, adhering to a stop at 33.25.

  Jeff Bailey   5/8/02,  10:49:19 AM
Jeff: Out with nice gain from yesterday in AMAT ....nice call my friend...moving on, giving serious consideration to maybe shorting the "turd-le" (CIEN) again...closed it out yesterday and it's looking tasty again....

Good trades! Be patient and look for good setups.

  Jeff Bailey   5/8/02,  10:45:19 AM
Applied Materials (AMAT) $25.00 +12% ... short-term trader's target achieved. Can sell strength here, or snug a stop just under $24.90 and see what happens.

  Leigh Stevens   5/8/02,  10:40:31 AM
Index Update: DJX - Has gotten back to its "breakdown" point in the 100 area, which is now potential resistance. (100 area is also the top end of DJX hourly downtrend channel - this declining channel line has previously stopped prior rallies.) For bears who are tempted to short this rally, this area would normally be attractive. However, 15/30 min. charts are tracing out a possible bull flag pattern, which could lead to a move to around 101.75 if today's high at 100.26 is exceeded on continued good volume. The 101.75-102 area is more attractive in my mind to try a put play.

  Jeff Bailey   5/8/02,  10:40:16 AM
Expedia (EXPE) $75.59 -7.4% .... understand risk to bullish support trend and can manage a trade accordingly. Link

  Jeff Bailey   5/8/02,  10:38:52 AM
Travelocity (TVLY) was acquired by Sabre Holdings (TSG) $40.51 -0.85%. Link

Hmmmm... bullish support trend test.

  Jeff Bailey   5/8/02,  10:35:26 AM
Hotels.com (ROOM) $53.89 -11.21% ... Ouch! Watch/monitor that bullish support trend carefully. If broken, signals longer-term weakness. Correlate perhaps with EXPE at $71? Link

  Jeff Bailey   5/8/02,  10:30:10 AM
Expedia (EXPE) Wall Street Journal article... reports that two of the nation's biggest hotel chains are set to announce they will beat rates that customers find through online travel sites. According to WSJ article, Six Continents PLC (which includes Holiday Inn, Crown Plaza, Inter-Continental chains) has been quietly testing a policy to undercut Web prices by 10%. Starwood Hotels (Westin, Sheraton, and W chains) is expected to offer an identical plan that begins June 1. (Sector names include ROOM, EXPE, TVLY).

  Jeff Bailey   5/8/02,  10:29:06 AM
Expedia (EXPE) $75.61 -7.39% ... stock traded against technology for weeks, now falls when tech rallies. To me, this is institution selling some positions on broader market weakness as there is most likely some bulls willing to buy the pullback and this helps liquidity for the seller.

Subscriber notes... Jeff, EXPE down 6.5%, and below pullback level issued on the OIN call play. Requesting your input on further downside or is it time to take advantage of the drop?

I'm looking at the 60-minute chart which shows the 200-pd MA serving as support in the past. 200-pd currently at $74. Can play, but only be looking short-term trade.

  Jeff Bailey   5/8/02,  10:20:44 AM
IGT +1.96%, INDU +1.72%, SPX +2.07% ... this is one thing I don't like about IGT (gaming stock) or insurance stocks today. I don't have a sector index to trade/monitor against. This puts us at a bit of a disadvantage doesn't it (long/short)?

  Jim Brown   5/8/02,  10:19:34 AM
Swing Trade Signals (What is this?) Link

For those who like to play the DJX a likely entry point, should the markets roll over, would be 9975. The Dow has fallen back to 9982 twice only to rally again. A break through 9975 could be an aggressive entry point for DJX shorts. Just thinking out loud.

  Jeff Bailey   5/8/02,  10:18:13 AM
Doing some checks... AMAT +9.3%, SOX.X +7.6%. Has me comfortable that we picked a strong stock in sector.

  Jeff Bailey   5/8/02,  10:15:34 AM
HMO Index (HMO.X) 594 -1.59% ... trading against the market, this time to the downside as market goes higher. Watching the 550 level as good support. That may also correlate with a tech rally stalling out? Link

  Jeff Bailey   5/8/02,  10:13:12 AM
Morgan Stanley Cyclical Index (CYC.X) 575.17 +1.65% .... key technicals to be monitoring here. Testing its rolling 50-day MA. A move higher gives bulls some conviction that underpinning economic activity still in play. Link

  Leigh Stevens   5/8/02,  10:12:19 AM
LONG INDEX PUTS - STRATEGY NOTE: Those short/long Index puts and sweating it - one thing to watch for in subsequent days is where the chart gapsare. It is very common, even if this rally is THE long-awaited market turnaround, to see the Indexes drop back to its gap areas, the difference between one bar's high (or low) and the next bar's low (or high). Charts gaps tend to both get "filled in" (subsequent trading occurs in the gap area) and/or act as areas of future support in the case of upside gaps.

If today's upside chart gaps get filled in, in part or all, you have a chance then to exit puts and see what happens next. On the other hand, if the gap area does NOT get filled in, this is valuable too -- prices will usually get close to these areas again and it is a sign that lows are in place; ie., indices will not see lower lows.

Chart gap areas are - SPX: 1054-1056 (hourly chart only); OEX: 520.5-521.8 (hrly chart only); DJX/INDU - no chart gap; COMP: 1594.6 - 1625.7; NDX: 1167.2-1212.8; QQQ: 29.3-29.8

NOTE on the S&P Index calculations - the reasons chart gaps are NOT seen on the daily charts is that the opening price on the 500, or 100, stocks, are calculated as the prior day's close if there is not an immediate opening tick. This convention came about because delayed openings would cause a distortion in the index calculations, so, Standard & Poor's uses the close if there is no opening tick. This means that the S&P "cash" indexes almost never have daily chart gaps.

  Jim Brown   5/8/02,  10:07:00 AM
Swing Trade Signals (What is this?) Link

Looks like the markets may be running out of steam. The QQQ gapped open to the low 30 range is is having trouble following through. I am thinking about entering a short on the QQQ if it breaks $30 to the down side. Still plenty of time for it to go either way.

All three indexes, Dow/S&P/Nasdaq have weakened but holding. Now is the time for the bulls to suck it up and hold it if they can. S&P 1069 looks like the entry point for a new short based on the trading pattern for th last 15 min. We will wait to see who is winning the battle. There was a nice tick up in the last couple minutes and the S&P is nearing the high of the day. Breakout or breakdown? We will know shortly.

  Jeff Bailey   5/8/02,  10:06:31 AM
Intl. Game Technology (IGT) $62.92 +1.53% ... monitoring stock (from bearish perspective). Would expect it to be up with broader market today, but as long as stock stays under the relative highs, then still comfortable.

  Jeff Bailey   5/8/02,  9:59:53 AM
Maybe the stuff I did in the 70's is causing me to hear things, but I could've sworn that the CSCO chart was whispering "short me, short me!"

(Big grin).... you too? I'm going to sit back and make some observations. However, the whisper I hear is Ciena (CIEN) back above $7.00 that's calling for a short.

Ciena (CIEN) $6.77 +11.33% ... bears from $7.00 still sitting on a gain here. Depending on your account can either close out the other 1/2 position for smaller gain than yesterday before the close, or sit tight. I don't think the stocks going all that much higher. Look for new opportunity. These are one of the guys that CSCO taking share from.

  Jeff Bailey   5/8/02,  9:56:56 AM
Dow Breadth is positive with 24 up and 6 down.

Gainers have C +3.91%, EK +3.75%, GE +4.1%, HPQ +4%, IBM +3.49%, INTC +4.24%, JPM +4.2%, MSFT +4.6%, SBC +3.9%.

Losers have KO -1.2%, MRK -1%

  Jeff Bailey   5/8/02,  9:42:24 AM
Jeff: Nice trade in the QQQ calls from yesterday. I didn't go out as far as September as your profile, but more short-term. Can you give me a target or should I just cut out this morning?

Once again... we need subscribers to have some targets in mind if they're trading some of their own trades (you should be too!). I have retracement on QQQ from $42.26 to $27.20. This gives a target of 19.1% at $30.26 (were above that here at $30.34) then at 38.2% at $33.32 as next retracement target.

I've also had regression channel on the chart. Mid-point of regression at $32 right now.

Combining retracement and regression, short-term trader targets $30.26 (slip a stop under there) and mid-point of regression at $32.

Good trade!

  Jim Brown   5/8/02,  9:40:30 AM
Swing Trade Signals (What is this?) Link

The SPX short was stopped out at 9:32 when the S&P gapped above our 1059 stop to 1063.76. We will now look for the market to give us a signal for the next play. The Dow is right at resistance at 10,000 with the Nasdaq slowing at 1637. First resistance on the S&P is around 1075 and it has slowed at 1067 over the last five minutes. Now is the critical period for the bulls. Failure to follow through here will setup another shorting opportunity for the bears. This should be interesting.

  Leigh Stevens   5/8/02,  9:39:49 AM
Index Update: Resistance levels from last night's Index Trader wrap up. The initial "breakout" point, which is minor resistance, followed by other, likely more tough, resistance areas.

COMP is well above breakout point at 1580; resistance expected at 1642; then, 1675 area; NDX breakout point at 1170 exceeded on this morning gap; resistance then in 1240 area; QQQ had minor chart breakout above 29.2; next resistance looks like 30.6; then, more key resistance, top of its hourly downtrend channel at 31.7.

  Jeff Bailey   5/8/02,  9:34:41 AM
Cisco Would close out remaining 1/2 short in the stock for small loss here

  Jeff Bailey   5/8/02,  9:33:26 AM
Cisco Systems (CSCO) $15.27 +17% ... take some notes against your retracement (retracement from $21.80 to $11.24) and note how market makers opened the stock at 61.8% retracement. Yesterday they closed it out at 80.9% retracement of $13.25. You can I "knew" the stock was 50/50 going into the numbers and now it shows.

  Leigh Stevens   5/8/02,  9:30:38 AM
Index Update: Resistance levels from last night's Index Trader wrap up at Link The initial "breakout" point, which is minor resistance, is followed by other, likely more tough, resistance points.

SPX - minor breakout > 1060; then, resistance at 1075; OEX - breakout > 525; then, resistance at 535-537; DJX - breakout > 99; then, resistance at 100 -- any put plays here ought to stop out on a move above 101.

  Jeff Bailey   5/8/02,  9:25:17 AM
Applied Materials (AMAT) $22.32 ... stock trading higher at $23.65 in pre-market. Lehman expects AMAT's Q2 results (May 14th) to be mixed with in-line to better than expected results, but perhaps worse than expected bookings guidance. Boosted by increased booking and quote activity as well as selected pull-ins, Lehman expects management to remain cautiously optimistic and provide sequentially higher guidance for Q3, but remain conservative on booking guidance due to potential for summer seasonality. Maintains "market perform" rating.

Hmmm.... AMAT's p/f chart looks like it has been a little better than "market perform" Link if compared to the QQQ Link

  Leigh Stevens   5/8/02,  9:19:18 AM
MORE on Cisco -- CSCO jumped about 12 percent in after hours trading, to $14.66 after the announcement and during the company's conference call.

  Jeff Bailey   5/8/02,  9:18:06 AM
Investors note Those subscribers that are longer-term option traders. If looking to play the telecom equipment stocks this morning, I'd think long and hard about which stocks I looking at. CSCO's earnings from last night cleary show they are "growing" by taking market share from their competition. This would have me thinking that CSCO is the leading stock (I've thought this for years).

Short-term traders... you could care less, just looking for risk/reward trade setups.

  Leigh Stevens   5/8/02,  9:17:01 AM
Good Morning. It's Showtime! Looks like we have a good rally going this am, sparked by Cisco Systems (CSCO) earnings report last night. CSCO has held on to the good gains made last night in its stock price, in very active after-hours trading. CBS Marketwatch headline says, the Cisco Kid is back! Loved the show, Cisco Kid, and Pancho too. Cisco, the stock, beat the Street estimates of course, by a couple of pennies -- these days, that's BIG.

Merrill Lynch (MER) raised its operating earnings per share estimate to 49 cents from 39 cents for calendar 2002 "to account for the higher profitability that Cisco is achieving."

  Jim Brown   5/8/02,  9:16:09 AM
Swing Trade Signals (What is this?) Link

Our open short of the SPX was initiated at 1053 on Tuesday with a stop loss at 1059. The CSCO earnings have energized the market and futures are up +17 at 9:AM. The market is set to gap open and will likely stop us out. We are not going to try to open any long positions on the gap. There is always the possibility of a gap and crap, a big surge followed by a quick sell off, but the heavy short interest should provide a strong short covering rally.

We do not want to chase the market. We want to see what happens and calmly setup for our next entry point, up or down. Strong gaps create emotional responses and emotional trading is not normally profitable.

Resistance on the S&P is around 1080, 10000 on the Dow and the Nasdaq at 1625 and 1700.

  Jeff Bailey   5/8/02,  9:15:10 AM
Applied Micro (AMCC) $5.60 ... stock jumping to $6.43 in pre-market after CIBC upgrade, but most likely due to Cisco's earnings. Remember we talked about AMCC as it relates to CSCO being their largest customer. Link


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