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  Jim Brown   6/5/02,  5:18:48 PM
Pivot Trade Wrap (What is this?) Link

The comments at the close from Oracle provided an exciting end to another boring day. The spike is best seen in the $GSO (Goldman Sachs Software Index). There was an instant spike followed by a pause as traders who did not know what was happening woke up to the sudden surprise and then a steady move upward as retail shorts began to cover. Look at this 1 min chart of Oracle for a graphic explanation.

The markets closed right at resistance of Dow 9800, S&P 1050, OEX 520 and the Nasdaq about 5 points below 1600 resistance at 1595. With the Intel analyst meeting after the close on Thursday there is likely to be a struggle to break these levels. There is no major reason to buy stock in early June despite the outstanding ISM numbers this morning. The markets are still very fragile and extremely jumpy as you can see by the Oracle spike. The company did not even affirm guidance. Ellison simply said "if the company was going to earn less than 12 cents per share it would have to issue a warning. We did not issue a warning." Not really a bullish comment in retrospect. Oracle had been expected by many analysts to be facing an earnings miss.

Trading tomorrow could be an exercise in patience. With no major gains OR losses expected in front of the Intel meeting we are likely to trade in a narrow range after the opening volatility. I said OR loss since there is also a possibility that Intel could say something bullish. With the Dow right at resistance I would probably short any opening short covering bounce and look for a quick fade back into the mid-9700 range as a safe place to wait. We will examine the pre-market indicators in the morning and make that decision before game time. See you at 9:15!

  Jonathan Levinson   6/5/02,  4:05:21 PM
5 minutes left to get my order in, but this recent move looks difficult to understand. Perhaps someone knows something ahead of the market. I will sit and wait for the dust to clear before initiating new shorts. Above all lose no money, then second directive: grow the account.

  Jim Brown   6/5/02,  3:57:30 PM
Looks like a perfect SHORT setup with the market at a dead stop at 9800. Too risky for the Pivot trade model to go SHORT overnight here but let your conscience be YOUR guide.

  Leigh Stevens   6/5/02,  3:56:49 PM
Subscriber NOTE: "The 60 minute QQQ chart appears to be forming a wedge "

RESPONSE: Could be a bearish rising Wedge on hourly basis in QQQ - I wouldn't be surprised to see another downswing on the Q's - one that would take it back to lows. Without strength in ORLC (Oracle) today, it might tank again. By the way, ORCL is right at top end of hourly downtrend channel. which Q's will also be to soon.

  Jeff Bailey   6/5/02,  3:55:02 PM
Sony (SNE) $56.63 +1.28% ... Jeff what stop would you put on SNE ? 54.30 ?

How about a "trader's stop" at $52, and/or "investor's stop at $50. Link $54.30 isn't bad either and would be just below the rising 50-day. Willing to give a little more room though. Again, would stick with 1/2 positions currently as stock is still below longer-term trend.

Target? How about "traders target" $66 and "investor's target" of $88.

  Jim Brown   6/5/02,  3:52:04 PM
The biggest moves I can find are in the software sector, which would indicate the Oracle rumor may have prompted a sector specific or tech specific buy program. MSFT jumped +1 in just a couple of ticks, which must have brought havoc to the MSFT pit after a sleepy day. Never short a dull market!

  Jeff Bailey   6/5/02,  3:50:27 PM
News Corp. (NWS) Jeff, Either:

News Corp's heavy exposure to Australia is a play on the Aussie Ishare with a side benefit of the company's multi-national exposure benefitting from the weaker dollar, or....

Rupert Murdoch is the media mogul bad guy from that Bond movie and you're trying to sneak a short play by us! :)

Your "right" on your first guess. Partially right on the second one, but not trying to be sneaky at all.

  Leigh Stevens   6/5/02,  3:46:35 PM
Subscriber QUESTION: "I don't recall you've looked at the OIH in your Sector Trader watch lately.... OIH is back down near Jan breakout level and trendline. Stochastics moving down smartly...any comment on the sector as long play? Economic growth picking up, friends in ME not getting much friendlier etc. "

RESPONSE: Will update Oil Service HOLDR's trust stock (OIH) tonight - have been updating the sectors themselves, but haven't included all the HOLDR's yet - will include OIH chart in tonight's Sector Wrap however. OIH may have bottomed and is oversold, but too soon to tell in terms of chart pattern - seemed to dig into support today. Will update on technical basis - have all I can do to keep up on the charts, haven't a prayer of analyzing them all on a fundamental basis; e.g., relating this sector to economic trends, etc. Can give you a read if those in the know appear to be selling still or are starting to buy the stock, etc.

  Jim Brown   6/5/02,  3:46:05 PM
The buy program at 3:25 was totally big caps. The Russell did not even blip. This leads traders to believe that is was a rumor response where a major futures buy occurred. I checked time and sales on the futures and found nothing spectacular. There was a rumor that Oracle had affirmed earnings and that spiked it. I doubt it hit all the indexes but I remain open to all possibilities. Still there was no follow through and that is the critical point. The markets stopped right at resistance of 9800/1590/1050/520. Strong resistance which will require more than an Oracle to break.

  Jonathan Levinson   6/5/02,  3:44:29 PM
Hi Jonathan I see U and Jim refer to buy/sell programs often but based on what exactly leads to this conclusion? Something tangible, some indicator or just a gut feeling?

It's any move that appears too big and fast to have been "organic" buying. A program buy or sell is one that triggers on a trading system and causes huge rapid swings in price.

  Jeff Bailey   6/5/02,  3:41:09 PM
Perot Systems (PER) $14.76 -17% .... resumed for trading. Stock got hit hard earlier. PER issuing statement acknowledging that it provided services to the California Power Exchange, but provided no services to Reliant Energy and no energy trading services to any California market participant. In fact, PER actively alerted CalPX and California ISO to defects in the market rules, which had already been adopted by the State of California. PER did not reveal or sell any confidential information of any kind. Link

  Jeff Bailey   6/5/02,  3:39:01 PM
Oracle (ORCL) $8.34 +6.64% ... stock "spiking" in last hour after Bloomberg reporting that ORCL said it will "at least" meet the $0.12 Q1 estimate.

In recent sessions, it has been rumored that ORCL would miss Q1 estimates.

  Jim Brown   6/5/02,  3:30:59 PM
Aggressive short traders would think this spike was a gift. It may be but I am not going to take it. I remain patiently flat.

  Jim Brown   6/5/02,  3:29:17 PM
There was that buy program I was worried about!
There are only 7 Dow components trading in negative territory. GE, DIS, JNJ, T, HPQ, MO, GM. However only 3 components have gained more than $1. UTX +2.19, MSFT +1.46, KO +1.25. Of the top 10 Nasdaq components only 3 are negative Dell, CSCO and WCOM.

  Jeff Bailey   6/5/02,  3:29:00 PM
Sony Corp. (SNE) $56.49 +1.03% ... stock recently pulled into 50% retracement and just above 50-day MA. If you had $55 and had to have bought a stock in early March, would you have placed it in the SPX, INDU, QQQ or OEX, or placed it in Sony (SNE) which gives you some exposure to Japan? Link

I like SNE bullish here for new entries.

Disclosure.... I currently have a bullish position in SNE.

  Jonathan Levinson   6/5/02,  3:27:53 PM
Developing a headache from squinting at the COMPX chart. Look at the point on this wedge! Seriously though, the longer trend is still down. But with little news due for tomorrow except for INTC after the close tomorrow, ... look at that buy program that just hit! 11 points just hit the COMPX in a few seconds. Time to scan for news.

  Jeff Bailey   6/5/02,  3:25:38 PM
News Corp (NWS) $29.02 +0.2% .... Oooooo.... I like those two "gap days" higher on BIG volume. Looks like somebody wants some longer-term exposure to the stock. Note how the recent pullback came right into the last gap. Look for a strong move higher should stock break back above $31. Link

  Jeff Bailey   6/5/02,  3:18:40 PM
News Corp (NWS) $29.03 +0.24% .... adding this to my "bullish watch list" and setting an alert at $31. See if you can make the "tie" with this stock as it relates to the 03:00 PM intraday update! Link

Test yourself and see if you're thinking what I'm thinking.

  Jim Brown   6/5/02,  3:17:26 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
With 45 min left in the trading day I am canceling the LONG signal at 523.50. I do not want to see an end of day buy program run up the indexes only to see them drop at the open tomorrow with worries about the Intel analyst meeting. Analysts will be active with upgrades/downgrades on Intel tomorrow as they try to anticipate the guidance. Repeat - cancel the open LONG signal. We will maintain the SHORT signal with a trade below 516.75 and go into the close short if triggered.

  Jim Brown   6/5/02,  2:46:45 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
I have numerous readers begging to go short here at resistance and I agree with them. The Nasdaq is struggling to maintain 1580 and the Dow is struggling with a current lower high. The internals are slipping slightly. Let's go short the OEX/SPX/DJX on an OEX trade below 516.75. (SPX 1044 est) We will give up a point but that gives us a little room for confirmation. We still have our breakout signal in place as well at 523.50.

  Leigh Stevens   6/5/02,  2:33:13 PM
Subscriber QUESTION: "Leigh, I may have missed an explanation and if so could you please repeat for me how you determine your envelopes (%)for the various indices and why the lower band is typically .5% greater? "

RESPONSE: It is really a matter of looking at the average volatility or price range above and below the indexes relative to a 21-day simple moving average. What "works" best on each index over the recent weeks and months in terms of percentage lines both above and below the Index in question. I begin to notice years ago how consistent 21-day moving average of SPX with 3% envelope bands was in showing not only that market was "oversold/overbought" but at WHAT price level the index might reverse or at least slow down its trend momentum -- this is what makes them more valuable than simple oscillators. Envelops on Indexes really function as a type of momentum/overbought-oversold "oscillator".

Lows in a downtrend will tend to occur at a slightly lower percentage "band". In an uptrend, the reverse tends to occur. However, I try different things for "best fit" - if prior lows averaged 10% under 21 day mov. avg., but next low is 12% under (e.g., NDX), I will change percentage to that to see if the next bottom has same level of volatility - if not, I shift back to the 10% line in this example. If there is a dip under or above the percentage that has marked the prior lows or highs, we at least know that the probability for a substantial further decline/advance is markedly less - a good point to take profits, not a good point on a risk to reward basis to put on new positions in the direction of the current trend.

S&P 500 (and Bonds) have been fairly consistent in temrs of the range it trades in - SPX has traded maybe 90% of the time within trading envelopes that have ranged between 3% and 5% - most common range has been 3-4%, this for the 15 years that I have used them.

  Jim Brown   6/5/02,  2:27:07 PM
Hi Jim, Really enjoy all this commentary. I am wondering what the internal indicators that you folks keep talking are. Please explain if you can. Thanks, Angel

Dear Jim , Will you please tell us {market monitor} which indicator you are looking at that show a possible drop at " days end ". Thanks again for all your teachings and insight with trading. Joan

The indicators I referred to were the ones I mention several times a day on the Monitor. I watch the advance/decline ratio which is currently falling at .85. This means declining issues are increasing and advancers are losing ground. I also watch the new highs/lows. Lows are currently beating highs 152 to 92. I watch the TRIN which at the current 1.38 is neutral. (neutral on a day with hard fought gains is a negative indicator to me) I watch the TICK which has been trending negative for the last 30 min. I have a 1 min chart for the TICK with a 30 period moving average which smooths out the peaks and valleys caused by various buy/sell conditions. That average is about to cross into negative territory after going positive at 12:06 PM. I also watch the other indexes. The Nasdaq has serious resistance at 1588-1592 and I watch the action as it nears that area. I am not playing the QQQs today but the tech stocks have a strong impact to the overall market.

I am watching the Russell which is down -1.00 and not participating in the Dow gains. I also watch the MDY (S&P Midcaps) and they are rolling over at their 50 period average on a 15 min chart. (I use the 15 min on them for a smoother picture. I also have a screen with the S&P-500 with a 30, 15, 10, 5 min chart each. The stochastics have already turned down on the 30,15,10 min charts and is flat on the 5 min. I also watch the MACD on the 15/30 and it is about to roll over on both.

I watch the VIX/VXN intraday and at VIX 25.87 it is slightly bullish but falling. The VXN at 48.54 is bullish and could show the Nasdaq as a leader if it can break the resistance at 1590. I also have quote sheets set up in Qcharts for all the major sectors as well as the Nasdaq/Dow. I have them dynamically sorting by "net" and I can visually see at a glance the sectors going red or green and monitor them as the conditions increase/decrease. I watch for Dow stocks breaking down or out since those individual moves will have the biggest impact on the market. During the day I have over 100 charts open on my QCharts and nearly 1000 symbols in open QuoteSheets.

For instance with GE at $29.88 I found it very hard to conceive of a Dow breakout this afternoon. If GE worsens here we could see this entire bubble dissolve quickly. I hope this was not too involved but there are so many things that we monitor on a minute by minute basis that these only hit the highlights. What all these indicators give you is a gut feel for the "health" of the market. We can be going up on weak indicators but if the internals are not healthy it will eventually crash.

For an example, in the time it took me to type this many of the indicators have reversed and others are just now confirming. There is no magic key to determining market direction. It takes lots of work and stress and once you formulate an outlook that outlook can change in just a couple minutes. The problem with most analysts is they formulate an outlook and then try to make all the indicators fit their outlook. We can't afford to do that. We need to just determine what the market is doing and climb on for the ride. Hope this helps.

  Jeff Bailey   6/5/02,  2:14:59 PM
Please take a look a ICGE I think a short squeeze is in play. With 16M short I am thinking for 3-4 days to cover shorts. What do you think?

Internet Capital Group (ICGE) $0.47 +30.55%.... these guys are still around? Must be bidding based on Dillar's comments the other day. Treat it like an option and be willing to lose any bullish investment.

  Jeff Bailey   6/5/02,  2:08:45 PM
Networking Index (NWX.X) 184.75 -2.29% ... breaking to a new 52-week low today. Sector lacks any bullish sponsorship on a broader level. Cisco (CSCO) $15.69 -2.4% still a stock I think quite vulnerable to downside as profiled last week. Thursday's mid-quarter update from Intel (INTC) in the balance.

Disclosure ... I currently hold a bearish position in CSCO.

  Jonathan Levinson   6/5/02,  1:54:33 PM
Quite the battle going on at the COMPX at 1575, as internals weaken with declining volume nearly tripling advancing volume and the TRINQ hanging at 1.88 and the QQV around 42.70. Remember that if in doubt, you can't go wrong booking a profit. The uptrend I mentioned earlier is still intact, though I don't know any bulls breaking out the champagne just yet. Looks to me as if the bears are waiting for a decent rise on which to reload their puts.

  Jim Brown   6/5/02,  1:37:00 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
We were stopped out of the SHORT on the OEX/SPX/DJX signal at 13:32:44 when the OEX traded above 518.75 (SPX 1046 est) The markets are now moving into resistance and further gains could be tough to come by. It is a shame we got stopped out here because the internal indicators are still leaning in favor of a drop by days end.

  Jeff Bailey   6/5/02,  1:22:29 PM
Jeff, What are your thoughts on plug, seems oversold today?

Plug Power (NASDAQ:PLUG) $7.85 -6.54% ... Maybe near-term oversold, but looks like the stock wants to see if it can't trade its bearish vertical count of $5.50 to me. Today's spread-triple-bottom at $8.00 is bearish too. Link

  Leigh Stevens   6/5/02,  1:13:23 PM
Subscriber QUESTION: " Hi. Am giving the service a trial. Very pleased. You mentioned on Sunday a possible OEX buy set-up for Tuesday - what strike do u tend to go with and what month? I have been debating w/ myself due to my tendency to go deep itm often and not worry about IV,theta,etc...but others tend to say atm or slightly otm. I like the liquidity and leverage of the atm alot too. When would u go w/July contracts? I know u are very busy and i understand if u dont have the time. i was long some June DJX puts this am but sold on the early bounce-if only more patient. "

RESPONSE: We, for the most part, at Option Investor.com, leave the choice of option strike and expiration (month) to our readers, as there are so many different preferences that people have regarding how they wish to implement the recommendation. It also depends on the type of trade being suggested of course; e.g., a very short-term "swing" trade or a longer "position" type trade. Some option traders have a definite standing preference for in-the-money (ITM) calls/puts, others will ONLY trade out of the money options (OTM). For a swing trade that you anticipate being in for 1-2 or 3 days, the nearby index options make sense. If the expected objective is for a small move, then you may want to be in an option that is close to at the money (ATM) as you suggest, so index option will trade closer to the underlying option in terms of matching the same moves.

If the trade recommended is more of position type trade, hoping to capture a 2-3 week price trend and its June 5, you will likely want to select the July options rather than one that is expiring June 20th, to allow the possibility that a strong trend develops. In my trade recommendations I will usually indicate an objective. If that objective could be realized in a few days, then the option expiration date could well be out only 2 weeks for example. Of course, if a sideways move develops while waiting for a trend to develop, that near month will tend to have a more straight line erosion of the time premium or convergence.

On balance, there are too many variables to suggest one size fits all in terms of option strike & expiration. I tend to want 2-3 weeks out, or more, to expiration at time of trade and prefer OTM options - I find that being right on direction and intensity of the trend is key to trade success and don't necessarily shy away from an OTM strike.

  Jeff Bailey   6/5/02,  12:47:00 PM
BEA Systems (BEAS) $10.57 +4.03% ... Jeff: What are your thoughts on BEAS? Do you short it or do you go long here?

Short 1/2 position, stop 12.55, target $6.

Point/figure chart is bearish and vertical count is $5.50. Link Only short 1/2 position as NASDAQ-100 Bullish % ($BPNDX) Link is "oversold" at 26% and this is similar risk level as found in early May, which may have had BEAS recovering from $8.30 to a relative high of $12.33.

Also... according to Dorsey/Wright, the software sector is also "oversold" at 26% bullish and "bear confirmed." However, May's low reading was 28%, so sector is exhibiting greater internal weakness.

  Leigh Stevens   6/5/02,  12:36:14 PM
Subscriber NOTE: "If your so interested in head and shoulders patterns on the weekly S&P chart, why not take note of a 10 year weekly chart of S&P 500 to see the finishing of the head and shoulders right shoulder at this point and the soon ensuing 500 point drop.

RESPONSE: Only problem with this assessment re the 1998 to present SPX weekly chart is that it is not a Head and Shoulders pattern. If you're interested you could look at a reference like the Encyclopedia of Chart Patterns by Thomas Bulkowski. There IS a large rounding top pattern, but much of the downside could have been realized from this formation already. If the 1998-2002 SPX chart pattern was an outline of a person, you would not see an elephant head in relationship to human size shoulders; due to this (and multiyear timeframe), a technical analyst would not see this as akin to a person's "head" in relation to their "shoulders". There are definitions to technical patterns so that is only point I would make - I can understand the super bear view -- the Elliott Wave/Bob Prechter group are into this too. My point is with H&S label - time will tell on the 500 points lower projection or a move to well under the Sept. low (945). There is certainly symmetry to the big top pattern and in that sense is similar to the symmetry of the H&S pattern. I would use for this chart the semi-log scale. We've had to date a 50% retracement (log scale) of the 1994-'2000 advance, a fairly "normal" correction in the scheme of things - time will tell on this.

  Jonathan Levinson   6/5/02,  12:34:59 PM
Down volume on the Nasdaq is currently doubling the up volume, with declining issues beating advancers 1842 to 1262. Nasdaq-100 volatility ($QQV) is down .43 to 42.92.

  Leigh Stevens   6/5/02,  12:09:09 PM
INDEXES: TRADE Recommendation - UPDATE: My QQQ buy recommendation made yesterday with entry at 29.25 - no change in suggested stop/exit point at 28.5. As I discussed in my evening Index Trader Wrap commentary last night at Link we can anticipate backing and filling today, perhaps tomorrow as well. Typical of bottoms, assuming that's what we're seeing, would be a touch or two at or near the prior lows and this backing & filling. Typical of trade suggestions I make, particularily with higher volatility jacking up option premiums, is rec was made cause I assessed trade had potential for an overall trend in the coming few days.

What I have not updated is what I think upside potential to be. Risk to reward can't be estimated withOUT a reward/profit potential target - I look for trades with a 1:2 or 1:3 or better (not less than 1:2) risk to reward potential (e.g., for every $1 risked, we hope to make $2 - you could lose on half these trades and still make an overall profit, less commission) - on this point, my initial upside QQQ objective is to 31, a 50% retracement of the last downswing and the pivot point represented by the 21-day moving average. If the Q's get through the pivotal 31 level, then we'll see what's what then. Certainly, if there is this kind of move creating an unrealized gain on the trade, will raise the stop/exit point. Point is to convert those unrealized gains into real money with pictures of former presidents on them.

  Jonathan Levinson   6/5/02,  11:46:05 AM
Watching the patterns on the COMPX chart, I see what could be a 20-25 point wide upward channel commencing from 1PM yesterday. If we see a reversal upward right here, it could take us to just under 1600. However, a breakdown will be another story. That's what bulls and bears are arguing about right now. Let's watch and see how it resolves.

  Jonathan Levinson   6/5/02,  11:37:05 AM
Thought it was just me, Jim! I remember being in a trade, being long some calls, and my trading friend and I had been waiting for hours for the stock to break out of its triangle. Suddenly the move occurred, and we took our profits and all was well. I asked him what happened and he said that he'd bought 1 put contract to make the stock go up! Funny but true. And, of course, *not* recommended.

  Jim Brown   6/5/02,  11:32:51 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
We were triggered on the OEX/SPX/DJX short signal at 11:27:08 when the OEX traded below 516.75 (SPX 1042 est) We are going to put a tight stop on this signal at 518.75 (SPX 1046 est) Be aware, nothing produces a rally quicker than entry into a short trade! (grin)

  Jonathan Levinson   6/5/02,  11:27:52 AM
Watch the TRINQ rising here, currently 2.08, as the selling accelerates.

  Jim Brown   6/5/02,  11:12:24 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
The Dow has significant resistance from today's high of 9792 to 9865, which could be a top to today's listless post ISM trading. This resistance correlates to 520-523 on the OEX. If a herd of bullish buyers appeared and pushed these indexes over those levels it would be a very strong signal and one we would want to buy. Unfortunately it is six OEX points above our current level of 517.50. There is simply too much resistance to go long between 517 and 523. Therefore we may have to sit and watch until those levels are broken. To capture a breakout go LONG with an OEX trade over 523.50 (SPX 1057) This is in addition to the SHORT signal still in place at OEX 516.75. This gives the market (OEX) a range of about 7 points to wander before triggering a signal. We will be patient and wait.

  Leigh Stevens   6/5/02,  11:10:41 AM
INDEX Update: Support & Resistance - Nasdaq Composite (COMP) Support > 1554-1555 -- Resistance > 1608-1610, then 1615, at top of hourly chart downtrend channel which would be a breakout point; Nas 100 (NDX) Support > 1155 -- Resistance > 1208, then 1214-1215, which is top of channel; QQQ: Support > 28.6-28.7, then 28.3 at low end of hourly downtrend channel -- Resistance > 29.9-30.0, then 30.2 at top end of channel.

  Leigh Stevens   6/5/02,  10:56:55 AM
INDEX Update: Support & Resistance - S&P 500 (SPX) Support >1030-1032 - Resistance > 1050 - 1055, then 1068 which would be breakout point above the top of hourly downtrend channel; S&P 100 (OEX) Support > 510 - Resistance > 520-523, then 535-536, breakout point at top of channel; DJX: Support > 96-96.2 -Resistance > 98-98.5; 98.7 is breakout point.

  Jim Brown   6/5/02,  10:54:31 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Short the OEX/SPX/DJX if the OEX trades below 516.75. (SPX 1041.50 est)The markets still appear to be discounting the good economic news and the buyers did not have enough strength to push through resistance. We could be setting up for another attempt by the market makers to cause a capitulation event. While I am bullish on the economy at this point, I am going to trade the market direction even if it is contrary to common sense. Attempting to trade our bias when it conflicts with the market is expensive.

The internals are weakening with the advance/decline ratio falling into negative territory at .89 after being up significantly earlier this morning. New lows are beating new highs nearly 2:1 at 87 to 49. GE is falling again to the $30 range coming close to $30.50 on the opening bounce. The markets will not be able to rally if GE falls below $30. I would love to see my previous indications from yesterday of a rally off support to come true today but resistance is proving difficult. I will place a long signal shortly to cover a breakout should the bulls return to graze.

  Jonathan Levinson   6/5/02,  10:53:25 AM
Here's a fine example of the impact of volatility on option prices. As underlying price begins to whip around more rapidly, option buyers and sellers become more anxious, afraid of missing what is becoming faster moves. So they bid and ask a little bit more, and in all the excitement we see the contracs becoming more expensive and premium heavy. Be careful and remember that growing the account is the second directive, the prime directive being not to shrink it.

  Jim Brown   6/5/02,  10:41:17 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Short the OEX/SPX/DJX if the OEX trades below 516.75. Details to follow.

  Jonathan Levinson   6/5/02,  10:40:29 AM
I'm looking at the 60, 30, 15, 10 min charts on the QQQ's and they look like they are about to roll over again. Additionally the market seems to have lost momentum after this mornings news. Do you see this as a favorable Risk/Reward entry to the down side?

It's starting to look good to the downside, as the news combined with what felt like a wave of bullish sentiment couldn't generate more than a deadcat bounce. Until I see the 1575 support level and low of the day give way, QQQ puts will feel risky to me. I'm frankly uncertain short term at the moment, given yesterday and today's chop. Short term puts only on a break below 1575, and I'll set my stop at the day high.

  Jim Brown   6/5/02,  10:39:44 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
We were stopped out of our long play at 10:35:50 when the OEX traded at 517.75 (SPX 1044.50 est) Our entry was OEX 511.50, SPX 1032. The market internals are weakening and we may be getting ready for that retest of 9550 I have spoken of several times.

  Jonathan Levinson   6/5/02,  10:22:54 AM
would you exit at point you mentioned on XAU? I think it was print around 82.45--or would you hold LT? I woke up to a nasty suprise this am! Thanks Denise

Nasty, but not too surprising, as gold and the Gold and Silver Index (XAU) have had a mega runup, reminiscent of the dotcom days (daze). XAU is sitting just about its 20 day EMA at 82.58, which also coincides with the middle bollinger band. The low band is currently at 74.82. If you have profits here, a break below the 20 day EMA is a logical place to lock them in, and wait for a buy signal if the XAU touches the low point in its range. However, the uptrend is still intact at these levels, and while many goldbugs have been waiting for a correction, most are waiting to buy the next dip.

  Jeff Bailey   6/5/02,  10:17:36 AM
Williams Cos (WMB) $9.90 -11.59% .... Stock breaking to yet another 52-week low. Profiled this one as short/put last week near $14 and prior above $15. Link

What I'd do here if short the underlying shares, is take entire position off the table for approx. 28% gain. Then, if you were short 500 shares the underlying, reduce risk in your account with 5 longer-term out the money put options and forget about them. This allows trader to only now be risking partial profits and still having exposure to a stock that looks to be in trouble.

Traders may note that yesterday, 100 contracts in the peviously profiled WMB Nov. $15 puts (WMBWC) traded 100 contracts at 14:09:09. This draws some attention to the $9.80 price in WMB ($15-$5.20). Just taking some notes here. I'm thinking this may have been a "naked" put as it makes little sense to buy the $15's for a hedge at this point. Either than, or subscriber closing out with a nice gain. I haven't been tracking open interest on this contract.

Disclosure... I currently hold a bearish position in WMB.

  Jim Brown   6/5/02,  10:10:12 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
We have had so many instances of "sell the news" events that I want to raise the stop loss to 517.75 (SPX 1043)

  Jim Brown   6/5/02,  10:07:07 AM
Pivot Trade Signals
The ISM numbers appear to be a blowout with the headline number of 60.1% much higher than the 56% estimates. The details will follow but the markets moved higher on the news. The Dow may struggle with resistance at 9800 and the Nasdaq 1600. I am going to raise the stop loss again to prevent a "sell the news" loss.

  Jeff Bailey   6/5/02,  10:06:52 AM
Retail HOLDRS $94.35 +2.38% .... getting a "double boost" from Wal-Mart's (WMT) Link same-store-sales and now the ISM numbers and is current sector gainer. Link

  Jeff Bailey   6/5/02,  10:04:44 AM
ISM non-mfg. for May came in at 60.1%, which was better than expected consensus for 56.0% gain.

  Jonathan Levinson   6/5/02,  10:02:32 AM
Jonathan, I wonder if you could help me with some technicals re SEBL. Could you give me an opinion on SEBL for long term?

On a midterm basis, SEBL looks oversold and trying to turn up. On a longer view, SEBL looks oversold and trying to get more oversold. On a short term basis, SEBL has to clear its 20 day EMA at 20.64. A break above this level on strong volume will confirm the midterm trend and make it a more attractive buy. However, follow the trend as described in my comment below. The long term trend in tech is down, and you need an excellent reason to fight it with individual stock plays. This might be present in SEBL's fundamentals, but I don't see it on a purely technical basis.

  Jeff Bailey   6/5/02,  9:58:51 AM
Citigroup (C) $42.26 +0.64% ... Monday's trade at $42 was a "bearish triangle" pattern in Citigroup. Link Trader that read Jim's "Pivot Trade Wrap" in last night's market monitor Link can make the tie between C being a Dow component and then understands the importance of the 9,600 level in the Dow Industrials.

One "problem" for a bear in C right now is that according to Dorsey/Wright and Assoc. the Banks are "bull confirmed" at 88.58% and it would take a reading of 82% to get the group "bear alert." While the broader market bullish %'s are more bearish, the banking sector is more bullish. This perhaps has the trader understanding that he/she needs some sector weakness going forward.

As such, C still makes an attractive put candidate, but a trader at this point may opt for just 1/2 position, then look to add if the Dow Indu. breaks Jim's 9,600 level, or the Banks Bullish % reverses into a column of O.

  Jim Brown   6/5/02,  9:55:33 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
The pre-ISM pause has begun. The markets will likely hold here or slip slightly while we await the numbers. If the numbers are bad I would close the long position at OEX 514.75 (SPX 1038) and look to re-enter the trade on any dip.
REPEAT - Raise the stop loss to OEX 514.75 (SPX 1038 est) to take us out on a bad ISM number.

  Jeff Bailey   6/5/02,  9:47:06 AM
Jeff: Is there any type of "search" tool to look for all these different point/figure chart patterns for bullish and bearish trade candidates without having to look at a bunch of charts?

Yes! As mentioned before, www.stockcharts.com has a section on its site Link that shows multiple stock screens.

For the point/figure hard core trader/investor, Dorsey/Wright & Assoc. has a built in search engine where you can customize your stock scans based on a multiple different characteristics you're looking for in a stock.

However.... some of the best trades are those that are found BEFORE the pattern is triggered. This allows the trader to identify candidate BEFORE the pattern is triggered, give some thought to your trade (option strike, expiration, etc) based on the various probabilities study from Professor Davis' work.

  Jonathan Levinson   6/5/02,  9:44:27 AM
With all intraday oscillators reaching overbought, the ISM data at 10AM will be key. Tech feels like it wants to go higher, but has significant resistance to clear overhead, notably in the 1600, 1615 and 1625 areas. Like Jim, I am expecting more downside, and will be watching closely. With the $BPNDX in oversold territory at 26, and the QQV above 43, a bounce can be expected. However, I do not see a major rally from these levels, and am more impressed by the downtrend in the COMPX. Watch the TRINQ intraday. Very low readings can signal short term tops. Nimble traders can play calls to capture upside, but I'd be quick to take profits.

  Jeff Bailey   6/5/02,  9:39:57 AM
Manugistics (MANU) $5.76 -27% ... stock down after warning on Q1. Link

Traders that may be holding puts or short the stock from the "bearish triangle" at $10, should look to lock in some gains here on weakness. According to Professor Davis' study, trader would have been looking for 33.3% decline in 2.5 months. At $5.76, trader has seen 42% decline since May 21st and exceeded the probabilities.

  Jeff Bailey   6/5/02,  9:30:42 AM
Millennium Pharma (MLNM) $12.98 ... stock trading $14.35 (+10.5%) in pre-market after getting FDA grants of MLNM's investigational cancer therapies, MLN341 and MLN518, fast track designation. Link

  Jeff Bailey   6/5/02,  9:25:26 AM
Jeff: with the qqq one time yesterday hitting 28.61 why would someone buy the june 39 call wondering because someone actually bought mine for 0.05

Often times we will see options traded at $0.05 a contract. Either a speculator is looking for a "pop" to $0.10 and a 100% gain, or an option trader on the other side of the position simply wants to close his/her naked position. It can alse be caused by the market maker simply leveling off some open inventory from their market making activities.

Lots of option traders will try and "salvage" $0.05 per contract on positions that don't look as if they will pay out and could simply erode. Just like you did, lots of traders will simply place a limit order to sell at $0.05 and look for any type of market volatility in the QQQ to get an up-tick to sell that option.

  Jim Brown   6/5/02,  9:22:41 AM
Pivot Trade Signals
The bullish sentiment overnight has evaporated with the warnings from MANU and EFDS. WCOM is up slightly on rumors that it may cut another 20% of its employees. KLAC is up slightly on an upgrade. MLNM is up strongly on news that it was granted fast track approval for cancer drugs.

The non-manufacturing ISM numbers are due out at 10:AM and although estimates are for a rise to 56%, investors may be cautious prior to the release.

The Pivot trade model is long the OEX/SPX/DJX from 9606 on the Dow, OEX - 511.50 SPX - 1032. We have initially set a wide stop loss on this signal of Dow 9545. We will raise this stop on any strong bounce. There is still the possibility of another strong drop as market makers try to flush out the remaining weak holders in the market. That drop should have trouble getting to the 9550 level, which is why we placed the stop so low. Should that drop occur the resulting bounce would be very buyable. Without that dip any current rally could only be a one day, maybe two day event.

Intel has its quarterly analyst meeting on Thursday after the close and investors will want to take profits in advance in case they warn. Friday morning is the payroll report as well which is an added incentive to be flat by Thursday's close.

  Leigh Stevens   6/5/02,  9:21:16 AM
Pre-Opening INDEX Comments - As has been discussed already, the Dow 30/Industrials yesterday held above both its intraday and closing levels dating back to early-February - however, also would note that the Nas Composite (COMP) held above its early-May lows on a closing basis, after filling in the upside gap from 5/7-5/8, which is bullish for the Nasdaq. COMP level to watch is 1558-1560.

  Leigh Stevens   6/5/02,  9:11:10 AM
Pre-Opening INDEX Comments - Good Morning! Index Futures trading: S&P > +2.00 ; DOW > +15 ; NAS > +1.00

  Jeff Bailey   6/4/02,  10:47:59 PM
Jim's onto something in his "Pivot Trade Wrap" and technicals discussed for the Dow Industrials and 9,600 level. Tonight, I was noting that the S&P 500 Bullish % ($BPSPX) currently reads 54% bullish. If we look at this chart, we can certainly make a "tie" between the 54% level found today, and that found in February (red 2). Link

Yes, these are two "different" markets (SPX and INDU), but each stock in the Dow is a component of the SPX. With the Dow technically stronger than the SPX or NASDAQ Composite, if any rally is to take place, then I would think Dow Indu should be monitored closely.

Further, I think Intel (INTC) which is Dow Component, S&P Component, NASDAQ Component is the "stock to watch" and "stock in the news" this coming Thursday at mid-quarter analyst update. Most likely its the "swing" stock that casts the deciding vote. Rally or capitulation.

  Jeff Bailey   6/4/02,  10:38:23 PM
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