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  Jeff Bailey   6/7/02,  5:06:02 PM
Jeff: Can you explain why AMGN is so weak although it achieved its vertical bearish count of $43.

For on thing, AMGN's bearish vertical count isn't $43. The current column of O's ($51 to $41) is the current column that would be used to calculate the bearish vertical count. Note: Even if AMGN's bearish count was $43, it should be understood that stocks can EXCEED their vertical counts. Sometimes it's by "just" a box or two, but sometimes it can be MUCH futher. Bearish vertical counts when achieved are not as much a "reason" to buy a stock (especially if it's in a downward trend and in a weak group like AMGN is) as it is to cover a bearish position.

Now, one "reason" the CURRENT bearish vertical count for AMGN would be $29:((11*2)*1)-$51. Trader/investor's will also note that AMGN's p/f chart recently gave the "spread-triple-bottom" sell signal at $45. According to Professor Davis' study, that bearish pattern is profitable 86.5% of the time, for an average gain of 24.9% in 4.6 months. From $45 (where the pattern was given) that would equate to a decline to about $33.79.

While this doesn't "mean" AMGN will trade $33.79 or $29 (bearish vertical count) the $33.79-$29 range is a place that every trader/investor should assess potential downside too. Link

Another "reason" that AMGN may be so weak is that it is classified as a biotech. According to Dorsey/Wright and Associates, the biotech group as of last night was "bear confirmed" at 18% (may have declined even more today based on this morning's action). While sector risk is running high for bearish trades in this group, it is also very weak.

In terms of bullish %, think about this. Remember that subscriber that played a Biogen (BGEN) $42.16 -11.6% "strangle" on 05/22/02 when BGEN was trading near $40? Look at this p/f chart. What if he did sell his call part of that trade at the bearish resistance on/after the "good news?" Link

Now, imagine if you will, for simplicity sake, that there are 100 stocks that make up the biotech bullish percent. Do you see how BGEN would still be "1" of the "100" stocks in the group still showing a "buy signal" on its chart (the buy signal was at $45). For BGEN to give a "sell signal" and take away from the group's bullish %, it would have to trade at $38.

Now... to fully understand risk/reward from an institutional point of view. What was the "risk" for a bull when BGEN rallied up to its bearish resistance trend at $50-$51? "Risk" for the bull, based on a stop where the first "sell signal" would be given was/is $38.

Using the p/f chart and simply looking at some stocks based on "from where the stock is right now, who has the greater risk to a sell or buy signal? Is it a bull or bear?" this can really "wake a trader up" to understanding risk/reward entry and exit points in a trade, based on market/sector conditions.

Look at some stocks you may be holding on their p/f charts this weekend. Are you still holding some WMB short? Or did you lock in some bearish gains? Link

What about RIMM Link , VZ Link , CIEN Link , C Link , RFMD Link

All of the above RIMM..... RFMD are bearish chart patterns, but do you see the different types of risk that are associated with each as it relates to "buy/sell" signal points?

I tell you what... if my account were loaded up with a bunch of stock charts on the bearish side like WMB and RFMD, I'd have locked in some gains by now.

Lesson learned today in INTC and will really have to consider in the near-term regarding holding any stocks over important mid-quarter update. In a way, while the technicals were still "bullish" in INTC up to last night's close, I think lesson learned that a stock that has given multiple sell signals and still has some downside to its bearish count of $22, needs to have a bull erroring on the side of caution. The only think I did "right" was to limit exposure to 1/2 position. Will learn from this mistake and try and use it to my advantage in the future. I guess the p/f chart was "telling" me $22 was in the cards for INTC, but I simply didn't listen. How fitting is today's close at $22.00 on INTC? Right at its bearish vertical count. Is that an "in your face" type of finish? How humble the market will make a trader and how powerful perhaps are the point and figure charts. I knew the risk, I played it, and lost. Link

 
 
  Jim Brown   6/7/02,  4:17:43 PM
Pivot Trade Wrap (What is this?) Link Profiling a Disaster Needless to say I got several emails for being on the wrong side of the market at the open. It was a considered risk that I discussed with everyone as it developed on Thursday. Had the Intel guidance not been seen as severe the morning outcome might have been much different. There is nothing I can do about that. I bet on the reaction to the guidance and oversold conditions and lost.

After waking up on the wrong side of several trades amid serious market instability you either tend to over trade or be over cautious. While I was expecting a bullish bounce off the 9500 level I set the stop too close on the first long and got tagged out immediately by the next dip. After being killed at the open and hit again 30 min later I was too cautious about closing the second long when the Dow dropped below 9500 again at 11:am.

Clearly in "reaction" mode at that point I elected to sit on my hands until a clearer picture developed and the volatility eased. I made the decision to wait rather than trade emotionally.

It is very frustrating to watch the markets move a hundred points while sitting on the sidelines and several readers shared their frustration with me in vivid terms. I am sorry. I feel tasked with the responsibility of not only producing profits for Market Monitor readers who choose to follow these signals but I also feel responsible for protecting the capital of those same readers. This is not a day-trading chat room with hundreds of type-a gunslingers willing to throw money at any idea that flies by. I would rather err on the side of caution than churn accounts into oblivion.

I would be interested in hearing from you with your thoughts. More aggressive? More passive? Take bigger risks? More trades? Less trades? Wider stops? etc. Take aim and unload your frustrations on me. I will not print the emails unless you give me permission. This is a free shot!

 
 
  Jonathan Levinson   6/7/02,  3:58:34 PM
Looks like the COMPX has defined the range within which we'll be working for the next few sessions, with today's high just below the area formerly known as support at 1550-1555, and the day low at 1495.

 
 
  Jim Brown   6/7/02,  3:54:42 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
Close the OEX/SPX/DJX SHORT at the close. If we had a couple points under our belt I would feel better about holding over the weekend but there is a good chance we could see a bounce at the open on Monday and the risk/reward ratio favors going flat. We can reinstate the position on Monday depending on the market direction then.

 
 
  Jeff Bailey   6/7/02,  3:49:48 PM
Smurfit-Stone Container Corp. (SSCC) $16.59 +0.91% ... fading a bit into the close. Day trader most likely closes out prior to close of trading. If having been long INTC last night, then lets get some sleep and not worry about holding another stock overnight right now. (for day trader).

 
 
  Jeff Bailey   6/7/02,  3:49:36 PM
Jeff: Any thoughts on Aquila (ILA) today?

Yes, I do. Stock is acting like a bear needed it to in my opinion. One thing I did do today was look at the 60-minute chart. Very "short-term" wedge is forming. Right now, really need a break of recent low to get some "capitulation" in the stock.

I've gotten a lot of e-mails from bears in this one. Hang in there. Right now, a short-term trader can simply place a stop above yesterday's highs. If you're a trader that can watch the stock on a minute-by-minute basis, then don't stick your stop out there with the specialist. By golly, he might just come up and get your stop. Yesterday's high was $13.51. Link

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

 
 
  Jeff Bailey   6/7/02,  3:32:08 PM
Tyco Intl. (TYC) $10.60 -27% ... stock "whacked" again today. Getting close to its bearish vertical count of $6. As such, any bears should simply weigh risk/reward to a target of $6 and act accordingly. Link

 
 
  Leigh Stevens   6/7/02,  3:25:42 PM
Subscriber QUESTION: "Leigh,I while back we talked about the VXN.X and at that time you said that you felt it would have to exceed 60 a major bottom could occur. Currently it’s at 53+. What’s your current feeling? "

RESPONSE: I can't really find a correlation on the VXN that suggests some "universal" principle other than spike ups in VXN and VIX repersents a "fear" indicator.

There is not enough price history in enough "types" of markets however. When I looked for some meaningful sign of a major bottom for the limited VXN history we have (only back to Feb. 2001), the CBOE Nasdaq 100 volatility measure ($VXN.X) had to go quite high, such as over 60. Going back to Dec., a more "normal" period at least in a bear market, when the VXN closed above 50 there were minor association with NDX market bottoms - in Jan. after a close in the 50 area, there was a lower low that came later; in early-Feb., such a reading was way early in terms of an NDX bottom; in early-May, such a closing reading was near a Nasdaq low, but it was not a lasting one. So, go figure!

I find it interesting when VXN (Nas volatility) spikes up, but can't find that readings below 60 mean much. And, even that statement does not reflect a long enough period to say that VXN, say above 60, is really meaningful over the long run, through many market cycles.

 
 
  Jim Brown   6/7/02,  2:58:30 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
We were triggered on the SHORT at 14:50 when the OEX traded below 508 (SPX 1029 est) The initial stop loss on this signal will be OEX 511, just slightly over the high of the day. (SPX 1033.50 est)

 
 
  Jeff Bailey   6/7/02,  2:57:14 PM
Adv. Micro Devices $9.66 -8.8% ... I got a few e-mails from subscribers about this one and how to manage their trade. Please review this update for your trading plan. Link

 
 
  Jim Brown   6/7/02,  2:57:09 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
We were triggered on the SHORT at 14:50 when the OEX traded below 508 (SPX 1029 est) The initial stop loss on this signal will be 511, just slightly over the high of the day. (SPX 1033.50 est)

 
 
  Jim Brown   6/7/02,  2:52:47 PM
Would it be reasonable to assume that the qqq, djx, oex just filled their gaps and are now turning lower since we don't have that much volume and this sure did not seem like a capitulation day? Susan

Leigh also pointed out that the gap had been filed in his 2:46 post. The risk here is to the downside with resistance at 510 on the OEX. The TICKS have gone negative again.

 
 
  Jim Brown   6/7/02,  2:50:30 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
The OEX has rolled over right at resistance of 510 and could be heading into an afternoon slide. Let's go short the OEX here at a trade below 508.

 
 
  Jonathan Levinson   6/7/02,  2:50:25 PM
This downmove on the COMPX doesn't violate today's upchannel, but it sure is close. I'm enjoying an excellent case of trader freeze here, as I *don't* enter a fresh put position.

 
 
  Leigh Stevens   6/7/02,  2:49:19 PM
INDEX Comments: QQQ has now "filled in" the downside gap that was created at the sharply lower opening, by getting back up to 28.6 area - this area will likely offer some resistance - ability to close above this level on both an hourly and daily basis, would add some evidence suggesting that a bottom is in place for a while or for the longer term.

 
 
  Leigh Stevens   6/7/02,  2:36:56 PM
Subscriber NOTE: "I think it's very important to point out to readers that a price change of $1 for (each stock) in the DJIA does NOT have the same impact on the Average and that it varies according to the stock and that stock's relative weight"

RESPONSE: It would be better to say each stock's relative PRICE (not "weight"), as divided by a special "divisor".

As you point out there is a factor (divisor) involved in the price-weighted Dow Industrial average, so it is not a straight line division, unlike the Value Line Index. "Weighting" is not price AND capitalization weight like the S&P - simply an arithmetic adjustment to account for how many price splits the stocks have had. The reason the Dow was called an "average" was that Charles Dow just added the 30 stock prices and divided by 30; i.e., the divisor was 30.

Now the divisor is .14452124. Add the stock prices at end of the day and divide by .1445. If Intel (INTC) is down 4.76 - divided by .1445 - the stock is accounting for -33 Dow points. The habit of calling the Dow, an "Average" has stuck however.

 
 
  Jeff Bailey   6/7/02,  2:31:03 PM
Treasury Watch 30-minutes left to go in bond market. 10-year YIELD now at session high of 5.072% and has matched yesterday's high. Stocks seemed to follow the action in YIELD today and now the major stock averages at unchanged levels.

Trader's might correlate a 10-year YIELD of 5.2% with a Dow Industrials (INDU) of 9,800. Dow Indu at 9,622.

 
 
  Jim Brown   6/7/02,  2:30:43 PM
Pivot Trade Signals
The Dow/OEX just turned green which is very bullish. However, I am reluctant to enter a long trade at these levels and be forced to hold over the weekend. I had felt 9600 would be a good entry point all week but this late on a Friday makes me cautious. The adv/dcl ratio just went positive at 1.04 but the volume on the Nasdaq is still just 1.4 billion shares. No conviction! While it is frustrating to sit and watch the averages slowly hit new highs it would be even more frustrating to buy at the top. Let your conscience be your guide!

 
 
  Jeff Bailey   6/7/02,  2:24:14 PM
AMAT/INTC Remember yesterday's discussion regarding the relative perfromance between INTC and AMAT over last couple of weeks? How INTC held up better than AMAT? Look at the relative action between the two today. AMAT down just 0.71% at $20.78, while INTC got whacked to $22.30.

Just like that, things are perhaps more "in line" and perhaps now more harmonic.

 
 
  Jonathan Levinson   6/7/02,  2:22:55 PM
Upvolume has now surpassed down volume on the COMPX.

 
 
  Jeff Bailey   6/7/02,  2:20:40 PM
Smurfit-Stone (SSCC) $16.75 +1.88% .... stock trading near session high. Short-term day trader from $16.47 is looking at 60-minute chart and needs to see stock get above its turning higher 200-pd just above at $16.84. If so, could then the the late surge to target of $17.38.

All things are possible and p/f chart still bullish longer-term with vertical count of $25.50. Swing-traders or those with a little longer-term view that just a day, see the potential with a trade at $18.50. Link

 
 
  Jonathan Levinson   6/7/02,  2:15:47 PM
COMPX internals firming significantly here as the COMPX prints highs of the day and the QQQ approaches yesterday's support level, now turned resistance. Let's see what it does.

 
 
  Jeff Bailey   6/7/02,  2:14:52 PM
Jeff, What are your thoughts on SNIC?

Sonic Solutions (SNIC) $9.00 +5.26% ... stock sounds familiar for some reason, but from a long time ago.

Point/figure is bullish with vertical count of $12.50. Would look long, but only 1/2 positon as stop would have to be $6.00. Link

 
 
  Jeff Bailey   6/7/02,  1:57:53 PM
Citigroup (NYSE:C) $41.00 -2.38% ... recently profiled this one as bearish. Short-term trader might lock in a gain here with NYSE getting a little bid. Looks week longer-term, but short-term risk is rally potential to about $43. Link

Also make some correlative observations between C and the KBW Bank Index ($BKX.X) point/figure chart. For short-term bearish trader, could see a BKX.X rally to $875, and correlate against a C rally to $43. Link

 
 
  Jeff Bailey   6/7/02,  1:46:09 PM
NYSE Composite ($NYA.X) 550.54 +0.10% ... broader market average turning green here.

 
 
  Jim Brown   6/7/02,  1:42:44 PM
Pivot Trade Signals
In an interesting divergence the internals of the market are improving while the averages are struggling to maintain their current levels. The adv/dcl ratio is up to .72 and the TICKS have been positive for the last hour. Looks like some bargain hunters may be nibbling from the sidelines. It will be interesting to see if they can hold them here as we approach the 2:00 turn. A Nasdaq breakout to 1530 could be a bullish trigger for the overall markets.

 
 
  Jeff Bailey   6/7/02,  1:37:34 PM
Oxford Health (OHP) $48.71 +2.33% ... stock continues to hold up well. Traded 52-week high today at $49.90. Point and figure chart remains bullish with vertical count of $71. Link

 
 
  Jeff Bailey   6/7/02,  1:34:41 PM
Tenet Healthcare (THC) $74.74 +1.96% ... stock continues to hold up very well. Traded a 52-week high today at $75.50. Point/figure chartist wants to see a trade at $76, get stock back on a "buy signal" and get vertical count bullish. Link

 
 
  Jeff Bailey   6/7/02,  1:29:15 PM
Hi Jeff, GE appears to have had a nice little bounce similar to the situation in 9/01. What are your thoughts?

Hmmmm.... GE $29.66 +1.22% .... Stock traded matching low from September. Could play bullish for a bounce, but would have to follow with a stop at $28. Would only try with 1/4 or 1/2 position. AGGRESSIVE bottom feeder's only. Link

 
 
  Jim Brown   6/7/02,  1:26:45 PM
Trade Signals - PVN
Several readers have asked about PVN today. The company financials were posted on Edgar Online today showing a profit for the last quarter of $10 million. The profit is encouraging considering they posted a -$481 million loss the prior quarter. However investors may have been disappointed that previous profit levels have not returned. PVN earned +$232 million in the June quarter last year. PVN dropped -.37 cents on the news. (-5%) I profiled this as a turnaround play on OIN and it is obvious they have turned the corner. I think the expectations of a rapid return to past numbers has tainted investor sentiment short term. I am still long PVN and have no plans to sell in the near future. I think the company is a takeout candidate once they divest the unprofitable portions of their business. While I cannot guide individual investors on whether to hold or buy more as some have suggested I am long and plan to remain long.

 
 
  Jonathan Levinson   6/7/02,  1:15:23 PM
Interesting divergence: VIX is now down on the day while VXN and QQV still significantly up.

This is interesting indeed. Gives us some clues that INTC sparked more panic in tech and a flight to the relative quality of other S&P components.

I remain most impressed with the relatively low jump in QQV and VXN (broader Nasdaq volatility index). This signals me that the bottom is not yet in, but only time will tell.

 
 
  Leigh Stevens   6/7/02,  1:13:41 PM
INDEX Comments: re Elliott wave pattern on DJIA 5-min chart - looks like it could be 5 waves up, but you don't have to put a "wave" interpretation on it just cause its a 3-part up move, with each interspaced with a correction - looks like another move up is coming from or after "flag" type consolidation that just completed itself, basis the 5-min chart. Whenever I mention Elliott Wave pattern possibilities, it loses a lot of folks - so, if anyone wants to mail me on a wave interpretation I can take a look, but probably not answer on the Monitor, as I get too many mails back that say "Whaaat"?, as in WHAT are you talking about.

 
 
  Jim Brown   6/7/02,  1:04:39 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
The market internals are declining again and there is yet to be a meaningful rebound. I am concerned that the afternoon direction could be south. A break below current intraday Dow support of 9540 could signal a trend change. The weekend surprises have been in favor of the bears, which could work in the favor of a short trade. Go SHORT the OEX/SPX/DJX with any OEX trade under 503.25. (SPX 1020)
This is an aggressive - high risk trade. Be aware!

 
 
  Jonathan Levinson   6/7/02,  12:56:56 PM
I am clueless about Elliott Waves, but even I can see that on today's Dow 5-minute chart, disregarding the opening blip, we've made 5 up and seem to be rolling over. I've been watching this for the past few days and, had I traded following this instead of being chicken, I'd be looking for a condo in Hawaii now....

Don't know how long this pattern's going to hold up, because now that I've mentioned it, it will go away, but thought you might find it interesting.

My inability to use and understand Elliott Wave Theory is truly awe-inspiring. Unlike Fib retracements, Gann angles, bollinger bands, all types of oscillators, etc., I've never managed to understand the underlying theory on which to base EWT's predictive power. EWT makes me think of ET- The Extra-terrestrial ("Ell-i-ott"). Any Ellioticians, your input will be welcome here.

 
 
  Jonathan Levinson   6/7/02,  12:47:23 PM
The consistent lunchtime effect would be that swings can occur between 1:40 and 2:15, as I've seen before, as traders return from lunch. But, again, I've never been able to predict a trend with any accuracy based on this. Just be aware that it's there and try to be careful.

 
 
  Jonathan Levinson   6/7/02,  12:40:01 PM
What, if any, "lunchtime effect" factors into your views of market activity?

Other than making me hungry while I skip it, I've been unable to deduce a consistent pattern to the lunchtime lull. I detect patterns that sometimes last a few days and then morph into different patterns. Any suggestions will be welcome on this.

 
 
  Leigh Stevens   6/7/02,  12:39:56 PM
Subscriber QUESTION: "Leigh, 15 min chart has MSFT showing a bear flag since opening, doesn't seem to bode well for QQQ this afternoon - am I seeing this correctly?"

RESPONSE: There was a bear flag or "pennant" that formed early on, but the breakout was to the upside - we have now "filled in" the downside chart gap, so now the moment of truth comes in - a move above 52.00 is needed to suggest a short-term bullish breakout - the most recent formation on the chart time frame you mentioned (15min.) now looks like a bull flag, so maybe 52.00 will be exceeded - unless this pattern "fails" also.

 
 
  Jim Brown   6/7/02,  12:39:42 PM
Pivot Trade Signals
Aggressive traders might be thinking SHORT right now. The Dow posted its first lower high since 10:am and the OEX stopped at 506. The Nasdaq stumbled at 1525 and the fear of holding dip gains over the weekend may be growing. Once the lunch lull has passed the afternoon direction should appear.

 
 
  Jonathan Levinson   6/7/02,  12:34:40 PM
Looking at the COMPX chart in different timeframes and noting that the internals have firmed considerably and relieved the extreme selling pressure that had built up, a put play could work well on a break below today's intraday uptrend with a print below COMPX 1517. However, its being Friday afternoon, and the markets being a *little* tough to call recently (grin), I'd keep this one on a very tight leash with a low stop at 1525. For Nasdaq bears only who are unafraid of that open gap overhead.

Disclosure: I'm currently holding QQQ puts.

 
 
  Jeff Bailey   6/7/02,  12:29:15 PM
Per Leigh's 12:18:48 I've thought about it and would equate it to taking Jim's Intel (INTC) longer-term bullish play. While it's "frightening" to think about buying INTC longer-term call, one can only imagine how "frightening" it was to have bought longer-term INTC calls back in May of 1999 at $25 and the new frontiers discovered in April of 2000 when the stock was trading as high as $70. Link

One can imagine that Christopher Columbus assessed his risk and weighed it against his life when setting off to sea. Option traders do the same and only risk what they can afford to lose. All along, weighing risk/reward as the "unkown, becomes known."

Many villagers thought Mr. Columbus had lost his mind. After all the earth was flat. Some will also believe Jim's lost his mind by profiling a longer-term bullish trade in Intel (INTC), after all, "this market is doomed!" Or so say some.

 
 
  Jonathan Levinson   6/7/02,  12:22:41 PM
Internals still firming on the Nasdaq, TRINQ now below 1 (!), and QQV blowing off some more steam and up just 1.84 on the day. Again, is *this* THE bottom? I don't think so, because the fear, panic and selling pressure didn't make it up to nosebleed levels. But we'll trade what it gives us.

 
 
  Leigh Stevens   6/7/02,  12:18:48 PM
ON THIS DAY in 1498, Chris Columbus left on his 3rd. voyage to the "new world" - this one had success at last, although the natives didn't think they had been "discovered" - well, having lived in New York, can say that Italian-Americans consider Columbus to be a major hero and he certainly had lots of bravery. In honor of this day, have an Italian hero for lunch and think a moment about what it must have been like to set out on those tiny ships into the big unknown.

 
 
  Jeff Bailey   6/7/02,  12:16:15 PM
Jeff On June 4 on your 9:32 post you mentioned CLS being bearish with a vertical count of $22. What is the time frame for this count 2-3 months or 4-6 months A part time trader

This is a very good question. With Treasuries seeing some buying, will turn more cautious with Celestica (NASDAQ:CLS) $26.29 -2.36% and perhaps suggest lowering a stop to just above the $28.00 level.

There's a couple of "probabilities" to look at per Professor Davis' study. First, we go back to original reason we were bearish back in February, and the "bearish triangle" of $40 (right at red 2, which is early February.) That probability has been achieved (87.5% of the time, average gain for bear of 33.3% in 2.5 months). Link

Now what a trader is "dealing with" is the bearish vertical count of $22 take note of that. The "spread triple-bottom" at $31 is (profitable 86.5% of the time, average gain of 24.9%, over 4.6 months. From $31, that would be a target of $23.28.

Therefor, bearish trader would look to target a range between $22 to $23.28 as a place to look to cover. Now, with the stock trading $26.42 here, I can further assess risk/reward from current levels. I "know" my potential reward as a bearish trader is about $3, so I should NOT be willing to risk any more that $3 (worse case) from current level.

Now you (the subscriber that wrote me the email) what is a comfortable risk/reward for you? What does your stated trade discipline say? Are you only allowed to risk $1 to make $3? If so, then you should then have a stop at about current trading levels of CLS $26.40 plus $1 risk = $27.40 to potentially achieve a target range of $22 to $23.28.

Even as a "part time" trader, you can look at the paper each night, assess your risk/reward in the trade, and make any adjustments to your stop that night. You don't need to look at the stock the next day during the session, but would once again look at the morning paper the next day, assess risk/reward yet again, and make any adjustments to your stop as needed. Very simply and very disciplined.

 
 
  Jim Brown   6/7/02,  12:14:38 PM
If that picture of Greenspan is causing anyone download/refresh problems just email me and I will delete it.

 
 
  Leigh Stevens   6/7/02,  12:10:58 PM
SECTOR Update: Software Index ($GSO.X) - This was one of 3 sectors that looked like they could have been bottoming, based on possible double bottom lows - Semi's and the Broker group being the others - these 2 have taken out their prior early-may lows. Not so with the software group, GSO, which, at today's low at 114.75 has held above its prior bottom (114.75). Software stocks are listed in SECTOR TRADER at Link The Broker sector index ($XBD) did stop going down today at low end of its daily downtrend channel (at 423.84) and is trading at some other technical support right now at 429.3 - close above this level would be a positive for at least a temporary bottom in the brokers - maybe Merrill will regain its credibility as it scrambles to make changes!

Picking up on Gold sector ($XAU.X) and Jeff's earlier comments, XAU is trading now under its March-May up trendline at 81.00 (last at 79.8) which suggests that a full-blown correction has finally hit this high-flying group.

 
 
  Jim Brown   6/7/02,  12:04:01 PM
Press Release I just caught this sound bite on the wires.


Come on Jeff, do your part!

 
 
  Jeff Bailey   6/7/02,  11:57:24 AM
Gold/Silver Index (XAU.X) $80.79 -3.45% ... Gold bulls should be looking for some sector support right in hear above the 80.00 level. This is mid-point of upward regression, and past relative high. If broken to downside, bull assesses risk to lower end of regression right with rising 50-day MA near $76.88. Link

 
 
  Jim Brown   6/7/02,  11:52:04 AM
Pivot Trade Signals
We are continuing to wander with a slightly higher trend. Still the markets did not exhibit the typical deep V rebound that you would have expected given the already oversold conditions from yesterday. Anybody short for the week should be covering now and it is not happening which indicates they are not convinced there will be a rebound. Bulls are not buying the dip in strength. Volume on the Nasdaq is only 770 million so far. The only conviction appears to be on the side of the bears but this can change as the day progresses. I don't like being flat here but the best advice is usually "when in doubt, sit out."

 
 
  Jonathan Levinson   6/7/02,  11:51:17 AM
This upswing has relieved the oversold readings on the COMPX intraday stochastics, and the market internals aren't as extreme as at and immediately following the open.

 
 
  Jeff Bailey   6/7/02,  11:51:09 AM
Bema Gold (AMEX:BGO) $1.35 (unch) .... still monitoring this "smaller" gold stock per earlier comments of 05/23/02 in market monitor. Stock did break below the $1.47 level. For me, this is my "pulse" stock on just how aggressive "gold bugs" are toward gold stocks. Thinking, based on observations over the years, is that these smaller gold stocks are the last to find bullishness in a secular bull market, but first to see weakness once a secular bull market play's out. Simply using the retracement outlined prior set at $2.75 to $0.19. This gave us 80.9% at $2.26, 61.8% at $1.77, 50% at $1.47, 38.2% at $1.16 and 19.1% at $0.67. Here's the Link to the 05/23/02 market monitor discussion on BGO and how a gold stock trader may be able to use with other gold stocks. (09:50:08, 02:07:03, 03:21:05). This may also give EVERY trader a technique for trade/position management as it relates to the use of retracement.

 
 
  Leigh Stevens   6/7/02,  11:48:52 AM
INDEX Comments: QQQ - If looking for reasons why NDX & QQQ have come up some from their lows, look at 5 Nasdaq stocks - here's a snapshot: Qualcomm (QCOM) had numerous recent daily lows in 30.15 area, creating a "line" of support there - this was taken out on the break this morning, but stock has rebounded to 31 at intraday high, last at 30.78. Action today continues its "basing" pattern; Cisco Systems (CSCO) - same deal - break this am took out recent line of support at 15.15, but CSCO rebounded above it and is back challanging its 50-day moving avg. right now in 15.65 area; Microsoft (MSFT) at 51.26 and low of 49.86 barely budged relative to other 4 Nasd biggies. Would trade unch on the day at 51.9. MSFT breakout would be on move above 53.2 - stock has approximate double bottom at this point;

Oracle (ORCL) will break out of its daily chart downtrend channel if stock trades above 8.70, especially on a closing basis - last at 8.46, low at 7.87; Intel (INTC) of course the weak sister of the group; stock has retraced more than 75% of its Sept to early-Feb. advance, which raises suspicion that it could retrace 100% and re-test its Sept. low in the 19 area. Based on look at first rally high off from Sept. lows, some technical support comes in at 21.8 and is around intraday 21.7 low today - so, key area going forward to watch is 21.7-21.8, going forward.

 
 
  Jeff Bailey   6/7/02,  11:42:30 AM
Gold/Silver Index (XAU.X) 80.82 -3.46% ... second only to Semiconductor Index (SOX.X) 434.60 -4.18% in sector declines. This has to be somewhat concerning to a bearish equity trader in broader market. Per 11:00 intraday update, Gold stocks usually perform better if there are problems. Yes, Gold has had nice move, but is this the top for gold and bottom for broader market?

We never know for sure, that's why a disciplined approach to trading is needed.

I didn't think my stop in CSCO at $15.50 would be triggered, so I set it there. However, the MARKET disagreed with that and took it out. OK, small gain for trader from earlier profile, but get the hint that something's up.

 
 
  Jeff Bailey   6/7/02,  11:34:24 AM
Cisco (CSCO) $15.75 +1.87% .... bearish traders should be stopped out of this one at lowered stop of $15.50 from this morning. I was trying to type up the 11:00 Update and didn't get it posted here at the time of trigger.

 
 
  Jonathan Levinson   6/7/02,  11:25:56 AM
Nasdaq internals are firming a bit, and the TRINQ has come down to 1.42. Most notably, QQV is down off its highs to 46.29 but still up over 2 on the day. This does not look like The Big Selloff to me- the monstrous fear and frantic selling isn't there.

 
 
  Jim Brown   6/7/02,  11:25:46 AM
Pivot Trade Signals
According to TrimTabs.com U.S. equity funds had outflows of $6.8 billion for the week ending on Wednesday. This is a huge amount of money and represents the very negative sentiment we have seen and investors going flat for the summer. The markets will have a hard time making upward progress with this type of outflow and the $8 billion of new offerings coming into the market. Billion here, billion there and pretty soon you have some serious money.

 
 
  Jim Brown   6/7/02,  11:13:27 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
As trading progresses I am becoming concerned about direction. The lack of a real bounce off of a severely oversold condition and a knee jerk drop on bad news, is bearish. The adv/dcl ratio is at .42 and dropping. It started the day in the low 20s and improved to better than .50. The new lows took a significant lead over new highs with 326 lows to only 38 highs. With this kind of very negative internals, which are not improving after a climatic selling drop, there is a strong possibility that the selling may not be over. Of course as I typed this update the Dow held 9500 again and is trending back up but I am not convinced. I think the best course of action for conservative investors is to watch the drama unfold from a flat position.

 
 
  Jim Brown   6/7/02,  11:01:52 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
Close the open OEX/SPX/DJX long here at 501. Update to follow.

 
 
  Jonathan Levinson   6/7/02,  11:01:05 AM
Gut feel. If we break 9450 this afternoon we could have a panic sell-off into the close.

There are probably a lot of guts feeling today (grin). It's tough to stay objective and not be overwhelmed with sympathy for all the participants on a day like today. But my own gut feel is the same as yours. I don't feel any strength in the charts, and would have expected more of a runup already. But then, XAU and the bond markets are confusing me, and so my gut is about the best indicator I have at the moment. Add to that the market breadth, declining vol/advancing vol 6:1, and new highs:new lows 1:21.5.

 
 
  Jeff Bailey   6/7/02,  10:56:39 AM
Intel (INTC) I would agree with Jim's 10:48:35 outline of a longer-term play. Stock has achieved a bearish vertical count on it's point and figure chart and represents what I consider a very attractive longer-term risk/reward play.

 
 
  Jim Brown   6/7/02,  10:48:35 AM
Trade Signals - Intel
With Intel at $22 and the economy improving this represents an excellent opportunity to make a low risk, long-term play. I would suggest the Jan-2004 $25 call leap at $4.40 or the Jan-2005 $25 call leap at $6.00. (You pay only $1.60 more but get an entire year of stock appreciation.) The Jan-2004 leap is down -$3.10 today on the $5 drop on Intel. This represents a strong buying opportunity! Computers are not going away and despite the upgrade cycle concerns I discussed in last Sunday's commentary Intel will be the survivor. $25 billion a year in revenue with 50% margins. Want real earnings with out funny accounting?

 
 
  Jeff Bailey   6/7/02,  10:46:34 AM
Technique Short-term traders. Some of the key sectors/stocks you follow, go ahead and set some alerts on your trading station undery this morning's lows and a little bit above today's highs. When done on various stocks, can help you get a feel for things as the session progresses. If they all start getting triggered (up or down) you really get a sense of strength/weakness on a near-term basis and will keep you alert.

If you're using q-charts, simply pull up a chart of a stock/sector you're following, "right click" your mouse inside the chart. You'll get a pulldown menu, then "left click" the (add alert) button. Then place the above/below level you want to monitor. I usually add about $0.05 on stocks to the high/low of the day and about $1 on sectors.

 
 
  Jeff Bailey   6/7/02,  10:42:30 AM
Getting some green on the screen YIELD move higher in the Treasury market looks to have stock firming and at best levels of the session. Sectors in the green are Banks ($BIX.X), Retail (RTH), Drugs (DRG.X), Oil Service (OSX.X), Forest/Paper (FPP.X), Home Construction (DJUSHB). All just fractional gains.

 
 
  Jeff Bailey   6/7/02,  10:39:39 AM
Treasury Watch YIELDs now green across the major maturities, only the 13-week ($IRX.X) 1.698% showing some buying. This is the note that most money market accounts are tied to and tracks the Fed Funds Rate rather closely. Fed Funds are 1.75%. This is the interest rate the the FOMC sets, not the market.

 
 
  Jeff Bailey   6/7/02,  10:35:25 AM
Hey Jeff- Talk about not being a rocket scientist....I decided late yesterday afternoon that maybe I was a little "too short" so I thought I should go long some QQQ"s at 29. Talk about brilliance, sometimes I amaze myself with it...

Hey, not so fast. If you bought some time and didn't go too far out the money, that's a very good risk/reward trade. I was reviewing the QQQ Sep. $30 calls (QAVID) from bullish profile for 1/2 bullish on 05/06/02 at $2.50. They're hanging tough at $1.60 and plenty of time until September. With NASDAQ-100 Bullish % ($BPNDX) Link at "oversold" levels of 24% as of last night, not a bad idea. If you were feeling a "little short" then you've probably done OK this morning.

disclosure... I currently hold bullish position in QQQ.

 
 
  Jim Brown   6/7/02,  10:32:35 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
We were triggered on the OEX/SPX/DJX long at 10:28:24 when the OEX traded above 503. (SPX 1019 est) The initial stop loss will be OEX 498.50. This is wider than normal but may prevent us from being thrown out on the high volatility. This is the low of the day.

 
 
  Jonathan Levinson   6/7/02,  10:32:00 AM
Breadth improving, declining volume over advancing volume 5:1, TRINQ at 2.01 and QQV staying up 2.48 as the COMPX prints its high of the day and the QQQ fights with resistance at 28.

 
 
  Jim Brown   6/7/02,  10:27:16 AM
Pivot Trade Signals
Using the OEX/SPX/DJX signal at 503 this would be a good time for those who like to play the DJX to take a position. This is a very oversold level on the Dow and considering the risk/reward the DJX could be the best play.

 
 
  Leigh Stevens   6/7/02,  10:27:15 AM
INDEXES: TRADE Recommendation - UPDATE: on QQQ rec I made recently in QQQ, filled at 29.25 with original stop at 28.50 - I suggested in my Index wrap last night to lower stop to 27.50 temporarily to stay out of the way of this bear express - would leave stop at 27.50 and see if Q's stabalize & hold intraday low at 27.52. If this morning's downside gap is filled over coming days by move back up to 28.63, will suggest raising stop again.

 
 
  Jonathan Levinson   6/7/02,  10:26:22 AM
XAU down .91 to 82.82 as I type. This does nothing to violate its upward channel, but is not action I would have predicted on such a negative day for the equity markets.

 
 
  Jeff Bailey   6/7/02,  10:23:40 AM
Smurfit-Stone Container (SSCC) $16.47 +0.06%. Day trader bull. This is forest/paper stock. Trading right at lower end of upward regression. I like full position day-trade bull here at the market, stop $15.99, target $17.38.

 
 
  Jeff Bailey   6/7/02,  10:19:57 AM
5-year Treasury YIELD ($FVX.X) 4.286% ... marginal selling now beeing seen in the short-end of the Treasury. This is further surprise to me. Usually, in time of more concern, the shorter-end usually sees bulk of buying at is is "less risky" than the 10-year and 30-year. Link

Once again, bearish equity trader takes note and undestands importance of locking in some gains at targets or at least snugging down some stops in profitable bearish equity trades.

 
 
  Jim Brown   6/7/02,  10:18:16 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Let's try this one more time. Go LONG the OEX/SPX/DJX with an OEX trade over 503 (SPX 1020), which is slightly over the last relative high.

 
 
  Jeff Bailey   6/7/02,  10:12:49 AM
Forest Paper Products (FPP.X) 354.31 +0.01% ... a little bit of green showing here. A "deeper cyclical" sector showing some relative strength.

 
 
  Jeff Bailey   6/7/02,  10:10:47 AM
Sector Watch All sectors in the red, except for the Gold/Silver Index (XAU.X) 84.21 +0.57% .... this is interesting. Might have thought this sector would have seen more buying if market was really concerned about U.S. Dollar, economic collapse.

Broader market equity bear takes notes and further solidify thought of locking in gains if bearish target is achieved.

 
 
  Jonathan Levinson   6/7/02,  10:02:38 AM
Bad Breadth on the COMPX, declining volume beating advancing volume over 9:1.

 
 
  Jeff Bailey   6/7/02,  10:02:34 AM
QQQ $27.63 -4.29% ... Will make note here that stock is trading right at/near the lower end of downward regression. QQQ has violated this downward trend by about $1 in past tests of trend. Sept. low of $27.20 not far away. Would expect MARKET to let it undercut that low and see what kind of selling takes place. Get a sense of capitulation.

Disclosure, I currently hold a bullish position in the QQQ.

 
 
  Jim Brown   6/7/02,  10:02:33 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
That was exciting! We were triggered on the stop loss for the OEX/SPX/DJX signal at 9:56:02 when the OEX traded below 499.50. We attempted to buy the oversold dip and it failed. We will now sit on the sidelines for a few minutes and watch the drama unfold. If 9500 is really going to fail then the next strong support is not until 9050, give or take a few points. We may waffle here at the 9500 level as market pressures equalize and then establish a direction. My bias is still a bounce and the next signal will likely be another LONG if conditions approve

 
 
  Leigh Stevens   6/7/02,  10:01:28 AM
INDEX Comments: CBOE Volatility Index, VIX ($VIX.X) , based on the S&P 100 (OEX) has been as high as 29.94, with last at 29.68 - intraday high equals peak of late-January. VXN ($VXN.X), volatility index on Nas 100 hitting a new high for this year - 53.28 intraday high, last at 52.94; This answers the question of not having the kind of high volatility that is associated with capitualation and a tradable bottom.

 
 
  Jeff Bailey   6/7/02,  9:58:39 AM
Intel (INTC) $22.00 -18% .... would move to the sidelines here in any bullish position on the underlying stock. Will make mental note that stock has achieved bearish vertical count. Link

 
 
  Jeff Bailey   6/7/02,  9:52:22 AM
RF Micro Devices (RFMD) $10.60 -30% .... If short/put, would lock in some gains on this morning's gap lower. Wish I had seen this chart and sell signal at $15.50 last couple of sessions. Link

Would have made a very good "like hedge" to a INTC long going into the mid-quarter update. Yes, rear view mirror, but taking notes as it relates to trading strategy and account/risk management.

 
 
  Jim Brown   6/7/02,  9:49:56 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
We were triggered on the LONG signal at 9:43:32 when the OEX traded above 502 (SPX 1018) We are going to put a tight stop on this signal in case Dow 9500 does not hold. The initial stop loss will be an OEX trade under 499.50 on the OEX. (SPX 1014 est) This is a high risk signal and a bet on an immediate bounce from these oversold conditions.

 
 
  Jonathan Levinson   6/7/02,  9:47:33 AM
The COMPX is going to have trouble taking direction here, with bulls guessing that the gap down was overdone and bears targeting the September lows and beyond.

 
 
  Jeff Bailey   6/7/02,  9:43:50 AM
Treasury Watch 10-year YIELD ($TNX.X) 4.987% seeing marginal buying here and not the sharper drop lower in YIELD I would have thought for such a negative reaction to stocks. This hints market isn't in "panic" mode. I would have thought bonds would have seen strong buying today.

Bears need to take note here and place greater emphasis on locking in some gains in bearish equity trades if targets are achieved.

 
 
  Leigh Stevens   6/7/02,  9:43:50 AM
INDEX Comments: QQQ seems to have support about where I would have expected in 27.50 area - big downside gap now, between yesterday's low at 28.63 and high of day, so far, at 27.99. Agree with Jim that we may at or near a final "capitulation" - gaps like this after a long decline sometimes turn out to be "exhaustion" gaps. Time will tell. Meanwhile, only sector plus on the day is the metals - XAU is up 1.5% - easy to see why gold is considered to be a "hedge".

 
 
  Jim Brown   6/7/02,  9:42:17 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Out of the frying pan and into the fire. With the Dow pausing at 9500 we want to attempt to capture any bounce from this level. Go LONG the OEX/SPX/DJX with an OEX trade above 502.

 
 
  Jonathan Levinson   6/7/02,  9:39:13 AM
I am short MRVL (23.57) and EBAY (54.66). Do you have any suggestions on how to play them today? Obviously, I am in good position. I guess the question is whether to take the quick profit on the gap down or wait for a further drop? These were designed as short term trades.

PS While I do not like to see the market go down, at least I am on the right side of the gap!

I agree with Jeff's email comments. Respect your targets previously set. As well, I agree with your comments. Remember that in a seriously down market, it's the shorts and bears who provide the critical buying. The market ultimately benefits from all its participants.

 
 
  Jeff Bailey   6/7/02,  9:39:13 AM
Intel (INTC) $22.50 -15.48% ... did see one block of 11,000+ trade at $22.25. Tick at $22.21 was corrected as "bad tick." For those that are actually monitoring their trade on a minute basis, still holding long if you "self-direct" your stops (at least most traders do). However, if you place stops directily with broker, then may have gotten grouped at the $22.50 level. Will continue to follow INTC for traders as if long INTC and not stopped.

Disclosure, I currenlty hold a bullish position in INTC.

 
 
  Jeff Bailey   6/7/02,  9:34:05 AM
Intel (INTC $22.40 -17.4% ... I have had retracement from $36.80 to $18.96. Will note stock opened right near 19.1% retracement of $22.36. Thus stop at $22.25, just under that level.

 
 
  Jeff Bailey   6/7/02,  9:30:54 AM
Cisco Systems (CSCO) $15.46 .... stock trading down at $14.85. Trader holding a bearish position can lower stop to $15.50 to remove risk from previous bearish profile near $16. Near-term target for trader would be $14.

 
 
  Jeff Bailey   6/7/02,  9:28:36 AM
CIENA (CIEN) $5.03 .... stock trading $4.95 in pre-market action. If short/put from past bearish profile near $7.00, would lower a stop to $5.05. Will need gains here to potentially offset a loss in INTC.

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

 
 
  Leigh Stevens   6/7/02,  9:25:17 AM
Pre-Opening INDEX Comments - Nas Composite (COMP) looks to open down in low-1500 area, down maybe 50 from its 1554 close. This takes COMP well under low end of its hourly downtrend channel, which comes in around 1517 based on recent trading - looks like there will be many trendlines to redraw.

 
 
  Jeff Bailey   6/7/02,  9:24:50 AM
Intel (INTC) $27.00 ... stock is most actively traded at $22.49 in pre-market. My profiled stop at $25.00 will see the stock gap below that level. What I would suggest traders do is place a stop at $22.25 here. This will at least give the bullish trader a chance to see if the stock can't recover from the opening tick. We will also remember that the bearish vertical count from the point and figure chart was $22.00, and pre-market trading is close to that level here.

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

 
 
  Jim Brown   6/7/02,  9:24:23 AM
Pivot Trade Signals
Bearish sentiment gone bad! The Intel news was not that bad, at least on the surface. However the market is over reacting again, which could be good despite or current long plays. This is the type of event that can cause real capitulation. A real wash out in stocks leading to a real bottom. I am sure most investors at this point would trade a couple busted plays to know that the worst was over.

The current open signals are:
LONG OEX/SPX/DJX with a stop at Dow 9545.
LONG DJX 98 Call signal with a stop on a Dow print under 9500.
LONG Intel June $27.50 call @ $1.05, no stop.

The OEX stop should be hit at the open. Close immediately if not.
The DJX call may escape with the 9500 stop but I would close it at the open also.
The Intel call will have no value with Intel trading -$5 from yesterday's close. This was a lottery play and our number was not drawn.

We took a chance that the extreme bearish sentiment on Intel was overdone and the markets would hold critical support at 9600/1550 and rally without any bad news. The news went against us and as I said yesterday we must now take our lumps. The only bright spot is the possibility of this event producing the climatic bottom everyone has been looking for. It is not going to be a fun open but that is the risk we take as investors in a bear market.

 
 
  Jonathan Levinson   6/7/02,  9:22:53 AM
The markets could gap and dive, but I'm expecting a technical bounce at some point. I will take any such bounce as a gift with which to add some puts on a rollover.

 
 
  Jonathan Levinson   6/7/02,  9:16:14 AM
Can you give me your views on CD. Does it really look like a technical nightmare for Longs?

Daily stochastics is oversold, but MacD is diverging deeper and pointed south, with price action pushing the falling bottom bollinger band. It looks technically bearish to me.

 
 
  Jonathan Levinson   6/7/02,  9:01:18 AM
Nasdaq-100 Bullish Percent Index ($BPNDX) closed in oversold territory at 24, and the Nasdaq-100 Volatility Index added 1.77 to close at 43.86, entering neutral territory from its previous complacency zone. Keep in mind that the BPNDX touched 1.0, as in only one stock was on a buy signal, on 9/21/2001. There is plenty of room for the market to become more oversold, as today's open will prove. Unless you are very confident, I would not recommend blindly trying to catch falling knives. I intend to watch carefully, and to enter carefully or not at all. Leigh's market wrap contained the only good analysis and discussion of s/r levels I've seen last night or today, and a print out of it belongs next to your screen today.

 
 
  Leigh Stevens   6/7/02,  9:01:05 AM
Pre-Opening, Stock INDEXES - A not so Good Morning for stock holders! Index Futures trading: Currently, S&P futures are off 16 pts, at 1013; DJ futures are down 125.00 at 9505.00; Dow stock Intel having a big impact of course - INTC trading down about 4.5 at 22.45 currently, down from its 27.00 close last night; Nas 100 contract, -52.00 at 1111.500

 
 
  Jeff Bailey   6/7/02,  8:52:25 AM
S&P futures (sp02m) 1,013 -16.5 points. Stocks are going to be very weak at the open.

 
 

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