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  Jim Brown   6/10/02,  4:53:21 PM
Pivot Trade Wrap

After two attempts to hit our initial entry point of 512, with one falling only a penny short, the end of day climax buying attempt finally pushed the OEX to a high of 513.10. We were already in the short trade when we entered on a dip to 510.50 at 1:54 PM. This made the end of day buying spurt and reversal a strong confirmation of our outlook.

The upper end of the downtrend channel since May-24th was 509.60 at the close and continues to provide resistance for the OEX. This corresponds with the 1031 level on the SPX. The bounce off the Friday lows of 498.50 culminated with the 513.10 high at 3:PM today. This 15 point range represents a penetration of the bottom of the channel followed by a penetration of the top of the channel in only two days. This oscillation from oversold to overbought defines the current market cycle perfectly. There is simply no conviction on the part of the bulls and while traders continue to buy the dips investors are still absent.

We are in the middle of warning season for the 2Q and tech stocks are running scared. Investors are still dumping them in fear of the next warning. Intel held the Friday lows most of the day but crashed just before the close to $21.06. This may be a prediction of things to come. There was positive news today in the market place, except for Tyco, and the markets barely managed to advance on light volume. Beware market rebounds on light volume!

We closed the day SHORT the OEX/SPX/DJX with an entry point at 510.50 and the OEX at 508.97 and trending down. The stop loss was 515.50 but will be adjusted down before the open on Tuesday. See you at 9:15 !

  Leigh Stevens   6/10/02,  4:11:23 PM
Subscriber QUESTION: "Questions regard Fibonacci retracement levels. You mention them in ur book. So now I am curious...Can you "use" them between ANY high and low separated by a few bars (the bars being 1 min, weekly or whatever)? Or is it better to use them on, say, a high made x days ago (if using daily bars) that has not been surpassed? Is there an optimum number for "x"? (must be greater than 2 for example). Does a fib retracement level, once passed as resistance, become support ?"

RESPONSE: 1.) Use between any swing high & swing low - the bigger the price swing, the more significant; the bigger the time frame, the more significant; e.g., hourly price swing is more significant than 5 min.; daily price swing more significant than hourly; weekly, more sig. than daily. 2.) Any prior swing high, once pierced, tends to "become" support; - any prior swing low, once pierced, tends to become resistance on a rebound.; - It is not so much the Fib. line as it is the top/bottom of the price swing.

  Leigh Stevens   6/10/02,  3:55:53 PM
INDEX Comments: Nasdaq - - We're now looking at a test of the (next) lower support levels - Nasdaq Composite (COMP) Support > - 1528, then 1505-1500 Nas 100 (NDX) Support > 1120 QQQ: Support > 28, then 27.7

  Jim Brown   6/10/02,  3:52:36 PM
Pivot Trade Signals
Investors should be aware of the drop in INTC this afternoon. The bottom has fallen out. This is possibly do to the CFO's scheduled speech at the CSFB conference tomorrow. Just a guess but look at an intraday chart of INTC!!

  Jeff Bailey   6/10/02,  3:50:59 PM
Cisco Systems (CSCO) $15.50 -1.46% ... stock has traded "heavy" all session. Another "techy" that just doesn't look like too many buyers are interested. Still looks short/put again for short-term trader.

  Jonathan Levinson   6/10/02,  3:45:24 PM
Cautious bears can cover their short trade here from the 1550 area this morning and lock in 19 points of profit on the COMPX. With the COMPX low of the day printing as I type, further downside looks likely, however.

  Jeff Bailey   6/10/02,  3:43:20 PM
NASDAQ-100 Bullish % ($BPNDX) is my "key" indicator of "risk" for QQQ. Trader's will note similar levels at 20% that were found in early May, just before short-covering rally to $33.63 through 05/15/02. Not sure, but I don't think many new signals generated today with such tight trading. Link

  Jonathan Levinson   6/10/02,  3:41:52 PM
TRINQ 1.38, $QQV flat, up a mere .02 and rubbing its eyes sleepily.

  Leigh Stevens   6/10/02,  3:41:26 PM
Subscriber NOTE: "Leigh, I've seen you banter this H&S stuff around twice now and I thought you may indicate it (chart - not shown) for what it is. It's a bear cup and handle."

RESPONSE: There is no general recognition in the technical analysis "world" (so to speak) for the Cup & Handle formation, so its not one that I have given a lot of attention to - William O'Neil (How to Make Money in Stocks) popularized this formation. Thomas Bulkowski, in the Encyclopedia of Chart Patterns, studied the pattern based on the criteria that O'Neil laid out. He found that the pattern was relatively rare and that the "failure" rate was an unacceptably high 26% (in his estimation - he looks for a failure rate of 20% or less) - however, he makes the point that if you wait for an upside breakout the failure rate is far less - he (Bulkowski) makes no mention of a "Cup and Handle" top formation; I don't know if O'Neil describes this "reverse" pattern.

Your point, as I understand it, is that a break of the "bottom" line of an (upside down) cup, in the 1000 area, implies then a substantial move lower; e.g., to 600 or lower. Lets go back to the idea that the projected move is "confirmed" by a break of the trendline at 1000; i.e., the top of the "cup". SPX closed last week at 1027.5 and I would agree that a weekly close under 1000 would suggest the possibility of a further down leg. The Cup & Handle bearish formation needs to be "confirmed" in other words.

It is the same with the Head & Shoulders (H&S) bottom that may have formed basis the weekly S&P chart - the bottom pattern is not "confirmed" unless the H&S "neckline" was penetrated to the upside - currently, the implied neckline intersects substantially higher, in the 1130 area - such a move may or may not happen. However, as the "failure" rate of the H&S bottom pattern is relatively low, I currently favor the idea that the market, in terms of the S&P, is putting in a bottom. However, as described, this pattern has not yet shown "confirmation" - time will tell.

  Jeff Bailey   6/10/02,  3:38:24 PM
Hello Jeff, Can you please share your thoughts on QQQ for short term trade with price objectives?

QQQ don't interest me much near-term. Nice little "inside day" for tomorrow setup. Could enter short here, stop above $28.79 (yesterday's high) then target $27.52. Risk is running higher for bears in here, so only willing to trade rather short-term. No technology leadership that bulls can draw from and GSTI Software Index (GSO.X) really went flat at 120 and couldn't even muster the 122 level, which might have sparked some short-covering. Bear's worst enemy in here is other bear's covering, not bulls buying.

Disclosure... I currently hold a bullish position in the QQQ. Sep. 30 calls to be exact.

  Jeff Bailey   6/10/02,  3:27:15 PM
Micron Technology (MU) $21.58 -2.52% ... may be a bearish play here. Mentioned this one as potential "straddle/strangle" ahead of Intel's (INTC) mid-quarter update. Per 03:00 EST Intraday update, may want to keep an eye on this one tomorrow. Today is "inside day" and would look to play the July $20 puts (MUSD) $1.35 on break below today's "inside day". No stop, target $16.50 prior to expiration.

  Jonathan Levinson   6/10/02,  3:21:59 PM
Your info about advance/decline etc. is very helpful to those of us who are multi-tasking as we keep one eye on the market. Any posts on Market Monitor keeping us up to date with your thoughts as to what market actions are showing would be greatly appreciated. (Like, is this rally for real?)

Other than new lows beating new highs, market breadth in terms of advancing volume and number of advancers is slightly positive. The TRINQ is just below 1, and the QQV is down almost .5. More importantly at the moment, all intraday stochastics have been buried in overbought and are starting to cross back down. Since your email arrived, the COMPX has declined by 3 points. I believe that the 1550-1555 resistance level will hold today. However, the daily stochastics is pointing up from oversold, and this down move could just be a dip to relieve some of the overbought condition before making a run at 1550 again. Best to respect the stops you set this morning and be ready in case the bulls have an ace up their sleeve.

  Jim Brown   6/10/02,  3:20:37 PM
Hi Jim. I just wanted to say I think you and the rest of the guys are doing an amazing job. I think that value for money, Option Investor has no one even close.

What I like about the service you provide is the EDUCATIONAL factor. Anyone can give buy/sell indicators and thousands of other websites do. Very few explain their “calls” (decisions). I’ve lost more money than I would like to think about in the last 18 months and only recently have I realized that I (!) am responsible for both my profits and my losses. I remind myself every day about why we have Stop losses, why human emotion must be put away, why saving your capital is so much more important than making a profit. The market needs to be respected because it can bring you to your knees. Sometimes it takes a lot of financial pain to realize.

The past 18 months could have been very profitable had I just listened to your “trading rules”. I’ve thrown emotion out of the window, and am determined to make this work. We all know there are no guarantees – if it was, everyone would be a trader. Rather, you take calculated risks and reap the benefits.

Should you change your service? Not one bit. The market monitor is one of the best additions you’ve made to your website. Those who question the decision making process of OI – they may want to simply consider not trading. No one is forced to trade.
Thanks and keep it up!
Shawn, (a huge fan in Canada)

Shawn, I singled out your email from the hundreds I received as a representative example. A few were more critical, most were much more thankful. Thankful, because of the education process. Individuals come and go at OIN but the main focus is always "teaching you how to fish." Jeff could easily just say short ROOM instead of EXPE but by understanding the reasons behind the trade it enables traders to make that decision on their own next time. Leigh is becoming a full time TA teacher with dozens of technical questions each day. Some wondering what the difference is between an H&S or inverted cup and handle, or why a 14 DMA is better than ????? (your favorite indicator here) We will continue giving you the reason and not just the signal and hope that your profits reflect this education.

  Leigh Stevens   6/10/02,  2:05:37 PM
Subscriber QUESTION: "Leigh, First I must say I have been a member for 3 years with limited success. I have understood more lately reading your letter and understanding more all the time. So although I am not making a ton of money I feel better about trading. I was watching an analyst and he mention that 1450 on the NAZ was the long term uptrend line and as long as we didn't break that we would be ready for the bounce. I have tried to find a chart that I could read, but I cant draw the lines to support his theory can you? "

RESPONSE: Actually, a long-term weekly chart trendline intersects currently around 1115 - at least the way I drew the 1994-2002 up trendline on the weekly bar chart - 1115 of course is quite close to the low of last week in the Nas 100 (1106.61). You can have a little variation in the "angle" and how exactly you draw a trendline of that duration - also, it may be that the analyst in question have been using a close-only "line" chart and they might be talking about 1150 on a closing basis.

You have to have charts that go back far enough of course. Once a trendline is constructed, its useful to then also look to see if the area of intersection of the trendline ALSO might correspond to other technical price points that might also suggest support in this area. We have this with the Nasdaq 100 (NDX) in that 1114-1115 is in the area of weekly lows in Sept-Oct 1998 (last correction before NDX took off to the moon), and is also the area of a "line" of prior weekly highs in the August - Oct. 1997 period.

  Jim Brown   6/10/02,  2:03:23 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
We were triggered on the OEX/SPX/DJX SHORT at 13:53:48 when the OEX traded below our entry point of 510.50. (SPX 1033.25 est) This roll over was right at the top of the down trend channel from May-24th. I am going to set the initial stop loss at 515.50 (SPX 1040.50) which is just above the 11:AM high from last Thursday. This is a wider stop than we normally use but technically this is a pretty good entry (right near the top of the channel) and I don't want to get knocked out on any last "climax" bounce this afternoon.

  Jim Brown   6/10/02,  1:44:00 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Go SHORT the OEX/SPX/DJX if the OEX trades below 510.50. (SPX 1033.50 est) Since the OEX appears to be topping let's take and entry on a drop as well.

  Leigh Stevens   6/10/02,  1:43:54 PM
Subscriber QUESTION: "Just prior to the last three options expiry Friday's the Daily 14 period stochastic for the QQQ's peaked in over bought territory. In other words, the market is run up into expiry to cause maximum pain to option holders. Right after expiry the market is allowed to drop.Looks to me that Daily stochastic is ready to turn up with prices into June 21 before we see the final capitulation phase of this downturn. The January 18 expiry was different in that prices went down prior to expiry. This was because we were in an uptrend prior to this date so max pain would have been to "call" buyers. Any thoughts?"

RESPONSE: Well, the last two times that the 14-day slow stochastic got fully oversold and went from fully oversold to fully overbought - from low to high was 10-11 trading days in the first instance and 8-9 trading days in the second. On 6/5, an upside crossover was generated in the same stochastic model. From 6/5 through 6/20 would be 11 trading days. From the price low on 6/7, thru 6/20, would be 9 trading days. It would be my guess also that we run up into expiration. Time will tell!

  Jim Brown   6/10/02,  1:41:41 PM
Pivot Trade Signals
Close but not quite! The OEX just keeps hovering between 511-512 and has come within 14 cents of triggering our SHORT entry. The Dow is struggling valiantly to get back to 9700. The same story with the Nasdaq, it just can't seem to hit that 1550 resistance level. This is good news for us if our signal is hit since it means strong gains over those levels could be really hard to make. The waiting is stressful because I am sure everybody is thinking it may roll over here and miss our entry point by just a few cents. I know I am! Many times there is the "climax" bounce just before the reversal appears. I am hoping that is the case today. I am going to put in a bottom trigger as well to keep us from missing any rollover from here.

  Leigh Stevens   6/10/02,  1:32:41 PM
INDEX Update: Support & Resistance - Nasdaq Composite (COMP) Support > 1529-1530, then 1500-1505 - Resistance > 1554-1555, then 1575; Nas 100 (NDX) Support > 1131-1132, the 1120 - Resistance > 1154-1155, then 1170-1172; QQQ: Support > 28, then 27.7 - Resistance > 28.8-29, then 29.3-29.4

  Leigh Stevens   6/10/02,  1:24:21 PM
INDEX Update: Support & Resistance - S&P 500 (SPX) Support > 1025, then 1012-1013 - Resistance > 1050, then 1055-1056; S&P 100 (OEX) Support >505-506, then 500 - Resistance > 514-515, then 520; DJX: Support > 95-96 - Resistance > 97.3, then 98

  Jonathan Levinson   6/10/02,  12:51:02 PM
Market Breadth is improving for the bulls, with advancing volume beating declining by 418,509,408 to 387,386,208 as I type. TRINQ is holding steady at 1.1, and QQV is at 46.06, up .54 on the day.

  Jonathan Levinson   6/10/02,  12:16:28 PM
for a trade---watch XAU support at 75? glad I took profits Wed. believe in gold for longterm, but know it needs to consolidate here. waiting patiently for new entry. Thanks! Denise in Phoenix

I intend to watch XAU for support at 75 before considering easing back in, but will also want to see the MACD reversing its decline and stochastics crossing up in oversold territory.

  Jonathan Levinson   6/10/02,  12:06:46 PM
Don't forget about HUMILITY!

Good one! But then, that one I didn't need the market to teach me (grin).

  Leigh Stevens   6/10/02,  11:55:35 AM
Subscriber QUESTION: "Correct me if I am wrong, but do you see a GIANT Head and Shoulders pattern for the S&P 500 if you look at the monthly chart (like I do) starting in 1998? Based on this, what do you think it "could" drop to? It seems similar to a Nasdaq Head and Shoulders if you look at the weekly chart since 98."

RESPONSE: The problem with this assessment re the 1998-2002 SPX weekly chart is that it does not fit the criteria for a Head & Shoulders (H&S) pattern. If you're interested would refer you to 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 already. If the 1998-2002 SPX chart pattern was an outline of a person, you would see an elephant head in relationship to human size shoulders. The pattern is not akin to the proportions of a person's "head" in relation to their "shoulders".

There are definitions to technical patterns and the one you describe does not fit the definition of a H&S pattern in terms of shape and time (duration of H&S is weeks/months, not years) - pattern does have has a similar symmetry but that is all. I would use a semi-log scale for this chart. We've had a 50% retracement (log scale) of the 1994-'2000 advance, a fairly "normal" correction in the scheme of things.

  Jonathan Levinson   6/10/02,  11:50:45 AM
Almost off-topic: I love trading because it achieves such a close metaphoric proximity to life itself. It's all about choices given the prevailing conditions at the time. One enters a position at the time of one's choosing and then accepts the consequences and acts from there. The lessons that trading teaches are of wide application beyond trading, and include patience, courage, decisiveness, and above all, self-knowledge.

  Jonathan Levinson   6/10/02,  11:34:17 AM
Declining volume has just crept ahead of advancing volume, ditto for the number of issues. TRINQ is mellow at 1.02, and QQV is up by 1.08 on the day.

  Leigh Stevens   6/10/02,  11:16:26 AM
INDEXES: SECTOR TRADE Recommendation - UPDATE: IJS, the iShares of the S&P 600, Value segment opened at 90.90, is last at 90.74 - will assume a fill at 90.90; the Growth iShares of the S&P 600 small cap opened at 74.85 and is last at 75.40 - will assume fill at open; the iShares of the Russell 2000 opened at 93.80, last at 94.04.

  Jonathan Levinson   6/10/02,  11:00:55 AM
Up volume slightly ahead of down volume, as is the number of advancers over number of deliners. Only new lows are exceeding new highs, 59 to 40. TRINQ at .77 now and $QQV is up .75 to 46.27.

  Jonathan Levinson   6/10/02,  10:34:35 AM
Hi, Jonathan, I've just recently begun watching $TRIN and $TRINQ. Can you give some ranges for bearish/neutral/bullish values for these indicators? For example, if the $TRINQ gets low enough, is that actually a bearish contrarian indicator?

The $TRINQ is the Nasdaq advance/decline ratio divided by the advance volume/decline volume ratio:

((Advancing issues/declining issues) / (advancing volume/declining volume))

The TRINQ is best understood by experience. Below .50 I consider it to be headed for overbought, above 1 to 1.5 I consider to be heading for oversold, and .5 to 1 is neutral. Different traders use it differently, but that's what it tells me. Kind of like an "oil pressure" gauge for realtime market breadth.

  Jeff Bailey   6/10/02,  10:31:12 AM
Biotech Index (BTK.X) 370.67 +2.42% .... sector leader this morning. Technicals show index bouncing from lower end of downward regression. Mid-point of regression is $400, so could see a near-term rally from weak sector in NASDAQ.

  Jeff Bailey   6/10/02,  10:21:43 AM
Omnicom (OMC) $76.58 +5.35% ... Wall Street Journal reporting that a longstanding director and audit committee chairman of the advertising company quit the board after expressing concerns about the creation of an entity that houses Omnicom's Internet assets, citing people familiar with the matter. OMC disclosed the resignation on Wednesday in a securities filing.

In a separate note, Morgan Stanley upgraded OMC to "overweight" from "equal-weight" this morning. Link

Personally... I'd look to lock in some gains on short/put position here, then look to "overweight" a put on any rally near $84.

  Jonathan Levinson   6/10/02,  10:21:30 AM
Looks like a rollover to me on the COMPX. Can go short here, with a stop overhead at 1560 or less. Set it tight- no need to lose money on this.

  Jonathan Levinson   6/10/02,  10:18:38 AM
$TRINQ at .36.

  Jonathan Levinson   6/10/02,  10:15:49 AM
$TRINQ down to .47 on this move. Still room to run. Watching COMPX 1550-1555 area for a rollover.

  Jim Brown   6/10/02,  10:12:21 AM
Pivot Trade Signals
The markets are trading in a narrow range this morning. The OEX is building a wedge with the bottom around 506.60 and the top just above 508. Once this wedge breaks the real market direction will appear. There is a bullish undertone despite the various warnings and news stories this morning. There is still no conviction and any move up into the 510-514 resistance area could be met with the expected roll over. We are in the "enter passively" mode this morning and will wait for the markets to come to us.

  Jeff Bailey   6/10/02,  10:06:45 AM
Arris Group (ARRS) $6.41 +0.15% ... Announces that it has filed a prospectus for the sale of 15 million shares of ARRS Link common stock by Nortel (NYSE:NT) $1.73 +5.48% Link . None of the proceeds will be received by ARRS. On Friday, NT filed to sell a total of 21 million ARRS shares.

  Jim Brown   6/10/02,  10:05:50 AM
Pivot Trade Signals
I am embarrassed to tell you what one of the most frequent comments was this weekend. I was taken to task for not following my own advice in a very choppy market. "Enter very passively, exit aggressively" Touche! I admit when manning this console the urge is very strong to trade every trend. This "overtrading" is a subtle trap for everyone that has sit in this chair. Four years ago I fell into the trap in a previous product called the "Trading Pit", Austin Tanner fell into it in the OEXSkybox and Austin Passamonte in the IndexSkybox. I have come full circle again.

The urge to over trade is prompted by the constant barrage of emails complaining about every missed move AND the urge to produce profits for everyone. I call myself a "news and event" trader and it does not bother me to sit out of the market for days at a time waiting for the next entry point. How many readers would still frequent this space with only one or two trades recommended every week is unknown. It is one thing to ASK for ONLY the best entry points and then be faced with no trades for sometimes several days in a row may make many traders rethink their request. Granted the number of winning plays would increase but the number of plays would drastically decrease.

To combat these overtrade/undertrade extremes I am considering a couple levels of trade signals. One level will be the "enter passively" signal where only those "strong" signals are issued. The other will be more of the gunslinger style where reaction times are much quicker with much more risk. More to follow.

  Leigh Stevens   6/10/02,  10:02:59 AM
INDEX Comments: ALL indices look pretty much the same on the hourly charts - like they're going to roll over here to the downside. Looks like some corrective action after the sharp rebounds from Friday's intraday lows. Short-term (5-hour) stochastic is on downside crossover.

Am staying long QQQ, and holding a stop at 27.5, looking for a more sustained rally at some point. Near-term, expect some backing & filling.

  Jonathan Levinson   6/10/02,  9:59:35 AM
Seeing a divergence between Nasdaq-100 Volatility as measured by the $QQV, currently up 1.38 to 46.9, and the QQQ, which is basically flat and rangebound for the moment. It looks like Friday's action and the lack of meaningful rebound has option traders demanding a higher premium to cover what they perceive to be higher levels of risk.

  Jeff Bailey   6/10/02,  9:56:55 AM
TVX Gold (NYSE:TVX) $1.02 -2.85% .... halted trading .... news pending. Link

  Jeff Bailey   6/10/02,  9:54:37 AM
Kinross Gold (AMEX:KGC) $2.28 -11.28% .... halted for trading... news pending. Link

Perhpas one of those "smaller" gold stocks to keep an eye on for "pulse" of aggressiveness or lack thereof in gold sector. As mentioned for shares of Bema Gold (AMEX:BGO) $1.13 -12.5% a couple of weeks ago. Link

  Jonathan Levinson   6/10/02,  9:46:30 AM
Looking under the hood 15 minutes after the open, market breadth shows roughly equal numbers of advancers and decliners, as well as volume. $TRINQ at .89 is also in a "neutral" zone.

  Jeff Bailey   6/10/02,  9:37:21 AM
Expedia (EXPE) $69.41 -0.97% ... jeff what are your thoughts on puts for room and expe? room hit 200 day average aND BOUNCED on short covering. expe still high in second channel. to late or to early for puts?

EXPE has given 3 consecutive "sell signals" on its point/figure chart without giving a buy signal and stock is starting to look like its is seeing greater distribution. Recent "bid" for remaining shares from USAI didn't come at much of a premium, thus has me and perhaps some market participants wondering if stock hasn't achieved "full value." I still think it is "early" for a put play in EXPE and therefor, would be looking put, but just 1/2 position as stock remains in upward trend. Recent "sell signal" at $71 was "spread triple-bottom." Link

ROOM $46.66 -0.84% ... Looks to be the "better short/put" as this stock HAS broken upward trend, and it too has given the "triple-bottom sell signal" at $47. Here I'd be comfortable with full position put/short. Stop on the underlying would be just above at $53. Bearish vertical count is $34. Link

  Jonathan Levinson   6/10/02,  9:33:41 AM
Precious Metals got whacked last week, and the chart on the Gold and Silver Index ($XAU) tells the story more eloquently than I can. Gold bugs tend to be well-accustomed to punishment, but with the substantial gains from the XAU lately this type of reversal hardly qualifies for that title. I'm expecting the selling to continue in the short term, but remain entirely bullish on precious metals. Bollinger band support should be at just above 75 XAU, but we will continue to watch carefully.

Disclosure: I am long precious metals through a precious metals mutual fund.

  Jim Brown   6/10/02,  9:31:53 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Go SHORT the OEX/SPX/DJX if the OEX trades above 512 (SPX 1034 est). This represents the midpoint of the OEX resistance of 510-514 and would be a likely pivot point on any bounce.

  Jeff Bailey   6/10/02,  9:29:34 AM
Changes to CSFB's U.S. Focus List Credit Suisse adds Tenet Healthcare (THC) $74.82 to their U.S. Focus List, and removes Health Management (HMA) $21.02 and El Paso Corporation (EP) $22.30. Firm adds THC given expectations that double-digit pricing trends will moderate but should remain well above expectations; HMA was removed as rural hospitals like HMA don't have the pricing leverage that the urban hospitals have, and EP was removed due to the recent changes in the outlook for the merchant business.

  Leigh Stevens   6/10/02,  9:28:06 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on Gary Winnick, Global Crossing's founder, who is trying to line up investors to back a management-led plan to restructure the company - this is the same guy that many blame for the company's decline & downfall; an inside article has discussion of Tyco & it's legal problems - Street analysts now looking more closly at the balance sheet - where there is smoke there is fire; also, story on ImClone, as officials with the compnay learning that the FDA might turn away its application for a cancer drup (Erbitux) - this backchannel communication was 3 days before the FDA formally informed the company of its findings.

  Jim Brown   6/10/02,  9:26:27 AM
Pivot Trade Signals
The markets have a slight upward bias this morning but strong overhead resistance could make any bounce short lived. The OEX has resistance between 510-514. The SPX 1034-1038 and the Dow is challenged from 9600-9700. Since techs have been our anchor lately we need to focus on the 1150-1562 area as the likely place any rebound could slow again.

Thank you for the many emails I received over the weekend regarding your comments about the Pivot trade model. I will be reprinting some of those in the Market Monitor today. One of the common suggestions was to establish pivot points ahead of time for expected reversals and then set the triggers to catch those points. For instance the upper OEX resistance this morning around 514 would be the ideal area to enter a short play with the expectations of a fall back to something just under 500 where support should be 497-498. Why is this different from establishing bullish and bearish triggers as the markets move into the 514 area? Most readers seemed willing to bet on the failure to break resistance and were willing to take the risk by setting a wide stop at these areas and taking their lumps if a breakout occurred.

What I read into the emails was a willingness to use broader stops at these pivot points AND only anticipate trading in one direction. The overwhelming majority of readers were willing to sit out the correctional swings between support and resistance if we missed the trigger at the pivot point. For instance if we set the trigger today at 514 and the OEX hit 513 and rolled over to head back for the 500 lows, readers were more than willing to wait for the next play to be the pivot off support for the next signal.

I will continue these comments as the day progresses. Signal to follow.

  Jonathan Levinson   6/10/02,  9:23:54 AM
QQQ is trading up .09 from its close at 28.30 as I type. I'm expecting a continuation of Friday's rangebound trading, and will watch the oscillators, which are my favorite tool for such days. I expect attempts today to break above 1550 or below 1500 on the COMPX to fail, and will trade accordingly, but will be watching the intraday oscillators and the Nasdaq-100 Volatily Index ($QQV), the Nasdaq Arms Indicator ($TRINQ), and intraday market breadth to confirm those trades.

  Leigh Stevens   6/10/02,  9:10:57 AM
INDEXES: SECTOR TRADE RECOMMENDATION: As highlighted in my weekly SECTOR TRADER update, including charts, at: Link The S&P 600 SmallCap and the Russell 2000 again appear to represent a buying opportunity for a longer-term buy and hold. The profit taking and rotational correction may have run its course after rebounds on Friday from areas of important prior lows or technical support areas.

Purchase is suggested at the opening. I especially favor the S&P 600 as a "size" sector and within the S&P 600, the S&P 600 "Value" segment iShares (SYM: IJS - Fri. close: 90.74), represents a preferred choice. I got interested in this one after my old comrade in arms, John Bollinger, pointed it out as a choice within the overall S&P 600.

However, if both value and S&P 600 "Growth" iShares (SYM: IJT - Fri. close: 74.64) were bought, along with the Russell 2000 iShares (SYM: IWM - Fri. close: 93.55), it would also offer a diversified selection within the small to mid-cap sectors. Stop points are suggested at: IJS - 87.30; IJT - 72.00; IWM - 89.70.

  Leigh Stevens   6/10/02,  9:08:54 AM
Pre-Opening, Stock INDEXES - Good Morning! Index Futures trading: S&P > +1.20 ; DOW > +15.00 ; NAS > +6.50


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