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  Jim Brown   6/11/02,  6:02:48 PM
Pivot Trade Wrap

A successful trading day! Unfortunately it came very close to not happening. The morning bounce for the Dow/Nasdaq tried several times to break through resistance and came very close to stopping us out. It was not to be and after some negative comments by companies attending the Bear Stearns tech conference the indexes rolled over and played dead.

Intel reportedly said they were not seeing any recovery in IT spending. AMAT said that we could possibly be in the stage one (consolidation) phase of the recovery. Definitely not bullish. Goldman Sachs said tech buyers should wait for another -15% drop in tech before valuations would be interesting. All of this coming on the heels of the CSFB projection that global PC growth would be zero instead of their prior +5% estimates and you had a recipe for disaster.

Disaster is what appeared with the major indexes pulling back to last weeks lows and exhibiting no indications of a bounce. There was a little end of day pause but no bounce. With the OEX at 500, SPX at 1000, Nasdaq at 1500 and Dow at 9500, we appear poised to retest the September lows. For the SPX that is only about 70 points away and about 110 for the Nasdaq. The Dow is a whopping 1500 points away from the Sept low. The key for Wednesday is the opening bounce. Yes, bounce. See my OIN wrap for details. If the markets cannot hold this line then turn out the lights and come back in a week. The great capitulation event may be about to begin. See you at 9:15 !

  Jim Brown   6/11/02,  4:39:13 PM
Well Jim I must say that the difference in trading styles in this week is very noticeable. I miss the action, but I do not miss being stopped out for small losses as frequently. Today I was missing playing the first rollover at when the DOW was up 100 and then again later. Then support at 9700 looks tempting for a bounce. Would you have been taking positions at those levels last week or am I just imagining things? I suppose if I just watch support fail here at 9700 I could answer my own question. Would appreciate your comments here though. BD

I have not specifically changed anything other than my resolve to trade less and profit more. I want to be more patient on entry points, which makes every following decision much easier. Better entry points and wider stops should help with being stopped out for small losses. Now we will be stopped out for large losses! (GRIN) We will never win them all but I will settle for 60% or better. The win today is clearly a win and should not draw any complaints about losing profits in the bid/ask spread. They will not all be 10 points but some could be more. (wishful thinking!) I will still indicate which trades I would make that are high risk even if the Pivot model does not take the trade. Those who want to trade 2-3 times a day can still do so but I doubt I will be calling the shots. The name of the game is profit and I will be doing my best to win.

  Leigh Stevens   6/11/02,  4:23:50 PM
Subscriber QUESTION: "I have a question about some of your commentary that describes options expiring where they cause the greatest pain. What does that mean? "

RESPONSE: I was referring to talk about, or commenting on, a view held among some traders that expiration can tend to go in the direction that will cause the "maximum" pain to the predominant way that traders are playing the indexes. I don't really pay huge attention to this idea, but it does seem to be the way that some option expirations go - if, for example, the OEX is in a decline and most individual speculators are playing the puts, we'll see sometimes a counter-trend rally for the few days preceding the expiration of the individual options that takes the OEX sharply higher and causes one or more popular option strikes to expire with those options being worthless.

So far, it doesn't look the way the June index puts are going, does it!

  Leigh Stevens   6/11/02,  4:12:11 PM
Subscriber QUESTION: "I have not found individual sectors ie. Sox, BTK, with reasonable liquidity and reasonable bid-ask spreads. Using your strategies with index trading, are you limited to buying and selling I-Shares, or have you found option trading reasonable in certain sectors. At this point it seems buying and selling option calls and puts in individual sectors is not a cost-effective option. Appreciate your comments. "

RESPONSE: Well, there are some active sector options, such as XAU (gold & silver) and especially the semiconductors (SOX) as you say. However, the bid/ask spreads on these are often extreme -- there are index options on these sectors because they are or can be volatile and traders are attracted to play them. This same volatility can make for very high premiums for those who want to play sector trends. In terms of being long or short, this principally leaves the HOLDR's or iShares. (I'm not counting the possibility of shorting the few sector options that are liquid; for example, SOX index calls or puts, but this is of less interest, at least among those I hear from on this and also requires more capital, doesn't have the limited risk, etc.)

Another strategy that I have suggested regarding sectors and is the reason why I list the component stocks in my Sector Trader column is the possibility of playing the options on keys stocks in the sectors. This would be the primary leveraged way that may be a reasonable option in the stock groups. Of course, this approach only allows some diversification WITHIN the sector if 2-3 of the stocks, in the particular sector are played.

  Jonathan Levinson   6/11/02,  3:57:32 PM
The Nasdaq is twitching here just below 1500, and the short covering bounce never came. It could be that short covering is what stemmed the decline and kept the QQV down throughout the fall.

  Leigh Stevens   6/11/02,  3:55:48 PM
INDEXES: TRADE Recommendation - UPDATE: QQQ - on long position I had previously recommended in 29 area, exit was made on stop at 27.50.

  Jim Brown   6/11/02,  3:55:32 PM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
We hit our profit stop of OEX 500.50 at 15:51:12 (SPX 1013.50 est) (Our short entry was at 510.50)
Was it just me or did those last few cents seem to take forever!

We will stay flat into the close and look for a new entry point at the open tomorrow. The VIX is finally climbing as well as the TRIN. There could be a bounce here but we will wait for tomorrow to check its health.

  Leigh Stevens   6/11/02,  3:54:25 PM
INDEX Comments: Nasdaq - new lows for the current move in all but the Composite calls into question my idea that we're bottoming in this area. Weakness in the Sox has been the key factor in my estimation. We're going to be at a new closing low in the Semis.

  Jeff Bailey   6/11/02,  3:49:38 PM
Jeff, I've been out of town this last week and just discovered amgn below 40. I bot at 50. this is 3x bottom and just learned its acquiring immx, prob cause of the down turn. I should have placed a stop loss but being a bellwether was willing to ride it out for long term investment but now worried. nearest support is 37 from 1999. what's your take on AMGN?

IMNX acquisition was announced a long time ago, but yes, that is now weighing on AMGN with today's news. Bearish vertical count on AMGN is $26, while bearish count on IMNX is $14. Would look to hedge with protective puts or move to the side.

  Jim Brown   6/11/02,  3:41:03 PM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
As we approach Dow 9500 I am going to keep lowering the stop to take us out at the low of the day on any end of day short covering bounce. Lower the stop loss to OEX 502.00 on the SHORT signal. (SPX 1016.00 est)

  Jeff Bailey   6/11/02,  3:39:59 PM
QQQ $27.52 -2.58% ... was a near-term target from yesterday's comments from subscriber e-mail. Bear can lock in gains here.

  Jonathan Levinson   6/11/02,  3:39:03 PM
TRINQ spiking to 2.97, but QQV still in the red.

  Jim Brown   6/11/02,  3:36:00 PM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
Lower the stop loss to OEX 503.25 on the SHORT signal. (SPX 1018.50 est)

  Jeff Bailey   6/11/02,  3:32:56 PM
Dow Transportation Average (TRAN) 2,710 -0.4% ... just couldn't clear that 50-day could it? Not looking to short/put this stronger sector as it performs relatively strong versus other sectors, thus hints better short/put candidates elsewhere. Regardless, good sector to keep a pulse on, but sure doesn't seem like too many bulls are around. As such, sectors that have been out of favor and lacked bullish sponsorship most likely fall quicker than those that have.

  Jim Brown   6/11/02,  3:31:24 PM
Pivot Trade Signals
Several people have asked me if I intend to go long at the 500 level. While I think it is a psychological support level the selling is increasing. I could see a temporary bounce, which may not have enough legs to be profitable. I could also see further selling to the bottom of the current down trend channe,l which is now around 493. That is uncharted territory and just a calculated guess. I think the better plan would be to watch what happens IF we hit 500 and then pick a high odds setup for the next trade. There is no need to rush back into the market. Nobody knows what will happen tomorrow!

  Jeff Bailey   6/11/02,  3:27:34 PM
Aquila (ILA) $12.63 -4% ... yep.... losing yesterday's lows. Still need a break of relative low, but bears still in the game here. "Better" break of the wedge to downside today we've been monitoring on the 60-minute interval. Upper end of lower trending wedge was never violated.

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

  Jeff Bailey   6/11/02,  3:26:44 PM
Williams Cos. (WMB) $7.61 -11.4% ... new 52-weeker here. This should be "good" for bears in Aquila (ILA).

  Jeff Bailey   6/11/02,  3:25:31 PM
Newmont Mining (NEM) $28.97 +3.09% ... nice little gain going for bulls from $28.19 (12:27:14). Would hold overnight if it is within your trading discipline and continue to target $30 near-term. 16% gain in BGO hints of aggressiveness worth holding NEM overnight.

For now, more cautious on XAU.X based on $2 box, which shows "high pole warning" Link , which is potential topping pattern. This $2 box is conventional box size used by Dorsey/Wright, which most institutions will view.

$1 box perhaps hints that $75 was longer-term support trend and bounce to $82 in play, which we can correlate against an exit in NEM near $30. Link

  Jeff Bailey   6/11/02,  3:16:33 PM
Affymetrix (AFFX) $20.21 -13.8% .... Today's trade at $21 could be "doom" for this biotech. That's a spread-triple-bottom and major break of support. Link

Capitulation to its bearish vertical count of $14 might be the "last shoe to drop" for eventual firming to take place in the sector.

I like the July $20 AFFX puts (FIQSD) $1.95 and target $15.00.

  Jonathan Levinson   6/11/02,  3:15:58 PM
QQV down .57, TRINQ at 1.8, up .5 on the day. Complacency continues, selling pressure increasing.

  Jim Brown   6/11/02,  3:15:56 PM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
Lower the stop loss to 505.25 on the SHORT signal. (SPX 1021.50 est)

  Jim Brown   6/11/02,  2:59:28 PM
Pivot Trade Signals
VIX at 26.21 and TRIN at 1.34 are taking the day off in light of the recent drop. Neither is showing any appreciable signs of moving into bullish/oversold territory. The adv/dcl ratio has fallen to a seriously negative .65 and the high/low ratio is .59. Both are indicating serious selling although on only moderate volume.

  Jim Brown   6/11/02,  2:55:40 PM
Pivot Trade Signals
Leading the Dow lower are IBM and INTC. Intel looks to be headed for $20 and IBM for $75. Both would be strong support but IBM has some serious internal problems that have yet to hit the mainstream media. It could be much lower soon.

  Jonathan Levinson   6/11/02,  2:54:39 PM
Somehow the Nasdaq-100 Volatility Index is still well within negative territory, down .76 as I type. Investors are complacent here, obviously betting on a bounce coming soon. We'll see if they're correct.

  Jim Brown   6/11/02,  2:51:52 PM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
Just in case we get a sharp drop let's put in our profit target in advance. I think there will be a bounce in the 500 range because of the psychological implications. Let's close the SHORT signal with a trade at 500.50 (SPX 1013 est) just to be on the safe side.

Also, let's lower the stop loss to 508.75 just in case the bounce comes early.

  Jeff Bailey   6/11/02,  2:47:55 PM
What can you expect of SGP and its continuous lower trendd? Thank you.

Schering Plough (SGP) $23.61 -3.07% ... stock achieved its bearish vertical count of $24 back on 05/16/02 and really hasn't done much since (vertical count dates back to June of last year at $35). Looks to be following the group lower today, but difficult to assess risk/reward from here. As such, looking to avoid trade. Vertical counts can be exceeded and those playing such most likely following with stop above $28 for now. Link

  Jim Brown   6/11/02,  2:45:16 PM
Pivot Trade Signals
Another buy program bites the dust! That buy program triggered at 2:30/9604 tacked on +40 points to the Dow but could not generate any buying excitement by traders still on the sidelines. The Nasdaq and OEX are now at lows for the day.

  Jeff Bailey   6/11/02,  2:40:56 PM
jeff what is your opinion on brcm?

I've been rather bearish on BRCM since $30 from p/f chart. Stock will have both a bull and bear's hair falling out as 7% up/down moves in a day, let alone an hour not uncommon. Stock is at lower end of regression channel. Bears are holding on, looking for some type of capitulation to the bearish vertical count of $10. Link resistance should be building at $25. $24 was triple-bottom sell signal.

  Jeff Bailey   6/11/02,  2:34:10 PM
Jeff: What is the p/f chart showing for Mr. BEAS?

Funny you should ask, as I was just looking at BEAS based on question regarding MSFT. Nothing has changed on the p/f since I last discussed at/hear $11.00. Would think bear in BEAS wants/needs MSFT weakness to keep bears from covering in BEAS. Link

  Jim Brown   6/11/02,  2:33:40 PM
Pivot Trade Signals
The is it, the true test. If the Dow breaks 9600 there may be a new low in our future. The Nasdaq is closing in on 1500 as well. Expect a bounce at these psychological levels. The 3:PM turning point is still ahead and with the bearish sentiment growing that 3:PM turn will be critical. Dow 9605 has been hit twice now with no material rebound. Things may get interesting here really quick.

  Leigh Stevens   6/11/02,  2:13:19 PM
Subscriber QUESTION: "Leigh, Reading your comments on support and resistance got me thinking about "retests". When a support or resistance line or area is "broken through", what percent of the time does the stock or index move back to the line it just broke and retest it? And does that percent increase based upon the number of points that made up the resistance "line"? I would guess that a resistance line made up of 5 or 6 highs would be more likely to be retested after the breakout versus a resistance line made up of 2 or 3 highs????? Resistance and support lines seems too prevalent an occurrence for anyone to have done a formal study, so maybe you could just give us your opinion based on ur experience??"

RESPONSE: I can't say what percentage of times except that it is quite common for retests - return rallies to a prior support area to retest that level or area as resistance; OR, sell offs back to a prior resistance, which again establishes that area as support - this tendency is one of the more common actions that you will notice on the charts. This tendency for retests is what makes for the common saying that support (once broken) "becomes" resistance and resistance (once pierced) "becomes" support. It is primarily through the "re-tests" of these areas that we see this tendency working over and over. And, yes, the more "touches" to a line of support or resistance, the more likely there will be a retest.

We need to look at the underlying dynamics here - take a low established multiple times at Dow 10,000 - it is established by buyers who are repeatedly interested in buying Dow stocks in this area. Each time that "works" they are more willing to buy that area. Now, due to events in the marketplace, sellers overwhelm buyers and take the Dow below 10,000. You can bet that the buyers regroup at some point and push prices back up again and the sellers step aside on the drive back to this area. If the buyers don't possess enough buying power (money) or conviction to push the Dow stocks as a group back above Dow 10,000, what happens ? -- sellers come back in force. Moreover, many buyers who previously bought in the 10,000 area - what had been "support" (buy low) after all - are now at BREAKEVEN on the stocks they bought at prior support and they are turn around and sell to get out.

How many times have we got out at our approximate breakeven when the market went against us, then came back? It's a very psychological game and this is one of the dynamics that "make" technical principles what they are.

  Jeff Bailey   6/11/02,  2:08:33 PM
jeff, what is the point and figure chart showing for mr softie?

Microsoft (MSFT) $53.43 +1.09% .... its trying to get turned around, but looking like some resistance here as broader technology isn't helping provide what I think is a needed "tide" of bullishness to get MSFT above $55. Would look to write some covered calls here if long the underlying as I'd expect some bears to try and leverage here and try and push for a break of $49. Stock has been gaining some relative strength. Link

  Jeff Bailey   6/11/02,  2:04:25 PM
Jeff, I have been watching MIL for Puts. As it was added to the short list over the week-end. It has broken the 52 week low today but the options have not moved. Not much activity in these options. OI is small and not buys except in the July 40 Puts and not many of them. What are you feelings on this stock. I am looking at the July 35 Put. But no trades so far today. I think yesterday only a few.

Millipore (MIL) $36.41 -1.19% .... reminds me a bit of Celestica (CLS) in that is is rather "slow" mover, and likely due to it being a NYSE listed stock and marker makers not able to whip it around or simply let it fall like they will do with NASDAQ stocks. MIL gave triple-bottom at $43 back in March and each rally has seen sellers. From here, would only establish 1/2 put position as rally to $40 not out of question. Still... 1/2 put not bad as stock may get whacked on further market weakness. Link

Will make note that bearish vertical count is $25. (count column is from $51 to $39).

  Jonathan Levinson   6/11/02,  1:56:16 PM
TRINQ has fallen back to 1, QQV down 1.33 to 44.91, and declining volume is now ahead of advancing volume 1.24:1. A great deal of complacency given the recent drop. Oscillators are working off their extreme oversold readings. I see the market searching for direction again, but my own feeling is that it could well be south. Let's watch.

  Leigh Stevens   6/11/02,  1:28:12 PM
INDEX Comments: Nasdaq - Built minor tops, rolled over and these indices now falling without much apparent buying interest. Potential support areas: Nas Composite (COMP) - key support now that COMP has taken out minor support in 1525 area > 1495-1496, back to prior low from Friday - 1500 is preceived as key psychological support; Nas 100 (NDX) key support > 1106 area, at prior low; QQQ > near support looks like 27.7, then at prior lows in 27.5 area.

  Jeff Bailey   6/11/02,  1:21:28 PM
Cisco Systems (CSCO) $15.25 -1.48% ... mentioned this one bearish yesterday. Getting downside alert here at 61.8% retracment of $15.27. CSCO hasn't closed below this level since its gap above on 05/08/02. Bears would like to see this networker close below $15.27, then get a nice follow through gap lower to get stock to fill the $13.50-$15.15 gap.

Point/figure chart of CSCO still bearish. Link

  Leigh Stevens   6/11/02,  1:17:32 PM
INDEX Comments: S&P/DJ - now that the indexes couldn't challange overhead resistance areas, focus is on potential support: S&P 500 (SPX) - key support > 1020, then at prior lows in 1012 area; S&P 100 (OEX) key near support > 505 area, then prior low at 498.5 - 500 area is key "psychological" point; DJX > support at 96-95.9, then at prior lows at 94.7 - believe DJX will hold 96 area, setting up a possible Head & Shoulders bottom on the hourly charts - just speculating here - time will tell. Stay tuned!

  Jeff Bailey   6/11/02,  1:16:17 PM
Jeff: some time ago you were bullish on SNE. The first sign to buy was given at 40 in the P&F chart and gave a vertical count of 61 which is close to where Sony recently turned down. The 3rd. out of the four most recent buy signals would give us a vertical count of 90 which would make it an attractive buy at present (close to 55 $) with a stop at 52. It is also forming an inside day. In a case like this, would you wait and follow buy if the follow through of the ID is positive?

Yes... that is exactly "how" I've tried to teach how to use both the p/f charts along with some trading techniques from the bar charts to set up some trades. While we don't alway's get "inside days" to perhaps trade from as entry points, this strategy can be useful. Even more so, when market conditions are like they are and bulls aren't too anxious to be getting long. What it can at least do is make you the trader a little more disciplined and selective in what you're trading.

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

  Jim Brown   6/11/02,  1:11:55 PM
Pivot Trade Signals
The stochastic on the OEX 5 min chart is now firmly oversold and the 15 min is racing to catch up. The 30&60 min are just now developing a steep vertical fetish. These markets have the capability to bounce from overbought to oversold intraday due to the light volume and lack of conviction by both sides. While I was pleased about the recent drop and its impact on our short signal, I would like to remind everyone that the initial downside target is only 500. As evidenced by the triple digit Dow this morning there is still a bullish side to the market given half a chance. There is also a lot of time left in this trading day and although the averages are negative, they are only barely negative. This may be a small consolation for those who bought at the high but it is a positive for the die-hard bulls. We could get a defensive bounce here or a washout but the market does not appear to be in any hurry to make that decision.

  Leigh Stevens   6/11/02,  1:07:11 PM
INDEX Comments: ALL are rolling over, breaking trendline support, generating hourly stochastic "sell signals" and headed lower - if they couldn't take em UP, they'll take em DOWN.

  Jonathan Levinson   6/11/02,  12:59:58 PM
TRINQ at .79 and QQV still down on the day despite this small COMPX selloff tells me that the 1525 COMPX level could be in jeopardy. It didn't take much fear or selling pressure to drop these almost 15 points off the COMPX.

  Jim Brown   6/11/02,  12:48:35 PM
Pivot Trade Signals
Blink, Blink, Blink That was all the major indexes changing from green to red as reality sinks into the markets again. That +100 point Dow gain has now evaporated after numerous negative comments coming out of the CSFB tech conference today. GS for one said investors should wait for another -15% drop before valuations became interesting again. Intel said they saw no signs of a recovery yet. AMAT said we could be in a stage one phase, whatever that is. The Nasdaq is dropping like a spent shuttle booster rocket and internals are showing signs of stress.

  Jeff Bailey   6/11/02,  12:34:59 PM
Boston Scientific (BSX) $26.02 -1.25% Link ... Announces that a German Court has ruled that certain Medtronic (NYSE:MDT) $45.70 -0.04% Link rapid exchange stent delivery systems and angioplasty dilation balloons infringe a patent licenced exclusively to BSX; the Court's decision was announced orally today, and a written decision is expected in several weeks; the decision gives BSX the right to obtain an injunction against continued sales of MDT's infringing products in Germany, as well as damages.

  Jeff Bailey   6/11/02,  12:29:02 PM
Bema Gold (BGO) $1.16 +9.34% ... been watching this smaller cap gold stock as mentioned in recent weeks for bullishness in NEM. BGO edging back above its 38.2% retracement of $1.16. If market getting a little "aggressive" again in BGO and willing to speculate, bull would rather take his/her chances with NEM.

  Jeff Bailey   6/11/02,  12:27:14 PM
Newmont Mining (NEM) $28.19 +0.14% .... look for a "pop" here in NEM. Short-term bull can go long here, stop today's low, target $30.

  Jonathan Levinson   6/11/02,  12:16:15 PM
What do QQV(-1.32) and TRINQ (.73)level tell me now?

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.

QQV is the Nasdaq-100 Volatility Index. It is the VIX for the Nasdaq-100. It traces an inverse relationship to the Nasdaq-100, measuring the level of investor "fear". Generally, spikes in the QQV correspond to bottoms in the QQQ, and vice versa. A quick chart of the QQV compared with a chart of the QQQ tells the story.

These are not indicators that tell the complete story on their own, and if you are confused, then follow along and develop your own feel. The continual exposure to these indicators through different market conditions will develop your "ear" to hear what they are telling at all times.

  Jonathan Levinson   6/11/02,  12:07:51 PM
COMPX advancing volume:declining volume is currently 1.4:1. TRINQ at .72, and QQV down 1.27. It feels as if the upper bollinger band on the QQV is the only thing supporting the COMPX right now. With the COMPX hovering around 1540, the intraday oscillators have worked off their overbought bias and are currently looking for direction.

  Jeff Bailey   6/11/02,  12:05:46 PM
Pharmaceutical Index (DRG.X) 314.58 -2.5% .... This is perhaps the "market" that TEVA belongs to. Not very strong is it, the "market" of drug stocks that is. Tends to keep bulls away and sticking with areas that have seen more kind results. Link

In essence... this is the current/tide which TEVA must try and swim against.

  Jim Brown   6/11/02,  11:59:51 AM
Pivot Trade Signals
I wrote up the lowered stop loss but never pushed the button to submit it around 514 because there was just so much resistance at that 514-515 level. Still too early to tell if this drop through the lunchtime lull will last but all the indicators are weakening. The adv/dcl ratio is still positive at 1.13 but significantly off the 1.50 highs for the day. The TICKS are negative and the TRIN is bearish at .91. The odds appear to still be in our favor but we need to stay alert.

  Jeff Bailey   6/11/02,  11:57:59 AM
Teva Pharma (TEVA) $62.35 -0.71% ... talked about this "drug" stock in market/monitor on 05/31/02 (09:27:02) at $67 Link . I thought stock might pull back to $63 "easily." Nooooow, stock looks better entry point for those looking bullish. Interesting to note that at that time, Drug sector was 34% bullish, now 26%. Do you see how even the "strong" stocks in a sector like TEVA can get "pulled lower" as the "head of the snake" turns back to see what is pulling at the tail? Link

  Jeff Bailey   6/11/02,  11:50:57 AM
Express Scripts (ESRX) $54.13 +0.72% ... Hi Jeff, I'm thinking SHORT ESRX @ 54.60$. It gave a Quad Bottom sell 2 days ago, and now at resistance ~55. Mangable trade (stop at 56 $= 50DMA) with good down potantial to 47? or below(40). What do you think ?

Yes, I like as short. P/F chart might have bear placing stop at $56 Link , but good risk/reward trade for bear. Dorsey/Wright and Assoc. has stock classified as "drug" and that sector is "bear confirmed" at 26%. Need to be careful and disciplined with stop as group is "oversold" below 30%. Action point for trade may be a break below today's low of $53.47.

  Leigh Stevens   6/11/02,  11:42:58 AM
ON THIS DAY in 1895, Charles E. Duryea received the first U.S. patent granted to an American inventor for a gasoline-driven auto. Pretty amazing - who would have thunk it - 1895! A delight and bane (depending on where you live) of our modern existance - the car. I'm enjoying my new one! It has been so many years since I had one - living in New York city (or London) a car was something I rented occassionally on a weekend. By the way you haven't lived until you drive on the "wrong" side of the road (left), shifting (stick shift is "standard") with your LEFT hand and threading the needle on narrow English country roads. Anyway, in honor of this day, take a drive in the country. If in Colorado, avoid the half of the state that is on fire.

  Leigh Stevens   6/11/02,  11:31:05 AM
INDEX Comments: DJ 30/Industrials (INDU) strength continues and the Dow is nearing key overhead resistance in the 9800 area (DJX - 98.0). Part of the boost in DJIA is from its sister index, the Dow Transportation (TRAN) average - Charles Dow's theory on the market said that if goods are being transported, it results in a pick up of the revenues & earnings of the transportation companies - the resulting rebound in these companies' stock prices is sometimes the first tip off that manufacturing is picking up. TRAN leading the INDU is something not seen in awhile.

If you haven't looked at what stocks are in the Dow Transportation average in awhile, the stocks are pretty varied across the transporation sector: Airborne Inc. (ABF); Alexander & Balwin (ALEX); AMR Corp (AMR); Burlington Northern (BNI); CNE Transportation (CNF); CSX Corp (CSX); Delta (DAL); FedEx Corp. (FDX); GATX Corp (GMT); J.B.Hunt Transport Services (JBHT); Norfolk Southern (NSC); Northwest Airlines (NWAC); Roadway Express (ROAD); Ryder System (R); Southwest Airlines (LUV); UAL Corp. (UAL); Union Pacific (UNP); US Airways (U); USFreightways Corp. (USFC); Yellow Corp. (YELL)

  Jeff Bailey   6/11/02,  11:30:12 AM
Movie Gallery (MOVI) Link to past discussion/observations from 05/16/02 at 06:44:11 PM, 06:56:57PM, 07:17:01 PM

  Jeff Bailey   6/11/02,  11:21:13 AM
Movie Gallery (MOVI) $20.47 +4% .... watch this one for "short-squeeze" here. Talked about this one a couple weeks ago. Did a secondary on 05/16/02. Break higher here may have shorts that don't have the leverage unfolding to upside. Link

With retracement from $27.51 to $8.99, 61.8% at $20.42 (upside alert given), then targets are 80.9% at $23.97 and 100% at $27.51. P/F chart remains bullish. Link

  Jonathan Levinson   6/11/02,  11:19:49 AM
Thanks. Now I am really confused. I know I am asking too much.

How do you get QQQ, QQV, COMPX, TRINQ together? Please give me some direction behind the thinking?

I am really getting deep here! exciting! You guys are great!

Thanks back!

COMPX is the Nasdaq composite index. NDX is the Nasdaq-100 index. QQQ is the tracking stock for the NDX. QQV is the Nasdaq-100 Volatility index, and TRINQ is the arms indicator for the COMPX. These are the primary indicators that I watch together to get a "feel" for where my QQQ options will be trading next. It all boils down to not losing money and to growing the account. The above indices and indicators are key ingredients in the mix.

  Leigh Stevens   6/11/02,  10:58:40 AM
Subscriber QUESTION: "You talk a lot about support and resistance. The stocks/indices go there and most of the time turn around. Can you give a short explanation as to what determines where support and resistance numbers come from. "

RESPONSE: Good question and hard to answer. In fact, this was a fairly major topic of my book. There are several ways to measure support and resistance - let me list the most important ones from the obvious to the more esoteric:

1.) At a prior low or high - support/resistance at a prior low is implied because buying/selling in this area reversed the trend of the index or stock previously; so, look at prior upswing highs or downswing lows on the hourly, daily and weekly charts.

2.) At trendlines - a trendline connects 2 or more (the more the better) prior highs or lows, either on a closing basis (line chart) or at low or high point of a bar or candlestick measuring an hour, day, etc. If prices are rallying or falling to the intersection of one of these trendlines, we anticipate possible support or resistance in this area. A break above or below a key support or resistance trendline is significant as it suggests a possible change in trend. Often, however the trendline "deflects" the move and prices reverse direction.

#3) - At "implied" trendlines - there is sometimes an "implied" trendline made by constructing a "channel" line drawn parallel to an up or down trendline (touching 2-3 or more highs or lows) but intersects only the highest high or lowest low "opposite" from the trendline in question. You can then watch this line - it may turn out to be support or resistance. Anyway, the point is that often stocks or indices trade in a PRICE channel, bounded by two parallel lines - the slope of the channel can be up, down, or sideways. The upper and lower lines often do a pretty good job of defining future support or resistance.

  Jonathan Levinson   6/11/02,  10:56:31 AM
$TRINQ at .53, $QQV down 1.20 as I type, and advancing volume beating declining volume better than 2:1. COMPX/QQQ shorts should watch their stops in case the COMPX breaks through the 1550-1555 resistance.

  Jim Brown   6/11/02,  10:49:24 AM
Pivot Trade Signals
The markets are developing an upward bias and are moving back to retest the day's highs. It is make or break time and the Dow may be the leader despite the performance by MRK and the tug of war over Intel. Maybe getting close to the time to lower that stop loss.

  Jonathan Levinson   6/11/02,  10:46:57 AM
If you trade the Q's...which is what I am doing some, why do you follow the compx numbers...I think I am missing this point on each index...like Jim giving OEX signals but often using numbers from SPX. etc. Is there some issue of more clarity or accuracy by watching for signals from compx for Q trades?

I like to follow the COMPX because I am most comfortable with its movements and levels, and because it provides information on a broader basket of stocks. In fact, I keep an eye on both, but it's easier to stay with the COMPX as a proxy for tech in general.

  Leigh Stevens   6/11/02,  10:35:10 AM
INDEX Comments: QQQ key stocks include Microsoft (MSFT) - at 53.85 has broken out above its down trendline which is top of its daily downtrend (price) channel. ALSO, MSFT is now trading above its 50-day mov.avg. (53.66)

  Jonathan Levinson   6/11/02,  10:32:10 AM
What are your thoughts on MSFT today? I'm itching to "short" it, but it's only a gut feeling. (Or maybe I'm getting bored and want to "force" a trade!)

If it's the latter, then please don't. If it's the former, be careful, as it's just crossed above its 20 day EMA at 52.52 and its bollinger band midpoint.

This, of course, has broader implications for the COMPX and QQQ, but we'll continue to watch the levels and oscillators.

  Leigh Stevens   6/11/02,  10:31:12 AM
INDEX Comments: Dow Transportation Average ($TRAN) - at 2742 is helping the Dow 30/Industrials with a rebound in last 3 days from level of its 200-day moving average (2625) - now the Transports are at level of its 50-day moving average. Also, today TRAN broke out above its down trendline. Contrast this action with Dow 30, trading under its 200-day moving average, at 9866 versus current trade at 9725.

  Jonathan Levinson   6/11/02,  10:28:13 AM
A number of reader questions as to which securities to trade in order to capture moves in the Nasdaq. I prefer QQQ options, personally, to trade the Nasdaq-100. I do not trade futures or e-minis.

  Jonathan Levinson   6/11/02,  10:24:28 AM
Internals have worsened a little on the COMPX, with advancing volume now less than twice declining volume,

  Leigh Stevens   6/11/02,  10:20:08 AM
INDEX Comments: S&P/DJ Indices have gone to slight new highs for the current move (dating from the Friday low), but have some way to go to challange key overhead resistances at: S&P 500 (SPX) key resistance > 1049-1050, at last week's hourly peak and at top end of hourly downtrend channel - looks like an area to sell into; S&P 100 (SPX) resistance > 520-521; DJX key resistance > 98.0 - this is really key level as it was area of prior lows, then hourly highs of last week; ALSO, trendline at top of hourly downtrend channel intersects here also.

  Jonathan Levinson   6/11/02,  10:19:48 AM
$QQV down 1.05 on the day, TRINQ neutral at .81. Only the shortest intraday oscillators made it to overbought on that surge. There's more room to the upside on this, but 1550-1555 is resistance.

  Jim Brown   6/11/02,  10:19:35 AM
Fire Update Numerous readers have emailed about the wildfire coverage on the national news. According to local reports today there are over 100,000 acres currently burning in about a dozen separate fires. Colorado is in the middle of the worst drought since 1957. Water rationing is a fact of life with fines from $200 to $500 a day for watering your yard. It is so bad that in some counties there is a ban on "outside smoking". You can only smoke in your cars or in your houses. Period! Don't even think about fireworks unless you want to be mobbed! Depending on wind direction visibility is 1-2 miles due to smoke and ash in the air and Denver is 50 miles from the nearest fire. Hundreds of homes, stores and buildings have been destroyed. Nobody at OIN has lost anything yet although a 10,000 acre fire came within 3 miles of my house over the weekend. Fortunately the wind changed directions at the last minute. It is very sobering to be running through the house taking an inventory of what you are going to try and save and what you can't. It does wonders for your overall perspective. Thank you for all your emails questioning our safety.

  Leigh Stevens   6/11/02,  10:07:57 AM
INDEX Comments: Nasdaq Indices retreating from lines of resistance as follows: Nas Composite (COMP) key resistance > 1549-1550; Nas 100 (NDX) resistance > 1156; QQQ > resistance > 28.9-29. Breakout above these levels are needed to get something further going on the upside. Somewhat bullish is that the key tech indexes are trending sideways - as they do so, they are "throwing off" their near-term overbought readings of late yesterday; possible consolidation ? Stay tuned!

  Jeff Bailey   6/11/02,  10:03:11 AM
Biotechnology Index (BTK.X) 355 -3.14% .... leading sector loser with Drug Index (DRG.X) 315.99 -2% not far behind. Biotech weakness seen from Idec Pharma (IDPH) $33.61 -12%. Salomon Smith Barner lowering estimates after IDPH announced delay in obtaining Zevalin Medicare reimbursement. Link

ooooo.... bearish triangle was at $42. According to Professor Davis, profitable for a bear 87.5% of the time, average gain of 33.3% in 2.5 months. From $42, bear targeting $28.01.

  Jonathan Levinson   6/11/02,  10:02:26 AM
COMPX struggling for direction at 1540, trying not to look down into its morning gap. Advancing volume is currently twice declining volume, as reflected in the $QQV, which is down .92 as I type. $TRINQ in neutral territory at .63. Number of new lows is almost twice the number of new highs, however. 1550-1555 looks like a good short to me at this time if confirmed by the oscillators, and if the COMPX even makes it that high.

  Jim Brown   6/11/02,  10:01:35 AM
Intel bounced +45 cents off yesterday's closing lows but is trending down sharply again. With the CSFB lowered estimates of global PC growth I am surprised INTC did not open down. While there is strong bullish sentiment around Intel at $20 there was heavy institutional selling yesterday. Shades of SUNW? I don't think so. I think the drop was simply an adjustment of positions and a buying opportunity for my editors play on Sunday. Remember, we are talking LONG term here. 2.5 years. What happens to it this week is immaterial other than providing a better entry point. If you liked it at $22 you should love it at $20. Just my opinion!

  Jeff Bailey   6/11/02,  9:56:51 AM
Advent Software (ADVS) $24.99 -29% ... stock down after multiple brokerage downgrades and company guidance. Would lock in 1/2 position gains if short/put here, look for resistance near-term at $30. Very bearish p/f chart, but difficult to assess near-term risk/reward. Link

  Leigh Stevens   6/11/02,  9:48:55 AM
SECTOR Update: Healthcare ($HMO.X) - Index broke out to new highs - last at 652.7 and is really on a tear to the upside - prior peak in HMO was 644.8 on 5/1 - a number of the HMO stocks had looked like they were making double tops. However, seems there is no stopping this group. Stocks in Index: AET; AHG; ATH; CAH; CI; FHCC; HUM; MME; OHP; OPTN; PHSY; TGH; THC; UNH; WLP

  Jeff Bailey   6/11/02,  9:45:06 AM
Tenet Healthcare (THC) $77.46 +1.82% ... have profiled this as bullish in past and several subscriber's have e-mailed regarding their June expirations calls. With stock trading just above the upper-end of regression here, would sell for gains, then look to roll out call options several months out expiration. I wouldn't want to risk June expiration (next Friday) in calls with stock at upper end of channel. Strategy here may be to simply roll 1/2 position out, then look for any pullback below $75 as another entry point. Reason to roll out 1/2 even at these levels is if stock "jumps out" of current channel. Point/figure chart is back on a "buy signal" given at $76, turning vertical count back to bullish and hinting at $89.

  Jim Brown   6/11/02,  9:41:36 AM
Pivot Trade Signals
If this little bounce fails, as it appears it might, it would be another gift to the bears. The morning highs did not even reach the afternoon highs from yesterday and failed right at resistance again. This should signal the start of another negative day for tech once the short covering from eased India/Pakistan tensions is over.

  Jeff Bailey   6/11/02,  9:40:27 AM
Wellpoint Health (WLP $82.50 +5.83% ... Prudential raises price target to $90 from $72 due to strong enrollment growth. Link

Note... stock gave "bearish signal reversed" pattern at $73. This is a "rare" pattern in the p/f world, yet high probability pattern. According to Professor Davis' study, profitable 92% of the time, average gain of 23.2% of time, over 2.5 months.

  Jeff Bailey   6/11/02,  9:35:14 AM
Amazon.com (AMZN) $17.40 +0.6% ... Soundview says bottom-line growth metrics show AMZN stock is not overvalued, as AMZN trades at P/E-to-growth ratio of roughly 1.4x on 50% secular earnings growth, which is a 20% discount to WMT. Link

  Jeff Bailey   6/11/02,  9:31:38 AM
Tyco (TYC) $10.70 -6.14% ... dismissed their general counsel, Mark Belnick, after he clashed with David Boies, who is leading TYC's internal investigation and reportedly accused Belnick of receiving $20 million in undisclosed compensation and of refusing to cooperate with the investigation. Link

  Jim Brown   6/11/02,  9:29:27 AM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
I was going to adjust the stop loss down this morning to something below the current 515.50 but the high futures are causing me some concern. The most likely level would be just over yesterday's high of 513.10 but that could be touched on an opening bounce. I think our best course of action is to keep the stop at the present level until after the opening volatility eases.

  Jeff Bailey   6/11/02,  9:28:41 AM
Overture Services (OVER) $20.97 ... stock trading $21.50 in pre-market after announcing an exclusive 2-year search distribution agreement with Lycos Eurpope. Link

  Jonathan Levinson   6/11/02,  9:14:21 AM
I'm with Jim. We see the resistance overhead at the COMPX 1550-1555 level, and will watch the intraday stochastics. Any rollover at resistance will be an opportunity to add more puts with a tight stop at 1560.

  Leigh Stevens   6/11/02,  9:05:58 AM
Pre-Opening, Stock INDEXES - Good Morning - It's Showtime! Index Futures trading: S&P > +7.00 ; DOW > +56.00 ; NAS > +15.00

  Jim Brown   6/11/02,  9:05:28 AM
Pivot Trade Signals
What the Heck? When I got home this morning at 4:AM I checked the S&P futures and they were down -3.60. Now at 9:00 they are up +7.40. What a difference a few calming words can make between hostile countries.

This show of strength is even more surprising when you consider we saw warnings from NOK and ABT, more problems with IDPH and downgrades of CHKP and ADVS. Also, CSFB cut estimates for global PC growth to ZERO from +5%.

The key here will be follow through. The tech sector finished the day on a down note yesterday and after the CSFB downgrade this morning the sector could see a rapid fade of the pre-market enthusiasm.

  Jonathan Levinson   6/11/02,  8:58:34 AM
The Gold and Silver Index (XAU) has run to its lower bollinger band support, closing at 75.17. The daily stochastics and MacD are in freefall, however, and imply further downside. It is these indicators that I intend to let guide my next entry into precious metals. Potential support levels below are at XAU 72, 66-68 and 61.


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