Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
  Jim Brown   6/13/02,  4:58:08 PM
Pivot Trade Wrap

Sellers prevailed again After a surprise morning bounce the sellers simply wore down the buyers and the major averages closed right on the edge of the cliff. After testing this support level twice in the last week it appears we are ready for a third chance at bat. A strike out here could setup substantially lower lows.

The good news from the chip sector last night and an upgrade on Tyco could not overcome downgrades on AXP, another warning from Lucent and worries about a new twist in the MSFT trial. The weak Retail Sales number was the straw that broke the markets bounce attempt. The consumer has been holding up the economy in the absence of corporate spending. If they have run out of money then this "soft spot", as Greenspan described it last week, could turn rotten in a hurry.

After issuing a short signal at OEX 504 during the early morning breakdown we closed that signal at 504.55 on the rebound. We reissued the short signal at OEX 506 at 2:06 PM and that signal remains open. The OEX closed at 501.77. The Dow closed at 9496 on my quote feed although CNBC is showing 9502. A close under 9500 would be negative and could trigger new sell programs at the open. Next real support for the Dow is 9363.

Factors that will impact the open tomorrow include warnings and lowered guidance from SANM, GNSS and ADBE. Should be exciting ! See you at 9:15.

 
 
  Jeff Bailey   6/13/02,  4:46:29 PM
Genesis Microchip (GNSS) $12.24 +2.85% ... stock getting hit to downside at $9.53 after warning on Q1. Outlook for Q1 revenues is now $41 to $43 million, which is well below previous forecast for $60 million. GNSS blames shortfall on a recent drop in orders, which company attributes to customers working off their inventories that were built up in anticipation of continued strong unit growth in the flat panel monitor market. Company believes that growth has collapsed due to sector-wide LCD panel manufacturing contraints; does not believe revenue shortfall was due to greater-than-expected price declines for its products in the quarter. Link

 
 
  Jeff Bailey   6/13/02,  4:40:13 PM
Adobe Systems (ADBE) $36.20 -3% ... stock getting hit lower at $35.06 after reporting pro forma earnings of $0.27, which was 2-cents bettern than consensus of $0.25 a share. Revenues for latest quarter (Q2) came in at $317.4 million versus the estimate of $312.6 million. ADBE sees Q3 revenues in the range of $300-$320 million, which is shy of the $324 consensus, and earnings of $0.24-$0.27 a share, versus consensus of $0.26.

After-hours lower reaction most likely due to "lighter" than expected revenue projections from ADBE.

 
 
  Leigh Stevens   6/13/02,  4:12:09 PM
Subscriber QUESTION: " Leigh: Thank you for your response to my last e-mail. As a new comer to chart analysis, I want to thank you for sharing your expertise. My biggest problem is that a chart patterns can be drawn and evaluated several different ways, and sometimes a fresh eye can really help.

I have a question about Philip Morris. I currently own 1,000 shares with a good profit. Looking at the 60 minute chart, MO is forming a wedge again, but I wonder if it could be a head and shoulders top? I ordered your book from Amazon, and can't wait to read it, but I was hoping I could get your thoughts before hand. "

RESPONSE: No wedge pattern or H&S apparent to me on the 60min. chart only a double top at 57.8 - Since you are investing oriented would mainly look at daily chart. What I see with MO is that the stock is coming back down to its up trendline - or the low end of an uptrend channel if you will - I would stay bullish as long as it does not break its trend, especially on a closing basis; ie., Dec.- May up trendline. This intersects at 55.3 currently - use the (downswing) low of the other day - at 55.25. A close under level would suggest to me to take profits on half my position - a close under 53.4 would cause me to exit the other - this is a VERY key support area on the weekly chart, at the top that formed last year about this time.

 
 
  Jeff Bailey   6/13/02,  3:55:48 PM
Newport Corp. (NEWP) $15.22 -0.65% ... Hi Jeff, NEWP around $15 now a days. What would be a good point to get out of AUG $17.5s? What would be a good down side target for NEWP?

On 05/29/02, I profiled the Aug $20 puts (NZZTD) at $3.70, now trading $5.20.

However... for the Aug $17.50's, targets would be pretty much the same. Triple-witching is next Friday, and stock may try and range-trade the $15-$17.50 strikes near-term. Should we see sharp break below the $15 level, would look to lock in gain on weakness at $13. That would be a nice trade in my book. Link

 
 
  Jim Brown   6/13/02,  3:52:52 PM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
We are holding the OEX/SPX/DJX SHORT signal open overnight. Conditions are sinking fast and a close under 9500 could trigger more sell programs at the open.

 
 
  Leigh Stevens   6/13/02,  3:52:06 PM
Subscriber QUESTION: "I'd been searching around trying to find my note on who recommended the Q purchase recently. I was glad to see your note on MMonitor. I did not use the stop because I have a put on ... However, looking at the bounce from May 17th to 24th....about 4.5 points on the Q's....how do I assess whether that kind of move is likely to take place now at this juncture? I do note that May 17th was expiration and we have one week to expiration of my puts.... Any thoughts?

RESPONSE: QQQ looks like it could have a good rebound over the coming week, but the stock needs to hang in at and above support. Best case is Q's hold 27.5 - if they start to take out 27 again, or the recent lows in the 26.8 it may be because QQQ is starting another down leg. So far, looking at the key NDX stocks - MSFT, CSCO, INTC, QCOM and ORCL - it’s a mixed bag. MSFT looks bullish, INTC hasn't been able to recover much from its big break recently, ORCL and QCOM look mildly bullish -- like they could rally with a better climate - and CSCO remains weak.

 
 
  Jim Brown   6/13/02,  3:50:00 PM
After I made that last post I got to thinking that maybe the MM readers would like to see the possible play list for OIN tonight. Here is the long list, we will narrow it to 2-3. Please feel free to comment! These are puts!!

LLL, IWM, FRK, IFIN, ACS, MDT, CYMI, SMG, RYL, IBM (surprise!) CCMP, PHTN, AFFX, CTX, ANN, MWD, CDWC, XLNX, BBY, CB, ACF, RE, PCAR.

Calls (and we are struggling here!) SWFT, UHS, SRCL, FDX, LPNT, QLGC, TDW

Odds are really good we will only add puts !!!!!

 
 
  Jim Brown   6/13/02,  3:41:31 PM
Hi Jim, Well, this market is sure keeping us on the edge.....seems like just waitng for the big move either way....have a question....since 503 area was a resistance yesterday , shouldn't we treat as support right now....the same way we look at 508....oops, looks like we're about there...

Can't tell the support/resistance without a scorecard? I know how you feel. I am torn about the open SHORT. I think the drop here at days end will carry over but closing right at support invites another bounce. Still my plan is to hold over. The good news last night could not prevent the drop today.

 
 
  Jim Brown   6/13/02,  3:38:22 PM
Pivot Trade Signals
A reader just commented on the NF.X, the financial index. It is crashing as we speak. I was just looking at possible OIN plays for tonight and financials were leading the PUT list.

 
 
  Jeff Bailey   6/13/02,  3:36:05 PM
KB Home (KBH) $47.20 -4.55% ... rather sharp break lower in this home builder after today's break of 50-day MA. Could be vulnerable to $40 level and 200-day MA.

 
 
  Leigh Stevens   6/13/02,  3:35:43 PM
Subscriber QUESTION: "Leigh, I noticed that the deviations on your envelope lines were different for each index, any reason, and why do you use envelope rather than Bollinger Bands? Also, is there a good setting for regression lines, at present mine are set 2, -2. Sometimes I switch to 2.5, -2.5, you apparently draw your own. Do you change the settings for different chart times? "

RESPONSE: I set the index envelope lines according to their individual volatility over time -- volatility is not exactly the right term, but as you know the Nasdaq 100 has bigger trading swings than the Dow for example. The lines are set, relative to a simple 21-day moving average, at the percentage value where the particular index tends to make significant bottoms and tops. For the S&P 500, in recent months, this has been averaging 4.5-5%. When the SPX gets this far above or below its 21-day mov. avg. by this amount, it is a measure that the index is overbought or oversold. As with "oscillators" like stochastics and RSI such readings, suggest at a minimum that the probabilities for trend reversals increases substantially. There may not be a reversal, but the upward or downward momentum will tend to slow.

I don’t tend to use Bollinger Bands because, for the indexes, I want a "constant" line (percent value), not a line that fluctuates above and above an average based on current (daily/weekly) volatility. This allows certain discoveries. If the SPX peaked at 5% above the 21-day avg., I look for a low of a similar magnitude - the market tends to range from similar "extreme" to similar extreme, like a pendulum. If the market starts peaking or bottoming at a level that is a bit further out from the average, I may expand the percent setting by a half or full percent. Generally, I don't adjust the lines all that often. I am simply looking for an area, where the odds of a substantial further move above/below the envelope is substantially less than a countertrend move.

I don't use regression lines - I "hand" draw through my best judgment on the key highs and lows. Sometimes, for example, I cut through (bisect) an extreme high or low (i.e., an "internal" trendline - one drawn through the most number of points) - a regression line may also have this result if a price spike is well above/below the trend progression. The point is, is that I don't construct trendlines mechanically. In fact, my life as an analyst trading adviser would be a lot "easier" if I didn't spend as much time as I do, re-drawing trendlines as the patterns shift. But this is the edge I may have over someone else and is probably mostly a result of experience, although I try to teach best practices in this area in my book.

Lastly, on changing envelope settings for different time frames - I only use "simple" moving average envelopes on the indexes and on a daily chart basis. It’s the only time frame and instrument that seems to make envelopes really useful - and, they seem to exhibit consistent behavior - on the dailies (charts) and on the indices. Oh, their very good on the long bond chart. If you trade bond futures they're very useful.

 
 
  Jonathan Levinson   6/13/02,  3:27:29 PM
The last hour's trading seems to have violated the small uptrending COMPX channel on the 10 and 15 minute charts. Internals remain weak, though we've seen weaker this week (no pun intended). There's very little guidance from the other indicators, as the intraday stochastics are all confused due to the intraday chop. 30 and 60 time frames are falling, 15, 10 and 5 are rising. When in doubt, stay out.

 
 
  Leigh Stevens   6/13/02,  3:16:57 PM
Subscriber QUESTION: " Please say somthing about MSFT, please. I don't know whether to go short or long!! "

RESPONSE: Well in the tug of war that is going on between the Bulls & Bears, one of the tech stocks that keeps me somewhat bullish on QQQ is Microsoft's (MSFT) chart pattern right now. The stock broke out above the top end of a multimonth downtrend channel on the daily chart yesterday on heavy volume (about double its average) and today is consolidating (those gains) in a bullish manner; so far, its intraday price range today is in the upper portion of its price range of yesterday.

A prior rally high at 56.4 implies that this is a resistance hurdle that needs to be overcome next, but I think the stock can clear this area and advance further - if so, see a next target to 59.75-60 next to its 200-day moving average which will be key resistance (the moving average) as it was at the mid-March (up) swing high (at 65).

 
 
  Leigh Stevens   6/13/02,  2:59:13 PM
INDEX Comments: SPX, OEX, DJX, COMP, NDX & QQQ - All have failed at near-term chart resistance points for now. What I thought last night were emerging Head & Shoulder's bottom patterns, now look like the reverse - H&S top patterns - with the rally up to these recent highs, then rolling over - it gives the look of "right shoulders" or the 3rd. top on the indices. So, we have a pattern of 3 tops, with a higher middle top.

Have not seen patterns like this in awhile - ones that could resolve themselves either bullish or bearishly in quite this way. Since we're still in a down trend, I'd be cautious here if long, unless all the indices can decisively move above their highs of today. Given that the short-term hourly stochastic has rolled over on a sell signal, looks like at least some near-term weakness ahead. Key near supports: QQQ > 27.5; NDX > 1105; COMP > 1494-1495; DJX > 94.8; OEX > 500; SPX > 1009-1110

 
 
  Jim Brown   6/13/02,  2:57:32 PM
Pivot Trade Signals
Indexes are struggling to hang on here at the 9560/1510/1015/505 level. Decliners are increasing their lead over advancers to 3733 to 2594. New lows have increased to 225. Still the indexes are holding to minimal losses. This is actually normal in a bottoming process. Indecision is rampant and buyers and sellers appear almost evenly matched. This could be a good sign going forward. This does not mean buyers will not dry up if we don't make some upward progress and another down leg could appear.

 
 
  Jim Brown   6/13/02,  2:40:57 PM
Hi Jim, I am very much a beginner at this game but I have been looking at the TRINQ today and it seems to be gravitating back to 40 to 70 range. My intuition is telling me that there is some buying going on quietly but it is hard to pinpoint the specific why. Have you ever had instances where your gut feel is so strong that it prevents you from acting? Your thoughts would be appreciated. Thanks, AB

Yes, yes, yes...... But it is best to remember, "when in doubt, sit out" There is no mandate to trade X number of times a day or a week. This market is very hard to predict. Professional traders have been saying for months that this has been the hardest market to trade than they can remember. If they are having trouble it is easy to understand why the retail trader is struggling. We need to remember to trade what we see not what we believe. It is very easy to say and very hard to do. Trading almost requires a bias of some sort. There will be plenty of time to profit in the future.
Good luck

 
 
  Jonathan Levinson   6/13/02,  2:34:50 PM
COMXP advancing volume is slightly ahead of declining volume, while the number of new lows continues to trounce new highs. TRINQ at .77 and QQV still negative on the day. The COMPX is either at the bottom of its recent uptrending channel, or about to challenge is 1500 level of support.

 
 
  Jim Brown   6/13/02,  2:18:09 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
We were triggered on the OEX/SPX/DJX SHORT signal when the OEX traded below 506 at 14:06:32. (SPX 1016.88 est)

The initial stop loss will be OEX 510.25. (SPX 1024.50) This is the low side of the 508-514 resistance range but as far away from the entry point as I want to risk today considering the earlier tendency to shake off bad news.

 
 
  Jim Brown   6/13/02,  1:55:24 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Go SHORT the OEX/SPX/DJX on a breakdown with an OEX trade below 506 OR another break above 508. This gives us the possibility of an entry point near the high of the day or on a further breakdown. (SPX below 1017 or above SPX 1021)

 
 
  Jim Brown   6/13/02,  1:51:46 PM
Pivot Trade Signals
If this market moves any slower they will have to put cots on the NYSE trading floor. The morning attempt to rally looks to be running out of steam at the bottom of the OEX resistance band (508-514) This failure to break yesterday's closing high could spell doom. I am going to re-enter the SHORT signal here.

 
 
  Jeff Bailey   6/13/02,  1:46:07 PM
Adobe Systems (ADBE) $37.02 -0.77% ... tonight, after the bell, expected to release earnings. Analysts are looking for $0.25 per share. Stock has been range-trading between $34 and $41 for better part of this year. Current chart exhibits words of caution, but past bullish and bearish counts have been quickly reversed. Would have to price out the calls/puts, but potential strangle trade at hand. Any break from this year's consolidation could give powerful move in the direction of the break. Tonight's earnings may be the catalyst. Link

 
 
  Jonathan Levinson   6/13/02,  1:29:23 PM
Stopped out of our put play on the COMPX at 1520.

 
 
  Jonathan Levinson   6/13/02,  1:02:05 PM
Advancing volume is now outpacing declining volume on the COMPX 1.7:1, although new lows outnumber new highs 120 to 36. I would lower the stop on the COMPX put play to 1520 to protect initial capital in the event of another upsurge.

 
 
  Leigh Stevens   6/13/02,  12:59:58 PM
INDEX Comments: Pivotal resistances -- SPX > 1030, at its hourly down down trendline; OEX deflected at its hourly down trendline in 508 area; DJX resistance > 96.5 - 96.7; Nasdaq Composite (COMP) near resistance at hourly down trendline was exceeded on COMP move above 1518; COMP needs to get back above 1518-1520, especially on closing basis, to suggest an eventual test of more major resistance at 1548-1550; QQQ pivotal near resistance > 28.00, then at 28.5;

 
 
  Jeff Bailey   6/13/02,  12:54:11 PM
Movie Gallery (MOVI) $20.55 +4.84% ... stock mentioned recently for potential short squeeze.. Looks like bears getting jittery here. Link

Disclosure.... I currently have bullish position in MOVI.

 
 
  Jonathan Levinson   6/13/02,  12:07:58 PM
TRINQ remaining neutral at .55, not showing any real selling pressure at the top of this move, indicating that it might not be the top. This is an aggressive trade, so keep the stops tight.

 
 
  Jeff Bailey   6/13/02,  12:05:21 PM
Gold/Silver Index (XAU.X) 73.60 -2.67% ... hasn't violated Tuesday's lows of 73.22, but sector bulls understand previous comments regarding any break at $73. On $1 box, this would be spread-triple-bottom sell signal and combined with break of trend would be bearish if 73 trade were to take place. Link

 
 
  Jim Brown   6/13/02,  12:05:11 PM
Pivot Trade Signals
Bullish indicators breaking out all over. Still weak but improving. The markets are moving into positive territory after a drop back to support at the open. This could produce a decent bounce as the oversold conditions ease again. First resistance for the Dow would be in the 9650 range with stronger resistance at 9750. This is the likely spot for another roll over. The Nasdaq has major resistance at 1550 as well. The OEX has resistance between 508-514 and should have trouble hitting the high end of this range. We will remain flat until these resistance levels are met on any continued bounce. This narrow trading range (OEX 502-514) needs to be entered on the extremes and not try to trade the center.

 
 
  Leigh Stevens   6/13/02,  12:03:33 PM
INDEX Comments: Relevent to QQQ, breakout move yesterday in Microsoft (MSFT) occurred on twice its average volume of late. MSFT is consolidating ahead of what looks like will be another move higher; may be forming a bull flag. Key near resistance is 56.3. (MSFT trading around 55.3). ALSO, key Nas 100 stock Oracle(ORCL) is also moving slightly above its down trendline currently - last around 8.4 - ORCL needs to clear near resistance at 8.7 to get a good move going. INTC now trading above its high of yesterday.

Disclosure - I own ORCL.

 
 
  Jeff Bailey   6/13/02,  12:00:12 PM
Newmont Mining (NEM) $27.44 -2.86% ... from bullish profile Tuesday at $28.19 ... would move to the sidelines here on violation of Tuesday's low.

 
 
  Jonathan Levinson   6/13/02,  11:57:58 AM
Let's wait for a break below COMPX 1520 as a signal to enter those puts. No need to try to guess at the top and risk being wrong.

 
 
  Jonathan Levinson   6/13/02,  11:54:20 AM
Or it might continue. The TRINQ is currently at .48 and all intraday oscillators on the COMPX are reaching overbought extreme as the index approaches its 1525 resistance level. A rollover from that level will be a good entry point for put plays, keeping a tight stop just above the resistance level.

 
 
  Jonathan Levinson   6/13/02,  11:38:44 AM
If that was the top of that upmove on the COMPX, it was quite weak, with declining volume staying ahead of advancing volume through its duration, and an absence of buying pressure as reflected in the TRINQ, which bottomed at .71. If we proceed lower from here, the Nasdaq's low of the day could be in jeopardy.

 
 
  Jeff Bailey   6/13/02,  11:35:10 AM
Research in Motion (RIMM) $13.37 +1.12% .... going to suggest that traders short/put from past profile near $16 take some gains off the table should stock break above yesterday's high of $13.60. Reason being NASDAQ-100 Bullish % ($BPNDX) only lost 1 net stock yesterday to 19%. Since this is still more "oversold" level, looking for some gains from bearish trades. May then look for re-entry on potential rally to $15.

Those perhaps holding the profiled December $15 puts (RULXC) from $2.60 profile can continue to hold, unless account management needs the 42% or so gain from current bid of $3.50.

P/f chart remains bearish with vertical count of $8.00. First sign of strength would be trade at $15.50. Link

 
 
  Leigh Stevens   6/13/02,  11:32:46 AM
INDEX Comments: affecting QQQ is bullish breakout of Qualcomm (QCOM) above its Dec.-Apr.-June down trendline and above its 50-day moving average. Stock is last at 33.4. This technical breakout occurs after QCOM traded sideways for past few weeks in what looks like "basing" type action, with a line of support at 30. QCOM looks like it could re-test resistance in 40 area and maybe test its 200-day moving average currently in the 44.7 area.

 
 
  Jim Brown   6/13/02,  11:24:12 AM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
Close the current SHORT signal, OEX currently at 504.55, (SPX 1015) I still believe in the overhead resistance at 508-510 but I would rather exit here and get out of this "choppy range"

 
 
  Jonathan Levinson   6/13/02,  11:23:07 AM
Internals are firming a bit the COMPX. Declining volume over advancing volume 1.6:1, with 99 new lows to 21 new highs 1,821 decliners to 1,145 advancers. Not a paragon of strength, but showing some improvement since respecting support at the 1500 level. TRINQ is at .78 and QQV is down .28 on the day.

 
 
  Jim Brown   6/13/02,  11:21:20 AM
Pivot Trade Signals
Bulls trying to buy these dips should be getting frustrated with the constant selling pressure. Still the indexes are trending up again from the 9510/1500/1010/500 levels. There appears to be strong support here and despite the negative sentiment on the surface the internals are slowly improving. I am closing the short signal with the intent to look for a new high odds entry point and get out of this chop.

 
 
  Jeff Bailey   6/13/02,  10:58:32 AM
Jeff,

One note on Tom Dorsey's book and the reference to Professor Davis' study...

He mentions in his 2nd edition book that he has removed the study results, citing the reason as giving people a mistaken belief this was mechanical rather than an art form.

I found a 1st edition book on BarnesandNoble.com

Oh! I don't have his second addition. Hmmmm. Tom is "wise beyond his years." Yes, many do think it is purely "mechanical" and it isn't. MUST use the bullish % charts to understand the internals of the MARKETs and SECTORs you trade. A bearish chart pattern from Professor Davis' study isn't necessarily bearish if the SECTOR and/or MARKET is in a bullish phase. It also depends on the LEVEL of bullishness or bearishness you're in.

 
 
  Jeff Bailey   6/13/02,  10:47:36 AM
Tyco Intl. (TYC) $13.03 +28.27% ... how weird is this? Yesterday, subscriber asks question based on "fundamentals" and we think, first sign of strength for confirmation of his belief is trade at $12. He's got some confirmation today. Link

 
 
  Jeff Bailey   6/13/02,  10:37:52 AM
Dow Jones Transports (TRAN) 2,709.81 +0.10 ... keeping a close eye on things here. Trading against the trend.

Fedex (FDX) $56.62 +1.37% .... was bullish this one yesterday... stock acting well. Yesterday noted reverse head/shoulder pattern here. Link and targeting $60.

Would sure be helpful if the TRAN can get above its 50-day MA. Act like a tidaly wave to help push FDX higher. FDX is trying to lead, but will the rest of the snake follow?

 
 
  Jonathan Levinson   6/13/02,  10:37:16 AM
CNNfn reported this morning that "Merrill likes Tyco". At the risk of causing a stampede of buying in Tyco's shares, I only wanted to add that I like vanilla soymilk, but none of you probably care about that either.

 
 
  Leigh Stevens   6/13/02,  10:36:34 AM
INDEX Comments: CBOE Volatility - Indexes are maintaining recent high levels again today, with the VIX ($VIX.X) (reflecting OEX options volatility), above 28 (last: 28.4) which keeps it in the area of its recent highs - 30 and above is often talked about as reflecting maximum "fear"; VXN ($VXN.X), reflecting the Nas 100 index (NDX) volatility, has made a NEW high on its recent run up, getting up to nearly 56 today (last:54.6). Highest level on VXN this year. Back in the fall, VXN got well above 60/65 for a lengthly period.

 
 
  Jonathan Levinson   6/13/02,  10:32:31 AM
Market internals on the COMPX are not improving significantly as the index sits at a level of support 6 points off its lows of the day. With the TRINQ a tame 1.25 and the QQV up slightly on the day, there's plenty of room to the downside, but an equal chance for an upswing from the 1500 support level.

 
 
  Leigh Stevens   6/13/02,  10:22:50 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on of course, what else, ImClones's Ex-CEO busted and charged with Insider Trading - Martha Stewart - sex appeal - the talking heads yesterday couldn't get enuf of this story yesterday. Given the "crisis of confidence" that investors are afflicted with, this is not the kind of story that is going to be a feelgood factor for Investors - the market has gotten an image as being a crooked game.

There was a WSJ story on permanent repeal of Estate Tax being voted down by Senate. Revenue concerns have come back into the forefront of Washington worries.

Last but not least, story on the Jury in the Anderson Trial being deadlocked - the judge told them to keep deliberating. All they would have to do with me is to take away the coffee and I would become decided fast!

 
 
  Jim Brown   6/13/02,  10:17:44 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
The short entry was triggered when the OEX traded below 504. (SPX 1015 est) The OEX was holding above the low of the day at 504.10 but the Dow/Nasdaq were weakening. Market internals were getting weaker and it appeared the opening direction from yesterday could be repeated.

The initial stop loss will be 507.50, just above the high of the day, the top of the downtrend channel and the convergence of several intraday averages. (SPX 1021 est)

 
 
  Leigh Stevens   6/13/02,  10:16:16 AM
INDEX Comments: ALL indices are giving back their gains of yesterday. IBM strength is not enough to help out the Dow, as its only 1 of 3 that is trading higher on the day. SPX could be heading back to a re-test of the key 1000 area and OEX, 500 - important areas to watch. As is 27 in the QQQ. Treasuries are strong - gold has tanked, so investors are back to looking for safe haven in Bonds.

 
 
  Jeff Bailey   6/13/02,  10:13:15 AM
Treasury Watch 10-year YIELD ($TNX.X) 4.87% ... this is "firm" break of the 4.967% level and also has 10-year YIELD breaking below its 200-day MA. Defensive posture from the bond market here. Look for decline in YIELD to 4.801%, which is 50% retracement we've been using. Looks like cash moving more rapid into the perceived safety of Treasuries.

 
 
  Jonathan Levinson   6/13/02,  10:11:01 AM
The TRINQ at 1.49 and QQV up .33 on the day have barely reacted to this downdraft on the COMPX.

 
 
  Jeff Bailey   6/13/02,  10:08:31 AM
BMC Software (BMC) $15.55 -1.26% ... Day Traders ... I'd be an aggressive short here. Stop $16.25 and target $14. Link

 
 
  Jim Brown   6/13/02,  10:06:14 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Go SHORT the OEX/SPX/DJX on a breakdown with an OEX trade below 504.

 
 
  Jonathan Levinson   6/13/02,  10:00:06 AM
COMPX declining volume beating advancing volume 1.5:1, with 6 new lows for every 1 new high. The TRINQ is at the upper end of neutral territory at 1.03, and the QQV is just above flat, up .22 on the day. The COMPX is still searching for direction, but not showing much strength so far.

 
 
  Leigh Stevens   6/13/02,  9:43:40 AM
Subscriber QUESTION: "What is a bear trap reversal? Are the bears trapped shorting the high, or snoozing at the lows like me without covering, or what? I stayed over yesterday on 1/2 a position of a profitable oex short yesterday, on the theory that closing at day's low, should see some follow thru--well it did but was over in what seemed like a blink of the eye--and I had moved to full posiition on Jim's signal to short! I held over again, and now am hoping this small loss does not turn to a greater one tomorrow. "

RESPONSE: "Bear trap" reversal is move to new lows followed by an immediate (within same session; e.g., same day, same hour, etc.) upside rebound to well above the same lows. "Bull trap" reversal is reverse - move to a new high, followed by a substantial decline.

I'm inclined to cover shorts on balance into support areas given the oversold market - on the other hand, I don't think we're going to start an immediate sustained move higher - fits & starts, backing & filling would be more like it. If this view is wrong, would expect recent lows to come under assault again.

A good number of sectors looked like they could have hit at least temporary bottoms yesterday - am interested in what the semiconductor index ($SOX.X) does over coming days relative to Nasdaq recovery; and, the NYSE Financial Index ($NF.X) - the broker index too ($XED.X) - as good gauges of NYSE upside potential.

 
 
  Jim Brown   6/13/02,  9:40:21 AM
Pivot Trade Signals
Stuck in the middle of the trading range we will remain flat until a trend and a favorable entry point can be established. The markets stopped their drop pretty quickly after all the morning news was digested. The chip news is providing support for the Nasdaq but it is very weak support.

OEX 508.50 would be the first resistance test to the upside and should tell us if there is any underlying strength like several people mentioned yesterday. Also the support at 499-501 could limit the downside. We are in a wait and see posture until something develops.

 
 
  Jonathan Levinson   6/13/02,  9:38:36 AM
Declining volume is just under twice advancing volume on the COMPX in the first minutes of trading.

 
 
  Jonathan Levinson   6/13/02,  9:35:35 AM
Hi Jonathan, I noticed today (Wednesday) that the QQQ Sept. 21 put QAVUT, there were 10,100 contracts traded. I got an email with a recap of options traded for the current day and noticed this. The premiums are real cheap and I'm tempted to take a gamble and buy a few contracts. I imagine there are only two reasons for this volume: either being used as a hedge aginst calls or someone is really bearish and expects the Qs to fall a lot lower, and of course they are so far OTM and cheap, they're a bargain.

Can you comment on this? I'm really curious to know what the downside could be with this play.

At $.40 x $.50 and the QQQ trading in the 28 range, the Sept 21 puts are anything but cheap, packing a negative $7.00 intrinsic value. Your breakeven on these is the QQQ trading at $20.60 on expiration day in September. Now, $.40 is cheap in dollar terms, but that's a goodish distance to fall for the QQQ, even by September. I don't rule it out, but I personally won't bet it here.

Because of the complexity possible with derivatives such as we like to trade (grin), that big block could signal any number of things, but I'd guess that it wasn't simply a directional naked put play. The purchase would more likely have been a hedge against a long QQQ play, either in shares or in calls.

Bottom line, I would have loved to be the seller in that transaction.

 
 
  Jim Brown   6/13/02,  9:30:30 AM
Pivot Trade Signals
After being positive all night the futures took a downturn when the May retail sales came in weaker than expected. Traders were concerned that the consumer was feeling the impact of the "soft spot" and may slow the buying that has held up the economy. Merrill Lynch also cut estimates for Dow component AXP.

The MCHP news from last night should provide a little strength for chip stocks but the rumor that MSFT would pre-announce better than expected earnings did not come true.

Closest OEX resistance 508.50
Closest support 500.50.

 
 
  Jonathan Levinson   6/13/02,  9:28:42 AM
Weaker than expected PPI data at 8:30AM took the wind out of the futures this morning, bringing them down from their best levels of the after hours session.

 
 
  Jonathan Levinson   6/13/02,  9:26:13 AM
QCharts is now online.

 
 
  Jeff Bailey   6/13/02,  9:24:56 AM
Hi Jeff,

I am most interested in the point and figure chart pattern study conducted by Professor Earl Davis that you frequently cite. I would like to learn more.

Do you know where I can find it?

Yes... Professor Davis of Purdue University first published his findings as part of the manuscript Profit and Probability-Technical Analysis of the Price Fluctuations of Common Stocks

Tom Dorsey's book "Point and Figure Charting" references this study and posts the various probabilities associated with the bullish and bearish chart patterns. You can get Tom's book in our book store at this Link

 
 
  Jonathan Levinson   6/13/02,  9:18:49 AM
QCharts appears to be offline.

 
 
  Leigh Stevens   6/13/02,  9:18:23 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index Futures trading: S & P > 3.20; D J > -37.00 ; Nas > -3.5

 
 

Market Monitor Archives