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  Jim Brown   6/17/02,  5:35:12 PM
Pivot Trade Wrap

Market extends gains from Friday's bounce
The markets bounced at the open and never looked back. The Dow paused for a breath at 12:00 but held its higher ground of 9650. A number not seen since last Tuesday. The rally continued into the close with the Dow finishing at the high tick of the day. The Nasdaq was just as positive but the end of day tick was barely over the 1550 level that had be a price magnet all afternoon.

The internals finished strong with advancers beating decliners 5072 to 2142 on a combined basis. New highs beat new lows 204 to 186. Up volume beat down volume by 2,317 million to 506 million shares. This 4:1 ratio is very bullish despite the only 1.5 billion shares on the Nasdaq. Volume was low but very lopsided.

Where to from here? The Dow has strong resistance between here (9685) and 9800 and the Nasdaq has strong resistance between here (1550) and 1580. The bulls would like to think they can push these indexes over the top but they have their work cut out for them. The two economic reports tomorrow, CPI and Housing Starts, should not move the markets. That is of course assuming the Housing Starts do not come in substantially below the 1.60M that analysts are expecting. Positive closes tend to produce positive opens and that is what I expect in the morning. The closing TRIN at .36 shows how bullish the buying was but also how overbought conditions are. Used as a contrarian indicator the TRIN at .36 is very bearish. It indicates extremely lopsided buying today and we all know how extremes tend to correct just as quickly. With strong overhead resistance it is not likely the rally will continue much farther without a rest. We will be looking for that point as our next entry level. See you on Tuesday.

  Jim Brown   6/17/02,  3:50:08 PM
Pivot Trade Exit Point Alert - DJX/OEX/SPX
The continued bullish bounce this afternoon could cause another short covering bounce at the open tomorrow depending on what earnings warnings come out after the close tonight. The Nasdaq has been basically flat since 11:30 while the Dow, SPX, OEX have trended slightly higher. There are a couple economic reports prior to the open, the CPI. and the Housing Starts. The market has been ignoring bad news so the risk is to the upside not the downside. Several readers have asked about carrying the short position over night. I think the deciding factor should be 515. An OEX trading below 515 at the close would be bearish and would warrant holding over. An OEX over 515 would be bullish and we should close that signal and wait for the open to establish a new signal. 515 is the 70.7% retracement level from the 9/11 gains. It has been a price magnet all afternoon. Based on current levels (515.19) will go flat at the close.

  Jonathan Levinson   6/17/02,  3:20:55 PM
Re: TRINQ and QQV: Do you have article on Option investor on these? Also, I use street smart pro-Schwab and cannot get $trinq. I have called them and the are no help, as usual. Thanks in advance. Steve

Not yet, Steve, but it sounds like an excellent idea. QCharts displays TRINQ data with $TRINQ. Can't help you with Pro-Schwab, unfortunately.

  Jonathan Levinson   6/17/02,  3:06:54 PM
COMPX breadth remains as it has all day, with the number of new lows creeping up slightly relative to new highs. The TRINQ is at the lower end of neutral at .55. MFST has dipped below 56, but with no particular fury, and the COMPX remains within its range, though now above 1550 instead of below it.

  Leigh Stevens   6/17/02,  2:53:24 PM
INDEX Comments: Hesitation here may be related to overbought readings on the hourly stochastics - if the indices rally strongly here into another minor up "leg", they would break the pattern of rally failures consistently over past weeks that occurred EVERY time these hourly oscillators register overbought extremes.

  Leigh Stevens   6/17/02,  2:48:42 PM
INDEX Comments: ALL INDICES - this is pretty key area here, as rally failures would negate the bullish hourly patterns. NYSE TRIN is a quite bullish .34 - perhaps on a buy program or two.

  Leigh Stevens   6/17/02,  2:44:10 PM
INDEX Comments: COMP is just starting to break out to the upside, out of its hourly consolidation pattern.

  Jonathan Levinson   6/17/02,  2:42:00 PM
This COMPX upmove, while impressive, "feels" toppy to me. Could be the TRINQ at .55, or the amount by which it's runup since Friday. If you get triggered on a print above 1555, please use a tight stop. If you're less than completely aggressive, set the trigger higher at 1560. We're simply not in a hurry to put on a position just for the sake of being in. I'd prefer to miss the move entirely than to lose money on it.

  Leigh Stevens   6/17/02,  2:40:18 PM
INDEX Comments: DJX - I spoke to soon, as the Dow is beginning to break out above its bullish flag consolidation hourly pattern. Now the other indices appear to be trying to follow suit.

  Jim Brown   6/17/02,  2:40:04 PM
Pivot Trade Signals
The markets had an excellent chance to roll over during the last two hours but didn't. The advance/decline ratio is slowly declining at 2.20 but still very positive. TICKs are improving again and back over their 30 min moving average. It is very possible we could get another end of day bounce if those that went short around noon and those who were short at the open decide the rally has legs.

  Leigh Stevens   6/17/02,  2:39:04 PM
INDEX Comments: ALL INDEXES are consolidating at or just under resistance. The hourly chart patterns look like bull flags - this would be confirmed by a decisive upside penetration of today's intraday highs -if so, upside objectives would be another good-sized move. Conversely, a drop below the recend narrow-range hourly chart consoldiations would imply a pattern "failure" and the start of a correction. Looks like buying and selling interests are pretty balanced right now, but nature and the market never stand still - Stay tuned!

  Jonathan Levinson   6/17/02,  1:51:54 PM
Perhaps the COMPX has achieved the mythical "perfect equilibrium", appearing destined to print all 100 cents of 1548. It might take a program trade to decide "now or never" and get the price moving in either direction. Patience.

  Jim Brown   6/17/02,  1:37:17 PM
Put activity in IBM is extremely active today with nearly 20,000 contracts changing hands across all the exchanges. The downgrade by SSB before the open as well as the stop right at $77 resistance excited traders. The possibility of an earnings warning is very near 100% if you believe the rumors flying in the various chat rooms. IBM is a current OIN put recommendation and the current bump to $77 provided an excellent entry point. Evidently others thought so as well!

  Jonathan Levinson   6/17/02,  1:31:19 PM
COMPX market internals remain almost exactly the same as they've been for hours now. This feels like our long awaited rollover, but I thought the same thing one hour ago, and am glad I was watching from the sidelines as price whipped back up. Patience is the rule.

  Leigh Stevens   6/17/02,  1:30:20 PM
INDEX Comments: OEX & DJX reversing right at the top of their down trendlines. COMP, NDX & OEX reversing or their rallies have faltered at or just under resistance implied by prior (up) swing highs on the hourly charts.

  Jim Brown   6/17/02,  1:26:25 PM
Pivot Trade Signals
QQQs could be rolling over here. Jonathan has a trigger to go short at 1543. It looks like it could be right on the money! Conservative traders may want to wait until a break under 1537.

  Jonathan Levinson   6/17/02,  1:06:14 PM
Could you comment on MLNM's chart?

With daily and weekly stochastics crossing up and MacD turning up from oversold and price having recently broken its monthlong downtrend, MLNM looks poised to challenge its 20 day EMA at 13.93.

  Leigh Stevens   6/17/02,  12:46:10 PM
SECTOR Update: S&P 600 Small Cap and Russell 2000 (RUT) - The iShares of the S&P 600 value (IJS) and growth, segments (IJT), as well as the RUT iShares, symbol IWM, having very strong rebounds from expected support areas; see my comments in Sunday's SECTOR TRADER at Link - looks like the downside corrections have run its course. Not before I was hit on my suggested stops in the iShares on Friday's big downswing. STOPS: Can't live with em (sometimes), can't live without them! Per my comments, if you bought them on my suggestion, but took a wait & see attitude or like to use a "close-only" stop point, stay with small cap as this group still looks like it has considerable long-term upside potential.

  Jonathan Levinson   6/17/02,  12:34:50 PM
The COMPX appears to be starting a rollover below the 1550 level, although the internals are more or less holding their ground, with the TRINQ at .6, and advancing:declining volume still under 4:1 but above 3:1. I'm sticking by my short trigger on a break below 1543, but urge anyone who dives in to set a tight stop. Price can be unpredictable during op-ex week, and losing money shouldn't be on anyone's agenda in case the buyers jump back in.

  Jim Brown   6/17/02,  12:30:33 PM
Pivot Trade Signals
Stochastics have turned negative on the 5, 10, 15min charts and should complete the turn on the 30 min with the next bar. Advancers are still ahead of decliners by a wide margin but dropping. The TICKS have turned negative and the TRIN is very bearish at .39.

  Leigh Stevens   6/17/02,  12:19:53 PM
Subscriber QUESTION: "I am a new subscriber..."Trial" and I will be signing up this afternoon...very impressed with your site and material...Great insight... I was wondering your thoughts, on EBAY...they are on a tear this morning, and my signals are saying that it could be a compelling Short at these nose bleed levels... at a forward P/E of 82 and selling at 20x 2002 sales...it seems to be a bloated piglet. I would appreciate your insight and thoughts."

RESPONSE: Well you got some insight from Jeff just now on eBay (EBAY) - I'll add my perspective and comment on a couple of other technical aspects. What I find especially bullish in its pattern is the "rounding bottom" seen over the Feb-May time frame and the upside acceleration here after EBAY broke out above its 200-day moving average. Slight upside gap is more likely "signaling" the early stages of a move higher - stock easily projects back up to $70-72 area, which has been the high end of a multimonth trading range.

  Leigh Stevens   6/17/02,  12:09:38 PM
INDEX Comments: QQQ - as far as the "biggies" in the big cap techs, what is most helping is continued advance in MSFT after its upside breakout of last week; ORCL - stong upside breakout over Friday & today; good oversold rebound in INTC over today & Friday; CSCO and QCOM not helping much here as stocks are still languishing - QCOM got whacked last week and has not been able to regain support. ORCL is on fire though - up 7% today! Am (finally) glad I own it personally.

  Jeff Bailey   6/17/02,  11:59:44 AM
eBay (EBAY) $62.27 +5.47 ... stock up strong today. On Thursday, stock gave "triple-top-buy" signal at $59 and today gives a "spread-triple-top buy" at $61. Bears need to be careful here. While these triple-tops are under "bear market" conditions, eBay has often been one of the first stocks to turn higher. Breaking out of BIG base here and looks bullish longer-term. Link

  Jeff Bailey   6/17/02,  11:51:57 AM
Dow Industrials (INDU) 9,650 +1.86% ... after achieving its bearish vertical count of 9,300 on Friday, turn higher today and trade here now has this market average giving a "buy signal" and turns count bullish to 10,250. The Dow has not been able to meet prior bullish vertical counts in recent months, but bears risk from Friday's 9,300 now understood. Link

Looking for some substantial resistance at the 9,800 level, where Dow Indu gave spread-triple-bottom.

With triple-witching week underway, expect some volatile trading as "anything goes" as hedges and position unwind and rolled forward in stock options, index options and futures markets.

  Jim Brown   6/17/02,  11:35:37 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Finally, we were triggered on the OEX/SPX/DJX SHORT signal at 11:23:44 when the OEX traded above 512. (SPX 1027.84, DJX 96.26) We will put the initial stop loss at OEX 517. (SPX 1043)

Amazing coincidence! Just after I changed that entry point from 513 to 512 that a buy program added 50 points to the Dow and 2 points to the OEX. I am sure that never happens to anybody else.

  Leigh Stevens   6/17/02,  11:35:17 AM
INDEX Comments: DJX , which typically trades in a more narrow trend channel has broken out above its hourly downtrend channel - also, DJX now has cleared its prior hourly (up) swing high at 96.2. Next resistance is 97, then 97.6 at the next higher hourly swing high.

  Jonathan Levinson   6/17/02,  11:22:47 AM
Nasdaq breadth has slipped just the slighest bit on this recent hesitation at COMPX 1543. TRINQ and QQV are virtually unchanged. This being op-ex week, I am more hesitant than usual to put on a trade, given the often surprising swings that tend to take place. Continuing to watch and wait.

  Jim Brown   6/17/02,  11:14:56 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
The gains appear to be slowing again and the TICKs are dropping. It appears the 513 level may not be hit. Let's add an entry point on a trade below 510.50 (SPX 1025) Also, change the upper entry point to 512 instead of 513 just in case we get another tick up.

  Jim Brown   6/17/02,  10:57:25 AM
Jim, could you explain what appears to me as a contradiction between your 10:16 and 10:18 posts? (failure of 514 resistance and shorts getting scared, then going short at 513?)

The "shorts are getting scared" comment was simply a reason why the initial resistance levels at 505-509 were giving way. Shorts who saw the opening bounce and follow through from Friday were beginning to cover and that was pushing the averages up. The 514 level is strong resistance and I am anticipating the current bounce to fail AT or under 514. Thus the 513 entry point just in case this does happen. The OEX rarely moves in greater than 10-12 point ranges on normal market cycles. Anticipating an end of the bounce after 12 points is just speculation based on range and resistance levels. I hope this spelled it out better.

  Leigh Stevens   6/17/02,  10:54:43 AM
INDEX Comments: COMP, NDX & QQQ ALL have broken out above the top end of their hourly chart downtrend channels that go back to mid-May. Just when high volatility has us most "fearful" - witness Friday's wild ride - up, up and away!

  Jonathan Levinson   6/17/02,  10:46:17 AM
Nasdaq breadth continues to hold strong, and the TRINQ is indicating orderly buying, staying within a neutral range. This is not "spiky" in way that makes me overly eager to short. I will look to short a rollover from the COMPX 1550 resistance area, identified by Leigh at 1548, on a subsequent break back below 1543, or to go long on a break above 1555. I'd prefer not to enter a trade at all than to enter poorly- thus the fairly wide range between 1543 and 1555.

  Leigh Stevens   6/17/02,  10:29:43 AM
INDEX Comments: COMP, NDX & QQQ cleared their first chart resistance points and look headed to their next per my earlier post on layers of support/resistance (9:48). Stochastic levels are overbought on short setting (5), not on longer (21).

  Leigh Stevens   6/17/02,  10:26:50 AM
INDEX Comments: SPX & OEX have cleared first levels of chart resistances - DJX is coming up on its, per my earlier post on Support & Resistance (9:42)

  Leigh Stevens   6/17/02,  10:23:08 AM
Subscriber QUESTION: "Checking the monitor on Friday I don't see any comments on good ole AU or bonds. W/Gold index up for first time i think in a few days and bond yields up big (.09 or better on 5, 10, 30) where's the money coming f/ to buy stocks and feed this rally? "

RESPONSE: Normally comment nightly on precious metals index, XAU in Sector Trader; Gold is weak today, with XAU (at 74.6) off nearly 3%; recent rallies reversed in area of 50-day MA; XAU looks lower to me and I think sector has topped; 63 area is where main support is.

Anglogold (AU) Ltd, at 28.8, has retreated from its highs in 34 area, but is hugging its 50-day MA at recent lows - trendline support comes in at 26.75 currently. Stock has retraced 38% of its Sept/Oct to May advance; 50% retracement would be to 25 - AU may get down to this area, judging by XAU

Jeff usually comments on Bonds daily when they are active and moving - to me, yields on the 5 & 10-year look they are down near the low end of a trading range.

Money to "feed" a next rally - there is plenty of money on the sidelines - not in funds cash balances so much, just cash from investors that could pour back into funds & individuals stocks if this market ever gets going on the upside in a sustained advance.

  Jonathan Levinson   6/17/02,  10:22:14 AM
The COMPX 1550 level will be my target for a short play in the QQQ, also if we make it there. Given the toppiness in the intraday oscillators, it could take quite a push. Positive breadth is holding so far, and the TRINQ remains in neutral territory.

  Jim Brown   6/17/02,  10:18:51 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
Go SHORT the OEX/SPX/DJX on an OEX trade at 513. (SPX 1038 est) We may never reach this level but it would make an excellent SHORT entry point if we do.

  Jim Brown   6/17/02,  10:16:22 AM
Pivot Trade Signals
The OEX is now approaching the upper end of its current resistance level. I would like to see it touch 510 soon, which would be a breakout of the 505-509 range. 514 is still strong resistance and would be at the upper limit of the OEX range of movement. I am thinking about putting a signal just under 514 in anticipation of a failure at that level. Shorts are getting scared!

  Jeff Bailey   6/17/02,  10:08:17 AM
United Natural Foods (UNFI) $18.95 -9.97% ... stock down in reaction to news that Tree of Life North America has signed up Wild Oats Markets as it primary national distribution partner for natural, organic and specialty food products in the U.S. According to UNFI's June 10-Q, Wild Oats accounted for 13.5% of sales in the April quarter. Link

  Jeff Bailey   6/17/02,  10:00:21 AM
Biovail Corp. (BVF) $32.46 +5.56% ... gapped higher on news that the company received FDA approvable letter for Cardizem, a novel medication for the treatment of hypertension. Link

  Leigh Stevens   6/17/02,  9:56:43 AM
Subscriber QUESTION: "Hi Leigh, Can you tell me what settings you use for your different peroid stochastics (it doesn't show on your tradestation charts) thanks "

RESPONSE: I do post lengths on my charts almost always - "length" setting is only variation I am really concerned with. Otherwise use "standard" default settings relating to "smoothing", usually 3; LENGTHS used: 14 on daily, 5 & 21 for hourly; 8 or 13 for weekly; would use 13 for daily, but 14 is so common and so close to 13, I just use that.

  Jonathan Levinson   6/17/02,  9:56:10 AM
Nasdaq market breadth is strong this morning, with advancing volume outpacing decline volume amost 4:1 and new highs beating new lows by almost 2:1. The TRINQ is neutral but the QQV is up over 1 on the day. I'm surprised that we haven't had more of a runup, and I'm watching and waiting for the moment.

  Leigh Stevens   6/17/02,  9:48:03 AM
INDEX Update: Support & Resistance - Nasdaq Composite (COMP) Support > 1505, then 1500-1495 - Resistance > 1528, then 1548; Nas 100 (NDX) Support >1111-1112, then 1100-1097 - Resistance > 1135, then 1152-1153; QQQ: Support >27.7, then 27.0 - Resistance > 28.3, then 28.7

  Jeff Bailey   6/17/02,  9:47:32 AM
Multimedia Games Inc. (MGAM) $27.39 -10.83% ... Stock down on news that the National Indian Gaming Commission plans to publish a set of new rules regarding how technological aids can be used to play electronic bingo on Indian reservations. MGAM expects these new rules, which appear to be favorable to the tribes, to be published today in the Federal Register. MGAM says it does not expect the threats to have an impact on FY02 earnings guidance. Link

Traders may want to monitor this stock over next couple of weeks. Can perhaps see how stock has been seeing selling into rallies since late March.

  Jim Brown   6/17/02,  9:46:01 AM
Pivot Trade Signals
The first weakness has appeared right at the midrange of resistance on the OEX of 507. This could be simply a pause before the bulls try to take them higher and we will watch for another bounce higher. Internals are good with advancers beating decliners more than 2:1 and new highs nearly 2:1 over lows. TICKS are strongly positive. Patience!

  Leigh Stevens   6/17/02,  9:42:52 AM
INDEX Update: Support & Resistance - S&P 500 (SPX) Support >1008, then 1000 - Resistance > 1021-1023, then 1038 area; S&P 100 (OEX) Support > 502.50, then 500 - Resistance > 509-510, then 514-515; DJX: Support > 94.4-94.8, then 94.0 - Resistance > 96.2-96.4, then 97-97.2

  Jeff Bailey   6/17/02,  9:41:28 AM
BMC Software (BMC) $16.17 ... this was profiled stop above Thursday's high of $16.15. Will move to the sidelines here from Thursday's bearish profile. Risk for bear on further rally would be the uppder end of downward trending regression and 50% retracement at/near the $17.34 level.

  Jim Brown   6/17/02,  9:26:42 AM
Pivot Trade Signals
Looks like a bullish open with the futures positive across the board. The oversold internals from Friday are carrying through to the futures. This is surprising since Dow components are under fire. IBM was downgraded by Salomon Smith Barney. JP Morgan suggested CAT may lower guidance. DD was upgraded by Bear Stearns.

This is triple-witching week While the futures are strongly positive the markets do have overhead resistance very close. The options volatility from the witching has been coming the week before in recent months and nobody can deny that last week was volatile. Resistance at OEX 505-509 could keep a lid on any bounce today and should that fail 514 is the next level. The downside support should be in the 488-490 level.

With the OEX at 501 you can see that we are dead center between these levels. Because of the expiration week AND positive trend carry over from Friday we want to make sure of our entry points today. This means we will stay flat this morning until one of the support/resistance levels is touched. I don't want to go long/short in the middle of the range only to be stopped out by a reversal a few minutes later. We need to "enter passively" today.

  Leigh Stevens   6/17/02,  9:14:08 AM
INDEX Comments: ALL Indices on higher openings will break out above their minor hourly down trendlines. This is options & futures expiration week.

  Leigh Stevens   6/17/02,  9:12:34 AM
Pre-Opening, Stock INDEXES - Good Morning _ It's Showtime!

Index Futures trading: S & P > +6.00; D J > +60.00 ; Nas > +15.00

  Jonathan Levinson   6/17/02,  8:54:39 AM
QQQ is looking quite bullish in the immediate term. The Nasdaq-100 Bullish Percent Index closed at 16, which is well into oversold territory. As well, the $QQV is looking ready to roll over from overbought, indicating that fear and volatility have peaked for the time being. Lastly and most importantly, price on the QQQ in multiple time frames is indicating upside crossovers from oversold on several different oscillators. How far this will run is anyone's guess, but at risk of getting headfaked, today's open looks to be the start of at least a technical bounce. I won't speculate as to whether this is the beginning of something bigger, although we shouldn't forget that the longer term trend on the Nasdaq-100 continues to be down. Leigh's weekend analysis of the ranges and s/r levels is excellent, and should be reviewed before planning trades.

  Jim Brown   6/14/02,  8:42:40 PM
The Friday Market Monitor has been archived for viewing at: Link

See you at 9:15 AM on Monday to begin an exciting expiration week!


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