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  Leigh Stevens   6/26/02,  5:58:59 PM
Subscriber QUESTION: "Intel & Amat - Where do they go from here? Intel went below sep low and Amat appears to have pierced 68 retracement, do you expect lower or bounce from here. If bounce, would you expect its just shorts covering? "

RESPONSE: I'm looking for a bounce - maybe one of decent size. Level of fear and bearishness is extreme enuf for one. INTC has a LOT of resistance above 23 I assume. AMAT is an interesting one - has completed an approximate 62% retracement of its Sept - March/May top on closing basis (line chart) and had a possible "bear trap" reversal today - like INTC in that respect.

 
 
  Jeff Bailey   6/26/02,  5:54:21 PM
Trader's notes from the Trader's Almanac July is often times the most bullish month of the third quarter. First trading day of the month (will be Monday, July 1) up 12 of last 13 for Dow Indu.

Average July gains have been +1.1% for SPX, +1.2% for Dow and NASDAQ has been laggered +0.04%.

Record of past for Dow Indu shows up 31 times, down 20, and July can still be unpleasant under "bear market" conditions.

July historically marks the start of NASDAQ's worst four months of the year.

On a side note... according to www.stockcharts.com and the Dow Industrials Bullish % ($BPINDU), the Dow entered a "bear alert" status in early April (red 4) and turned "bear confirmed" in early May (just after red 5) and currently remains in "bear confirmed" status. Link

 
 
  Jeff Bailey   6/26/02,  5:37:33 PM
Jeff: GSCO has been at the ask at $8.50 on RATL for over 30-minutes. What does this tell you?

It tells me that Goldman Sachs' market maker has some stock for sale at $8.50.

Rational Software (RATL) $8.02 -11.08% was a stock profiled as bearish on premierinvestor.net 06/21/02 at $9.94 and will be moving stop down to $8.32 in an attempt to protect gains.

P/F chart remains bearish after the spread-triple-bottom sell signal at $10 (Professor Davis' study that pattern was profitable 86.5% of the time, average gain of 24.9% in 4.6 months) and bearish vertical count is to $6.50. Link

Therefor, thinking is that current risk/reward for bear a little less favorable since profile and moving stop down to $8.32 which puts risk/reward from current levels to the bearish vertical count at roughly $0.30/$1.50.

From the triple-bottom sell at $10, Professor Davis' 23% decline would have target at $7.70 and getting close at $8.02. As such, time to reduce risk and lower stop.

 
 
  Jim Brown   6/26/02,  4:34:23 PM
Pivot Trade Wrap
Amazing - The markets came back from the dead to close where they started despite a Fed meeting in the middle. The WCOM news crashed the markets at the open and the intraday rally failed in front of the FOMC decision. Rates remained unchanged and growth appears to have moderated from the first quarter. Stocks fell again but were rescued from the lows of the day at 2:30 by two monster buy programs. With the indexes severely oversold the result was dramatic with the Dow rocketing back into positive territory in less than 45 minutes. A move of +234 points. The euphoria ended there and except for a little short covering at the close the day was done.

Thursday we should see some more buying as funds window dress for the end of the quarter and maybe some more short covering. I don't think it will last since Monday will see a strong bout of window "undressing" as funds unload the same stocks they were buying today. The cash outflows have not ceased and with the strong terrorist threat over the July 4th holiday very few people will want to be long stocks going into that weekend. Thursday may be an ideal chance to kick back and let the markets thrash around in preparation for entering a new short position on Friday.

Hard to tell when some analysts are still trying to call a bottom. I did not see anything change for the better today and I doubt institutional investors did either. We still have not seen the fall out from the WCOM news. Banks, suppliers, customers, etc, all will suffer as WCOM enters bankruptcy. EDS for instance has a $12.4 billion services contract with WCOM. Will it stand? It is still unknown what other tricks they pulled to cook the books. Why stop with just one? The searchlight is now on for other companies that could be guilty and you can bet that search will be with a huge microscope. I doubt WCOM will be the last to confess.

Markets don't go up or down in a straight line and the bounce today was artificially induced. Decliners still beat advancers by 3:2 and new lows were a whopping 523 to 110 new highs. Capitulation? Not hardly. Volume was strong on the NYSE at 1.9 billion but not capitulation strength. The Nasdaq only managed 2 billion as well. We tested those 9/11 lows and there was no explosion. Keep those seat belts buckled and hang on.

 
 
  Leigh Stevens   6/26/02,  4:24:37 PM
INDEXES: TRADE Recommendation - UPDATE: Going out Long OEX calls, bought at assumed price of 477.30. I "reconfirmed" buying in 475-477 area on subsequent weakness in the minutes after this recommendation. Original stop suggested was 474.00 - raise slightly, but only to 474.50 for now, as my strategy is to hold on a dip to 475 but not below it.

Long QQQ at 25.5 - suggest maintaining for now risk/stop point at 24.50.

 
 
  Leigh Stevens   6/26/02,  4:09:40 PM
INDEX Comments: OEX closed above its Sept. low, as did bellwether GE - the Nas Composite (COMP) TESTED its Sept. low at 1387 (intraday low today 1375.5) with a close at 1429! - a good showing for COMP, setting up the potential for a double bottom.

Since the dollar is supposed to be so important to stocks these day, I think the run of the Euro is in the end phase. If you look at the daily chart, it reminds me a lot of Nasdaq stocks before they topped out. I may feature the chart again on my INDEX TRADER column tonight.

 
 
  Jeff Bailey   6/26/02,  3:49:23 PM
Conagra Foods (CAG) $26.15 +5.06% ... stock has traded strong most of the session. Will note upgrade today from Merrill to "strong buy" from "buy" and placement on firm's Focus 1 list. Believes that as CAG executes it plan to become streamlined food processor, the earnings multiple should expand. Price target from Merrill is $30.

CAG is expected to report earnings of $0.33 before the bell tomorrow morning. Link

If memory serves me, we mentioned this one as bullish on spread-triple-top at $26 not long ago as more defensive type of play for bulls with limited overhead supply. Link

 
 
  Jim Brown   6/26/02,  3:41:05 PM
Pivot Trade Signals
Looks like all the gaps just got filled and the indexes quickly ran out of steam. If I was going to place a bet I would short this market here. However with only 22 minutes left in the day I would look to short any opening bounce failure tomorrow. Like Art Cashin said a minute ago, EOQ window dressing, Russell rebalancing and short covering before the weekend could keep the volatility very high through Friday.

 
 
  Leigh Stevens   6/26/02,  3:38:53 PM
INDEX Comments: Relevant to QQQ - ORCL broke out to upside possibly "confirming" H&S bottom; INTC had nice upside reversal - looks like a "bear trap" reversal (i.e., move to new low followed by strong rebound & possible close above prior day); QCOM has possibly confirmed a double bottom low; MSFT has rebounded nicely, keeping its H&S bottom intact; CSCO has also rebounded strongly, indicating a potential double bottom relative to its early-May low.

 
 
  Jim Brown   6/26/02,  3:33:31 PM
Pivot Trade Signals
Nice little End of Quarter window dressing program(s)! At least that would be my guess. With the quarter end upon us it is typical for fund managers to "dress up" big cap stocks to make their holdings look better. With the size of the buy program it had to be a big fund or a couple of funds accidentally triggered at the same time. Considering the levels we hit today this is a pretty safe bet for them. Look at the stocks impacted, PG, IBM, MMM, INTC, MSFT, all big caps and easy to store big money. I don't want to burst anybody's bubble but I would be surprised if this stuck.

 
 
  Jeff Bailey   6/26/02,  3:32:08 PM
Stock rally I'm not seeing anything on the news wires to explain rally in stocks. Bond market is of no help here as it closed at 03:00 EST. US Dollar Index (dx00y) 106.58 -0.91% at about midpoint of today's range.

May be some extensive short covering by bears, on thoughts of some type of budget ceiling lift before the weekend. (see last night's market monitor 08:28:20, or last night's PI wrap). Link

 
 
  Jeff Bailey   6/26/02,  3:27:18 PM
Good Morning Jeff: Q - Qwest comms. 2.25 -1.94 FON Sprint 9.75 - 1.54, with the WCOM turmoil, would you agree the above two companies will see more downside, would you recommend puts? appreciate your input.

I wouldn't mess with put options on Qwest (NYSE:Q) $1.68 -59.90% now below $5.

Sprint (FON) $9.93 -12% looks to have considerable downside longer-term and would be suspect still. Bearish count from p/f chart is $2. The FON January $10 puts (FONMB) are offered $2.50, and that's about the same risk as shorting here, stop $12.00 and put options less risky as long as trader doesn't overleverage. Link

 
 
  Leigh Stevens   6/26/02,  3:25:01 PM
INDEXES: TRADE RECOMMENDATION: Buy QQQ at current levels (last: 25.4), risk/stop to 24.50

 
 
  Leigh Stevens   6/26/02,  3:23:30 PM
Subscriber NOTE: "The VIX only had one higher weekly close since Sept 98 than where it is at this moment and that was the week immediately after 9/11. "

RESPONSE: Interesting note - I show weekly closes above 36 which is VIX high so far this week, on one other occasion since the week ending 9/21 and that was week ending 10/12.

 
 
  Leigh Stevens   6/26/02,  3:14:30 PM
Subscriber QUESTION: "I caught a blurb on Market Monitor on the story you did on PREM and EPREM. Can you give me the link? I cannot find the story for the life of me on OIN. It is all over the place today. I ve always wanted to know what the significance of that indicator was. "

RESPONSE: I did what I call a "Mini-Trader's Corner", on this subject at the end of my regular Index Trader column on 6/20 - at - Link - Or, go to the OI home page and scroll back to 6/20 - then click on my INDEX TRADER column.

 
 
  Leigh Stevens   6/26/02,  3:06:53 PM
INDEX Comments: QQQ and the rest of the Nasdaq indices have the same "W" bottom pattern - I like the Q's also on the long side, playing them for an oversold bounce. However, want to watch QQQ a while as the stock still has not cleared near resistance at 25.2 - maybe on another dip or on a decisive upside penetration of 25.20.

 
 
  Leigh Stevens   6/26/02,  3:02:00 PM
INDEX Comments: OEX has traded down a bit from point where I suggested it (tick at time was 477.57) - probably a buy program that has run its course. I still favor buying OEX in the 475-477 area - last at 475.74 - keeping risk tight at 474.00.

 
 
  Jim Brown   6/26/02,  2:57:09 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Buyers are appearing from nowhere especially on the Nasdaq. We were stopped out on the open SHORT signal at 14:50:26 when the OEX traded above 476. (SPX 962.92, DJX 90.15, DIA 90.36, SPY 96.67) We will remain flat the rest of the day and not try to trade this extremely choppy market. With the VIX at 35.99 just a few minutes ago and the TRIN spiking to 3.11 it is not surprising to see this bounce. It was triggered by a buy program across all the indexes including the QQQ. The buying has dropped the TRIN from the 3.11 reading to 1.81 in less than ten minutes. We will stand aside.

 
 
  Leigh Stevens   6/26/02,  2:57:06 PM
INDEX Comments: ALL the indices have put in "W" bottoms on their intraday charts - strong rallies have followed - I noticed it first on INTC, which is a key stock to prospects of an oversold rebound in both the Q's and OEX

 
 
  Leigh Stevens   6/26/02,  2:55:02 PM
INDEXES: TRADE RECOMMENDATION: Buy OEX calls at current levels (last: 477.57) - risk/stop: 474

 
 
  Leigh Stevens   6/26/02,  2:43:02 PM
Subscriber QUESTION: "If 17.45 be taken out, what is the downside risk for INTC? If INTC rebounds, where will be the 1st and 2nd upside target for INTC? Thx. "

RESPONSE: Intel's sloping downtrend channel line "allows" for slightly lower lows, say down to 17.00 over this week, where the stock would remain within its downtrend channel. If INTC fell under 17? - based on the weekly chart, there were a number of weekly lows in '97-'98 in the 15.75-16.70 area, so I would look for a target in this area, if INTC drops under 17.

On the upside,if a rebound got going, a first upside target is back up to resistance in the 22-23 area; major overhead resistance due to scale up selling will lie in the downside chart gap between 23 and 26. I can't pin it down better than this - it will be a tough climb above 23!

 
 
  Jim Brown   6/26/02,  2:28:42 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The market SHORT signal was triggered at 14:21:28 when the OEX traded below 473. (SPX 957.78, DJX 89.56, DIA 89.70, SPY 95.86) The initial stop loss will be tight at OEX 476. (SPX 962.50)

 
 
  Jonathan Levinson   6/26/02,  2:27:07 PM
Declining volume now 6:1 over advancing volume. TRINQ still in the 2.5 range, and QQV is still up nearly 6 points on the day. 1400 looks like resistance again on the COMPX, and I'm trying to pick up some puts. Stop loss will be set overhead at 1410.

 
 
  Leigh Stevens   6/26/02,  2:26:07 PM
SECTOR TRADE Update: Biotech HOLDR's (BBH) were bought on my SECTOR TRADER recommendation at 79.10 - BBH is last at 80.05. Suggested initial stop: 76.00.

Am looking for a rebound from the low end of Biotech (daily chart) downtrend channel. So far, this group is holding at or above prior lows, with the Index ($BTK.X) making a possible double bottom - time will tell on this - and the BBH HOLDR's continuing to hold above its prior lows in the 76.60-76.80 area.

 
 
  Jim Brown   6/26/02,  2:16:40 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT again with an OEX trade below 473

 
 
  Jonathan Levinson   6/26/02,  2:15:55 PM
Look at that sell candle on the one minute COMPX chart!

 
 
  Jeff Bailey   6/26/02,  2:14:29 PM
Interest Rate Decison No change in interest rates. Fed keeps "neutral" bias and still sees "balanced risks" to the economy and sees economic activity continuing to increase.

 
 
  Jim Brown   6/26/02,  2:09:41 PM
Notice how all the indexes have been drawn to resistance/support levels just before the announcement?
Dow 9000, Nasda1 1400, OEX 475, SPX 960

 
 
  Jeff Bailey   6/26/02,  2:09:03 PM
Treasury Watch the very short-term 13-week Treasury Bill YIELD ($IRX.X) is currently trading lower today with YIELD at 1.657%. MARKET expects Fed to stand pat on interest rates and leave Fed Funds at 1.75%. Hints that any type of Fed action would be a BIG surprise to the markets.

 
 
  Jeff Bailey   6/26/02,  2:06:57 PM
Fed decision on interest rates scheduled for release at approximately 02:15:00 EST.

 
 
  Jim Brown   6/26/02,  1:58:19 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Several readers have asked about the open short signal and the end of the Fed meeting. I thought we would be farther below our entry point by now or I would not have taken the chance going short. With the possibility the Fed may try to soothe the markets with some comments about the market, economy, etc, we could see a strong bounce after the meeting. If they see the economy shrinking again then the bottom will fall out. Either way the volatility should be extreme for the first ten minutes. The question arises "do we close now below our entry point for a breakeven" or "do we let it ride and take our chances." I do not believe any comments will be long lasting and institutions will take the opportunity to sell into the bounce. Still the stop loss could be hit only to see the indexes plummet seconds later. Going naked without stop losses could subject you to even greater risk if they say something positive and we get a bounce that holds. What if they cut rates again? Not likely but always possible in light of the WCOM depression.

Our risk is to remain short. Therefore the safe play is to exit here at 474.50 and look to re-enter again when the complete situation is known. Bottom line = Exit the short now

 
 
  Jonathan Levinson   6/26/02,  1:55:22 PM
Am nervous in case Mr G. lowers the rate. I got most of my short acct evaporated twice before when he did it unannounced! my question is--do you put your stop in physically to protect against fast mkt conditions, or just keep a mental one? thanks Denise

It's a question of account management. The stops should be wide enough to allow for "noise" to pass by without affecting your positions, but not so wide as to cause an unmanageable loss in the event that it's not "noise" but an actual move against your position. Remember, the first rule is to protect capital, then comes the second, which is to grow it. Mental or mechanical, set them in advance and respect them.

 
 
  Jonathan Levinson   6/26/02,  1:48:08 PM
QQV is up 5.85 now, with the TRINQ sitting in the low 2's. COMPX internals remain unchanged, aka very weak, as the price hovers around 1400. Looks like a preannouncement lull to me. So much for my wish for some more chop.

 
 
  Jim Brown   6/26/02,  1:05:16 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 12:58:38 when the OEX traded below 477. (SPX 964.61, DJX 90.27, DIA 90.36, SPY 96.74) The initial stop loss was 482 as indicated in the Entry Point Alert but due to market action let's lower it to an OEX trade over 480. (SPX 970)

 
 
  Jonathan Levinson   6/26/02,  1:04:14 PM
Not a lot of sound or fury to work with this lunch hour. The COMPX has commenced a slow fade lower, with declining volume between 4 and 5 times advancing volume. The QQV is way up, though, 4.6 on the day, and the TRINQ is at 2.27. I tried to get in on the decline to buy some puts but no one would sell to me on the bid. I'm expecting some renewed movement before Fed meeting, and like Jim, I expect a decline afterwards. We'll watch for potential entries in the coming chop.

 
 
  Jim Brown   6/26/02,  1:01:55 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY - Corrected
We were stopped out on the LONG signal 1 point below our 478 entry point when the OEX traded below 477 at 12:58:38. (SPX 964.61, DJX 90.27, DIA 90.36, SPY 96.74)

 
 
  Jim Brown   6/26/02,  12:59:09 PM
Talk about watching paint dry! The intraday ranges have shrunk to nothing and volume has died. The Nasdaq is the only directional intraday trend and that as turned down.

 
 
  Jim Brown   6/26/02,  12:47:58 PM
TDS Put Play on OIN - If you are in this play you can preview the conference call slides at this address: Link The call is not scheduled until 2:PM.

 
 
  Jim Brown   6/26/02,  12:41:34 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I agree with Leigh here. If we are stopped out of the LONG at a trade below 477 I want to Go SHORT the market at 477 as well. The failure at 480/971 would indicate a continuation of the prior downtrend even after the big drop this morning. The initial stop loss on the SHORT would be wide at 482.

 
 
  Leigh Stevens   6/26/02,  12:30:20 PM
INDEX Comments: ALL indices have failed AT or (slightly) above technical resistance - I anticipate sideways to lower from here, especially for OEX/SPX/DJX, which are somewhat less oversold than Nasdaq.

 
 
  Jim Brown   6/26/02,  12:21:45 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Tighten the stop on our current LONG signal to an OEX trade below 477. (SPX 964) The bounce ran into trouble just as the Nasdaq neared positive territory. TICKS are decreasing and adv/dcl ratios are weakening again. It appears investors are realizing that there may not be a V bottom bounce here.

 
 
  Jeff Bailey   6/26/02,  12:14:16 PM
FedEx (FDX) $50.08 +4.33% ... Jeff, what is your opinion on FDX. Is it safe to go long with sep calls?

As stated yesterday, would have cut a bullish position in the underlying stock at $51 on the double-bottom sell signal. Near-term upside limited to $52 most likely. As such, answer would be "NO, it is not safe to go long the SEP calls." Link

 
 
  Leigh Stevens   6/26/02,  12:06:34 PM
INDEX Comments: SPX, OEX and DJX have climbed back to resistance at their "breakdown" points at 480 in OEX, 971 in SPX and 90.8 in DJX. If they continue to climb above these levels and especially if they "sucessfully" re-test these levels on pullbacks, this would suggest a further upside potential this week. Failure at resistance suggests more of the same - more selling, more weakness.

 
 
  Jeff Bailey   6/26/02,  12:05:12 PM
Citigroup (C) $37.15 -5.03% ... Hi Jeff, I bought Sept 40 puts on 6/7/02 for 210 after reading your Market Monitor observations. There also was a large increase in the open interest in the Aug 40 puts yesterday. Any thoughts on how you might assess this play from here would be greatly appreciated.

Neart-term, I'd continue to hold (unless account management dictates a gains should be taken) and target the September lows of $35. Bearish vertical count of $32 builds in enough downside for a test of the September lows. Link

Your observation of large increase in the Aug. $40 puts, may well be an institutional hedge to protect an underlying long position in the stock.

 
 
  Leigh Stevens   6/26/02,  12:02:50 PM
INDEX Comments: COMP,NDX & QQQ have gotten back above resistance implied by their recent lows, which is bullish so far. A rally longer than the typical 1-day wonder may be indicated if there are pullbacks to the breakdown points of this morning that now "hold" and indicate support/buying interest - Key technical levels are: 25.2 on QQQ; 1414 on COMP; 1015 on NDX.

 
 
  Jim Brown   6/26/02,  11:57:09 AM
The Fed meeting has a little more than two hours to go before the announcement is made. You can bet they are aware of the market problems and will try to word their statement to soothe investor nerves. Of course this could be a wordy problem if they are seeing a breakdown in the economic recovery. If this was the case it would not be surprising to see them cut rates to prop up the market. This has not helped in recent cuts but historically it has precedence. If there is a post meeting spike I would look to sell into it unless there was just a huge bullish surprise. Stay tuned.

 
 
  Jeff Bailey   6/26/02,  11:55:40 AM
Tyco Intl. (TYC) $12.19 -10% ... Bloomberg reporting that former CEO Dennis Kozlowski has been accused of tampering with evidence by New York authorities. Kozlowski reportedly removed a bill of lading from a file of documents kept at Tyco's offices in Boca Raton, FL, before the file was delivered to New York prosecutors. Link

 
 
  Jim Brown   6/26/02,  11:52:44 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the LONG signal at 11:43:26 when the OEX traded at 478. (SPX 965.19, DJX 90.21, DIA 90.35, SPY 96.86) The initial stop loss will be OEX 475.75 (SPX 962.50) This is a high risk signal and we will be raising the stop loss quickly to avoid any fast drop. Sellers are still active as each new high is hit. It will be tough to make any serious gains but sometimes the bigger the wall of worry the better the market performs.

 
 
  Leigh Stevens   6/26/02,  11:50:41 AM
INDEX Comments: Surprise ! - at least contrary to my expectations re another drop from the apparent "bear flags", there have been minor breakouts to the upside. Now, the key is what happens at resistance at the index "breakdown" points: SPX at 970; OEX at 480; DJX at 91; COMP (there already) at 1414; QQQ at 25.2. New downswings could start if there are reversals in these areas.

 
 
  Leigh Stevens   6/26/02,  11:32:26 AM
INDEX Comments: ALL the indexes since the rebound and consolidation off the lows, look like they are forming bear flag patterns on the 30 min. charts. These patterns suggest that, after this consoldiation/sideways move runs its course, there may be further downswings. The intraday charts don't look like bottom formations. Nasdaq and NYSE TRIN readings, while down from peak readings are still showing that sell pressure predominates - readings above 1.50 especially show sell imbalances. NYSE Arms Index or TRIN is last at 1.89, Nas TRIN ($TRINQ) is last at 2.00. More on TRIN and how your trading can benefit from keeping an eye on this indicator, is found on my Trader's Corner article at Link

 
 
  Jonathan Levinson   6/26/02,  11:30:34 AM
Declining volume leading advancing volume more than 6:1 on the COMPX. This 1400 level is beginning to look fishy to me, and I'd be inclined to buy those puts on the next little rise. The FED meeting is looming, and I'm not sure what they could possibly say to rally the markets, but if I had *that* crystal ball, we'd all be partying at my fictitious resort on a beach somewhere right now. As one reader aptly pointed out, all of the sentiment indicators are indicating high fear/premium in the market, and tight stops are the order. I'm always in favour of tight stops, but it bears repeating today.

 
 
  Jim Brown   6/26/02,  11:28:20 AM
They keep selling into each bounce but at least they keep trying to bounce. If we stay in this range throughout the day then the odds of another major afternoon sell off will increase drastically. Without a successful intraday rebound, even if it is just back to zero, the sentiment will get worse. Bulls are being converted by the thousands today. Floor traders on the NYSE were hoping for a -300 to -500 day and they could still get their wish.

The Nasdaq traded below its 9/11 intraday low of 1387 but the S&P fell short of its 944 post 9/11 low with a low today of only 953. This probably explains why the Nasdaq is the stronger of the major indexes today. Buyers probably see the Nasdaq levels as a successful retest of those 9/11 lows. However, the definition of a successful retest implies that the index goes higher from the tested levels. A break below 1387 this afternoon would indicate a major breakdown of sentiment and trigger more selling. I have been pointing out the failure of the NDX already at these levels so I would be surprised to see the Nasdaq hold.

 
 
  Leigh Stevens   6/26/02,  11:18:49 AM
INDEX Comments: QQQ "drag" looks mostly like Intel (INTC), which made new lows this am, falling further (to 17.45) under its Sept. low in the 18.9 area. However, INTC finally touched the low end of its daily downtrend channel, so maybe it will stablize. MSFT gapped lower but at intraday low of 51.05 is holding above its recent lows in the 48.50-49.20 area. Could still be building a H&S bottom - the giant of Seattle has some price increases coming to prop up earnings. ORCL did not see much downside - still looks to be building a H&S bottom. QCOM has put in a possible double bottom. Cisco put in an approximate double bottom relative to its early-May low. If the Nas 100 is going to have another down "leg" from here, it's not quite evident in big Nas stocks - except for INTC, which may stablize - today's INTC low at 17.45 looks like a level to watch on this bellwether.

 
 
  Jim Brown   6/26/02,  10:44:17 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Signal Recap - We currently have two open signals.

Go SHORT with an OEX trade below 471 (SPX 953) This would represent a break below the lows of the day and an indication of a new leg down.

Go LONG with an OEX trade above 478 (SPX 965) This would represent a breakout above the intraday highs and a possible rebound.

These are both HIGH RISK signals and should only be taken with risk capital. Exits may be quick as intraday swings could be extreme.

 
 
  Leigh Stevens   6/26/02,  10:44:13 AM
INDEX Comments: OEX & QQQ rebounded some early from the low end of their hourly downtrend channels, at 473 and 24.5 respectively. However, looks like sell pressure is coming back and there could be another shot down later. The indices are not registering a "maximum" oversold just yet on the longer hourly stochastic setting I rely on (21), nor is the 14-day stochastic quite at the level of prior extremes.

 
 
  Jonathan Levinson   6/26/02,  10:40:52 AM
Declining volume is now just 5.52 times advancing volume as the Nasdaq climbs above 1400. The TRINQ got down below 1 but is now at 1.73. Volatility reigns. This bounce is holding for the moment, with price almost midway into the morning's opening gap.

 
 
  Jim Brown   6/26/02,  10:32:50 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Conditions are improving and the Nasdaq has moved to the high of the day. Go LONG the broader market with an OEX trade over 478, which would be the high of the day. HIGH RISK!!

 
 
  Jonathan Levinson   6/26/02,  10:22:13 AM
The oscillators are all over the place because of this morning's move and subsequent chop. I'd like to buy some puts on a rollover at 1400, but the stochastics aren't going to give a nice consensus, because the hourly and 30 minute stochs got so oversold at the open. Watch 1400, but do be careful- this is very aggressive/speculative if you decide to jump in. If we get the stochastics to line up in overbought and begin their downward crosses, that should be considered as a gift.

 
 
  Jim Brown   6/26/02,  10:18:16 AM
Down volume still running 10:1 over up volume. New lows 460, high 29. The total volume on the Nyse/Nasdaq is only around 800 million shares. Far from any expected capitulation type volume. It may be ugly this morning but it is not as bad as many would like.

 
 
  Jeff Bailey   6/26/02,  10:14:23 AM
New Home Sales jumped 8.1% to 1,028K, which was much stronger than 920K consensus.

Dow Jones U.S. Home Construction Index (DJUSHB) 370.48 +0.06 up fractional. This index and Gold/Silver (XAU.X) +1.81% only ones in the green here.

 
 
  Jonathan Levinson   6/26/02,  10:14:20 AM
QQV now up 4.16, as the market begins to wonder if that rise in the QQQ was "The Bounce". TRINQ at 2.92 is showing moderate selling but we saw worse yesterday.

 
 
  Jim Brown   6/26/02,  10:11:23 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
If we are going lower then let's put a signal in place to capture the breakdown. I am not going to try and pick a top here until conditions are clearer. Go SHORT the broader market with an OEX trade below 471 (SPX 953)

 
 
  Jeff Bailey   6/26/02,  10:10:32 AM
US Dollar Index (dx00y) $106.08 -1.38%* ... not getting hit too bad, but weak again today. % loss here just about equal to gains in Gold/Silver Index (XAU.X) 79.07 +1.54%. This hints of a rather "rational" market and things pretty much in line. If Gold/Silver had jumped 10% or more "out of whack" then more of a market panick type environment.

* 30-minute delayed quote

 
 
  Leigh Stevens   6/26/02,  10:08:07 AM
Subscriber QUESTION: "THANK YOU FOR YOUR GREAT WORK. PLEASE SEND NAME OF ONE OR TWO BOOKS FOR SOMEONE WHO HAS NEVER TRADED OEX-SPX-DJX . USE THREE MONITORS,ONE HAS MARKET MONITOR ALL DAY,GREAT INFO FROM GREAT PEOPLE. GOING BACK ON OIN COULD NOT FIND WHAT I NEED. "

RESPONSE: Well, I'm never one to shirk from mentioning my own book, "Essential Technical Analysis", as a good primer on the technical approach. In our "Bookstore" section on the Option Investor site (on left) you will see Larry McMillan's book "Options as a Strategic Investment", which is a minor classic in the field.

 
 
  Jim Brown   6/26/02,  10:08:03 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
That was quick. The index rolled over almost immediately and we were stopped out at 475. If that was the bounce then we are in trouble.

 
 
  Jonathan Levinson   6/26/02,  10:07:04 AM
Market internals firmed significantly on that rise, up to only a 10:1 declining:advancing volume ratio, but the Nasdaq stopped dead at 1400 and reversed down. Currently at 1391. Note that the QQV is up 3.89 on the day- a big jump in fear/volatility.

 
 
  Jim Brown   6/26/02,  10:04:59 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the LONG signal at 0:59:24 when the OEX traded above 476. (SPX 957.98, DJX 90.24, SPY 96.43, DIA 90.29) The initial stop loss will be OEX 475 (SPX 955 est) Be aware this is a very short term trading signal and we could be out very quickly.

 
 
  Jonathan Levinson   6/26/02,  10:00:22 AM
Still holding that 20:1 ratio of declining to advancing volume on the COMPX. The TRINQ at 1.95 shows surprisingly little selling pressure- looks like the gap down took care of that. Time to look at longer term charts to try to work out some s/r lines as price tries to fill the opening gap.

 
 
  Jim Brown   6/26/02,  9:59:13 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with an OEX trade above 476. (SPX 960)

 
 
  Leigh Stevens   6/26/02,  9:54:16 AM
Subscriber QUESTION: "In light of our recent correspondence regarding the S&P H&S pattern in the mind of Phil Erlanger, and considering that the S&P futures are down 22.50 as I type this, do you still think Erlanger is off on his targets? Is the capitulation that we have all been waiting for or are we headed for the depression type scenario that you referenced? I don't have any particular bias, and I'm sincerely interested in your view point. Thanks again for your much appreciated help. "

RESPONSE: Well, again, a multiyear pattern of the "shape" of the Weekly Dow chart does not give a "valid" H&S downside objective - it may be a multiyear top, but not a Head & Shoulder's based on "length/time" and "shape" considerations.

However, the Daily Head & Shoulder's (H&S) Top pattern in the Dow Industrials, formed since Feb., looks quite valid - you can see this chart and its measuring implications at Link -- The H&S daily chart Top pattern "minimum" downside objective measures to 8860 in the Dow.

 
 
  Jim Brown   6/26/02,  9:52:33 AM
Dow appears to be holding at 8943. The next support level for the market is S&P 945 which is the 9/11 intraday low for that index. No sign of buyers yet but selling is weakening. Still too early to pick a bottom but we should be about ready for the bounce.

 
 
  Jeff Bailey   6/26/02,  9:49:32 AM
Jeff: I'm holding 10 DJX put contracts. Would you hold and wait for a turn on the market or take no chances and close at the open?

I'd look to institute some account and trade management. If holding some bullish positions in other stocks, might want to "leg" out of some of those puts, say 1/4 or 1/2 and lock in some gains, but this may not be over at the open.

While WCOM's news is a catalyst for a sharp move, I do think there's some risk of U.S. Governent default near-term if the House doesn't pass the budget by this Friday. (see last night's market monitor.) Link

 
 
  Jim Brown   6/26/02,  9:46:04 AM
Combined advancers 743, decliners 4366

 
 
  Jim Brown   6/26/02,  9:43:36 AM
Combined down volume (NYSE/Nasdaq) 254 million to up volume 15 million shares. TRIN high was 6.05. New lows, 356, new highs (really) 19

 
 
  Leigh Stevens   6/26/02,  9:38:15 AM
Subscriber QUESTION: "Leigh, I know until the technical indicators tell us "after the fact" that we have see THE LOW, we won't know for sure (and maybe won't even know then!), but, what does your gut tell you? Does your gut agree with Jon, that we have further (maybe much further) to go in terms of time and price before we see the BOTTOM? "

RESPONSE: Well, I've had a target on the Dow to 8860 - I have to use the Dow as it has a top pattern that can be measured as to the downside potential, quite well. Beyond this target (DJX: 88.6) my crystal ball is hazy.

 
 
  Jim Brown   6/26/02,  9:37:39 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Set a stop loss on your open SHORTS at OEX 475. This was the trading range after the initial drop and would be the exit point on any bounce.

 
 
  Jonathan Levinson   6/26/02,  9:37:24 AM
COMPX declining volume 20x advancing volume at the open.

 
 
  Jeff Bailey   6/26/02,  9:35:10 AM
Invitrogen (IVGN) $30 -5% ... getting downside alert here, which is triple-bottom sell signal. Link

Would look 1/2 position. Obvious today's weakness is brought on by broader market, but may be eager sellers in coming sessions based on market environment. Can use "inside day" technique to manage trade going forward. Link

 
 
  Jeff Bailey   6/26/02,  9:31:09 AM
Jeff: as a non option trader would i be better shorting ratl or the dia or spy

At this "stage" of the game, I'd opt for shorting the SPY. Reason's why...

1) With the S&P 500 Bullish % ($BPSPX) at 42%, there's still some downside potential, and risk for a bear is "less" than other markets. With a disciplined stop, would be less likely to suffer sharp loss in a single session. (I would NOT short a full position at this morning's open) Link

2) Risk should be assessed to 1,050. Link

 
 
  Jim Brown   6/26/02,  9:30:03 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go short the broader market at the open and set a stop loss just above your entry point. Be prepared to jump out quickly.

 
 
  Leigh Stevens   6/26/02,  9:27:11 AM
INDEX Comments: OEX & QQQ - based on a move to the low end of their hourly downtrend channels, I had targets last night to around 473 in OEX, maybe 470 and to 24.5, maybe 24.0, in the Q's.

 
 
  Leigh Stevens   6/26/02,  9:24:31 AM
INDEX Comments: U.S. Dollar continues weak this morning, with the Sept. Euro futures up to .9882, a gain of 1.46% - currency traders that I talk to indicate they expect a move to slightly over a dollar for the Euro. I have a target to 1.01 based on the chart analysis, which was in my last night's INDEX TRADER at Link

 
 
  Jonathan Levinson   6/26/02,  9:23:38 AM
Heavy buying in bonds, yields down across the board.

 
 
  Jim Brown   6/26/02,  9:22:53 AM
Pivot Trade Signals
Let's see, how are we going to trade this disaster? Normally I would wait for the first bottom and buy calls. This morning may be different. The damage is so extensive that the drop could be several levels and could last several days. (worst case) On the flip side things are normally darkest before the dawn and it is so black today you need a searchlight.

I think aggressive traders should go short or buy puts at the open and then set an initial stop loss at your entry point. Be prepared for a bounce 15-30 minutes into the day. I expect another dip later because institutions will not normally sell into an opening disaster. They wait for the smoke to clear.

Once it appears to have bottomed/rebounded at support and I listed those levels in my last post, I would go long or buy calls for the bounce but be aware that the sentiment has turned significantly worse and any bounce could be minimal.

Now that I have set out the trade possibilities above you MUST realize that many times in circumstances like this the futures are grossly overdone and the drop does not occur as expected. (hey, if it was easy everyone would have more money than Warren Buffet) This is a seat of the pants day. Fasten your seat belts and hang on.

 
 
  Jeff Bailey   6/26/02,  9:21:26 AM
Aquila (ILA) $8.78 ... Jeff: Any targets for ILA?

Yes, as outlined before Link , target from current levels would be $5.94 and would move profit stop down to $9.65.

 
 
  Leigh Stevens   6/26/02,  9:15:12 AM
Pre-Opening INDEX Comments - Dow downside target based on a "minimum" downside objective for the Dow Head & Shoulder's TOP I highlighted last week - at 8860 (DJX: 88.6) looks like it is accurate the way things look, just when I was beginning to doubt whether the Dow would get this low. 8860 is a minimum objective only - the averge can go lower of course - but often it will also conincide with a "final" low. Time will tell. Stay tuned!

 
 
  Leigh Stevens   6/26/02,  9:06:35 AM
Pre-Opening, Stock INDEXES <> Good Morning - HANG ON TO YOUR HATS!

Index Futures trading: S & P > -25.50 ; D J > -230.00 ; Nas > -46.00

 
 
  Jonathan Levinson   6/26/02,  9:01:07 AM
The question most traders are asking themselves is what will happen after the open. Note that WCOM is one incident that follows in a growing number of such incidents, and foreigners had already been registering their disapproval in the falling US dollar. Buzz Lynn's market wrap on Monday discusses this eloquently. While price is going to fall precipitously at the open, I don't believe that any of the conditions that have been causing this year's decline have changed- WCOM has just become yet another, albeit huge, example. So, fundamentally, the market will not become a buy just because of the gap down today, although technically we might see a bounce. Will today be a capitulation event? I don't believe so either, because we option investors all know many "buy and hopers" who have been holding their telecom mutual funds, and their GE and INTC and T, because they're "good companies" and "always come back". News like today, exacerbating a year's worth of similar bad news, will be a serious blow to investor sentiment, and could lead to a slower but huge wave of selling and mutual fund redemptions. What I'm trying to say is that, in my opinion, investors should be very reluctant to call today a bottom or "capitulation" event. The towel appears to me very far from being thrown in by the huge mass of investors. Sharp shooters will trade, and we will trade what we see, but longer term, I just can't see the bottom being in today.

 
 
  Jeff Bailey   6/25/02,  8:58:10 PM
The Market Monitor has been archived for Tuesday. To view Tuesday's action, simply click this Link

 
 
  Jim Brown   6/25/02,  12:39:41 AM
Pivot Trade Signals
End of the World As We Know It? - Not hardly. The WCOM impact to the markets will probably be severe. The futures at 11:30 PM are down -23.50. To say this would suggest a negative opening would be putting it mildly. Extrapolating these numbers would put the S&P around 950 (closed at 976) and the OEX around 470 (closed at 483)

Normally I would say this was the answer to a traders prayer but this time it may not be so clear. Most traders will expect the big blowoff drop at the open and then a rocket rebound once the 9/11 lows are breeched. While that may happen I think the damage is going to be more severe. With WCOM at $.35 cents vs the $.83 cent close the actual impact to the Nasdaq will be minimal. The real impact will come from a serious hit to market sentiment. If WCOM, Tyco, Enron, Adelphia, etc, are the visible cockroaches then how many more are still in the closet? When market conditions force major corporations to result to fraud in order to cook the books and stave off the inevitable then how much more so with smaller companies?

While you and I may be traders who will capitalize on this event there are millions more that will simply throw in the towel and go back to CDs, bonds and money market accounts. The biggest hit will be from overseas investors who are not as familiar with the U.S. accounting practices and only see the headlines in the papers. With mounting accounting scandals, falling markets and a falling dollar many of them will opt out of U.S. markets for something closer to home. With the dollar dropping it is like paying a 15% commission to be able to invest in America. Add to that 15% the market losses and suddenly a 2%-3% investment return at home looks good.

I have heard several analysts tonight say "buy" tomorrow when the VIX hits 35, or when the TRIN hits 6.0. Wait for ticks under -1500, 5:1 down volume on the NYSE, etc. Everybody has their pet indicator but every indicator will go stratospheric at the open and become useless. Sure they will tell us how bad it really was but they will not tell you when it hits bottom. You can bet your last dollar there will be strong selling at the open where all the conditions are met and then a morning bounce. Bulls will be buying this bounce with abandon! I would normally be buying it as well. Tonight I am not so sure. What I am sure about is that there will be a lot of stock for sale tomorrow and not all of it will happen in the first 30 min. Knowing that things seem bleakest at the open many institutions with a lot of stock to sell will wait for the bounce and then try to feed it to the market in more digestible bites. This has a very good chance of killing the rebound.

Remember, nothing fundamentally changed in the markets. Companies are still warning, confidence was slipping and it was possible we were slipping into a second dip recession. Not conditions that warrant buying stocks just because they will be a bit cheaper at the open.

I don't claim to know how the day will play out but this is shaping up like a real capitulation day. Whether it will be the bottom is anybody's guess. What I do claim to know is that we should only trade this market not invest in it. There will be plenty of time later once a trend is established. How you react in the morning will be key. If you are long you will not be a happy camper. If you went into the close short then you will be shopping for new toys soon. There is no magic answer I can give you tonight. If you are not a "trader" then I suggest you watch from the sidelines. If you are a trader I suggest you throw out all preconceived ideas about close support as there is none at the levels the market will open at tomorrow.

The best we can hope for is for the S&P to stop at the 9/11 intraday low of 944.75 or the October 1998 low of 923.32. If those levels fail we are in worse trouble than anyone is anticipating. The Dow has no support below 9000 until around 8533. If 9000 fails we could go into free fall to that level and still be 500 points above the 9/11 low of 8063. If you are determined to buy the dip then Dow 9000, S&P 945 would be the levels to watch. For the Nasdaq the Oct-98 low of 1357 could be the last ditch support if the 1387 9/11 intraday low fails.

Wednesday is going to be an exciting day if you were in cash at the close! Tune in at 9:00 for the play by play!

 
 

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