Option Investor
Printer friendly version
  Jeff Bailey   6/27/02,  8:22:15 PM
Worth noting Looking at some charts and want to note that both the QQQ and the S&P 500 (SPX.X) achieved their prior bearish vertical counts. For the QQQ, this was $25 Link) and for the SPX, 9,600 Link

While these can always be exceeded to the downside, worthy of note. Not long ago (June 14th), Dow Indu (INDU) achieved a bearish count of 9,300 intra-day, then rallied to 9,700, before falling again. Link

  Jim Brown   6/27/02,  6:24:37 PM
Pivot Trade Wrap
Head Fake! - After opening strong on the GDP report and a lower than expected jobless claims the markets rolled over to lay dormant around Dow 9100 for a couple hours. Then they rallied slowly through a couple intraday resistance levels to close at the high of the day. Most of the buying was in the big caps but the base broadened into the Nasdaq and the Russell before the close. The advance/decline ratio ended positive at 1.65 but the VIX sank all the way back to 30.02. The TRIN was also neutral at 1.02.

The ending performance was impressive considering the possibility that the end of quarter portfolio dressing will turn into portfolio stripping on Monday. Helping the move is the Russell rebalancing for tomorrow at the close. The candidates for addition have not see the typical buying frenzy and that can only be attributed to fear by speculators to take any long position. However there was some bargain hunting today.

Friday could be volatile as the markets are far from oversold in any short term context. The momentum pushing them higher is slowing and fear of the July-4th terrorist warnings will come back into the market the closer we get to the holiday. There was a rumor after the close today that WCOM and the SEC were close to a settlement on the accounting fraud story and that would be a positive if announced on Friday. It is amazing they can move that fast but they need to resolve the issue quickly so they can pay severance to the 17000 employees being cut next week. Friday we get the PMI and another Consumer Sentiment. Should be an interesting day.

  Leigh Stevens   6/27/02,  4:41:39 PM
INDEXES: TRADE Recommendation - UPDATE: OEX call buy rec at OEX 477.3 - Raise STOP to OEX 476.00 from 474.50. Sell objective on long calls is OEX 494. Will revise as needed tomorrow (Friday).

QQQ stock bought at 25.5 - suggest raising stop to 25.20 from 24.50. SELL at 26.60.

  Jeff Bailey   6/27/02,  4:38:24 PM
Interesting quote .... "An entrepreneur tends to lie some of the time. An entrepreneur in trouble tends to lie most of the time." -- Anonymous

  Jeff Bailey   6/27/02,  4:28:32 PM
Will be interesting to see if there is any type of "internal repair" taking place in the more volatile NASDAQ-100 Bullish % ($BPNDX), which turned back to "bear confirmed" on Tuesday. Last night's reading was 13% bullish.

Should get an updated chart Link and reading in a couple of hours. It would take a reading of 20% to get back into "bull alert" posture, and a reading of 24% to get "bull confirmed."

Bearish equity traders need to be very careful if overly short when NASDAQ-100 Bullish % reaches a "bull confirmed" status from such low levels.

"Key stock" is Microsoft (MSFT) $54.92 +1.45% and continues to trade strong. As it relates to the NASDAQ-100 bullish %, this stock gave a "buy signal" back in May at $55 (contributed positively to the bullish %) and hasn't given a sell signal since that $56 trade. From here... trade at $56 is further bullish, while trade at $57 stronger still. That would be an excellent point for bulls to be looking long ($57, especially if the NASDAQ-100 bullish % reverses into a bull confirmed status). Link

  Jeff Bailey   6/27/02,  4:13:52 PM
Today's action ... the Fiber Optic Index (FOP.X) 44.12 +6.41% was today's biggest sector winner. Subscriber's know from past commentary that this sector has perhaps been one of, if not the WEAKEST sectors. Today's action hints of extensive short covering and that is it.

I doubt strongly that bullishness in this sector was "window dressing" for the end of the quarter. Unless of course, shorts from $68 were dressing up their results and locking in some gains. Link

Only "technical" reason for today's rally was that yesterday's action has the bar chart testing the lower end of downward regression and we've seen sectors rebound for similar technicals, only to find resistance, consolidation and further breakdown after a rally as distribution then continues.

  Jim Brown   6/27/02,  4:01:05 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The closing numbers on the last exit for those that are interested... OEX 490.04, SPX 988.11, DJX 92.41, DIA 92.55, SPY 99.15

  Leigh Stevens   6/27/02,  3:59:46 PM
INDEXES: TRADE Recommendation - UPDATE: OEX & QQQ look like they are going to close near their highs, which is bullish - am maintaining the "HOLD" on OEX calls & long QQQ stock I suggested yesterday, but revising the stops shortly. Options AND QQQ stock trades until 4:15 pm eastern.

  Jeff Bailey   6/27/02,  3:58:56 PM
I'm feeling your pain with ABX, but I'm not selling until July 3rd. At lest give it through tomorrow, where the window dressing may become window cleaning.

I see your point and I held AU as long as I could, but my account management just has me saying so long. Hey, made in BGO what I lost in AU, so about break-even, but I'm starting to "doubt" the gold bug theory here. If the budget ceiling isn't lifted, will probably regret selling AU today, but the MARKET doesn't seem to agree with my previous thoughts.

Today's lower price action in Gold doesn't really make sense to me with the weaker dollar.

But then again... I'm sure weakness in WCOM at $34 may not have made much sense either, but eventually things were known. Link

  Jim Brown   6/27/02,  3:56:54 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Several panicked readers just emailed me that their stops did not trigger at 490 either. Evidently there was something strange about that tick. If you are still in the trade I would keep it open. I like this level as an entry point and would probably change the stop to 491 since 490 appears to be the upper resistance.

  Jim Brown   6/27/02,  3:46:15 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
A reader just pointed out that the OEX high of the day is 490.04. The stop on the current open SHORT signal was a trade over 490. I had my Qcharts alert set to a trade at or above 490.01 and it never triggered. I don't know if this was a bad tick, a delayed tick or just another Qcharts error. I checked with Alan Knuckman at Preferred to see if the AutoTrade program got stopped out and he confirmed the 490.04 print at 2:52:07. Sorry about the confusion. For good or bad one thing I always want to do is report EXACTLY what is happening in real life and we will let the chips fall where they may! We are flat as of 2:52.

  Jeff Bailey   6/27/02,  3:31:20 PM
Anglogold (AU) $26.61 -4.62% ... I can't take it anymore... with today's trade at $73 in the XAU.X, I'm placing a stop loss order here on previously profiled AU at $26.49. If filled so be it. If I can get any type of rally above $27, will go buy one of those gold plastic rings from the penny vending machine at the super market. Either $73 in the XAU.X is a "bear trap", perhaps clearing out some stops, or getting ready for a leg down. Link

Note... since I can watch on a minute-by-minute basis, won't give the specialist the stop, but set an alert there and run the trade myself.

  Jonathan Levinson   6/27/02,  3:19:41 PM
Up volume now just twice down volume on the COMPX. As Jeff was noting with our four letter stocks, price got just above its top channel before reversing. Seems we have to work harder and harder to make a buck at this- no doubt numerous stops got flushed and longs got triggered on that break. In any event, the TRINQ has remained pretty much mute through this chop, but the stochastics are very good at times like this - now confirming to us that we're now in a bear roll headed south.

  Jeff Bailey   6/27/02,  3:19:15 PM
NVIDIA (NVDA) $17.25 -14% ... Jeff: What about NVDA? It seems to have hit its bearish vertical count of 18. What do we do now?

What? (grin) ... same thing a trader should do with all stocks that hit their bearish targets. Either take your gain off the table, or snug down a stop like that described in today's 01:00 Update. Link

As previously shown on bar chart (at least I think I've shown it). Lower end of downward regression is right in here at $17.00 and can take some gain off the table. Otherwise, lower stop to $19, which was the bearish vertical count from p/f chart. Link

  Leigh Stevens   6/27/02,  3:16:52 PM
Subscriber QUESTION: "Hello Leigh - Do you have any recommendations for playing a trade such as OMC today, as I have seen many stocks with similar action, and would like to know a method of capitalizing on potential short covering etc.Thanks a lot... Love your Forum...keep up the great Work "

RESPONSE: Well the main thing is to keeping looking at a lot charts - you have to anticipate the places to "catch" a low (or high) like that. However, there was a very likely price at which to anticipate a reversal area.

In the case of OMC, the Weekly chart told the story - the Intraday low (36.5) for Omnicom (OMC) equaled the low of 37 in the week ending 10/9/98 - this was MAJOR reversal as the stock took off on a run to above $100 in the next 12 months.

So, at a "minimum" this told you that the MOST likely spot for a short-covering rally to begin was at 37 - at this point you could buy the stock on margin or buy calls on the stock and gotten a sharp boost from the short-covering rally you noted.

  Leigh Stevens   6/27/02,  2:55:34 PM
INDEX Comments: QQQ has broken out above it's hourly/half-hourly down trendline - Nasdaq finally being "pulled" higher by S&P, the powerhouse of this rally.

  Jonathan Levinson   6/27/02,  2:53:16 PM
TRINQ at .50, not showing extreme buying pressure as the COMPX prints its highs of the day. Despite the overbought oscillators, the TRINQ is telling me that there's more upside left. Remember how the TRINQ nailed the top of this morning's move when it printed .26.

Up volume on the COMPX is now thrice down volume.

  Jim Brown   6/27/02,  2:49:53 PM
Pivot Trade Signals
SO CLOSE !!!! Talk about pegged to resistance at the 10 DMA! The last five min has been amazing. A solid stop that could break either way. Advancing volume has been increasing slightly but the ticks are trending down ever so slightly. If we break out here it could be explosive.

  Jim Brown   6/27/02,  2:44:44 PM
Pivot Trade Signals
According to a reader Arch Crawford just issued his 2:PM update and he is suggesting shorting the SPX with a target of 937. He is expecting a hard drop very soon. Just for your information. He has been pretty accurate the last couple weeks but then everybody was predicting the crash, not just him.

  Jim Brown   6/27/02,  2:40:51 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 14:35:52 when the OEX traded below 487. (SPX 982.56, DJX 92.11, DIA 92.21, SPY 98.55) The initial stop loss is an OEX trade over 490. (SPX 987)

  Jim Brown   6/27/02,  2:35:02 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The 10 DMA appears to be holding. I am willing to risk a half position here with a tight stop. Let's go SHORT the market with an OEX trade below 487. (currently 487.05) With a tight stop at 490.

  Jim Brown   6/27/02,  2:28:34 PM
Pivot Trade Signals
The buying we are seeing is end of quarter window dressing. It has pushed the major averages to current resistance at the 10DMA. The Nasdaq is the only index to break through that level but the others are knocking on the door. If resistance in this area fails it could cause a wave of short covering. Dow 9221, SPX 984, OEX 488, Nasdaq 1444. This is a critical intraday point. Most buying will be today with sellers likely to gain the upper hand tomorrow once the funds are done.

  Jeff Bailey   6/27/02,  2:24:06 PM
US Dollar Index (dx00y)* 106.49 -0.06% ... forming a nice "wedge" on its 5-minute chart interval. Stocks look to be anticipating a move higher.

*30-minute delayed quote.

  Jeff Bailey   6/27/02,  2:20:27 PM
Diamonds (DIA) $92.33 +1.2% ... not filled on the $92.20 bid, will pull here as US$ not confirming, but look for potential entry closer to $92.00 on 5-minute chart.

  Jonathan Levinson   6/27/02,  2:18:49 PM
Advancing volume is now over double declining volume on the COMPX, with the TRINQ at .66 as the COMPX tries for the 1450 resistance level again. All intraday stochastics are overbought, and the next hour should be very interesting to watch. We can short another rollover from here with a tight stop, but if price breaks above this resistance, the next area to watch will be COMPX 1470.

  Jim Brown   6/27/02,  2:17:04 PM
Jim, I have puts on IBM at 70.50. Is your assessment of a stop still at 72.50? Mike

Yes, but what we are seeing is big cap window dressing. Stocks like IBM offer a quick way to enter the market with a lot of money and a quick way to exit on Monday. Liquidity is good and big orders don't really move the stock.

  Jeff Bailey   6/27/02,  2:06:06 PM
Dow Industrials (INDU) 9,200 +0.92% ... session higher here and trying to make a move. If US$ will confirm, looks to have some upside to 9,400.

Looking to bid the Diamonds (DIA) at $92.20 here. Short-term trade only. Stop $91.25, target $93.90.

  Jeff Bailey   6/27/02,  2:04:18 PM
United Technologies (UTX) $65.94 +1.68% .... may be a stock to keep an eye on near-term for break above $66.15. Pretty good volume spike of 480K shares at 01:00 EST from $65.39-$65.65.

Point/figure chart not looking all that bullish so any bullish trade would have to be short-term oriented right now. Link

  Leigh Stevens   6/27/02,  1:53:07 PM
INDEX Comments: OEX and the other NYSE related indexes broke out above its hourly/half-hourly down trendline on this last rally. This increases the probability of OEX then clearing its prior upswing high at 487 - OEX last at 484.3. This same pattern of breakout above their minor down trendlines is seen on SPX and the DJX hourly/half-hourly chars. Technical buying usually comes in ON the breakout, then subsides a while, especially if selling then comes in the area of the early morning high - this is the current dynamic with DJX, SPX and (to lesser extent)with OEX.

  Jeff Bailey   6/27/02,  1:39:40 PM
BEA Systems (BEAS) $9.22 +1.09% ... Jeff, Please give us your thoughts on whether to go long or short here for BEAS.and what does the P and F Charts show? Under current market conditions, entering BEAS as a bullish play hasn't even come close to crossing my mind. Only reason to be bullish is if locking in gains from the bearish side.

Nothing has changed on the p/f chart from past comments (last time I think we were at $11.50). Vertical count still bearish to $5.50. Link

Would have to correlate against US$ and Treasury YIELD observations going forward, but right now, I wouldn't be too bullish on a pure bullish play in BEAS.

  Jeff Bailey   6/27/02,  1:32:54 PM
Stocks trying to bid again as Treasury YIELDS hold their intra-day highs. Should U.S. Dollar Index (dx00y) 106.47 -0.07%* confirm with a rebound, may help push stocks to exceed best levels of the session.

* 30-minute delayed quote.

  Jim Brown   6/27/02,  1:29:13 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's close the open SHORT signal here at 483 and reopen it when weakness reappears. No need to fight the trend.

  Jonathan Levinson   6/27/02,  1:04:46 PM
Advancing volume is now almost 1.5:1 over declining volume. The COMPX looks to be headed for another try upward, 1450 resistance currently 17 points away. TRINQ at .76, QQV down .65 on the day, and 30 minute stoch crossing up from midrange- never made it to oversold.

I am currently watching an upchannel, easily visible on the 30 minute COMPX candle view, the lower line of which starts at yesterday's low. Price is currently sitting at the bottom of the channel, and has just moved slightly above it.

  Jonathan Levinson   6/27/02,  12:32:44 PM
Time to move the stop loss down to COMPX 1430 on open puts bought at the morning highs. If this congestion breaks to the upside, we book our profits. If it heads down from here, so much the better.

  Jeff Bailey   6/27/02,  12:24:45 PM
USA Intl. (USAI) $20.74 -8.8% ... reason for continued weakness most likely from thoughts that the Media sector uses EBITDA as a primary earnings metric. Stocks that took a beating yesterday were UVN, IPG, USAI, LAMR, VIA, FOX, AOL.

  Jonathan Levinson   6/27/02,  12:17:05 PM
Advancing and declining volume are now pretty much even on the COMPX, flipping back and forth. Price seems to be chopping below 1430 on the COMPX, and I don't feel a lot of strength here. I'm still holding my puts from earlier, and am in no rush to unload them. The TRINQ is neutral around 1, and the stochastics are becoming scattered in the chop.

  Jeff Bailey   6/27/02,  12:13:27 PM
Expedia (EXPE) $54.55 -8.89% ... jeff please give me your ideas on EXPE. thanks dave

Grin!.... I think we covered it pretty good on 06/12/02 at $64 with bearish profile and then again on 06/19/02 Link . Has come together like a bear wanted.

From here, I'd simply set an "alert" on USAI $20.63 -9.43% at $23.17, which is just above yesterday's high. With USAI under selling pressure, the previously announced "deal" with EXPE, ROOM and TMCS now become suspect. Will shareholders of USAI approve such an offer with their stock going in the tank? If they call it off, then MARKET may think... "hey, if USAI thinks they're paying too much, then EXPE, ROOM and TMCS might be over valued."

Note... EXPE did achieve its bearish vertical count of $59 yesterday and our near-term target of bullish support trend. Link

But as mentioned in intra-day commentary and "tie in" with USAI, we see break of bullish trend and the bearish vertical count of USAI still growing and now at $6.00. USAI also met a "bearish target" of $21-$22, thus my thoughts on simply snugging down a correlative stop with the EXPE/USAI stocks.

However, now we better understand further potential downside of USAI calling off the "merger" with EXPE, ROOM and TMCS. While that scenario is yet to play out and we never know for sure the outcome, may be worth sticking around in EXPE, using a near-term stop of $22 with USAI.

Again... thinking on my part is if merger is called off, USAI might rebound, but EXPE, ROOM and TMCS could decline further on this type of news, thus my thought that EXPE, ROOM and TMCS were the better short/puts, and not USAI.

  Jeff Bailey   6/27/02,  11:58:40 AM
IBM (IBM) $69.78 -0.35% ... you guys are doing a fantastic job over here! Back in IBM this morning any thoughts on a downside objective? Maybe back to the $66 level from yesterday?

Yes, I like that type of trader for short-term bear. Correlate this week's highs as stopping point (say $71.75) with the US$ high today.

  Jeff Bailey   6/27/02,  11:49:58 AM
Rational Software (RATL) $7.72 -3.86% ... from last night's "conversation" in market monitor regarding a subscriber's observation that Goldman Sachs was a seller yesterday at the offer of $8.50. Note this morning's rally high was $8.45, and after that... "boom!" selling to $7.24. Wonder who was the seller?

  Leigh Stevens   6/27/02,  11:47:13 AM
SECTOR Update: The Semiconductor Index ($SOX.X) is having a decent rally off from an emerging rounding bottom, but hits significant resistance at 403-404. A close above this area would be bullish; a close under 366 quite bearish.

  Jeff Bailey   6/27/02,  11:46:30 AM
NASDAQ observation here's something I want to alert NASDAQ traders to, if you're trading 4-lettered stocks. Yesterday, I got "sucked in" on a bullish trade I ran in my account in RDRT. I didn't risk much, but thought the stock might get a pop higher as the Disk Drive Index (DDX.X) was bucking the early market trend.

I watched RDRT for about an hour, and there was what looked to be a seller at $0.84 on the 5-minute chart interval. When the stock finally cleared that offer at $0.85, I went long 2,000 shares and was targeting $0.94. I got that shoved right back down my throat and held into the close of $0.50. Ugh!

Today's action plan was to get out on any type of "rally." What I observed was another "trick" on this time interval, where the market maker backed away from the offer, and the stock appeared to break above its 50-pd MA (5-minute chart), then seller came in as the "piker" day traders (that would be me) bought the breakout. However, I thought.... "aha!, those $*()@#$" and the stock fell back to $0.62. I missed by chance right? Nope.... same thing took place at 10:20:00 and RDRT again edged above its 50-pd, and as soon as that took place, I dumped at $0.67.

Point is, be careful of any "break out" near-term. Even when I was trading RDRT and looking for confirmation for the US$ or Treasury, I just wasn't seeing that confirmation.

If the market makers are doing this with a "garbage" stock like RDRT, they are most likely doing the same thing with other 4-lettered stocks.

  Jeff Bailey   6/27/02,  11:29:30 AM
Wow! I can't type those intraday updates fast enough can I. That action noted earlier in the weakening US Dollar Index (even on 30-minute delay) looks to have been a signal doesn't it? Dow Indu (INDU) now down 58 points and was up about that much when the US$ move came to the downside.

See how the Gold/Silver Index (XAU.X) 75.92 -0.45% has recovered somewhat after being down about 2%? I get the feeling that the institutional traders are keying off some of this stuff on a near-term basis. Over time, it eventually become longer-term type of trends.

While these market monitor observations can be "killer" benefit for short-term traders, it may be a bit "frustrating" to a swing trader as it creates (up, then down, then up again) type of observations. DON'T get frustrated if you're a swing trader. The only adjustment you should be doing is looking at things on a different time scale. While a shorter-term day trader is studying 60,30,15,10 and 2-minute charts, The swing trader most likely looks 60-minute interval as his shortest term chart along with daily interval, then makes his/her entry and exit points from those observations. Of course every trader uses the point and figure charts to get the "real" picture and institutional perspective of things. (big grin).

  Jeff Bailey   6/27/02,  11:27:33 AM
Invitrogen (IVGN) $31.58 +3.71% ... Jeff--I missed getting in IVGN yesterday--would you still do it at this point? Thanks

You haven't "missed" anything, but YES, I'd still look put on IVGN. I don't like to outright short biotech stocks on the thought that "the cure for cancer" could leave an outright short in the stock in serious trouble. Thus, in my book, options are the way to limit your risk, but give you exposure to potential downside. Link

I would only look 1/2 position though. That should be enough if stock is going to tank. I've noted in the past that according to Dorsey/Wright and Assoc., the biotech bullish % is very "oversold" at 13.4%, thus not looking full positions.

I will also draw on action in recently bearish profiled Affymetrix (AFFX) $22.30 -0.88% from its spread-triple bottom sell at $21. Link

Both of these stocks are "biotech" and neither stock finds its point/figure chart on a "buy signal" at this point and both have given bearish chart patterns based on Professor Davis' study. The "only thing" in my mind holding them together is that the sector is so oversold and risk does run high for a bearish trader. However, if the MARKET knows something is wrong with either of these stocks and they fall sharply, a bearish trader then perhaps understands that he/she will want to lock in some gains should the rappid decline take place, based on the probabilities study.

  Jonathan Levinson   6/27/02,  11:24:57 AM
What stochastic setting are you using, using 533 I had a crossover at 10 am?

I use 10(5) to filter out false signals, at the expense of getting fewer signals overall. I like to use tight stops and prefer fewer trades with fewer false entries and than many with more.

  Jim Brown   6/27/02,  11:23:34 AM
Pivot Trade Signals
That was a pretty strong sell program. The Russell took a significant hit and the adv/dcl ratio went from +1.44 to negative in less than 5 minutes. When the market is this "thin" any buy/sell program can move it substantially. While this program may not end up with a lasting impact today it does show us that there are very few bids under the surface. Traders are scared and nobody wants to place heavy bets on the long side. That should be a clue for market direction before the holiday.

  Jonathan Levinson   6/27/02,  11:23:30 AM
Down volume now exceeding up volume on the COMPX, with a bearish cross on the 60 minute stochastic just printed. COMPX now below 1420 support.

  Jim Brown   6/27/02,  11:14:57 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The market SHORT was triggered at 11:10:48 when the OEX traded below 481. (SPX 972.28, DJX 91.10, DIA 91.08, SPY 97.40) The initial stop loss on this signal will be 484.50. (SPX 978.50)

  Jonathan Levinson   6/27/02,  11:11:11 AM
Advancing volume is now 1.3 times declining volume as the COMPX prints its lows of the day. We now have a bearish cross on the stochastics on my 30 minute COMPX chart. TRINQ is tame at .99.

  Jim Brown   6/27/02,  11:06:36 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
So much for having patience. The bleed is accelerating with the OEX hitting lows for the day. Let's go SHORT the market if the OEX trades below 481. (SPX 972)

  Jim Brown   6/27/02,  11:00:44 AM
Pivot Trade Signals
The markets ran into resistance much sooner than I expected. It is amazing to see how quickly the bullishness faded. There is still a slight bullish bias but it appears everyone is waiting for the next shoe to drop. The urge to short here is strong but despite the market stall the internals are still strong. Combined up volume is running better than 2:1 and the advance/decline ratiro is very positive at 1.75. Aggressive traders may want to enter short positions here but it is possible that institutions are waiting for another dip to complete their window dressing. I would like to let the markets decompress for a little while longer before entering a new position. Of course while I was writing this the internals started declining slightly so we may see a trend change shortly.

  Leigh Stevens   6/27/02,  10:56:48 AM
ON THIS DAY in 1905, the crew of the Russian battleship Potemkin mutinies --no fictional "Caine mutiny", but the real deal relating to very brutal shipboard conditions. AND, in 1927, the U.S. Marines adopt the English bulldog as their mascot - now there's a story. Couldn't they have picked the American something or other - oh, I suppose being a nation of immigrants, all the dog breeds come from elsewhere. My recent favorite is the Beshan, hailing from France. The Russian wolfhound is a striking dog, but I never see it - well President Putin is here instead. No analogy there, just that I hear Russian right now on CNBC. In honor of the great fighting spirit of the English Bulldog and the Marines, treat your dog to a special dinner tonight.

  Leigh Stevens   6/27/02,  10:45:01 AM
Subscriber QUESTION: "Thanks to all of your at OI for the great work. I'm currently holding the July 40 Puts on ZLC. Quite a change since mid-afternoon yesterday, with nothing but northerly movement. See this type of action as anything more than a rebound? I was expecting a bit of a bump up, but this seems too strong, too fast. Appreciate your insight on this one. "

RESPONSE: This rally could be more than a minor rebound - too soon to tell, but I don't see it as too far to fast. It would be if market went "straight up" today which is not happening. I like to see some dips along the way - the best rallies seem to start with "legs" like that.

Reminds me of the story of Jessie Livermore bringing a tip on a stock to an old time experienced trader - first thing the guy did was SELL some of the stock - young Jessie was shocked - "why are you selling a stock that I just told you is going higher?" - the old pro replied that he FIRST wanted to see how the stock reacted to selling - price action was firm, indicating accumulation - at that point the trader took to the long side.

  Jonathan Levinson   6/27/02,  10:39:59 AM
Advancing volume is now just under 3x declining volume on the COMPX. TRINQ now at .62.

  Leigh Stevens   6/27/02,  10:35:41 AM
INDEX Comments: OEX/SPX stocks are running into selling, with NYSE TRIN bouncing up to 1.25 (over 1.00, selling pressure is greater than buying), but Nasdaq TRIN ($TRINQ) is at .51 - seems that there is some buying interest in the fallen tech angels.

  Jeff Bailey   6/27/02,  10:33:58 AM
Renaissance Learning (RLRN) $18.08 -24% ... stock "whacked" after lowering guidance, blaming that tightened state education budgets are resulting in lower revenues than previously expected. Link

  Leigh Stevens   6/27/02,  10:30:29 AM
Subscriber QUESTION: "leigh, I made your suggested play on the biotech holders. I played a july call with an 85 spot. It was at 82.30 when I bought for 3.70 a contract. Monday at 1PM occurred and the contract went to 4.90 a contract. I started lusting after an in the money delta and decided not to exit but instead hope for a longer run twards the 90's (at that time BBH was at 85 even). From there it fell throughout the afternoon to close at 83.30. Tuesday morning it went back up to 4.70 a contract only to end up closing in the 2.70 area with BBH at around 80. QUESTION: Should I be satisfied with such a high risk play with a 20% gain and perhaps play it twice or should I be waiting for a better run? "

RESPONSE: I am anticipating a rebound in the Biotech HOLDR's (BBH) perhaps back up to a key "line" of resistance at 89. With BBH trading at 82.5, I see some upside from here of maybe 8% before it faces a key price test. If you get 20% on an option play, it's tempting to take it in this market.

  Jeff Bailey   6/27/02,  10:29:21 AM
Telecom still under some selling pressure today and not really participating with the broader markets. Combined Telecom (IXTCX) 101.52 -0.6% and North American Telecom (XTC.X) 378.50 +0.03% depict action.

Verizon (VZ) $37.69 -2.6%, SBC Communications (SBC) $28.75 -2.54% and BellSouth (BLS) $29.50 -2.47% showing bulk of weakness. WorldCom (WCOM) still halted, with last trade showing yesterday's pre-market of $0.23.

  Jeff Bailey   6/27/02,  10:24:04 AM
US Dollar Index (dx00y)* 106.57 +0.01% ... has given back bulk of gains in last hour. While this "quote" is from a 30-minute delay, not good for stocks in my book.

* 30-minute delay quote.

  Jonathan Levinson   6/27/02,  10:20:25 AM
The TRINQ below .4 and the stochastics overbought on the COMPX tell me that 1450 should hold as resistance. I say this with some uncertainty, however, because of the bullish news this morning. Nevertheless, a good pilot trusts the indicators. I would short the QQQ with a tight stop from any rollover back down below 1447. For aggressive traders only.

  Leigh Stevens   6/27/02,  10:17:42 AM
Subscriber QUESTION: "Leigh, I missed the buy of QQQ at 25.50 level yesterday. If it dips to that level this morning, would you still buy it? "

RESPONSE: Yes, although I wouldn't be thrilled with this action - however, dip to 25.5 is still ok in terms of the chart pattern - drop below 25.00 is not.

  Jeff Bailey   6/27/02,  10:13:12 AM
Gold/Silver Index (XAU.X) 75.09 -1.54% .... Today's trade at 75, puts the $1 box of the XAU.X back on a sell signal. From here, vertical count now bearish again, this time currently $69. Key support at 74, but trade at 73 would be negative. Can really see the range developing now from 74-80. Break either way from this range could bring sharp move in the direction of the break. Link

Catalyst either way most likely is the budget ceiling that has yet to be approved. Should the government default on some debts due to lack of approval, the gold could see upside from here. If resolved, then could be catalyst for break lower.

What are the politicians going to do? The MARKET is tough enough to "figure out" let alone figuring out what a politician is going to do. (grin)

However, the p/f chart hints that bullish and bearish traders in the sector better have some type of "damage control" plan in place should the XAU.X chart break from the 80-74 range. Get the plan together on underlying positions now, then be ready to execute the plan on the break.

Anglogold (AU) $27.20 -2.5% .... I'm still holding a bullish position in AU from previous bullish profile, and other than a few fleeting moments above $30 am not liking it. My plan should the XAU.X break 73 is to simply sell for loss. Should XAU.X break above 81, would think things work out OK. Link

  Jonathan Levinson   6/27/02,  10:11:29 AM
The TRINQ made it to .31 again on that recent rise, and again didn't last longer than 2 minutes or so, conveniently about the same time it takes to enter and verify an order (grin), before the upswing in price reversed. These are very, very minute moves though, and if the TRINQ worked that well, it would be more widely exploited. Just an interesting relationship I'm seeing this morning.

  Leigh Stevens   6/27/02,  10:09:40 AM
INDEX Comments: QQQ key stocks update - MSFT has been lagging the rally, INTC has been a drag on it, down on the day - still "ok" technical action unless it slips below 18.00'; CSCO has faded from its intraday highs; ORCL is the standout performer, having broken out above the resistance "neckline" of a Head & Shoulder's bottom pattern; QCOM getting a little bounce from the potential double bottom low of yesterday, relative to its early-May bottom. All in all, this rally is nothing to write home about in terms of the key stocks. Sellers may be sidelined a bit, but the buyers are not showing up in droves either. SUNW has finally reversed its slide and is having a bit of rebound and is trading above $5.00, after falling to as low as 4.55 yesterday.

  Leigh Stevens   6/27/02,  9:56:14 AM
SECTOR Update: MOST sectors that I track are up - exceptions are Gold & Silver index ($XAU.X), which I've been pointing out of late in my SECTOR TRADER updates looked like a good short/put play on the XAU rebound after the first decline. Usually corrections have the form of down-up-down, with second "leg" down typically longer than the first.

Also down on day (slightly) are the Drugs and Telecoms sector indexes.

The Russell 2000 ($RUT.X) was unch. on the day, now plus by 0.8%. The Russell is being re-balanced this week and there are big portfolio changes going on because of it - also, they will also begin to catagorize a "value" and a "growth" group, such as is the case with the S&P 600 SmallCap ($SML.X).

  Jeff Bailey   6/27/02,  9:53:49 AM
US Dollar Index (dx00y)* 106.86 +0.28% .... rallied to its 50-pd MA on 60-minute interval of $107.00 and found some resistance. Intraday, may take move above 107.00 to see further gains in stocks from their session highs.

  Jonathan Levinson   6/27/02,  9:48:40 AM
The TRINQ made it down to .26 near the open today, indicating extreme buying pressure. I have never seen a TRINQ reading that low persist for longer than a few minutes. The TRINQ is remaining below .5, currently reading .4. The COMPX price is currently "diverging", printing new lows as I type. We will watch to see whether price and the overbought stochastics or the TRINQ prevails.

I note that MSFT has just flipped red.

  Jonathan Levinson   6/27/02,  9:41:28 AM
Advancing volume is beating declining volume 7:1 on the COMPX at the open. Price is sitting right at 1450, with all intraday stochastics currently overbought.

  Leigh Stevens   6/27/02,  9:22:24 AM
INDEXES: TRADE Recommendation - UPDATE: Long OEX calls at OEX 477.30, with stop/exit point at 474.50 for today - no specific objective at this point. Will see if this rally has "legs"; Long QQQ at 25.5, with stop/exit at 24.50 - as with OEX, no specific target - update later on this point; "key" resistance looks like 27.00.

  Leigh Stevens   6/27/02,  9:14:48 AM
Pre-Opening, Stock INDEXES - Good Morning - It's Showtime!

Index Futures trading: S & P 500 > +9.80 - Fair Value: +.52; Dow Industrials > +95.00; Nasdaq > +20.00

  Jim Brown   6/27/02,  9:03:15 AM
Pivot Trade Signals
What a difference a day makes - The open today is shaping up to be much different than yesterday's disaster. The futures are strongly positive due to the final first quarter GDP number at 6.1%, Surprising everyone the gains came from final sales not from building inventories. The second quarter GDP is only expected to be in the 2.5% range. Dow futures are +98, Nasdaq +23.50, S&P +11.80.

This positive news is building on yesterday's positive close and could be prompting more short covering. End of quarter window dressing will be a factor again today. The major averages will have to overcome major resistance to move much higher than the futures are indicating. Major resistance levels are Dow 9420, S&P 1007, OEX 502, Nasdaq 1470.

With yesterday's closing bounce taking away some of the oversold conditions the averages may struggle getting to those resistance levels. We are not going to chase the markets on the long side this morning and will be waiting patiently for an entry point at higher levels.

  Leigh Stevens   6/26/02,  10:04:19 PM
The Market Monitor for Wednesday has been archived and can be viewed at Link


Market Monitor Archives