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  Jeff Bailey   7/3/02,  4:43:36 PM
WorldCom (WCOME) $0.22 +121% ... Jeff, per the comments from your 3:15 Intraday Market Update, if a trader recently speculated on a small position in WCOME, and if, quoting you "Goldman Sachs believes that the future removal of WorldCom (WCOME) from the NASDAQ-100 has in order of likelihood" how would this affect those holding WCOME shares if the stock were removed from the Naz100?

Funny.... the "if a trader recently speculated on a small position in WCOME..." Doesn't that sound like the person that calls the radio program and says.... "this friend of mine needs some advice...." (grin). Hey... don't be "ashamed" if you speculated on WCOME. To confess my sins, the other day I actually contemplated of a trade when when the stock was range-trading between $0.06 and $0.07 that it might be a neat little trade to bid $1,000 at $0.06 and turn on the offer at $0.07 and try to whip out a 16% gain between the spread. If it did/does go bankrupt, then I'd order the stock certificates from the broker/dealer, frame them, then hang them on the wall for a conversation piece. Cost of the artwork a little over $1,000.00, if the stock doesn't go into bankruptcy, then "priceless." Then I'd go do a credit card commercial.

Seriously now... being taken out of the NASDAQ-100 is the least concern for a bullish trader in WCOME right now. It's kind of like being chained to an anchor at the bottom of the ocean and holding your breath, then wondering what you're going to have for dinner that evening. In summary, I wouldn't be concerned about being taken out of the NASDAQ-100, right now they're facing being delisted from the NASDAQ entirely and moved to the pink sheets.

I'd treat WCOM as "speculative" and willing and able to lose all invested capital. Treat it like an option and "lottery play."

 
 
  Jim Brown   7/3/02,  4:36:25 PM
Pivot Trade Wrap
What No Crash? - Nobody complaining on this end! The markets rallied off of new eight month lows to close positive on bargain hunting and short covering. End of story. While the volume was very strong for a pre-holiday session at 1.53B and 2.6B respectively most of the volume was in low priced stocks. This could be the "blue light" special syndrome where buyers feel they want to buy something and cheap stocks like Qwest and Lucent definitely limit risk.

Was it really bargain hunting or short covering? Short covering gets my vote. Stocks like AOL, which has not seen any buyers since November, suddenly posted a +12% or $1.54 gain for the day. JNPR saw strong volume and bounced off the $5 range just when the networking sector was suffering from another round of downgrades. Since $5 stocks cannot be shorted on margin it is very possible that shorts covered for a profit and went to cash for the weekend. Cisco traded 76 million shares and gained +.48 cents after a two month slide and a new eight month low yesterday. Intel rebounded off a new low of 16.26 and a level not seen since April-1997 to post a +1.18 gain on 63 million shares.

It is likely all the reasons for the afternoon bounce are valid. Short covering driven by obvious signs of extreme oversold conditions and a little bargain hunting in front of a relief rally on Monday. The urge to be flat over the weekend was also a factor. Did this change the market metrics? No. As evidenced by the second AMD warning this quarter things are simply not well in the economy and the coming July earnings AND guidance will point this out. Next week will be interesting. How far will any expected bounce go? The S&P closed back above 944 and the Dow closed well over 9000. This could be a very good omen for next week. Friday trading is only half a day and volume is usually very light. I will bet it nears record levels this time! Have a safe 4th!

 
 
  Jeff Bailey   7/3/02,  4:13:13 PM
Dow Transports (TRAN) 2,596.76 -0.88% ... weak close here and below its 200-day MA of 2,616.80. Past closes below the longer-term 200-day MA (January and February of this year) have seen quick rebounds within a session or two. Should we see DIVERGENCE from the past, then this becomes larger negative in my book. Link

Today's trade at 2,600 on $50-box is even larger negative yet. Either a bear trap or headed lower to test the bullish support trend at 2,300.

 
 
  Leigh Stevens   7/3/02,  4:05:38 PM
INDEX Comments: A LAST note on a potential bottom - re DJX - back on June 20th, I calculated a downside objective for the February-March Head & Shoulder's Top pattern for DJX, coming up with a 88.6 "minimum" downside objective. DXJ low today was 88.9.

Given the potential to be off by a "pencil width" when drawing these things - for all practical purposes the downside potential for the Dow, based on its Head & Shoulder's top - has likely been FULFILLED in my estimation. The chart I refer to can be seen at Link

 
 
  Jonathan Levinson   7/3/02,  4:01:52 PM
Have a wonderful and safe 4th of July, everyone.

 
 
  John Seckinger   7/3/02,  4:00:39 PM
For Friday: June Non-Farm Payroll (estimates for 75k versus 41k, prior month) will be released one hour before the market opens. Currency traders seem more concerned about a number completely off base with expectations (either much higher or lower), and movement within the dollar should be a precursor for equities. Moreover, I believe the 5-year bond will be more important than other maturities since it will be indicative of event risk. Volume should come into the markets early on and then quickly dissipate as the session progresses. Therefore, another extended move is likely.

 
 
  John Seckinger   7/3/02,  3:54:14 PM
With traders unable to hedge equity shorts via buying bonds (since bond market closed), it was not surprising to see an extended move develop during the last few hours of trading. From Semiconductors to Drug issues, risk taken by short sellers evidently became too great.

 
 
  Leigh Stevens   7/3/02,  3:47:05 PM
Subscriber QUESTION: "Any comments on AMAT as it is rebounding much like INTC?"

RESPONSE: Applied Materials (AMAT) also got down to the low end of a downtrend channel and rebounded - like INTC - only AMAT has not gone to new lows relative to its Sept. bottom - in fact the stock has retraced 75% of its Sept. - Apr/May advance.

When an index or a stock does not retrace more than 3/4 ths of its prior rally, the stock is showing better relative strength than one that retraces ALL of its prior upswing. The most bullish potential aspect to the daily chart pattern is that of a bullish falling wedge. A decisive upside penetration of 18.5 would tend to "confirm" a trend reversal and that a bottom was in place.

 
 
  Jim Brown   7/3/02,  3:44:41 PM
Do you think we have been to the well too many times on IBM or is it worth one more try here?

I would be leery of opening a new short position here on IBM. While it is at resistance and primed to roll over again we have not seen the expected earnings warning. I don't know for sure when their quiet period begins but I would assume it was this week. This means they may not warn. Because of the very oversold conditions and the heavy shorting in IBM any rally on Monday could send it even higher. If I were going to open a new position it would be on Monday/Tuesday after we see what kind of relief rally appears.

 
 
  Jeff Bailey   7/3/02,  3:42:07 PM
Invitrogen (IVGN) $29.65 +0.85% ... stock "popped" from $27.30 to $30 at 02:30, after the company reaffirmed guidance for Q2 and FY. Expects Q2 results to come in at or above the upper end of co's guidance, which was $0.44-$0.46 on revenues of $160-$163 million (consensus $0.45/share and $161.41 million). IVGN's outlook for the remainder of the year is unchanged. Link

Most likely, company was called by an analyst based on this morning's news out of Qiagen (QGENF).

If holding puts and "jittery" then look for a pullback near $28 to close out with small gain.

 
 
  Jeff Bailey   7/3/02,  3:38:06 PM
The 3:15 PM intraday update has been posted. Link

 
 
  John Seckinger   7/3/02,  3:35:03 PM
Interesting to note shares of General Motors (GM) continue to come under pressure, down 80 cents at 49.72. Corporate Spreads work again!

 
 
  Jeff Bailey   7/3/02,  3:34:46 PM
If a option is .05 ask/ bid is blank. If I were to sell this option, would I get zero (bid) for the contract? Thanks Yes, this option is basically "no bid"... best you can do if looking to sell is simply stick a limit order out there. Sometimes, a trader that may have sold that option as "naked" may take your offer to close out his/her exposure. Just make sure that the $0.05 you might get for it is enough to cover your cost of commissions.

 
 
  Leigh Stevens   7/3/02,  3:24:54 PM
Subscriber QUESTION: "what would be a stop-loss limit for ORCL? "

RESPONSE: 7.7 for now - however, if emerging up trendline was broken by a move to below today's lows at 8.5, the pattern would not look as bullish.

 
 
  Jonathan Levinson   7/3/02,  3:24:39 PM
Up volume is swamping down volume better than 2:1 even with our applied WCOME discount. The COMPX is now 9 points off its high of 1375- surprising that this lift didn't take us further. The QQV is now down .86 on the day, and while the longer intraday 10(5) stochastics are still displaying their bullish crossups, they've lost a lot of velocity on this last 9 point drop off the highs. The 30 minute is beginning to roll over as I type.

Note that this up move has now violated the downtrend that started on June 28.

 
 
  Leigh Stevens   7/3/02,  3:13:40 PM
INDEX Update: Support & Resistance -

S&P 500 (SPX) Support > 934-936 - Resistance > 953, then 958-959

S&P 100 (OEX) Support >471, then 463-464 - Resistance > 475-476, then 480

DJX: Support > 89-89.3 - Resistance > 90.9-91.0, then 91.9-92.0

 
 
  Leigh Stevens   7/3/02,  2:59:46 PM
Subscriber QUESTION: "What's your price target and time frame for ORCL?"

RESPONSE: On Oracle (ORCL), my objective is to $12 over the next 2-3 weeks I think. 12.00 is a "minimum" upside objective based on the measurement of the Head to Neckline, then same distance added to neckline at Right Shoulder.

 
 
  Jonathan Levinson   7/3/02,  2:57:02 PM
This looks like runaway short covering to me without instutions to sell into it in our pre-July 4 getaway. Good call, Jim!

 
 
  Leigh Stevens   7/3/02,  2:55:06 PM
INDEX Comments: NDX & QQQ are now back above their prior hourly lows (QQQ: 24.4; OEX: 471) which is suggesting that this rally could be gathering a bit of steam. Like Jim, could see the potential at the lows in QQQ (and OEX), but was/am reluctant to step up to the plate given the tendency for wider swings due to a thinned out trader-ranks over today and Friday.

 
 
  Jeff Bailey   7/3/02,  2:38:12 PM
AT&T Wireless (AWE) $5.42 +8.18% ... stock up on "trader talk" that Cingular will announce an acquisition of AT&T Wireless (AWE) when the markets close today. This follows a June 24th report by f#@edcompany.com that a Cingular buy of AT&T Wireless was close. Both AT&T Wireless and Cingular declined comment on takeover rumors.

Will note volume today in the July 5 and 7.5 calls and puts hinting of speculation.

 
 
  John Seckinger   7/3/02,  2:14:33 PM
Bond Market is closed. 30 Year bonds finished unchanged at 103-23 while surprisingly the 10 year note ended down a few ticks. Five year bonds were marginally higher. This highlights possible event risk and likely unwinding by mortgages - causing weakness in the 10 year sector. It is more important to realize that volatility may pick up as one of the capital markets ceases trading.

 
 
  Jim Brown   7/3/02,  2:13:39 PM
Pivot Trade Signals
Sure would like to go long here with all the internals improving slightly and the OEX/SPX/COMPX all putting in a series of higher lows. However, if we go back and look at the recent trading this type of trend has been failing later in the afternoon. Just when traders begin to get their hopes up the institutions load up the sell programs and take us down again. Nobody can predict the future today but the bull in me wants to go long here with a breakout over SPX 944. The cautious trader in me is saying, "Wait you idiot! Better to miss an afternoon spike and avoid any weekend news event and start with a fresh outlook on Monday."

Everyone reading this has their own bias and are free to trade that bias at will. If you do decide to go long then I wish you the best of luck!

 
 
  Jonathan Levinson   7/3/02,  2:12:17 PM
WCOME has now racked up 675M shares today, with the TRINQ now at the lower end of its day range at .15. Ordinarily, a reading this low would be a peak in buying pressure certain to end abruptly, but the TRINQ has been trading .15 to .20 all day due to WCOME.

Volume Breadth is positive on the COMPX, even discounting the WCOME volume. This coincides with price action on the COMPX at 1356 as I type, which is leading the way higher after struggling around 1350 throughout the late morning and early afternoon. Surprisingly, the QQV is up at the higher end of its range, up .76 on the day.

 
 
  Jeff Bailey   7/3/02,  2:07:02 PM
Market Schedule Jeff: Does the market close early today?

Nope... full day today, closed tomorrow, and Friday will open at 09:30 AM EST, but closes early at 01:00 PM EST.

Handy link for holiday's and market hours is at the NYSE web site, the "real" market. Link

 
 
  John Seckinger   7/3/02,  2:06:41 PM
Corporate Spreads in the auto industry continue to widen as analysts continue to remain concerned over 0% financing. Shares of General Motors (GM) remain lower by 0.71 at 49.79 but above its intra-day low of 49.09.

 
 
  Jim Brown   7/3/02,  2:00:21 PM
I'm sitting here wondering why I'm here watching the market ... I'd like to go long (vix over 40 would be better) but (in lieu of "terrorist event risk") what if a bunch of warnings are waiting for the holiday weekend (maybe I better go both ways) or what happens to the time premium if you gamble and the market opens flat or opposite on Monday ...... Do you see any *real* opportunity this afternoon? David

The real opportunity is to the upside. The SPX has been putting in higher lows and a break over 944 could produce strong short covering. We still have the event risk but it appears the market has "priced it in" since it does not want to drop further. What is a trader to do?

Lottery play on the long side or stay flat.

 
 
  Leigh Stevens   7/3/02,  1:51:32 PM
INDEX Comments: QQQ - find it easier to see if there is upside reversal potential if I look at the key underlying stocks themselves:

MSFT is holding above its prior downswing low in 49 area, but action today is "neutral" as stock trades in the middle of its intraday range so far

INTC - rebounding from the low end of its downtrend channel and from level of low going back to '98 - move above 17.8 would be bullish for at least an interim low

CSCO is establishing a possible double bottom low relative to May bottom.

QCOM also establishing a possible double bottom.

ORCL has most bullish looking chart - its Head & Shoulder's bottom pattern is firmly intact. (I own the stock on a trading basis - just bot some more.)

SUMMARY - Nasdaq 100 could mount a substantial counter-trend rally in coming days, especially if MSFT got a boost and started moving higher again.

 
 
  Jeff Bailey   7/3/02,  1:49:34 PM
Panera Bread (PNRA) $30.99 -5.37% ... Jeff: what are your thoughts on panra bread as a put before its split it couldnt get above 70.00 high pe 65.00 used to b e resistance now the stock is trading down around 62.00 63.00 200 day average now is 27.77 if it breaks 30.00 it looks like it might hit the 26.00 level Hmmmm.... compelling thought perhaps as it relates to this morning's call from Bear Stearns regarding IBC (thinking they are both "bakers").

On a post split basis, today's trade at $31 was a double-bottom sell signal for PNRA, and gives the trader a bearish vertical count column that hints at $26 (where did subscriber come up with $26?). Link

We will also note that past bullish vertical count was to $52.50, so this might hint that somebody thinks or at least thought of longer-term bullish. Under current market conditions, I could see 1/2 position put with target of $26, but I wouldn't expect an "easy" time of lower prices.

Could use the S&P 500 Bullish % ($BPSPX) Link to understand MARKET risk as it relates to Panera and that stock most likely being drug lower by MARKET.

You can see the tendency from PNRA's relative strength chart versus the SPX to pull back, then lead higher, pull back, then lead higher. Thus thoughts of lessening capital exposure here with partial positions only. Link

 
 
  Jeff Bailey   7/3/02,  1:43:22 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Leigh Stevens   7/3/02,  1:42:36 PM
Subscriber QUESTION: "I was away from the market this morn. Was that a bad tick on the Q's at 10:52 showing a low of 22.73?"

RESPONSE: I show a low around that time frame of 23.62 - 22.73 "bad tick" has not been corrected on my TradeStation DAILY charts, or on Q-charts.

The quote vendors are dependent on getting a "refresh" message from the Amex to correct a daily high or low.

 
 
  Jim Brown   7/3/02,  1:38:23 PM
Looks like the Dow, which has been the laggard in the recent drops, may be the leader in any afternoon selling. The Nasdaq is still the strongest index but could be influenced by any Dow drop below 8900 this afternoon. The Nasdaq is in danger of breaking into positive territory again as I type this. Technical buy signals are breaking out all over as bargain hunters are trying to position themselves before the weekend and shorts are covering to go flat as well. Shaping up to be an interesting afternoon.

 
 
  Jim Brown   7/3/02,  1:21:49 PM
Has anyone looked at the new highs/lows? The combined NYSE/Nasdaq new lows are 450 compared to only 36 new highs. Decliners are beating advancers 4560 to 1738. Capitulation anyone?

 
 
  Leigh Stevens   7/3/02,  1:21:04 PM
Subscriber QUESTION: "The 60min SPX is approaching the bottom of the channel, bottom of the envelope and 5 pf stochs are o/s. If these three factors line up, would you go long for a few points? "

RESPONSE: I'm interested in the long side, given the move (and stabilization) at low end of the hourly channel - today in 934 area. There may be another shot down, but doubt that there will be a lower low or not by much.

 
 
  John Seckinger   7/3/02,  1:12:51 PM
With one hour left before the Bond Market closes, there remains an underpinning bid as the Nasdaq seems to be at a pivotal area. The dollar seems to be a non-event as liquidity is almost nonexistence and the Bank of Japan will likely not intervene. Note: The Biotech index did find support at 290 and is currently resting exactly at the 300 level. No coincidence.

 
 
  Leigh Stevens   7/3/02,  12:59:46 PM
INDEX Comments: SPX & OEX - with the S&P indexes hanging in at the low end of the hourly downtrend channels that "defined" the area from which 2 of the last 3 upside reversals occurred. The question is now I think the timing. The last time the S&P indices bottomed at the low end of their well-defined hourly downtrend channels, it occurred over a 6-hour trading period. The 2nd. "touch" to the trendline was the one that led to a sustained rebound.

Given the low volume and lack of buying interest this week, the S&P indexes may, yes, be at or near a tradable bottom, but may also require a period of "basing" (a sideways move) before a rally develops.

 
 
  Jonathan Levinson   7/3/02,  12:54:07 PM
Well, the TRINQ is still "broken" due to another huge volume day on WCOME. A big percentage gain in WCOME has day traders and casino dippers giddy today, many of whom bought at $.06 and unloaded in the low $.20s. That said, breadth is flat on the COMPX factoring out the 578M WCOME shares traded so far today, with an even amount of advancing and declining volume. Nasdaq-100 volatility is up negligibly, .19 on the day and below its resistance level. Nonetheless there are 237 new lows to 13 new highs, and the price action at these low levels gives COMPX bulls nothing to cheer about. However, nervous bears are their own worst enemy, and in this light volume week a short covering rally could work wonders. I doubt that it will happen, but I note that the morning lows have held so far.

 
 
  Jeff Bailey   7/3/02,  12:53:14 PM
Cisco Systems (CSCO) $12.54 -0.23% ... talked bearish about this one back in May above $16 and since. Have noted in past the the bearish vertical count was/is $7. Bears eagerly watching for a trade at $12.00, which would be triple-bottom sell. If short from $16, stop goes to $14.50, which would put stock back on a "buy signal" and turn vertical count bullish. Still bearish here with an alert set at $12 and $14.50. Link

Hmmmm... makes OSIS look a little pricey doesn't it?

 
 
  Jeff Bailey   7/3/02,  12:44:20 PM
OSI Systems (OSIS) $16.90 -3.8% ... Jeff: I think back in April, you profiled OSIS as a put play. If I calculate the bearish vertical count correctly, I come up with target of $6. Is this correct? Do you still like a put play? Your put trades have done well in stocks that have found resistance at their downward trends.

Ahhh yes... OSIS. Actually, it was a fellow trader friend of mine that is more of a day trader that thought he "sniffed" out a big short up at $25. I found his comments compelling as OSIS had achieved it bullish vertical count of $27.50 back in March and the Bullish % charts were all "overbought" levels.

Oh how the tables have turned since March as risk has been methodically reduced in the NASDAQ-100 to a measley 10% from March's "overbought" level of 70% Link while OSIS slowly has succumb to distribution from that $25 level and giving some glaring sell signals recently at $18 in the "triple-bottom." Link

Currently, I'd look short/put 1/2 position at current levels and target longer-term would be $6, but also use Professor Davis' study of tiple-bottom from $18 to target a 23% decline over next 3.4 months. From $21 a 23% decline would be $13.86. Link

While it looks like institutions are monitoring that bearish resistance trend on the p/f chart, sure looks like somebody's been monitoring the 50-day MA also. Link

Market volatility has those October $17.50 puts (UOJVW) a little expensive at $3.00, thus I'm more confirmed in my belief right now at just 1/2 position. If OSIS is going to $6, then would be nice to have a partial position.

OSIS makes fiber optic related equipment and is an OEM for a broad range of applications, including security, medical diagnostics, fiber optics, telecommunications, gaming, computer peripherals to name a few.

 
 
  John Seckinger   7/3/02,  12:38:38 PM
The Financial Index is coming under pressure, underneath its 200 DMA (currently at 2188) on a daily basis while under both the 22 and 50 averages on a weekly chart. Currently at 2106, recent selling has placed the index on a pivotal area established during trading in late February.

 
 
  Jim Brown   7/3/02,  12:28:00 PM
The failure of the Nasdaq to give up a lot of ground even when the broader markets dipped earlier has given the bulls a little more confidence. Still it appears the lows for the day may be tested again. The TRIN has collapsed from yesterday's highs and the declines are picking up speed again. The SPX stopped within twelve points of the October 1998 crash low of 923. That would be my entry point for a long play. I view the risk of a drop from there as minimal despite the event risk from the weekend. This is a critical level, which should not be broken easily and should spark a rebound rally.

 
 
  Jeff Bailey   7/3/02,  12:18:50 PM
American Express (AXP) $35.93 -2.4% ... (per 11:51 GE comments), might be a "better" Dow component candidate to look for some type of leadership near-term, but certainly not seeing it today.

Stock has been trying to hold near a rounding flat 200-day MA of $36.21 for last couple of weeks. Point/figure also shows bullish support/trend at $35, and stock has held that level on two-tests. Lower highs are concerning, but understandable under current market conditions. Link

As noted back in April/May, stock achieved its bullish vertical count of $43 and since that time has been under distribution, again, MARKET action, but may have also reached "fair value" based on institutional models at that $43-$45 level.

As such, I looked at a July $35 call (AXPGG) $1.95 as potential short-term play as a little "pop" to $39-$40 not unreasonable and a nice double in the call would be had under such a circumstance, but I'll look at some other's to see if we can't find a stock that has pulled into technical support like AXP, but still has yet to achieve a bullish vertical count target.

Bar chart of AXP may also "breed" some near-term hope. MACD on this interval has crossed above signal, but still below zero. Some bullishness from MACD indicator and could see a "pop" in AXP to the 50-day MA (near $40) as MACD tries to trend up to the zero level. Link

Note... Monday was an "inside day" and yesterday, AXP broke lower from that. As such, can put ourselves in the position of being short at $36.54 from this short-term trading technique, with stop just above yesterday's high of $37.55. As such, short from that technique is a winner right now, so no hurry to be trying to get long.

 
 
  Jim Brown   7/3/02,  12:18:30 PM
That last bounce off the SPX lows was prompted by an order for 500 S&P futures contracts when the futures hit 935. This prompted some short covering in the futures and set off a little mini rally that brought the markets back from their lows. Now back at resistance the buying spurt has lost its steam. However, it does show that there are a lot of buyers lurking under the surface and quite a few of those buyers are shorts that are convinced the bottom is near. They are covering quicker but are just as quick to jump back in if the rally fails.

 
 
  John Seckinger   7/3/02,  12:10:07 PM
Treasury Bonds hit a high of 103-31 before turning lower, adding to the credibility that 104 was an important resistance area. Now at 103-24, it is odd that bonds are not lower as equity markets stage a rebound. This could imply that bondholders do not believe the rebound will sustain itself.

 
 
  Jonathan Levinson   7/3/02,  12:02:29 PM
While this bounce has taken the COMPX out of today's downtrending channel, I wouldn't be investing much hope in it and expect it to run out of steam at 1360-1363, the next short term resistance level. Beyond that, we watch the day highs if it gets that far.

 
 
  Jeff Bailey   7/3/02,  11:51:11 AM
General Electric (GE) $27.10 -3.59% ... new 52-week low today.

Jeff: what thoughts do you have on GE short and long term? If we have a bullish run on Monday do you feel it will be one of the leaders of the pack?

GE has exceeded its bearish vertical count of $28, but Professor Davis' study from that "triple-bottom sell signal" at $35 back in January (profitable for bear 93.5% of the time, average gain of 23% over 3.4 months) has played itself out on time and finally achieved the $26.95 level today! As such, would be looking to lock in gains if short! Link

However, while I consider GE a "key stock" for broader market direction and MARKET'S perception of global economy, I wouldn't consider GE as a potential candidate to "lead" a bullish rally. If looking at relative strength of GE versus Dow Industrials Link we see a RS chart that is on a "sell signal" and column of O, thus weak RELATIVE to the Dow Indu. Leadership most often comes from strong stock leadership, not weak.

 
 
  Jeff Bailey   7/3/02,  11:47:48 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Leigh Stevens   7/3/02,  11:39:55 AM
INDEX Comments: SPX & OEX - starting to rebound a bit after, for all practical purposes, having reached the low end of their hourly downtrend channels. Probably some short-covering and technical buying coming in.

 
 
  John Seckinger   7/3/02,  11:32:33 AM
Can you define Corporate spreads and their significance? Thanks.

Response:

Great Question. First a definition of Corporate Bonds; Bonds issued by private corporations rather than by governments. Most corporate bonds pay somewhat higher interest than bonds backed by the full faith and credit of the U.S. or by local government taxing powers, but government bonds usually carry tax advantages. The "spreads" I talk about is the difference in yield from these corporate bonds to that of Treasuries (using same maturity). If the difference becomes greater (read: widening) then a good assumption is that the corporate bonds are becoming riskier to hold (read: company possibly having financial problems). The significance is that if a company's bonds widen there is a good chance that their credit is being hurt and could negatively affect stock valuations.

 
 
  Leigh Stevens   7/3/02,  11:31:15 AM
INDEX Comments: Selling picked up once the Dow broke its prior low.

SPX and OEX are just about touching my lower downtrend channel lines currently.

 
 
  Jonathan Levinson   7/3/02,  11:18:23 AM
There is an astounding lack of strength. Generally, seeing all 10(5) stochastics oversold across all time frames, from the multiyear (Q)uarterly view all the way down to 1 minute, would cause one to expect a bounce of more than 4 points, but what the COMPX is doing could only be described as twitching. The QQV has barely budged since its morning open, still up by under .5 on the day. There's no action, just selling.

 
 
  John Seckinger   7/3/02,  11:14:23 AM
Reader Question about a possible bounce in the Biotechs near the 300-310 level

Response:

I am a believer in Top-Down modeling, meaning that if the economy is weak (or perceived to be weak by the markets) then there is no sense fighting the trend unless investing clearly defensive – which Biotechs have not acted as such. Support should be found near 280-290; however, if the overall markets are crashing it may make sense to sit on the sidelines until the dust settles. If you are looking more intermediate or long-term, then current prices could become more attractive. It seems that least resistance is lower, and now that prices are below 300 it may make sense to let the market find support before “telling” it where support should be (if Biotechs more actively traded then different story, since then more of a psychology comes into play). Another possibility is waiting until a bid back above 300 in order to confirm a shift in momentum.

 
 
  Jeff Bailey   7/3/02,  11:02:54 AM
U.S. Laboratories (USLB) $12.00 -5.8% ... this trade at $12 "could be doom" as it breaks bullish support and triggers triple-bottom. Defensive here as bearish count is $10. Link

 
 
  Leigh Stevens   7/3/02,  11:02:05 AM
INDEX Comments: DJX is only index that has NOT fallen under its prior recent low at 89.3 from 6/26 - however, the index looks that it will fall under 89.3 shortly - last at 89.4. A new DJX low could bring in some more technical selling.

 
 
  John Seckinger   7/3/02,  10:55:17 AM
Treasury Bond Futures near session high, up 2 ticks at 103-25. A move above 104 should provoke profit-taking; however, bond market closes early and there may not be the liquidity to stop possible panic buying ahead of July 4th. On the downside, it will take a move back underneath 102-28 before assets significantly shift back into equities.

 
 
  Leigh Stevens   7/3/02,  10:52:36 AM
INDEX Comments: Minor rally lacked fizz - the way all the indices rallied suddenly across the board suggested we had a buy program(s) active - once out of the way, the indexes continued their path of least resistance, DOWN. SPX trading further under prior Sept. low at 344.7.

Possible downside targets, based on low end of hourly downtrend channels are: SPX > 934 area; OEX > 463; DJX > 87.2; COMP > 1325-1326; NDX > 923-924; QQQ > 23-23.20 area

 
 
  Jeff Bailey   7/3/02,  10:50:19 AM
Hi Jeff, Thank you very much. I played IVGN and made money on 35, 32.50 and 30 puts. Very nice indeed. Thank you for the heads up. Keep up the great work. Best regards, Wow! You were bearish. Maybe that's called the "trifecta?" I'm not sure I agree with having to buy 3 different strikes, 1 strike of either would have been enough, but good trade.

 
 
  Jonathan Levinson   7/3/02,  10:48:04 AM
Now *that's* a sell program! Compx at its lows of the day.

 
 
  John Seckinger   7/3/02,  10:37:04 AM
Corporate Spreads beginning to widen out and could pressure equities going forward. Side Note: There is once again a rumor that the Bank of Japan could intervene and sell Yen (last time was last Friday).

 
 
  Jeff Bailey   7/3/02,  10:18:36 AM
Genomic tools companies QGENF Link , AFFX Link , IVGN Link

Hey! We noticed that trade at $29 in Invitrogen (IVGN) $26.95 -8.3% earlier this week and thought "put." Nice, very nice.

 
 
  Jonathan Levinson   7/3/02,  10:15:30 AM
WCOME-discounted upvolume is now approximately 1.5x declining volume on the COMPX as price bounces back down from its high of the day at 1367.

 
 
  John Seckinger   7/3/02,  10:13:56 AM
Biotech Index trades underneath 300 for the first time since December 1999; however, possible support should come into play near 280. The Pharmaceutical Index is showing similar price action while sectors trying desperately to hold onto decent chart patterns are Financial and Banking issues.

 
 
  Jeff Bailey   7/3/02,  10:11:07 AM
Affymetrix (AFFX) $18.42 -10.7% ... stock down (grin) after genomic tools maker Qiagen (QGENF) $6.39 -36.2% reduced outlook for FY02 and FY03.

On June 11th at 03:16 we thought that trade at $21 "could be doom" for AFFX. Link

Two targets for put holders from profile are from vertical count of $14, or Professor Davis' study from "spread-triple-bottom" of $21, being profitable 86.5% of the time, average gain of 24.9% in 4.6 months. From $21, that would be a target near $15.77. Thus "range" to lock in gains established from $14-$15.77.

 
 
  Jeff Bailey   7/3/02,  10:03:24 AM
ISM Services came in at 57.2% for June, below consensus of 58.2%. Levels above 50% are associated with growth.

 
 
  Jeff Bailey   7/3/02,  10:02:18 AM
Factory Orders rose 0.7% in May, which was better than the 0.6% forecast.

 
 
  Jeff Bailey   7/3/02,  10:00:26 AM
Factory Orders and ISM Services due out at 10:00 EST. Services number most likely won't have that big of impact as Factory Orders number.

Factory Orders are expected to rise to 0.6%, while ISM Services forecast is for 58.2%.

 
 
  John Seckinger   7/3/02,  9:59:36 AM
Volume extremely light within currency markets as the dollar holds on to some decent gains. Turning to Treasuries, 2 and 5 year bonds are performing relatively strong - most likely due to July 4th Terrorism threats - while the 30-year comes under pressure. It is interesting to note that bonds are NOT at session lows while Nasdaq finds a bid.

 
 
  Jeff Bailey   7/3/02,  9:52:26 AM
Market Internals continued to erode after yesterday's action. NASDAQ-100 Bullish % ($BPNDX) Link fell from 13% to 10%.

S&P 100 Bullish % ($BPOEX) Link fell to 33% from 35% and getting close to the 30% level which would be considered a longer-term "oversold" level.

The broader S&P 500 Bullish % ($BPSPX) Link edged lower to 36.47% from 38.88%. Still hovering at a "historic" low level, but not near the 30% or more deeply oversold levels like that found in September of a capitulation type level. The reason I say "historic" low level, is that it takes EXTEME selling and bearishness to have this broader indicator pushed below 30%.

 
 
  Leigh Stevens   7/3/02,  9:51:43 AM
INDEX Comments: ALL indices have classic bear trap reversal patterns - move to new lows followed quickly by upside reverals, at least on intraday charts.

exception is DJX in terms of move to new lows, but upside reversal is going on there too.

 
 
  Jonathan Levinson   7/3/02,  9:48:51 AM
Even with WCOME's advancing volume removed from the mix, advancing volume is currently doubling declining volume on the COMPX as it prints its highs of the day.

 
 
  Jonathan Levinson   7/3/02,  9:47:26 AM
Something I've never seen before- a 0$ price target:

"UBS cuts Allegiance, Choice One, sets $0 price on CWON"

 
 
  Jonathan Levinson   7/3/02,  9:40:26 AM
WCOME is accounting for the majority of the COMPX's advancing volume so far at the open, and I expect this to continue throughout the day. The QQV is up .21 to 53.66, below its upper bollinger band resistance at 55.88, telling me that there's still room for investors to become more fearful, even at these lows.

 
 
  Jeff Bailey   7/3/02,  9:38:03 AM
Vodafone Group (VOD) $12.86 ... Dow Jones reports that a Vodafone spokesman denied the accounting rumors that contributed to driving the stock more than 6% lower yesterday. "We are not being investigated. We are not aware of any accounting issues at all. We have yet to hear any specifics on what these issues might be." According to Dow Jones, VOD were also driven down by concerns it may overpay for increasing its stake in French mobile operator SFR. Link

 
 
  Jim Brown   7/3/02,  9:29:18 AM
Pivot Trade Signals
Same song, another verse. The premarket sentiment has fallen into negative territory and the possibility of another losing day looms large. The event risk still exists and the morning flurry of downgrades and warnings just added to the negative tone. The markets are extremely oversold and at extremes only seen 4-5 times in modern history. This is going to produce a very strong bounce if the weekend comes off peacefully.

The SPX is hovering just above the 944 intraday S&P low and a break below that level will be very negative and could lead to another round of selling. The possibility exists for another strong move down today but the Pivot model is going to remain flat without a compelling reason to play. Should we get a compelling drop it is possible we could go LONG the market if there is sufficient reason to believe that the markets could recover substantially before the close and take us out of immediate risk on a long play. I don't foresee this happening but the possibility exists. We will monitor the conditions as the day progresses.

 
 
  Jeff Bailey   7/3/02,  9:27:59 AM
Scientific Atlanta (SFA) $14.07 ... HC Wainwright downgrades to "accumulate" from "strong buy" due to lack of visibility in near-term demand and the expenses outlook; says co's announcement this morning that it is cutting 30% of employees at a Mexican mfg. facility appears to be more significant that the 10% reduction in workers last fall, and firm says it is likely that their 2003 estimates will be revised. Link

 
 
  John Seckinger   7/3/02,  9:27:01 AM
Weekly jobless claims fell for the second straight week to its lowest in nearly 15 months; nevertheless, the layoff report earlier in the week most likely will keep non-farm estimates (Friday) on the low side while keeping the unemployment rate relatively high. Current estimates are for an increase in 75k jobs while maintaining a 5.9% unemployment rate. This compares to a 41k increase and 5.8% rate.

 
 
  Leigh Stevens   7/3/02,  9:24:02 AM
Wall Street Journal (WSJ) - This morning's WSJ has a front page story on Cynthia Cooper, the internal auditor at WorldCom who uncovered the accounting fraud there - she is cooperating with Justice's criminal investigation. Her version of what happened is at odds witht the company's account of events - in the game of who do you trust, the winner is?

Also, front page is article on "U.S. Nuclear Plants Face Security Gaps Since Sept. 11 Raids" - this is one to fill us with confidence also!

Money & Investing section has headline that "S&P 500 follows Nasdaq to Multiyear Low" - no doubt, their version of the low is on a closing basis. Guess that makes sense, especially to money managers where the close is what counts.

There is also a story about how the WorldCom fallout is starting to both adversely impact hedge funds and the entire corporate bond market - selling of bonds was mentioned as a problem for Qwest Communications International, Tyco and AOL Time Warner - all have been accused of using aggressive accounting methods or have seen their senior execs under fire.

 
 
  Jeff Bailey   7/3/02,  9:23:29 AM
US Dollar Index (dx00y) 107.35 +0.57% .... nice little "pop" in the U.S. Dollar this morning. Keep and eye on Treasury YIELDS here. If YIELD begins to rise (selling in Treasuries), then that may be a "heads up" to rebound in stocks.

Currency traders are wondering if the strength in the U.S. Dollar is just a "flight to quality" this morning. Personally, I don't think so, as the "quality" did little to attract buyers over the past couple of months as the dx00y dropped to 105.85 late last week.

While U.S. Dollar has recovered somewhat in past 3 sessions, lower YIELD in Treasuries hints that some money has perhaps trickled back to the U.S., but bulk has been placed in the perceived safety of Treasuries as the benchmark 10-year YIELD ($TNX.X) has slid from 4.86% YIELD to current 4.74%.

For me, I think "meaningful" move for stocks would come from a 10-year YIELD above 4.8% combined with a dx00Y above 108.50.

 
 
  Jonathan Levinson   7/3/02,  9:21:24 AM
There is a multitude of reasons to expect a serious downdraft here. Most convincing to me is the rapidly approaching earnings season, and the certainty that auditors will be on red alert and companies looking to "come clean" with any dubious past transactions or reports. However, the fact that nothing goes up or down in a straight line is tempering my short term bearishness. The July 4th (and July 4th weekend) event risk gives sound reason to expect either a plunge in the event of an attack or a strong bounce in the event no attack occurs. While I've been thinking through different option strategies to cover this, I can't do better than Jim's "go flat" advice- the market will be there when we get back, and booking profits is always a winning strategy.

 
 
  John Seckinger   7/3/02,  9:21:01 AM
The Semiconductor Index looks to extend losses during trading on Wednesday as shares of AMD and INTC are expected to open soft. Advanced Micro Devices issued a 2Q warning and is currently at lowest levels since mid-April 1999.

 
 
  Jeff Bailey   7/3/02,  9:16:48 AM
Interstate Bakeries (IBC) $28.85 ... Bear Stearns downgrades to "neutral" from "attractive" based on valuation concerns. At 15x forward number, IBC trades at the top end of its historic range.

Worth noting is the p/f chart of IBC has been bullish and vertical count from dating clear back to Feb. 2001 has been $30.50. With stock at $28.85, longer-term call option holders may want to take some profits off the table as stock may be at an upper-end of both technical and fundamental range. First sign of trouble would be a trade at $22. Link

 
 
  Leigh Stevens   7/3/02,  9:12:32 AM
Pre-Opening INDEX Comments - Generally, quiet trade is expected today. With a close at 948, the S&P is quite close to its prior Sept. low in the 945 area. Institutional money managers, tied to the benchmark S&P Index in terms of their fund performance, will be watching to see if this Index holds its post-9/11 panic low. Expectations for a market lift in here is low. The public is not buying stocks. Funds are not rushing in either. Short-covering will only get the indices up so far.

 
 
  Leigh Stevens   7/3/02,  9:05:23 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index Futures trading: S&P 500 > -2.40; Dow Industrials > -30.00; Nasdaq > -1.00

Index Futures have weakened a bit over last 10 minutes.

 
 
  Jeff Bailey   7/2/02,  8:55:01 PM
Tuesday's Market Monitor has been archived. To view Tuesday's commentary, simply click this Link

 
 

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