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  Jeff Bailey   7/8/02,  7:17:31 PM
Tyco Intl. (TYC) $13.30 -0.82% ... This is my 3rd e-mail asking your opinion on tyc. Please reply. I have lost quite a pretty dollar on this stock and about to do it again. I bought in @14.51 and would like to know if I should hold here or cut my losses @current price of 13.70+. Its acting a little better today not going red with market, however, it just doesn't seem to hold 14. I am waiting for your reply....asap,please! Thanks in advance.

I thought I discussed TYC per this e-mail back on June 20th, in the "market monitor" at 02:00:22 . Maybe that wasn't this subscriber's e-mail, but review of that commentary my be a starting point from here. Link

Stock is trading $13.30, so the only "beating" you could possibly take here from $14.51 would be on a position that you may have OVER LEVERAGED in and should probably cut back some exposure here.

I'm having a hard time in recent months understanding why some traders are exposing EXCESSIVE amounts of capital (at least it sounds like you have exposed a lot of capital) to stocks that are under the scrutiny of the SEC.

To me... this is a "cloud of uncertainty" that a bullish trader should try and AVOID, unless they are CERTAIN that the company isn't doing anything abnormal with their SEC filings/reporting.

For me, I try and AVOID uncertainty when trading one side (bullish) or (bearish) and NOT go looking for uncertainty (unless implementing straddle/strangles).

To be short or long TYC, I would suggest the trader classify himself/herself and HIGHLY SPECULATIVE near-term.

My interpretation of the MARKETS in recent months is that most participants are trying to AVOID stocks with any type of uncertainty associated with the stock. What can happen is that shorts will attempt rumor to "talk down a stock" and create further uncertainty/doubt.

I currently perceive downside in TYC as $6.00, and with retracement set from $59.95 to $6, I perceive near-term upside at $16.30 (80.9% retracement), which the stock achieved on 06/20/02.

From this subscriber's e-mail, it doesn't sound like much success has been found with a bullish trade in TYC in the past (I'm guessing few have had any success). As such, would only expose MINIMAL CAPITAL to the stock right now, and be looking very long-term as it may take a while for MARKET to regain confidence in the stock/company/ or its management.

If I (Jeff Bailey) felt the way it seems this subscriber currently feels, I'd look to change stock symbols with a stock that has treated me better in recent days/weeks/months.

Stock remains longer-term bearish. Finding some support at $11.50 and vertical count still bullish to $31.50. Stop at $11 (triple-bottom-sell signal) is first sign of trouble and that sounds like "too much downside" per subscriber's e-mail. As such, would look to lighten up exposure on the stock, especially under current market conditions where SEC scrutiny is viewed as a NEGATIVE. Link

 
 
  Jim Brown   7/8/02,  5:23:26 PM
Pivot Trade Wrap
Bernie in Hot Seat -While Bernie Ebbers sweated bullets in the hot seat today the markets showed no follow through to Friday's gains. When we started this morning there were two likely scenarios. An opening dip and rally to new highs or an opening bounce and afternoon sell off. We got both. An opening dip, rally and then afternoon sell off. The amount of the afternoon dip, about a -110 point decline, was about what was expected after the +300 point gain. The afternoon bounce off that dip appeared to be the start of a rebound off that profit taking. Unfortunately the rebound failed.

Whether it was the controversy brewing over the WCOM hearing or just worries about the impending earnings cycle we don't know. The morning started with Merrill, Morgan and Goldman Sachs buying large quantities of S&P futures but the trend changed almost immediately. Tomorrow we will see if this afternoon was just profit taking or the prelude to another leg down. There was a small buy program at 20 min before the close but the volume was very weak. Neither IBM nor INTC have warned and earnings are fast approaching. Bulls may not be interested in taking positions at this level until after the giants have spoken. It is hard to build a case for a positive week and the negativity from the WCOM hearings could drag on the markets. Stay tuned.

 
 
  Leigh Stevens   7/8/02,  4:22:16 PM
Subscriber NOTE: "I know you are strictly technical but a little insight for you. Both Pontiac and Buick are putting the XM satellite radios in their vehicles as standard equipment for the 2003 model year (September. announcement). It will be optional on many Chevrolet models. I haven't looked at the other makes but assume many others will be offering this product as standard equipment. I believe your reader is premature in buying but this is a stock that could run back to 15 or 20 in a heartbeat. I think there is lots of potential for this company. Of course I've been wrong before.

P.S. I have enjoyed your feedback and am getting a lot out of your book. You did a good job on that one. "

RESPONSE: I appreciate the feedback and information and do follow fundamentals where I can, which is limited. Can see that XM Satellite Radio stock (XMSR) can really move, but figure that greatest likelihood that valuations will look "cheap" again to investors will be at those prior lows around 4.00.

Conversely, to also give a "breakout" point, where the stock would look like it had reversed back to the upside, would give a more complete view of the possibilities at least technically - a daily close above $6.90 currently would be a bullish upside penetration of the Dec. - June down trendline. This line will intersect at lower levels over time.

Also, a daily XMSR close above 7.70 and the ability to hold this level on subsequent pullbacks, would take out a "line" of prior consolidation highs in the late-June period- if this occurred, I would then be looking for a move back up to test resistance in the $11 area - a weekly close above this level then sets up still higher objectives.

 
 
  Jeff Bailey   7/8/02,  3:45:45 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jim Brown   7/8/02,  3:43:39 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market SHORT at 15:37:54 when the OEX traded below 484. (SPX 973, DJX 92.43, COMPX 1401.69, QQQ 25.14, DIA 92.64, SPY 97.66) The initial stop loss on this signal will be OEX 487, (SPX 979). If not stopped out we will be holding this signal overnight.

 
 
  John Seckinger   7/8/02,  3:35:58 PM
Since profiling The Biotech Index at 326, an explosive move did in fact occur from the outlined pivotal area. Currently at 315, look for light support at 310 before 290 becomes the obvious objective. It will now take a move above 330 to reverse sentiment.

 
 
  Jim Brown   7/8/02,  3:33:29 PM
I apologize for my blackout this morning. On Mondays I sometimes monitor the markets and write from a location in the Colorado mountains. The phone lines cannot support even 24K for more than 2-3 minutes at a time. Instead I use the Starband satellite uplink product. It has some limitations such as a two second lag time on the uplink but it has significant improvement on the download side. I have been using the system for about three months and have only had two real outages. This morning was a failure of a network cluster impacting my region. When it came back up I had numerous emails asking about the reliability. I will respond to those when time permits. I do like the system but with any bleeding edge technology there are challenges from time to time.

 
 
  John Seckinger   7/8/02,  3:31:25 PM
With just over 30 minutes left in the trading session and the bond market closed, weak sectors near their lows of the session should pick up steam as we head towards the close. Of course, this includes the Nasdaq.

 
 
  Leigh Stevens   7/8/02,  3:25:17 PM
Subscriber QUESTION: "How do you equate 14 on daily to 21 on hour chart. I only have 30 min.chart max. What would my 30 min. setting be to relate to your 60 min.? Being hour is 1/6.5 I can not see the relationship. "

RESPONSE: I don't "equate" 14 on a daily stochastic to "21" on an hourly stochastic. Different time frames show you different things. I would use "13", another "fibonacci" number, but 14 is a common "default" setting for daily charts and I simply use that.

21 "works" well on an hourly chart for "signaling" some tradable highs and lows especially when the 5-hour and 21-hour stochastic models are BOTH at highs ("overbought") or lows ("oversold"). The 14-day stochastic changes much slower than the hourly stochastics as you rightly note.

Again, the "relationship" between daily and hourly stochastics is not one of "equality" - they give you some ideas about different parameters. But, if you want same "degree" of overbought or oversold on a 30-min chart as on an hourly chart, simply double the setting "length" on the 30-min. chart; e.g., set 30-min stochastic to 10 to be equivalent to 5 hours and to 42 to be equivalent to 21-hours on an hourly chart.

 
 
  Jim Brown   7/8/02,  3:22:48 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The morning rebound failed and it appears that we are about to roll over to new lows for the day. Go SHORT the broader market if the OEX trades below 484. This would be just below the low of the day and would represent a breakdown of the intraday support. I would rather see another rally to give us a higher entry point but it may not happen. Without any follow through from Friday the prospect of further gains has become doubtful

 
 
  John Seckinger   7/8/02,  3:02:35 PM
The Financial Index has rallied exactly to the 22 DMA (currently at 2186) before profit taking set in. Still showing gains on the session, shorts now have a place to defend going forward. On a daily chart, the double bottom still looks strong below; however, the series of relative lower highs could push the index back to 2100 and form a bearish triangle.

 
 
  Jonathan Levinson   7/8/02,  2:57:49 PM
The QQV has broken to new highs, showing renewed caution and fear on behalf of QQQ option traders, now up 4.15 on the day to 52.21. QQQ is currently trading 25.38, and the COMPX has just printed a new low of the day at 1413.79. The TRINQ at 2.93 is off its highs of the day, and I continue to watch 1400 as the next downside target.

The Worldcom hearings are on Bloomberg right now, listening on the internet. Wow, am I glad not to be in that room!

 
 
  John Seckinger   7/8/02,  2:42:21 PM
Over the last few weeks, The Biotechnology Index has formed a bearish triangle, broke below and did hit our support level of 280-290 before rallying back to test the pivotal 325-330 area. So now what? The 22-DMA is trending lower at the 345 level, while 350 seems like a solid objective for bullish traders. However, this re-test should be heavily defended by shorts and there is only slight support at 310 before testing 290 once again. Things are pivotal here, so taking a strong stance one way or the other is purely speculative. Once momentum picks up, then odds greatly increase and our levels can used for exiting positions.

 
 
  Leigh Stevens   7/8/02,  2:32:08 PM
Subscriber QUESTION: "I've been reading your column with great interest and would like to trade the indices, especially the QQQ. I use Realtick and tried setting up the envelope lines using your parameters - 4% and 5.5%. However, the lower envelope and upper envelope don't look at all like your QQQ chart. The envelope lines are far away from the bars, and they don't touch any of the bars or come close to them like in your chart.

Also, I'm not sure how to set up your stochastic parameters - 14-day for daily and 21-hour for 60 mins. Any help you can provide me would be greatly appreciated. Thank you.

RESPONSE: I am hampered by not having your application to try out. You should ensure that the ("centered") moving average is set to 21. And, that the moving average and its envelope lines are set to the same "scaling" as the chart to which you apply it.

Beyond these general guidelines, for specifics on the application product, you can generally e-mail or call your application provider as to how to set up "moving average envelopes". By the way, be sure you are not using the "Bollinger Bands" study or indicator.

There is in every charting application that I know of, a stochastic setting or "variable" that you can set called "length" -- this is simply the number of "bars" that you want to be calculated in your stochastic indicator; e.g., "14" hours, days or weeks, depending on the time frame of the chart you are looking at. Now, you have to set up "14" for daily, if that's what you want, and then shift to another chart window and set to "21" if that is what you want on an hourly basis.

 
 
  Jeff Bailey   7/8/02,  2:25:54 PM
Genzyme (GENZ) $20.75 +4% ... wild ride in last 30-minutes. Stock fell after competitor Transkaryotic Therapies (NASDAQ:TKTX) $36.15 +6.54% provided date for the FDA panel review of its application for Fabry disease treatment Replagal. In rather "typical" fashion, investors viewing positive news for TKTX as negative for GENZ sold GENZ earlier.

Now GENZ bids in reaction that FDA panel will also review the Fabrazyme biologics license application on Sept. 26th, a day before Transkaryotic (TKTX) Replagal BLA is reviewed.

 
 
  Leigh Stevens   7/8/02,  2:08:44 PM
Subscriber QUESTION: "Leigh, What does the formation of back to back or double "hammers" mean? Is that better than one? I’m happy I was still long to capture today’s mania, however, I’m not crazy about loading up for a summer rally with the US about to attack Iraq. Care to discuss what impact that may have on the market? Third, could the market really rally huge prior to Big Blue’s earnings? That may be a loaded gun about to go off as well."

RESPONSE: Two successive weekly "Hammers" on the S&P 100 (OEX), is doubly bullish I suppose - I think that is the correct "candlestick" interpretation. When we see a bottom set up twice in the same area, its normally bullish - more so considering that there is a prior low some time back in the same area - that would be Sept. of course.

I also think that an attack on Iraq would be bearish on the market, given the great unknowns involved. However, the most knowledgeable speculation (and "intentional" leaks of military planning) does not envision such an action until early next year.

The market could rally some ahead of IBM's earnings if the market is looking ahead to Q3/Q4 and beyond already. In other words, if the market goes back to its "historical" tendency to anticipate ahead by 6 months or so. IBM is not as influential as it once was. However, given that earning's season is ahead - the impact of this could keep a lid on the overall rally potential for the market, particularly in tech. .

 
 
  Jeff Bailey   7/8/02,  2:02:59 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Jeff Bailey   7/8/02,  2:02:50 PM
Shorts look a little jittery in the contract manufacturer space. Names like SLR, CLS and FLEX show some intra-day action to the upside.

SLR was showing rather large offer at $5.50, but buyer was there and once the larger offer (see 10:32) was taken out, bears seemed to scramble and drive stock to current levels. Really shows up on 5-minute and 10-minute intervals and can make for decent little day-trader longs. Looking for some near-term support at the $5.60 level in SLR.

 
 
  John Seckinger   7/8/02,  1:57:54 PM
Current Events: United Press International reports that Al-Majd, a Jordanian magazine, says Palestinian leader Yasser Arafat is expected to step down in the coming weeks through an agreement between the United States, Israel, and certain Palestinian and Arab parties.

 
 
  John Seckinger   7/8/02,  1:54:46 PM
Thoughts: Oil significantly lower could partially explain an asset allocation play into equities, since the CRB Index has finally turned negative and inflationary concerns become muted. Of course, a weaker dollar should spur inflation, offsetting such reasoning. Therefore, maybe lower oil based on reduced terrorist concerns is a reason value players are scaling into positions of beaten down U.S. companies. I find this train of thought suspect. What is not suspect is the Dow unable to follow-through above the 22 DMA, currently at 9394. I am just thinking outloud.

 
 
  Leigh Stevens   7/8/02,  1:54:05 PM
Subscriber QUESTION: " first thanks for the great commentary..you are terrific ! look forward to your analysis. I have one for you though, do you think the S & P is making a head and sholder on the hourly ?..albeit descending head and shoulder.."

RESPONSE: The S&P (either SPX or OEX) could be forming a "triple top" - a Head & Shoulder's top will tend to have the "middle" top that is noticeably above the two tops on either side - the "wings" so to speak. I tend to discount a top here, so far at least, based on the way that the market is holding up - its been a fairly shallow correction so far, which is not what you would expect of a triple top.

 
 
  Leigh Stevens   7/8/02,  1:46:12 PM
Subscriber QUESTION: "I hold July QQQ puts from Friday afternoon. QQQ is currently near lows of day. Where would you be looking to close if they were yours "

RESPONSE: Myself, would be inclined to take any profits and look to buy puts again on a next rally. Not an easy call (so what else is new!) - QQQ has pulled back to the area of its prior resistance trendline, which may now be acting as "support" - a break to new lows and to below (prior support) 25.2 would be bearish - absent that there may be another rally attempt before it would again come down to the area where we are marking time or trading sideways in QQQ currently.

 
 
  Leigh Stevens   7/8/02,  1:38:10 PM
Subscriber QUESTION: "Leigh, I have been studying a lot of your very educational commentaries this weekend and they are wonderful. I would appreciate it very much if you could help me with a question regarding XM Satellite Radio stock. I have been averaging down on XMSR between 7.25 to 5.98 thinking it looked like a good buying opportunity. Now I don't know whether to hold for it for a recovery to around 8 or sell before it drops further. Of course, the downgrade to neutral by Merrill Lynch the same day didn't help. I don't know how much credence to give ML's downgrade. "

RESPONSE: Well, you have to give some credence to an Analyst who believes that the company's earnings trend outlook is not good.

Mainly, you are fighting a dominant downtrend currently, as the stock has had strong downside momentum since it hit a high in the $15 area in mid-April, with the stock trading under $6 today. The key factor is not only the unrelenting downtrend but the fact that XMSR has not yet re-tested the double bottom low in the $4 area that was made in April 2001 and in Sept/Oct of last year - from this area, stock went up to over $20 by late-Dec. Some mover!

It tends to be the case that stocks on a deep retreat like will tend to have a lot buyers looking at a major prior low like that, figuring they are not going to step up to the plate as buyers until/unless it again hits the level where the stock turned around before.

 
 
  Jonathan Levinson   7/8/02,  1:35:23 PM
The COMPX is showing no strength, with a new low of the day freshly printed a few moments ago. Declining volume is still beating advancing volume better than 4:1, with the TRINQ hovering at 3.14 and the QQV still up better than 3 points on the day. The US dollar index seems to have settled at support at 106.40. I'm receiving questions as to whether to close profitable put positions. I am not, but this is entirely a question of account management. Do I believe the QQQ will go lower? Yes. But if I'm wrong, it's a relatively small position I have staked on it, and I can afford to lose it if need be. The surest way to be a winner is to cut losses and let profits run, so if in doubt, tighten up your stops and let the market do the work for you.

 
 
  Leigh Stevens   7/8/02,  1:06:20 PM
Subscriber QUESTION: "If we have seen an extremely low TRIN, overbought intraday indicators and an established intraday trend down, why are you and/or Jim not shorting the market? "

RESPONSE: Jim might have a short-term swing trade signal in here, but his quote feed is down temporarily - AND Jim did say at 9:12 am - "My outlook for the day is cautious. There could be an initial opening dip which could be bought by those who missed the rally on Monday. From there we could see more shorts cover and the markets move up to the next resistance level."

Jim's comments are pretty clear. I suggested shorting near the top of the hourly downtrend channels in my last daily commentary before the Friday rally when the S&P indices got up to the top end of their downtrend channels - this was on the move toward 500 in OEX and in the 990's in SPX and to the 1450 area in COMP. Why am I not suggesting shorting it now?

I am taking a wait and see attitude about selling on downside momentum as this market is not "falling apart" - the correction so far is fairly shallow you'll notice. If the market is building a bottom, there will be another rally to short. If not, there still will be another rally to short, when my hourly stochastics are again both showing overbought readings.

 
 
  John Seckinger   7/8/02,  12:59:05 PM
The Semiconductor Index, currently down 13.72 at 379, has now retraced exactly 50% of Friday's advance. Shorts should begin taking quick profits, stabilizing semiconductor issues temporarily.

 
 
  Leigh Stevens   7/8/02,  12:45:49 PM
Subscriber QUESTION: "Went long on SHLM today as it broke above inside day from Friday. Am thinking that it could challenge 24 level soon, but am also worried about the "outgoing tide" of the market grounded the good ship SHLM..... Pleasantly surprised by pop up today......any thoughts on this stock or its industry? Could the rubber and plastics industry be viewed as a "safe haven", especially with upside earnings announcement from SHLM occurring a few days ago? "

RESPONSE: Schulman (SHLM) certainly has been in a strong up trend since Sept. rallying from under $10 to over $24 (mid-May) strongly bucking the downtrend in the Nasdaq and S&P 500. It does look resistance, at the top of its daily uptrend channel and in the area of the recent high, is in the $24.0 area. Support looks like $18, at its up trendline currently. No thoughts on the industry. The stock probably reflects the money that flowed into the cyclical type stocks - those whose businesses tend to benefit from an economic upturn the quickest. However, stick with the price points. I think I would be a seller on a move in SHLM back to the $24 area, or watch this area closely (if reached), as a double top could set up which would be a strong indication of at least an interim top.

 
 
  Leigh Stevens   7/8/02,  12:34:55 PM
INDEX Comments: RE Friday's "short-squeeze" being the start of a turn around in the Nasdaq trend - technical "confirmation" is also lacking.

Nasdaq Composite (COMP) is the key index here - its Friday rally reversed right AT the intersection of its down trendline in the 1148-1452 area. The Nasdaq 100 (NDX) and the QQQ tracking stock, did break out above the top of their trend channels, but are close to falling back to within those channels. I think it is likely that they will fall further with the likely target being the gap area - some or all of those gaps will likely get "filled in" - gap areas will tend to act as support, especially at the low end of the gap.

The chart gaps to watch are: 1401-1380 in the Composite; 1018-996 in the Nasdaq 100 (NDX); and, 25.25-24.75 in QQQ. If these gaps "resist" being filled in with subsequent pullbacks not getting into these price zones or certainly not to below the low end of these price zones - this would be bullish technically - suggesting that an important bottom is in place. On the other hand, retreat to below the low end of these gaps, suggests that the indices are still vulnerable to lower lows.

The market is probably going to mark time a bit ahead of the President's speech tomorrow.

 
 
  Jeff Bailey   7/8/02,  12:24:44 PM
Frontier Airlines (FRNT) $8.38 +11.58% ... stock getting a boost today from Raymond James upgrade to "buy" from "market perform" based on valuation and thoughts that investors should realize a very good return over the next year, and possibly a double or triple over the next 2-3 years. RJ's target is $11.

I was looking at FRNT last week. Will note that stock exceeded bearish vertical count of $8.50 and right back at its post-Sept. 11th lows. Looks oversold and may provide decent 3-month or longer call play. Overhead resistance at $14.50, so some upside to be had. Link

Could look 1/2 position here in the Nov. $7.50 calls (FUOKU) $2.20. Target $14 by expiration.

Long on underlying stock would have trader most likely following with stop at $6.50, so risking about $2.20 per share. Hey! That's what the call options are risking per contract. No stop needed in the calls as risk is equal to the stock. Allows option trader to let the trade work until expiration.

According to Dorsey/Wright and Associates, Aerospace/Airline Bullish % is "Bear Alert" at 34.6%, thus more defensive and only suggesting partial positions. Bullish % chart here still in column of O's and would take a reading of 42% to get back into X's.

 
 
  Leigh Stevens   7/8/02,  12:21:30 PM
INDEX Comments: Looking at the liklihood of Friday's "short-squeeze" being the start of a turn around in the S&P trend - technical "confirmation" is lacking.

SPX & OEX have reversed back to the downside (with recent acceleration of downside momentum) from below the top end of their downtrend channels, suggesting that the S&P is still in a downtrend. Only DJX broke out slightly above the top end of its hourly downtrend channel - however, this index tends to trade in the "narrowest" hourly channel, so the broader S&P indexes provide the key to this market segment.

 
 
  John Seckinger   7/8/02,  12:18:34 PM
Afternoon Anecdotals: Dollar September Futures Index lower by 1.1%. Crude Oil continues to slip, lower by 0.68 cents and just off intra-day lows. 5-year bonds maintain a strong bid relative to longer-dated maturities. Gold is also higher. All except oil points to lower equity prices, and the weakness in oil still cannot take the CRB Index lower. Note: The rise in 5-year bonds explains the flight-to-quality as funds continue to leave the Dow and Nasdaq in search of more performing assets.

 
 
  Jonathan Levinson   7/8/02,  12:12:47 PM
Volume breadth has now deteriorated to 5:1 in favor of declining volume, with the COMPX now at 1417, the QQV up 3.66 on the day and the TRINQ staying persistently high at 3.26. Just printed a fresh low of the day at 1414 as I type.

 
 
  John Seckinger   7/8/02,  11:59:20 AM
The Computer Index has now fallen underneath Friday's low of 665 (intra-day low of 664), completing an outside day. This technical pattern should be a precursor for more selling pressure ahead.

 
 
  Jeff Bailey   7/8/02,  11:58:42 AM
Jim Brown's Satellite modem has not been working, thus he is unable to currently post comments to market monitor. When he gets a connection back, he will then be able to post.

 
 
  Leigh Stevens   7/8/02,  11:57:02 AM
Subscriber QUESTION: "Regarding your comment on AMAT: '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. A decisive upside penetration of 18.5 would tend to "confirm" a trend reversal and that a bottom was in place.' - So, since the stock is above the 75% retracement, is this now a buy? I sold jly 20 calls at 1.1."

RESPONSE: The close above 18.5 suggests some further upside potential, perhaps to the 22-23 area.

 
 
  Jonathan Levinson   7/8/02,  11:55:49 AM
I read you are holding some gold issues. Can you tell me if XAU is an index of holder? Can one buy XAU, if yes how? if not, is trading options in XAU the only way?

XAU is an index, and while XAU options are traded, the XAU cannot itself be purchased as shares. CEF on NYSE and its canadian counterpart, CEF.A on the TSX (which I own) is worth looking into as a play on gold and silver if you prefer not to play XAU options.

 
 
  Jonathan Levinson   7/8/02,  11:47:35 AM
The COMPX has stalled in its 1422-1428 congestion area, and is back down at 1421. COMPX volume breadth continues to be weak, still just over 4:1 in favor of declining volume. The TRINQ, predictably, is still high at 3.53.

 
 
  Jeff Bailey   7/8/02,  11:39:14 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   7/8/02,  11:30:27 AM
OSI Systems (OSIS) $17.96 -0.29% ... Any particular strike price for a potential put play? Thanks

Yes.... on Wednesday, I thought 1/2 position in the October $17.50's (UOJVW), in the money Oct $20's (UOJVD) $4.20 also not bad. Near-term target from retracement would be $14.37 (retracement from $27.10 to $6.50) has 61.8% at $19.23, 50% at $16.80, 38.2% at $14.37 and 19.1% at $10.43. Plan would be to lock in some gains on any type of move below $14.37, while using bearish count of $6 and overhead supply above $18.50 as reason for bearishness.

 
 
  John Seckinger   7/8/02,  11:29:51 AM
The Computer Index, currently down 17.62 points at 671, has an intra-day high of 691 - equaling the 22 DMA. Support should be seen at 665, Friday's low. If 665 fails the index will have put in an outside day, encompassing the entire range of Friday's session. A settlement underneath 665 would be viewed as significantly bearish.

 
 
  Jim Brown   7/8/02,  11:25:05 AM
OEX 486 was the intraday support on Friday and could provide the support today for the next run to higher levels. Aggressive traders might want to try buying the bounce from OEX 486 with a tight stop. The drop from the opening highs has been playing out as expected and now we will see if the bulls can support the dip. You should not read anything into this dip/bounce as this is normal profit taking from the strong move on Friday. The tech generals are firming after giving back some of their gains. We are still waiting for the volatility to pass and the real trend to surface again.

 
 
  John Seckinger   7/8/02,  11:10:59 AM
Trim Tabs estimated that U.S. equity funds had a monthly outflow of $64.9 billion as bond and hybrid funds gained $1 billion.

 
 
  Jonathan Levinson   7/8/02,  10:57:39 AM
The COMPX has just given up the fight again, and is printing new lows of the day below 1420. This 1422-1428 congestion area should now act as resistance. I'd look for short term support at 1400, just before the gap from 1380. The TRINQ is currently at 3.21.

 
 
  Jeff Bailey   7/8/02,  10:52:25 AM
OSI Systems (OSIS) $18.10 +0.38% ... still think this one of the "best looking" short/put candidates in the market. Stock gave back bulk of Friday's gains before the close and hints of some longs looking for the door. Overhead supply from $19-$22 and bearish vertical count of $6 gives some downside room. Link

 
 
  Jonathan Levinson   7/8/02,  10:42:50 AM
As the COMPX rests on support at the 1425 level, volume breadth has deteriorated, now 4:1 for declining volume. The QQV is now up 3.14 on the day, and the TRINQ is maintaining its high level at 2.88.

 
 
  John Seckinger   7/8/02,  10:42:06 AM
Reported that The Fed is buying coupons between 4/30/04-5/15/05. In other events, the dollar continues its free-fall; voiding the island reversal pattern seen last week. It is interesting that MRK's accounting concerns and a weak dollar doesn't pressure the equity markets relatively more. These accounting scandals do not have the same event risk as when Enron announced; however, foreign capital should still be re-patriating at the expense of the Dow and Nasdaq.

 
 
  Jeff Bailey   7/8/02,  10:32:05 AM
Observation For listed stocks on NYSE. Short-term traders may want to take notes if trading from Level II. I've been day trading some listed stocks in recent weeks and have seen some interesting action. One thing I've noticed is that when I see some size (10K shares or more) on the bid, then stock usually finds a seller at the bid and stock trades lower from that level. Conversely, when there's some size at the offer/ask, then large trade comes in, takes offer out and stock bumps higher.

What I've been doing with this, is simply following a stock, watching bid/ask, then look for some size to come in on bid/ask. Can come in with 1,000 shares for your account, and sometimes scalp 25 to 50 cents. I've been using more as a "heads up" for near-term action.

This action depicts the specialist matching some block orders and filling larger orders at bid/ask. Then after either is taken out, retail traders come in and push stock direction of the block order. I do think that some retail traders are actually trying to short in from of large offers, but when the offer is taken out to upside, the specialist leaves little stock, stock will move up 25 to 50 cents over next couple hours (sometimes minutes) as the traders that thought they were shorting in front of "big seller" turns to cover for loss.

 
 
  Jeff Bailey   7/8/02,  10:26:08 AM
CIENA (CIEN) $4.93 +6.25% .... thinking put here in the Jan03 $5 (euqma) $1.40. Stock up most likely on news of Mr. Buffet taking stake in Level 3 (LVLT) $4.82 +66.78%.

Near-term, would be looking put Level 3 (LVLT) also and look for pull back to $3.50 as bearish target.

 
 
  Leigh Stevens   7/8/02,  10:12:17 AM
INDEX Comments: - Relevant to the Subscriber note to Jonathan, my Trader's Corner article explaning how TRIN works and how it might be used in reading the pervailing "winds" of the market can be found at Link

 
 
  Jonathan Levinson   7/8/02,  10:09:19 AM
We have a more than 3:1 declining:advancing volume ratio on the COMPX. 1090 advancers to 1553 decliners. The TRINQ at 2.41 now could be boosted by WCOME, which is now in the red on the day, but price action on the COMPX and the QQV up 2.41 indicates a marked absence of bullishness so far today.

 
 
  John Seckinger   7/8/02,  10:09:12 AM
The Banking Index remains above both its 22 and 50 DMA's, while The Financial Sector continues to rally after setting a double-bottom pattern a few sessions prior. Interestingly enough, The Telecommunication Index is at the top of its bearish channel and hasn't rolled over just yet. One Index that seems to be failing is the SOX, unable to trade above Friday's high of 396.

 
 
  Leigh Stevens   7/8/02,  10:07:56 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on (of course) the Merck "accounting" story. Also, how an oversupply of coffee beans has driven down global coffee prices - someone should tell Starbucks to drive downt their Latte prices!

Story on how Bershire Hathaway, with partners, are expected to invest $500 million in Level 3 Communications, a move intended to help fund acquisitions in the telecommunications industry. Up until now, Warren Buffet has been an avoider of tech investments - however, a fellow Omaha company and its chairman, appear to have found a way to appeal to the interests of the "oracle of Omaha", Mr. Buffet.

Story on key players in the WorldCom accounting scandel appearing on Capital Hill to give - or NOT - testimony to a House financial-services panel. They can make em come in, but not necessarily spill all - or anything - "I respectively decline to answer on the grounds of...." might be all that is forthcoming from some.

Accounting reform will be discussed in the Senate today as they focus on a bill that would take control of audit standards away from the auditing profession.

Enron's Directors knew about the firm's risky accounting practices and should have stopped them, according to a Senate report - no kidding! - unfortunately, those Directors got caught up in keeping the stock moving up, forgetting their responsibilities to shareholders.

Lastly, a story on how the labor market is "far weaker" than previously thought based on June data and downward revisions in employment levels.

 
 
  Jonathan Levinson   7/8/02,  9:51:42 AM
Is that TRIN number extreme? I would assume that means things are gonna get ugly soon?

Exactly. Extremely low TRIN and TRINQ readings usually tell me that the move is unsustainable and that a short term blowoff top is shaping up. No one indicator can tell the whole story, but here we see falling bond yields, rising XAU, and a huge up move from Friday on light volume with all intraday stochastics overbought.

 
 
  Jim Brown   7/8/02,  9:48:28 AM
The markets should chop around here for sometime as the gains from Friday are worked out. The initial opening volatility is continuing and the odds of a sizeable drop on profit taking are still good. We need to see how the markets react AFTER this opening volatility before establishing our next entry benchmark. There is still an upward bias despite the initial softness.

 
 
  Jonathan Levinson   7/8/02,  9:47:20 AM
COMPX declining volume of 105M compared with 63M shares of advancing volume so far. The TRINQ is now reflecting selling pressure at 1.7, while the TRIN is still in extreme buy mode at .18.

 
 
  Jeff Bailey   7/8/02,  9:45:59 AM
Market Internals saw some strengthening from Friday's trading, but not enough to have the bullish % charts reversing the needed 6% and back into a column of X.

The NASDAQ-100 Bullish % ($BPNDX) rose to 13% from Wednesday's 8%. Link It would take a reading of 14% to reach "bull alert" status, and a reading of 24% to achieve "bull confirmed" status. Very "oversold" on a longer-term basis here, but still defensive.

The S&P-100 Bullish % ($BPOEX) rose to 31% from Wednesday's 30%. In essence, a net gain of 1 stock to a buy signal. Link Not as much "technology" here, and not quite as volatile. Some improvement at the "oversold" 30% level and near more historic low levels where reversals higher have been found. Still defensive, but a reading of 36% would have this market back to "bull alert" status.

The broader S&P 500 Bullish % ($BPSPX) rose to 34.4% from Wednesday's 33%, so roughly a net gain of 7 stocks to buy signals. Link It would currently take a reading of 40% to see a reversal back into X's and "bear correction" status, followed by a reading of 66% to get back into "bull confirmed" stauts. Similar to the S&P 100 Bullish %, this market is at historical levels where reversals can be found, but still defensive with supply in control.

 
 
  John Seckinger   7/8/02,  9:43:30 AM
Over the weekend, Japan's Finance Minister discussed that he could not artificially manipulate foreign exchange rates while also maintaining that most financial officials believe the dollar could fall to levels seen after September 11th (115.80 on September 20th).

 
 
  Jonathan Levinson   7/8/02,  9:39:47 AM
We have a TRINQ reading of .28 and a TRIN reading of .12 in the opening chop.

 
 
  John Seckinger   7/8/02,  9:35:04 AM
There are no analyst meeting scheduled for today, but there is a Deutsche Bank Asia Pacific Financial Institutions Conference. Should be a non-event. Moreover, the Quiet period ends for shares of TOC and PACR. Sidebar: Reasons for a decline in oil prices include reduced fears over terrorist attacks. May be true; however, I am not a believer inflationary pressure(s) will remain dormant within commodities.

 
 
  Jim Brown   7/8/02,  9:31:42 AM
Interesting article this morning on the value of IBM using free cash flow. This points out the decreasing revenues and some of the accounting methods like profits from its pension fund which has boosted IBM earnings recently. Their price target of $50. Read it here: Link

 
 
  Jonathan Levinson   7/8/02,  9:29:11 AM
I'm hoping to see the 1480 resistance area on the COMPX and expect a rollover if we make it that far. However, Friday's close was within the 1440-1450 congestion area, and all intraday stochastics on the COMPX are buried in overbought. There's a good possibility of a rollover from here at the open, but I'm very reluctant to enter a put position in the opening chop, particularly on a gap down open. I counsel patience. Rule #1 is protect capital, followed by rule #2, which is to make profits. One alternative is to enter a partial position at the open and then add to it on a rollover from the next resistance level if we go north after the opening gap down. However, if in doubt, stay out. There will always be an easier setup later on.

 
 
  John Seckinger   7/8/02,  9:27:28 AM
Reports that Reliant Energy (REI) inflated its revenues by $7.9bln from 1999 to 2001. Shares closed on Friday at 16.05.

 
 
  Jeff Bailey   7/8/02,  9:25:31 AM
The 9:00 AM intraday update has been posted. Link

 
 
  John Seckinger   7/8/02,  9:19:59 AM
Checking the anecdotals: With futures still lower, I am not surprised to see a weaker dollar while short-term maturities (5-year) maintain a bid. Technically, the dollar could come under more downward pressure. Gold Futures are only up 0.70 but remains above intermediate support. The corporate spread market may be hard to read today following SEC action having the intention of forcing corporate executives to "swear by their numbers" under oath.

 
 
  Jonathan Levinson   7/8/02,  9:15:45 AM
Good morning! The US Dollar Index is recovering from what looks like an Acapulco Swandive that commenced last night, currently at 106.80, off its lows just below 106.40.

 
 
  Leigh Stevens   7/8/02,  9:15:20 AM
Pre-Opening INDEX Comments - The indices finally broke out above their hourly downtrend channels, but not above their prior (up) swing highs at 497 in OEX, 1002 in SPX, 26.8 in QQQ, 1486 in COMP and 1075 in NDX - exception is DJX which did manage to get above its prior high at 93.6 - not for long! These prior highs will be the numbers to watch after this sell off runs its course and there is another rally attempt.

 
 
  Jim Brown   7/8/02,  9:12:28 AM
Pivot Trade Signals
The markets are suffering from a hangover after the +324 point gain on Friday. The futures have improved significantly from the morning lows and the first Dow components, Alcoa, has announced earnings. AA missed the street estimates by a penny as expected. The bigger news is that the earnings have started. Even bigger news is the fact IBM has not yet warned. This is one of the clouds hanging over the market

An Internet acquisition is making news with EBAY buying PYPL for $1.5 billion. This makes sense for Ebay since their own payment program, BillPoint, is running far behind PayPal in acceptance.

My outlook for the day is cautious. There could be an initial opening dip which could be bought by those who missed the rally on Monday. From there we could see more shorts cover and the markets move up to the next resistance level. For the OEX that would be 499 and then 518. For the Dow that would be 9400 with a speedbump at 9550 and ultimate resistance at 9725. With the 9725 level around 350 points away I would be surprised if we hit that level today. The Nasdaq has resistance between 1475-1485 and could be the critical index to watch. If the Nasdaq rolls over at those levels then the other indexes will likely follow suit regardless of their resistance.

The Pivot Trade model is flat and looking for an entry point at the end of the current market cycle. That cycle would end with a failure of the current rally. We are going to avoid taking positions between the extremes and rely instead on the higher odds entries. That first entry could be in the OEX 500 range but we will wait for an actual failure at that level instead of buying when touched. Patience is the key. The current up move is unsupported and needs to prove it has legs before going long at this level.

 
 
  Leigh Stevens   7/8/02,  9:06:41 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index Futures trading: S&P 500 > -4.50; Dow Industrials > -62.00; Nasdaq > -10.00

The Merck (MRK) news on it's Medco unit booking 12.4 billion in revenues over past 3 years that it never received, is the latest news on questionable accounting that has spooked the market. Overlooked is the fact that the company's treatment of this "revenue" from insurance co-payments had no effect on net income as the same amounts (as the co-payments) were deducted as expenses. Never mind, the Market doesn't like anything that smacks of double dealing!

MRK is trading down about $3 in pre-market trading.

 
 
  Jeff Bailey   7/5/02,  9:34:13 PM
The Friday Market Monitor has been archived. You can read it and the rest of the week here: Link
Have a great weekend!

 
 

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