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  Jim Brown   7/9/02,  6:48:43 PM
In late news S&P announced some major changes to the S&P-500. They are kicking out seven non-U.S. firms and replace them with U.S. companies. The deletions are

RD, UN, NT, AL, ABX, PDG and N.

The additions are

UPS, GS, PRU, EBAY, PFG, ERTS, SDS.

As always the deletions will be dumped by all the index funds and the additions will be bought in volume. Considering the size of many of the new companies there will be some shuffling to balance market caps. The change will be effective as of the July-19th close. Going to be interesting tomorrow. Investors in these gold stocks are not going to be happy!

 
 
  Jim Brown   7/9/02,  4:37:22 PM
Pivot Trade Wrap What Rally? -
The Dow is within 34 points of retracing the entire +323 point gain from Friday. The SPX, OEX and Nasdaq all hit their July-3rd closing levels or broke them. The "Rally" is now history and we are back to "earnings" as usual. With the multiple downgrades of the chip sector and cautious comments from Dell it was surprising the markets took so long to tank today. When they finally did the carnage was complete.

The good news is the retracement is also complete. The gap has been filled and we are free to trade higher without any technical baggage. However, the earnings baggage should be enough to keep us from any more +300 point surprises anytime soon. With INTC announcing next Tuesday, IBM on Wednesday and MSFT on Thursday the deck is stacked and INTC and IBM have a strong possibility of a negative surprise. Tomorrow could see a small relief rally from the severe oversold conditions but I do not expect a blowout. The severity of today's drop will have blunted bullish enthusiasm.

The Pivot Trade Model is flat after exiting the SHORT signal at the close for a move of 7.50 OEX points. Not a big winner but we will take it. See you at 9:15 !

 
 
  Leigh Stevens   7/9/02,  4:02:14 PM
INDEX Comments: DJX - The only index that was not back into its downtrend channel is back into it. SPX has dropped back below a couple of prior lows of significance, with the move below -first, 971, then 953 - next target, in terms of a low, is down at 935. OEX has also taken out a prior low - at 480. Previous lows at 471 and the recent bottom at 464 are the next levels of technical interest. Stay tuned for tomorrow - daily closes on the intraday low is bearish, as if you needed any reminder.

Talk about giving the guy no respect - as soon as the Pres left town, that oh so tough Wall Street crowd gave the rasberries to the generalities of Bush's speech. Oh well, back to earnings worries - what the market is really focused on.

 
 
  Jim Brown   7/9/02,  3:52:49 PM
Hindsight is always 20:20 - the profit stop was hit at 15:50:20 at 474.50

 
 
  Jim Brown   7/9/02,  3:49:41 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Sorry about that rushed exit. Just as I posted the profit target the TICKS spiked and we got a couple short-term green candles. Since we were planning to be out anyway I decided to bail early. Take the money and run! The official exit was OEX 476.53 (SPX 956.21, DJX 91.26, DIA 91.43, SPY 95.97)

 
 
  Jeff Bailey   7/9/02,  3:46:13 PM
Yahoo Inc. (YHOO) $12.81 -0.54% ... will profile a "lottery play" in the YHOO July $12.50 puts (YHZSV) $0.95 offer. Target $11.50 in next couple of days.

 
 
  Jim Brown   7/9/02,  3:46:00 PM
Pivot Trade Signals
I have a strong urge to go long here at the 50% retracement from the July-3rd lows to the July 5th highs. (OEX 475.70) I will stand aside until tomorrow since earnings warnings are still with us. With Intel next Tuesday, IBM Wednesday and MSFT on Thursday I don't want to be long overnight. IBM likes to warn before the bell. We will be patient!

 
 
  John Seckinger   7/9/02,  3:43:38 PM
If yield curve is predicting strong recovery - why are we so weak lately? Secondly, eyeballing some drugs, would you wait a while longer due to your projection?

Response:

Yes, "predicting" is the operative word. I brought that historical figure to light because I do believe that we are "near" a turn around. Of course, the yield curve like most markets still needs to trade in that "third standard deviation" (far extreme levels) before turning around. It is my impression that we are now entering that 3rd Deviation. Concerning drug stocks, the $DRG Index is down 13 points at 284 with really little in the way of support. When trying to fight such a strong trend lower, the odds of predicting a "bottom" without solid fundamental or technical reasoning becomes extremely hard. My next level to the downside is 264; however, a bid above the 22 DMA at 305 would temporarily reverse my negative sentiment. Therefore, let weakness work its way out (buying puts would work) and have others deal with the panic selling.

 
 
  Jim Brown   7/9/02,  3:38:18 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Forget the profit stop, close now at 476.50

 
 
  Jim Brown   7/9/02,  3:37:02 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's set a profit stop on the SHORT signal just in case. Close the position if the OEX trades at or below 474.50. (SPX 954.30)

 
 
  Jeff Bailey   7/9/02,  3:36:37 PM
Treasury Watch ... the 10-year YIELD closed at 4.741% and really darted lower in last two hours of trading. Very defensive type response after the end of President Bush's speech, and stocks seemed to follow.

With U.S. Dollar Index (dx00y) 106.63 -0.63%, could very well face a "gap lower" type of open tomorrow morning in the U.S. Dollar, and that would be a negative in my book.

I'm a bit "surprised" that the Gold/Silver Index (XAU.X) has been able to add about 1.5% gains to the 77.44 +6.74% level since the 01:00 Update, and now we see it rallying right to my "upper" level of near-term resistance of $78.

As you can perhaps invision, the U.S. Dollar is pegged near a low, and Gold/Silver Index (XAU.X) is getting close to resistance, almost like the market is at a critical pivot into the close.

What I've done in my account today has been trading just one stock.... Bema Gold (BGO). Bought a small position at the open, then got pretty aggressive with a full position at the $1.42 level. Dumped 1/2 at $1.48 earlier in the moring, then rounded back to full on a pull back to $1.42, then dumped 1/2 at $1.45 and will hold 1/2 overnight, just in case the U.S. Dollar tanks between today and tomorrow morning's open.

Really contemplating a put play in Yahoo! Inc. (YHOO) $12.80 -0.62% before the close. Looks to be hanging on by a thread, but can't figure out why the CBOE Internet Index (INX.X) 71.85 +0.13% hangs tough today, as this is a sector that trades strong only when bulls and bears get more aggressive on the buy side of things. Would only make sense if the U.S. $ were to rebound along with selling in bonds, but not seeing that today.

 
 
  Jim Brown   7/9/02,  3:32:41 PM
Pivot Trade Signals
Wonder why the Nasdaq comp is holding at 1387? It is really the NDX futures holding at 1000. If they break 1000 the comp is toast.

 
 
  Jeff Bailey   7/9/02,  3:30:14 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jim Brown   7/9/02,  3:27:16 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss on the current SHORT signal to OEX 478. (SPX 959) We could get a bounce at any time as we near the gap retracement levels in my 15:14 post.

 
 
  John Seckinger   7/9/02,  3:21:53 PM
Gold Futures, currently higher by four dollars and at the session's high, further reinforce nervousness within equities. For myself, it is important that these anecdotal readings line up to some degree before putting on a positions (I like the cards stacked in my favor).

 
 
  Jim Brown   7/9/02,  3:17:21 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss on the current SHORT signal to OEX 481. (SPX 965) We could get a bounce at any time as we near the gap retracement levels in my 15:14 post.

 
 
  John Seckinger   7/9/02,  3:16:07 PM
Commodity Price Pressures: Oil Futures have rebounded sharply, now posting a five cent gain and just off the session high. Moreover, prices are 39 cents higher than the morning low. This could be based upon the API report after the close. Bonds have also seen a strong "flight-to-quality" and this should continue to weigh of traders' minds regarding equity positions. Also noteworthy, the Biotech and Pharmaceutical Indices are both coming under significant pressure as we head towards the close.

 
 
  Jim Brown   7/9/02,  3:14:39 PM
Pivot Trade Signals
The OEX/SPX are coming close to filling their gap from Friday which would be about 474 on the OEX and 954 on the SPX. I am going to start dropping the stop loss on the open SHORT signal in anticipation of a rebound at those levels. Also, because of the serious oversold conditions building I will likely close this signal going into the close.

 
 
  Jim Brown   7/9/02,  3:00:07 PM
Pivot Trade Signals
The 1:PM depth check resulted in a -100 point drop in the Dow. We are rapidly approaching the 3:PM turn. This is when the direction for the day either reverses or accelerates. Any votes for acceleration today? The advance/decline ratio has moved into negative territory at .80 and the VIX/TRIN are climbing while the TICKs are going deeper into negative territory. If the direction is going to change it will have a strong tail wind to overcome.

 
 
  Jonathan Levinson   7/9/02,  2:38:17 PM
The COMPX is now printing its low of the day at 1392, with declining volume back over 2:1 advancing volume, yet the TRINQ and QQV remain entire mute through this move, still at 1.84 and up 1.55 respectively. This is of the rare occasions where these indicators haven't telegraphed intraday moves.

 
 
  Jeff Bailey   7/9/02,  2:28:10 PM
Overhead Supply Jeff: Could you explain your earlier comments regarding OSIS and the term "overhead supply?" What does this mean and what indicators "show" this?

Overhead supply is a term that market technicians use to explain stock that is owned at higher price levels, that is now at a losing position.

The "best" way to understand this perhaps is the point and figure charts, which do a very good job of showing supply (O's) and demand (X's). Now.... for every buyer there is a seller and the opposite is true, but simply try and think of the O's as selling (excess supply) and X's as buying "excess demand." When looking at the p/f chart of OSIS Link we see that past supply (O's) had been reversed higher from the $18.50 level. But in recent sessions, we see that supply (O's) really started outstripping demand in a more meaningful manner, when a trade at $18.00 took place.

I ask myself.... "If I owned the stock long/bullish at $18.50 or higher, what would I be doing right now?" Just sitting around and believing/hoping that everything will be OK?"

For me, I'd have to "know" something bullish that was going to take place in the stock for me to still be a buyer/holder currently. I will confess that I don't "know" anything bearish either, but the supply/demand chart of OSIS looks somewhat similar to the chart of Retek, Inc. (RETK) Link as it relates to supply/demand. Different stocks, different types of business, but similar looking supply/demand charts.

 
 
  Jonathan Levinson   7/9/02,  2:26:54 PM
And, as I was posting that last, this was received from its author:

Hi Jonathan-

I just noticed the questions about the VXN and the VXN in the Market Monitor. I'm the culprit that wrote the articles on the VIX awhile back, so I figured I'd help you out. Here are the links on the OIN site to those articles.

Link

Link

Best Regards,

Mark Phillips -- aka Rocketman

Thanks, Mark!

 
 
  Jonathan Levinson   7/9/02,  2:25:12 PM
Found it. Everything you wanted to know about the calculation of the VIX: Link

 
 
  John Seckinger   7/9/02,  2:23:42 PM
The Pharmaceutical Index is lower by 9 points or 3% at 288 and a settlement at current levels would be the lowest close since January 1998. I have a long-term objective of 264.

 
 
  Jim Brown   7/9/02,  2:15:27 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss on the current SHORT signal to our entry point of 484 to prevent a material loss should the current drop reverse direction. (SPX 971)

 
 
  Jonathan Levinson   7/9/02,  2:14:38 PM
I thought the VIX was calculated using eight different options, four front month and four back month (two puts and two calls). Of each group of four, I was under the impression the strikes were selected to be as close as possible to ATM then the next closest strike. I seem to remember reading an OIN Traders Corner article several months ago on this very subject. - Keith

I remember that article too, though have been unable to find it so far. Does anyone have a line on this one? It was an exhaustive discussion of the calculation of the VIX, and went into enough detail that even the author mentioned that he had covered everything he ever wanted to know (and never wanted to know) about the VIX.

 
 
  Jeff Bailey   7/9/02,  2:02:31 PM
The 1:00 PM intraday update has been posted. Link

 
 
  John Seckinger   7/9/02,  1:54:28 PM
Yes, I do agree that the bond market has recently followed equities; however, the yield curve contines to chart its own path and is usually a more important barometer. This curve simply maps out yields from shorter to longer-dated Treasuries, and it really doesn't take a rocket scientist to decipher what the slope is telling investors. Currently the curve is "steep", which implies that the gap between shorter and longer dated Treasuries is "wide" (example, yields on 2-year at 5% while 10-year yields are at 7% - that would represent a gap of 2%, or 200 basis points). Currently the gap is at a six-month high of 204 basis points and historically such steep curves indicates strong economic recoveries.

 
 
  Jim Brown   7/9/02,  1:49:49 PM
The NF.X may give us some help to the downside. It just hit a new low for the day. Fabes

Something just kicked us over the cliff and this looks like it could be the reason. The markets are hitting the lows of the day and dropping fast.

 
 
  Jonathan Levinson   7/9/02,  1:38:02 PM
Market internals have firmed somewhat, with declining volume:advancing volume at 1.71:1. The COMPX is treading water above 1400, building energy for a break in either direction. Neither the QQV nor the TRINQ are providing much guidance, staying at roughly the same levels we've seen since the mid-morning.

 
 
  Jonathan Levinson   7/9/02,  1:30:16 PM
Jim suggested that you might know how the QQV & VXN are calculated? If there's already an article on it, perhaps you could refer me to it. I did a brief search of the OIN website and haven't yet found it.

The CBOE Nasdaq volatility index (VXN) is calculated the same way as the VIX. It represents the implied volatility of a hypothetical 30-day ATM option. I am looking for a definition of the QQV, which is the equivalent measure for the Nasdaq-100.

 
 
  Leigh Stevens   7/9/02,  1:12:15 PM
Subscriber QUESTION: " Hi Leigh, Interesting comments on using 5 and 21 Stos for trading 2-3 day swings.....2 questions:

1) do u use just the %k with 5 and 21 as lengths, or do u also include %d with smooth factor of 3? Question #2 - Once signals are OS (or OB) together, I am assuming u would get in on a penetration of prior hourly high (or low), or is that a parameter u would suggest is best chosen by the trader? "

RESPONSE: I use a "smoothing" factor of 3, which is default on most systems. As far as "playing" with different smoothing factors - forgetaboutit! Well, its an individual thing, but you gain more by studying chart patterns rather than this kind of "play"

21 is normally an effective good "length" setting for trading the 2-3 day swings - "5" for 1-2 day moves

"Parameter" re trade-entry criteria you mention is best chosen by the trader - I like to sell into resistance, buy into "support" rather than trade on momentum which is penetration idea. However some trade momentum very well, particularly in futures where this is an advantage in a way.

 
 
  Jim Brown   7/9/02,  1:06:45 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss on the current SHORT signal to OEX 486.25 in case we get a reversal this afternoon. I would rather risk two points on a continued drop rather than close early.

 
 
  John Seckinger   7/9/02,  1:04:42 PM
Dell Computer (DELL): Company reports that it had not seen a pick-up in demand for personal computers but its results in the current quarter are on track as it holds down costs and captures market share from competitors. The company also denied rumors that it will buy printer maker Lexmark International. Shares of DELL are currently higher by 0.21 at 24.96. The 22 DMA remains higher at 25.36 while the 50 and 200 reside at 25.78 and 26.08, respectively.

 
 
  Leigh Stevens   7/9/02,  1:04:12 PM
Subscriber QUESTION: "Do you see any bottom on IDTI? Thinking of buying some call here. Thanks and love your accurate analysis on the indices. "

RESPONSE: Well, yes - there is some sign of a bottom around recent lows at 14.67. On a weekly chart basis, this is in the AREA of a number of highs going back to 1996 - early 1999 and close to one downswing low in Oct 99, before the stock went to the "moon" in the $100 area.

Now the thing I CAN'T tell you is what time frame the stock might attempt to mount a rally. It's one thing for a stock to MAYBE be putting in a "bottom" - its quite another to say how low the stock will need to "base" before the fundamentals change such that knowledgeable investor/trader types find value in the stock again.

 
 
  Jim Brown   7/9/02,  1:01:56 PM
Pivot Trade Signals
If the old saying "never short a dull market" is true then we are in for one heck of an upside breakout soon. This market is so dull even the talking heads are struggling to find something to talk about. The failure of the markets to fall out the bottom could be a leading indicator that we are going to see an up move soon. Profit taking from Friday's gains appears to be over and the bad news about the chip/software sectors this morning failed to crash the Nasdaq. I am giving serious thought to closing the open short in preparation to go long. I know it is against the conventional wisdom but the longer we go sideways the closer the oscillators are to going positive. We are approaching the 1:PM directional check where traders coming back from lunch test the market to see where the bids really are. We need to pay close attention the rest of the day or risk getting caught off guard.

 
 
  Leigh Stevens   7/9/02,  12:56:10 PM
Subscriber QUESTION: " Leigh, you said today that"best time frame in my mind for trading 2-3 day price swings is hourly chart with 5/21 stoch and bands." What time frame, stochatics (bands too?) would you recommend to someone who likes to usually get in and out the same day though holds over occassionally? And would the "signal" likewise be when both stoch. line up in extremes? "

RESPONSE: 5-bar stochastic works well on 30 & 60 min charts for those type "signals" and swings. Signals are best when crossovers are from extremes; e.g., up at 80 or higher, down at 20 or lower. However, without "right" chart pattern along with it, I will not just take a buy or sell "sigal" - indicators are SECONDARY indicators - PRIMARY is price patterns in my estimation.

 
 
  Leigh Stevens   7/9/02,  12:44:50 PM
Subscriber QUESTION: "Would you please comment on UNH and the Health Services sector? They have been in an uptrend since Oct 99 and looks like it's ready to roll over like the Nas in Mar 00. "

RESPONSE: United Health Care (UNH) looks like it may be building a top, along with the Healthcare sector of which it is part - a break below 85 would suggest "confirmation" of a top. (last: 92.7). - I have been commenting on the Healthcare Index ($HMO.X) top off and on in my Sector Trader column - see an index at Link -- The last time I commented on HMO contained these comments -

PRIOR COMMENT - Possible downside reversal in HMO sector is suggested by the bearish price/RSI divergence. I anticipate the HMO index working lower, to around 564 or lower, or at least a 50% retracement.

CURRENTLY - HMO has reached my first downside objective - however, the sector looks like it could have another downswing, say to around 540 - last at 580.4

 
 
  John Seckinger   7/9/02,  12:40:36 PM
Afternoon Anecdotals: Dollar Futures at session lows, Gold at session highs, and shorter-maturity issues maintain an extremely strong bid compared to longer-dated Treasuries. All signs point to continued pressure within equities; however, both the Dow and Nasdaq seem to asleep at the wheel.

 
 
  Leigh Stevens   7/9/02,  12:23:01 PM
Subscriber QUESTION: "I have been trying to trade S&P and Nasdaq e-mini futures but, I can't seem to find an indicator to watch for trade signals. Do you have any suggestions? Thanks a lot. "

RESPONSE: this is one HARD question to answer as its so broad a subject. one suggestion might be to read my book - Essential Technical Analysis - or another such book on trading. There is no ONE indicator or even two.

However, best time frame in my mind for trading the 2-3 day price swings is an hourly chart with 2 hourly stochastics, one set to length "5" and the other to "21" - best 'signals' tend to come when both line up at high or low extremes.

Also, use of the hourly "moving average envelope" lines I show on my nightly wrap is good - last one at Link -- My Trader's Corner article on use of "envelopes" is at Link

 
 
  Leigh Stevens   7/9/02,  12:11:55 PM
Subscriber QUESTION: "Hi Leigh, I have been short QLGC and Brcm for long time now.....where do you think they'll stop their slide ???"

RESPONSE: Qlogic (QLGC) may be forming a bottom - stock completed a retracement (of its Sept - Feb advance) that was not quite equal to 62%, then reversed back to the upside. Now, QLGC is - so far - holding above its prior (Feb.) low in the 36 area. Looks like there is a large supply overhang (stock for sale) at and above $40 - so, it may take some sideways type "basing" action before it can penetrate $40 to the upside.

Broadcom (BRCM) is another story - stock (last at 16.86) has broken down below 18.50-18.75, the area of a cluster of lows back in late-Sept/early-Oct. which maintains a bearish pattern - this pattern would not be reversed unless there are daily closes back above the 18.50-18.75 area.

 
 
  John Seckinger   7/9/02,  12:09:16 PM
Commodity Note: The American Petroleum Institute inventory report will be released after the close today. Other News: JP Morgan believes that Q2 results for banks should be impressive, benefiting from positive earnings cyclicality without experiencing significant valuation pressure from rotation into other economically sensitive sectors. Banking Index is up fractionally and above both 22 and 50 DMA.

 
 
  Jim Brown   7/9/02,  12:02:54 PM
Pivot Trade Signals
So much for the Presidential bounce! The sell the news, or lack of it, crowd came back in force and surprisingly the S&P-600 is now leading the markets lower instead of the Nasdaq. The S&P being the broader index does not benefit as much from one or two strong stocks like MSFT which is holding up the Dow with its gain today.

 
 
  Jonathan Levinson   7/9/02,  12:02:35 PM
MSFT, up $1.10, appears to be carrying the QQQ on its back. Fascinating resilience in that stock, given the bad news from AMD, INTC and AAPL, for starters. Either investors have yet to connect the dots, or MSFT's price is hinting at good news to come, but either way, this is one very strong stock in a very weak market.

 
 
  Leigh Stevens   7/9/02,  11:56:40 AM
INDEX Comments: ALL are encountering some renewed selling as they trade back down to the low end of their recent range - maybe not enough specifics in the President's speech. A bit long on generalities is one of the reactions I have been hearing from the talking heads.

 
 
  Leigh Stevens   7/9/02,  11:45:24 AM
Subscriber QUESTION: "Thanks for explaining and teaching how to interpret the recent hourly index chart formations. I have a question about Scalping stock on a daily basis - which time period of chart (60, 30, 15, 5) in your opinion will be suitable? "

RESPONSE: You need to use all those time frames really. Especially, 15 & 30 min. - but keep an eye on hourly.

 
 
  Jonathan Levinson   7/9/02,  11:43:55 AM
The COMPX appears to be commencing a new leg down on the 60 minute candlesticks after printing a high of 1415.31. We have intraday support at 1400, 1393, and then 1380. Market internals have firmed somewhat, declining volume now just under twice advancing volume.

 
 
  Leigh Stevens   7/9/02,  11:42:36 AM
Subscriber QUESTION: "qqqs held does spx break to below 971 concern you? -- or, is it still bullish overall? PS - got great entry on some ORCL calls this am --fingers crossed! "

RESPONSE: 971 is a prior low of note. However, current SPX pattern would not have a bearish "breakdown" in my estimation unless if falls under 970. Pattern is still potentially bullish overall, but there should be a breakout to the upside soon if any bullish possibilities are to be realized.

I like ORCL action today also - bullish (H&S) bottom pattern is intact.

 
 
  John Seckinger   7/9/02,  11:38:08 AM
Would you comment on AMGN vs Biotech Sector 310 support in more details?

Response:

Exactly the Question I was hoping for, thanks. Amgen (AMGN) represents 2.6% of the Nasdaq 100 and certainly has significant influence over the Biotech Sector. The other 14 company within the Sector include names such as GENZ, BGEN, PDLI, etc. For AMGN and Biotechs in general, it seems as though least resistance is lower on an intermediate and long-term basis. Looking at AMGN, once the 22 weekly moving average crossed under the 200 WMA, longs certainly took their cash and headed to the sidelines. The same can be said for the $BTK, but not to the same degree of selling pressure. Support in AMGN could come in at 32.50, while longs most likely will not get exited until 41 is taken out to the upside. For AMGN in specific, if support holds in the $BTK at 310 there may be a short-term bid in AMGN; however, shares of AMGN have under performed and will most likely lag the index by a small amount. To go long shares of AMGN, possibly wait for the $BTK to take out 326 for a move to 350.

 
 
  Jeff Bailey   7/9/02,  11:36:11 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jonathan Levinson   7/9/02,  11:34:22 AM
The White House outline for the President's speech can be found at this Link

 
 
  Leigh Stevens   7/9/02,  11:29:25 AM
Subscriber QUESTION: "Friday's volume was over a billion in 3 1/2 hours, pro rated over the day it could have been 2 billion. This is not "thin" volume evryone was talking about. In view of gap retracement levels holding so far, do you feel the market is getting ready to put in a strong bid?"

RESPONSE: Could be - that's my take on it.

 
 
  Leigh Stevens   7/9/02,  11:24:16 AM
Subscriber QUESTION: "Leigh, Do you think yesterday all indexes were tracing out "Rectangle Tops"? If this is true then it may achieve minimum down side target to the distance of the rectangle. I will appreciate your response. "

RESPONSE: Rather than a rectangle, which is a consolidation that can be a top OR a "continuation" pattern - what has been traced out on hourly basis looks more like downward sloping "flag" consolidations; e.g., SPX first run up (Friday) could be the "flagpole" of the pattern - if there is a breakout above the upper line drawn down through recent hourly highs, then it would suggest another upswing.

If, on the other hand, the breakout is to below the low end of these same consolidations, then I would look for another drop. For example, on SPX, the potential "breakout" point is around 984 - a rally has to keep going however. Conversely, a drop below 970 would suggest that SPX was vulnerable to a downswing of at least 10 points

 
 
  Jonathan Levinson   7/9/02,  11:22:09 AM
President Bush is taking the podium a few minutes early, as the COMPX prints a high of the day at 1412.

 
 
  Leigh Stevens   7/9/02,  11:11:28 AM
Subscriber QUESTION: "Waited breathlessly as your response came just about the time AMAT was reaching its low for the day. Closed out July 20 calls at >.5 for .6 profit. Stock bounced to close around 19. Hold 1000 shares long at 18.13. Any stop loss recommendations, like low of Monday at 18.50? Thanks for the great job you guys do and the great education. "

RESPONSE: Applided Materials stock (AMAT) is under pressure again today of course. Action doesn't look all that bearish to me so far - the stock is rebounding some from its morning low. Assuming you are still in the position, I suggest sell stops under today's low (17.52); e.g., at 17.30.

 
 
  Leigh Stevens   7/9/02,  11:01:23 AM
Subscriber QUESTION: "I noticed that the NDX futures bounced right at the 50% retracement level and the SPX futures bounced at the 38% level yesterday (Mon). If the markets hold above Wednesday's low this week, the 21 hour stochastic turns back up, and the index closes above today's high (a lot to ask I know), would that be a reverse H&S pattern in your opinion for the intermediate term? I'm strictly a technical index trader and have been following your analysis closely since it is very close to my own. "

RESPONSE: Well if SPX came back to the 960 area or a bit lower, say to around 955-953, then turned up, that would be a Head & Shoulders (H&S) bottom pattern on the hourly & daily chart - not a major H&S however, in regards to your question re "intermediate-term".

The close above the high, or the relative position of the stochastic model, has nothing to do with the (H&S) pattern of course. What is needed to "create" the H&S - assuming 935 as the "top" of the Head - is a pullback to "define" the right shoulder.

 
 
  Jonathan Levinson   7/9/02,  11:00:56 AM
Declining volume still ahead of advancing volume just over 2:1. The QQV has eased down a bit following this small rise in the COMPX, now up 1.14 on the day with the TRINQ at 1.87.

 
 
  John Seckinger   7/9/02,  11:00:09 AM
Goldman Sachs reportedly sees The Fed refraining from hiking rates until late 2003. Reasons in the research note included slow U.S. growth, weaker equity prices, and a recent Fed study on Japan regarding falling prices and stagnant growth. Opinion: I disagree, since inflation will be sparked by a weaker dollar; thus prompting a rate hike earlier. Moreover, many economists fail to price in a "technological shock" that inevitably occurs after this kind of recession. Furthermore, we are not Japan with a ten-year bond at 1% and highly volatile GDP.

 
 
  John Seckinger   7/9/02,  10:47:29 AM
The interest sensitive Utility Index continues to come under liquidation pressure. At such low levels, trying to follow the asset allocation into another sector would become difficult; however, clearly this breakdown will affect Consumer Confidence. Therefore, a Confidence Crisis in utility issues certainly has to be monitored.

 
 
  Jeff Bailey   7/9/02,  10:42:47 AM
Gold/Silver (XAU.X) 75.07 +3.47% .... strength in gold most likely coming from a weaker US$ and marginal selling in longer-end of Treasury. This type of action between the three is actually rather defensive.

My thought being that the weaker US$ is "lack of confidence" in U.S. If US$ should weaken further and we continue to see selling in Treasury, then even more negative as it relates to confidence in US. Not only the currency, but the debt (Treasury bonds). This is why I thought in 09:00 Update, that gold and gold stocks would find some bids this morning.

For now... monitoring the XAU.X point/figure chart closely. Should find some resistance at current levels to $78. Link

 
 
  Jonathan Levinson   7/9/02,  10:40:51 AM
Declining volume on the COMPX is beating advancing volume 2.25:1, as price breaks back above 1400. Although I won't be doing it myself, gunslingers are no doubt thinking of calls ahead of the Bush speech at 11:30. If you decide to go long, keep in mind that the news today has been quite bad, from the US Dollar's new lows through the multiple tech downgrades. Keep very tight stops on any long trades here if you decide to get in.

 
 
  Jim Brown   7/9/02,  10:39:49 AM
Pivot Trade Signals
I am looking for a little bounce here as the President speaks about corporate accountability. He will attempt to give investors a "warm and fuzzy" feeling about the changes he is suggesting and the general direction of corporate reporting. His suggestions are light years away from reality since he does not make the law, only suggest changes to it. The Markets are looking for direction and have traded on both sides of zero numerous times already. This media event could be the spark that turns the tide for at least a few minutes.

 
 
  Jeff Bailey   7/9/02,  10:25:16 AM
OSI Systems (OSIS) $17.68 (unch).... will reiterate put/short profile from last week here. Recent triple-bottom-sell at $18.00, and bearish vertical count to $6.00 gives some downside room. Good overhead supply above $18.50. Break of $16 would give near-term downside to $14.50. Link

Resistance from bar chart looking firm at $18.50. Link and from current levels, "there's a lot of air under there."

 
 
  Leigh Stevens   7/9/02,  10:19:41 AM
SECTOR Update: Semiconductor Index ($SOX.X) is trading lower on a Merrill Lynch downgrade on a number of chip stocks. SOX is trading at 360.50, -15 or -4%. Prior lows were in the 344 area, where the SOX bottomed in Sept. With the gap lower opening and downside momentum we're seeing, there may be a better than even chance that SOX will retest the area of the prior recent low.

Selling in Intel (INTC) is taking its price (last, 17.89) back into the upside gap area from the other day - stock is close to 17.78 which would fill in the gap. Below this area, potential support is at the prior 16.26 low. INTC weakness is acting as a substantial drag on QQQ - hard for any Nas 100 rally to catch on without the semiconductors helping out.

 
 
  Jonathan Levinson   7/9/02,  10:17:51 AM
The COMPX is now hanging on by its fingernails at the top of Friday's opening gap, currently trading 1396. The QQV has spiked up, now up 1.89, though the TRINQ at 1.98 continues to show moderate selling pressure. This is shaping up to be an exciting day.

 
 
  John Seckinger   7/9/02,  10:08:34 AM
Update: Biotech Index hits 310!

 
 
  John Seckinger   7/9/02,  9:58:05 AM
Corporate Spreads seem to be trading in-line with Treasuries, but will continued to be monitored on a company specific basis. Turning to the Sectors: The Utility Index is still experiencing long liquidation pressure, The Financial Index is trying to stop the series of lower relative highs, and The Biotech Sector (currently at 315) should test our 310 support area in the near term.

 
 
  Jonathan Levinson   7/9/02,  9:49:16 AM
Not a lot of strength in the COMPX at the open, but surprisingly not as much weakness as I would have expected, although the QQQs seem to be softening as I type. The QQV is up a mere .25, and the TRINQ at 1.69 is showing only moderate selling pressure. Clearly 1400 is the immediate line in the sand. I'm not feeling particularly bullish on Bush's upcoming speech- I expect that CEOs and auditors will be in CYA mode as they review their Q and K reports, and no doubt this will negatively impact reported earnings and forward guidances, not to mention the potential skeletons that will dragged out of the closet. However, price is the only action that sways our accounts, and as of right now, it continues to hold up.

 
 
  John Seckinger   7/9/02,  9:43:51 AM
Side Note(s): President Bush proposes doubling the maximum jail term for mail and wire fraud -- charges frequently used in cases of corporate fraud -- to 10 years.

 
 
  John Seckinger   7/9/02,  9:29:42 AM
Morning Anecdotals: Dollar is lower, 30-year bond is lower while the 5-year Treasury note continues to outperform, and Gold is higher. Just like yesterday morning, and it should spell out weaker equities prices once again. What if equities rally? Time to look at weaker oil prices. Note: Dollar is close to a double-bottom, but Treasuries seem to have some room to fall. Gold, on a futures basis, also seems to have some upside potential.

 
 
  Jeff Bailey   7/9/02,  9:27:14 AM
The 9:00 AM intraday update has been posted. Link

 
 
  John Seckinger   7/9/02,  9:21:02 AM
Dollar/Yen at 115? Finance Minister Masajuro Shiokawa expects the dollar to fall toward 115 yen, and it seems traders are nervous about supporting the greenback during its free fall. Currently at 118.43, Shiokawa expressed concern a strong yen will damage Japan's export-led recovery. These comments help explain Monday's drop in the Dollar and might be a precurser to more dollar-denominated selling (including 30-year bonds and equities).

 
 
  Leigh Stevens   7/9/02,  9:20:55 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on "How Outdated Files Hamper FBI Effort to Fight Terrorism" - agents lack such basics as e-mail and the ability to due complex searches of their database. Time to make some changes, guys!

Of course, Bush's activities today make up a front page story.

In the What's News section - Congressmen (and women) blasted WorldCom's top executives for mismanagement and other actions relating to the 3.8 billion accounting - they call it a "lapse" - others may call it FRAUD!; WorldCom released internal memos indicating that its ex-finance chief, planned to bury a 3.8 billion accounting misstatement in a charge; EBay agreed to buy PayPal for 1.4 billion in stock - and their stock actually might be worth something next year this time, as EBay continues to have lots of people making payments for stuff bot online; Finally, AOL lined up $10 billion in new bank credit lines - maybe they could use PayPal!

 
 
  Jim Brown   7/9/02,  9:16:19 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the stop loss on the existing SHORT signal to OEX 490.25 from the current OEX 487 level. I would love to avoid being stopped out on any positive opening sentiment but we may be too close to avoid it. This revised stop is wider than may be comfortable for many traders and you may wish to close the position at the open rather than take the additional risk.

 
 
  Leigh Stevens   7/9/02,  9:12:11 AM
Pre-Opening INDEX Comments - Market participants of course are waiting for President's Bush speech - he is due, in a speech to be delivered today to a group of corporate executives at a Wall Street hotel - where else! - to call for tougher criminal penalties for corporate execs convicted of fraud. The White House hopes that this will help the investor crisis of confidence that has led to the current "buyer's strike".

Mr. Bush is also expected to propose significant increases in funding for the regulatory agencies involved in regulating and policing the corporate sector - this without asking for a bunch of new laws. Yesterday, ina a press conference, President Bush defended his own sale of stock when he was a corporate insider.

The Pres also gave a preview of the measures he will fully unvail today regarding jail time for corporate execs convicted of fraud - there seems to be a "lock em up!" mood after WorldCom, the straw that broke the camels back. Bush will be speaking at 11:30 am, Eastern - stay tuned!

 
 
  Jim Brown   7/9/02,  9:10:45 AM
Pivot Trade Signals
Another day another downgrade! Merrill and DBAB warned that the chip sector may not grow as fast as previously expected. Merrill cut 13 semiconductor equipment stocks on expectations that orders will slow the second half of 2002. They claim the market has softened significantly over just the last several weeks. Merrill also warned that enterprise and applications software would be "sequentially lower or at best flat" for the 2H.
Morgan Stanley cut short term estimates for Citigroup due to exposure to WCOM. AOL was under pressure after Business Week said they may have to take another write down to reflect the decline in their Internet business. Bear Stearns initiated coverage of SEBL at unattractive with a target of $9.00.

Still the futures recovered from morning lows to nearly neutral and are pointing to an underlying strength in the markets. Bush is planning on speaking at 11:30 ET and will say some positive things about the economy and market.
With the positive indications and obvious denial of the flood of bad news this morning it appears we could move higher from here. I am going to raise the stop loss on the existing SHORT signal slightly in hopes of avoiding being knocked out on the opening tick.

 
 
  Leigh Stevens   7/9/02,  9:02:47 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index Futures trading: S&P 500 > -0.50; Dow Industrials > -3.00; Nasdaq > -7.00

 
 
  Jonathan Levinson   7/9/02,  8:46:01 AM
The US Dollar Index broke its 106 support and is currently trading in the 105.80 area.

 
 
  Jeff Bailey   7/8/02,  7:41:05 PM
The Market Monitor has been archived. To view Monday's comments, simply click this Link

 
 

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