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  Jonathan Levinson   7/15/02,  8:17:40 AM
The US Dollar Index has just fallen off a cliff after trading weakly all night, currently at 104.80.

 
 
  Jeff Bailey   7/12/02,  8:09:04 PM
NASDAQ-100 Bullish % ($BPNDX) Here come old flat top. He come groovin' up slowly. He got jew jew eyeballs. He want holy rollers. He got hair down to his knees. Got to be a joker. He just do what he please...... Kind of sounds like the market and the bullish % doesn't it? Just does what it wants to do.

Today's action saw a net gain of 6 stocks to buy signals today. Close, yet so far (3 stocks) to a 24% reading of "bull confirmed." Link

However, the broader S&P 500 Bullish % ($BPSPX) fell to a reading of 26.4%, down from Thursday's 28%, so still some internal damage being done here and still "bear confirmed" and showing little life. Link Have a great weekend! I'm starting to get "punchy."

 
 
  Jeff Bailey   7/12/02,  7:45:18 PM
Teach yourself! Did you know that the "Bailey's Basics" section of the web site has a tutorial articles on calculating bullish and bearish vertical counts? Link

I can't get back to everyones questions regarding p/f questions. Sometimes I'm afraid that subscribers aren't taking some trades they could be, or taking some trades they shouldn't be, only because I can't get back to all the e-mails I get, but subscribers have the ability to fully utilize their subscription dollar and use our educational material.

Yes... it takes some work and a little time, but many of us have chosen to take things in our own hands and make our own decisions.

Bearish vertical count on GE? $28 according to www.stockcharts.com p/f chart. Using the Dow Industrials bullish % hints of oversold conditons in Dow components right now. Link

Bearish vertical count on HD? $39 has been exceeded and tough to ascertain any type of risk/reward from p/f now. Link

I get a great deal of satisfaction when a subscriber says "thanks for the profitable trade," but I get a lot more satisfaction when a subscriber says "Jeff! A couple of weeks ago I bought XXXX option when the stock traded a triple bottom and all be darned if it didn't fall to its bearish vertical count of $xx! I really dig these point/figure charts."

 
 
  Jeff Bailey   7/12/02,  7:22:26 PM
FedEx (FDX) $49.90 -1.07% ... Jeff: I know it's a little early to say thanks for the FDX put trade from Wednesday in the July 50 puts. Are you still targeting $47.50 by Friday's expiration?

I think there's still a good possibility FDX could trade $47.50, but I'd sure look to lock a gain in there if it happens. Open interest is heaviest at July $50 (3,170), then at July $55 (2,440) and then July $45 (1,629). For me, a bit of a bullish bias between $50-$55.

Call interest is at $55 (5,620) and $50 (2,523). I'm kind of thinking a $50 settlement on expiration, so would eagerly take the money and run if FDX trades $47.50 or close to that level. Link

 
 
  Jeff Bailey   7/12/02,  6:50:15 PM
DJ US Home Construction (DJUSHB) 340.42 ... sector got "clocked" this week and lead sector decliners with a 10.1% hit.

Supply/demand really starting to look more bearish here and trade at $335 would break June relative lows. Longer-term trend now broken and vertical count bearish to $320. Link

May well be due to 1) investors selling their gains as losses mount elsewhere, 2) MARKET knows something about the economy or 3) Institutional distribution after nice 2-year bullish run.

Lower YIELDS in Treasuries should help lower mortgage rates, which could spur new home sales is biggest threat to sector bear. Still.... any time you see a lot of strong earnings, but technical weakness, can begin to hint of a top.

KB Home (KBH) $48.55 -1.83% may be a stock to watch should DJUSHB break down further. Trade at $47 in KBH would put stock on a sell signal, have bearish vertical count to $40, which initially ties in with bullish support trend (blue +). Link

On bar chart, KBH stock is flirting with an upward trend right here if taken from the 9/21/01 low of $25.50, and attached to the 10/30/01 low of $27.65. This trend has been tested 1,2,3,4, previous time and tested here again. However, could see the "sell signal" from point/figure chart at $47, couple with a break of the upward trend on bar chart being an action point that could trigger some good selling. MACD just now going below zero and looks lower. Link

Ugh... those puts are expensive.

 
 
  Jeff Bailey   7/12/02,  5:57:01 PM
Siebel Systems (SEBL) $11.53 -5.18% ... Jeff: Where do you think SEBL is headed?

Lower, but risk/reward is tougher to assess here. Stock achieved its bearish vertical count at $13 (count column was O's from $33 to $25). Link and has given.... 1,2,3,4,5,6, consecutive sell signals. That was a "beauty short" at $27 on the spread-triple bottom at $27 wasn't it? Wasn't the NASDAQ-100 Bullish % ($BPNDX) in "bear alert" status in April? Answer:Yes.

What I'd do is use a "fitted retracement" here. I've taken retracement from $37.13 to $6.67. This gives me $25.49 at 38.2% retracement (resistance on 05/15 and market makers selling short), then $18.31 is 61.8% (market maker support level where they're buying back some short and measuring order flow), and now $12.49 at 80.9% retracement (once again, market maker buying back some short, but stock now breaking lower again) and finally $6.67 is 100% where a market maker has to assess potential downside to.

With stock breaking to new 52-week lows, obvious there isn't a heck of a lot of demand for the stock, and bear can be shorting, but with risk running higher for bears, I'd want a tighter stop above $12.50.

All a bear has to worry about in this one I think is any type of selling in treasuries, which might have a bear then looking to cover and lock in some BIG gains he/she is carrying in the stock.

Funny... if memory serves me correct, we actually talked about the May 30th Soundview comments .... "Soundview says that today's strength in enterprise software group (PSFT, ORCL, SAP and SEBL) likely due to checks indicating visibility in May has significantly improved and is running ahead of last year, and that professional services firms are indicating a significant increase in requests for proposals".... I think my comments were that the charts of all these stocks were bearish and that "proposals" didn't necessarily mean "sales" were being had. Heck... I'll go kick tires on a Dodge Viper now and then, but not really a buyer.

Hint:.... Listen, make that "don't listen" to Tom Siebel. If he's bearish, then get bullish. He's pretty well known for trash talking the competition and building up his company's stock and product. On January 23rd SEBL $34.80 ... Tom Siebel says that there was a significant change in buying behavior in the CRM business in Nov/Dec, and it has continued in January. Tom calls it a return to rational business processes and buying behavior and is optimistic about 2002.

Next day, stock jumps to $38.38 intra-day, that's the relative high and south from there. SEBL expected to report earnings July 17th after the bell. May want to listen to Tom, see what he has to say. If he'd very bearish and things look dismal, may be time to lock in the gains. Analysts are looking for earnings of $0.10 a share.

Software Bullish % ... According to Dorsey/Wright, in Januar of this year, the software bullish % was at a 2-year relative high of 62% bullish. Reversed later that month into column of O's and was at 48% by February 1st. Current reading is 17.64%, which is "bear confirmed" and would take a reading of 24% to reverse to "bull alert." Has historically had the ability to achieve 12% and 14% levels so a little downside still could be found.

 
 
  Jeff Bailey   7/12/02,  5:26:01 PM
Bullish % Jeff: I appreciate your comment about bullish conditions and comparing them to the fall of 2001 (mm 11:45a) I shorted like crazy and really got hurt so I appreciate your comments. Have a great weekend.

Glad it makes sense. You're doing something here that needs to be noted. What you're doing is looking back and reviewing a "mistake," then perhaps understanding how the bullish % may have hinted to you that you shouldn't have been "shorting like crazy" (crazy being the operative word. It's OK to still do some shorting, but just not excessive).

Hey.... I've shorted some stock in my time, before using the bullish % charts and got "whacked" real good. When I went back and looked at some of the bullish % charts, I quickly understood that I was shorting a stock, when either its group/sector or associated market was actually reversing into "bull alert" status.

Always good to review some of your best trades and worst trades. Very educational to test against the bullish % charts as it relates to approximate time. Remember, on a point/figure chart, the 1=January, 2=February, 3=March...... 9=Sept., A=Oct, B=Nov and C =December.

 
 
  Jeff Bailey   7/12/02,  5:04:45 PM
Placer Dome (PDG) $10.88 -0.82% .... CIBC upgrades to "strong buy" from "buy" with price target of $18. Link

I mentioned this stock as potential bullish candidate on July 11, in 01:00 Update Link

Maybe CIBC thinking good risk/reward trade in gold sector. Point figure still longer-term bullish with vertical count of $23. Does appear to have a lid on it as PDG comes out of S&P 500 next Friday. After that, may see a supply/demand shift back to demand once S&P shuffle is done. Still... needs a gold commodity to hang in there. December Gold futures (gc02z) at $318.20.

Disclosure... I currently hold bullish position in PDG. (and at this point, would be happy with a trade at $12!)

 
 
  Leigh Stevens   7/12/02,  3:56:23 PM
INDEXES: TRADE Recommendation - UPDATE: Short QQQ - Am short the stock at 24.90 & plan to hold over weekend - Nas is "resisting" a further decline based on the stocks being fairly oversold - we'll see what next week brings. Suggest lowering stop to 25.15, from 25.60, in case there is breakout above the 30/60 min down trendlines.

 
 
  Jeff Bailey   7/12/02,  3:45:59 PM
NVIDIA (NVDA) $19.91 -0.10% .... trying to bid here. 2-minute interval chart shows break above intra-day downward trend. I tried to bid at $19.85 and didn't get any. :(

 
 
  Jim Brown   7/12/02,  3:38:07 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The stop loss was triggered at 15:33:30 when the OEX finally traded over 457. (SPX 918.17, DIA 86.75, SPY 92.26, DJX 86.59) The entry point on this signal was 460.50. End of day short covering appears to be providing the bounce.

 
 
  Jeff Bailey   7/12/02,  3:36:14 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jeff Bailey   7/12/02,  3:35:51 PM
Industrial Stocks Prudential says that it anticipates that the Machinery/Diversified industrials universe will likely realize a 20% year-over-year improvement in earnings, driven mostly by margin expansion and lower interest expense. Pru says best chance for an upside surprise exits in PCAR and TRW, and their best 12-month long ideas are ETN, ITW and CUM.

P/F chart of PCAR Link still rather bearish. Vertical count hints at $38. Look for confirmation of Pru's comments with a trade at $45, which would break downward trend and give a "triple-top-buy signal." Link

P/F chart of TRW quite bullish, but a little overextended. Vertical count hints at $66, but too much downside here to support at $46. Link

Good combination though to set some upside alerts at $45 in PCAR and $58 in TRW. If triggered then Pru may be onto something.

 
 
  John Seckinger   7/12/02,  3:28:54 PM
Trying to decipher hundreds of companies' earnings is hard enough; nevertheless, next week the market will be forced to confront Industrial Production and Capacity Utilization figures on Tuesday, Philadelphia Fed on Thursday, and CPI released on Friday. Note: Corporate earnings should easily take the spotlight; however, there is a chance an economic report becomes the catalyst for a move in the dollar - affecting equities.

 
 
  Jeff Bailey   7/12/02,  3:23:13 PM
Cisco Systems (CSCO) $14.46 +2.91% .... here's another NASDAQ-100 stock that generates a "buy signal" today. Similar to NVDIA's (NVDA) buy signal. While a sign of bulllishness, note how "close" the overhead supply is. Going to need a lot of selling in treasuries is my thinking to provide enough capital to eat through that supply. Link

 
 
  John Seckinger   7/12/02,  3:23:05 PM
Looking Ahead: With a plethora of earnings to be released next week, some noteworthy stocks early on include BAC on Monday, GM, JNJ, MER before the open on Tuesday and AAPL, INTC, MOT, and VRTS after the close. Wednesday, Thursday, and Friday comprise of over 150 companies reporting. Just food for thought when trying to imagine volatility of earnings as an already sensitive stock market is forced to digest more financial accounting.

 
 
  Jim Brown   7/12/02,  3:18:36 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
There is a little bargain hunting here and the drop has slowed. Lower the stop loss on the open SHORT signal to OEX 457.50. (SPX 919) and let's go into the weekend flat if we get a little bounce.

 
 
  Jonathan Levinson   7/12/02,  3:14:57 PM
Down volume is now ahead of up volume 935M to 761M. QQV is down by 1.77 on the day.

 
 
  Jonathan Levinson   7/12/02,  3:10:04 PM
By deep ITM what do you mean? - 2 strikes, 3 strikes, 4 strikes? At some point it no longer makes sense to go any deeper ITM does it not? So what do you consider deep ITM with regard to the question you answered about hoilding July puts over the weekend to mitigate decay?

You know that by this time next week, the premium on your contracts will be zero, or very close to it. Compare the current premium to the intrinsic value on your contracts, and then calculate how much you will lose by this time next week in deciding whether to hold or not. Now is a good time to consider rolling those front month contracts into August expiries- can sell here and buy the later expiries. This will solve the premium decay problem for now.

 
 
  John Seckinger   7/12/02,  3:07:39 PM
Not surprising that the yield curve came more in line as equities weakened. Clearly equities are leading the way with bonds simply following. After the retail sales and sentiment figures, bonds seemed to carry more weight; however, traders in the bond pit became helpless with the Nasdaq falling underneath 1387. Note: The bond market is now closed.

 
 
  Jonathan Levinson   7/12/02,  3:07:36 PM
My outgoing mail server seems to have taken this half hour off. I'm receiving requests for specific advice about specific trades and contracts. ie When to exit with July 26 Puts, etc. Please note Jim's first comment of the day, for the past several days. We cannot provide individual advice about specific positions you may have on.

 
 
  Leigh Stevens   7/12/02,  3:04:03 PM
Subscriber QUESTION: "Leigh.. I know you rely somewhat on Stochastic indicators, but in trying to understand them as well as others, I was curious as to your comparison to their use versus that of MACD at various moving avg.'s.."

RESPONSE: Well, one thing is that stochastics is a "normalized" indicator - formula is such that it trades between 0 - 100 - unlike MACD where "overbought" or "oversold" is has to be judged on a relative basis. I like MACD as an oscillator - especially on Weekly charts. But I like RSI better - as bullish/bearish "divergences" show up on a more regular basis.

 
 
  Jim Brown   7/12/02,  3:02:48 PM
Pivot Trade Signals
Obviously that was a buy program that triggered at Dow 8600. The Dow hit 8599.66 before the trades started kicking into gear. If that was the only program then this blip should not last long. I doubt anybody can give us a fundamental reason for being long over the weekend and shorts have got to be thinking "new low ahead." TICKs just rolled over so it appears the program ran out of steam.

 
 
  Jim Brown   7/12/02,  2:56:49 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the stop loss on the open SHORT signal to OEX 459.50. (SPX 923) With the Dow bounce at 8600 I don't want to end the day with a loss.

 
 
  Jim Brown   7/12/02,  2:54:34 PM
Pivot Trade Signals
The Dow is now approaching the lows for the week and a -800 point loss. It closed last Friday at 9379. This is already the worst week in points and percentage since the week after 9/11. There is an outside chance the last hour could see a real break if 8600 does not hold. Traders would fear the worst and run for the sidelines.

 
 
  Leigh Stevens   7/12/02,  2:52:35 PM
Subscriber QUESTION: "I have DELL, should I sell it? "

RESPONSE: Stock had a pop today due to revenue growth. But, the stock is back down to its intraday low - still above the upside "gap". Dell is is in a broad sideways trading range between roughly 22 and 28-28.5. If looking at long-term investment, would hold myself, hoping for a breakout above its down trendline at 26. Upside then is to 28 - maybe 30 over next 12 months.

 
 
  Jonathan Levinson   7/12/02,  2:51:55 PM
COMPX just printed a fresh low of the day at 1366. Expect support at 1360, followed by 1340-45.

 
 
  Jim Brown   7/12/02,  2:48:56 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the stop loss on the open SHORT signal to OEX 461.50, just above the entry level trigger point. (SPX 926) I expect the markets to move lower but I do not want to get too close and have a buy program at Dow 8619 take us out.

 
 
  Jonathan Levinson   7/12/02,  2:46:39 PM
You said you would be willing to hold your QQQ puts over the weekend, I have July puts, how much am I likely to loose due to time decay between now and Monday? Thanks, I really appreciate your commentary.

Very good point. Expect serious premium decay to set in, unless your puts are deep in the money. If they are not, I would be looking to exit today to avoid the premium slide over the weekend and into next week.

 
 
  Leigh Stevens   7/12/02,  2:43:46 PM
Subscriber QUESTION: "This is more a long term investing question, do you know anything about Harry Dent? He is (was?) one of the guys predicting Dow 30K and Nas 15K by '08-09 due to all of the baby boomers retiring...his theory was that they need to save NOW as most spend 101% of their income, and driving this money into the markets would cause another huge runup along with his 80 year cycle theory...now the interesting part here is that he calls for a 17 year downswing in the 2008-2009 area when this money is being pulled out of the markets by these retired people. If you know anything about Harry, what do you think about these theories, and also do you suppose the 17 year downswing if it were to occur (geez that would be a MOPO!) do you think maybe Harry could be off 7-8 years and we could be in it now? "

RESPONSE: well, I know the woman Harry is dating and the guy that fixed them up - but that's it!

On a more serious note, I think his theories are just that - theories or "unproven" speculations. However, do think that a next bull market will have plenty of cash to fuel it.

 
 
  Jim Brown   7/12/02,  2:40:49 PM
Pivot Trade Signals
Now that the markets are moving in our direction we need to start speculating on the downside targets. The first speed bump for the OEX is 455 with more support at the week's lows of 450. The Dow has support at 8619 which is the 78% Fib retracement level from September. The S&P futures have support at 916 (currently 918.80) The SPX cash could slow at 915. The bottom line? We will lower the stop loss on this signal as the OEX approaches 455.

 
 
  John Seckinger   7/12/02,  2:34:35 PM
Looking at the Internet Index (DOT.X), a 30-minute chart shows weakness has put prices right back to the 50 and 20 period moving averages. Furthermore, it appears that the 20 moving average will cross above the 50 during the next upswing in prices, getting institutional traders' attention.

 
 
  Leigh Stevens   7/12/02,  2:30:23 PM
INDEXES: TRADE RECOMMENDATION: Short QQQ/buy puts at current levels (last: 24.90) - set stop at 25.60.

 
 
  Leigh Stevens   7/12/02,  2:28:56 PM
INDEX Comments: QQQ -looks like the rally is failing here, right at the top of the trendline.

 
 
  Leigh Stevens   7/12/02,  2:27:25 PM
Subscriber QUESTION: "LEIGH - this is commentary from Larry McMillan today. I was wondering if you agree with the several points he makes here, or if your take is different. Thanks, as always:"

"From a larger perspective, no matter when or how the next rally bottom occurs (even if it starts today), there will surely have to be a retest. We have violated all the aspects of the previous September bottom and are now required to set up a new bottom all over again. This time, I can assure you, it won't take nine months to come back and test the bottom -- the bulls don't have the ammunition nor the stomach for that again. Perhaps that bottoming process would take place over a month or two, thereby setting up the intermediate-term bull market that we still envision as beginning later this year." - Larry McMillan

RESPONSE: I agree - best time for "retest" is Sept.-Oct.

 
 
  Jonathan Levinson   7/12/02,  2:26:27 PM
From Reminiscences:

"There is a time for all things, but I didn't know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No [person] can always have adequate reasons for buying or selling stocks daily - or sufficient knowledge to make his play an intelligent play."

I think that's well put, and highlights a weakness that I'm in the process of learning my way out of: When in doubt, stay out. Pick the one's you're most comfortable with. There's always another play around the corner.

By the way, COMPX price just broke 1380.

 
 
  Leigh Stevens   7/12/02,  2:22:23 PM
Subscriber QUESTION: "Do you see a flag forming on the Naz 60 min. chart with price just above the 50pma? Any comments?

RESPONSE: Could be a "bull flag" formation in both NDX and QQQ - however, the sideways consolidation is going on a bit long. Usually a flag "resolves" itself with a further move in the same direction as the prior (up or down) thrust within a FEW bars; e.g., 3-5.

 
 
  Jonathan Levinson   7/12/02,  2:19:31 PM
Price on the COMPX is currently chopping around just below 1385. Volume breadth has deteriorated a bit, now 1.3:1 for advancing volume. The US Dollar Index remains just under 106, while the QQV remains down by over 3 points. I'll be willing to hold my QQQ puts over the weekend, and absent a short covering panic into the close, I don't expect major fireworks from here.

 
 
  Jim Brown   7/12/02,  2:17:21 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
That last sell program knocked us out of the recent trading range and triggered the bottom SHORT signal at 14:07:08. This was not the preferred method of being triggered as severe sell programs tend to rebound quickly if they have no breadth. (SPX 924.84, DIA 87.40, SPY 92.75, DJX 87.19) The initial stop loss on this signal is going to be wide at 467 since I was willing to enter a SHORT up to the 465 level. Hopefully the afternoon trend just began and we will not need to worry about the high side. The S&P futures have broken the intraday support at 926 and the Nasdaq futures (ND02U) are threatening to break support at 1010.

 
 
  Jeff Bailey   7/12/02,  2:16:12 PM
10-year YIELD 4.602% starting to break lower here from four-hour consolidation. Has stocks softening a bit. With Dow Ind. -75, SPX off -1.82, OEX -1.99, COMPX +10.7 and NDX +11.1 here.

 
 
  Leigh Stevens   7/12/02,  2:14:03 PM
Subscriber QUESTION: "Re your comment on ndx and futures as leading indicator, comparing the two charts it looks completely coincident to me throughout the day. My futures quote is 10 min. delayed, but looking back to adjust to contemporaneous quotes I don't see a leading correlation. Am I missing something here? "

RESPONSE: Well, all I can tell you is the futures sometimes "pop" first and its very fast. However, I am NOT suggesting that you must or NEED to follow the futures to successfully trade the Nasdaq.

But if you are - you can sometimes pick up a few ticks here and there or will see when "sentiment" changes due to premium expansion or erosion. I don't chart the futures myself, only the actual index and the stocks.

And you have to look at where the premiums went above 'fair" value or below "fair value" This is a value in tracking futures - you can't "see" this by the method you propose

 
 
  Jeff Bailey   7/12/02,  2:09:48 PM
AOL Time Warner (AOL) $13.31 -2.84% ... Previously, someone profiled AOL to $13.00, which at the time was around $18, I’m impressed! What are your thoughts now?

I remember saying less than bullish things regarding AOL back near $18, but others in the market monitor may have been too. While $5 decline doesn't seem like a lot, still a nice little 27% gain doesn't hurt.

The stock has rebounded a bit from the lows of $12.04 and if still holding short, I'd actually use the "inside day" trading technique to manage the trade going forward.

Let's "pretend" that a new bear showed up on 07/10/02, and shorted the break of the 07/09/02 "inside day" at $13.75 (break of $13.77 from 07/09 low). His/her stop would be placed just above yesterday's high of $13.88. That type of "pretending" could have a bear from $18 doing the same thing here, only due to the more "oversold" nature of the bullish percent charts and higher reading from the VIX.

MACD on the daily is baaaaaarely above the signal and very flat, but the bearish vertical count of $10.50 still gives some downside "hope." Link

Way, way, way too early to even think about this stock as a bullish candidate. Relative strength versus broader market averages is dismal.

 
 
  Leigh Stevens   7/12/02,  2:07:47 PM
Subscriber QUESTION: "What is the difference in the regular futures and the e-mini?"

RESPONSE: The DOLLAR value of the contracts - All index futures trade with a value (of the contract) based on a "multiplier" - a certain dollar amount TIMES the (numerical) value of the index.

The Nasdaq "mini" contract trades based on a (contract) value equal to $20 times the Index (NDX)

The Nasdaq contract trades based on a (contract) value equal to $100 times the Index (NDX)

 
 
  Jeff Bailey   7/12/02,  2:06:32 PM
The 1:00 PM intraday update has been posted. Link

 
 
  John Seckinger   7/12/02,  1:59:19 PM
The Utility Index is experiencing more long liquidation pressure following Duke Energy (DUK 24.86 -3.09) acknowledging it received subpoenas late yesterday related to the company's trading activities. Currently down 4.30 at 240.9, the NNA.X is still developing an inside day lower. It would take an almost impossible rally back above 250 to rejuvenate bullish interest. Shorts are most likely looking for weakness to 230 before covering.

 
 
  Leigh Stevens   7/12/02,  1:46:20 PM
INDEX Comments: Re the Question on Nasdaq 100 futures - I only gave the front month symbol on the smaller "mini" contract - the "full-sized" Sept. NDX futures contract is called up on Q-charts using symbol: "ND02U"

Volume is greatest in the "mini" contract (NQ02U) - today, I show 157,000 contracts trading on the mini, versus 2,733 in the larger contract (ND02U).

 
 
  Jonathan Levinson   7/12/02,  1:44:54 PM
While we chop around in this COMPX range, I have just received my recent order from Powell's books, which includes Edwin Lefevre's classic, Reminiscences of a Stock Operator, about Jesse Livermore. This quote is priceless:

"I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit."

The moral for us- respect those stops.

 
 
  Leigh Stevens   7/12/02,  1:34:16 PM
Subscriber QUESTION: "Leigh, Regarding your 13:02 post, would you happen to know the symbol on Qcharts for the NDX Futures. "

RESPONSE: Q-Charts symbol: "NQ02U" for the current "front-month" contract; When Sept. expires front-month becomes Dec.(Z) - i.e., NQ02Z; then, March (H) - e.g., NQ03H; then, June (M)

Above symbol (NQ02U) gives you 10-minute delayed quotes on the E-mini Nasdaq 100 fututes -- UNLESS of course you are paying for real-time quotes from the CME (Chicago Mercantile Exchange).

 
 
  Jim Brown   7/12/02,  1:31:22 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The Dow continues lower and the Nasdaq was unable to post a new relative high. The OEX/SPX are flat at current resistance levels. Futures are holding in a very narrow range. The OEX has strong resistance at 465 and again at 470. I just do not think the markets can make a major upward move today. Go SHORT the broader market on any spike to OEX 465 again. ALSO, go SHORT the broader market with any breakdown below OEX 460.50. This is just below the recent intraday low. Hopefully we will get one more bounce back to the 465 area where we were stopped out before. I think that is the best entry point we can hope for. This signal gives us an upper level entry but also allows for a quick breakdown as well.

 
 
  John Seckinger   7/12/02,  1:29:57 PM
The dollar continues to avoid parity with the Euro, just barely missing the ominous 1.00 exchange rate following a downward revision in the retail sales data. Furthermore, the 116.48 low versus the yen was fractionally above a 10-month low. This only confirms least resistance should be lower until confidence in dollar denominated assets pick up (less accounting concerns, etc). Also, with five year notes still underperforming, an underpinning bid in equities should remain throughout the session. Same disclosure as yesterday: This does not mean a strong rally but only that there should be assets leaving notes to give Nasdaq holders a "cushion."

 
 
  Leigh Stevens   7/12/02,  1:23:06 PM
Subscriber QUESTION: "I am practice trading the option market and have about 1000 hrs. in at this time. I enjoy playing the OEX. What is your pick of books on trading options on individual stocks and the OEX. "

RESPONSE: Well, a starting point might be: "Options As a Strategic Investment", by Larry McMillan - sometimes called the "bible" of options trading. Talks about strategic opportunities using options. Good examples about how each strategy is used.

In terms of market timing, suggest either Stan Weinstein's "Secrets for Profiting in Bull and Bear Markets", or a good book on technical analysis - my own is "Essential Technical Analysis".

 
 
  Jonathan Levinson   7/12/02,  1:22:21 PM
The Qcharts symbol for the NDX futures is nd02u.

COMPX Advancing volume:declining volume is now 1.69:1. Price so far has made an intraday lower high and is now chopping around 1390.

 
 
  Leigh Stevens   7/12/02,  1:10:25 PM
Subscriber QUESTION: " I'm watching the NDX futures and wondering if that really affects the 'future' of the NDX throughout the day fairly well. Is that a good forward indicator?"

RESPONSE: Yes, watching the Nasdaq futures is a pretty good "forward" indicator, assuming you do not have delayed quotes of course - not only to reflect the first hint of a rally or a downswing - but as an important "leading indictor" when the futures premiums expand or contract over an hour or a few hour period.

 
 
  Leigh Stevens   7/12/02,  1:02:22 PM
Subscriber QUESTION: "RE your Bollinger Bands article in Trader's Corner:" '4. If the (centered) moving average is lengthened, the number of standard deviations needs to be increased; e.g., from 2 at 20 periods, to 2.1 at 50 periods. Likewise, if the average is shortened, the number of standard deviations should be reduced; e.g., from 2 at 20 periods to 1.9 at 10 periods.'

"This implies there's a formula for adjusting the standard deviation count based on the period length of the BB moving average. If so, can you share it with us/me?? I use the 80 and 100 period ma's on intraday charts. What stddev settings should I use? Good article!"

RESPONSE: In John's mind there is - these are the examples he gave when at our meeting.

I don't know what John's "formula" is for adjusting standard deviation - we can ask him when he is here speaking at our October (O.I.) seminar!

 
 
  Jim Brown   7/12/02,  1:01:37 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were finally stopped out on the SHORT signal at 12:56:42 when the OEX traded above 464.50. (SPX 932.07, DIA 88.06, SPY 93.60, DJX 87.85) This was unfortunate, as I believe the markets will trade lower before the day is over. We will look to re-enter this signal later in the day. The entry point for this signal was 462.

 
 
  John Seckinger   7/12/02,  1:00:10 PM
Side Notes: The Bush administration expects the federal government to post a deficit of $165 billion this fiscal year, which will be a 56 percent increase over earlier projections. Reasons included an unexpected downturn in tax revenue caused by weakness in the equity markets. Maybe they will start auctioning off the 30-year again? Nah.

 
 
  Leigh Stevens   7/12/02,  12:56:22 PM
Subscriber QUESTION: "YESTERDAY I BOUGHT 4 OEX AUGUST 480 CALLS @ 8.9 (...JUST BEFORE THE DOLLAR WENT SOUTH) AND 2 OF THE SAME 510 CALLS @ 2.05 (....AT LEAST I GOT CLOSE TO THE LOW THERE...) AND I WOULD LIKE TO KNOW YOUR TAKE ON THE NEXT OEX LEVEL TO THE UPSIDE WHICH WOULD EFFECTIVELY PROVE A PRETTY GOOD RESISTANCE LEVEL IF WE ARE NOT BLOWING THROUGH THEM WITH A LOT OF FORCE. DOES 470 SEEM MOST LOGICAL OR DO YOU SEE A BETTER LEVEL AT WHICH TO BOOK PROFITS (..HOPEFULLY 550!)THANKS AND I LEARN A GREAT DEAL FROM YOUR SERVICE AND FROM YOU. "

RESPONSE: Yes, OEX does have resistance around 470; then, around 475-477, according to the 30min. charts; 475 is the at my upper envelope line (2.5%) relative to the 21-hour moving average and may be a "deflection" or turning point near-term.

 
 
  John Seckinger   7/12/02,  12:30:15 PM
The Internet Index is trading very similar to the Nasdaq; however, DOT.X traders is putting more weight in the 22 period moving average on a 5-minute chart. The Index has used that average as a tradable pivot over the course of the last few sessions. Currently up 0.94 and now below the moving average, it will take a bid above 86.5 to spark interest in bullish traders. On the downside, support can be found near 85.75. Non-aggressive traders can use a rise above 87 before looking at further moves to the upside.

 
 
  Jeff Bailey   7/12/02,  12:28:09 PM
Aquila (ILA) $7.17 -3.1% .... Bear from past profile in the mid-teens does the same type of thing here. Understands a trade at $8.50 would also be a long-tail down and perhaps removes some risk and locking in of some gains here. Link

Hey, since we used WMB, EP, DYN and ILA to sniff out some awesome shorts, no since giving up on the correlations now!

 
 
  Jeff Bailey   7/12/02,  12:24:12 PM
Williams Co (WMB) $5.80 +4.31% ... Jeff: What do you think of WMB's long tail down, then 3 box reversal today on the pnf chart? I believe this is a good thing according to Dorsey.

Hey, if short from past profile at $14, then good place to at least lock in some gains. What an aggressive bull will do is play bullish, stop at $4.50. Link What a bear does is if short at $14.00, understands his/her risk is now risking $8, to potential make another $4.50. That's unfavorable risk/reward and will limit exposure to the bearish trade.

 
 
  Jim Brown   7/12/02,  12:19:28 PM
Pivot Trade Signals
Just like the Futures were keeping us from breaking out this morning the S&P futures are now supporting the market at 925. As long as that support level holds we have a chance of recovery. However upper resistance is still 931, which could limit any upside. Without any major bullish news event there is nothing to send the markets over this resistance except for short covering ahead of the weekend.

 
 
  Jonathan Levinson   7/12/02,  12:18:28 PM
Upvolume on the COMPX is now 1.33 times down volume as the COMPX sits just above that 1380 support level. No significant changes in any of the other indicators, although the bear Hope-ometer is rising, at least in this author's office.

 
 
  Jim Brown   7/12/02,  12:12:00 PM
Pivot Trade Exit Point Alert - SMH
The SOX rally is toast and the index is dropping fast. We were stopped out of the SMH LONG signal at 12:05:50 when the SMH traded below 29.50. The SMH-HE call we are using as the benchmark for this trade was bid at $5.40, last trade 5.70 when the stop was triggered. Ask on this call when the entry point was triggered was $4.80. Not a big gain but a good attempt to capture a possible rally.

 
 
  Jim Brown   7/12/02,  11:57:19 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the stop loss on the broad market LONG signal at 11:50:08 when the OEX traded below 462. (SPX 927.01, DIA 87.62, SPY 93.01, DJX 87.45) The entry point on this signal was 458.50.

 
 
  John Seckinger   7/12/02,  11:56:20 AM
It is reported that net purchases of U.S. securities (stocks and bonds) by foreign investors came in at $93.3 billion for the first quarter. This represents a 56 percent drop from the $166.3 billion invested in 4Q of 2001. Side note Within the mortgage arena, low 10-year yields may spark faster prepayments and refinancing - therefore more supply by lenders will enter the market and should get investors more attracted to Treasuries. Nevertheless, mortgages have higher credit quality and is usually preferred over corporates, especially in wake of accounting issues. Just something to think about while I wait for a significant move out of either the dollar, yield curve, oil, gold, CRB index, or equities themselves.

 
 
  Jim Brown   7/12/02,  11:55:23 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market SHORT signal at 11:50:08 when the OEX traded below 462. (SPX 927.01, DIA 87.62, SPY 93.01, DJX 87.45) The initial stop loss for this signal will be 464.50 which is just above the last intraday relative high. (SPX 931)

 
 
  Jonathan Levinson   7/12/02,  11:53:57 AM
Volume breadth is a little weaker here on the Naz, and thanks to Lowell for reminding yours truly to remember to breathe- always good advice, isn't it? In any event, there are now just less than 2 advancing shares for each declining share. The QQV still down nicely, currently 3.44 on the day, and the return to complacency increases that breathing room a bit more for us in bearish trades. I'm still doing my best to ignore the TRINQ, which is no longer working as my primary radar beacon, but fwiw, it's currently at .84.

 
 
  Jeff Bailey   7/12/02,  11:49:00 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   7/12/02,  11:45:01 AM
Bullish % I've been swamped with questions regarding this morning's bullish percent data. I've tried to take the time to address as many questions as possible as it relates to the VIX, which everyone seems to understand better. Try making the "tie" with how these two may work together to understand "risk." Should be posted in a minute.

The reason I'm taking so much time on the bullish % right now is this. In December and March, I received a lot of e-mail from subscriber (most of them new) that I was way too bearish. You see, they weren't all here in September when the bullish % charts were all burried oversold and started reversing up. Some were watching the market eventually surge and decided they would start making oodles of money in December after the major move up.

However, I also remember some new subscriber showed up in September, to buy puts and short stocks as the markets were on the brink of further distruction, but the bullish % charts were all reversing up in October as the internals began to strengthen. By November, the e-mail was filling up with investors that were holding short positions that were moving 30% against them and emotions were running high as the margin calls were coming in.

My greatest "fear" right now is that subscribers that haven't been with us for a couple of cycles in the bullish %, are showing up to now aggressively short/put this MARKET, when the bullish % charts are now nearing lows and starting to show internal strength. That combined with the HIGHER VIX.X hints a near-term bottom is being found.

True, the SPX is right back where it was in September will be the call from the bear. But ask that bear if he shorted in September and held into December how he/she was feeling. Not good is the honest answer.

If you're going to short stocks at current levels, PLEASE be disciplined with your stops.

 
 
  Leigh Stevens   7/12/02,  11:34:23 AM
INDEX Comments: QQQ - well, wouldn't you know! - QQQ DID reach my upside objective at 25.50, with intraday high so far at 25.52. Hope that anyone who hung in, took the profit there - as I noted before, 25.50 area is resistance implied by the top of the currently hourly downtrend (price) channel - if the Q's consolidate here and make a run THRU this area, it would be a bullish breakout.

Nasdaq is hanging in pretty well, and the key is bellwether Cisco Systems (CSCO), which as broken out to the upside but does have resistance just above its intraday high (14.84) at its 50-day moving average at 14.91. A stock to watch!

 
 
  Leigh Stevens   7/12/02,  11:26:47 AM
Subscriber QUESTION: "Re: XAU - What about the weakness in the dollar? And another shoe falling in corporate america? And 9/11 anniversery? "

RESPONSE: I don't normally trade on contingent or market-external factors like those you mention - I use technical analysis and this market is "telling" me that its going lower - I don't know all the reasons why, but play it as I see the chart pattern. I may be wrong and its my opinion - it works for me, not for everyone.

 
 
  Jim Brown   7/12/02,  11:23:05 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point for the current SHORT signal to 462. (SPX 927) It appears we set a new lower intraday high and futures are confirming the weakness. The markets could break down at any time.

 
 
  Leigh Stevens   7/12/02,  11:21:00 AM
Subscriber NOTE: "Hi Leigh, I imagine you may have gotten a few e-mails on getting out of the QQQ when it was weak this morning. I had taken your buy signal yesterday, actually was stopped out even before you told us to get out this morning (approx. same price). So we got "scared out" and missed the current move. Big deal. I follow you because I know you trade with the odds and probabilities. I also know you will be wrong from time to time. All that is fine.

The trend is down until proven otherwise. You are smart to protect profits on a bull trade and get out when there is doubt. We will get another chance, we always do! So, keep waiting for the odds to be in your favor, take what the market gives you. I depend on you for solid advice and trade ideas with the probabilities on our side!"

RESPONSE: Thanks for your note. I do attempt to strictly play probabilities and risk/reward - my "guiding light" on trading. If I am unsure I tend to exit - old trader's saying: "when in doubt, get out" - of course, there is the other axiom to "let your profits run". The trick is to strike a balance in these principles.

On QQQ this morning, the further upside relative to the downside risk, looked about even - I never like to take a trade where my risk is equal to my reward. I favor trades where upside potential, as I can best measure it, is at LEAST two times what I am risking; i.e., at my stop/exit point - which is why, for example, I try to buy at where I estimate support will be, when most everyone may be bearish. I can then put my stop just under a prior downswing low. If the market then turns, my risk relative to the reward potential is significantly in my favor.

 
 
  John Seckinger   7/12/02,  11:11:38 AM
5-year Failure? Currently down 6 ticks (6 times 6 equals 36, see prior posting), the 10-year note is only lower by 5 ticks (5 times 4 equals 20). That means this is a 16 (36-20) tick "flattener" and is definitely bullish for equities. A good rule of thumb: A move in the curve by 4 is normal, 16 is solid, while 32 and above is significant.

 
 
  Jonathan Levinson   7/12/02,  11:01:16 AM
Volume breadth on the COMPX is firmer at just over two advancing shares for each declining share. The US Dollar Index is below 106, off its highs of the day. All intraday stochastics 5(3) and 10(5) are overbought as price breaks COMPX 1400.

 
 
  Leigh Stevens   7/12/02,  10:59:51 AM
Subscriber QUESTION: "Will the XAU go down if this market rallys? "

RESPONSE: Unlike John Murphy, my old buddy at Merrill Lynch, I don't make these links between markets directly.

I tend to look at the gold stocks ($XAU.X) separately - I have been bearish on XAU for some time as I don't see anything to SUSTAIN a gold rally - especially on the inflation front, which tends to drive the big moves in precious metals historically. Of course, war scares can get the price up for a time.

The recent XAU rally failed at resistance implied by its 50-day moving average and the sector index reversed a peak that was lower than the prior (up) swing high. A definition of a bearish trend is LOWER rally highs and lower downswing lows. My best guess on XAU is that a next downswing can take out (penetrate) its prior recent low at 69.6 - my target is to around 65, possibly back to the 60 area. XAU is last at 74.6

 
 
  Jim Brown   7/12/02,  10:59:04 AM
Pivot Trade Signals
Futures are finally breaking out of their resistance and being led by the NDX contracts. Today is turning into a struggle but the bulls are starting to gain an edge. Keep your fingers crossed!

 
 
  John Seckinger   7/12/02,  10:56:46 AM
Looking at a table of recommendations (Stocks/Bonds/Cash Allocation) by 10 top Wall Street firms, the average is 70% stocks, 21.5% bonds, and 8.5% cash. Their 2002 targets for the S&P range from 1050 to 1450, while Dow estimates are from 10,400 to 11,500. There are only 3 estimates for the Nasdaq by end of 2002: 1700, 2250, and an impressive 3300 expectation.

 
 
  Leigh Stevens   7/12/02,  10:52:11 AM
Subscriber QUESTION: "Leigh, What am I missing? Dell increases sales by $100 million and it moves the market. $8.3B in sales works out to sales of $125.7 million a day (assuming 66 shipping days in Q2). After Dell's comments about PC demand last week, a $100 million increase doesn't have me mortgaging the ranch to go long.

So "where's the beef" in this one? Has the market moved from irrational exuberance to irrational disenchantment/distrust so that any non-negative comment is viewed as being noteworthy? "

RESPONSE: irrational disenchantment - Absolutely! The market tends to move from extreme to extreme. In fact, the greater the "irrational exuberance" at the last extreme, the greater will be the opposite extreme in the bear market that follows.

If, for example, stock valuations had not gotten so high, we might have had a more "normal" type correction - but this was not the case. If you recall, it took a long time to "build" a top at the last peak - now, it is taking a long time to bottom.

 
 
  Jonathan Levinson   7/12/02,  10:47:31 AM
And I'm really nervous with my QQQ short. Readers are asking what a tight stop really is. Well, it depends on your account, but tight is tight. In my case, I'm watching 1400 and remembering to breathe. The overbought stochastics are reassuring, but in the short term, a big move up could change the picture and glue all the intraday stochastics to the ceiling as my loss on the trade mounts. Decide in advance how much you're willing to lose and make that your stop. It's easier to give back the comms than to give back the comms plus a piece of your account.

 
 
  Jim Brown   7/12/02,  10:46:39 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point for the current SHORT signal to 459.50. (SPX 921) If we roll over here I want to catch the drop just under the 10:15 intraday support.

 
 
  Jim Brown   7/12/02,  10:43:22 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I am really nervous with the current LONG signal and I am raising the stop loss to 462. (SPX 927) The futures are stalling as increased selling is appearing.

 
 
  John Seckinger   7/12/02,  10:43:03 AM
The Internet Index got my attention yesterday following a double-bottom formation, adding to gains as trading on Friday progresses. DOT.X currently higher by 2.07 at 87.45, with our objective the 22 DMA - currently trending lower from 94.28.

 
 
  Leigh Stevens   7/12/02,  10:42:13 AM
INDEX Comments: ALL indices have popped back up after the early morning dip. Volatility measures like VIX (OEX options), last at 38.8 and VXN (NDX options), last at 65.2, continue to be high. Obviously market participants are nervous - QQQ may reach my 25.50 target after all, where the stock has resistance at the top of its hourly downtrend channel. A move through there (25.5), especially on an hourly closing basis, would be a bullish breakout.

The S&P indexes have more room on the upside and are more oversold, except on the very short-term hourly stochastic, which is back up to a peak. OEX resistance looks like it begins well above current levels - at around 477-478, based on my upper hourly trading "band" -

By the way, my Trader's Corner article posted last night is on Bollinger Bands - everything you ever wanted to know about Boli bands and more! - John Bollinger of course will be with us at our October Seminar. My article on John's work can be viewed at Link

 
 
  Jim Brown   7/12/02,  10:39:32 AM
Pivot Trade Exit Point Alert - SMH
I am raising the stop loss on the LONG SMH signal to 29.50. We are seeing a breakout in the SOX and the SMH is moving up nicely. The initial target is 30.50 but we could see it move to test resistance around 31.50. Keep your stops tight because the INTC earnings on Tuesday are sure to produce some caution later today or Monday morning.

 
 
  Jim Brown   7/12/02,  10:34:11 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Futures came to a dead stop on resistance (930/1020). I am raising the stop loss on the current LONG signal to 459.50, just above our entry point of 458.50. I am worried that a failure in the futures could result in a new market drop.

 
 
  Jonathan Levinson   7/12/02,  10:33:06 AM
The QQV is down 3.26 on the day to 56.61. Volume breadth has firmed again, advancing volume now doubling declining volume on the COMPX.

 
 
  Jeff Bailey   7/12/02,  10:24:21 AM
Dow Industrials Bullish % ($BPINDU) I don't use the Dow Industrials Bullish % as a primary "risk" indicator, but it does serve a purpose as it relates to the other more broad bullish %. See how the Dow Industrials BP has recently reversed back into a column of O? Link

For me, I like this because it now sets up a potential "bull confirmed" reading at 34% and I don't have to wait for a reading of 52% to get "bull confirmed." This is important for us bearish traders too as we now get an earlier alert of meaningful demand starting to build. We can now get a better feel from this combined with the NASDAQ-100 Bullish % ($BPNDX) should it achieve the 24% level and also get "bull confirmed."

If we start getting some "bull confirmed" readings in the narrower bullish percents, this can then give us a better feel that more and more stocks are beginning to trigger buy signals and that supply is starting to dry up and demand getting an upper hand.

Then, you'd begin looking for some type of "confirmation" in the broader S&P 500 Bullish % ($BPSPX). You see how it tends to be less volatile and doesn't give as many small reversals as do the NASDAQ-100 and Dow Bullish %. That's because there's a lot more stocks that make up the S&P 500.

 
 
  Jonathan Levinson   7/12/02,  10:21:46 AM
Down volume is catching up to up volume on the COMPX, 273M Advancing to 208M declining. With COMPX price chopping along just above 1380, it feels like my purchase of puts is the only thing supporting the price at this moment. We'll see.

 
 
  Jim Brown   7/12/02,  10:20:18 AM
Zale, (ZLC), an OIN put play from last week finally issued the profit warning we were expecting. We dropped it last week for lack of movement and with the warning today it lost -6.00 to 27.50. Timing is everything!!!

 
 
  Jim Brown   7/12/02,  10:18:24 AM
Pivot Trade Signals
Futures have sold off in early trading but are moving back toward the day's highs. Resistance on the S&P is 931 and 1020 on the Nasdaq. Buy stops would be triggered above those levels and possibly spark another round of short covering.

There is still no discernable trend and we are waiting for somebody to make a move. With the strong down drop this week there should be some short covering today if it appears the markets are not going to fall further. It is all just temporary and would just be a pressure release going into the weekend.

 
 
  John Seckinger   7/12/02,  10:18:04 AM
Yield Curve Explanation: If 5-year bond futures are up 6 ticks, I multiply this by (6) and get 36. 10-year bonds are currently higher by 9 ticks, I multiply this by (4) and get 36. Since they both equal (36), curve "flat on the day". If 5-year got a 40 number and 10-year got a 30 number, then curve is "steepening" and would be bearish for stocks based on current Fed outlook. If 5-year number was 30 and 10-year number 40, that would be a "flattener" and be bullish for stocks.

 
 
  Jonathan Levinson   7/12/02,  10:15:16 AM
Let's not forget the negative picture painted by this week's employment data and sentiment numbers. While the University of Michigan sentiment calculation strikes me as being far from a "hard" economic calculation, it, in combination with negative employment news, tells an ominous story for the US consumer who has thus far been supporting the fabled economic recovery.

 
 
  Leigh Stevens   7/12/02,  10:14:32 AM
Subscriber NOTE: "The 40 level on the VIX is closely watched by traders because it has coincided with significant market bottoms several times since 1986. However, what's interesting to note is that the VIX was above 40 for several days in each of those past episodes, according to a report yesterday by Arnhold & S. Bleichroeder:

In 1987, from Oct. 19 through Dec. 17; In 1988, from Jan. 8 through Jan. 14, and again on Jan. 21; In 1998, on 21 of 34 days between Aug. 28 and Oct. 14, and; In September 2001, from Sept. 17 through Sept. 24."

RESPONSE: thanks

 
 
  Jeff Bailey   7/12/02,  10:11:35 AM
Treasury Watch Bond market's response to U Mich. consumer confidence was defensive. 10-year YILED dropped back below the 4.635% level and now trades YIELD of 4.578%. This is "defensive" posture from bond market in my opinion. Will set an alert just below yesterday's low YIELD of 4.553% to alert to further defensive posture.

 
 
  John Seckinger   7/12/02,  10:08:02 AM
Mixed Anecdotals: Dollar futures higher (appears to be technical in nature, positive to equities), Oil and CRB Index higher (continued rally after reduction in inventories, negative to equities), Yield curve basically flat (neutral to equities), Gold futures lower (positive to equities). Moreover, corporate spreads have narrowed Globally (positive to equities).

 
 
  Jeff Bailey   7/12/02,  10:07:52 AM
NVIDIA Corp. (NVDA) $20.00 +0.37% ... stock traded $21 and that's enough to get the stock back on a "buy signal." Link

OK.... now my thinking is "notice has been served" and the stock has traded at a level not achievable on the last run in column of X. But you can see how the U of Michigan sentiment numbers have weakened markets and NVDA didn't shoot up to $25 in 10-minutes. Did you think it would? Nope, probably not.

Now, I hope we don't have any subscribers "surprised" by the decline in sentiment. As we've noted before, consumer sentiment is GREATLY impacted by the NASDAQ stock market performance. I think any trader/investor worth his/her salt felt or factored in a weaker sentiment number.

What I'd do with NVDA if looking long, is perhaps try and "Fine tune" a trade. Look at the 60-minute interval. We see a hooking around 50-pd MA down at $18.21. See how that 50-pd MA served as some support yesterday at $17.85? Then up above you have the 200-pd MA at about $25. That's a swing-trader's target right now. If not overly excited about NVDA, but looking for an entry point on a pullback, the watch that 50-PD MA on 60-minute chart for support entry, then use the p/f chart stop as outlined as stop on the underlying stock.

Still, today's trade at $21 shows some sign that demand starting to outstrip supply.

 
 
  Jim Brown   7/12/02,  10:07:03 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the LONG signal at 10:01:04 when the OEX traded above 458.50. (SPX 917.04, DJX 86.96, DIA 87.15, SPY 92.52) The initial stop loss will be 455, which is also the entry point for our open SHORT signal. Nobody knows which way the markets will trade the rest of the day but we want to be ready for either direction.

 
 
  Jonathan Levinson   7/12/02,  10:06:12 AM
Just added a put position the QQQ. This feels aggressive to me, and I'll close it and take my lumps if the COMPX can break 1400, which I doubt. Be sure to set your stops appropriate to your own risk tolerance and account, and err on the side of caution.

 
 
  Leigh Stevens   7/12/02,  10:04:49 AM
INDEXES: TRADE Recommendation - UPDATE: QQQ has traded back up to 24.9 area - nevertheless have exited my long position taken at 23.90. Lack of rally follow through makes the stock look vulnerable to another downswing.

 
 
  Jim Brown   7/12/02,  10:01:16 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with an OEX trade above 458.50. (SPX 919)

 
 
  Leigh Stevens   7/12/02,  9:59:51 AM
INDEXES: TRADE Recommendation - UPDATE: Exit QQQ at current levels (last at 24.72) and bought at 23.90. Cancel stop at 24.15. Looks like a short-term reversal in the stock. NDX reached the top end of its downtrend channel and reversed - think QQQ is vulnerable to falling further.

 
 
  Jim Brown   7/12/02,  9:57:57 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market with an OEX trade below 455.

 
 
  John Seckinger   7/12/02,  9:56:53 AM
Following disappointing sentiment figures, shorter maturities have firmed up slightly (defensive for equities); moreover, financial issues have continued to trade underwater (IXF.X) - failing to take out 2100 and reversing recent bearish sentiment.

 
 
  Jonathan Levinson   7/12/02,  9:53:12 AM
U of Michigan consumer sentiment index dropped to 86.5 in July, down from 92.4 in June. Economists were looking for a reading of 92.9%, so the 86.5 was below expectations.

 
 
  Jim Brown   7/12/02,  9:52:30 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The Consumer Sentiment fell substantially to 86.5 and the negative market reaction triggered the stop loss on the LONG signal at 9:47:22 when the OEX traded below 462. (SPX 926.85, DIA 87.45, SPY 92.46, DJX 87.60)

 
 
  Jonathan Levinson   7/12/02,  9:49:22 AM
Looks like disappointing sentiment data, if the COMPX price action is any indication- new lows printing as I type.

 
 
  Jonathan Levinson   7/12/02,  9:38:55 AM
Volume breadth is strong at the open, just over 2 advancing shares for each decliners. But the 1400 resistance looks strong from here, as it also coincides roughly with the top end of the COMPX down channel. With overbought intraday stochastics, I'm waiting for the 9:45 sentiment numbers to see if this is going to have legs.

 
 
  Jeff Bailey   7/12/02,  9:38:22 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jim Brown   7/12/02,  9:38:00 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the current LONG signal to OEX 462, (SPX 926)

 
 
  John Seckinger   7/12/02,  9:31:55 AM
Important Note: Preliminary Michigan Sentiment report is scheduled for 9:45 a.m. (EST) with consensus estimates at 93.0.

 
 
  Jeff Bailey   7/12/02,  9:29:44 AM
09:00 Update Don't feel like you have to be in a rush to read and fully understand the bullish % comments from this morning's update if you've got some trades to do.

Point I want to get across is more to bears than bulls at this point. For now, strategy for any shorting would be to begin pulling back a bit and easing into any short/puts you may identify.

For instance, when bullish percent's begin to get more oversold like we're seeing in the NASDAQ-100, S&P 500, S&P 100 and Dow Industrials, there will be p/f charts that give some triple-bottom's, bearish triangles and other high probability patterns that bears like to trade. But understand, some of those pattern are simply created by excessive bearishness in the MARKET and bulls are more likely and willing to throw the baby out with the bathwater. If the breaks are quickly reversed, be careful of "bear traps."

An option trader has the upper hand as he/she can limit risk in bearish plays as risk is limited by the amount of capital in the put option. However, with market volatility high, many option traders turn to shorting the underlying stocks as premium becomes too expensive at these higher levels of volatility.

One subscriber sent me an e-mail yesterday regarding a triple-bottom-sell signal in PacifiCare Health (PHSY) $25.01 +0.24%, when the stock traded $23.

Look at the bullish % charts and understand how the MARKET has gotten crushed from March (red 3), but then look at PHYS and how this stock actually shows gains. Only now, when the bullish % charts become more oversold doe's PHSY start to break trend. As such, you can perhaps see how just a 1/2 position, with a stop at $28 is strongly advised. The bearish price objective is $18 (column of O from $28-$24 is count column). Link

Still, 1/2 position can be initiated, but thought that the bullish % are more oversold and a lot of risk has been taken out of the market (as depicted by the bullish % charts) should have a bearish equity trader starting to think that many stocks have suffered lately as investors held their losers, and must now sell their winning stocks to get a warm fuzzy feeling that they "made money."

Still, just as a bull liked PHSY long back in late March (red 3) at $17.50 or $19, or even more at $19.50 in April, the recent break at $23 should also get some attention.

 
 
  Leigh Stevens   7/12/02,  9:27:32 AM
Pre-Opening INDEX Comments - Dell, No. 2 PC maker globally (behind Hewlett-Packard) indicated that they expect sales of $8.3 billion, up about 9% from same period last year. Consensus estimates were about $8.2 billion.

Intel Corp. (INTC), a key mover in the Semiconductor Index ($SOX.X) - highligted last night in my Sector Trader wrap up at Link -- benefited from the positive Dell news, rallying to $18.50 in European trading, from its 18.25 close - key zone of resistance on INTC I see at 18.8-19.5, as noted in Index Trader yesterday at Link

-- better action in tech land is helping boost QQQ - I have a long position in the Q's from 23.90. I am inclined to treat this as a "trade" only and exit at 25.5, at the top of hourly downtrend channel. Suggested raise on my stop is to 24.15.

 
 
  Jonathan Levinson   7/12/02,  9:22:15 AM
I see COMPX resistance at 1380, 1400, 1412 and 1440.

 
 
  John Seckinger   7/12/02,  9:21:44 AM
Testing the Yield Curve: On Thursday, traders evidently took profits on their five-year positions - shifting cash into more riskier investments, equities. In morning activity, the trend seems to be continuing and should provide an underpinning bid for equity traders. Issues relatively outperforming are 10 and 30 year bonds.

 
 
  Jim Brown   7/12/02,  9:18:37 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The current stop loss on the open LONG signal is 455.50 Because the Consumer Sentiment report is likely to provide some quick volatility I do not want to move it too close to the current OEX level of 463. I am going to raise it to only 459 to protect about half of the current move. If we do get a significant pop at the open I will raise it higher. I just hope the sentiment is not a disaster and we can get some good short covering before the next down leg.

 
 
  Leigh Stevens   7/12/02,  9:14:46 AM
Pre-Opening INDEX Comments - Retail Sales as Jim noted were reported at an impressive gain of 1.1% to $299.5 billion, offsetting a 1.1% decline in May - reported by the Commerce Department. Auto sales were up a very strong 3.4% to $72 billion in June, biggest increase since October. Excluding autos, retail sales rose only 0.4% however. This is providing a positive tone this morning, but index futures are jumping all over the place.

 
 
  Jim Brown   7/12/02,  9:12:41 AM
Pivot Trade Signals
Good news breaking out all over! GE reported earnings that were inline with estimates and said they were comfortable with full year estimates. June Retail Sales climbed +1.1% and nearly double the +0.6% estimates. TrimTabs reported that fund outflows slowed over the last week with only -6.3 billion going out compared to -$10.9 billion the prior week.

The futures have weakened from yesterday's after hour pop but they are still up slightly. The open appears positive but the Consumer Sentiment report is not due out until 9:45. Fear that the market has driven the sentiment down is keeping a lid on the pre-market.

The Pivot Trade model is LONG the broader market from OEX 454 with a stop loss at 455.50 and I will be revising that upward shortly.

We also have an open LONG signal on the SMH from 28.50 with a stop loss of 27.00.

 
 
  Leigh Stevens   7/12/02,  9:09:03 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index Futures trading: S&P 500 > +1.70; Dow Industrials > +18.00; Nasdaq > +16.50

 
 
  Jim Brown   7/12/02,  9:01:38 AM
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  Jeff Bailey   7/11/02,  9:07:48 PM
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