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  Jim Brown   7/17/02,  5:09:22 PM
Pivot Trade Wrap
IBM Revisited -Amazing, up +$2 in after hours. The smoke and mirrors is working and somebody is buying stock. One trick IBM has played for the last couple years has been buying back shares to make the qtr/qtr comparisons easier. I found in the notes to the earnings release that IBM bought back $1.8 billion in stock last quarter. A little quick math shows this was a little more than 25 million shares. Also noted in their earnings was they claimed only 1.69 billion shares outstanding. This compares to 1.74 billion in the same period last year. So the net result is a 50 million share difference with 25 million of those shares bought back in the last quarter. The difference in reported earnings would be between 2-4 cents depending on which number you use. Using the smaller number and giving them the benefit of the doubt that would put their earnings at about $.82 cents per share instead of $.84. After removing the charges they would have missed earnings instead of beat. Analysts are not privy to the share buyback numbers until the earnings are released and base their estimates on the shares outstanding at the end of the last quarter. You can easily see that IBM ramped up their share buybacks while writing off "discontinued operations" at a record rate. Also, due to the write offs their tax rate dropped from 28.9% to 25.3%. That fact alone accounted for an extra $52 million in net profits which came very close to the $56 million in net profits reported after charges. Without the tax rate change they would have only netted around $4 million in profit on $20 billion in revenue.

I am far from being a financial analyst but I can see the obvious points. I doubt that institutional investors will fall for the bait and switch routine but after the Intel bounce this morning anything is possible. See you at 9:15 for the verdict.

  Jeff Bailey   7/17/02,  4:57:53 PM
IBM $70.69 +2.43% ... Trading $72.78 on Instinet. Link

  Jeff Bailey   7/17/02,  4:52:55 PM
VERY IMPORTANT! OK.... it now becomes VERY IMPORTANT for traders that are using Professor Davis' studies and the various "bearish" chart patterns in NASDAQ-100 stocks to understand, that the "bull confirmed" reading of the NASDAQ-100 Bullish %, has an OVERRIDING influence as it relates to his study.

Subscribers that have read Tom Dorsey's (1st addition) or their annual subscription books they got earlier this year, that the "bearish chart patterns and probabilities" are for "BEAR MARKETS" and bull/bear market conditions are classified by the bullish % charts (not the media) and the "bear market results" that Professor Davis' probabilities were found, were during periods of bear market reading, NOT bull market readings.

Anticipating further questions... What the heck do I do with Microsoft (MSFT) $51.91 +1.28%?

See... MSFT is a component of the "bull confirmed" NASDAQ-100, but it is also a component of the "bear confirmed" S&P 500, the "bear confirmed" S&P 100, the "bear confirmed" NASDAQ-Comp, and the "bear confirmed" Dow Industrials.

Let's forget about what happened in December and March with the bullish % charts at overbought levels. But look back at September (red 9) and October (red A).

Did the NASDAQ-100 Bullish % ($BPNDX) Link

Did the still narrow, but not as tech-heavey so not so volatile, S&P 100 Bullish % ($BPOEX) seemingly "confirm" the NASDAQ-100 move? Kind of, it would have reversed from 16%, to 22% just before early October's (red A) 24% reading. Link

Did the narrower NASDAQ-100 and S&P 100 bullish % charts then give a "heads up" to a reversal higher in the much broader S&P 500 Bullish % ($BPSPX)? Yes, as the (red A) shows up at the 3-box reversal of 22%, right at the (red A). Link

What was Microsoft (MSFT) doing on its chart at the (red A)? Answer: MSFT was trading $52 and had not yet given a "buy signal". A bear that believed in "irrational exuberance" shorted the stock, with no regard to the bullish % charts reversing higher into "bull alert" status, but did follow with a stop at $54, which would have been a "double-top buy signal" on MSFT's chart. Link

On October 3rd, the bearish trader would have perhaps stopped out when MSFT did trade $54.

Now.... if a bear had been "advised caution" in his short at $52, he may well have shorted 1/4 or 1/2 position, but would have been better off than having shorted a full position.

Point and figure chartists that are using Dorsey/Wright and Associates p/f charts can use their "software sector" bullish % charts to understand "sector risk" as it relates to the software group as a whole.

Interesting. On Dorsey's "software bullish % chart" the software group and reversed up to "bull alert" in October from a reading of 12% to the "bull alert" status of 18%. By January (red 1) the software bullish % moved straight up (just like the NASDAQ-100 Bullish % did) to a 62% reading and that was the top for the software bullish %.

As of last night (today's charts are being tabulated) Dorsey's software sector bullish % (BPSOFT) was "bear confirmed" at 18.03% and would take a reading of 24% to reverse into "bull alert" status.

  Jim Brown   7/17/02,  4:19:32 PM
IBM - What a pile of earnings! IBM "officially" beat the street by a penny if you take the massive one time charges into consideration. The estimates were for $.83 cents and IBM posted earnings of $.03 cents after charges. Those charges of $.81 cents included layoffs, restructuring, closing operations, selling businesses, etc. Given the paper possibilities of hiding huge operating losses in over a billion of misc charges the odds are really good they would have missed by a mile without the discontinued operations.

The news is still coming out slowly in bits and pieces and we will not have a complete picture for a couple hours (if ever). IBM is not yet trading in after hours and we cannot gauge investor reaction yet. If they took any lessons from Intel yesterday the spin doctors will be very busy.

  Leigh Stevens   7/17/02,  4:15:49 PM
Subscriber QUESTION: "In your book, I believe u mention a strategy using the Weekly and Daily MACD, where if the weekly MACD gives a buy signal, you wait for the daily MACD to give a buy signal, and at that point go long........

I am thinking that since the DAILY MACD on QQQ is currently on a buy signal, if the 60 minute MACD gives a buy signal, AND the 5 and 21 stochastics are oversold and turning up, it could be a very nice, low risk (with appropriate stop) buy signal. What do u think? "

RESPONSE: Sounds reasonable - I never quite know until I try out exact strategy - however, you're on the right track - in using a series of the key different time frames ranging, per your example, from Daily to Hourly AND using the "confirming" signal of when the two stochastic models (short & longer) also line up.

  Steven Price   7/17/02,  4:15:37 PM
Correction Earlier I stated WalMart's current bearich vertical count was $52. Walmart's current bearich vertical count, according to PnF is $46.

  Jeff Bailey   7/17/02,  4:00:10 PM
I'm back had a little computer problem the last couple of hours, but things look to be working again!

Per Jim's 03:35:58 and subscriber questions. Hee, hee, hee. I enjoy a good laugh as much as the next guy.

However, per earlier "bears need to be cautious," I will say that back in December and even March (December mostly) you may not believe the amount of "discussion mail" I got from bulls in regards to "bulls need to be cautious" comments when the bullish % charts were all at/near "overbought" levels of 70%.

One subscriber asked a great question, or wanted some clarification. My "bears need to be cautious" comment came at a time when another alanlyst here issued a bearish market monitor trade profile. This created "confusion" for the subscriber.

Now... If I'm thinking "bear needs to be cautious", then in my mind I'm thinking 1/4 or 1/2 positions short/put at most. I'm not thinking... "hey, these guys are on completely different planets and aren't helping me."

I will confess! In December, when the QQQ was breaking above $40, I DID NOT know the QQQ was about to reach a new near-term top at $43. I did however "know/understand" that risk for bulls was high and advised caution. Same thing could be observed in March as it relates to the QQQ/NASDAQ-100.

Do I dream in X's and O's? Nope... I dream of hunting and fishing then go hunting and fishing. Then when I'm hunting and fishing, I think about why nobody replied to my "web ad" that my beloved colleagues wrote on my behalf. You can only imagine..... (grin)

  Leigh Stevens   7/17/02,  3:57:57 PM
Subscriber QUESTION: "Thanks for your insightful commentary. You've been a tremendous help educationally and financially.

I've been toying with envelopes on the ESU2 charts. Have found 21,2%,4% to be quite accurate on the 60 min chart. Would appreciate your thoughts. "

RESPONSE: You are going to be best judge of this; i.e., on the Sept S&P 500 Mini futures.

I typically use moving average envelope lines ranging from 2 to 4% on the SPX hourly (and daily for that matter, although daily is usually at or above 3%)

  Leigh Stevens   7/17/02,  3:35:58 PM
Subscriber QUESTION: "What is the downside target on OEX? Some say as low as 400. Does the VIX need to retest sept. lows?? "

RESPONSE: In short versus long-term, guess you're looking at long-term. Short-term, OEX is holding up pretty well in terms of "holding on" to most of its gains - its consolidating at the top end of its downtrend channel - this is a mixed action. On one hand OEX is poised to break out, on the other hand it hasn’t. Meanwhile the sideways action is "throwing off" its near-term overbought condition - this is the kind of action that will happen with a market that is still on its way up.

OEX close above 457 is bullish -- OEX downside penetration of 447 area is bearish - in that event my downside target is to 440-436 area again or lower - perhaps to a new relative low around 430, based on the current intersection of the low end of its hourly downtrend channel. I don't have a target more "long-term" than that currently.

I don't have an opinion on VIX linkage to OEX in terms of its Sept. low.

  Jim Brown   7/17/02,  3:29:49 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the open SHORT at 15:22:36 when the OEX traded above 452. (SPX 902.83, E-Mini 904.00, DIA 85.45, SPY 90.67, DJX 85.23) It appears shorts are afraid to hold over the IBM earnings after the INTC bounce this morning. The futures traders were unable to push the S&P below 897 on the last dip and that led to some short covering and the recent bounce. We are flat going into the close and will look for "guidance" from IBM tonight.

  Steven Price   7/17/02,  3:27:54 PM
Reader Question : Cendant (CD) $13.68 (+0.47) Can you share your views on CD. Is being Bearish here a good call ?

Response: CD does look bearish, however there is some support at $12.60, and again at $12. I would like to see it break these levels before deciding to go short.

  Leigh Stevens   7/17/02,  3:25:52 PM
Subscriber QUESTION: " Could you shed a little light on the divergence in the SMH price and the SOX today? As i write this, the SOX are up only .8% and the SMH is currently trading at 3.2%. What would cause this, and how can it be used for assistance in what direction we finish for the day?"

RESPONSE: There has been a lag in the Semiconductor HOLDR's (SMH) in recent days relative to the SOX index - today, for a while at least - SMH was playing catch up. SMH ran up when SOX looked like it was going to break out above its key resistance in 405 area - I commented on this key aspect of the SOX technical pattern of the chart last night in my Sector Trader wrap up at Link

  Jonathan Levinson   7/17/02,  3:22:09 PM
Hi Jonathan,

I read your 10.43 post this morning and noticed you mentioned that you did your trading through Waterhouse Canada and are not able to use stops on your option trades.

I live in Canada and have had to contend with this same problem and of course the commission charged by my online discount broker is much higher than its U.S. counterpart not to mention having to add an additional 50% to cover the dollar exchange rate.

U.S. broker "Options Express" will accept foreign accounts and will permit the use of stops on stocks and options and offers many trading screens for various types of plays at prices of roughly one half of that of Canadian discount brokers. "Interactive Brokers" have recently opened a Canadian office which offers similar features and very low rates i.e. $1.00 per contract on options and one cent per share on stocks.

I realize that you would not be able to offer guidance in respect to which specific brokers one might consider, but if you have heard or do hear of any experiences in this regard from other Canadian subscribers I would appreciate hearing from you.

Thanks for your informative articles.

Thank YOU for this information, Gene. I know that I and our other readers here in Canuckistan are very grateful for this- I'll forward whatever other information comes back.

  Steven Price   7/17/02,  3:19:16 PM
Expiration Reminder Just a reminder that July options expire this week!

  Leigh Stevens   7/17/02,  3:16:41 PM
Subscriber QUESTION: " Hey Leigh! Any technical comments on MSFT? "

RESPONSE: -Sure, Microsoft (MSFT)is trading sideways in what looks like a consolidation type "basing" pattern - that is the overall bullish aspect.

Bearish aspect is sell off to below, and failure of stock to get above, its 50-day moving average. Of course there is the waiting for earnings so this is no doubt reason for "indecision" pattern here. Also, bearish is DECLINING On Balance Volume, while the stock goes sideways, particularly in past week. More volume is being traded on down days, than on up days basically.

MSFT would break out above 56, especially on closing basis - with follow up support on dips to & under 56. MSFT would break down on move below 48.50 - 49.00.

  Steven Price   7/17/02,  3:11:38 PM
EMC Corp (EMC) 8.47 (-0.53) EMC is on OIs current play list, however it will be closed today ahead of tomorrow's earnings release. We noted in last night's update that an intraday run-up in the stock would be an exit point opportunity to close the position. Link The stock has traded $9.41 today, and is now trading $8.41.

  Jonathan Levinson   7/17/02,  3:02:42 PM
1,023M advancing shares versus 772M declining shares on the COMPX while price goes for another dunk below 1380. This is turning out to be a tricky market to trade. The Bullish Percent readings make the NDX a candidate for sudden, inexplicable bounces (keep it up, Sherlock). But, when in doubt, I try to stay with the prevailing, longer term trend, which is down. When in doubt, zoom out. The US Dollar Index is off its lows of the day, currently hovering around 104.50. The TRINQ, still beset by WCOME's low worth/high volume trading, is near the upper end of its range today, currently .70. The QQV is still down on the day. Like yesterday, the QQQ put player is now dealing with IBM indecision. I prefer to book gains and let others do the worrying, but it's your call. Bad news is expected, "good" news could cause another bounce. If it's as skinny as last night's "good" news, we'll just short it again tomorrow morning.

  Steven Price   7/17/02,  2:59:56 PM
XL Capital (XL) $73.50 -$3.38 : Current put play XL has reached the area targeted in OI's current play write up as a point at which to take some profits off the table. Link The stock still looks weak and has now fallen to the same point to which it gapped down following September 11. This gap was followed by a move down to $62 before rallying back to $98. Since the stock filled that gap last year, it is not statistically significant, however something to note.

  Jim Brown   7/17/02,  2:58:00 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the new broader market SHORT signal at 14:52:26 when the OEX traded below 450. (SPX 899.97, E-Mini 899.25, SPY 90.20, DIA 85.00, DJX 84.87) The initial stop loss with be OEX 452 (SPX 903.50) This is only intended to be a quick scalp trade and we will close this signal before the close.

  Leigh Stevens   7/17/02,  2:56:36 PM
Subscriber QUESTION: "Anybody know what happened to Teradyne today? Down 12% and falling with SOX still green. "

RESPONSE: All I can say about it - I don't know what "event(s)" might have triggered sell off in Teradyne (TER) - is that the stock is back to the area (around 18.50) where the stock bottomed (twice) in Sept.- Oct. - if it holds in this area, it’s a double bottom and it may be a buy on that basis.

  Steven Price   7/17/02,  2:36:19 PM
Bank of America (BAC)$65.40 -0.90: "Good call on BAC. I took a half position on BAC Aug 70/65 bear put spread. Stock is falling nicely. Drop, drop, drop!! At what point would you consider rounding up to a full position?"

Response: If we get another bump up today, I can see BAC approaching $67, which might be a good point for a trader to enter an additional 1/2 position. If instead we break down through $65, taking some profits might be a good idea, since there looks to be support around $62. Looking at the next strike down,I don't think entering another put vertical with the 65/60 put debit spread for $1.90 (where it currently is offered), which might max out at $3, offers sufficient risk/reward.

  Leigh Stevens   7/17/02,  2:30:22 PM
Subscriber QUESTION: "Looking forward, the key stock will be IBM. Please comment the technical setup for IBM"

RESPONSE: Recent 4-week IBM consolidation looks suspiciously like a "bear flag" with the "pole" represented by the sharp down week that preceded this consolidation. Stock looks vulnerable to another sell off and drop to a 58-60 target - this price area is one of more "natural" support for IBM.

Where IBM has been trading in past month is not an area of technical support (past buying interest) particularly, whereas there was a cluster of weekly lows made back in '98, in the 57-60 area that I'm looking at. Plus, the 75% retracement level is around 58. This retracement is relative to the ' 97 to ' 99 run - no long-term holder of the stock has made anything since the 1999 - only exception would have been someone "trading" the stock as it had a bunch of back and forth price swings as it "built" a top

  Jim Brown   7/17/02,  2:28:33 PM
Pivot Trade Signals
S&P Futures are struggling back toward significant resistance at 914. The resistance on the cash SPX is around 912 (OEX 456). A breakout of these levels would trigger buy stops and give us a positive run into the 3:PM turning point. If these levels hold we might consider going short again on any weakness at this higher level.

  Jim Brown   7/17/02,  2:22:41 PM
Pivot Trade Signals
Wouldn't it be ironic if IBM beat estimates and raised guidance and MSFT missed and warned? Stranger things have happened and it makes a good case for being cautious about holding over major earnings events.

  Jim Brown   7/17/02,  2:17:15 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Looks like we were stopped out by .18 cents and no follow through. Let's look to scalp a few more points before the close if the market breaks down again. Go SHORT the broader market if the OEX trades below 450. (SPX 899) With 1:45 to go before the close it is possible the bulls could get weak in the knees in front of the IBM earnings. We will be maintaining a tight stop once entered and we will be exiting before the close. This is a HIGH RISK signal but expiration week only comes once a month!

  Leigh Stevens   7/17/02,  2:15:12 PM
Subscriber QUESTION: " going long qqq if it gets to 25?"

RESPONSE: Yes, this is the level in QQQ that I thought it would pull back to and was willing to be long at - if long the stock from 25.00 or under, I would use a stop at 24.30 today, looking to raise it tomorrow - Q's already dipped under 25 once of course - intraday low so far was 24.89 - last at 25.42.

  Jim Brown   7/17/02,  2:09:09 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The stop loss on the open SHORT signal was triggered at 14:02:48 when the OEX traded above 454. (SPX 907.72, DJX 85.68, DIA 86.00, SPY 91.20, E-Mini 904)

  Jeff Bailey   7/17/02,  2:05:57 PM
The 1:00 PM intraday update has been posted. Link

  Steven Price   7/17/02,  1:56:41 PM
Bid/Ask Spread Question: I received a question from a reader regarding this morning's discussion of bid/ask and why a trader might move a mid market bid or offer out of the way, rather than wait for it to trade at his price. Here's an example:

If a market maker feels a call is worth $5.15, he may make a bid/ask market of $5.00 bid, at $5.40 offer. If he is obligated to trade 10 contracts (in some issues the commitment is higher) at the posted price and you offer 2 of these calls at $5.10, this offer is posted on his bid/ask screen. The market is now $5.00 bid, at $5.10. If another public customer comes in and says "$5.10 bid, I'll buy 10 calls," now you get to sell your 2 calls at that price, but the market maker has to sell the other 8 at $0.30 below his offer. Therefore sometimes he would simply pay the $5.10 for your 2 calls, which is below what he feels the call value is anyway, so that he doesn't have to sell 8 of these calls at the lower price. And you get an extra $10 per call. You'll want to check to see if the commission on a market order is less expensive than a limit order, which middles the market, before trying this strategy to make sure your overall cost is worth it.

  Jim Brown   7/17/02,  1:55:27 PM
We are going to begin instituting our new Power Poll feature like CNBC is doing. (grin) Our first question for all our market monitor readers is:

Does Jeff dream in X's and O's?

Obviously I am kidding about the poll but we do need to find him a life. He is addicted to the markets and literally works 7:am to 10:pm five days a week looking at PNF charts. We signed him up on Match.com but it didn't work. All the potential matches wanted somebody with a regular pulse. Jeff's is more like a chart. It runs up for several minutes and then crashes.

I am trying to spice up this boring afternoon with a little comedy but I am sure you all agree with us. Jeff's commentary is priceless and worth well more than the $99.95 a month we are going to start charging for the market monitor. (just kidding!!) Send him an email and tell him you appreciate his hard work! It works better than a raise and it is cheaper for me! (grin)

  Jim Brown   7/17/02,  1:45:41 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Seeing a little strength here in the futures and the advance/decline ratio. The bulls are trying to rally support. Let's lower the stop loss to OEX 454 (SPX 907) and take a profit and look to re-enter higher or on the next breakdown.

  Steven Price   7/17/02,  1:43:50 PM
Lowe's (LOW): A reader asked what our downside target on last night's put play LOW was. I see the next real support level at $32.50. While the PnF objective shows a downside target of $35, the downside objectives of WalMart (WMT) and Home Depot (HD) were more of a glass floor that was shattered quite easily on the way down. Walmart had a price objective of $52 (now trading $48.50) and Home Depot had a target of 41 (now trading $30.75).

  Jonathan Levinson   7/17/02,  1:18:24 PM
COMPX volume breadth is now 755M advancing to 621M declining. Reality seems to be returning indeed. Despite that, QQV is still down 1.25 on the day as the COMPX sits just above its lows, now below 1380. The TRINQ made it up to just under .80 on that downdraft, again signalling a lack of significant selling pressure. Many readers are asking about going long at QQQ 25. I will not, though I personally will take my profits from my QQQ puts around that level. This is a very weak market, and I still have difficulty understanding today's runup, and I still expect further downside, but it's all in a morning's work.

  Jim Brown   7/17/02,  1:11:27 PM
Will you hold OEX puts over IBM earnings tonight? Thanks, John

Come on John, that is a very touchy subject today!! After seeing the response to the Intel spin this morning I think almost any investor would want to exit a profitable put position at the close today. While I cannot imagine IBM being able to apply spin as well as Intel, anything is possible. Also, the bounce today on bad news shows that we could be nearing that mythical market bottom. When bad news fails to crash the markets the end cannot be far off.

After seeing the gap up today I will close the put signal before the close. We can then watch the futures limit down before tomorrow's opening from a strong profit position and in cash, comfortable that potential lost profits from not being in the market are not the same as lost capital from being on the wrong side of a market surprise. (grin)

  Jim Brown   7/17/02,  12:58:31 PM
Pivot Trade Signals
We are now approaching the first weak support levels on the OEX of 448. Should that level fail I would expect to see the 438 levels from Monday retested again. The Dow just went negative after a +250 point opening gain. Reality has returned!

  Jim Brown   7/17/02,  12:51:48 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
With the current breakdown in the indexes I am lowering the stop loss on the open SHORT signal to OEX 457. (SPX 913) It appears we will not be testing the upper end of resistance this afternoon. If we do then the lowered stop will allow us to exit the current signal profitably and be ready to re-enter at resistance again. Currents Dow 8500, Compx 1380, S&P 900.07, OEX 450

  Jim Brown   7/17/02,  12:43:21 PM
Pivot Trade Signals
The S&P came within 2 points of filling the gap from this mornings open. (900.85) That would be a potential rally point and a further breakdown from there would be very negative. The markets are struggling to hold on to their gains and once the Greenspan testimony is over and the possibility of a market lifting comment is over we could see the true direction appear.

  Jonathan Levinson   7/17/02,  12:39:32 PM
COMPX Advancing volume now just less than twice declining volume as we enter the afternoon following the "Intel Rally". The TRINQ has made it up to .57, and QQV is pretty far from showing any signs of panic today, still down 1.94 as I type. Price is just above the 1380 support level.

  Steven Price   7/17/02,  12:26:35 PM
Reader Question Applied Materials (AMAT):this morning at the open I short very heavily AMAT,wich is doing pretty well,where would you pull the trigger??????

Response:I'm glad to see you've got a nice little profit at this point. I see some support for AMAT the last few days in the range it's in now, between $18 and $18.30. Prior to that it bounced off support in the mid-$16 range.

  Jeff Bailey   7/17/02,  12:21:22 PM
Semiconductor Index (SOX.X) 385.65 -0.19% ... has "filled its gap" from higher open here. Intra-day support range $380-$385.

  Jim Brown   7/17/02,  12:20:29 PM
Pivot Trade Signals
The Russell-2000 just became the first index to fall back into negative territory. The S&P and OEX are not far behind with the SPX only positive by +5 and the same amount as the OEX. This is unusual and would indicate a weakness in the broader market. The Adv/dcl ratio is on the verge of turning negative. Where did all the Intel buyers go? (grin)

  Jeff Bailey   7/17/02,  12:08:08 PM
NVIDIA (NVDA) $19.87 -6.61% ... This morning, Morgan Stanley downgraded the stock to "equal-weight" from "overweight" amid weak PC demand, GPU pricing pressure, and expecations for an Xbox inventory correction. Firm reduces FY03 estimates to $1.45 from $1.95 and FY04 to $1.65 from $2.25. Thinks stock remains attractive from long-term perspective. Price target $35.

Levell II market maker ID for Morgan Stanley is MSCO

  Jonathan Levinson   7/17/02,  12:06:23 PM
The US Dollar Index has fallen from its highs of the day at 104.90 to just above 104.40 as the COMPX chops along above 1400. COMPX volume breadth has firmed, with just over 4 advancing shares for each declining share. The TRINQ is lower at .28, reflecting the COMPX' recent move off its lows.

  Jeff Bailey   7/17/02,  12:05:44 PM
The 11:00 AM intraday update has been posted. Link

  Leigh Stevens   7/17/02,  11:59:10 AM
Subscriber NOTE: " ESignal futures format is: S&P 500: SP U2; S&P E-Mini: ES U2; NDX E-Mini: ND U2; Dow: J U2 "

RESPONSE: Thanks for info.

  Leigh Stevens   7/17/02,  11:55:01 AM
Subscriber QUESTION: "Leigh - does someone who trades QQQ options almost exclusively need to watch real time futures? If so, which one - ND02U or NQ02U? And what about for someone trading the DJX options - would they need to watch the ES02U or the SP02U? "

RESPONSE: Oh, in my 11:27 post, I forgot to mention DJ futures - symbol: DJ02U.

As I've said before I don't watch the futures that much, but sometimes you may notice a chart pattern develop a little sooner on the futures. Not enough to affect my style of trading at all certainly or most others I believe.

If I continue to get real time Mini-Nasdaq futures, real-time, I'll keep the intraday chart up - why not! - but, I'm not going to pay the CME monthly fee just for that. I tend to occasionally monitor BOTH the Nasdaq 100 (ND) and the Nasdaq Mini-contract (NQ) as it has so much more daily volume and tends to reflect "retail" buying/selling interest.

For DJX, you can watch the Dow futures if you wish - DJ02U - Sept. futures, being the front-month or lead contract currently.

  Steven Price   7/17/02,  11:51:26 AM
Reader Question: NVIDIA (NVDA) I just looked at the AUG20 NVDA calls and They were at 2.60 after todays drop. In your article you said 2.05. I put in a limit order for 2.05 Maybe it will hit. Are the numbers that you give the numbers that you wish to buy the option at?

Response The numbers we give are a purchase price we see as a trigger point to initiate a position

  Steven Price   7/17/02,  11:40:59 AM
Reader Question Intel(INTC): I am long INTC by holding Jan04 20 Calls at a price of 4.25. What is the risk in writing July 20 calls? What happens if INTC closes above 20, say at 21, this Friday?

Response: If you write the July 20 calls against the January 04 calls and the stock finishes above 20 on this Friday's expiration, it is extremely likely that you will have the stock called away. If you already own the stock (at 100 shares per July option that you write), you will simply be left with a long Jan 04 20 call naked. If you do not already own the stock, you will be short 100 shares for every call you write, but hold the Jan 04 call against your short shares. If you are forced to exercise your Jan 04 calls to cover the short position, you will be giving up whatever premium is left in the call. If you can hold a short position,and you are left short 100 shares of stock and long a call, this is the same as being long a Jan 20 put. If the stock drops more than the premium amount left in the call (which at this moment looks to be between $5.00 and $5.30), then you can buy the stock back lower than you sold it at 20 for more than the loss on the long call. If you do this and the stock goes back up you can sell it again, because you own a call in case it keeps going up. This is how market makers trade against long option positions. If you are lucky enough for the stock to keep moving back and forth around the $20 strike, you can do this several times for a nice profit.

  Leigh Stevens   7/17/02,  11:37:42 AM
Subscriber QUESTION: "I am always intrigued ( and puzzled) when people talk about support/resistance/swing highs/swing lows etc regarding the QQQ's. My understanding is that the QQQ's are an index tracking stock ( $ price of QQQ = 1/40th the value of the Nasdaq-100 Index), and as such it merely reflects what is happening to the Nasdaq-100.

Surely such technical analysis is meaningless in this instance, as the "price" of the QQQ's is not affected by buyer/seller pressure, but is determined purely by the value of the Nasdaq-100 index. Alternatively, perhaps I am being a liitle pedantic here ??? "

RESPONSE: What you say in true about QQQ being the Nasdaq 100 tracking stock - and, I would note, one of the most active stocks traded anywhere. Technical analysis is not different because it is done on an Index that is composed of 100 stocks. Collective buying and selling pressure pushes the index up or down, has resistance/support points, works with trendlines, etc.

Moreover, analysis of QQQ is not different than NDX (Nasdaq 100) index but since so many are trading QQQ, it makes more sense to do the analysis directly on QQQ. Also, due to the volume and trader interest in QQQ, it can lag or move a bit ahead of the Nasdaq 100 index ($NDX.X) - it takes on a bit of a life of its own so to speak, just as Index futures do, even though they are based on the underlying index also - so, its good to be talking directly about QQQ.

  Jim Brown   7/17/02,  11:35:46 AM
Jim, Looks like the market has produced a new chart pattern: the "crap & gap & crap bear trap" J

And if IBM unloads crap tonight...........

  Jim Brown   7/17/02,  11:31:43 AM
Hey, I'm just wondering if any of your subscribers has phoned Arch Crawford's hotline today as yet. Thanks. Elizabeth

I don't know. Nobody has updated me on the current forcast.

Anybody have access to the hotline today? What is the recommendation today?

  Leigh Stevens   7/17/02,  11:27:33 AM
Subscriber QUESTION: "Hi Leigh,The Market has an exciting open today. I presume it's major short coverings. It seems Index FUTURES can give us a glimpse into the future. Can you give me the symbols for the Index FUTURES on Qchart or point me to a site where I can monitor? "

RESPONSE: Futures symbols can vary according to the quote vendor or service - but, for Q-charts, symbols for Index Futures are: symbol + year + month: U = Sept; Z = Dec; H = March; M = June

S&P 500: SP02U - Sept SPX futures; Nasdaq 100: ND02U (value = $100 times Index)


For some reason - and, I only noticed it today - Mini-Nasdaq 100 futures (value = $20 times numerical value of Index; most active; "retail" contract) NQ02U - Sept. futures -- on Q-charts, is showing me quotes in real-time

  Steven Price   7/17/02,  11:26:31 AM
Omnicom: $51.80 (-0.43) OMC, on our current call play list, once again flirted with its recent highs, trading up to $54.20, before pulling back. While this could be a choppy day for this stock, remember it traded down in the $48 range on Monday, only to snap back to trade over $54 again today. This is a good sign, as OMC seems to be making a real effort in spite of the market pulling back.

  Jeff Bailey   7/17/02,  11:22:54 AM
Irrational exuberance? Laughing..... as it relates to the bullish % charts. Nope... irrational exuberance in the QQQ was when the NASDAQ-100 Bullish % was above 70% back in December. Link

Irrational exuberance was when the OEX bullish percent was at 78% in March, not here at 14%. Link To even "think" irrational exuberance, one would have had to say in late September that the market was irrationally exuberant. Of course the OEX.X reversed from 500 to 600 not long after (+20% move in 3-months).

  Steven Price   7/17/02,  11:20:36 AM
NVIDIA (NVDA): $19.98 (-1.32) NVDA has experienced a pullback just below $20. This looks like a good entry point for a long play, as it broke this level of prior resistance and traded up to $23.35 yesterday. See last night's Play of the Day for analysis. Link

  Jim Brown   7/17/02,  11:17:12 AM
Jim, I believe we have now officially revisited irrational exuberance. DAS


  Jim Brown   7/17/02,  11:16:20 AM
Pivot Trade Signals
Madam Cleo just called and suggested there may be a spot for her on the Market Monitor. She felt here insightful analysis could have prevented the surprise at today's open. She admitted she had no market analysis experience but felt none was necessary since the market was illogical anyway and reacted only to highly emotional news events. Since she is a master at capitalizing on the emotional needs of weak people she felt this was another revenue opportunity for her. I suggested she call IBM and see if they had an opening in the investor relations dept. My psychic powers tell me they may need a professional counselor there soon. (grin)

  Jeff Bailey   7/17/02,  11:14:04 AM
Jeff, I know we're chartists, but don't we have to understand why NVDA got clobbered in a strong up market move?

Excellent question. Answer: Not if you're a chartist. Per yesterday's subscriber comment, he didn't "understand" why NVDA was moving higher from the $20 level when he bought, then sold near $23, when the stock was moving higher in a down market.

Case in point.... In July, when COF traded $55 and gave a glaring sell signal at $55, then confirmed that bearish signal with a trade at $54 on July 10th, did a chartist have to know the reason for that triple-bottom sell signal at $55 and the following sell signal at $54? Maybe, but what good is it today to "understand" what was taking place last week. I would argue that "smart money" understood what was going on, and "uneducated money" is perhas finding out today. Link

Now.... one could think today's weakness in NVDA is "due" to Apple Computer (AAPL) $15.60 -12.65% earnings as it relates to computer sales. But looking at AAPL's p/f chart Link.

  Jonathan Levinson   7/17/02,  11:10:39 AM
Advancing volume is now just over 3x declining volume as the COMPX breaks below 1400. QQV is still down 2.93 on the day, as complacency remains strong today, although we saw the QQV lagging the action yesterday as well. The TRINQ is at .37 and WCOME is still in the green. The strong selling has not begun.

  Steven Price   7/17/02,  11:10:11 AM
Play Alert Lowe's (LOW) - Lowe's was a new put pick in yesterday's plays. It is approaching our trigger or $37.25

  Jim Brown   7/17/02,  11:08:12 AM
Pivot Trade Signals
With the Dow falling below +80 the curbs have now been lifted and unrestricted program trading is now available.

  Jim Brown   7/17/02,  11:05:00 AM
Pivot Trade Signals
We are looking at a potentially life changing event today. While that may be a gross exaggeration a Dow close in negative territory would be very negative to the current market sentiment. We have now lost half of the morning's unexpected gains and should be at the psychological intraday support level. With the Dow now back below 8600 and the futures dropping like a rock the outlook is not good. Smith Barney, Goldman Sachs and JP Morgan are selling S&P futures currently with Merrill the only holdout on the buy side. Could be shaping up for an exciting close if Greenspan doesn't pull a magic comment out of his jacket to prop up the markets

  Jonathan Levinson   7/17/02,  10:53:21 AM
LOL! Thanks Jim!

  Leigh Stevens   7/17/02,  10:50:49 AM
INDEX Comments: QQQ - no sooner than my comment on how Q's have resisted filling in the upside gap from this am - it starts trading down further into it. GAP is "filled in" at 25.30. We'll see how much the rest of the gap or the low end of it "acts" as support, by traders willingness to buy under the gap up opening - so far, QQQ has traded down to 25.70.

  Jim Brown   7/17/02,  10:45:29 AM
IBM - If conditions repeat themselves tonight IBM will miss earnings by a nickel, warn that mainframes have fallen out of favor and explain to investors that massive bankruptcies by ten of their top customers will knock $20 billion off their revenues over the next five years. They will claim however that Mars is aligning with Venus and their astrologer has predicted a $100 stock price by the end of the year if customers buy more computers and Greenspan grows more hair. Investors fearing the worse will be relieved that there are no serious problems and the stock will gap open +$10 at the open on Thursday.

  Jonathan Levinson   7/17/02,  10:43:30 AM
Advancing volume now just over 6x declining volume as the COMPX chops along at 1410, just above yesterday's 1405 s/r line. The TRINQ at .36 is moving off its lows, and I note that WCOME, not exactly the mother of compelling buys, has been positive for most of the day, and its low priced high volume action is disguising what was an even lower extreme TRINQ reading. In other words, I'm still fairly confident in my new put position. Stops remain in place and I'll trail them down. For the many readers asking, Waterhouse Canada (through which I trade) does not yet offer stops on options, so all of my stops are mental. After years of this, I've become automatic with it and respect my levels. Cutting losses is as essential to successful trading as taking profits, and above all, avoid the mistake of getting killed on bad decision. S/R lines are my way of setting stops, but whatever works is the best recipe for you.

  Jeff Bailey   7/17/02,  10:41:44 AM
NVIDIA (NVDA) $20.00 -5.82% ... trade at $20 now has p/f reversing 3-boxes and gives traders a completed bullish vertical count column to $33.50.

Can now better assess risk/reward in trade. From $20, risking $2.50 to a stop at $17.50 with potential reward of $13.50 to bullish count of $33.50. Link

Relative strength of NVDA versus QQQ back in column of O with today's trading. Can look for 1/2 bullish positions still and monitor RS chart shown here Link (NVDA vs. QQQ) for "buy/sell signals" along with NVDA's p/f chart.

Note... relative strength calculates can be derived by taking NVDA's price and dividing by the QQQ. Example.... NVDA=$20 and QQQ=$25.83 is ... $20/$25.83=0.774 and can multiply the 0.774 by 100 to get a whole number of 77.4 which can be charted on a p/f chart.

As it relates to options. If risk/reward is assess as described above, call option trader sees he/she is risking $2.50/share in the underlying stock. As such, trader notes the NVDA Aug 20 calls (UVAHD) are offered $2.50. Therefore, can look bullish this call, NO STOP (as risk of $2.50 is equal to assessed risk in stock). While I'm not certain NVDA will trade bullish count by August expiration, if it trades more than $22.50 before expiration, trade is break-even. Levels above $22.50 would be profitable.

Try to use this type of analysis in other trades you may be looking at.... long or short.

  Leigh Stevens   7/17/02,  10:38:33 AM
Subscriber QUESTION: " I'm long the Q's (July calls) from yesterday. With time value nearly gone, the movement is huge. Can you tell me your opinion of my risk factor in holding through the day, or perhaps into tomorrow? "

RESPONSE: Re further upside in QQQ - Q's have dropped back from highs, but seems to be resisting "filling in" its upside gap from this morning. Further upside looks like 1-2 points max from 26. Downside is 25, I think next day or two - maybe I'm too bullish, but I'm impressed with Nasdaq action - "oversold" market really manifests itself when some news that would have previously caused market to get slammed, one day is more or less "ignored".

Makes some "sense" to me that Q's end up at week's end at 25. Funny how they wind up at those even numbers at expiration!

  Jim Brown   7/17/02,  10:32:18 AM
PVN - Providian triggered my initial buy signal this morning but I am staying out due to the new wave of government intervention. They are trying to force them to warn card holders that credit card interest is damaging to your health and this could force an interest rate ceiling at some point in the future. They are pointing out that an $8,000 balance and minimum monthly payments can take decades to pay off. PVN and COF know this and it is the basis of their strategy. They are resisting the intervention but in the light of consumer protection they may lose. Pass for now.

  Jim Brown   7/17/02,  10:26:30 AM
Buying the 20 P sure seems attractive now if you really believe that the market will eventually really digest what was said last night. Do you touch this kind of trade or is it uncertain enough that you think of it as a lottery play? Chris M

Chris, I think this would be an excellent play unless you believe the talking heads this morning. I heard it with my own ears last night. Andy Bryant said we have no idea when the PC recovery will appear. Our estimates are based on an "expected" seasonal pickup which "may" appear in the 3Q. Very qualified statements and with all indicators pointing to a slowdown in mother boards out of Taiwan, weak European sales and a slowdown in U.S. consumer spending I can't imagine why Intel will not warn again at their mid quarter analyst meeting next month. Just my opinion!

  Leigh Stevens   7/17/02,  10:24:10 AM
Subscriber QUESTION: "How are you looking at the qqq this morning? Are you waiting to short it and at what level? "

RESPONSE: I'm not itching to pull the "short" trigger just yet on the Q's. So far, rally (at intraday high of 26.4) has stopped short of prior 26.5 high. However, am giving QQQ some benefit of the doubt on bullish side, as stock may yet take a run to 26.5-26.8. Would like to sell in this area if reached - Q's could get to 28 area max I think, but that seems more possible after a pullback to 25 area again. On balance would like to sell in 26.5-26.8 area, if reached, with objective to 25.

  Steven Price   7/17/02,  10:19:51 AM
Bullish Percent : An interesting note from last night's Market Sentiment. There is a large divergence between the bull confirmed status of the NDX ($BPNDX), and the bear confirmed status of OEX ($BPOEX) and S&P 500 ($BPSPX). The NDX has been in Bull confirmed status since the beginning of the month - could it be a sign? Link

  Leigh Stevens   7/17/02,  10:13:12 AM
Subscriber QUESTION: "On Q-chart screen, selection of "STUDY" does not show Envelope selection. On Qchart homepage I do not know which version of Qchart I have? I will appreciate if can provide me contact inforamtion of Q chart."

RESPONSE: Per my description of using envelopes last night at Link - Right click ON a chart, then selection of "Studies" should bring up menu choice of "Envelopes".

If you click on Help and selection of "About Q-charts" will give you version # - however, I would assume that all versions have Envelope study. This is a long-standing common Indicator/Study.

HELP section has info: "for inquiries about using QCharts use the Customer Support Contact Form. Or call: (888) 788-1848 or (650) 428 5000."

  Steven Price   7/17/02,  10:12:31 AM
Reader Question:Lots of noise out there with regards to Market Makers and how they make a living. Could you give us an honest answer about how they make their money? Also, when playing the OEX what would you offer as a general rule of thumb for the retail trader to get the best price? Those spreads are horrendous.

Response: There are a number of ways market makers make a living. One is the bid/ask spread in the options. The OEX and other index option spreads remain wide because they are only traded in one location and there is no competition, other than between market makers in that pit. 3 years ago, however, The CBOE, PHLX, PSE and AMEX went to a multiple listing format in equity options and began competing by listing options that had previously been listed on only one exchange. A year or so later the the ISE, which is an electronic exchange, listed equities as well. This has narrowed the bid/ask spread in equity options, due to the competition, which you have probably noticed. This is the main reason for the difference in the amount of the spreads between equities and indices, along with the fact that bid/ask spreads are allowed to be wider on higher priced options, which you see in the OEX and other indices. One strategy is to middle the market on a small order because market makers are obligated to honor the markets posted on their screens for a minimum of 10 contracts. If your order is for only a few contracts between the current bid/ask, and has been posted on the screen in the pit, many times a market maker will trade that order simply move it out of the way so that they don't have to trade any more contracts than necessary between the bid/ask. This is one way to try to avoid paying the offer or sellling the bid. It doesn't always work, but sometimes it will. As far as other ways they make their money, since a market maker is obligated to buy or sell on the posted market, they accumulate large option positions whose value moves with the stock/index. There are ways to trade the underlying product against these positions in order to make money, or lock in profits.

  Jim Brown   7/17/02,  10:12:22 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I am raising the stop loss on the current SHORT signal to OEX 466.25. (SPX 934.50) I want to get above that resistance between 463-466. This is a little wider than normal but I want to give the markets plenty of room for volatility before assuming a new trend has been established.

  Jonathan Levinson   7/17/02,  10:09:50 AM
Advancing volume is now 12x declining volume on the COMPX, with the TRINQ at .23 and price off its lows of the day. Watching the day high at 1426 as immediate resistance and am willing to get stopped out of this morning's put position on a break above that.

  Leigh Stevens   7/17/02,  10:03:05 AM
Subscriber QUESTION: "Any thoughts on WLP? I know you were following the HMO.X last month but have kind of tapered off. I bought the 77.5 calls as a gamble last week but it appears that it is possibly a lost cause unless something happens in the next 3 days.. My thinking was since it bottomed at 72 last week and went back up with relative force; it was a good sign along with earnings coming out on the 24th which should be good since THC reported a 40% increase. What are you’re thoughts.. "

RESPONSE: Wellpoint Health Networks (WLP) has come down to it's March - May up trendline and held it to date. If the 73 area continues to provide support, the stock could rebound - consider it still in an uptrend, unless there is a close under prior recent lows in 71.50 area - if this occurred downside potential is to 66-65 area. Move above 76.50 need to resume uptrend, with further resistance at 80-81.

Am still following HMO sector, just haven't had much new to say about it lately.

  Jim Brown   7/17/02,  9:58:37 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 9:52:22 when the OEX traded below 461. (SPX 924.51, DIA 86.90, SPY 92.58, DJX 86.79) The initial stop loss on this signal will be OEX 464, just above the high of the day. (SPX 927) Should the markets give back this gain and close the day in negative territory it would be very bearish!

  Leigh Stevens   7/17/02,  9:57:52 AM
INDEX Comments: Nasdaq - big upside gaps - QQQ at intraday high at 26.4, stock getting near resistance implied by prior swing highs at 26.5 - 26.8; 27.00 was Sept. low and I figures an area where selling would come in. However, because Q's have broken out above its 21-day moving average at 25.7, a possible upside target becomes 28 area, at my upper trading envelope line on the daily chart as you can see at Link ; Nasdaq Composite ($COMPX) got to first resistance area at 1417-1420; next, is around 1430.

  Jim Brown   7/17/02,  9:49:54 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market if the OEX trades below 461. (SPX 925) This is the entry point I had hoped for yesterday and would represent a breakdown in the morning euphoria.

  Jonathan Levinson   7/17/02,  9:49:29 AM
Advancing volume is now 12x declining volume on the COMPX. The TRINQ is still low at .23. Keeping tight stops and watching the 1425 level as immediate upside resistance.

  Jim Brown   7/17/02,  9:43:39 AM
Pivot Trade Signals
The OEX is nearing resistance at 465. We will now get to see if the bounce has legs. This should have produced a strong urge to cover shorts and it is possible we could see a breakout. Be prepared to enter quickly if we see weakness. I can't see entering a long play at these levels even if sentiment has turned bullish. We need to let the volatility collapse first. I could see entering a short on a failure here.

  Leigh Stevens   7/17/02,  9:42:59 AM
INDEX Comments: OEX,SPX/DJX - all broke out above their hourly down trendlines - OEX - a next upside target and possible resistance looks like 466-467, then 470 area; SPX near resistance I figure at 927, 934, then 937 area; DJX resistance looks like 87.3, 88, then 88.5 area.

  Jonathan Levinson   7/17/02,  9:42:22 AM
Resistance on this move, if it continues higher from here, looks to be 1450-55 COMPX.

  Jeff Bailey   7/17/02,  9:40:45 AM
Semiconductors Bernstein moves to "market weight" rating from "underweight" in the semiconductor group due to valuation, and expects the group to beat estimates through the end of the year and into Q1. Favorite stocks are STM, TSM, AGR.A and NVLS.

  Jim Brown   7/17/02,  9:39:40 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The opening tick on the OEX was 450.36 but we are officially out at OEX 452.18 (SPX 901.50, DIA 86.64, SPY 92.50, DJX 85.25)

  Jonathan Levinson   7/17/02,  9:39:02 AM
Wow! Big gap up open on the COMPX. Respect your stops if in short positions. Jeff saw this coming with his BPNDX analysis- many kudos, Jeff. The opening TRINQ at .16 is very low, and the QQV is already down -1.72. I'd be shorting this, but then, the whole move is a surpise, and so it's best to protect the account until the trend becomes clear in either direction.

  Jeff Bailey   7/17/02,  9:25:05 AM
Sept. Crude futures (cl02u) $27.61 -0.54% ... slipping back from last night's contract high of $28.05.

  Jeff Bailey   7/17/02,  9:21:06 AM
Philips Electronics (NYSE:PHG) $23.45 ... is the largest consumer electronics maker in Europe and said late yesterday that it expects its second half of 2002 to improve from the first half, but that market conditions aren't showing a dramatic turn. Chart= Link

Analysts said a decline in orders in PHG's semiconductor business in the 2nd quarter highlighted the company's caution. Philips is the 3rd-largest chipmaker in Europe behind STMicroelectronic (NYSE:STM) $23.80 Link and Infineon (NYSE:IFX) $16.73 Link .

Philips posted a net loss of euro 1.4 billion for the second quarter after taking a euro 1.6 billion charge largely due to a euro 1.52 billion write-down of its stake in troubled French-U.S. media group Vivendi (NYSE:V) Link

  Leigh Stevens   7/17/02,  9:15:43 AM
Pre-Opening INDEX Comments - INTC is up a buck - Motorola was up also - market is looking forward to a better 2nd. half for chip makers, which is going back to role of market to discount ahead a few months. Better European stock markets and stronger dollar - and, I assume short-covering - are also influences this morning. Strength in Citigroup, Coca-Cola & United Technologies helping the Dow futures here.

  Jeff Bailey   7/17/02,  9:14:46 AM
The 9:00 AM intraday update has been posted. Link

  Jim Brown   7/17/02,  9:14:33 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Close the open SHORT signal at the open. We will look to re-enter if the markets fail at the 465 resistance level again.

  Jim Brown   7/17/02,  9:12:16 AM
Pivot Trade Signals
What the heck? At 10:45 PM last night the S&P futures were down -10 on the Intel earnings news. Somewhere around 2:45 this morning lightning struck and the futures began a +28 point reversal into positive territory.

Traders say better than expected results by some Dow components has contributed to the positive sentiment. Citigroup, BA and KO posted better than expected results which is impacting the Dow futures by +160 points. Amazing! Intel should be pretty happy about its spin control from last night. I have already heard two talking heads reporting on the third quarter PC rebound underway as reported by Intel last night. This is an exact 180 degree opposite from the Andy Bryant's comments that he had no idea when a PC recovery would appear. I feel like I woke up in the twilight zone and reality has been reversed. Futures should be down -18 on worries about the 3Q not adding up to previous estimates instead of +18 on better than expected rebound.

Well it looks like we are going to trade what we see and not what we believe today and that means we need to get out of the open SHORT signal at the open. Secondly we need to let the opening volatility pass for at least 30 min and see if reality returns before opening a new position. There is strong overhead resistance at OEX 465 (SPX 933) and it should take more than wishful thinking to break those levels. Stay tuned!

  Jeff Bailey   7/17/02,  9:11:44 AM
S&P 100 (OEX.X) 448.81 ... Jeff: check out open interest please and indicate where "smart money" might want it to end

Hmmmm.... much more difficult to push around 100 stocks than just 1 to get an index to close where you'd want it to, but here I go...

Open interest in OEX calls is heaviest at 475 and 500.

Open interest in OEX puts is heaviest at 420.

I'd look for an OEX Friday expiration at 474. Link

  Leigh Stevens   7/17/02,  9:11:00 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES trading: S&P 500 > +18.30 at 921.60; Dow Industrials > +167.00 at 8632; Nasdaq > +31.00 at 1047

  Jonathan Levinson   7/17/02,  8:52:18 AM
The US Dollar Index had a good night, currently hovering just below 104.80. The futures as well did a complete 180, coming from deep minus territory to strong positive. This should be a very interesting day.

  Jeff Bailey   7/16/02,  10:42:05 PM
Oil stocks May be on the bullish trader's watch list Wednesday. Late Tuesday, the Amer. Petr. Inst. (API) reported that crude inventories fell by 4.03 million barrels. Not long after, September Crude futures (cl02u) traded a contract high at $28.05 and creates some DIVERGENCE between the commodity and oil equities that are off their highs.

Thinking here might be that equities have been in a bit of a "sell it all and save my portfolio" type of thinking and oil-related equities have been thrown out with the bathwater.

One stock in group to watch for break above $52.45, stop $49.75 from a "tweezer bottom" is Apache (NYSE:APA) $51.29 -1.98% for a "pop" to $55 on higher domestic crude prices. Link

July option expiration is Friday, and open interest in APA calls is at $55 and $60, both at about 2,500 contracts. Put open interest is 8,200 at $60 and 5,181 at $55. "Smart money" sold the calls and bought the puts and may not want to risk it into expiration. If they start closing them out, APA could try and settle the $55 strike by Friday. Using the API data and Crude at contract highs as scenario to unwind the options.

  Jeff Bailey   7/16/02,  10:03:21 PM
Bull Confirmed The more volatile NASDAQ-100 Bullish % ($BPNDX) reached the needed 24% level (24 of 100 stocks now showing a "buy signal") and closed with a reading of 29%. This puts the NASDAQ-100 in "bull confirmed" status at a relatively low level and still below the "oversold" 30%. Link Bearish traders short some 4-lettered stocks must now immediately assess risk to future "buy signals" and perhaps getting more aggressive with their short-covering and locking in of bearish gains.

Attention will also turn to the narrow, yet not as technology filled S&P 100 Bullish % ($BPOEX) which edged lower at 14% from Monday's 15% (net loss of 1 stock to a sell signal). If correlated against the Sept. 2001, post terrorist levels, this market is still weak, but "less risky" for bulls than market conditions found at Septembers 16% level. Traders are monitoring for a reversal up to 20% and a "bull alert" reading to perhaps begin building some confirming signs of demand that may help drive the tech-heavy NASDAQ-100. Here's the S&P 100 Bullish % chart Link

Then as we step out to the broader S&P 500 Bullish % ($BPSPX) we find very modest improvement from Monday's 21.8% reading with Tuesday's action seeing modest improvement to 22%. Still "bear confirmed," but approaching the September low reading of 16%. Again.... NASDAQ-100 bulls would like to see some type of reversal higher in the much broader S&P 500 Bullish % ($BPSPX) to 28% and a "bull alert" reading to create a potential "tide" of bullishness to depict demand outstripping supply. Here's the S&P 500 Bullish % chart Link

  Jeff Bailey   7/16/02,  9:47:30 PM
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