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  Steven Price   7/22/02,  5:12:30 PM
Reader Question: I just got out of UPS put at the low of the day. What is your idea for re-entry or shud one look else where now?

Response: I would look to re-initiate the short play above $64 if UPS finds further resistance at the $65 level. I still see support around $60.

  Leigh Stevens   7/22/02,  4:31:28 PM
Subscriber QUESTION: "With the recent rise of BBBY to the 200 on the the 5 min and the 60 20 (30.20) offering resistance what do u see for this stock in respect to the technicals and the sector it is in?"

RESPONSE: No bottom in sight as stock has increasing downside momentum based on the daily chart - Bed, Bath & Beyond (BBBY) may be midpoint in a move based on recent gap down, a possible "measuring gap". First "leg" down was $10. Next leg may be equal to that - so, at 29, downside is perhaps back to the lows of Sept. lows in the 19-20 area. 23-24 is a next possible stopping point however. Like the stores - maybe not the stock!

  Leigh Stevens   7/22/02,  4:24:22 PM
Subscriber QUESTION: "How can a person find out when program trades are scheduled or is this a mystery? It is difficult at best to trade this market, when a program buy or sell program hits and takes you out of a trade so quickly.

Thanks for your thoughts, I am thinking of sitting on the side lines and waiting as this is an extremely difficult market to trade. "

RESPONSE: You have to rely on a method or trading that accounts for the volatility - program trade increased activity is merely a function of that. Best trading strategy is also to trade when you trade "fresh" - one way you do this is sit out when in doubt.

  Leigh Stevens   7/22/02,  4:18:04 PM
Subscriber QUESTION: "amat, sndk and qlgc - these are holding up quite well, any further comments on these if we rebound? Thanks"

RESPONSE: Applied Materials (AMAT) holding support in the 16.5 area - looks bullish if it can continue to do that - breakout on the upside is to above 20.

Sandisk (SNDK) presents a more mixed picture - rallying to, but not beyond resistance implied by its 200-day moving average. If 13 holds, you could get a pop in the stock to the $20 area if market rallies.

GLGC (Qlogic) I have commented on before - recent lows in the 34 area probably "defines" the low end of its multimonth trading range - recent 34.43 (7/2) closing low was under its late-Feb. closing low at 37.25 and early-May's 38.12 - however after this new low close, stock had a rapid rebound back to 40-41 area where it is now. I would consider that QLGC trading range is now 33-34 on low end, 51-52 area as upper end. Stock is probably "locked" in this range for a while. Next move looks like it could be up given downsloping bull flag pattern.

  Jim Brown   7/22/02,  4:16:08 PM
Pivot Trade Wrap
When is -235 points an indication of strength? - Maybe today. The Dow did not make the trip to 7400 as many traders had speculated and bounce off 7800 several times before closing in that area. The VIX is screaming temporary buy at 48. Obviously -235 is not an indication of strength in the normal sense but it is an indication of how oversold the market is currently. This extreme oversold condition could be corrected at the open on Tuesday. When added to the -1359 Dow points lost over the last two weeks creates a bounce opportunity not often seen. That is nearly -1600 Dow points in 11 trading days.

Nobody can predict when or how big but oversold conditions this extreme cannot last. We need the bounce to equalize the pressure again and give us a setup for the next down leg. Earnings did not change and accounting problems are still being discovered. Legal problems for JPM, C, SSB and others are continuing to weigh on the markets and the failed +340 point rebound intraday on Monday dashed hopes of the dip buyers once again.

I was glad to see the OEX close above 405 and the SPX at 820. I think this could provide a springboard for a morning bounce and give us another entry point for a SHORT position. Big cap stocks were weak including MSFT and IBM. If MSFT is finally being sold then the capitulation everyone is seeking should be near. When the favorites are trashed it represents investors selling the last bright spots in their portfolios.

The bottom line? Hope for a bounce back to Dow 8000 or higher at the open on Tuesday and a new short position when it fails.

  Jeff Bailey   7/22/02,  4:03:06 PM
Citigroup (C) $32.00 -11% ... will note here that trade at $32 is bearish vertical count. Traders short/put from past profile of $42 at "bearish triangle" may look to take 1/2 positions off the table. Link

  Leigh Stevens   7/22/02,  3:51:39 PM
Subscriber QUESTION: "I see several nice setups for put plays but I am leary of the premium cost with the vix so high. Obviously if the market continues to decline then the vix will get bigger and help out a put trade. How sharp does the market rebound need to be for the vix to drop so that option premiums are quickly altered? I guess my struggle is picking an accurate stop loss on the option price. I can estimate where it will be based upon stock price and delta, but don't have a feel for how drops in the VIX alter the put prices.

Any comments on how you consider this would be appreciated. "

RESPONSE: I think a drop below 35 in the VIX may be a "trigger point" at this point in the cycle - for a possible steep premium decline.

I don't know how far the market rebound will have to be for the VIX to drop - I would look at it the reverse - when VIX drops under 35, stop factoring in premium expansion from high VIX and trade on expected market direction.

  Jim Brown   7/22/02,  3:48:35 PM
Pivot Trade Signals
Looks like that last stop loss was a little too close! The closing drop finally came but the buy program at 3:17-3:25 just nicked us and closed the short. If I were going to bet overnight I would bet on a bounce at the open. The failure of the Dow to repeat the -300 point drop and the bottom of the OEX in the 407-410 range could be a leading indicator. Just a hunch!

  Leigh Stevens   7/22/02,  3:44:48 PM
Subscriber NOTE: " RE your 14:43 post: First day I've seen Tick under -1000 for a hour in the last 7 years (Tick went down to -1300) - every time this has happened the market has rallied in the next 2 months. Will it be different this time? " I hope it doesn’t take two months for a rally! "

RESPONSE: I think it was "for" the next 2 months. Ya, I hate these "indicators" that signal a rally within 3 months - I would hope so, more months of this will be bad for our (economic) health!

  Leigh Stevens   7/22/02,  3:40:08 PM
ON THIS DAY in 1894, history, at least of the modern type, recorded its first ever automobile race, which took place between Paris and Rouen, France. Bet it wound up in Paris! Anything like the Tour de France - hey, how about that Lance Armstrong - awsome!

And, ON THIS DAY in 1934, John Dillinger was shot dead by FBI officers outside a Chicago cinema - his girlfriend did him in so the story goes. How fickle love - especially if you are a gangster. Don't take one of them to lunch today!

  Jonathan Levinson   7/22/02,  3:39:55 PM
Note that Novellus reports tonight and could impact BRCM.

  Jeff Bailey   7/22/02,  3:38:43 PM
Broadcom (BRCM) $20.30 +1.96% ... Jeff: I was assigned 10 BRCM Jul 20 P this weekend. I'm now holding 1000 shares and am presently holding. What is the outlook on BRCM? It has held up pretty well in this market on both Friday and today. I guess I'm wondering if I should just close around $20 since a lot of my capital is being tied up?

Take the $20 strike, and subtract the premium received for selling the naked put. This is YOUR cost basis.

As it relates to account management, I would not want more than 10% of MY account exposed to any one stock. As such, may wish to take some risk out of the account here, or place stop where still comfortable with carrying position overnight.

  Leigh Stevens   7/22/02,  3:35:25 PM
INDEX Comments: Volitility as measured by VIX continued to climb today, reaching a high, as of the closing hour, at 49.7 - VIX has not been this high since the "blow off" top reading on 9/21. On that date VIX climbed to as high as 57.3, but closed 48.3. Stay tuned!

  Jim Brown   7/22/02,  3:31:08 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the current SHORT signal at 15:27:12 when a buy program pushed the OEX over 415.00. (SPX 832.72) We will remain flat into the close.

  John Seckinger   7/22/02,  3:29:21 PM
Side Note: There are no economic releases until Thursday, when new and existing home sales figures is scheduled in addition to durable goods orders and the 2Q employment cost index (ECI - accounting for 80% of wage-push inflation).

  Jeff Bailey   7/22/02,  3:26:33 PM
The 3:15 PM intraday update has been posted. Link

  Steven Price   7/22/02,  3:26:20 PM
Bed Bath and Beyond $29.25 unch

Reader Question: Hi, I got out of BBBY near the lows today. Now I'm looking to re-enter and am wondering what we should look for or if it is still valid. Thanks for any insights you can give.

Response: BBBY looks weak under $30, with support around $27 and again at $25. I would place a stop loss at $32.50, just above its most recent attempt to hold over $32. I still like this short with the Retail Index ($RLX.X) struggling and WalMart re-testing its lows below the bearish vertical of $46. BBBY is currently working on a bearish vertical count of $20, although this represents a very aggressive view. I see some support on the PnF at $25

  John Seckinger   7/22/02,  3:16:27 PM
There is speculation concerning Nigeria leaving OPEC, pressuring oil prices lower. In other news, European stocks have closed at their weakest level since October 1997 and have lost almost 30 percent in 2002.

  Jonathan Levinson   7/22/02,  3:16:19 PM
Looks like the futures and Jim nailed it. MSFT is back below 47, and the QQV is spiking, up 3.13 on the day. The COMPX at 1285 has all the dippers saying "That's it?" as the index rolls over again. A break below the day low has me targeting 1260 as the COMPX' next "support".

  Jim Brown   7/22/02,  3:11:02 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Now that the drop has begun let's lower the stop loss on the current SHORT signal to OEX 415 (SPX 833). My plan is to exit this trade before the close. I will continue to loser the stop loss as we near 4:PM.

  Steven Price   7/22/02,  2:59:57 PM
Reader Comment : just informed that Aug 10 Calls in T skyrocketed today from 10000 to 30000? Anything interesting going on to get in? jean

Response: AT&T (T) $9.57 -0.35 When open interest triples in a particular option, it usually means someone is making a big bet, or maybe knows something. These calls look cheap at $0.50, however there are several strategies that might apply. If the purchaser wants to get short, they can short stock and use the cheap call as insurance against a potential up move, therefore creating a synthetic put, or they may have checked the chart and seen support around $9.40 and figure to play a rally in the market with a cheap call for the upside. This, of course, assumes a purchaser. Unfortunately I cannot tell you if the order was a public buy or sell.

  Jim Brown   7/22/02,  2:57:03 PM
Pivot Trade Signals
We are rapidly approaching the 3:PM turn and the futures are indicating it may be down. This is when the margin selling picks up steam and funds start the liquidation process to cover redemptions recorded today. If we do sell off, the days Dow low near 7700, OEX 405, SPX 810 would be my targets.

  John Seckinger   7/22/02,  2:45:43 PM
Afternoon Anecdotals: Crude oil showing significant weakness while the dollar rebounds slightly. Bonds off intra-day highs, but still near the important 105-30 level (September Futures). The CRB index has also come off it's highs as the Dow recovered. What to make of these readings? The Dow is leading all markets with almost every indicator in the "parabolic pattern" of extreme trading. Perfect trading conditions. Go with momentum until price action proves otherwise.

  Jonathan Levinson   7/22/02,  2:39:10 PM
A reader has pointed out that my volume information for WCOME is lagging. Scottrade realtime reports current volume at 398M, while Waterhouse reports 518,969,077 at 14:34:00. I'll trust Waterhouse. It means that the WCOME-discounted volume breadth on the COMPX is even more negative than I previously reported.

  Leigh Stevens   7/22/02,  2:33:31 PM
Subscriber QUESTION: First day I've seen Tick under -1000 for a hour in the last 7 years (Tick went down to -1300) - every time this has happened the market has rallied in the next 2 months. Will it be different this time? "

RESPONSE: I have no idea on whether it will be different this time. Interesting observation on TICK (Advancing stocks minus declining - symbol: $TICK).

  Steven Price   7/22/02,  2:30:18 PM
Lowe's (LOW): $36.03 unch - Current put play Lowe's, originally picked at $37.60, has rebounded from today's low of $33.70 and is hovering around unchanged on the day. After seeing Walmart (WMT) bounce off support just above September's low, OI sees new Lowe's stop loss of $38.

  Jim Brown   7/22/02,  2:22:49 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 14:14:34 when the OEX traded below 416. (SPX 834.50) This is the bottom end of the current uptrend channel and we need a quick drop to snap that trend. We are still 45 min away from the 3:PM turn but traders know it is coming. A break now could give it some added acceleration. Since we have already traded down -300 points today any afternoon drop could be vicious. The initial stop loss on this SHORT signal will be wide at OEX 421.25 (SPX 844.50), which is the 10:45 high.

  Leigh Stevens   7/22/02,  2:17:05 PM
Subscriber QUESTION: "Leigh, If this is the day the market turns at what point would you jump on OEX,QQQ for a bounce? "

RESPONSE: Haven’t seen conclusive indication for bottoms here in QQQ or OEX - they may be in, but upside action so far looks more like short-covering. For example, QQQ recent rally failed right at first significant resistance in the 24-24.1 area.

Bargain hunters are tired of getting slammed, so seem to have stepped aside for now. Me too.

  Leigh Stevens   7/22/02,  2:11:19 PM
Subscriber QUESTION: "If one still holds the qqq, where is the stop and up side target to get out? "

RESPONSE: Think now I would risk in QQQ to just under 23.00. Upside potential is for a rebound back to the 25 area, assuming it can get above first resistance at 24.00 - if the Q's then can climb above 25, upside potential I see is a bit higher, to 26 before it hits top end of its downtrend channel.

  Jim Brown   7/22/02,  2:07:27 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point on the potential SHORT signal to a trade below OEX 416. (SPX 835)

  Jonathan Levinson   7/22/02,  2:05:57 PM
COMPX up volume is 967M to 712M of down volume, though 386M belongs to WCOME. Nevertheless, the QQQ's are back above 24 and MSFT is back above 48. The QQV is falling off slowly, currently up 2.04. I don't see much more than an oversold bounce here, and we'll see if it lasts to the end of the day. The COMPX at 1310 is approaching ths morning's congestion area. I will be watching for the next rollover at or slightly above currently levels to target some new puts. With today's rapid moves, however, I'm entering passively and exiting aggressively on the general advice of our favorite gunslinger.

  John Seckinger   7/22/02,  2:05:22 PM
What do you think about 10 year bonds?


Looking at a chart, there should be support (based on yields) near the 4.4% area. However, even if the market recovers there is a chance that traders will be selling five-year bonds and buying ten years as a possible hedge (common arbitrage) - lowering yields. Most likely traders long will wait until yields settle higher before taking profits; nevertheless, I would not be surprised to see fixed-income traders begin to scale out of long positions as Monday's session comes to a close, locking in profits and hopefully canceling out equity losses. Being long Treasuries at current prices is for aggressive traders only, looking to ride a parabolic move for a short time and not worried about allocating into equities if a quick reversal takes form. In conclusion, if long, riding momentum can still be profitable; however, always remember to manage risk and trade along the lines of probability. Probabilities are for lower yields; however, probabilities of a bear trap is becoming higher as well.

  Jim Brown   7/22/02,  2:05:21 PM
Pivot Trade Signals
Pretty amazing recovery by the Dow with a +300 point rebound. Remember two weeks ago when the Dow came back +400 points from the lows. It rolled right back over again and has traded -900 below that close today and -500 points below that low. An afternoon bounce of incredible proportions is nice to watch but it is purely technical. The extreme oversold conditions we have been talking about are quickly being corrected and opening up the way for the next leg down.

  Leigh Stevens   7/22/02,  2:01:00 PM
INDEX Comments: QQQ has rebounded from its lows down in the 23 area, after stopping me out. I've gotten questions re whether its time to get back in. I'm still bullish on the Nasdaq around these recent lows - fact that the index went 21 points under my stop doesn't change that. Now Q's are back up to its hourly down trendline at 24 - if its gets above 24-24.1 it starts to break out above this first implied resistance point.

  Jim Brown   7/22/02,  1:49:23 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point on the potential SHORT signal to a trade below OEX 411. (SPX 824) It appears the buy programs that provided the recent bounce have run their course.

  Steven Price   7/22/02,  1:46:25 PM
Reader Question:I noticed that BMC broke descending triple bottom on P&F charts. I will appreciate if you show me what will the down side target be?

On BMC first sell signal @ 15.00 double bottom second sell signal @14.50 triple bottom. Third sell signal today @13.50 triple bottom. Do you think my observation is correct?

Response: BMC $13.65 (-0.35)looks like a spread triple bottom break, as the columns of Os are not exactly equidistant, but its a good call on your part. I see the bearish vertical count at $8. I do, however, see some bullish support on the PnF at $12 from last September and October.

  Jim Brown   7/22/02,  1:43:07 PM
Pivot Trade Signals
The Dow is moving back to resistance at 8000 and the OEX at 420-425, SPX 845. While this bounce is interesting it is not expected to last. It is a function of the oversold conditions and the buying has brought the VIX down from its 49.67 high to 46.76 already. I will be raising the entry point on our potential SHORT signal as we get closer to resistance on these indexes. I would rather follow it up to capture a breakdown instead of trying to pick an entry point above and get run over by a sudden flurry of short covering.

  Leigh Stevens   7/22/02,  1:41:25 PM
Subscriber QUESTION: "Have you been watching the SOX? "

RESPONSE: Sure. Semiconductor Index (SOX) recent decline (low today at 348.63) had put SOX down near to its 344 low from June/July and last Sept. The Index today then has rebounded back to above its opening level at 364.

Many of the semiconductor stocks have looked like buys near these lows in the index as well as the Index itself in terms of its traded options.

  Jeff Bailey   7/22/02,  1:39:06 PM
The 1:00 PM intraday update has been posted. Link

  Jeff Bailey   7/22/02,  1:38:47 PM
Dow Industrials (INDU) 7,931 -0.97% ... trading curbs lifted with Dow down -72 points.

  Steven Price   7/22/02,  1:29:46 PM
Reader Question: The hmo and hospital stocks were hold up and have collapsed. Any good put or short plays? What do you think of targets for unh etc? Thanks Mark

Response: Looking at United Health Group (UNH) $83.30 -4.90, I see the Sep 80-75 put debit spread at $1.30. This is still below the $80 round number support level, and after a day like today a rebound could shrink this spread. However, the next real support looks to be in the low $76 range, and I can see this spread doubling in value if the $80 support fails. If the stock goes back up, puts tend to hold their value, so it's probably a relatively inexpensive play in this high volatility environment.

  Jim Brown   7/22/02,  1:27:31 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
With the longer term trend still down I want to keep an open SHORT signal on the downside. Go SHORT the broader market if the OEX trades below 407.75. (SPX 817.50) This is just below the intraday support from 12:45 to 1:15. The afternoons lately have been very negative and should we get another free fall like we had on Friday then we want to be in it.

  John Seckinger   7/22/02,  1:27:04 PM
Note: The Treasury is due to sell a record $27 billion in two-year notes on Wednesday. With 30-year bonds above 106 and looking to establish an extremely bullish pattern (in my opinion, a bear trap), weakness underneath 105-30 could then be viewed as "supply pressure" and nothing to be concerned about. I disagree. If bonds fail from current levels, watch fixed income traders take profits quickly. In fact, with bonds, CRB Index, and dollar all at extremes, there is a good chance this is the "third standard deviation" move most analysts have hoped for. Trading against momentum extremely difficult, but now we have a line in the sand in case a reversal does materialize.

  Jim Brown   7/22/02,  1:23:05 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
That last buy program triggered the current stop loss on the open SHORT signal at 13:18:46 when the OEX traded above 412.50. (SPX 827) This signal, which was opened at 425 is now closed.

  Steven Price   7/22/02,  1:17:56 PM
Reader Question : re: Juniper Networks (JNPR) $8.10 (-0.80)

What would you think of getting long the JNPR play here. It traded down to 8.05 today and has been holding above that level for a short while now. Or would you wait for it to move a bit higher before stepping in?

Response: Currently on OI's call play list, Juniper is hovering above its 50 ma of $8.07, which has provided recent support. In our play, our stop loss on this stock is below $8.00 Link I'd like to see a little rebound in the stock before adding to the position, possibly above $8.50.

  Jonathan Levinson   7/22/02,  1:15:07 PM
It's easy to stare too closely at the screen on days like this, and to lose sight of the longer trend. The reversal from the day's lows on the COMPX looks more like a deadcat bounce than a reversal. Zooming out to the longer intraday views, we see that the downtrend is firmly intact. A break back above 1300 would spell at least a short term bounce. Imagine if you were trapped in a large position and eager to get out- well, there are many pondering just that, and for that reason I'm very sceptical of any rally attempts here.

The QQV spiked, but is back to 55.66, while the poor old TRINQ, which no longer works properly on that fluffy WCOME volume, is at .39. On any other day, .39 would be signalling the approaching top of an ongoing rally.

  John Seckinger   7/22/02,  1:13:51 PM
Some $1.5 trillion in investor wealth has evaporated from the stock market since July 4, based on the Wilshire 5000 Total Market Index

  Leigh Stevens   7/22/02,  1:01:19 PM
Subscriber QUESTION: "Hi Leigh,Can you explain when curbs kick in? "

RESPONSE: A decline in the DJIA of a 180 points or more requires all index arbitrage sell orders of the S&P 500 stocks to be stabilizing, or sell plus, for the remainder of the day, unless on the same trading day, the DJIA advances to a value of 90 points or less below its previous close.

An advance in the DJIA of the 180 points requires all index arbitrage buy orders of the S&P 500 stocks to be stabilizing, or buy minus, for the remainder of the day, unless the DJIA retreats to 90 points or less above its previous close.

The restrictions are re-imposed each time the DJIA advances or declines 180 points.

Above rule in effect prevents use of automated sell orders such as by use of the DOT or Super-DOT systems.

  Jeff Bailey   7/22/02,  12:58:18 PM
Halliburton (HAL) $10.12 -12.38% ... Announces that a study regarding the potential future asbestos claims has been essentially completed and will be announced on Wednesday, July 24. The amounts are still being tabulated, but the charge will be substantial and impact both coninuing and discontinued operations. Link

  Jeff Bailey   7/22/02,  12:41:04 PM
Lowes Corp. (LOW) $33.80 -6.10% ... Jeff: low is at 34.50 below 35.00 entry point for a put play does it still look like a 32.00 target at the low ? or has this changed? p s you have been making some nice calls which I have been making money on thanks

LOW was an OI put play. Will note that stock has achieved bearish vertical count of $35 today. Link

Bears may now be targeting Professor Davis' probabilities study from the spread-triple-bottom at $41, of 24.9% decline. From $41, that would be approximately $30.79 as target. As such, bearish targets would be in a "range" of $35 to $30.79. Therefor, would look to lock in at least some gains here!

  John Seckinger   7/22/02,  12:39:43 PM
It should not be long before traders turn their attention to possible inflationary pressures stemming from the CRB Index and a weaker dollar. Currently up 0.75 at 215.50, the CRB index is beginning a parabolic rise into blue sky territory. Also, traders witnessing another round of long liquidation in the dollar are evidently still more comfortable either on the sidelines or outside the U.S. Clearly least resistance for the CRB is higher and lower for the dollar; however, now is the time to make mental notes on what could be the next leading indicator. This would be analogous to shares of MMM at say 135....yes, momentum is higher; however, once back below 135 risk can be controlled for shorts and traders will be able to enter after the panic is done. For the CRB, it would be for a move back to 211 in order to confirm panic has subsided (hopefully correlating to equity psychology as well). For the dollar, 107 on a futures basis seems pivotal.

  Leigh Stevens   7/22/02,  12:37:50 PM
Subscriber QUESTION: "I've just noticed that there is about a minus ten cent difference in the qqq price vis a vis NDX divided by 40. Is this a common occurance or just plain slippage? "

RESPONSE: As far as I know, just "slippage" - like the index futures, bearish selling can drive QQQ under the equivalent NDX level - buyers may be scarce and sellers have to drop their offers to induce buying. Arbitrage activity will tend to keep NDX and QQQ closely aligned, but the two can diverge some at times.

  Jim Brown   7/22/02,  12:32:39 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The Dow is having a tough time breaking 7800 to the downside which could eventually cause a bounce if the bears cannot force it through. Let's lower the stop loss slightly to just above the last bounce at OEX 412.50 (SPX 828) A break below 7800 should be negative but support for the OEX is close at 406-407 with a probable bottom for the day near 400 unless the Dow self destructs.

  Steven Price   7/22/02,  12:28:03 PM
Reader Question:Hi Steve,could you please comment on the action on amat?????? Thank you

Applied Materials (AMAT): $16.80 unch AMAT has been holding strong above recent support at the $16.60 level, which has been reached several times since the beginning of July. PnF still bearish on AMAT, with a trade of $16 as a double bottom breakout. Below $16, I see support next around $15.40. Resistance at the 21 dma of $18.38

  Leigh Stevens   7/22/02,  12:27:01 PM
Subscriber QUESTION: " What are your thoughts on going long on the QQQ'S?"

RESPONSE: - I am waiting to see signs of stability in MSFT and it's in free fall. Also, would like to see CSCO successfully retest its prior lows in the 12.30 area (last: 12.86) and turnaround or just reverse back to upside somewhere shy of that. Too soon to look at going long QQQ without more signs of a bottom. It may be close but more damage can be done.

  Jonathan Levinson   7/22/02,  12:23:12 PM
The QQV is now up 2.6 on the day to 55.72 as MSFT goes "whhooshh", currently at 46.65. The TRINQ has been rendered useless today by WCOME. MSFT is falling faster than I could type- the market, and particularly the QQQ's, don't have much hope without MSFT today.

  Leigh Stevens   7/22/02,  12:19:30 PM
Subscriber QUESTION: "What is the support on QQQ,OEX,XAU? "

RESPONSE: Hard to pinpoint "support" on moves to new lows like this.

However, low end of OEX hourly downtrend channel is in 405-407 area. 400 level is likely to be an important "psychological" level of potential support in OEX.

QQQ has rebounded a bit from its lows at 23.10. Looks like QQQ should have support around 23, then 22.5

I have been assuming that Gold & Silver sector Index (XAU) has support around 65 area at 200-day moving average - this has long been my target, as I've been saying in my Sector Trader wrap. (Have been suggesting selling rallies in gold for some time.)

  John Seckinger   7/22/02,  12:10:36 PM
Checking Commodities: Crude Oil is 86 cents lower at 26.96; however, the triple-top and then slight profit-taking still has the index placed on average solid support. Important note: September Treasury Bonds have rallied above 106 (high at 106-04) and now sits only a few ticks lower. Above 106 could be critical for investor psychology and there is a good chance that this will "trap" the last of the longs entering the bond market. Historically, a pattern this good merely triggers stops and then reverses course.

  Jonathan Levinson   7/22/02,  11:57:21 AM
Volatility is finally beginning to appear in the QQQ's, with the QQV up 2 on the day to 55.12. The TRINQ continues to stay pinned around .5, with many thanks to WCOME. MSFT is off its lows of the day. Down volume is now decisively ahead of up volume on the COMPX, with 292M of up volume going to WCOME, we still have down volume outnumbering up by 564M to 528M.

  Jim Brown   7/22/02,  11:53:04 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
While I think the markets will continue to trend lower we are now down to the point where we do not want to risk giving back a nice move. The risk/reward ratio has changed to risk. We need to lower the current stop loss to OEX 415. (SPX 833) If you want to take profits here (OEX 409) and move to the sidelines that is perfectly acceptable as well. Nothing goes down in a straight line and after the +600 point drop last week and another -200 point drop this morning the oversold conditions start shifting the short term possibilities more to the upside instead of a continued drop. We can still drop further today but it becomes harder as every threshold is reached. The next level that must be broken before the next leg down can begin is Dow 7800. The low for the day is 7807. The VIX hit a high of 47.53 on the last dip.

  Leigh Stevens   7/22/02,  11:51:25 AM
INDEX Comments: NYSE Trading Curbs went into effect earlier. This prevents the NYSE automated order systems from being used for index-related arbitrage programs. It does not prevent all program trading activity, only that related to stock/stock index futures related unwinding or those type "sell programs".

  Jeff Bailey   7/22/02,  11:51:03 AM
Gold/Silver Index (XAU.X) 68.16 -4.4% .... one of leading sector losers today. Having tough time getting above bearish resistance on $1 box and generating another triple-bottom sell signal on $1 box scale. Link

$2 box is what many institutions monitor and low trade so far today has been $68.08, but not the needed $68.00 to see a "sell signal." If trade at $68 were generated, then near-term risk to downside become bullish support at $64. Link

US Dollar Index (dx00y) $104.66 +0.57 partially weighing on gold stocks as December Gold futures (gc02z) 325.30 -0.24% down just fractional.

  Jeff Bailey   7/22/02,  11:48:09 AM
The 11:00 AM intraday update has been posted. Link

  Leigh Stevens   7/22/02,  11:45:52 AM
INDEX Comments: CBOE Volatility Index (VIX) - as Jim noted earlier, this is a new high for OEX volatility for the current price decline. VIX has moved sharply higher today, climbing above 47 today - last at 47.12.

Some historical perspective for the last 52-week period anyway: Last time VIX was above 47, was in the 9/17-9/21 time frame. On 9/21, a Friday, VIX climbed to a 49.04 and closed at this level - on 9/24, on a Monday, VIX climbed to an intraday peak of 57.3, with a close of 48.3. It was basically downhill after that with VIX falling to 32 area 8 trading days later.

  Leigh Stevens   7/22/02,  11:38:35 AM
INDEXES: TRADE Recommendation - UPDATE: Exited QQQ long position at 23.30 on suggested stop.

  Jeff Bailey   7/22/02,  11:38:11 AM
Check Point Software (CHKP) $14.42 +4.04% ... Jeff: what is your opinion to short CHKP and its bearish target?

CHKP achieved its bearish vertical count of $10.50 (column of O's from $19.50 to $15.50) and recent "buy signal" at $14.50 has vertical count now bullish (column of X from $11 to $14.50) to $23. Link

With resent action in NVIDIA (yes, it's a semiconductor, but it's also tech-related) could look short CHKP here, with thinking it will reverse and give a "sell signal" like NVDA did today, but stop above at $15.75 (just above 50-day MA) would be good stopping point.

If trading CHKP, also would monitor PeopleSoft (PSFT) $15.40 -5.39% Link , which also beat estimates and is "like stock" for CHKP. Will note PSFT has NOT given a "buy signal" despite beating estimates. Talked about this one last week with caution.

  John Seckinger   7/22/02,  11:36:18 AM
Gold Fields (GFI) was up nicely in pre-market--now down-- how does your post regarding dollar/yen impact gold?


Thinking out loud, traders short dollars and willing to exit dollar-denominated assets will most likely be selling longer-dated treasuries and seeking relatively safe investments. Does this include Gold? Fundamentally, the first thought would be "yes"; however, a chart of GFI reveals other factors at work. A divergence of this type should always favor the direction of the more specific asset, in this case GFI. Currently down 0.55 at 11.99, the inability to clear the 22 and/or 50 DMA (12.58 and 12.56, respectively) should give a trader wishing to go long a solid pivot area to watch going forward. Shares are at the lower end of its trading range (possible bearish flag formation); however, I would personally wait for a settlement above both moving averages before taking a long position. The Key: When the dollar and gold shares diverge from a theoretical perspective, solid trades can still take form; however, size of position(s) should generally be reduced as risk is increased. Note: Bearish flag does have downside objective of 6.25, which could result if both averages are left untested.

  Leigh Stevens   7/22/02,  11:36:18 AM
INDEX Comments: QQQ note - other Nasdaq bellwether stock that has is pulling down the NDX/QQQ is Cisco Systems (CSCO) - stock is trading at a new low for the day at 12.87. Looks like CSCO will retest its recent hourly double bottom low in 12.30 area.

  Leigh Stevens   7/22/02,  11:31:53 AM
INDEX Comments: Nasdaq new low on the day has a lot to do with Microsoft (MSFT) break below prior "line" of support at 49.00 and just now, dip to 47 area - stock has rebounded a bit, to 47.76 and may be "washed out" for now, but will be a key Nas stock to watch relative to QQQ ability to hold 23.50 area.

  Jim Brown   7/22/02,  11:23:26 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I think we can safely lower our stop loss to OEX 420 (SPX 847) The Dow finally set a new intraday low and the drop is beginning to accelerate.

  Jonathan Levinson   7/22/02,  11:21:59 AM
The COMPX has just printed a new low of the day below 1300. QQV up just 1.07 and the TRINQ is now at .52. MSFT seems to be breaking again at new lows of the day.

  Steven Price   7/22/02,  11:20:21 AM
Wal Mart (WMT): $46.15 (-0.35) WalMart has reached its bearish vertical count of $46 on the PnF chart. Watch to see if it can break through, or finds support here. It traded $46.00 earlier this morning.

  John Seckinger   7/22/02,  11:13:45 AM
It looks as though the spread between yields on the 2 year and 10-year bonds are near levels not seen since 1993. The relatively low 2-year yield versus higher 10 year yield obviously is an indication of investors' appetite for risk. Looking back to 1993, a chart of the OEX does show technical patterns holding as prices managed to maintain a steady increase in valuations after volatility began to fade. Something to think about.

  Steven Price   7/22/02,  11:12:56 AM
Lehman Bros. (LEH) $53.00 (-1.47): Current OI Put Play is heading south, along with the rest of the sector (Securities Broker Dealer Index (XBD) 367.15 -8.76). Look for this to continue as the market falls. As money flows out, these brokerage firms are looking at continued weakness. As stocks get cheaper, more stock must be sold to generate the same cash flow, which leads to investors clearing more of their accounts. While this generates commissions, it only represents a sell, not a sell and then purchase of another issue.

  Jonathan Levinson   7/22/02,  11:06:37 AM
COMPX up volume is still slightly ahead of down volume, but the QQV is moving up, now up 1.18 on the day to 54.3. Unlike the VIX, the QQV is not at or near the top of its recent range, and this coincides with today's TRINQ, currently at .5. There's plenty of room to the downside. MSFT seems to be sticking below 49, which has been acting as resistance for the past hour.

  Steven Price   7/22/02,  11:00:59 AM
SBC Communication (SBC) $22.81 (-3.87): Current OI put play SBC is having a rough day. Bell South (BLS) lowered expectations for the year, which, combined with WorldCom's bankruptcy, has affected this sector. OI will be closing this play ahead of tomorrow's earnings and this is a good opportunity to take profits on the position, which was originally picked at $29.64

  John Seckinger   7/22/02,  10:56:00 AM
Continued talk coming from currency traders about possible Japanese Intervention, most likely resulting in a Dollar/Yen rate of 115. The September Dollar did fill Friday's gap at 104.82, but I do believe cash instead of futures will be on traders' minds.

  Steven Price   7/22/02,  10:53:12 AM
Verizon (VZ) $28.50 (-4.00) Current put play VZ has reached our targeted level and then some. With WorldCom's bankruptcy news, this stock is also taking a beating. This would be a good point take at least partial profits on shorts from the $35 range where it was originally picked.

  Leigh Stevens   7/22/02,  10:49:37 AM
Subscriber QUESTION: "I know you haven't mentioned in Monitor but would you kindly offer your comments on INTC as I'm with puts from just over $19. Thank you. "

RESPONSE: Intel Corp (INTC), at 18.7, is trading up from its low in the $16 area. Stock has been in consolidation that looks like it could preface a move higher - rally above 19.9-20.0 would suggest a next move up to maybe 22.50 area, or perhaps to 23-23.5 resistance implied by the beginning of the downside chart gap from early-June and the current level of the 50-day moving average.

Conversely, a close under $18 or a dip to 17.00 intraday, would suggest that INTC might re-test its prior recent low. Right now the stock offers the best hope for QQQ holding its prior lows - INTC, ORCL & QCOM having charts with some bullish possibilities, versus CSCO & MSFT, which have been weak of late.

  Jim Brown   7/22/02,  10:45:45 AM
Pivot Trade Signals
For those wondering, I have not lowered the stop loss because the Dow is resisting setting new lows. For those who don't want to risk their profit I would lower it to the entry point for the signal of 425 or 423 which is just over the 10:AM highs. The next resistance level is around 420 but that is really close and while it would represent a minor profit it would prevent you from any major drop later in the day. I suggest we maintain wide stops and let these oversold conditions work themselves out.

  Steven Price   7/22/02,  10:45:08 AM
VIX For those of you looking to spread higher volatility levels against lower levels, note that in an environment like this, front month implied volatility should be higher in terms of percent than back month implied volatility, as it reflects the short-term uncertainty in the market. The increase in the back months is higher on a dollar basis, however, and has more to give back should volatility fall.

  John Seckinger   7/22/02,  10:42:13 AM
Drove 3,000 in seven days, but still couldn't get away from CNBC. Looking at a chart of the 30-year Treasury Bonds, a trade above 106 will actually be bearish based on historical bullish traps. Currently up 11 at 105-16, I continue to be impressed with the relatively strong five-year bid.

  Jonathan Levinson   7/22/02,  10:41:37 AM
Up volume on the COMPX is beating down volume 327M to 287M. Factor out the WCOME volume of 62M and down volume is slightly ahead. The TRINQ confirms this, back down to .49. Imagine where the price would be if there was actually some selling pressure today, and be careful if thinking about going long.

  Steven Price   7/22/02,  10:41:26 AM
The only stocks that were added to the S&P 500 last week that aren't down this morning, are Electronic Arts $56.63 (ERTS +0.04) and SunGard Data Systems $20.89 (SDS +0.19). These stocks were beat up at the end of last week after releasing earnings, however, and seem to already have taken their beating early.

  Jeff Bailey   7/22/02,  10:37:00 AM
OSI Systems (OSIS) $15.85 -3.9% ... What was your downside target. Thanks

When first profiled, longer-term bearish count was $6.00, with near-term target of $14.09 from retracement.

Since first profiled as bearish at $18, and triple-bottom sell signal, stock gave "buy signal" and rallied smack into overhead resistance. Today's trade at $16, has stock back on a sell signal. New vertical count column under construction here to $12.50. Link

  Jim Brown   7/22/02,  10:31:26 AM
Pivot Trade Signals
The VIX is soaring to new highs with the current 45.03 indicating very serious oversold levels. As I mentioned over the weekend it is a historical buy signal but only in context. The last two times it reached these levels it went much higher. It reached 57 back in September and broke 60 in Oct-1998. We are on track to reach those highs with the earnings restatement problem ranking with the Asian Crisis, Long Term Capital and the September attacks if you believe what the markets/VIX are telling us. Decliners are rapidly gaining on advancers today and the TICKS are headed lower. The markets have yet to go into the expected freefall today but we are getting close to the lows of the day.

  Leigh Stevens   7/22/02,  10:26:09 AM
Subscriber QUESTION: "Anything new in your thinking regarding OSIS? I choose not to sell when it ran up into the $18.25 range...happy I did."

RESPONSE: OSI Systems (OSIS) still on the defensive, with Friday's move to new closing 6-month low - downside follow through today took stock to new intraday low for the current move. Could see OSIS retreating to the $13 area, which looks like the next area of technical support of significance.

  Steven Price   7/22/02,  10:26:04 AM
Bullish Percent NDX: note on Jeff's report. Between the Dow ($BPINDU), S&P 500 ($BPSPX) and NDX ($BPNDX), the NDX bullish percent had been the only one on the rise, while the others fell. It made quite a move from the beginning of July, when it was at 8%, all the way up to 35%. This may simply be a pullback, however our glimmering beacon of hope seems to be at least resting after Friday's action.

  Jonathan Levinson   7/22/02,  10:20:13 AM
The COMPX is printing new lows of the day below 1305. The TRINQ at .67 tells me that the selling hasn't even gotten started yet- so far, the buying is only slowing down. Note however that WCOME, America's biggest bankruptcy in history, is rallying, up .05 to .14 on 27M shares. What a place to park Junior's college money... In any event, this volume is doubtless skewing the TRINQ somewhat.

  Steven Price   7/22/02,  10:18:11 AM
Johnson and Johnson (JNJ) $42.85 (+1.00) JNJ is rebounding after getting hammered on Friday for its manufacturing problems at the plant that produced Eprex. Probably oversold on Friday, but the specter of criminal investigations in this environment does a great job of spooking investors.

  Steven Price   7/22/02,  10:13:42 AM
United Parcel Service (UPS) $65.18 (-1.82) UPS is coming back to earth after funds scrambled to add it to their portfolios on Friday, the day it was added to the S&P. Look for this pattern for the new adds that spiked at the end of the day on Friday.

  Jeff Bailey   7/22/02,  10:11:12 AM
NVIDIA (NVDA) $17.52 -3.4% .... weakness here and trade at $17.50 bearish. If long 1/2 position of underlying stock from $21, would look to write at the money Aug. covered calls or honor stop. If long Aug.$17.50 calls, would look for rallies back to $20 level as exit. Link

On Friday, NASDAQ-100 Bullish % ($BPNDX) fell from Thursday's 35% level to 31% and marginal internal weakening. Reflected further perhaps with today's sell signal in NVIDIA, which would be net loss of 1 stock to sell signal.

  Jonathan Levinson   7/22/02,  10:09:20 AM
The TRINQ is rising from the opening spike down, currently .48 indicating that initial opening wave of buying has relaxed. It is not yet even in what I consider to be neutral territory above .50. The COMPX is coiling up just below 1320, right at the middle of its range.

  Leigh Stevens   7/22/02,  10:05:59 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on the NASD preparing to take regulatory action against star telecommunications Soloman Smith Barney Analyst Jack Grugman - he is alleged to have violated securities rules over his research on Winstar Communications, a former tech darlin, that became a fallen tech angel when the company filed for bankruptcy protection in 2001. For some strange reason, the NASD thinks that perhaps Mr. Grugman was still touting the stock even after he knew that the company was in deep financial trouble. I wonder where the Feds got such an outrageous idea!

Another front page story is the tea leaves that investors are attempting to read to tell them if a market bottom might be near - was Friday bad enough! Stay tuned!!

An inside story is about rising exports, the upside of a weaker dollar - good news for some U.S. Manufacturers, whose businesses have been quite depressed. Every cloud has a silver lining, hey.

  Jim Brown   7/22/02,  9:57:20 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I barely got that last upgrade posted before the buy program quit and the indexes rolled over. The SHORT was triggered at 9:52:08 when the OEX traded below 425. (SPX 852.75) The initial stop loss will be a trade over OEX 429. (SPX 860)

  Jonathan Levinson   7/22/02,  9:56:21 AM
It looks like our initial range will span from 1305 to 1332.

  Jeff Bailey   7/22/02,  9:53:24 AM
Bellsouth (BLS) $24.80 -10.53% ... Posts Q2 EPS of $0.52, which was 4-cent below estiamtes. The results include bad debt expens of $225 million or $0.05 a share. For 2002, sees EPS of $2.13-$2.20, well below consensus of $2.34. Link

Verizon (VZ) $30.58 -5.90% down in sympathy and getting close to bearish vertical count of $29 Link

  Jim Brown   7/22/02,  9:51:59 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point for a breakdown to OEX 425 (SPX 853) to take advantage of this uptick. A nice little buy program in the Nasdaq futures gave existing shorts a surprise.

  Jonathan Levinson   7/22/02,  9:42:15 AM
Just over 3:1 advancing volume:declining volume on the COMPX 8 minutes after the open, with the TRINQ at .27. This low TRINQ reading is no doubt the result of opening volatility and I doubt that it's signalling a short term top.

  Jim Brown   7/22/02,  9:41:52 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point for a breakdown to OEX 418 (SPX 841) to take advantage of this uptick.

  Steven Price   7/22/02,  9:41:32 AM
Reader Question:I'm wondering what you think about some straddles/strangles this week. With TYC, AOL, QCOM or even XMSR is seems like stocks will probably be bouncing around a lot (like they haven't been anyway).

I'm not thinking about AUG options but OCT or NOV. This way the losing side doesn't have to evaporate it just doesn't go down as fast as the winning side goes up. In light of current option prices how does this strategy sound to you?

Thanks, Johnny

Response: Long Straddles and strangles can certainly be profitable if the stock moves enough in either direction. One thing to remember about current option prices is that the Volatility Index ($VIX.X) is the highest it has been this year. This index is derived from the price level of options on the OEX and does a pretty good job of representing the price of options across the board. Right now, in general, options are VERY expensive. What I do is calculate just how much a stock needs to move, in terms of percent, for my straddle or strangle to break even. Certainly the market has been moving enough recently to justify the current prices, which is why the VIX is this high. But it must move just as much in the future if your long straddles/strangles are going to pay for themselves. Look at the individual issue, see what it has done, calculate your break even, and then make your decision.

  Jim Brown   7/22/02,  9:36:55 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market if the OEX trades below 417. (SPX 840) We got a little stronger than expected tick at the open but all Dow stocks are not yet open. If we get a bounce we will raise the entry.

  Jeff Bailey   7/22/02,  9:32:15 AM
Treasury Watch 10-year YIELD ($TNX.X) 4.517% and breaking below last week's relative low. Defensive action here, but right at lower end of downward trending regression may offer some support (resistance for price). Look for YIELD resistance (price support) to be firm at/near 4.635%.

  Jeff Bailey   7/22/02,  9:29:11 AM
September Light,Sweet Crude (cl02u) $27.42 -1.5% ... modest downside pressure in crude this morning amid speculation that Nigeria is looking to boost production. Sept. contract -2.7% from last week's contract high of $28.18.

  Jeff Bailey   7/22/02,  9:29:02 AM
The 9:00 AM intraday update has been posted. Link

  Jonathan Levinson   7/22/02,  9:23:16 AM
I will be watching immediate overhead resistance between COMPX 1325-1330. More than that, however, I intend to watch the stochastics on a 5(3) setting, alongside the TRINQ and QQV. Because of the expected volatility, I will lean more heavily on the indicators to tell me where the support and resistance currently are. I intend to take much smaller positions than I usually would, as above all, I don't want to lose recent profits. So, I expect to play 1/4 to 1/2 of whatever position I normally would.

  Leigh Stevens   7/22/02,  9:20:33 AM
INDEXES: TRADE Recommendation - UPDATE: Holding long QQQ at 24.30; suggest placing stop at 23.30 for this morning, a slight revision from the initial 23.50 stop.

  Leigh Stevens   7/22/02,  9:13:33 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES trading: S&P 500 > -6.50 at 837.50; Dow Industrials > -78.00 at 7920; Nasdaq > -2.00 at 965.00

"Fair Value" numbers: S&P 500 futures ($SP02U): 0.90 -- Nasdaq 100 futures ($ND02U): 3.34

  Jim Brown   7/22/02,  9:12:03 AM
Pivot Trade Signals
Bipolar continues to describe the current market. The S&P futures have vacillated from strongly negative to positive and back to negative again this morning. The Nasdaq futures are struggling to hold near positive territory and appear to be carrying over the underlying strength from Friday. The NDX held 950 despite the -390 point Dow drop. After the close on Friday and all weekend analysts have been calling for another major triple digit drop at the open this morning.

This morning that drop is not as apparent as many analysts had expected. With the markets so oversold and the VIX at 43.36 there is a slim chance we could see a bounce instead. If we do bounce after the opening dip it would be a gift as an entry point as conditions in the overall market have not changed. My market view for the week is still down with Dow 7400 as my target. Any bounce should not be considered a rally but an entry point for shorts.

Initially I would like to be short on any break below Friday's low of 419.02 but because there is likely to be some serious volatility swings we cannot set that as an entry point until those swings have passed. The ideal setup would be a bounce to the OEX 427 level sometime after the open and a failure from there. However ideal rarely comes to pass. Aggressive traders should be prepared to enter a short position at any time and conservative traders should wait for a breakdown below any initial dip. With S&P futures negative -7.00 the OEX should open around 416-417.

The wildcards here are the 7 new S&P companies which should give back their gains since their announcement. This would be an additional drain on the SPX an added to the overall market weakness.

The bottom line is hope for an oversold bounce at the open but be prepared to go SHORT at 415 if the bottom falls out instead.

  Jonathan Levinson   7/22/02,  8:28:28 AM
The US Dollar Index is up to 104.60, a considerable distance from its Thursday night spike below 103.60.

  Leigh Stevens   7/20/02,  12:28:04 PM
Market Monitor comments from Friday, July 19th, can be seen at Link


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