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  Jim Brown   7/23/02,  6:56:56 PM
The problem has been solved! The huge after hours volume on MSFT, NTAP, NXTL, MXIM, etc was due to a Nasdaq error. They are planning on launching a new trading platform in six days and a glitch appeared today. The entire days trading volume for stocks beginning with "M" and "N" was rebroadcast after the close. This essentially doubled all the trades for the day on volume charts and time and sales. For more info: Link

 
 
  Steven Price   7/23/02,  5:56:35 PM
Reader Question:

Hi Steve,what do you think about a long play on orcl at this level?????Thank you for your comments....

Response: Sorry for the late reply, but I don't like it anyway - too much resistance around $10 in the short term.

 
 
  Jeff Bailey   7/23/02,  5:29:57 PM
If you're a parent and have a Junior High or High School aged child/young adult, tonight's dinner conversation might be about "back to school clothes." If you go home and they've left the "went to the mall" note on the fridge, then meet them at the door when they get home!

Things to listen for are where they want to go shopping. Abercrombie (NYSE:ANF) $21 -3.6% Link or Gap (NYSE:GPS) $11.39 -2.3% and any negative comments from the kids regarding this year's seasonal line might be of interest as both stocks have given some glaring sell signals recently. ANF at $22 with a bearish vertical count of $9 and GPS at $13 and bearish count of $7.50 don't bode for bullishness right now.

Can't really see any of the "retailers" looking all that hot right now. If the kids want to go to Kohls (NYSE:KSS) $57.70 +1.70% Link , at least stock achieved its bearish count of $64 and just above some past historical support of $55.

Some seasonal up-trends present for some of the retailers with "back to school" season nearing and Holiday season less than 5-months away! Never hurts to think ahead. Takes some time for the institutions to build some positions in their favorites.

Keep your ear to the ground and find out where the little ones are rubbing the numbers off your credit card!

 
 
  Jim Brown   7/23/02,  5:16:33 PM
Pivot Trade Wrap
Today would be a good description for "oversold" - The already extremely oversold markets took a hit on some bad news but still attempted to rally several times. The Citigroup/JPM duo knocked about -70 points off the Dow with the impact of those two Dow components. Microsoft accounted for nearly -25 points more and the index still traded in positive territory late in the afternoon. Could it be that the spring just cannot be pushed down any further?

After the close there was a huge volume in MSFT, NVDA, NXTL shares and a few others. Literally 55 million shares were "posted" in MSFT after the bell. This caused many readers to start grabbing the Maalox with the MSFT analyst meeting on Thursday. Everyone assumed the worst and were ready to short everything in sight. I have no confirmation but I suspect it was a computer problem at a market maker and their trades were not fed to the exchange until after the close. The reasoning here is the speed of trades and the range of prices. The time and sales screens were moving so fast you could not read them. The speed of the feed slowed other applications on my P4-2.2mhz PC for about 10 min. The prices were all over the map and there were literally thousands and thousands of trades. Far too many to be handled that fast in after hours. I have watched WCOM, INTC, ENE, ORCL etc trade multiple millions in after hours after disasters and this was far beyond those levels. Bottom line, it was a non-event unless somebody shows up with a real explanation.

With the severe oversold conditions I can't help but believe we are close to a relief bounce. Had it not been for the Nasdaq weakness, lead by Microsoft today, the outcome might have been much different. With the -1700 point Dow drop in the last 12 days and the VIX close over 50 we are approaching maximum pain. I am not saying we are at a bottom but I think we are near a bounce. It could be only an intraday bout of short covering again like the two +300 point bounce lately but I think we are getting close. We need the bounce as a new entry point for the next SHORT signal because it is getting too risky to short at this level after this big of a drop. Tune in tomorrow and see what happens.

 
 
  Jeff Bailey   7/23/02,  4:57:10 PM
Merck (MRK) $39.05 -2.39% ... company announces its board has approved a $10 billion stock repurchase program. Link

Will note bearish vertical count is $37. From $39, bear immediately assesses potentail reward to bearish count of $2 and limits risk to $2, and places stop at $41 if short and looking for some trade/account risk management.

$10 billion at $39 is about 256.4 million shares. Today's volume was 11.4 million, so MRK could sit a bid for equivalent of 22.4 days at $39.

If short/put the triple-bottom at $56 in April (red 4) and using Professor Davis' study of (Profitable for bearish trader 93.5% of the time, average gain of 23% in 3.4 months) and holding August puts (about 5-months out from April) may look to lock in some gains instead of risking time-erosion in a stock that may have a large bidder offering some support (the company).

 
 
  Jeff Bailey   7/23/02,  4:38:33 PM
InVision Technologies (INVN) $25.50 +3.78% ... is a stock that OSIS traders may have been correlating against. Tonight, INVN reported Q2 EPS of $0.52, which was $0.05 better than consensus. Revenues were $68.4 million, versus conses of $68.9 million. Guidance is for Q3 EPS of at least $1.00 and revenues of at least $110 million, versus consensus of $0.80 and $148.3 million. Link

This may have bears in OSIS keeping close eye on stock as it sits right on 61.8% retracement support of $14.09. See Link for past commentary comparisons and Link for retracement on OSIS.

 
 
  Jim Brown   7/23/02,  4:04:08 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The official closing numbers for the SHORT signal are OEX 396.44, SPX 797.26, Emini 797.00, DIA 77.15, SPY 80.00, DJX 77.02, NDX 901.51, Compx 1232.14

 
 
  Jeff Bailey   7/23/02,  4:02:23 PM
Halliburton (HAL) $9.02 -9.72% ... Jeff: Jeff, I'm not sure if you profiled it. I'm short on HAL (holding Aug 10 puts) for a profit. Where do you think is the stop--I've it currently at 10.70, about 5% above today's high. How will the asbestos news affect the stock? As always, I value your opinions. Oh..I missed the Merril put play, it's already down over $2.3.

Hmmm... not sure how the asbestos will impact HAL, but not looking "good" is it? Or is it? Depends if your call or put I guess. About all you can do is what we did in 03:00 Update with Merrill. With HAL, bearish count is.... oh no... $0.00. Take retracement from $19.44 to $0.01 (par value on stock certificate). This gives us 50% at $9.72 (your stop is good), 38.2% at $7.43 (near-term target at $7.43) and 19.1% at $3.72.

 
 
  Leigh Stevens   7/23/02,  3:59:06 PM
Subscriber QUESTION: "Re NVDA - I know you spoke a lot yesterday, but the firming today is interesting. A quick comment on an entry here? "

RESPONSE: No sign of a bottom yet in Nvidia (NVDA) but hope springs eternal!

Q's are just about to reach its downtrend line on the daily chart. Anyway the market backdrop of major market downtrend is pulling all stocks lower - just like the receding tide lowers ALL the boats.

14 in NVDA looks like next lower support - today is weak close, under prior bottom and at intraday low today which is the extreme end of its substantial 17.5 to 15.41 price range today.

 
 
  Jim Brown   7/23/02,  3:54:16 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Close the current SHORT signal now at 396.91. Drop has slowed, I want to be flat overnight with the intention of going long with any positive conditions at the open tomorrow.

 
 
  Jim Brown   7/23/02,  3:46:03 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Cancel the LONG trigger at OEX 403. We will wait until tomorrow and see what the open brings.

 
 
  Jim Brown   7/23/02,  3:45:17 PM
Pivot Trade Signals
The last down draft is being led by the NDX futures which just set a new low for the day at 910. If we close on the lows as it appears we might then we will hold the SHORT signal overnight. I am still looking to get long here soon but we want the markets to tell us. I have an urge to pick a bottom (temporary) at Dow 7700/OEX 398 and go long but that is an emotional decision not a sound technical one. We will wait for tomorrow to go long. I am cancelling the LONG signal at 403.

 
 
  Leigh Stevens   7/23/02,  3:44:58 PM
Subscriber QUESTION: "Has the VIX ever closed over 50? "

RESPONSE: No, actually not - previous high close was 49 - if we close where we are now - at 51 at 3:45 - then today is a NEW HIGH CLOSE on VIX. - any thing over 49.04 is.

 
 
  Leigh Stevens   7/23/02,  3:38:09 PM
Subscriber QUESTION: "Can you comment on sndk?., The stock has not giving a sell signal yet. any comments will be appreciate so I can decide wether long or short. "

RESPONSE: Yes. Sandisk (SNDK)'s stock is in the apparent middle in a trading 9.5/10 - 22-23 trading range; last: 14.3 while still trading. Stock has been reversing in recent days in area of its 200-day moving average at 15.12 - the recent rally may be the best it can do before coming down again - potential in that case is 12.4, then back down in 10-11 area.

 
 
  Jeff Bailey   7/23/02,  3:34:05 PM
OSI Systems (OSIS) $14.18 -5.78% ... Jeff: Hi Jeff, Is the 2nd target at $6? now that NAS is in Bull correction isn't more likely we get to $6?

Excellent thought! Yes, it may become "more likely" now that the internals are giving back some "buy signals," BUT, and this is very important, the NASDAQ-100 bullish % is now "bull correction" and for now, has us simply thinking that we're in a "rest" period for this part of the market. Link

One could go back to the bar chart with lower trending regression, make the tie that the stock is at the lower end of regression here, but if this regression channel is projected over time, we do see a tie in with $6 on or about November 18th. Remember, just 5 days ago, OSIS was at upper end of this downward regression.

Now, the NASDAQ-100 is just 100 stocks. Very narrow part of the market.

What a bear also wants to see is the much broader S&P 500 Bullish % ($BPSPX) continue to deteriorate. Just remember though, it is at very low levels. Link

I think the MAIN point here is TIME! Very different to be "thinking" $6 for OSIS for August expiration versus "thinking" $6 for November expiration.

 
 
  Jim Brown   7/23/02,  3:32:09 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the entry point on the LONG signal to OEX 403. (SPX 809.50) This is the exit point on the current SHORT signal as well. We will hold this signal overnight if triggered.

 
 
  Jeff Bailey   7/23/02,  3:31:27 PM
The 3:15 PM intraday update has been posted. Link

 
 
  John Seckinger   7/23/02,  3:29:10 PM
Looking ahead: The Networking Index (NWX.X) is currently down 4.38% at 130.30; however, this possible double-bottom formation might do a number of things. First, the index could bid back up to 149 and form a long liquidation pattern (value near 144). Secondly, index could wash out lower and form a bearish wedge (objective at 120 before bidding higher). Thirdly, the index might set a series of lower highs with a constant bottom near 130 - setting a bearish triangle. It is amazing how dynamic markets can get. Of course, once the pattern is recognized then positions are taken and probability for profits are greatly increased.

 
 
  Jim Brown   7/23/02,  3:26:50 PM
Pivot Trade Signals
I am thinking about switching sides here. The futures have double bottomed intraday. All the markets are trading well off their intraday lows and there does not appear to be any end of day sell off. Get ready to switch.

 
 
  Jonathan Levinson   7/23/02,  3:18:39 PM
Watching MSFT playing price ping pong, as the QQQ draws the same pattern but within a narrower range. I have the strangest feeling that one of these short up moves isn't going to stop, but have been unable to bet on it. Had I picked the last MSFT low, I'd be up perhaps .30 on the trade. Not bad for a few moments, and the US Dollar Index, which is astounding at 106.75 or so, is giving me more confidence in the long side than I've had all year. Not yet ready to bet on it, but it's worth watching.

 
 
  Leigh Stevens   7/23/02,  3:18:10 PM
Subscriber QUESTION: "What are your thoughts about LEH puts? The 50.50 level held twice today with significant bounces. Of course lower highs are also being set. Is your take that 50.5 will be broken? "

RESPONSE: Well, there is no "natural" (ie, prior lows) in this area. Will do an analysis, at least what I see technically, on Lehman chart (LEH) - stock is a recent steep downtrend, having broken below the low end of its multimonth trading range.

there are a lot of stocks that have patterns like this - stock holds well above its prior low, which is almost always the post 9/11 low - then has broken sharply in recent high volume days (especially in NYSE stocks) and now looks like it could fall back to that lower low even. In case of LEH that is 43.5 area; stock last at 51, low was under 50. Not saying it will go there but this is your "risk".

 
 
  Jim Brown   7/23/02,  3:13:21 PM
Pivot Trade Signals
The SPX/NDX futures found support on the last dip to 798/915 respectively and are holding up the markets. Looks like a buy program based on the strength of the candles and the strong bounce in the TICKS. The advance/declines did not reflect the pop which would lead me to believe it was limited to bigcaps. Nearing 3:15 and the liquidation process should be kicking in anytime if it is going to happen.

 
 
  Leigh Stevens   7/23/02,  3:05:20 PM
Subscriber QUESTION: "Are you watching any other indicators for confirmation of a possible upmove, or should we look for the levels you have mentioned before to be surpassed before getting confident a bounce is underway........."

RESPONSE: Look for the levels to be exceeded. Particularily and especially, it's when a prior rally high is exceeded that begins to suggest a turn in the trend. The more of them (prior swing highs) that are pierced, the more solid the developing new trend becomes.

 
 
  Jim Brown   7/23/02,  3:02:47 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
For better or worse we were triggered on the SHORT signal at 14:55:58 when the OEX traded below 400. (SPX 803.36, Emini 803.50, DIA 77.40, SPY 80.61, DJX 77.47, NDX 920.08, COMPX 1250.72) The initial stop loss will be tight at OEX 403. (SPX 809.50) The internals are trending back down but there is decent support at 395. We just passed the 3:PM barrier and could see the negativity appear at any moment if today follows the recent trend.

 
 
  Steven Price   7/23/02,  2:56:14 PM
Juniper Networks (JNPR) $7.65 (-0.48) Current OI call play JNPR has rebounded from intraday low of $7.30. A close below $8.00 will stop us out on this one.

 
 
  Leigh Stevens   7/23/02,  2:55:15 PM
Subscriber QUESTION: "Does the VIX need to retest the sept. high for this market to turn? "

RESPONSE: Not necessarily. but a substantial spike up from 50 area would "copy" the same pattern. Actually VIX was up already today to 52.5 area. Its only another 8% further to the last Sept. spike high in the CBOE Volatility Index ($VIX.X) at 57.3

Whenever, a market makes a similar pattern to a prior extreme I look at the possbility that its a cyclical repetition of a prior trend - there is a lot of this kind of technical analysis.

 
 
  John Seckinger   7/23/02,  2:49:06 PM
Sector Updates: Securities Index came 1.79 points from projected 340 support, while Transportation Index continues to the downside - currently lower by 3% at 2175. I also was impressed with SOX.X rejecting levels underneath 343. Note: The key is still with the Dow, while Treasury Bonds should make headlines in the next few days if fixed income traders start taking profits (futures settle under 105-30). The dollar is viewed as technical in light of European news, while Oil and the CRB index remains on the radar screen.

 
 
  Jim Brown   7/23/02,  2:47:22 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Just in case we get a roll over at 3:PM let's go SHORT again with an OEX trade below 400. (SPX 803.50) This is a high risk signal but allows us to capture any move in either direction. The LONG signal at 408.50 will capture a real breakout and this SHORT signal at 400 should allow us to capture a break down. The risk on the downside remains a bounce at 395 and the risk on the upside remains the days high at 411. Nobody ever said it would be easy!

 
 
  Steven Price   7/23/02,  2:42:14 PM
Reader Question: Hello! Steve, can you comments on PMCS and sndk Best Regards,

Julio Response: Current OI call play PMCS $9.74 (-0.43) is hovering above its 10 dma and 21 dma. It is still above our $8.90 stop loss. Keep an eye on these averages for support. SNDK $15.10 (-0.04) broke above its 200 dma of $15.05 and has been riding it as support, as far as closing price is concerned. On the daily chart it spent some time below (at $14.67) before rebounding, so it will be interesting to see where it ends the day. Holding above this level on several successive down days in the market shows good relative strength.

 
 
  Jim Brown   7/23/02,  2:40:46 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the broader market SHORT signal at 14:35:44 when the OEX traded above 402.50. (SPX 808.17, Emini 809.00, DIA 78.25, SPY 80.98, DJX 78.02, NDX 931.24, COMPX 1261.24)

 
 
  Leigh Stevens   7/23/02,  2:40:35 PM
Subscriber QUESTION: " I'm looking at buying Aug Puts on INTU. The stock has come under heavy selling pressure lately and I think a close below 42 (~200DMA) could send the stock down to 36.5 or lower. Also, this stock is still carrying a very hefty PE which is not looked upon favorably in this market.

Am I looking at this right ? I'd appreciate your expert analysis. "

RESPONSE: Intuit (INTU) - - Held right at its 200-day moving average on recent decline. Immediate consolidation at trendline and steady price in such a down market is bullish - my guess is stock looks like it will rally again. There are these stocks - INTU may be one, ORCL is another, that are in patterns that indicate good buying interest on any significant price pullbacks.

It's my guess that with the overall market dead weight removed, such as would be the case with a strong NDX rebound, this stock could rock & sock. Amazing - stock is STILL in a long-term uptrend, from ' 97! Disclosure: I DON't own the stock, just woudl like to.

AND -- Stock may have high P/Es for a reason.

 
 
  Jim Brown   7/23/02,  2:37:18 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market on an OEX break above 408.50 (SPX 821) If this oversold market is not going down then the next option is up!

 
 
  Jonathan Levinson   7/23/02,  2:33:45 PM
My quote screen has just become very "quiet". MSFT stalled just below 45, QQQ just below 23. QQV up .90 and the TRINQ at .40. This feels like the eye of a storm. With the VIX at 50.62, the bungee on the broader market is stretched very tight. There could be a snap, but the direction is the question du jour. Down volume is 972M to 737M up volume on the COMPX.

 
 
  Jonathan Levinson   7/23/02,  2:25:33 PM
For the bears among us who are mourning all those big ones that got away:

You know J, it’s especially wise to err on the side of caution these days. We’re living through history here and we really have little precedent to rely on for guidance. Who knows what this market is going to do. Like you, when I have a nice profit, I take it with gratitude.

Here here.

 
 
  Jim Brown   7/23/02,  2:23:36 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss on the open SHORT signal to OEX 402.50. (SPX 809) I know I said I was not going to lower it until OEX 395 but there appears to be support just above that level. I want to err on the side of caution. We will lower it again when/if 395 is hit.

 
 
  Jonathan Levinson   7/23/02,  2:23:19 PM
For traders in Canuckistan only:

Hi, Jonathan, I noted you said you said you traded using a TD Waterhouse Canadian account which does not permit stop loss on options. You said you used mental stops and honor them strictly. Does that mean you write them down at the time of the trade on a journal and constantly review them? That method is not too applicable for somebody with a pretty full time job like myself, is it? I have a lot of frustration with TD Waterhouse Canadian: I complain that swing and position trader like myself won't know what happens to a trade order until the next day when TD updates the whole account!! I drool when all of you on MM talk about trailing stops so easily. My eyes lightened up when the other day a subscriber talked to you about 2 new alternatives for Canadian traders: Option Express and Interactive brokers. I only got as far as glancing at their web home page, have you or anyone you know used them or checked them out? I do not know how MM works or whether you are Canada-based or not, but I am hoping you can comment on my e-mail when you have a minute maybe off market hours for us advantaged Canucks. Thanks, Jonathan, I enjoy following your comments.

I've spoken to a representative from OptionsXpress, who confirmed that they *do* accept Canadian accounts, and *do* offer a full array of stops for option trades. So far, for the past several years, I simply note my entry price and then watch the trade, tick by tick. In general, this has cost me because my stops become subject to my own mental state, instead of the numbers alone. If I could set trailing stops and then let the trade run, I'd be much further ahead. So far, I've found OptionsXpress to be very professional, but I have yet to place a trade and cannot vouch for them. Do your homework and let us know what you find.

 
 
  John Seckinger   7/23/02,  2:13:20 PM
Semiconductor Index: Lower by 3.38% at 344.98, the SOX.X has fell underneath the relative lows of 343 set during the first few weeks of July as well as last September. A settlement at current levels should have traders looking for another wave lower to 273. A move back above the 345-350 level could be the catalyst for a rise to near 370 before sellers take control once again. Long-term objective for bulls would be for a move back to 400.

 
 
  Leigh Stevens   7/23/02,  2:10:42 PM
Subscriber QUESTION: "To learn to trade qqq - If long qqq today above 23.8, where is my stop and where is the target? "

RESPONSE: 22.00 to 21.80 is place to exit in long QQQ currently, which would be move under the current slope of its daily downtrend line. When rate of change accelerates to the extent that it brings steeper downtrend line - this becomes my personal exit point. A possible upside target is to 26, assuming a breakout above 23.8 as you note.

 
 
  Jim Brown   7/23/02,  2:03:16 PM
Pivot Trade Signals
27% (137) of the S&P-500 have set new 52-week lows already today. There have been only 2 new 52-week highs in this index for the last seven days!

 
 
  Leigh Stevens   7/23/02,  2:02:21 PM
Subscriber QUESTION: " Could you please give me your opinion on CPN. It looks like some institutions are dumping it this morning. I am long 1000 shares from $4.50. I am not sure what to do at this point. Thanks"

RESPONSE: Calpine Corp,(CPN) for whatever reason is in danger of going to zero at the rate its price and volume trendlines are pointing. Most of the volume is coming in on declining days. That said, the stock has fallen to the low end of its downtrend channel around 2.1 - in days ahead stock could have a bounce, dead-cat or otherwise. Lot of resistance is assumed at 4.00 area including your shares for sale at 4.50 I'm sure.

 
 
  Jeff Bailey   7/23/02,  1:57:32 PM
Treasury Watch YIELDS diving lower still. 5-year now at 3.523%, 10-year at 4.421% and 30-year firmly in the red at 5.284%. (see 11:45:20 and 12:42:43)

Benchamarking Dow Indu. -90.80, S&P 500 -22.29 and NASDAQ Comp -37.92.

 
 
  Steven Price   7/23/02,  1:57:11 PM
Reader Question:

Can you please outline some variations of the spread positions on GS that seem most viable? Thanks!

Response: Earlier today (12:16:00) I highlighted the long Sep 70-60 debit put spread, which has already increased from $3.00 to $4.20. I still like this spread. Another alternative is long Aug 70-60 put debit at $3.75. The volatility in this stock is very high and individual options are expensive, which is why I like spreading in this issue to defer some of the costs of getting short. Long Oct 70-60 put debit spread at $4.10 also an alternative. These spreads are growing as I write and the stock drops.

 
 
  Leigh Stevens   7/23/02,  1:54:07 PM
SECTOR Update: SOX threatening to break below the low end of its recent support and the 344 Sept. low; at 342.5 last.

 
 
  Jim Brown   7/23/02,  1:51:35 PM
Pivot Trade Signals
VIX just hit the high of the day at 51.75. New lows 1111 BUT the TRIN is only 1.13. Still have a ways to go!

 
 
  Jonathan Levinson   7/23/02,  1:50:36 PM
The QQV has finally turned green and is now up 1.04 on the day. What is worrisome for the NDX is how much the QQV has been lagging the other volatility measures. Combine that with a nice low TRINQ, currently .51 (the artist formerly known as WCOME, now WCOEQ?), and the way is clear for a strong blast downward.

A number of readers have been asking about the XAU and the price of gold, both of which have been slammed today. Different explanations center around today and this week constituting a "liquidity event," in which everything is getting sold, or the damage being done to JPM and counterparty risk for their derivatives contracts, or the current economic conditions causing deflationary pressure, which many believe to be bearish for precious metals. Lastly, concerning the XAU, the S&P rebalancing resulted in many index funds being forced to sell ABX and Placerdome, both of which are heavily weighted in the XAU. Regardless, it's a sad day for gold bugs. Look for next support in the 55 area.

 
 
  Jim Brown   7/23/02,  1:46:48 PM
Pivot Trade Signals
Once the 7750/400 levels are broken the next support for the broader market would be 395 on the OEX which is the bottom of the down trend channel on an hourly basis. Broader support is 784 (OEX 393) on the S&P futures (currently 803)

If we do get a further drop the OEX 395 level is where I will tighten the stop losses with a target to exit of OEX 392-393. We will follow the market down with stops in case that level fails as well.

 
 
  John Seckinger   7/23/02,  1:46:22 PM
Treasury Bonds: September 30-bond futures are above the important 105-30 level at 106-02. The index must settle above 105-30 in order for institutional investors to remain interested (this seems likely). Turning to TYX.X (Treasury Bond Index), the 22 DMA is poised to cross underneath the 200 DMA; thus implying lower yields are to follow. Of course, lower yields mean higher bond prices, which is the normal allocation when concerned about lower equity prices.

 
 
  Steven Price   7/23/02,  1:45:09 PM
Bed Bath and Beyond (BBBY) $29.70 +0.83: A reader asked whether this was an entry point for BBBY. I see this as an opportunity to initiate a put play. The Retail Index ($RLX.X), Walmart (WMT) and Home Depot (HD) have all made similar rebound efforts to BBBY, only to be turned back. Some rebound should be expected after the sector has been down 10 of the last 11 sessions. OI's stop loss on this put play is $32.50, which looks good for now.

 
 
  Jeff Bailey   7/23/02,  1:41:36 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Jim Brown   7/23/02,  1:36:09 PM
Pivot Trade Signals
Dow 7750 is still the line in the sand with Nasdaq 1250 as the backup. it is amazing to see how all the major indexes have gravitated to round numbers. OEX 400, SPX 800, Nasdaq 1250, Dow 7750. Obviously there are some buy triggers at those points and until we burn through those orders we will see a pause in the descent.

 
 
  Jeff Bailey   7/23/02,  1:34:08 PM
Johnson & Johnson (JNJ) $44.56 +4.7% ... Jeff: About 30 minutes ago, JNJ recorded a sale at $45.39. This was over $1.00 more than the current ask. From that moment on, the stock has been rising steadily...but recently has met resistance at about $44.40

I'll try and show this in the 03:00 Update. This is perhaps something we talked about in the QQQ several weeks ago as it relates to "bad ticks." It is noted that trader's observation came at about 11:36 EST, when JNJ was trading $44.51. Since then, JNJ traded a session high of $45.70.

Thinking in past, as it relates to QQQ, is that some type of "buy program" was set up, but the "upper limit" of the buy program triggers the "bad tick" at the upper limit.

Yes, this commentary is a little "too late," but does tie in to past comments regarding the QQQ which are also very heavily institutionally traded and subject to program buy/sell trading.

 
 
  Steven Price   7/23/02,  1:33:13 PM
Reader Question: Steven, I have problem calculating (bearish or vertical) count using P&F charts. If there are three or more vertical O's after first X's in this case which vertical O's should used to find vertical count? just as on P&F chart of MER, EXPE, BMC or QQQ has more than two vertical O's after first sell signal.

Thanks

Response: You want to look for the first column of Os giving a sell signal, meaning it drops below a previous column of Os. If this is negated by a column of Xs that exceeds a previous column of Xs, then it is basically cancelled out and you need to look for the next occurence. You use the first sell signal that is not negated, and count the column of Os, multiply by the box size and then multiply by 2. Keep in mind that if the box size changes within the column, you should calculate the counts separately for those Os. Subtract that number from the top of the column of Os to get the bearish vertical count.

 
 
  Jim Brown   7/23/02,  1:30:45 PM
Pivot Trade Signals
New lows just surpassed yesterday's 1040 with a print at 1070. New highs are only 28.

 
 
  Jim Brown   7/23/02,  1:19:13 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss on the open SHORT signal to OEX 404.50. (SPX 812.50) It appears the afternoon trend will still be down but I don't want to give back those points if we get a surprise rebound off that last ditch support I mentioned earlier.

 
 
  John Seckinger   7/23/02,  1:18:35 PM
Defensively Defensive: The Biotech Index (BTK.X) is down 2 percent at 307.90, placing the Index within the 305-310 pivotal range. Underneath 305, odds for a move to the 295 area seems likely. On a weekly chart, the Index has begun to set a series of higher lows; nevertheless, consolidation at best seems likely in the near term. A settlement underneath 295 could be costly for longs, while a move back through 320 should shift sentiment to slightly bullish.

 
 
  Jim Brown   7/23/02,  1:13:52 PM
Pivot Trade Signals
We are testing the OEX 400 level, which equates today with Dow 7750. If these levels break we could go into free fall as there is no material support immediately below us. The Dow's closest support is just above 7700 and then not again until well below that at 7500-7560.

 
 
  Jonathan Levinson   7/23/02,  1:07:45 PM
Down volume on the COMPX has finally surpassed up volume 604M to 576M as it prints new lows of the day beneath 1260. The TRINQ is "high" today at .36! The QQV is still down .94. These are very confusing indicators to read, unless you believe that they are reflecting buying enthusiasm on a day in which the COMPX is printing multiyear lows.

 
 
  John Seckinger   7/23/02,  1:07:33 PM
Oil Index (XOI.X): Currently down 3.88 points, or 0.89 percent, to 428.41, this inflationary leading indicator has dramatically fell from 548 from just a few weeks ago. It would take a move back above 460 before selling pressure subsides. Such a powerful commodity, oil can affect price pressures world wide and greatly influence currency rates. Long-term resistance can be seen at 500, with support only light below at 415.

 
 
  Jim Brown   7/23/02,  1:05:36 PM
Pivot Trade Signals
GE and MSFT are impacting the Dow sentiment as each are setting new 52-week lows. The biggest tech and the biggest conglomerate both sharing the same fate. MSFT has dropped more than $10 in the last three weeks and GE has dropped from $30 to $25 today.

 
 
  Jeff Bailey   7/23/02,  12:54:56 PM
OSI Systems (OSIS) $14.35 -4.71% ... Jeff: Just wanted to say thanks for the handholding on OSIS. I learned alot about disciplined trading with your help on this one. Since I was a little nervouse at $19, I'm cutting out early today, but you saved me a small loss and I got an acceptable gain. Much different than what I was doing prior to finding you guys. Thanks again

Glad we could help. Getting close to first target of retracement at $14.09! No problem with locking in a gain early! Good trade.

 
 
  Leigh Stevens   7/23/02,  12:50:50 PM
INDEX Comments: ALL, except DJIA, falling to new lows on the day in last half hour - Nasdaq following lead of the S&P, unable to resist the bearish tide. Free fall in bellwether Nasdaq stock MSFT is adding to weakness in this market.

 
 
  Jim Brown   7/23/02,  12:48:42 PM
Pivot Trade Signals
Everyone on the NYSE trading floor keeps wishing for a capitulation event with a free fall drop to 7400. How hard would it be for the market makers to simply step aside today and let the prices fall to accomplish this. I know it has happened in the past from after the fact reports from previous crashes. Art Cashin implied this a couple weeks ago when the S&P was nearing the post 9/11 944 low. Time will tell but with some shorts starting to cover long term positions it needs to be soon or there will be too many buyers on the sidelines to get a true washout.

 
 
  Jeff Bailey   7/23/02,  12:42:43 PM
Treasury Watch 10-year YIELD ($TNX.X) 4.456% now edging red and following 5-year YIELD lower (see 11:45:20). 30-year YIELD ($TYX.X) 5.292% unchanged.

Benchmarking Dow Industrials up +18 (vs. +76), S&P 500 -9.45 (vs. -2.76), NASDAQ Comp -20 (vs. -5.5).

 
 
  Jim Brown   7/23/02,  12:40:11 PM
Pivot Trade Signals
We may be nearing that capitulation event. The new lows for today are soaring at 880 compared to new highs at only 25. This is a huge weighting and it is possible we could see over 1000 new lows again, (yesterday we had 1040), if we get a serious down draft this afternoon.

 
 
  Jim Brown   7/23/02,  12:34:47 PM
Pivot Trade Signals
We may have just seen the defining market moment for the day. The Nasdaq just broke to a new low and may now begin dragging the Dow conviction down with it. Decliners are increasing quickly and TICKS are approaching the -1000 level again. The speed of the drop and the movement in the NDX futures indicate it might be a tech only sell program. The SPX did start moving down but nowhere near the speed of the Nasdaq.

 
 
  Leigh Stevens   7/23/02,  12:20:35 PM
INDEX Comments: Heavy NYSE Volume - I noted earlier the heavy volume trend in the NYSE with two back to back days of total daily volume above TWO billion shares - this is Nasdaq type volume levels, and not seen in a while in the NYSE market. There is the possibility that NYSE sees 3 consecutive days with volume over 2 billion shares. The volume trend is key factor here and you can see the NYSE surging volume trend in the past 2 months on the NYSE at Link -- the trendline through the volume peaks shows a strong slant higher - and this is supposed to be the summer doldrums!

Volume trend suggests that a lot of money is coming out of the NYSE stocks, a trend that already largely happened in Nasdaq. When this outflow runs its course, both markets should be ready to rock back.

 
 
  Steven Price   7/23/02,  12:16:00 PM
Goldman Sachs (GS): $69.20 (-2.80) GS traded as low as $68.90, establishing a triple bottom breakdown. Looking at the put offers, they are all pretty expensive, although Aug 70-60 put debit spread at $3.00 seems reasonable.

 
 
  Jim Brown   7/23/02,  12:12:38 PM
Pivot Trade Signals
To follow up on the Dow comments earlier. Most of the components up today are either at resistance or very close and a breakout over the 7900 level would cause significant short covering. If we get the move it could be strong but there is selling in the futures every time they approach 820. The 8-10 strongly positive Dow stocks are struggling to pull the broader futures forward with little success. With the afternoon trend negative in recent days the Dow needs to break resistance very quick or risk being sold off again at the close. Declining issues continue to increase and were it not for the Dow winners the picture would be a lot different.

 
 
  Jim Brown   7/23/02,  12:03:10 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I am beginning to become concerned about the current SHORT signal. With the Dow strength and a couple higher lows on the SPX and futures I am beginning to fear a bounce here soon. I am going to lower the stop loss to OEX 408.50. (SPX 821) This is slightly above the recent resistance and protects us from a major move. Aggressive traders may want to give it room to the 412 level but the official exit is 408.50.

 
 
  Steven Price   7/23/02,  11:51:05 AM
Goldman Sachs (GS) $70.13 (-1.87) After breaking above its 10, 21 and 50 day moving averages last week, GS has given back its gains and is once again testing $70 support. It traded below $70 this morning, but I see the more important number of $69 looming. A trade at $69 would constitute a triple bottom breakdown on the PnF chart and could mean a much lower bottom, as it would be working on a bearish vertical of $60 at that point. GS made last night's Watch List Link and we will be keeping a close eye on it. Important note: This is the 6th time GS has tested this PnF support without breaking down.

 
 
  Jeff Bailey   7/23/02,  11:48:13 AM
Gold/Silver Index (XAU.X) 61.94 -6.9% ... leading sector declines and getting "crushed" on U.S. Dollar Index (dx00y) 106.15 +1.32% strength.

This action has traders closely monitoring bond YIELDS as MARKET looks to be gaining some confidence back in the dollar and ridding portfolio's of the once "defensive" gold stocks.

 
 
  Jeff Bailey   7/23/02,  11:45:20 AM
Treasury Watch 5-year YIELD ($FVX.X) 3.579%, dipping marginally red here and now seeing marginal buying. This differs somewhat from earlier this morning when selling was found in this shorter-term maturity. Hints of defensive action.

Both the 10-year and 30-year still showing marginally higher YIELD, but that may begin to fade as 5-year edges lower.

This action a bit defensive for stocks. Benchmarking the Dow +76 points, SPX -2.76 points and NASDAQ Comp -5.5 points here.

 
 
  Jim Brown   7/23/02,  11:40:22 AM
Pivot Trade Signals
The Dow is acting very well considering Citigroup is down -4.20 and JMP is off -2.66. There are only 8 losers and 22 gainers. The big winners that are holding the Dow up are MMM +2.66, UTX +2.25, PG +2.16, WMT +1.97, JNJ +1.90 (current call play), DD+1.38, MO +1.21

 
 
  Jeff Bailey   7/23/02,  11:34:47 AM
USA Interactive (USAI) / Expedia (EXPE) have mentioned both stocks in "unison" in past. Bearish break lower in USAI today at $20 and lots of "room" to bearish count of $6 (column of O from $32 to $20) should weigh on Expedia (EXPE) $51.00 Link

Yesterday's trade at $56 turned EXPE vertical count bearish. Current column of O is the vertical count column. Let's see.... $59-((9*2)*1)= $41. Will also note CE Unterberg Towbin downgraded EXPE to "market perform" from "buy" due to valuation; in addition, firm believes that EXPE will guide Q3 transaction revenue lower for the first time due to elimination of travale agency commissions from the major airlines and the expected tough environment for air travel this summer.

 
 
  Jonathan Levinson   7/23/02,  11:33:30 AM
COMPX price is approaching the 1280 resistance area, which has held for the last few attempts. I'm itching to put on some new COMPX shorts, particularly in light of the relatively low QQV, down 2.24 today. However, on the longer intraday views, COMPX price continues to be near the low end of its descending channel, and I'm concerned that bungee snap north on the DOW or S&P could bring the COMPX along for the ride. I will try to wait for a rollover from a higher resistance level before initiating new put positions. Gunslingers who *need* to be in here can use tight stops and target rollovers from our intraday resistance levels.

 
 
  Jeff Bailey   7/23/02,  11:33:22 AM
The 11:00 AM intraday update has been posted. Link

 
 
  John Seckinger   7/23/02,  11:32:39 AM
What are your thoughts on MER?

Response:

Going back to Valentine's Day week of 1999, shares of MER finally broke out higher and began to ingraine important technical levels in investors' minds. A pullback that August also seemed to use the same level in order to take off higher and not look back for 2 years. What level am I talking about? Believe it or not, almost exactly the same level as shares of MER are currently trading at, 35.30. Therefore, MER is at a pretty pivotal support level (not to mention at the bottom of a recent downtrending channel). Risk should be more weighted towards shorts, while bulls most likely will keep stops very tight. As far as purchasing options, this pivotal area could prove to be a reason for consolidation; thus hurting time value and lowering premiums. I would not be surprised to see a move to 37.8, while weakness underneath 35 could swing sentiment to more bearish levels.

 
 
  Jim Brown   7/23/02,  11:30:29 AM
Hi Guys I noted yesterday on MM a subscriber saw the tick at - 1000 for over 1 hour , my R/T Esig shows as low as 1400 on 2 occasions. Yet a local radio station programe I listen to in The Orl/Tampa area with a guy who uses Tick quite a lot said he did not see that , I know he uses BB . Did u see the 1400 or so and is it poss for different services to have such differances. Regards, Eamon.

Anything is possible depending on quote systems. In a world that lives and dies by accurate quotes it is nearly impossible to match quotes from one quote system to another. Here is what I show.

-1091 - 11th
-1294 - 15th
-1148 - 19th
-1460 - 22nd
-1309 - 23rd

 
 
  Jeff Bailey   7/23/02,  11:29:50 AM
Newport Corp (NEWP) $14.37 -2.57% ... first profiled this one as bearish back on 05/29/02 at $18. While stock did trade its bearish vertical count of $14, recent month's action has generated "new" bearish count of $11. Equity trader might look short on break of yesterday's low of $14.35 and target $11.50 as swing-trade. Start with stop just above yesterday's high of $15.20. Link

With MACD starting to roll, just below zero, stock could break to September lows like other stocks have been doing. Link

 
 
  Leigh Stevens   7/23/02,  11:28:05 AM
Subscriber QUESTION: " I just finished reading your book. Great insights! I'm thinking about triggering a Aug 23 call if the q's hit 23.What do you think as a setup? "

RESPONSE: It has some risk, trying to "catch" a bottom - momentum has not been sustained on upside, so taking a new long side trade in QQQ is hoping that something will happen that generates some upside follow through buying. So, its more than the Q's being back down into apparent technical support. With Microsoft breaking to a new low for this move, I'm leary of stepping up to the plate.

On other hand, we getting into an area where action in Q's is showing that the Nas 100 stock group is finding some buying interest. Volume has not been light, so assume that discouraged longs giving up on the former tech darlings are being met by buyers.

 
 
  Steven Price   7/23/02,  11:21:53 AM
Reader Question: Hi Steven. I was wondering what you think about LMT (I bought some DEC 50 puts last week)? The defense sector has taken a beating from it's high and others in the sector (GD and NOC) are getting nuked! From my calculations, the current bearish vertical count is about 61-(2*15)=31...That seems a mile away - I think it will bounce at it's bullish support line at 41. Are my calculations correct?

Thanks. LR

Response: I get a bearish vertical count of 40. The count should be started at the top of the column of Os where the initial sell signal was given. This would be 70 - (15 x 2)=40. The column of Os in this case started at 70, and gave a sell signal when the stock traded 59, eventually reaching 56 before reversing. You are correct about the location of bullish support at 41. I also see quite a bit of consolidation in the candlestick chart around $46, which could serve as support. Note that the stock bounced off some support in the $52.85 area yesterday.

 
 
  Leigh Stevens   7/23/02,  11:13:15 AM
INDEX Comments: Nasdaq weakness - looks like further pressure on Microsoft (MSFT), slippage in QCOM, CISCO, INTC and ORCL putting some renewed pressure on the Composite and the Nasdaq 100.

Big NYSE volume in past two days noted just now by CNBC - today could be third 2-billion share day, which is BIG for the Big Board - capitulation type selling? - stay tuned.

VIX has continued to advance a bit today - not by much, but has been holding near 49. Main point of interest is that volatility is not falling. Question traders are asking themselves is whether there will be a final spike up in VIX, like there was post-9/11. VXN, measure of Nasdaq 100 options volatility, has fallen off some from recent 68.7 high - right now VXN is at 63.7

 
 
  Steven Price   7/23/02,  11:07:22 AM
Retail Index 263.02 (+5.22) The retail index has rebounded slightly today. The chart looks the same as most of the large retail players (Walmart (WMT), Home Depot (HD), Target (TGT)), with a small bounce after 10 of the last 11 sessions were down. I don't buy it yet. WalMart (WMT) did reach its post Sept low of $44 yesterday (actually trading $43.99) and has rebounded to $45.84, which still constitutes and inside day. I'd like to see a close at least above yesterday's open of $46.25 before believing in the possibility of a rebound for the sector.

 
 
  John Seckinger   7/23/02,  11:06:31 AM
The Securities Broker Dealer Index (XBX.X) has gotten my attention twofold. First, the index is historically far enough below the 22, 50, and 200 DMA's (index at 354, 110 underneath the 22 DMA - which is barely above the other two) for buyers to begin to take notice. Secondly, and most importantly, the XBD.X index is testing strong support from October 1999. Near 340 should be downside risk, while a move back to 400 seems more likely in the near term. Once at 400, a strong overall market could propel brokerage issues back to near 450 before consolidating.

 
 
  Jonathan Levinson   7/23/02,  11:04:13 AM
Not a lot of spring in the COMPX' step this morning. It appears that the whole market is waiting for that elusive next bounce to reload their short positions or sell off some more of their underwater longs. In any event, 1280 is acting as the immediate hurdle on the way to the top of this short term range.

 
 
  Jim Brown   7/23/02,  11:03:58 AM
Pivot Trade Signals
I am constantly asked about the "enormous, huge, abnormal, unjustified, etc" spreads in the OEX and why/how can anybody trade them and make money. Yes, the spreads are wider than the QQQ for instance. The QQQ has had a good day with a 1-2 point move. The OEX has had a good day with a 10-15 point move. The spreads are larger but the moves are larger.

I also get the question constantly about the "high" option premiums. "How can anybody make any money with a $9-$12 premium?" Last week we had a couple days when the high option premiums doubled. A $9 premium in the Preferred Autotrade program went to $19, A $12 premium went to $21. Yes, the premiums are higher and the spreads are wider than the QQQ. They are not much higher on a relative basis. If you want a 50-cent move, play the QQQ. If you want a 10-point move plays the OEX. For reference the bid/ask on the OEX AUG-400 put as I write this is 15.10x16.50 with the OEX at 407.

An alternative to these two extremes could be the DJX options. With the Dow at 7833 the DJX $76 put is b/a 2.15x2.60. The DJX moves 1 point for every 100 Dow points. A 300 point move, common recently, would put the 76 put ITM and raise the premium to 3.50x3.80 like the $79 put is currently. (est)

There are numerous options available for traders wanting to capture the broad market swings. We do not recommend any specific vehicle, option, strike because of the many different investors reading the monitor. Many use the DIA/SPY and just go short/long. This requires more capital but eliminates the spread problem. Others use options on the DIA but they are fairly thin on volume. What you use is up to you.

The autotrade program at Preferred Trade filled the ATM traders this morning with the OEX 405 puts at $17.80 (average) and the ITM traders with the OEX 410 puts at an average of $20.20.

 
 
  Leigh Stevens   7/23/02,  11:02:24 AM
Subscriber QUESTION: " With yesterdays action do you feel their will be follow through early and a chance to go long for a rally on the OEX and QQQ? What is you thoughts on the weakness in the XAU? Will we see a bounce?"

RESPONSE: Well I thought XAU might find some support in 65 area, at its 200-day moving average. However, Gold/Silver sector is below that now - I have lower objectives in the 61-61.50 area, where XAU begin its rally in March.

Chance for rallies in OEX & QQQ of course is possible at any time based on the indices being very oversold and down near the low end of their respective hourly downtrend channels, etc. However, a "spark" for a turnaround is missing or has not happened - the much talked about rebound in the dollar hasn't provided it - I never saw the linkage to the dollar that most of the media talking heads did. Anyway, some type of bullish news is what appears to be needed to set off a sustained rally - a "sustained" rally used to be 2-3 weeks, now it would seem like a minor miracle to get a 2-3 day advance.

Technical factors are less important in this kind of blow off market, just as they were not in the blow off to the upside in 2000.

 
 
  John Seckinger   7/23/02,  11:00:14 AM
Starting with the Transportation Average (TRAN) - down fractionally at 2228, this index has lost value 15 of the last 16 session and is underneath the pivotal 2275 to 2320 area of prior support. Why profiled? A Head & Shoulders pattern which began at the beginning of 2002 has an objective of 2200. Therefore, this index should finally begin to see bids enter just below current levels and give a solid risk/reward play for a move back to near 2340, if not higher.

 
 
  Leigh Stevens   7/23/02,  10:48:23 AM
Subscriber QUESTION: "I'm looking at shorting an Iron Condor on EBAY. Same play I had for July expiration, which is S60/B65 Aug Call and S50/B45 Aug Put. Based on OIN's comments on EBAY, the play looks promising for Aug. expiration. Any thoughts? "

RESPONSE: If the play works based on the stock not going anywhere on the upside, it looks OK. Ebay (EBAY) stock decisively broke its up trendline on a sell off yesterday - origin of this was gap lower and sell off on Friday on VERY heavy volume, suggesting a significant downside reversal - anyway, decline yesterday also took it below its 50 and 200-day moving averages.

EBAY needs to get back above 58.25-58.5 to regain its bullish footing. Absent that, stock is vulnerable to falling back to the 54 area at a minimum, maybe lower, such as back to 50-51 where it seems to have best support and is low end of its 50 - 62/64 trading range of past few months. .

 
 
  John Seckinger   7/23/02,  10:40:13 AM
Sweeping the Sectors: Disk Drive and Internet issues continue to come under significant technical pressure, while Biotechs and tobacco stocks showing strength. Today's profiled sectors: Securities Brokers and Transportation, both in free-fall mode.

 
 
  Jim Brown   7/23/02,  10:35:05 AM
Pivot Trade Signals
The VIX just broke 50 and the internals are very bad. New 52-week highs are 13, new lows 374 !! Decliners are beating advancers nearly 2:1. The Dow found temporary support at 7750, 33 points above yesterday's lows. It looks like a buy program triggered at the 7750 level and Nasdaq 1275 level. Could be one or multiple. It will be interesting to see if it sticks!

 
 
  Jonathan Levinson   7/23/02,  10:33:35 AM
The COMPX seems to be at the bottom of its short term channel and will try now for its next lower high, around 1290 if we see it. The 30 and 60 minute intraday stochastics aren't getting much chance to become overbought before reversing, so I'm watching the shorter oscillators for a rollover below the 1300 level, most likely around 1290. The QQV is now down 1.91 on the day.

 
 
  Jeff Bailey   7/23/02,  10:32:21 AM
Merrill Lynch (MER) $35.04 -2% ... not a bad looking short/put in the brokerage sector here. Stop $40 with bearish vertical count of $23, gives bear a decent risk/reward of $5/$12, and getting tougher to find such risk/reward. Link

 
 
  Steven Price   7/23/02,  10:27:51 AM
Lehman Bros (LEH): $51.20 (-1.30)

OI Play of the Day (Put) Link LEH is down, as it follows JP Morgan and Citigroup. LEH looks ready to break its next support level at $50.

 
 
  Leigh Stevens   7/23/02,  10:23:10 AM
Subscriber QUESTION: "Hi Leigh! Great work! Question...which 200 day moving average is most important in determining support/resistance ? 60 minute? daily? weekly? "

RESPONSE: A 200-"day" moving average only refers to 200-day measurement - assume you meant if 200 "period" average is appropriate for hourly, daily, weekly, etc.

200 is commonly used as the moving average length applied to the Daily charts. It is a "standard" for judging the intermediate to long-term trend; i.e., if above its 200-day average, stock is viewed as being in an uptrend; if trading below its 200-day moving average, stock is typically viewed as being in a confirmed downtrend. The same average, as you note, is often used to spot support/resistance areas. Also, important in stocks is the 50-day moving average - it often highlights or "defines" technical support and resistance areas.

Have not used 200 period moving averages on hourly or weekly charts. Not that it can't be used, but its not one that traders use much. I tend to use the 21-Hour moving average and either 8 or 13-Week moving averages - this is some a matter of personal preference, but find that these help tell me where stock or index will break out to upside or break down in THOSE time frames.

 
 
  Steven Price   7/23/02,  10:20:56 AM
JP Morgan (JPM) $22.15 (-2.37) JPM is now below its Oct 1998 levels (low of $22.54).

 
 
  Jim Brown   7/23/02,  10:20:53 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broader market SHORT signal at 10:10:52 when the OEX traded below 407.00 (SPX 818.99, Emini 817.50, DIA 78.30, SPY 82.10, DJX 78.37) This was not my preferred entry point and had hoped we could see a substantial bounce instead. With support at 400-405 this is a risky signal but the weakness in the morning markets could be pointing to another significant failure. The initial stop loss for this signal is OEX 412.25. (SPX 828) This is much wider than normal but should prevent us from being whipsawed out on any buy program triggered around OEX 400. Under 400 we could go into free fall.

 
 
  Jonathan Levinson   7/23/02,  10:15:55 AM
Thanks much for the insight. I know you guys don't recommend which options to trade, but as a neophyte I find that front-month OEX and SPX prices are pretty high with up to a 2-point spread. Where can I get good bang for the dollar? Seems the QQQ's move well and the DIA's seems less actively traded.

I find that the QQQ options, with their monster volume and OI, very tight spreads and relatively low premium are the easiest and most forgiving of the index options. Remember not to overleverage and use appropriate stops.

 
 
  Steven Price   7/23/02,  10:13:24 AM
Reader Comment : Steve, In looking at the long term trend of the SPX with an eye toward trying to find a logical support point, I put a retrace bracket from the monthly low at July 1996 to March 2000. I found the typical brackets (19.1, 38.2, 50, 61.8, 78.6) mapped pretty well. The drop yesterday put us right about at the 78.6 line. I would have to say that this potential support point is now in some jeopardy, but my observation appears to be holding some water. I thought you might be interested. Bill K.

Response: Interesting note Bill. I looked at the chart and you are correct, although I see yesterday's close broke down to 84.1%. Something to keep an eye on.

 
 
  Jeff Bailey   7/23/02,  10:12:45 AM
Citigroup (C) $28.00 -12.6% ... stock getting "whacked" again today. Yesterday's trade at $32 achieved "bearish vertical" count. Today's trade at $28.00 achieves Professor Davis' study from the "bearish triangle" given at $42, which was where we first profiled as bearish. Would lock in at least 1/2 positions here, then follow rest with stop at $39. Link

Another idea might be to lock in 1/2 position gain, then if 100 shares or more is left over, think about selling covered puts.

Stock down on New York Times reports that records and interview with investigators demonstrate for the first time that senior credit officers at Citigroup (C) misrepresented the full nature of a 1999 transaction with Enron in the records of the deal so that Enron could ignore accounting requirements and hide its true financial condition.

 
 
  Jim Brown   7/23/02,  10:07:47 AM
Pivot Trade Signals
The first hurdle the markets must overcome is resistance in the futures between 826-829 with the next level at 839. The 839 level is strong resistance and should provide a top for the current market based on the opening strength. The NDX futures have resistance at 958-960.

 
 
  Leigh Stevens   7/23/02,  10:04:59 AM
Subscriber QUESTION: "What do you think of QSFT? Stock has extremely rich call premiums. It has held up well under current market pressure. "

RESPONSE - Quest Software (QSFT) has rebounded from the recent lows near $8 back up to the 10.50 area. However, this is about the best upside that I see in the near-term as the stock has run into selling pressure just under substantial overhead resistance. Judging by the breakdown on 7/9 on very heavy volume, suspect that is plenty of supply (stock for sale) if stock even approaches 11 area. Pattern looks like recent rally is not going to upside follow through - next price swing is down, in my estimation. That said, close over 11.50 and ability to build "support" in 11-11.50 area would be bullish technically.

 
 
  Jonathan Levinson   7/23/02,  10:04:33 AM
We have bullish crossups on the intraday COMPX stochastics 5(3), and I'm watching the impending resistance levels for signs of a rollover. The COMPX is currently printing highs of the day as I type (can now watch this on my new 19" screen :)

With the QQV down another 1.76 so far today, we are gaining leeway for a nice whoosh down. The TRINQ is at .22, but again, the compelling buy that is WCOME has broken my beloved TRINQ.

 
 
  Jim Brown   7/23/02,  10:03:13 AM
Pivot Trade Signals
The prospects of a bounce are less than exciting so far. We are starting to see a little life but not enough to consider a LONG play. We will wait patiently for a roll over at hopefully a higher level.

 
 
  Jeff Bailey   7/23/02,  10:01:26 AM
Market Internals Internal weakness again after yesterday's action.

NASDAQ-100 Bullish % ($BPNDX) reverses into "bull correction" status at 28%, and found a net loss of 3 stocks to sell signals. Covered calls advised on many bullish positions in this market or tight stops. Link

The also narrow S&P 100 Bullish % ($BPOEX) saw a net loss of 1 stock to a sell signal and day by day continues to show internal damage. Current reading is "bear confirmed" and very oversold on longer-term basis. Link Current 11% is below September's readings of 16%.

The broader S&P 500 Bullish % ($BPSPX) fell to 14.6% from 16.6%, so roughly 10 stocks fell to sell signals in this market. Matching the September low readings here. Link

Then the broadest have both the NYSE Bullish % ($BPNYA) Link and NASDAQ-Comp. Bullish % ($BPCOMPQ) Link falling into "oversold" territory at/below the 30% level. Still defensive and monitoring for a reversal.

 
 
  Steven Price   7/23/02,  9:58:50 AM
UPS $61.82 (-1.29) Current OI put play UPS warned that 3rd quarter profits may be hurt by customer worries over a strike. With earnings this morning, OI views this as an opportunity to close this position, which was originally picked at $67. Last week this stock had support in the $61.50 range

 
 
  John Seckinger   7/23/02,  9:56:58 AM
Reasons for a weaker Euro include a possible delay to an EMU referendum in Sweden, helping a short squeeze within the dollar. There is also speculation that fund managers are selling their overseas positions to both book profits and raise cash for liquidity needs.

 
 
  Jim Brown   7/23/02,  9:51:30 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I was very glad to see the bounce. This gives us a chance to work off the oversold conditions before starting a new leg down and hopefully will allow us to enter our next play at a much higher level. It also gave us a bottom for the morning and a higher breakdown point. Raise the entry point for a breakdown to OEX 407, just below the low of the day at 407.09. (SPX 817) I will be entering a new short signal for an entry on a roll over soon.

 
 
  Steven Price   7/23/02,  9:45:59 AM
Tyco (TYC) $11.40 (-0.45) Tyco announced that they will NOT certify their financials until an internal probe is complete. Doesn't sound like a reason to take any long position in this stock.

 
 
  Steven Price   7/23/02,  9:43:17 AM
Closed Plays: We closed put play SBC Communications (SBC) $24.50 +0.54 ahead of earnings. It is up slighlty after releasing this morning which beat estimates by 0.02, however they guided lower for the year to $2.26 - 2.35 from expectations of $2.36. Verizon (VZ) $28.51 (-0.14) This put play was closed last night to take profits Link . This morning's open around last nights closing price should be seen as an opportunity to close the position.

 
 
  Jonathan Levinson   7/23/02,  9:40:24 AM
The opening TRINQ showed the lowest reading I've ever seen at .13, currently at .28 as the buying slows. MSFT is back below 46 as the COMPX re-approaches its current low of the day at 1279.

 
 
  Jim Brown   7/23/02,  9:40:24 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I had wanted to see a little stronger opening before taking a new position but it appears the markets don't want to participate. Let's go short with an OEX trade below yesterday's low of 405.47 with an OEX trade below 405. (SPX 813) This gives us room to bounce in the next 5-10 minutes but launches a play on a breakdown.

 
 
  John Seckinger   7/23/02,  9:37:40 AM
Around the World After cutting rates for the first time in 2.5 years, China has decided to leave key lending and deposit rates stable for the rest of the year. Also, the 12% rise in the Euro is beginning to reflect in Germany via reduced imports and lower producer prices. Lastly, Japanese consumer confidence rose in the second quarter - first back to back gains in more than 1.5 years.

 
 
  Jeff Bailey   7/23/02,  9:30:13 AM
Lincare Holdings (LNCR) $29.91 ... Jeff: LNCR will replace WCOME on he Nasdaq 100 (PRNewswire) on Wednesday 7/24. Is it common that those “greenhorns” shoot up like UPS did last week? Then, would it be a promising strategy to get into LNCR tomorrow morning 7/23 and exit Wednesday afternoon 7/24?

I can honestly say... "it depends." For instance, last week not only was UPS Link added to the S&P 500, but so was SDS. Two entirely different "reactions" to the addition. One might say "demand" was stronger in UPS prior to the addition, while SDS' Link point/figure chart showed supply was clearly in control. Then when DEMAND was further enhanced by the S&P additions, both stocks traded much differently.

As for Lincare Holdings (LNCR) $29.91, longer-term trend is bullish and not a bad looking stock under current/past market conditions. First sign of trouble for a bull is a trade at $28. Vertical count is bullish to $52. Link I can envision a "pop" to $34 on NASDAQ-100 addition, but stop at $28.

 
 
  John Seckinger   7/23/02,  9:27:26 AM
Morning Anecdotals: Gold futures almost four dollars lower, dollar higher, and September bonds have a high of 105-30 (pivot level profiled yesterday). All complement a higher opening in equities. Note: This would be the largest one-day gain for the dollar since last September.

 
 
  Jeff Bailey   7/23/02,  9:25:45 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jonathan Levinson   7/23/02,  9:24:03 AM
COMPX support looks to be at 1270-75, then 1260, with resistance at 1300-05 then 1320-25.

 
 
  Jim Brown   7/23/02,  9:20:27 AM
Pivot Trade Signals
Futures are green? How do we react to this? (grin) Just kidding of course but the possibility of a positive day requires more than +3.00 on the S&P futures. It is time for some relief from the constant decline of triple digit days. The internals are very oversold but that does not guarantee a lasting bounce.

UPS warned and AT&T beat estimates. Chip stocks remain mixed and could lead the Nasdaq lower. Other companies that missed estimates include BMY, COC, LGTO, LU, MGM, P, SPC, WAT, XTO.

Overall nothing has changed in the markets and we will look at any positive bounce as a possible entry point for a new short signal. Support for the OEX is 405, resistance 425-430. The better the bounce the better the entry point!

 
 
  Leigh Stevens   7/23/02,  9:16:15 AM
Pre-Opening INDEX Comments - - Stock Index Futures lost their early gains as we get closer to the U.S. opening. Microsoft, a big loser yesterday, was holding some gains however - as was AT&T and Tyco.

Nasdaq seemed to dig into support areas yesterday. The problem is with the Dow - technically, where the average wound up the day, is NOT a particular prior area of support - major support looks to be at still lower levels. OEX near resistance I measure as at 420, then 430-435 area. SPX resistance at 840-842, then in 850 area. DJX resistance at 80.3, then 81.7 on the hourly charts. QQQ - good support has developed in the low 23 area; resistance, first at 23.7, then 24.5 next.

 
 
  Leigh Stevens   7/23/02,  9:09:25 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES trading: S&P 500 > +5.60 at 825.40; Dow Industrials > +35.00 at 7820; Nasdaq > +1.50 at 945.00

"Fair Value" numbers: S&P 500 futures ($SP02U): 0.89 -- Nasdaq 100 futures ($ND02U): 3.32

 
 
  Jonathan Levinson   7/23/02,  8:52:17 AM
The US Dollar Index spiked overnight to just above 106.50 (not a typo), and has been easing off steadily since, now just above 106. Futures are also well off their overnight highs, currently flat.

 
 
  Leigh Stevens   7/22/02,  7:41:34 PM
The Market Monitor for Monday, 7/22/02 can be viewed by clicking on Link

 
 

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