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  Jim Brown   7/24/02,  5:28:19 PM
The total market volume today was 5.99 billion shares with the NYSE trading over 3 billion. Of the total volume 4.71 billion was up volume and only 989 million was down volume. The new 52-week lows soared to 1730 today with new highs only 25. This was the highest number of new lows since the -2083 on 9/21 last year. The S&P stretched to seven the number of days without a stock setting a new 52-week high and 179 (36%) set new lows today. The oversold conditions were extreme and the short covering rally reflected it.

 
 
  Jim Brown   7/24/02,  5:10:57 PM
Pivot Trade Wrap
Instant Replay - The short covering today was an instant replay of the rallies on 6/24, 7/5, 7/15 and 7/22. The only difference is the magnitude. Round numbers for the four days mentioned the markets saw bounces of +300, +350, +400, +350 points. These were all short covering from oversold conditions. All eventually failed and we have traded much lower since. The monster +650 point bounce off the morning dip was due to the magnitude of the oversold conditions leading into today. The VIX was over 50 and the Dow had lost -1700 points over the last 12 days. The conditions were ripe for an explosion and while the +488 point gain was spectacular it represents less than 1/3 of the losses from the prior two weeks.

The challenge now is finding a catalyst to keep it going. Once the shorts are covered and traders begin taking profits from the bounce the true market direction will then appear. Did anything happen on Wednesday to change the economic outlook? Don't think so. Did anything happen to change the accounting scandals to come? Not to my knowledge. One day does not make a rally and looking at many charts tonight show the rebound took stocks right back to prior resistance. Now the work begins. We need for the rally to follow through tomorrow morning and we need the flurry of economic reports tomorrow to be market positive. Multiple earnings were announced after the close but the most relative to me was EDS, which warned of lower income due to a lack of new customers and reduced spending by current users. They also said WCOM would impact earnings substantially. I expect the WCOM news to be repeated numerous times over the next few weeks as companies assess their exposure to the bankruptcy.

AOL reported earnings after the bell that beat the street and affirmed guidance at the high end of estimates. However, AOL said they only added half of the one million new subscribers analysts had expected. Also the SEC announced they were starting a probe into their accounting practices. AOL was trading down after the bell. GE also announced a layoff of 2500 workers.

The Dow closed right at resistance, which continues to 8275. The OEX stopped right at resistance at 420 with strong resistance to 431. The Nasdaq has strong resistance at 1300-1310. The SPX has strong resistance between 845-854 and it closed at 844. (Salomon Smith Barney lowered their year-end targets for the S&P to 1,000 and the Dow to 9,650. This is not going to be the last set of revisions.) The point I am making is that the market still has a lot of potholes in its future and stopping just below strong resistance sets it up for failure at the open.

Nobody can tell you tonight what will happen at the open. The overseas markets will rally tonight based on the Dow/Nasdaq gains and the temptation will be to follow them tomorrow. Whatever happens at the open the shorts have not retired from trading. They will wait patiently and when the weakness appears they will come off the sidelines in droves. This will be the true test. Today was better than I speculated last night and a great day for longs. However, it was just one day. Tomorrow begins with a fresh sunrise and bulls will have to justify buying stock after a +500 point gain. Can you? Did I mention the TRIN was very bearish at .33 and the VIX has cooled to 45?

 
 
  John Seckinger   7/24/02,  4:06:05 PM
Looking Ahead: Tomorrow there will be a plethora of economic releases; from Initial Claims to Durable Orders to ECI all at 8:30 a.m. Then, one-half hour after the market opens there will be New and Existing Home Sales. Of course, there will be a number of companies reporting earnings and Microsoft will be holding their Analyst Day, time not reported.

 
 
  Jeff Bailey   7/24/02,  4:01:22 PM
Dow Industrials (INDU) 8,200 +6.45% .... closing above its Sept. 21st low and this will make things very interesting in the morning. Today's close just shy of the September 21st close of 8,235 and that may be a near-term resistance level for tomorrow morning.

 
 
  Jeff Bailey   7/24/02,  3:59:03 PM
60-minute charts Seeing Dow Industrials (INDU) 9,197 +6.43%, IBM $69.51 +3.65%, Oxford Health (OHP) $41.20 +4.91% trading right at their 50-pd MA's on 60-minute intervals. May be some targets for other short-term traders to be looking at regaring any bullish positions they've entered today.

 
 
  Jim Brown   7/24/02,  3:58:25 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORT signal at 15:54:38 when the OEX traded above 419. (SPX 842.23, Emini 843.50, DIA 81.97, SPY 84.60, DJX 81.82, NDX 946.46, Nasdaq 1283.62) This is disappointing. The OEX is dead on resistance at 419-422 and the Dow is up +500 points. Tomorrow is another day.

 
 
  Jonathan Levinson   7/24/02,  3:56:41 PM
please update us as we go into the close if you are going short on the q's. Thanks and I really appreciate your insightful posts

See my last post- you see now what I'm watching. If we get that 60 minute 5(3) crossover, I'll look at the TRINQ, and if it's low, say below .30 or so, I might well. But there's a lot of energy here, and we won't have time to see a confirming fall to bring down the 60 minute stoch. I'll be going into the close flat.

 
 
  Leigh Stevens   7/24/02,  3:55:00 PM
Wall Street Journal (WSJ) - This morning's WSJ had story on front of their "Money & Investing" section on Program Trading - called: "Is Program Trading the Problem - or Excuse" , which alludes to a "shoot the messenger" take on Program Trading. There is greater and greater volatility, so funds that have to reduce their holdings or "reweight" their portfolios, turn increasing to simultaneous selling/buying the stocks invovled so they the prices they get are in line with the S&P Index. Small traders note the greater number of program style trades and complain about it. I say, "Fuggetabotit!

Sure "program trades" have accounted for as much as 40% of total daily NYSE volume of late - but this is more a function of individual investors staying away and reducing the volume. Who is left - the funds that you and I invest in, and they have to respond to the market changes. An efficient (less costly) way for them to do that is by executing "blocks" of stock at the same time. By the way, we're not talking about that variety of program trading that is involved in stock index futures arbitrage with a basket of the stocks underlying the index involved. And, the artcile quotes a Big Board (NYSE) "spokesperson" as stating that "Arbitrage" accounts for maybe 10% of the total.

This is consistent of my knowledge of it in terms of volume levels - Index Arbitrage opportunies are far more limited in the ABSENSE of the bullish "sentiment" that frequently bids up the S&P futures premiums to well over "fair value".

The definition noted for what is a "program trade" - the NYSE defines as: "any trade valued at at least 1 million dollars in which more than 15 different stocks are bought or sold at once".

A million actually is only small potatoes as individual program trades can easily have a value of $100 million and more - such as a major rebalancing of a major pension fund - such resulting program trading could involve 2-3 Billion, with a "b".

The funds believe or theorize that Program trading block transactions can help "steady" the market as it falls, spreading losses around a variety of stocks that might be in firm's portfolio. Well, maybe - you mean "its good for us"!?

 
 
  Steven Price   7/24/02,  3:54:42 PM
Reader Question: Goldman Sachs $71.28 (+3.55) I am not familiar with your style re: stops....GS is starting to hurt us with above 69-any comments? Linda

Response: Linda, Our stop loss is the point at which we close a play that has gone in the direction opposite the trend we have identified. Our stop on GS is $70 Link listed in the play. This particular stop was placed above the PnF breakdown level.

 
 
  Jonathan Levinson   7/24/02,  3:42:34 PM
how do you feel about shorting the qqq's here?

I'm waiting for that 60 minute 5(3) stoch to cross downward. Until it does, this just looks like an upmove gathering more steam. The .45 TRINQ confirms- not yet extreme.

 
 
  Jim Brown   7/24/02,  3:36:38 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market SHORT at 15:30:34 when the OEX traded below 415.00 (SPX 834.79, Emini 834.50, DIA 81.35, SPY 83.90, DJX 81.25, NDX 930.61, Nasdaq 1266.16) The initial stop loss will be just above the high of the day OEX 419, (SPX 841)

 
 
  Jeff Bailey   7/24/02,  3:33:54 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Leigh Stevens   7/24/02,  3:31:24 PM
Subscriber QUESTION: "H&S on OEX - What do you think? 2 day pattern on the OEX? Not quite textbook, but this breakout is confirming, no? "

RESPONSE: Agree on H&S and your description of it as not quite "textbook" - its more of a "V" bottom - but, a bottom by any other name, is still a bottom (and apologies to William "The Bard" Shakespeare).

On OEX, one key to gauging strength and the "legs" that this rally might have is to next look at the minor downtrend channel, the top of which it hits in the 420-421 area. If the S&P 100 pierces this resistance area - if so, next resistance and an objective, is to 435-436.

 
 
  Jim Brown   7/24/02,  3:28:57 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
With 30 min to go before the close there is a good chance all the bullishness will evaporate tomorrow. Let's raise the entry point on the current SHORT signal to OEX 415.00 (SPX 834)

 
 
  Leigh Stevens   7/24/02,  3:23:53 PM
Subscriber QUESTION: " seems like the qqq cant break above the down trend line. I am long qqq, infact, I think the only thing keeping it from going higher is me not selling my calls:) Whats your slant on the q's as we go into the close. Would youtake what you can and run after such a struggle of a day for the NDX? "

RESPONSE - QQQ now has achieved a decisive upside penetration of its hourly trendline - it can take some time for these rallies to set up. Upside now to 24 area is what I see next.

You're right, selling your calls would have precipitated the rally sooner! :-

 
 
  Jim Brown   7/24/02,  3:23:44 PM
Pivot Trade Signals
OEX 418-420 is strong resistance but at this rate it will be in the rear view mirror before the technicals catch up with reality. I am suppressing the urge to go short here at 418 with a stop at 422, the top of the down trend channel.

 
 
  John Seckinger   7/24/02,  3:19:34 PM
The bond market is closed and the September 30-year has closed at 105-30/31 with settlement pending. Definitely not a coincidence, since with the high on the day was 107-26 a close underneath would represent a significant reversal. Nevertheless, I would not be surprised to see Treasuries witness continued selling pressure during the after-market; further sending equities higher. Of course, the big question will still be where bonds settle tomorrow, since this should give traders an idea of where funds are heading for more than just a few hours of short covering. Stay tuned.

 
 
  Jim Brown   7/24/02,  3:19:31 PM
Pivot Trade Signals
The NDX futures finally broke to a new high at 927 but have significant resistance at 932. This could be the end of their rally. Afternoon selling in the broader markets did not appear and shorts are now scrambling for their lives. The advance/decline ratio finally went positive after spending all morning deeply negative. The +450 Dow gain is spectacular and all the internals are now solidly positive. The VIX has crashed back to 46.83 and the TRIN to .37. That TRIN number will be a problem for the open tomorrow. MMM now up +7.12. The guys wanted to add it as a call play on Tuesday and I vetoed it thinking any Dow weakness would drag it below support. Bad move on my part!!! Got to love that hindsight!

 
 
  Jonathan Levinson   7/24/02,  3:17:44 PM
There she goes! The COMPX is breaking north, printing new highs as I type. Glad we waited for the bearish 5(3) stochastic crossover that never came.

 
 
  Leigh Stevens   7/24/02,  3:17:03 PM
Subscriber QUESTION: "re your comment earlier today on stochastic settings, am I correct that %K is "length" as you referred to it, and %D is smoothing? "

RESPONSE: %K is not "length" - length is the number of bars or the trading period that is a user variable - YOU put that number in to a stochastics study. %K is part of the stochastic formula that is applied for X number of bars - the specific "X" number of bars is LENGTH.

you are correct in that %D is the one that is "smoothed", of the two (%K,%D).

 
 
  Leigh Stevens   7/24/02,  3:13:15 PM
STOCK Comment: Gap Stores (GPS) had a huge swing today on a percentage basis, opening at 10.50, falling all the way to 9.10, then rebounding to the 11.25 area where it is now.

Wall Street Journal (WSJ) - story on the stock talked about all the problems facing the company now that it is no longer riding the wining wave in casual clothing. And the kids don't like em - I can attest!

This leads me the speculation that the Journalists involved - two are named - who wrote the story may be ripe for regulations involving any possible "front-running" of the story by making copies available of any brokerage accounts they own. Well, they were probably as surprised as anyone.

And, we thought only "pumping" up the earnings was a way to play a stock slam or sky shoot.

 
 
  Leigh Stevens   7/24/02,  3:05:17 PM
INDEX Comments: QQQ finally followed the COMP and broken out above its hourly down trendline ever so slightly. Pattern is more apparent on the 30M chart. Nasdaq rally, so far, has a "hesitating" quality to it. Rebound in MSFT, INTC and CISCO off their intraday lows is taken some of the pressure off - but not enough to bring in a wave of buyers. Tech buyers have been through so many of these rallies that have fallen apart quickly. Let em buy S&P stocks!

 
 
  Steven Price   7/24/02,  3:02:38 PM
Reader Question:

Steven, LOW is up $2.00. Is it a good entry point, or should we wait for a breakdown? And what's the breakdown point?

Thanks Bala

Response: With the market up over 300 points, I'd like to see if we experience a pull back before reinitiating this play. Target, Walmart and Home Depot are exhibiting similar gains. This could be a turning point for the retail sector, or maybe a sustained bounce. Walmart has rebounded from just above its Sept low, so I'm going to watch this sector before jumping back in.

 
 
  Jim Brown   7/24/02,  3:01:26 PM
Pivot Trade Signals
Dead stop at resistance at OEX 411 and the NDX futures are still below the highs of the day. Traders are waiting to see if the funds are going to be sellers in the next 15 minutes before continuing to cover those shorts.

 
 
  Jonathan Levinson   7/24/02,  2:56:12 PM
The COMPX is at the 1250 level and the stochastics (5(3)) are in overbought territory. I am waiting for a roll over before getting in, if at all. The TRINQ is at .72, far from overbought, and the stochastics have yet to roll over confirming the down move. Buying puts here is equivalent to catching a falling knife, which I won't do.

 
 
  Steven Price   7/24/02,  2:51:30 PM
Johnson and Johnson (JNJ) $47.77 (+3.69) The best traders let their winners run and cut their losses. Jim certainly had the right assessment of this stock earlier, as far as raising the stop. I would raise stops at this point to $46.50, in the middle of our original target for this OI call play, originally picked at $41.85

 
 
  Jim Brown   7/24/02,  2:46:11 PM
Pivot Trade Signals
The Dow is making some remarkable gains but the Nasdaq/SPX/OEX are lagging. The OEX is only up +2 points since we were stopped out. The NDX futures are well below the days highs and showing no strength. The vote is not in yet for the last hour trend.

 
 
  John Seckinger   7/24/02,  2:39:36 PM
Afternoon Anecdotes: Dollar futures lower, oil higher by 0.47, and bond prices up within shorter maturities while the 30-year bond is barely above the key 105-30 level at 106-02 - low of session 105-29. Moreover, CRB Index is off slightly while Gold futures remain lower (still 5 dollars above intra day low). What does this mean going forward? It seems as though the Dow leads the dollar and bond market (not yield curve), but I would still closely watch bond futures (30-year) for some type of follow-through if the futues close underneath 105-30. Inflationary commodity pressures remain subdued but more on investors' minds than one would think.

 
 
  Steven Price   7/24/02,  2:33:34 PM
Reader Question: Steve, whats up with spreads of 40 cents (2.00 by 2.40) on DJX puts w/1950 contracts traded? motivations here? thx.

Response: Looking at the current options bid/ask, I don't see many spreads that wide on options under $3, but I imagine with this type of volatility in the market place, and only one place to purchase these options, market makers are not in a rush to take on added risk. If they are going to sell puts, it is going to have to be on their offer. Usually in slower conditions, there is always someone with a different opinion than they guy standing next to him. On a day like today, when it is very busy, with big swings, there are usually a lot of market orders, with customers playing direction, rather than optimal pricing. When there are a lot of market orders it makes sense for the market makers to leave the market as wide as possible to take advantage of the bid/ask spread.

 
 
  Jim Brown   7/24/02,  2:25:46 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market with an OEX trade below 399.50. (SPX 805) I wanted to put it at 402.50 again but caution indicates we go below the afternoon bottom at 400 and give up those points to avoid another losing signal. Aggressive traders could enter now at OEX 404.

 
 
  Jim Brown   7/24/02,  2:22:00 PM
Pivot Trade Signals
The markets are struggling just below the highs of the day and TICKS are weakening. I am going to reinstate a SHORT signal in advance of the 3:PM turning point. I am not willing to go long on a breakout but I am willing to go short again.

 
 
  John Seckinger   7/24/02,  2:15:00 PM
Side Notes: Bank of Japan Governor Masauru Hayami said that the dollar's current weakness was not surprising because of its history of volatility. The Governor did say that he hopes the dollar would not fall further. In other global news, European stocks fell to new five-year lows as talk of hedge funds shorting equities took center stage once again. In Europe on Thursday, bellwether corporate names report earnings; Alcatel, Astrazeneca, BT, EADS, Fiat and Telecom Italia. Just something to think about if positions are held overnight.

 
 
  Jim Brown   7/24/02,  2:12:11 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORT signal at 14:07:00 when the OEX traded above OEX 406. (SPX 816.61, Emini 818.25, DIA 79.50, SPY 82.12, DJX 79.38, NDX 911.59, Nasdaq 1243.15) We got a couple little buy programs that ticked us up near the highs for the day. After trading 50 cents over our stop the OEX has dropped back slightly. We are still 49 minutes from the 3:PM turning point and the closing direction is still in doubt.

 
 
  Leigh Stevens   7/24/02,  2:09:42 PM
INDEX Comments: COMP breaking out above its down trendline on the 30m chart. NDX & QQQ starting starting to poke above their resistance trendlines.

 
 
  Jonathan Levinson   7/24/02,  2:05:46 PM
If this rollover comes per your 13:48 post, would that be a place to buy a full position of QQQ puts?

That depends entirely on you, and your account management and risk profile. I haven't played a full position in a few weeks, being timid of the potential for a full blown bungee snap to rip off my less resistant appendages. Being a conservative options trader, I prefer to risk profits in every subsequent trade, but then, of course, that limits my upside. You have to evaluate the market and your account yourself and make the call- I can only report what I'm seeing at the time, and alas, I make mistakes too.

 
 
  Jonathan Levinson   7/24/02,  2:02:21 PM
In your 12:19:22 comments, you mentioned about Idea setup! Over the years I learned so much from you guys at OI, I have some idea (?) about ideal setup. I realized that some ideas are not good enough. Hence this question! Can you give me the 1,2,3s of the ideal set up? If possible, give me some pointer on how to identify the approaching ideal setup? (this where I mess up most of the time and end up late to the party).

For me, and this varies from trader to trader, an ideal setup is one in which the trade is intended to follow the primary trend, which in this market so far has remained down. So first off, I'm looking to follow my friend, the trend, in a bearish trade. An ideal bearish trade for me is one which kicks off from an overbought level (stochastically) at a major resistance point (though a minor one will do), coupled with a low TRINQ reading (anything below .30 today will do for me), and the QQV well off its highs of the day. I'd prefer to see the other averages also topping out, but above all, the very low TRINQ and the rolling stochastics (wait for the actual crossovers of the slow line by the fast line) are the most important. But perhaps even more important is that the trade be one that you're comfortable with, and that it feels right, with the appropriate stops and exposure already established. Sorry for the broad strokes, but volumes have been written by traders more accomplished than I. These are my own criteria to govern my trades- but the best formula is the one that pays for you.

 
 
  Jim Brown   7/24/02,  1:59:41 PM
JNJ - I am a little more optimistic on JNJ and the chances for it to move up a little higher. Not to go against Steve but I would tighten my stop instead of an outright sell on JNJ. Every analyst I have heard said this probe was without merit. You be the judge but JNJ has behaved well despite the down markets. Just my opinion!

 
 
  Jeff Bailey   7/24/02,  1:59:22 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Steven Price   7/24/02,  1:58:02 PM
Reader Question: Hope you guys will have an in depth article on how SSFT (single stock futures) will affect stock and index options trading.

Russ

Keep an eye out for a Traders' Corner article on this topic.

 
 
  Steven Price   7/24/02,  1:55:23 PM
Reader Question:

Johnson and Johnson (JNJ) $46.15 (+2.02)

In the call update last night, there is plan to close the JNJ call play between 46-47, do you see possibility to close it today or tomorrow? And if holding a Oct 45 call, what would be a good profit taking target? Thanks

Response: JNJ has had quite a week, contrary to most other stocks in the market (at least until today). The Oct 45 call, originally listed in our play at $3.20, looks to be currently trading $4.40-$4.50, which would amount to a %38 gain. I do see a possibility of closing this play today or tomorrow if the stock continues its trend upward. I have some questions about whether it can make it back to the $49 range, from which it fell when the federal probe was announced. This is a good level to take some profits on this trade, as it is trading over $46.

 
 
  Jeff Bailey   7/24/02,  1:49:47 PM
YIELD Alert! 30-year YIELD ($TYX.X) 5.286% at intra-day high and now at unchanged levels. From 12:41:30, thinking should be that stocks should see extended gains.

Benchmarking Dow Indu +213 (vs. +132), S&P 500 +16 (vs. +10) and NASDAQ Comp. +9.6 (vs. +1.12).

 
 
  Jonathan Levinson   7/24/02,  1:48:45 PM
The COMPX is still below 1250 resistance, and those 60 minute and shorter 5(3) stochastics are getting toppy. The QQV is at 59.51, and still up 1.24 today. A rollover could take the COMPX right back down again. The TRINQ is at .46, as bulls spend their bullets without moving the index significantly higher. While a blastoff is not out of the question, I'll be watching for a stochastics/price failure for a QQQ put play, but using tight stops in case it's a fakeout.

 
 
  Steven Price   7/24/02,  1:38:36 PM
Goldman Sachs (GS)$68.01 +0.28: Current OI put play GS rallied with the rest of the market, but has fallen back. Yesterday's triple bottom PnF breakdown still looks very bearish for GS under $69

 
 
  Steven Price   7/24/02,  1:34:24 PM
The Nasdaq is awaiting approval of a new exchange that would list single stock futures. The effect on options trading could be immense. This would provide a third leg in the options arbitrage formula. Equity options are currently priced based on interest considerations for carrying long stock, as well as dividends. Futures do not have the same considerations. In addition there will be only a 20% margin requirement, if approved in its current state, which would allow cheaper plays between options and stocks.

 
 
  Jim Brown   7/24/02,  1:32:58 PM
Pivot Trade Signals
We are only one program trade away from a breakout or a breakdown. The markets are moving sideways in a very narrow range where any decent buy/sell program could trigger buy/sell stops and send us rocketing off in that direction. It appears there is an attempt to maintain a 900 bottom in the NDX futures, which is just barely keeping the Nasdaq in positive territory. Like walking on the edge of a razor blade we are in very dangerous territory.

 
 
  John Seckinger   7/24/02,  1:26:42 PM
Other sectors seeing a bullish divergence with regards to the Relative Strength Indicator (RSI) is Semiconductor (SOX.X) and Networking (NWX.X) Issues. By definition, prices fall to a new low while an indicator (RSI in this case) stops at a more shallow low than before.

 
 
  John Seckinger   7/24/02,  1:03:48 PM
The Combined Telecom Index (IXTCX) seems poised for an increase in volatility over the near term. Currently down 2 percent at 91.36, the downside objective is for an extended move lower towards 60; however, if the index can manage a rally above 93.25 there should be a quick move to 100 before investors catch their breath. Looking at the Relative Strength (RSI), while the index fell to new low the RSI did not - a bullish divergence. Volatility traders should keep this index on the radar screen.

 
 
  Jeff Bailey   7/24/02,  12:41:30 PM
Treasury Watch Turning attention to 30-year YIELD ($TYX.X) 5.238% here. Thinking intra-day is that 5-year action did indeed trigger some asset allocation programs. Watching 30-year YIELD pull lower for session high of 5.281% right into 50-pd MA on 5-minute interval chart. In recent sessions, this 50-pd (now at 5.230%) serves as resistance and for stock rally to hold, equity bull would want to see 30-year YIELD (riskiest of major Treasuries) see selling and keep YIELD above 5.230%. Trading 5.24% here so equity bulls need YIELD to hold here. Otherwise, stock rally may fade.

Benchmarking Dow Indu +132, S&P 500 +10.07 and NASDAQ Comp +1.12 points.

Note: 5-minute interval observation is VERY short-term and day-trader use only.

 
 
  Jim Brown   7/24/02,  12:40:46 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broader market SHORT at 12:35:06 when the OEX traded below 402.50. (SPX 811.68, Emini 810.75, DIA 78.75, SPY 81.35, DJX 78.68, NDX 902.12, COMPX 1233.38) The initial stop loss on this signal will be OEX 406 (SPX 817)

 
 
  Jim Brown   7/24/02,  12:38:34 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the LONG signal at 12:35:06 when the OEX traded below 402.50 (SPX 811.68, Emini 810.75, DIA 78.75, SPY 81.35, DJX 78.68, NDX 902.12, COMPX 1233.38) This signal was initiated at OEX 387 at 9:48:11 this morning.

 
 
  Leigh Stevens   7/24/02,  12:36:45 PM
Subscriber QUESTION: "We are getting a bounce in xau will this last?"

RESPONSE: Well XAU has fulfilled my downside objectives with the move to the 59-60 area, completing a 75% retracement of the Nov - May advance and reaching a line of support around 56 today that goes back to the June-Oct timeframe of last year when there were some peaks in this area - resistance "becomes" support.

Now, question becomes as to how high can a rebound take the Gold & Silver sector Index. XAU could get back up to the downside chart gap of the other day at 66.00 - XAU is last at 61.2. Above here there is a sizable resistance "overhang" in 70 area - XAU would be doing VERY well to get back above 70, which I think will be tough. Stay tuned!

 
 
  Jim Brown   7/24/02,  12:33:10 PM
Pivot Trade Signals
Talk about capitulation! New lows across all markets are now 1612 compared to only 18 new highs. That is a 90:1 ratio!!! This is with up volume beating down volume 2:1 on over three billion shares traded so far.

 
 
  Jim Brown   7/24/02,  12:28:51 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market if our stop loss on the open LONG signal at OEX 402.50 is triggered. (SPX 809) The bounce at 12:24 just above the 11:48 lows of 402.86 shows us where the breakdown point may be. TICKS have been declining slightly and the adv/dcl ratio has topped at about .82

 
 
  John Seckinger   7/24/02,  12:25:43 PM
The Dow Transportation Index (TRAN) did fall underneath projected support of 2100 (intra-day low of 2090), now marginally lower at 2160. Now what? Well, with the index closing on Tuesday at 2160, clearly the index will attempt to close higher for the first session in 13. Moreover, this rebound can be viewed as a bullish reversal and possibly spark solid short covering. The objective to the upside (intermediate term) is 2275, while weakness below 2130 should put traders back on the sidelines until the session comes to a close.

 
 
  Jonathan Levinson   7/24/02,  12:19:22 PM
COMPX price is banging up against the top of the descending trendline, easily seen on the 15 minute candlestick view. With the QQV back below 60, signalling an intraday reversal in the QQQ volatility measure, we could see further upside. Certainly there are a lot of richer bears and a lot of frustrated/damaged bulls. The TRINQ at .42 is lower than I'd like to see it for a strong punch upward. Best to keep watching and wait for an ideal setup.

 
 
  Leigh Stevens   7/24/02,  12:18:44 PM
INDEX Comments: VIX - an interesting note - with the high today at 56.7, the CBOE volatility index has approximately equalled the 9/21 peak in the 57 area. That Sept. day VIX CLOSED at 49. Today, VIX is well off its high near 57 - last at 51.

 
 
  Leigh Stevens   7/24/02,  12:14:52 PM
INDEX Comments: Nasdaq Composite (COMP) started to poke above its down trendline on the 30 min chart. Not so yet with NDX and QQQ.

Funny shift - Nasdaq was holding up quite well while S&P was in free fall. Then, when the S&P finally has a decent rally, Nasdaq is not following. Well, its consistent - the Nasdaq has been disconnecting from the NYSE market.

I would not underestimate the psychological impact of the images of Adelphia top management being led off in handcuffs in terms of providing a "spark" for an oversold rebound in the S&P.

 
 
  Jim Brown   7/24/02,  12:09:29 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the current LONG signal to OEX 402.50. (SPX 809) We just hit resistance at 408, which was the 161% Fib retracement of the post 9/11 gains. That level means nothing to me but for technicians it is a potential pivot point. Internals are still improving but the S&P futures are struggling to break 820.

 
 
  Jonathan Levinson   7/24/02,  12:09:15 PM
The COMPX is approaching first resistance at 1250, which I do not expect to hold, given the bullrun I'm seeing on the 60 minute 5(3) stochastics. I'd be more confident calling a rollover from 1260-65, except that this week reversals have been happening ahead of the projected resistance levels. The best way is gunsling using the TRINQ and the stochastics on a rollover from overbought on the intraday time frames. The TRINQ currently is at .51, and today it's been signalling short term reversals from below .40. The QQV remains above 60, currently 60.03. I think everyone is breathing a sigh of relief that today wasn't a full blown crash out of the gate. Please remember, however, that whatever trades you put on require close stops- we're in a very difficult, downtrending market, and I'm hearing of bulls and bears alike getting blown out. Be careful above all.

 
 
  Steven Price   7/24/02,  12:07:21 PM
Resisting the urge to jump on the bandwagon by going long individual issues. I'd like to see conitinuation of the trend, or a pullback to look for better entry on shorts. That being said, a bear market rally has plenty of room on upside.

 
 
  Leigh Stevens   7/24/02,  12:00:51 PM
INDEX Comments: NYSE TRADING CURBS - You may have noticed the CNBC "CURBS IN" note on the screen. Program trading curbs work both ways!

On the upside, the rule is: "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 (buying or selling) are re-imposed each time the DJIA advances or declines 180 points.

The restrictions on the buy side, in effect prevent index arbitrage buy programs from being put "on" in that their stock orders to buy can't effectively be placed on the NYSE automated order system due to the "buy minus" restriction; i.e., buys need be on down ticks, the same way that selling when Sell Curbs are on, must be on up ticks.

 
 
  Jeff Bailey   7/24/02,  11:59:01 AM
Oxford Health (OHP) $40.20 +2.36% ... potential "bear trap" at $38 today. Bulls can look long here, stop $38 and target bounce to $43 short-term. Link

Disclosure ... I currently hold bullish position in OHP

 
 
  John Seckinger   7/24/02,  11:53:37 AM
Looking at the 30-year bond, traders may be wondering why the TYX.X index did not even test Tuesday's low yield of 5.348 (high on Wednesday is 5.279) as the Dow strongly recovers. Shouldn't yields be higher? Well, not necessarily. When the Dow sold off, most fixed income traders were buying five-years and selling 30-years and ten-year notes. Therefore, as equities recover the same traders are now selling five-years and buying 30-years, preventing the index from achieving higher yields. Another scenario...the Dow is simply in short covering mode and fixed income traders do not want to take profits just yet. I am a believer in the former scenario. In conclusion, follow the five-year note for guidance.

 
 
  Jim Brown   7/24/02,  11:47:17 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the current LONG signal to OEX 399. (SPX 801) I don't want to get too close and get stopped on the next sell program but as we get overextended on the upside the chances for a failure increase. Maintain the SHORT trigger at OEX 394 for the time being.

 
 
  Leigh Stevens   7/24/02,  11:44:31 AM
INDEX Comments: - OEX, SPX & DJX have now cleared resistance trendlines on the hourly charts. So has QQQ, but it's falling back, as COMP & NDX have NOT yet followed suit with breakouts above the similar down trendlines on their interday charts.

 
 
  Jim Brown   7/24/02,  11:43:28 AM
Pivot Trade Signals
A short covering rally is a thing of beauty to watch! Blowing through resistance levels like they didn't exist and green on every screen. Alas, all good things must come to an end and we should not expect this to last. We will ride it until it drops from exhaustion but then drop it like a hot skillet. Internals are still improving despite the pause at Dow 7900. If the futures can get by this resistance at 815 the next serious challenge is not until 820 then 830.

 
 
  Jeff Bailey   7/24/02,  11:35:39 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Steven Price   7/24/02,  11:35:35 AM
Mohawk (MHK) $42.61 (-0.89) Mohawk appears to be stalling just under our put triggger point of $42.75. If the market fails, this could be a good entry point for this put play. I would wait for a market pullback, however, to avoid getting short at he beginning of a major bounce.

 
 
  Jim Brown   7/24/02,  11:29:14 AM
Pivot Trade Signals
S&P futures are nearing resistance at 808 and the NDX futures are poised to break resistance at 914. Let's rock and roll!!!

 
 
  Jim Brown   7/24/02,  11:27:08 AM
Pivot Trade Signals
The adv/dcl ratio is rapidly improving with net decliners well off their -4800 lows this morning. Now at a -2608 they are improving dramatically. Resistance on the OEX is still 402-407 and this is where the next test will be.

 
 
  Steven Price   7/24/02,  11:24:15 AM
Johnson and Johnson (JNJ) $45.15 (+1.07): OI call play JNJ is continuing upward in its attempt to close last week's gap. A market pullback may stall its rise, but it held up well this morning while the market was at its low point.

 
 
  Jonathan Levinson   7/24/02,  11:21:35 AM
Listening to Bloomberg this morning, Adelphia sounds like a corporate Addams Family. A terrible story.

 
 
  Steven Price   7/24/02,  11:20:03 AM
Members of Adelphia Communications founding Rigas family were arrested this morning for fraud. They are accused of overstating earnings and performance (subscribers),and spending company funds for their own use, including $242 million for personal margin calls, as well as building a personal golf course. Apparently much of the looting was done after they were made aware of the ongoing investigation. This will only add to the overall investor distrust weighing on the market. Adelphia, filed for bankruptcy protection last month, following the disclosure of billions of dollars of off-balance-sheet loans guaranteed by the company to the Rigas family

 
 
  Leigh Stevens   7/24/02,  11:15:06 AM
Subscriber QUESTION: "What are your settings on the index chart for your "5-hour" and "21-hour" Stochastics? I have qcharts too. Thanks - you do a great job."

RESPONSE: The only generally needed stochastic setting in my estimation, is that of LENGTH - Length is set at "5" and "21" respectively in my two hourly stochastic models.

I use the "smoothing" factor of 3 which is the default setting on most applications. If I say a stochastic is a 5-hour stochastic, it means that "Length" is set to 5. If I label a stochastic as 21-hour, Length is 21

In the case of a stochastic with Length at 5, the stochastic formula is measuring the current "last" relative to the highest high and the lowest low for the prior 5-hourly "bars".

 
 
  Jonathan Levinson   7/24/02,  11:13:36 AM
It would appear that the TRINQ is working today, being currently at .88 after reaching an intraday low of .22 at the peak of that COMPX bounce. Pirce is currently off its highs of the day, now 1219.90. WIth the QQV up 2.65 on the day, fear and QQQ-options premium are off their highs of the day, but the QQV is staying above 60.27, what I consider to be fear territory. There's more of a bid in the QQQs than one would think, as I've actually been hearing the word "Crash" on Bloomberg's streaming internet TV feed this morning. There is not a lot of strength, but it's not the free-fall we had feared.

 
 
  John Seckinger   7/24/02,  11:10:21 AM
Side Note: The U.S. Treasury Secretary Paul O'Neill has delayed trips to Brazil, Argentina and Uruguay amid criticism he has been on the road too much while the stock market has been plunging. Could this be a precursor to a stronger dollar policy?

 
 
  Steven Price   7/24/02,  11:09:18 AM
Walmart (WMT) $44.60 (-0.50) WalMart has yet to cross its September lows, coming within $0.14 this morning. That level of $43.58 will be a critical level, as many other companies passed their September lows weeks ago. A significant bounce from here could be a sign of turnaround for the retail sector.

 
 
  Jim Brown   7/24/02,  11:08:41 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market if our stop loss on the open LONG signal at OEX 394 is triggered.

 
 
  Leigh Stevens   7/24/02,  11:02:35 AM
INDEX Comments: Trendline retreat - No sooner had I pointed it out, but the DJX & OEX have now fallen back to or just under their 30 min. down trendlines. The prospect of a technical breakout still looking a bit dim without that "second" wave of buyers - the troops that need to come in after the shorts have done their buying. The sellers also noted the resistance and THEY were not shy about coming back in to the Market.

 
 
  Steven Price   7/24/02,  10:59:35 AM
Reader Question: Steven, Do you think I should wait bearkdown near upper MA envelope ( $62.50) of AZO before initiate AZO trade.

Response: I would like to see this stock (and our other put plays) fall back to its trigger point on a failed rally before initiating the trade. Keep in mind the possibility for a market rally. While recent previous rallies have been beaten down quickly, a Dow bear market rally of even half its recent losses could be a 900 point gain.

 
 
  Jim Brown   7/24/02,  10:53:53 AM
Pivot Trade Signals
Remember, I do not think this is THE rally but only a short covering bounce from extreme oversold conditions. We will continue to follow the bounce with a stop loss but just like we were extremely oversold we have extreme resistance above us. It will take more than just wishful thinking to break through all the sell programs in our future. Every time we penetrate a resistance level there will be a sell program waiting. Until these sell programs turn into buy programs we have a rough road ahead.

 
 
  John Seckinger   7/24/02,  10:50:41 AM
How would you play the biotechs?

Response:

Now an impressive eight points higher since last posting, traders looking to go long will have less room for short term profits (execution is everything) over the next day or so. There should be a move from 311 to near 316 with 320 being the objective in the near term. A move below 305 should be viewed as neutral to short-term bearish. For even longer-term traders, 350 appears to be the likely scenario for maximizing profits. If the index settles underneath 305, look for a move to 280 before finding support. Since current levels are neither above 311 nor below 305, I would be on the sidelines looking for other performing assets.

 
 
  Leigh Stevens   7/24/02,  10:46:22 AM
INDEX Comments: Trendline resistances - on the 30/60 min. charts, DJX has broken out slightly above its down trendline at at 77.5; OEX trendline resistance comes in at 398, so it has just gotten a bit above this line; QQQ trendline resistance comes into play at 22.70. Even a minor upside penetration above these down trendlines woudl be first time this week that technical resistance has been pierced.

 
 
  Jim Brown   7/24/02,  10:44:55 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Now that there is some momentum to the upside we need to start looking for the reversal point. First resistance on the OEX is around 402. This corresponds with just over 7800 on the Dow. Let's raise the stop loss to OEX 394 (SPX 791) As we approach OEX 402 I will raise it again.

 
 
  Leigh Stevens   7/24/02,  10:35:28 AM
SECTOR Update: Bank bust - The bank sector, as measured by the Philly Bank Index ($BKX.X) - includes BAC; BBT; BK; C; CMA; FBF; FITB; GDW; JPM; KEY; KRB; MEL; NCC; NTRS; ONE; PNC; SOTR; STI; STT; USB; WB; WFC; WM; ZION - has fallen from 800 area to today's low at 603 in 8 trading days! BKX is climbing back this morning, along with S&P - last at 626.

 
 
  Steven Price   7/24/02,  10:34:39 AM
Autozone (AZO): $61.35 (-0.38) I like the entry point on new put play if this stock falls back below OI's trigger $61.25. This rebound may provide better entry points for put plays if it fails.

 
 
  Jeff Bailey   7/24/02,  10:30:49 AM
5-year YIELD Alert! ($FVX.X) 3.357% ... has met its bearish YIELD vertical count of 3.3%. This would be considered "safest" Treasury as it relates to 5-year, 10-year and 30-year. As such, it would perhaps make some sense that this is first to achieve its YIELD objective from vertical count.

On the alert here for any potential selling at a YIELD objective that was started back in May. Link

Could also trigger some asset allocation programs with near-term shift from Treasury to stocks.

 
 
  Jonathan Levinson   7/24/02,  10:20:58 AM
It looks like higher lows and higher highs on the COMPX as the QQV prints at 63.12, up a whopping 4.85 on the day. The TRINQ at .72 is in neutral/slight buy territory.

 
 
  Jim Brown   7/24/02,  10:20:26 AM
Pivot Trade Signals
The new 52-week lows today have already surpassed yesterday's levels with a print at 1449. This is a level not seen since the week after 9/11 when the high was 2083 on 9/21. The other numbers for that week are:

9/17 -1547
9/18 -1086
9/20 -1475
9/21 -2083

 
 
  Jeff Bailey   7/24/02,  10:20:24 AM
Sector Strength is slim, but Software (GSO.X) +0.12%, Health Provider (RXH.X) +0.91% and Oil Service (OSX.X) +0.12% are equity sectors showing gains.

 
 
  Steven Price   7/24/02,  10:16:32 AM
As the market bounces from its open look to initiate put plays at better entry points if we settle in and meet resistance on the upside.

 
 
  Jim Brown   7/24/02,  10:13:38 AM
Pivot Trade Signals
With the overwhelming bearish sentiment this morning we have a very good chance of a decent short covering rally. It appears everyone in the market is short and getting shorter and a quick bounce could provide that covering rally I was looking for today. Now would be a great time for the Fed to cut rates again but they will probably wait for Dow 7400 as the critical support level which would provide them the most bang for the buck. Futures are trading near the high of the day but struggling. We are far from out of the woods and with victory (total washout) so close the market makers may be tempted to pull the bids one more time to see if they can really knock the bottom out. Going to be an interesting day!

 
 
  Steven Price   7/24/02,  10:12:12 AM
Reader Question: Steven, I am a subscriber. I noticed the AZO puts have a $0.40 spread. Do you think this is too expensive a spread to pay?

Greg.

Response: Greg, on options over $5 there is a maximum bid/ask spread of $0.40. Often market makers are willing to sell below the bid and pay over the offer on a spread this wide since they can still trade outside of their theoretical values. I would like to see the market settle in before jumping on put offers, in case we have a bounce from the open

 
 
  John Seckinger   7/24/02,  10:09:57 AM
One of the rare indices not showing massive long liquidation over the last few days is the Biotechs. The index has lost 1/2 of its value since the beginning of the year (600 to currently 299); however, the last few weeks have been promising. Even today's low at 293 was a good sign that support dating back to September 1999 continues to hold water. A close underneath 295 would be bearish, while recent levels could indicate a test of 320 before traders consider positions.

 
 
  Jeff Bailey   7/24/02,  10:07:53 AM
Aquila (ILA) $4.75 -20.8% ... from bearish profile near $14.50, stock hits downside target from "fitted retracement" of $5.94 and blows through to the downside. I know of two-subscribers still holding longer-term puts and would lower a stop to $5.25 here. Any downside target would come from lower trending regression and mid-point of that regression at $3.50.

 
 
  Steven Price   7/24/02,  10:07:49 AM
VIX 56.08 (+5.60) VIX now within 1.25 of its September high, lots of panicking put buyers

 
 
  Steven Price   7/24/02,  10:05:29 AM
eBay (EBAY) $51.56 (-1.60) This current OI put play is approaching our target. We will be looking to close this position if the stock trades $50. On a day like this there may be several opportunities to take profits.

 
 
  Jonathan Levinson   7/24/02,  10:02:38 AM
Here's the release regarding that Fed rumour:

Link

 
 
  Leigh Stevens   7/24/02,  10:00:57 AM
INDEX Comments: QQQ - key stock watch - Bellwether Cisco Systems (CSCO) gapped below support at prior lows (12.30 area) - last at 12.14 - trying to climb back from its intraday low at 11.95, but there is substantial technical "damage" unless the stock rebounds back about 12.30 by the close.

Microsoft (MSFT) of course continues very weak - MSFT is at least approaching the low end of its daily chart downtrend channel, which intersects in the 40.00 area currently - last at 41.91.

Weakness in these Nasdaq biggies, plus continued weakness in the Semiconductor sector ($SOX.X), as it retreats further below broken support in the 342-344 area (SOX is trading last at 331.7), suggests caution in looking for a bottom in QQQ too soon.

 
 
  Steven Price   7/24/02,  10:00:09 AM
Mohawk (MHK) : $40.90 (-2.60)New put play MHK Link has reached its trigger point below $42.75. The stock opened down at $42 and has dropped quickly under $41.

 
 
  Jonathan Levinson   7/24/02,  10:00:07 AM
The TRINQ has eased off its highs, and is currently 1.28, while the QQV has not, currently 61.77 up 3.5 on the day. The US Dollar has found first support at 1.50 as the COMPX retreats from its gap fill attempt. I'm seeing that the pricing on QQQ options is still relatively reasonable, thanks to the high OI and volume. However, I have no confidence in the direction to play, beyond the fact that I read a report last night showing a relative put to call ratio on the Qubes, and the fact the short, medium and long term trends continue to be... well, you know.

 
 
  Steven Price   7/24/02,  9:55:16 AM
Rumor that the Fed may be getting together for an unscheduled FOMC meeting. It has responded with "no comment"

 
 
  Steven Price   7/24/02,  9:54:02 AM
Autozone (AZO) $60.34 (-1.39) New OI put play Autozone Link has reached its trigger point below $61.25. there may be some round number support at $60, however AZO is now below significant moving averages and recent support at the trigger point.

 
 
  Jim Brown   7/24/02,  9:51:16 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
This is a speculative signal based on the extreme oversold conditions and the washout at the open. The initial stop loss will be OEX 384, just below the low of the day at 384.96. (SPX 775)

 
 
  Jeff Bailey   7/24/02,  9:50:22 AM
Pick up the phone! if you called your mortgage lender a couple of weeks ago and got the paperwork started. Benchmark 10-year YIELD ($TNX.X) quickly approaching its bearish YIELD objective of 4.15% here at 4.334%. Link

According to Realtor.com, the average rate on a 30-year Fixed is 6.42%, 15-year fixed is 5.87%.

 
 
  John Seckinger   7/24/02,  9:49:41 AM
Shorter-dated Treasuries clearly are more defensive than seen in years, with five-year notes relatively higher than ten-years by an almost unprecedented amount. This flight-to-quality has also put the 30-year bond (TYX.X) underneath yields set last December, but more importantly has broken below an entire range during the last 8 months. This is when risk shifts to traders buying bonds (in the very short term).

 
 
  Jim Brown   7/24/02,  9:48:11 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market now at OEX 387. (SPX 779)

 
 
  Jim Brown   7/24/02,  9:47:16 AM
Pivot Trade Signals
The VIX opening print is 55.88, VERY high

 
 
  Leigh Stevens   7/24/02,  9:46:20 AM
INDEX Comments: Downside targets - Re the question on any major downside technical targets, I do get one off the broad weekly downtrend channel in OEX - assuming a fall to the low end of the channel, this would take the OEX to around 350.

On QQQ, there is a well-defined hourly downtrend channel (per the chart on my Index Trader wrap at Link ) - the bottom of this channel intersects around 20.00, a next potential downside objective in the Q's.

 
 
  Jeff Bailey   7/24/02,  9:46:19 AM
Affymetrix (AFFX) $14.00 ... from past bearish profile at $21 and "spread-triple bottom" sell signal, will note stock has achieved it bearish vertical count of $14 (column of O's from $28-$22). Bears can lock in 1/2 position gains here, place stop on other 1/2 just above yesterday's high with next target being historical low of $8.06 dating back to August 1998. Link

 
 
  Jim Brown   7/24/02,  9:43:14 AM
Pivot Trade Signals
This smells more like the fear everyone has been looking for. The indexes are in free fall and support levels are so far away you can't even chart them. The VIX should be off the scale this morning (first print in about 5 min). If this washout continues without a morning bounce it would be very encouraging

 
 
  Steven Price   7/24/02,  9:41:17 AM
Johnson and Johnson (JNJ) $44.26 (+0.18) OI lone call play JNJ still holding up is spite of sky falling around it.

 
 
  Jeff Bailey   7/24/02,  9:38:35 AM
IBM $65.99 -1.26% ... Has stock giving spread-triple-bottom sell signal here. With bullish% charts at oversold levels, would only look 1/2 positions here, not full. Stop on underlying short goes above at $75. Vertical count turns bearish to $55 as stock did trade $65 this morning. Link

Can also use Professor Davis' study that "spread-triple" bottom sell is profitable 86.5% of the time, for an average gain of 24.9% in 4.6 months. From $66, a 24.9% decline would be $49.56.

The vertical count combined with p/f pattern gives bear a target range of $50-$55 over next 4.6 months.

 
 
  Jonathan Levinson   7/24/02,  9:38:14 AM
We have a TRINQ reading of 4.18, showing strong selling, and the QQV at 60.79, up 2.52 on the day. The COMPX gapped down over 25 points on the open, and I see no bounce thus far.

 
 
  Leigh Stevens   7/24/02,  9:37:33 AM
SECTOR Update: - Utilities woes! - The Senate hearing going on this week into corporate accounting practices also impacted shares of many energy companies, whose accounting is again being challenged. The Dow Jones Utility Average ($UTIL), dominated by electric utilities and includes some of the energy trading companies, fell yesterday 17.81 points, to 191.85, a drop of 8.5 percent. That was the steepest one-day decline for that index since the 1987 crash and left it at a seven-year low. That index has fallen 30 percent this month.

The Utility Sector Index ($UTY.X) was down 7.6% yesterday - it closed yesterday at 224.68, sharply off its December high in the 400 area - wow, a loss of nearly 50% in a half year. These used to be the stocks for "widows & orphans"!

 
 
  Jonathan Levinson   7/24/02,  9:36:50 AM
There goes that 106.00 support on the US Dollar Index, currently just above 105.50.

 
 
  John Seckinger   7/24/02,  9:32:02 AM
U.S. investors selling US equity mutual funds is not only above the record rate of redemptions set last September, but almost double. Moreover, traders are avoiding risk to such an extent that gold is lower by 4% since Monday's close. Cash is king.

 
 
  Jeff Bailey   7/24/02,  9:30:44 AM
Intl. Business Machines (IBM) $67.05 ... may be a stock to watch this morning. As stocks continue to get beaten down, tougher and tougher to find good risk/reward trades for entry points. IBM is one of two stocks in the Dow Industrials (Intel the other) that currently trades with a "buy signal" on its point and figure chart. That could change at the open with IBM indicating $65. A trade at $66 would be a "spread-triple-bottom" and bear can be looking short/put 1/2 position here. Link

 
 
  Jeff Bailey   7/24/02,  9:26:51 AM
Market Internals continued to erode yesterday as depicted by the bullish % charts.

The narrower NASDAQ-100 Bullish % ($BPNDX) Link remained unchanged at 28% and "bull correction," as did the narrow-based, but not as tech-heavy S&P 100 Bullish % ($BPOEX) Link which stayed at 11% and still "bear confirmed."

The broader bullish % charts did see declines. The S&P 500 Bullish % ($BPSPX) Link fell to 13.8% from Monday's reading of 14.6%, so a net loss of 4 stocks to "sell signals" here.

The broadest of broad had the NYSE Bullish % ($BPNYA) Link falling to 26.78% from Monday's 29.94%, while the NASDAQ Composite Bullish % ($BPCOMPQ) declined to 28.31% from Monday's reading of 29.95%. Link

Still very defensive at "oversold" levels in the S&P 100, S&P 500, NYSE Composite and NASDAQ Composite, and reading "bear confirmed."

 
 
  John Seckinger   7/24/02,  9:26:28 AM
Yields on Two-year bonds are not only at their lowest yield ever, but 18 basis points lower than Tuesday's close. Yields have dropped 36 basis points for the week. Large holders of two-year notes include China and Japan, possibly inferring that cash is generated from selling yen-denominated assets (in light of a relatively stronger yen/dollar spread lately) is going into Treasuries. Note: September Eurodollars are currently underneath the Fed's 1.75 Federal Funds target.

 
 
  Jim Brown   7/24/02,  9:26:28 AM
Pivot Trade Signals
Looks like we are headed for even more oversold if the futures are any indication of market direction this morning. The problem with Citigroup and JP Morgan continues to weigh on traders. Several brokers are defending the stocks and JP Morgan is hosting a conference call as I write this. In other news, several members of the Rigas family (ADLAC) were arrested this morning for securities fraud And the beat goes on....

The futures are bouncing all over the place and are significantly below the +6 posted at 3:AM. The pivot model is flat and we will not be going short at the open. The oversold conditions do not warrant trying to chase the market. We will look for a tradable bounce before issuing a new signal. The morning drop could be sharp and steep and possibly could take us down far enough for that "C" word to occur. We will be patient this morning.

 
 
  Jeff Bailey   7/24/02,  9:25:03 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Leigh Stevens   7/24/02,  9:04:43 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -19.90 at 776.10; Dow Industrials > -173.00 at 7525; Nasdaq > -22.00 at 880.00

"Fair Value" numbers: S&P 500 futures ($SP02U): 0.88 -- Nasdaq 100 futures ($ND02U): 3.30

 
 
  Jonathan Levinson   7/24/02,  8:39:08 AM
Bond yields are tanking before my eyes. This looks like a very negative open being telegraphed from here.

 
 
  Jonathan Levinson   7/24/02,  8:36:41 AM
The US Dollar Index seems to have levelled off. Bulkowski might have a label for the formation I see on the 24 hour chart, but to me it looks like a head-and-shoulders-with-goiter-on-right-neck pattern. Resistance would look to be at 106.50, and dubious support at 106. Of course, the move from sub-104 to super-106 caught me flat-footed, so my TA is suspect even to me. These are interesting times, within the meaning of that Confucian curse.

Today is the day scheduled for a large, possibly the largest treasury note auction ever. If the behaviour of the equity futures is any indication, the markets aren't very happy about it.

 
 
  Jeff Bailey   7/23/02,  10:26:46 PM
Tuesday's Market Monitor has been archived. To see Tuesday's comments, simply click this Link

 
 

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