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  Jim Brown   8/1/02,  4:59:02 PM
Pivot Trade Wrap - Economy Dipping? -
The news out this morning was grim. The economy growing much slower than anybody expected and may already be in a new recessionary quarter. While this should have produced a huge triple digit down day the markets held their ground amazingly well until a huge sell program knocked the stuffing out at 3:30. Dow 8500 held all day and with repeated attempts to rally off the bottom. The Nasdaq did the same at 1287. While this support was amazing I still think it is doomed to fail. I have been hammered so much this week trying to go short and trade my beliefs that I was seduced by the bounce attempt when I should have held my ground. In the end the markets did what they should have and more should follow.

The bottom line here is it does not make any difference what you believe if you trade what you see on a technical basis. Not an emotional "see" based on intraday movement. I got nearly 50 emails today asking when we were going to switch to a long position because of a variety of reasons compared to 3 agreeing with the short. It is tough to remain objective when everybody is suggesting you are wrong. I switched and got killed. To avoid falling victim to this pressure in the future I am going to post the entire game plan for the next day the night before. I will lay out my reasons for each position, entry points, stop losses and targets with corresponding charts. Readers can choose in advance which signals they want to take and which ones to ignore. This should produce less trades but more well defined positions. I will post the game plan for tomorrow around 9:PM ET tonight.

I am also not going to read and answer email during the day. I received nearly 350 emails today, which I try to answer but they detract from my market focus. I am sorry I have to do this but the bottom line is performance not hand holding or being a personal sounding board.

Tomorrow begins with the nonfarm payrolls and if the trend for the week holds true they will be lower than expected. If so this should be the final nail in the bulls coffin. But then that would assume logic and reason win the day.

If today was Friday "osservatore@fast...." would be the winner of the dual monitor video card with their guess of 8504.26 in this weeks Guess the Dow contest. The average guess was 8291 and we have a really good chance of closing in that range. The winner will be announced in the Sunday newsletter. Don't miss entering next week's contest, which begins after the close on Friday.

 
 
  Jonathan Levinson   8/1/02,  4:47:26 PM
Jonathan,

You're the Man! Dumping those puts sure helped!

Krish

Don't mention it, Krish- it never fails. (grin)

 
 
  Jim Brown   8/1/02,  3:41:41 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The SHORT signal at OEX 440 is still active and if triggered will be held overnight.

 
 
  Jonathan Levinson   8/1/02,  3:37:15 PM
Well, I couldn't change the ask fast enough, and got filled to close my open put position, which sets the market up for a breakdown (grin). Low of the day at 1284, QQQ currently bidding 22.83.

 
 
  Jim Brown   8/1/02,  3:36:38 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The exit points on the LONG signal were OEX 448.14, SPX 891.98, Emini 890.25, DIA 85.56, SPY 89.44, DJX 85.60, NDX 924.25, Compx 1291.52) I should have stayed with my initial market view and not fallen victim to the intraday bounce off support. There is no reason to be long the market and we know it! Hindsight is 20:20.

 
 
  Jonathan Levinson   8/1/02,  3:33:12 PM
The TRINQ is now at 3.04 and the QQV is up 2.54- the selling is definitely picking up. Over 5 declining shares for each advancing as the COMPX sits near its lows of the day. QQQ is below 23, just above the fibonacchi line I have on my intraday chart at 22.89.

 
 
  Jim Brown   8/1/02,  3:28:14 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The afternoon rally did not appear. Let's close the open LONG play here at OEX 448.15 and go flat into the nonfarm payrolls tomorrow.

 
 
  Jeff Bailey   8/1/02,  3:21:14 PM
The 3:15 PM intraday update has been posted. Link

 
 
  John Seckinger   8/1/02,  3:19:47 PM
Per 14:43:56 Update, I am showing September Bonds closing at 106-09, well above 105-30.

 
 
  Jim Brown   8/1/02,  3:10:43 PM
Pivot Trade Signals
Now, if the trend hold true the hedge funds will see they could not push the market lower and start covering into the close. If this happens and the nonfarm payrolls are not a disaster then we could see an up day tomorrow. Obviously the markets are ignoring bad news so any good news should do wonders.

 
 
  John Seckinger   8/1/02,  2:43:56 PM
With only 20 minutes to go before the bond market closes, it is still not clear if September bonds will close under 105-30/31. Currently at 106-04, a settlement underneath should give equity holders some relieve. A close above 105-30/31 should continue pressuring the blue chips for the last hour of trading. Looking at a chart of the Dow, it is interesting how the previous 8600 psychological level took precedence during the last hour over the 8585 aformentioned area. All part of understanding psychology.

 
 
  Jonathan Levinson   8/1/02,  2:41:45 PM
To all you bears who emailed me, again, my apologies for single-handedly supporting the gap with my open contracts (grin). The QQV deflated a bit somehow, now up just 1.97. The TRINQ, however, is at 2.72, a modest rise from its earlier resting point. The COMPX printed some fresh lows before rebounding a bit, but it's been quite a few small bounces with no breakaway to the upside, and I'm picturing a ping pong ball, bouncing lower and lower as it goes along. The COMPX tick is at -95, and it feels like if the COMPX breaks down, it could be a biggie, given the room afforded by the TRINQ and QQV readings thus far.

 
 
  Jeff Bailey   8/1/02,  2:40:51 PM
Ford (F) $13.10 -2.74% ... July U.S. total sales rose 1.5%.

 
 
  Steven Price   8/1/02,  2:36:30 PM
I see Land Rover July Sales were up 94.6%, and Jaguar July sales were up 73.1%. Looks like our OI put buyers were ready for new vehicles.

 
 
  Jim Brown   8/1/02,  2:33:08 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I still believe in the SHORT side of the market despite the bounces. However I am not going to try and trade the center again. The low side of the weeks range has been OEX 440. With support at 445 and 443 there is a strong risk of traders trying to buy the dip at those levels. I want to wait for a total failure of both before going short on another breakdown. Go SHORT the broader market with an OEX trade BELOW 440. The initial stop loss will be OEX 445 and the target a filled gap at OEX 427.

 
 
  Jeff Bailey   8/1/02,  2:27:16 PM
Auto Sales General Motors (GM) $45.73 -1.76% reports July U.S. total sales rose 24%.

DaimlerChrysler (DCX) $41.90 -2.01% reports July U.S. total sales fell 4%.

Have not see Ford's (F) $13.12 -2.59%.

 
 
  Steven Price   8/1/02,  2:16:17 PM
Reader Question: Steven, if you have time can you comment on HD. I'd like to go long on it but feel there is too much resistance at $30.00. Should I wait for it to trade above 30 or see if there is some kind of pullback to support around $29 or $28. Thanks for any advice you can give. Andy

Response: Home Depot (HD) $29.67 (-1.22) I've been looking at this stock for a while now. I have watch listed it a couple of times, as well. The problems with putting a position on here that I see are resistance at $31, and support at $28. I'd like to see a decisive move through one of these levels before getting in.

 
 
  Jonathan Levinson   8/1/02,  2:10:36 PM
The COMPX is trapped in a range below 1300 and above 1288 or so, as the QQQ chops between 23 and 23.20. Everyone I correspond with is going long, either buying calls or dumping puts. It's getting lonely here on the short side. No doubt my remaining contracts are the sole force supporting current levels, and I expect to receive a medal of honour from the bulls. The TRINQ continues to report moderate selling and the QQV moderate fear. I'm hoping that this is nothing more than distribution before the next plunge, but the verb "to hope" should be anathema to a trader. This is a very tiring week indeed.

 
 
  Steven Price   8/1/02,  2:10:01 PM
Reader Question: What do you think about the JPM put options? So far, it has been as exciting as watching paint dry! I worry that it does not move on a day like this.

Response: JP Morgan (JPM) $24.88 (-0.36) JP Morgan continues to look like a rollover at $25. Today's relative strength is impressive, however it continues to struggle with this resistance level. Our current stop is $26, so on a real breakout we will be stopped out relatively quick. We continue to see large exposure for JPM relating to Enron. A consideration of course, is time decay, with options and August is a short month with expiration on the 16th. We are holding this play, but will respect our stop if it breaks to the upside.

 
 
  Jim Brown   8/1/02,  2:06:42 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Sorry, the stop loss on the LONG will be OEX 446, (SPX 886)

 
 
  Jim Brown   8/1/02,  2:01:56 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the broad market SHORT at 13:54:32 when the OEX traded above 450. (SPX 894.84, Emini 895.50, DIA 86.05, SPY 89.86, DJX 86.00, NDX 932.65, Compx 1297.33) Now that we are out the market is free to drop.

 
 
  Jim Brown   8/1/02,  1:59:49 PM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broader market LONG signal at 13:55:32 when the OEX traded above 450. (SPX 894.84, Emini 895.50, DIA 86.05, SPY 89.86, DJX 86.00, NDX 932.65, Compx 1297.33) If they are not going your way you have to go theirs. I don't understand the markets bucking the negative economics but if they want to go higher then we will go with them.

 
 
  Jim Brown   8/1/02,  1:54:22 PM
Pivot Trade Exit/Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the stop loss on the current SHORT signal to OEX 450.(SPX 895) Go LONG the broader market with an OEX trade over 450.00 (SPX 895)

 
 
  Jeff Bailey   8/1/02,  1:44:04 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Steven Price   8/1/02,  1:42:21 PM
Reader Question: Steven, TXN is approaching a yearly low. What do you the the upside prospects are or do you believe it will continue down and if so at what point will it find support? /Roger

Response: Texas Instruments $21.40 (-1.75) TXN's September low was $20.10. A look at the chart shows some consolidation between $27 and $22. If the stock breaks down below $21, it will probably re-test this September low, which is not far below that. I would be more inclined to short this stock than go long, however the September low provides enough support that I would probably wait for it to take out that low before shorting. A look at the Semiconductor Index does not show a pretty picture. Check out last night's Market Wrap for a look at the downward trendline.Link I'm not a buyer of the semis until I see something that makes me want to buy them.

 
 
  John Seckinger   8/1/02,  1:31:37 PM
Could you draw a chart illustrating the 'b' formation you speak of with reference to the Dow? (Per 11:05:59 and 11:46:54 posts)

Response: Of course. Note: 8584.73 (roughly the 8585 pivot) was the high pullback at 13:00:00 before falling. This should confirm shorts are defending the pattern.

Link

 
 
  Steven Price   8/1/02,  1:12:45 PM
Black Box (BBOX): (+0.74) OI put play, picked at $36.92 BBOX taking a breather after dropping almost $6 in the last week. $34.80 would close the gap down from Tuesday, however with the market looking weak overall, it may not get there. The relative strength today is something to keep an eye on, though, and we'll be watching for signs of consolidation down here.

 
 
  Leigh Stevens   8/1/02,  1:11:21 PM
Subscriber QUESTION: "Leigh, read your article on TRINn and see that readings over 2.00 are extreme and usually precede a reversal. I've seen this in the last few weeks. Today's 2.50 is extreme, but considering the economic news, not extreme enough. Will this condition be a exception?"

RESPONSE: Yes, its high, but can stay high for some time. Use of a 5 or 10-day moving average helps provide perspective.

Also, the other thing is where you see the Arms Index (TRIN) at a high, and it then starts falling intraday, or vice-versa. I suggest, as you've done already, to follow this indicator over time, and continue to gain perspective with it and not try to formulate exact trading "rules" with TRIN. Also, don't use TRIN in "isolation" - I only use in conjunction with chart patterns for example. Also, I don't equate TRIN to specific underlying market fundamentals.

 
 
  Jim Brown   8/1/02,  1:05:10 PM
Pivot Trade Signals
Sure looks like another rally in the making. The indexes are bouncing off an intraday double bottom and gaining speed. If we get stopped out today I hope they keep going for about 1000 points. If we are bound to go up then lets go the heck up and quit failing one resistance point higher only to try again.

 
 
  Jonathan Levinson   8/1/02,  1:03:08 PM
There are currently 3.6 declining shares for each advancing on the COMPX. QQV is still up 2.25 on the day and the TRINQ is 1.93, reflecting the buying that saved the COMPX just below 1290. QQQ is trading at 23.15. There's a dilemma for put holders such as yours truly: There's an intraday "double bottom" around 1290. But there's an airborne grand piano that was dropped on the markets this week. So, it's risky to stay short, risky to go long, and generally difficult to read. Again, the solution is that cash is a fine position, and if in doubt stay out. If already in, then respect your stops, and don't begrduge a profit, however small.

 
 
  Leigh Stevens   8/1/02,  12:54:30 PM
Subscriber QUESTION: "If you were holding QQQ puts where would you be looking to exit?"

RESPONSE: I am currently anticipating that QQQ may "fill in" in its upside chart gap by trading down to 22.75. Alternatively, in case there is enough support in the area of the gap to keep the Q's above this level - I am not the only one looking at this gap area - and we see a turnaround above this level, I would cover puts if QQQ breaks out above its hourly down trendline, which currently intersects in the 23.50 area.

 
 
  Leigh Stevens   8/1/02,  12:46:37 PM
Subscriber QUESTION: "Leigh, NDX just bounced off the top of it's chart gap. Why do you seem to favor the COMPX numbers when you're trading the NDX?"

RESPONSE: Actually, if you are a reader of my end of day Index Wraps, you'll note that I mostly comment ONLY on the Nas 100, as represented by QQQ.

Anyway I sometimes will talk about the Nasdaq Composite (COMPX) because COMP sets the "tone" for the Nasdaq, just as the S&P 500 (SPX) does relative to the S&P 100. At times its of interest to refer to the overall market index as a "guide" - for example, suppose NDX entirely "fills in" that gap, but COMP does not - it could suggest that NDX may have a bit further to do on downside and might not complete its correction until the Composite does also.

I range around in terms of all the indices. I suggest looking at all just to kind of do cross checks.

 
 
  Jonathan Levinson   8/1/02,  12:39:22 PM
since all European market are down 4-5% today, is it an indication that our markets could follow and drop sharply from here ?

It could, but then again, maybe not. There are any number of signs of great weakness looming for the markets, including this one you've highlighted. Except for price so far, everything makes sense (grin). I would not blindly follow the other markets, as any trend that simple has no doubt been found and exploited already.

 
 
  Leigh Stevens   8/1/02,  12:34:01 PM
Subscriber QUESTION: "Could i have your take on the price action in bbox? Seems that it was mentioned as one of top twenty small cap companied in the business week mag."

RESPONSE: Someone should tell the stock!

Black Box Corp. (BBOX) recently broke support at 37 - next potential support looks like 27. The 30 area is a 75% retracement of the 1994 to mid-2000 advance. If BBOX does not hold the 27-30 area, major support based on long-term weekly charts is back to 21. Stock is now as "oversold" as its gotten in the past, so may be due for a rebound, perhaps back to resistance in 37 area, at the recent "breakdown" point.

Typically, after a prolonged bear trend, it can take some months for any sizable advance to "set up" - the typical pattern is a period of "basing" or going sideways before a significant rebound develops.

 
 
  John Seckinger   8/1/02,  12:21:09 PM
Finding another catalyst: Gold higher, dollar lower, better bids in five year than 30-year bonds...all defensive, but more or less "reactive" to the Dow. Tomorrow's non-farm payroll should have traders getting even more worried, but eclipsing Wednesday's low of 8537 by a few points doesn't seem to fit the definition of "worried" just yet. If trading ahead of tomorrow's non-farm report is going to be the catalyst, maybe looking at September bond futures make sense. Currently up 11 ticks (11/32) at 106-09, the intra-day high is just above at 106-12 and it would take a reversal back below 105-30 before shorts can get excited. Therefore, if traders are pretty sure bonds will stay above 105-30, look for more downward pressure on the Dow.

 
 
  Steven Price   8/1/02,  12:12:23 PM
Eli Lilly (LLY): This OI call play has performed well since originally picked at $53.70, having traded up to $59.24. It fought off yesterday's downgrade to rally back to $58.42. It fell within 0.10 of our new stop (profit as opposed to loss in this case) this morning of $55.00 and has rebounded once again. We are, however, witnessing the bears starting to get the upper hand in this tug of war. If the stock makes it back over $58, conservative traders may want to take some profits.

 
 
  Jeff Bailey   8/1/02,  12:04:33 PM
US Dollar as depicted by the US Dollar Index (dx00y) 106.86 -0.51% really took a hit lower ofter the ISM data.

Thinking here is that some foreign capital may have "thought twice" about some bargains in U.S. and pulling back some cash again.

Looking for stocks that have perhaps rallied with the dollar in recent week, but stocks that have rallied into resistance where a 3 or 4-box pullback in the P/F chart makes for decent trade lower.

General Electric (NYSE:GE) $31.76 -1.36% may fit the bill, stop $34, target $28. Link

Can perhaps put together technical scenario of GE backfilling recent gap higher over next couple of weeks. Link

Disclosure ... I currently hold a bearish position in the GE Sep. $32.50 puts

 
 
  Jim Brown   8/1/02,  12:00:21 PM
Pivot Trade Exit/Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the stop loss on the current SHORT signal to OEX 452.(SPX 898) If the stop loss of OEX 452 is hit today after the very negative ISM report then reality has failed and we need to trade what we see not what I believe. Go LONG the broader market with an OEX trade over 452.00 (SPX 898)

 
 
  John Seckinger   8/1/02,  11:46:54 AM
Per 11:05:59 posting, let's do some hindsight analysis. Ok, pivot was 8565 instead of 8563. The interesting (and somewhat common) pattern was at 11:00:00 when there was a low of 8585 and high of 8595. This undoubtedly got longs committed, believing the pivot was left behind and a rally would take place. In fact, everyone should think like that...since the market did not prove the longs wrong until prices went back through 8585 and rejected the initial move. Then shorts began to smell blood. When a rejection takes place, there is the tendency to have a more explosive move - since longs are trying to get out as well. Note: This is one tool and does not predict how far down or up the market will go. Other technical tools give that information. The more patterns a trader can recognize, the more informed about human psychology a trader will be - invaluable when it comes to trading.

 
 
  Jim Brown   8/1/02,  11:46:50 AM
I noticed the last couple of days when we get close to 8500 on the Dow,buying comes in, with good rebounds, and that was pointed out on the Market Wrap newsletter for Wednesday. Do you suggest opening a call play? Rob

I am fighting that urge. If you just look at the charts it would seem to indicate that would be a good course of action. I still think you have to factor in the economic news and coming August 14th certifications. There is no reason to buy stocks now with the prospects of more negative disclosures and lower lows ahead. Still the bulls keep buying the dips. I am going to lower the stop on our current SHORT signal and make it an entry point for a LONG play also. They say don't fight the tape but you should also not check your brain at the door when investing.

 
 
  Jim Brown   8/1/02,  11:46:38 AM
I noticed the last couple of days when we get close to 8500 on the Dow,buying comes in, with good rebounds, and that was pointed out on the Market Wrap newsletter for Wednesday. Do you suggest opening a call play? Rob

I am fighting that urge. If you just look at the charts it would seem to indicate that would be a good course of action. I still think you have to factor in the economic news and coming August 14th certifications. There is no reason to buy stocks now with the prospects of more negative disclosures and lower lows ahead. Still the bulls keep buying the dips. I am going to lower the stop on our current SHORT signal and make it an entry point for a LONG play also. They say don't fight the tape but you should also not check your brain at the door when investing.

 
 
  Leigh Stevens   8/1/02,  11:45:54 AM
Subscriber QUESTION: "I think OI has covered this before and maybe in archives, but can you simply explain basis of $trin how the $trin is calculated ?"

RESPONSE: TRIN (the Arms Index), how it's calculated and how it can be used to guide trading decisions, was the topic of a Trader's Corner article I did which can be found at Link

 
 
  Jeff Bailey   8/1/02,  11:38:30 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Leigh Stevens   8/1/02,  11:37:37 AM
INDEX Comments: OEX/Dow - as Jim noted, they are not only in danger of taking out support but have done so by a slight amount, basis the hourly charts. A slightly deeper plunge below support has occurred in the S&P 500 (SPX) which is often the leader. However, SPX is now just about touching its next "line" of support at 884.50.

The market is giving ground "grudgingly", and the buying interest on the way down may continue which will likely prove frustrating to the bears - who are now habituated to deeper plunges when technical support is pierced.

 
 
  Jonathan Levinson   8/1/02,  11:35:12 AM
There are 4.4 decling shares for each advancing, as the COMPX breaks below 1290 support for a few moments. The TRINQ remains tame in sell territory at 2.24, QQV is up 3 to 52.19, and QQQ is hovering at 23 support. The COMPX is sitting atop its gap from July 29.

 
 
  Steven Price   8/1/02,  11:34:39 AM
The S&P has now dropped below short term support of 890 from the last couple of days, but the Dow is still holding above 8500, which has provided support over the same period of time

 
 
  Leigh Stevens   8/1/02,  11:27:01 AM
INDEX Comments: QQQ - as many have been anticipating, the Q's are now back into its upside gap from Monday, which begins at 23.12 and extends to 22.75 where it (the gap) becomes completely "filled in". Gap areas not only tend to get filled in, but often act as areas of support - the gap area being a price area where potential buyers could not get into the market when the stocks jumped on the opening, so represents a better (lower) price.

By the way, the nature of the gradual sideways to lower move has now put my longer hourly stochastic model all the way down to an oversold reading.

 
 
  Jim Brown   8/1/02,  11:21:36 AM
Pivot Trade Signals
Maybe that sound we just heard was the bottom falling out. Support levels across all the indexes are now in danger and internals are picking up speed to the down side.

 
 
  Jonathan Levinson   8/1/02,  11:10:33 AM
Regarding Jim's reference to the Plunge Protection Team, or PPT, the theory is that the Fed, through its open market operations, can control the amount of liquidity in the markets at any time. Through its terse announcements, the Federal Reserve Bank of New York announces its open market operations each day. Today, the Fed announced that it added $4.75B, which refunded yesterday's expiring $2.25B added the previous day, for a net add of $2.5B. The theory goes that through its team of 22 brokers, this money finds it way into the markets. Some believe that this is used to jam the markets when they are vulnerable and avert crashes- recall old J.P. Morgan, as quoted in Reminiscences "That's what your reserves are for." I personally do not profess to know whether such is true or not, and I am not a conspiracy theorist. However, the theory exists, and the Fed's operations can be followed on a daily basis. The foregoing is the extent of my understanting of the PPT, and I don't have much to add, so please don't inundate my mailbox with questions I can't answer- I'm a trader, and if I had a clear line on any magic indicators, I would have retired by now (grin). Those interested can check out the Fed at Link

 
 
  John Seckinger   8/1/02,  11:05:59 AM
Pattern Recognition: In attempting to look at chart patterns for a sense of investor psychology, I usually run across a lower case "b" pattern, which to me is long liquidation happening. A five-minute chart of the Dow shows such a pattern. The key is to imagine the pivot within the lower consolidated price range (between 8609 and the one-tick new low (hate those) at 8564). The pivot seems to be around 8583. Once the apex is set (which may have already occurred based on time), a move from the pivot should be a solid trade.

 
 
  Leigh Stevens   8/1/02,  10:58:36 AM
INDEX Comments: Nasdaq Composite (COMPX) has support beginning around 1290 - but area of interest to me technically is the top of its chart gap at 1286 - the gap extends down to 1262. Some or all of this gap should get "filled in" - the LESS that it retreats into this area, it tells us something about the level of support or buying interest that is underpinning the market.

 
 
  Steven Price   8/1/02,  10:56:21 AM
Baxter (BAX) $38.00 (-1.91) this OI call play, originally picked at $35.89, has receded from yesterday's highs and is now hovering around our new stop loss of $38.00. If the stock closes below this level we will be stopped out on the play. BAX looked poised to break into new territory yesterday, as it closed within a dime of $40 resistance after breaking through and trading $40.18 intraday. Our new trigger of $40.50 was not reached, as the sinking tide seems to be bringing this one down as well.

 
 
  Jim Brown   8/1/02,  10:55:22 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I am going to lower the stop loss to our entry point of 454 (SPX 902). I continue to be amazed at the lack of a further drop and the lack of the futures to take out yesterday's lows on the initial drop. (SP02U 888.70) The OEX has support at 446 and 443. Until these levels are broken we are still at risk of another bounce.

 
 
  Leigh Stevens   8/1/02,  10:51:32 AM
INDEX Comments: SPX now trading slightly under its up trendline on the 30 min charts.

 
 
  Jonathan Levinson   8/1/02,  10:46:53 AM
The COMPX has just broken below 1300. The TRINQ is tame at 2.12, as is the QQV at 50.91, somehow up just 1.79 on the day. Volume breadth is telling more of the story, with 328M declining shares to 97M advancing, and 78 new lows to 7 new highs. Reality appears to be coming back into fashion.

 
 
  Jim Brown   8/1/02,  10:43:15 AM
Pivot Trade Signals
For a minute there I thought it was going to bounce again but the futures are holding it down. Still despite the very negative ISM internal numbers the markets are holding their ground. This is very bullish but totally irrational. Makes you wonder if the plunge protection team sees the handwriting on the wall going forward and is trying to blunt the drop until the bad news wears off.

 
 
  John Seckinger   8/1/02,  10:42:02 AM
The Question that I ask myself every day around this time (I need some intra-day price movement first): Will the market (eg. Dow) trade responsively or be more initiative? In other words, will prices stay in a defined range and I should buy low and sell high, or, will prices test an intra day low (or high) and I should sell low (high) and buy even lower (higher)? Looking at a five-minute chart of the Dow, even a test underneath the day's low of 8565 will cancel out the recent pattern of higher relative lows; therefore, I expect more selling and would opt for the latter once 8565 is taken out. Note: Yes I am tired of the Dow re-testing the 8600 pivot over and over again; however, that is by definition responsive trading.

 
 
  Jonathan Levinson   8/1/02,  10:28:33 AM
Happy that you came out yesterday afternoon and said you were going to keep your puts overnight. My charts said to hold but they are not much good if we have a big gap up open. I held my 24's.

Think we are going to have a big down day?

Well, we should, but we should have yesterday too. Endless resilient, this crazy market. I'm holding my 24's, but am nervous because of the inexplicable strength we've been seeing. Respect your stops and be careful- remember that tomorrow is the first Friday in August and Third Friday will come up early.

 
 
  Steven Price   8/1/02,  10:25:15 AM
Reader Question: Expedia (EXPE) : $46.64 (-1.98) Steve, Can you please comment on recent down action on EXPE ? It dropped from just over 50 to 47. With recent warning fromAdobe more selling pressure likely to hit the tech sector. Regards,

Response: We were stopped out on this former OI put play, however some readers holding the position are getting a second shot here. $46 looks to be a significant level of support, however there is some chart noise looking back to January between here and $40. The stock's recent rally was turned back from former PnF support at $52-53 range and looks weak. Stock also well below 50-dma of $50.60. 100-dma long way down at $36.48. This could be a second shot to close position as well, which conservative traders may want to do.

 
 
  John Seckinger   8/1/02,  10:18:23 AM
As Treasuries rally in price, lower in yield, areas of support (TYX.X) underneath the day's low of 52.92 seem to be at 52.80 and then much lower at 52.65. Currently at 52.93, this area is reminiscent of the Dow at 8600 - neutral. However, as we have seen over the last few days, the market will continue to gravitate back to its pivot before sentiment can become significant and either bulls or bears capitulate. For bonds, a sense of capitulation would be a close underneath the 52.80 area.

 
 
  Jeff Bailey   8/1/02,  10:14:19 AM
Peoples Energy (PGL) $29.45 -16% ... delayed open and gaps down on Merrill downgrade to "reduce/sell" Link

 
 
  Jim Brown   8/1/02,  10:11:43 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad markt short at 10:03:10 when the OEX traded below 454. (SPX 901.79, Emini 902.50, DIA 86.51, SPY 90.64, DJX 86.52, NDX 951.22, Compx 1317.31) The initial stop loss for this signal will be OEX 458.50, just over the high of the day. (SPX 911) The ISM numbers were just one more indication of the failing economy and the last hope of the bulls to avoid reality.

 
 
  Steven Price   8/1/02,  10:11:32 AM
SPX: Keep an eye on the 890 level in the S&P, which has served as support since breaking through on Tueasday morning.

In the latest episode of Court TV, we have WorldCom Execs Scott Sullivan and David Myers spending some time in the cooler this morning. Tape of Sullivan in handcuffs has already hit the airwaves.

 
 
  Jeff Bailey   8/1/02,  10:05:56 AM
June Construction Spending -2.2% versus +0.2% consensus.

 
 
  Jeff Bailey   8/1/02,  10:04:57 AM
July ISM comes in at 50.5%, which was below consensus of 55.3% and June's 56.2%.

 
 
  Jonathan Levinson   8/1/02,  10:03:04 AM
A big sell candle just bloomed on my 1 minute chart as the COMPX dropped 5 points in under one minute. It looks like more bad news at 10AM. Fresh lows of the day are printing as I type.

 
 
  Jim Brown   8/1/02,  10:02:37 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's go SHORT the broader market with an OEX trade below 454 which would be a potential breakdown or an OEX trade at 464.50 which is the top of the current resistance range.

 
 
  Steven Price   8/1/02,  10:01:46 AM
Not to beat a dead horse, but going back to January 2000 and 5000 levels in the COMPX (yes it was really there, you weren't dreaming) on the weekly chart, it is amazing how the top of the long-term channel has acted as a nice neat downward trendline since the beginning of March 2002

 
 
  Steven Price   8/1/02,  9:56:54 AM
COMPX is at the top of a descending channel beginning in the middle of May, but if you look at the channel beginning in March we are just on top of the center line. Move back to January and we've got more room to the upside of the channel as we have not yet reached the center line. I suppose this allows just about any analyst to pick his/her poison when making predictions.

 
 
  Jim Brown   8/1/02,  9:56:08 AM
Pivot Trade Signals
I am resisting the urge to jump in here before the ISM numbers with a short signal below the days lows but as we have seen over the last two days even bad news has not been met with selling. We will be patient if it kills me.

 
 
  John Seckinger   8/1/02,  9:53:05 AM
There is speculation that the Bank of England will announce a surprise rate cut; following the lowering of rates by the Swiss National Bank just last week. With both Japan and South America continuing to have economic problems, currency traders are likely hoping the BoE can curtail further spiraling economies.

 
 
  Jonathan Levinson   8/1/02,  9:47:14 AM
COMPX breadth is 67M declining to 52M advancing. 40 new lows to 7 new highs. 1,040 advancers to 1,075 decliners. Price is chopping just above 1322.

 
 
  Steven Price   8/1/02,  9:46:15 AM
Adobe Systems ADBE $17.87 (-6.09) This stock could spell bad news for the tech sector after lowering earnings and revenue guidance, blaming a worldwide business slowdown.

 
 
  Jonathan Levinson   8/1/02,  9:38:20 AM
The opening wave of bargain hunters on the COMPX appears to have subsided, leaving us with a TRINQ of 1.50 or so now rising as the COMPX prints lows below 1320. Still amazing resilience in this market floating in a sea of seriously bad news. QQV is up 1.13 to 50.25.

 
 
  Leigh Stevens   8/1/02,  9:36:38 AM
Subscriber QUESTION: "I am a new member and you guys do a great job - I want to thank all of you for your inputs. I would like to ask you about NVDA. How low do you see it going and what is support & resistance?"

RESPONSE - - Nvidia Corp. (NVDA) got hit very hard in the recent sharp selloff, gapping down from 15 area down to $11. This area happens to the low end of its multimonth downtrend channel. Now, whether it can rally from here and "fill in" some of the downside gap is unknown. But it does seem that worst downside may be over. I'll call "support" as 10.70 area - substantial overhead resistance is at the high end of the aforementioned (chart) "gap" area at 14.30 to 15.00.

 
 
  John Seckinger   8/1/02,  9:32:01 AM
The headline economic event is still to come at 10:00 a.m. with the release of the ISM (formerly known as NAPM). Consensus is for 55.0. Notes: Morgan Stanley has cut growth estimates for Europe over the next year, possibly explaining the bid in the dollar. There is speculation that currency traders will support a Euro near the .96 level versus the dollar. Other rumors include a West Coast bond fund buying Treasuries yesterday in size.

 
 
  Jeff Bailey   8/1/02,  9:30:30 AM
Precise Software (PRSE) $12.55 ... stock edging up to $12.70 in pre-market after Soundview says that it believes EMC will consider an acquisition to bolster its relational database software, with a likely candidate being PRSE; while EMC licenses PRSE technology, company could be exposed if a competitor such as VRTS or IBM steps into buy PRSE.

PRSE p/f chart does hint of some underlying bullishness. While still in downward trend, support has been firm at $8.00 and vertical count bullish to $19. Not sure, but if Soundview correct, might a $20 acquisition price be in the cards? Link

 
 
  Jeff Bailey   8/1/02,  9:26:22 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   8/1/02,  9:20:47 AM
Oxford Health (OHP) $43.02 .... reports Q2 earnings of $0.75 per share, $0.05 better than consensus. Revenues rose 10.0% to $1.22 billion versus the $1.22 billion consensus. Link

Past analysis of "bear trap" at $38 (depicted by a 1-box break below a triple-bottom, then reversed higher) looks to be in play. If long the underlying stock near $40 from recent bullish profile, might look to sell the Aug. $45 calls (OHPHI) $1.25 or Aug. $47.50 calls (OHPHT) $0.50.

Supply/demand chart looks longer-term bullish with current vertical count bullish to $52 (current column of X is the bullish count column).

Option traders that played near-month call options, should look to sell early strength if found. In recent weeks, other stocks in group have reported strong earnings, seen there stocks trade sharply higher, to pull back into support.

Option traders that may have sold the August $40 naked puts over the past couple of weeks, would do nothing here unless you'd simply like to trade for profits and have no interest in actually ever having the stock potentially assigned to you at expiration (Aug. 16th).

 
 
  Jim Brown   8/1/02,  9:17:48 AM
Pivot Trade Signals
More earnings warnings, more indictments, more unemployment, more negative futures. Sounds like another rally day. (grin) Still to come are the Construction Spending numbers and the July ISM numbers, both of which come out at 10:AM. The pivot model is flat after being stopped out of our last short position on the closing bounce yesterday. We will wait until after the 10:AM reports before attempting to pick a direction.

 
 
  Leigh Stevens   8/1/02,  9:15:52 AM
Pre-Opening INDEX Comments - No sooner than after making new highs for the current move in S&P indices - not however in the Dow, and most definitely not in Nasdaq - we get some sell pressure going this morning. Tech under the gun on a downgrade of Adobe, which fell sharply. AOL getting hit again as the company is the target of an accounting probe. Then we have Cisco earnings coming soon and that's a subject of speculation.

The market has re-discovered all the fears out there - "double dip" recession, etc. We may be building a minor "expanding" top in the S&P - I'll be watching 447 as trendline support in OEX and around 23.40 in QQQ, to "signal" whether a downside correction is likely to gain some momentum.

 
 
  Leigh Stevens   8/1/02,  9:04:44 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -7.20 at 904.30; Dow Industrials > -37.00 at 8660; Nasdaq > -12.00 at 952.50

"Fair Value" numbers: S&P 500 futures ($SP02U): .76 -- Nasdaq 100 futures ($ND02U): 2.70

 
 
  Jonathan Levinson   8/1/02,  8:47:16 AM
Initial jobless claims rose by 20,000 last week to 387,000, up from a revised 367,000 a week ago. This was higher than forecast at 365,000-375,000. Futures down, NDX currently down 11.50, S&P down 7. The US Dollar Index is heading down to base camp 3, currently 107.60.

 
 
  Jonathan Levinson   8/1/02,  8:23:03 AM
The US Dollar Index was ramped all night, and has made it through the no-fly zone all the way to 107.80. Gold touched $300 per ounce before rebounding slightly. The futures are down slightly. Anecdotally, and of minor interest, my parents' stockbroker, with whom I've been known to have occasional and vociferous disagreements, was telling my mom last night that he couldn't understand why the markets didn't tank yesterday. The fact that he and I had the same view of the markets at the same time makes me uneasy- he was the one talking my father out of buying QQQ Dec 36 Puts five months ago after I had recommended them to him. In any event, with the COMPX up against its longer term descending trendline, and a slew of bad economic news from yesterday and more news to come, today should be an interesting one. The word for the day (other than "vociferous") will be Caution.

 
 
  Leigh Stevens   7/31/02,  6:52:12 PM
The Market Monitor for Wednesday, 7/31, has been archived and can be viewed by clicking here - Link

 
 

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