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  Jeff Bailey   8/5/02,  5:07:36 PM
eBay Inc. (EBAY) $53.35 -2.82% ... I got short EBAY @ 53.66 on late Friday as I got a little over anxious and to be honest, I entered too early. However, the daily and weekly charts seem to support a short play. The hour and 1/2 hour are more worrisome. ANy thoughts?

First thought would be to pick a time frame and stick with it. I'm thinking you're a short-term trader if looking at the 60-minute and 30-minute charts. I do like the fact that you're looking at 1-day and weekly to make sure that there's some type of longer-term downward direction to at least have you looking bearish on a near-term basis. As such.... I have had retracement since I don't know when from $71.08 to $30.37, which has 38.2% at $55.53 and this rececently served as resistance. Therefor, would keep a stop at $55.60. Near-term target would be 50% retracement of $50.73 (did reverse up from a relative low at $51.05 on 07/24/02). On any "gap down" situation, would monitor for support at 61.8% retracement of $45.92.

Point/figure chart is bearish with vertical count of $41, so some good downside potential longer-term. Link

Relative strength chart of EBAY versus S&P 500 still rather strong and would read "on buy signal, but column of O," which hints that stock is currently trading lower simply due to broader market negativity. As such, short-term trader probably looking to lock in some gains from a bearish trade if $50.73 retracement were achieved. Link

 
 
  Jim Brown   8/5/02,  5:03:29 PM
Swing Trade Wrap -
Negative Breaking Out All Over -
The bulls are on the run and stock TV is now talking about bear market rallies and false bottoms instead of the bottom being behind us. Suddenly the economic news from last week has come back to the forefront and the dog days of August are in our future. You would think the only direction remaining was down. However when things turn negative that is normally a signal for the next bounce.

That bounce may be short lived if it appears at all. There are multiple reasons I would expect it tomorrow, but not necessarily at the open. The TRIN closed at 2.44, very bullish, and the VIX at 49.31. However, the Dow also closed below 8069 and its last support level before 7875. While we are historically experiencing some typical technical buy indicators, which are a result of the current oversold conditions, we only need to look back two weeks to see these levels exceeded on better economic conditions than we have today.

I will not try to predict tomorrows market direction here (see the swing trader game plan) but I still believe the market will see new lows soon. I also believe we will continue to see intermediate bounces as bulls struggle to keep from sliding down the slope of hope. Cisco is the big dog on the street tomorrow and will announce earnings after the close. Negative news from them could be the next major market mover. Stay tuned!

 
 
  John Seckinger   8/5/02,  4:30:56 PM
New to the bond market and wondering how they relate to the Dow and Nasdaq?

Response

No problem, I encourage anyone with a question to send me an email. When bond prices go higher, in theory equities should go lower. With bonds, please remember that higher prices mean lower yields. These are the two capital markets at work (bonds and equities), and it is common to look for cash to leave one and enter the other. Equities lower, bonds higher.. or reverse. Of course, this doesn’t always happen (grin). The fun part is seeing allocation within bonds (like within sectors: eg. Biotechs to Cyclicals to Tech) and seeing how it relates to equities.

 
 
  John Seckinger   8/5/02,  4:22:25 PM
Interesting comment on you MM post 15:54 about last minute put buying. Can you elaborate? Specifically what do you mean by "supply not being satisfied"?

Response

Without having an up-to-the-minute Open Interest figure, there is a good chance the selling on the close (following an intra-day drop) represents more supply hitting the marketplace. If there is not a bounce, we (traders) don't know if all this supply is done; however, odds are that it is not. Then, if there is more to follow, some traders believe it makes sense to put a short on at the close when liquidity usually picks up temporarily (end-of-day programs).

 
 
  John Seckinger   8/5/02,  4:17:50 PM
Your comments regarding bonds about to go parabolic seem to suggest that there is an upcoming dramatic drop in the DOW, but it also says shorts will need to be squeezed out first.

Response

It does get confusing, I apologize. My comments do imply a drop in the Dow, and the shorts that I am referring to are within the September Bonds (USU2). Lower yields, higher bond prices, and possibly lower equity prices. Every time I give a call down to the CBOT a friend of mine explains how shorts step in and just "hope" for the Dow to do a one day rally. They get squeezed and then for some reason get upset at the market, as if it now owes them their money back. Therefore, a lot of the traders put on the same shorts but at higher levels. This can be guaged via Open Interest. The extreme example was in the Japanese 10-year bond years back, when a lot of institutions lost a lot of money selling bond prices when yields went much lower than where Treasuries are now.

 
 
  Jeff Bailey   8/5/02,  4:12:25 PM
Brocade Communications (BRCD) $15.01 -10% ... Jeff: What you think of BRCD?

"Communications" stocks weak again today and one of weakest technology areas. Point/figure chart bearish and vertical count bearish to $12.50 (column of O from $19.50 to $16.50 is bearish count column). Link

Relative strength chart of BRCD versus S&P 500 Link currently on a "sell signal" and in a column of O.

In brief... looks vulnerable to September lows of $12.60.

 
 
  Jeff Bailey   8/5/02,  3:59:47 PM
Current month expiration Jeff: Any thoughts on QCOM as we head into the close? I've got some Aug 22.5 puts and wondering what the thinking might be given today's drop and partial recovery starting around 2:30PM.

My own account strategy the last couple of sessions is to be rather "aggressive" with profit taking in current-month expiration, only because premiums are jacked up. I don't know when you bought QCOM Aug. $22.50 puts, but if a couple-weeks ago, would lean toward the sell side and then look to roll out into later months.

 
 
  John Seckinger   8/5/02,  3:54:30 PM
With the possibility that the Dow will close on its low, there are many traders who (during the last minute of trading) will sell the market (or buy puts) and hope that supply was not satisfied. In the bond pit, many institutional clients would do the same thing and try to get just a few points out of the market. Aggressive, but something to think about.

 
 
  John Seckinger   8/5/02,  3:50:41 PM
Are things about to go parabolic? Looking at a chart of the September Bond (USU2), the 107-30 settlement is both outside of the Bollinger Bands and above the high put in on July 24th. This chart pattern certainly has the look of an explosive move to 110 or 111. I still expect the USU2 to come back and test 106; however, shorts most likely need to be squeezed out first. If price action in Sept. Bonds work like the Dow, look a move to 109-15 in the next few days before prices come back to 108. If things do in fact go parabolic (defensive for equities), shorts most likely will be watching the settlement for an opportunity not seen in quite some time. Remember, settlement is key. Stay tuned.

 
 
  Jim Brown   8/5/02,  3:42:39 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 15:35:48 when the OEX traded below 420. (SPX 836.69, DIA 80.72, SPY 83.96, Emini 835.00, DJX 80.67, NDX 857.84, Compx 1208.03) The decliners have taken a serious drop in the last few minutes and the S&P futures are at the low of the day. The support at 420 held valiantly for 30 min and may still produce a bounce. We will be carrying this signal overnight with no material change in our outlook and the initial stop loss will be 426.50 to hopefully get us over any end of day surprise.

 
 
  Jonathan Levinson   8/5/02,  3:36:49 PM
The US Dollar Index is making a surprising run north, currently up above 107.20, as precious metals indices (XAU and HUI) continue south. Meanwhile, volume breadth has continued to deteriorate on the COMPX, and there are now more than 10 declining shares for each advancing.

 
 
  Jeff Bailey   8/5/02,  3:35:30 PM
PMC Sierra (PMCS) $7.90 -8.56% ... do u think that pmcs will be able to rebound from here @ 7.87?

Today's trade at $8.00 sets off "bearish triangle" and not a good pattern to be thinking rebound. For instance, OI profiled similar "bearish triangle" in PMCS at $19.50 as put play back in February (after red 2). Link

This "bearish triangle" pattern is high probability winner for bears. With vertical count currently at $2.50, would be defensive here.

 
 
  Jeff Bailey   8/5/02,  3:34:32 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jim Brown   8/5/02,  3:28:10 PM
Swing Trade Signals
Was that close enough? The OEX traded to 420.01 before gaining traction and rebounding off the lows. Considering the goal line stand I even considered going long with a trade over 423-425. However, this late in the afternoon our best bet is to remain flat and see what the morning brings unless we get a breakdown below 420.

 
 
  Leigh Stevens   8/5/02,  3:21:28 PM
Subscriber QUESTION: "Any thoughts on the downside potential of TXN?"

RESPONSE - - Texas Instruments (TXN) has first level of long-term support at 17.60; next major level is then well under this area, down around 12.60, which is also area of bottom of weekly downtrend channel. Stock needs to get back above 25.60 to suggest a bullish upside reversal.

 
 
  Jonathan Levinson   8/5/02,  3:06:23 PM
The COMPX and QQQ seem to have stopped right at the edge of the abyss, COMPX 1210 QQQ 21.35 as participants wonder if there's time to dish out one last beating before the end of the trading day. Apparently yes, as fresh lows begin to print as I type. The indicators are all repeating the same story as they have all day as these indices continue to trend lower.

 
 
  Jim Brown   8/5/02,  3:02:46 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point on the SHORT downside trigger from 417 to 420. The Dow is the leading indicator here and it appears to be breaking 8100.

 
 
  John Seckinger   8/5/02,  2:58:41 PM
With 30-year bonds looking to settle at levels not seen seen on a closing basis since last November, where could yields go from here? I think I might just have the answer (Note: Each line is either support/resistance and will change its role if the level(s) is penetrated). Link

 
 
  Jim Brown   8/5/02,  2:52:57 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Cancel the outstanding signals for a short entry point at 426.50 and 430. As we approach the end of the day a rebound could carry over into Tuesday. I would rather go into Tuesday flat on any strength this afternoon.

 
 
  Steven Price   8/5/02,  2:44:00 PM
IBM $66.08 (-1.80)

Reader Question: Steve, Thanks for the update on MSFT. Noticed IBM is trading close to the bottom of its trading channel (66 -75). What are your thoughts on going long IBM as we have completed 50% retracement on DOW. Regards,

Response: I see where IBM is, in fact, at the lower end of its recent trading range. The Dow does not look very strong, inspite of its 50% retracement level, and unless I see a bounce, I don't have much faith. I would be looking to see if IBM can break its recent low of $65.70. A breakdown from its latest range of almost a month and a half can be significant. The Semiconductor Index (SOX.X) is also down big today, another sign I don't necessarily want to play a bounce in IBM until I see at least a small sign of one. If you are looking to play that bounce on speculation and don't want to wait first for signs of a bounce, I would use a very tight stop, such as $65.00, as the longer it takes a pattern to form, the more significant can be its breakdown. A look at the 5 & 10 min charts do not show much support yet at this current level either, so keep an eye on the short term chart as well to see if any bottom appears to form. If we get a rebound in the Dow, IBM may well follow, but I would personally wait for some sign of firmness before going long.

 
 
  Jim Brown   8/5/02,  2:41:41 PM
Swing Trade Signals
That support I have been referencing in the 417-422 range is still holding although very weakly. We are only 20 min away from the 3:PM turn and the direction is still up for grabs. Internals have flattened over the last 15 min.

 
 
  Jonathan Levinson   8/5/02,  2:33:01 PM
832M declining COMPX shares to 111M advancing, with 244 new lows and 11 new highs. The proud and the few. The TRINQ is getting up there now, 3.55, reflecting some assertiveness on the sell side. QQV seems to have topped out, now up 4.37 on the day. The COMPX stopped at 1211, but it's just twitching and convulsing, no sign of a bounce. I'd be looking for 1190 as the bottom of this move, but 20 more downside points on the COMPX seems pretty ambitious. Shorts may decide to get paid before heading home, and that could cause a bounce into the close. I wouldn't lay any upside bets myself, but short covering could temper the selling going into the close.

 
 
  John Seckinger   8/5/02,  2:25:45 PM
Perusing the Sectors: The Mexico Index (MXY.X) is testing levels not seen since last September, with this chart only brought up because of recent geopolitical news stemming from South America. A chart of the International Market Index (ADR.X) actually looks worse. From Disk Drive to Networking to Semiconductor to Transportation, bears are certainly going for the jugular. Not is bad might be The Morgan Stanley Commodities Index (CRX.X), currently at levels where value players might become interested and possibly allow for consolidation before another leg down.

 
 
  Jeff Bailey   8/5/02,  2:21:57 PM
Intel (INTC) $16.25 -2.63% .... new 52-week low here. May bring more sellers to semiconductor sector near-term. Look for lots of stops to be triggered here and would not look to establish full position shorts at this time, but ease in if looking short/put.

 
 
  Leigh Stevens   8/5/02,  2:20:48 PM
Subscriber QUESTION: "Please comment on ADOBE systems (ADBE) for long term. i purchased at 48. What down side target can I assume after the recent warning on their earnings?"

RESPONSE: Looking at the longer-term weekly chart, a next potential downside target for Adobe Systems (ADBE) is back to top of prior trading range Looking at the longer-term weekly chart, a next potential downside target is back to the $13 area, the top of a prior trading range from ' 97 - ' 98 - last at 16.8 and there is no real support in this area - "support" as implied by a prior major low or the like.

Conversely, it would take a rebound to back above 23.00 to suggest a bullish turnaround.

 
 
  Jonathan Levinson   8/5/02,  2:07:19 PM
The QQV is getting back into nosebleed territory (for the day, anyway), up over 4.5, while the TRINQ is back above 2 as the QQQ returns to the bottom of its day range, leading the COMPX this time. Other than the QQV, it looks like the next downdraft could be a doozy, and if I were a bull, I'd be waiting for 1190 before committing anything serious to a long play. However, with the COMPX down almost 30 on the day, it'll take some serious committed selling to get us there.

 
 
  Jim Brown   8/5/02,  2:06:49 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
It appears we may not hit the overhead SHORT triggers and with the afternoon shaping up to be negative I want to protect against a downside blowout. Go SHORT the broader market with an OEX trade below 417. (SPX 835) This should allow for any bounce in the 417-422 range and take us back short again on a support failure. The drop from 417 to 400 could be quick.

 
 
  Jeff Bailey   8/5/02,  2:02:14 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Steven Price   8/5/02,  1:47:53 PM
Microsoft $44.62 (+0.21) MSFT is showing some real resilience. A look at both daily and 10 min. charts show impressive support at $44.00. A note on our stop loss policy. Although Microsoft traded through the $44.00 stop intraday on Friday, OI uses end of day closing prices as a stop loss indicator. Although MSFT is currently on a PnF sell signal, its bearish count was $46. PnF reversals up from $42, down from $48, and support at $44 seem to indicate we are seeing some consolidation.

 
 
  Jim Brown   8/5/02,  1:37:59 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT a HALF position at OEX 426.50 (SPX 851).
Also, go SHORT a HALF position at OEX 430.00 (SPX 857.50)
The initial stop loss will be OEX 436 (SPX 868)
The initial target will be OEX 421

 
 
  John Seckinger   8/5/02,  1:34:33 PM
Just thoughts: 30-year bond (TYX.X) rejected levels underneath July 24th (51.78) and there doesn't seem to be the same interest in the yield curve (read: shorter dated maturities) as this morning. The Biotech Index also rejected levels underneath the 22 DMA, now off its 330 low at 337. I am not sure what to make out of the Semiconductor Index, lower by over 5 percent and could fall to 251 based off a 127% retracement analysis from the relative high of 407.

 
 
  Jim Brown   8/5/02,  1:34:19 PM
Swing Trade Signals
Looking forward to the next swing trade signal we need to analyze the current possibilities. On the downside there is strong intraday resistance from 422 to 417. This means we do not want to "go short" in that range until we fall out the bottom at 417. That does not mean we can't go short again from a higher level and hold though a drop through that range. On the upside there is light resistance at 427, again at 430 and stronger resistance at 435.

The current bounce from 422, and a 50% retracement of the July gains, is pretty wimpy. Advancers are increasing on a broad basis so there is some buying interest but it is not very strong. We are just equalizing the oversold pressures and I still expect another down trend. I would like to get short again at 426.50 but I am not sure we are going to see that again today. A better entry would be OEX 430-435 but it will take a lot more buyers to make this happen. I am going to issue a signal for both for a half position. I don't want to issue any short signals on the downside until below 417.

 
 
  Mark Whistler   8/5/02,  1:19:00 PM
Would like to briefly comment on the Market Volatility Index, $VIX.X. The VIX is currently printing 47.68, quite a move from the low four days ago. Stats: 7-24-02 The high was 56.74 with a close at 45.29 7-29-02 After the pullback from 7-24 high, the low was 33.73 with a close at 33.73. Today: Opened at 45.59, current: 47.06. CBOE put/call ratio: Close Friday = .93 Today's intraday ratio: 9:00 AM 0.75 9:30 AM 0.98 10:00 AM 0.89 10:30 AM 0.81 11:00 AM 0.82 11:30 AM 0.81 12:00 PM 0.83

 
 
  Jim Brown   8/5/02,  1:16:24 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The bounce at OEX 422 finally found some buyers and we were stopped out of the current SHORT signal at 13:11:42 when the OEX traded above 424.50, SPX 846.74, SPY 85.09, DIA 81.56, Emini 847.00, DJX 81.45, NDX 868.33, Compx 1220.31. The swing trade model is now flat and all outstanding triggers have been cancelled.

 
 
  Leigh Stevens   8/5/02,  1:12:23 PM
Subscriber QUESTION: " Wondering what your take is on GS..I have had puts on it for quite a while, but looks like it is consolidating in the 70-74 range..for a move in some direction..do the charts indicate a direction...my guess is down, but would like your thoughts?"

RESPONSE: The big question is whether Goldman Sachs (GS) will retest its Sept. low in the 63 area - most other stocks and indices have done this. Looks to me like, at a minimum, it will retest or take out its recent 65.50 bottom - stock last at 68.2.

GS needs to close over, and stay above 75.00 to suggest a bullish turnaround.

 
 
  Jonathan Levinson   8/5/02,  1:09:40 PM
Declining volume is beating advancing volume on the COMPX 628M to 113M, with 210 new lows to 11 new highs as QQQ struggles below 21.60 and the COMPX below 1220. Nasdaq TICK at -341 is the best I've seen it in the past hour or so, and the TRINQ stays steadily around 2.60. QQV is up 3.65 on the day. The big sell orders on QQQ are taking longer to fill, it seems, with many nibbles necessary to take them out. It looks like a complete absence of bullishness, but the selling is careful and orderly.

 
 
  Leigh Stevens   8/5/02,  12:56:25 PM
Subscriber QUESTION: "What is your opinion on the XOI?"

RESPONSE: I usually comment on the OIX (CBOE Oil) index, but the stocks and the index charts are basically the same. The Amex Oil Index (XOI) has basically been in a trading range for the last two years, ranging from 410 on the downside and 575-600 on the upside. Interesting that the invasion talk has not jumped the price, but the oils tend to react to more immediate influences and threats.

When XOI rallied recently from its intraday low in the 418 area recently (7/24) it was quite oversold - with the 14-day RSI all the way down to 17 (oversold is below 30 typically), but the rebound up to the 480 area took the reading into a neutral range. Now, the downtrend has resumed of course - last at 445 - and I have to assume that it could retest lows in the 420 area again. There's the possibility of a retreat even to 410 again.

There is no technical turnaround until and unless there is a close above 480 and the ability to stay above this level.

 
 
  John Seckinger   8/5/02,  12:53:32 PM
U.S. not getting help: Britain's manufacturing output reportedly fell 5.3 percent to a 23-year low in June, once again pressuring the Bank of England to cut interest rates. The pound came under pressure as well. Output in the UK is now down 6.6 percent on the year. Another important Global figure comes out on Wednesday with German unemployment. The Dollar (DX00Y) Index has been using the 22 DMA (106.53) as support over the last six trading sessions, possibly setting up the index to test the 50 DMA (108.22) in the near term. Nevertheless, it is my opinion that the dollar is currently lagging the Dow.

 
 
  Steven Price   8/5/02,  12:49:59 PM
Kla-Tencor OI put play KLAC $35.51 (-1.52) has now dropped blow recent support in the low $36 range. The trade of $36 established a bearish catapult on the PnF, which is a triple bottom breakdown, followed by a double bottom breakdown. While their could certainly be a reversal before achieving the bearish count of $26, the stock continues to show a slow, steady decline. $35 could provide psychological support as well.

 
 
  Jeff Bailey   8/5/02,  12:46:12 PM
Dow Industrials (INDU) 8,111 -2.4% ... will monitor for trade at 8,100. If traded, would have $50 box back on sell signal with bearish count initially at 7,550. As such, thinking trade at 8,100 could have Dow retesting lows over next couple weeks. Link

With Treasury YIELDS at lows of the session and 5-year YIELD ($FVX.X) breaking to new lows, not looking for bears to be too eager here, but will monitor closely.

 
 
  Jim Brown   8/5/02,  12:44:58 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss on the current SHORT signal to OEX 424.50 (SPX 846.50) It looks like we could move lower but let's take some chips off the table if is doesn't.

 
 
  Jim Brown   8/5/02,  12:27:35 PM
Swing Trade Signals
Rapidly approaching the 422 retracement level. The problem now is do we squeeze the stop loss to take us out on a bounce or set back and wait to see if any bounce holds. Originally I was targeting 421 as an exit but I think maybe the better plan is to hang back The market internals are deteriorating and we could see a drop below that level. There is considerable talk about a retest of the July lows and it may be self-fulfilling. That low was 384. I don't expect that today but I could see 418. I am comfortable holding the current 427.50 stop loss until we see what happens.

 
 
  John Seckinger   8/5/02,  12:21:22 PM
That was too much fun. The Dow, Per 11:38:23 and 10:22:59 post, rose exactly to 8203 before rolling down to the 8147 objective. I have to buy some lottery tickets tonight.

 
 
  Jonathan Levinson   8/5/02,  12:13:18 PM
I caught my breath for a bit there, but it was clearly just a deadcat bounce for a few minutes. The TRINQ and QQV came down, the oscillators below off steam, and now the selling is resuming on the COMPX. It doesn't take long to scan my mental radar, but the COMPX appears to this observer to be entirely devoid of good news for the moment, although it is less expensive than it's been at most points this year (grin).

 
 
  Jim Brown   8/5/02,  12:12:38 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
With that last break below OEX 425 lets lower the stop loss to OEX 427.50 (SPX 852.50) As we near the support levels from 417-422 we want to be aware there could be a bounce as the 50% retracement level is reached. (OEX 422) Hopefully any rebound will stop just below OEX 427 as it did in the 11:20 and 12:00 blips. Decliners are still increasing which gives us no positive indication yet.

 
 
  Jeff Bailey   8/5/02,  11:42:33 AM
Citigroup (C) $29.05 -5.89% ... would look to take some gains here from last week's profile of bearish on break of $32 for August expirations. With market volatility high, premium "jacked up" in the near-month August puts. Example is the August $30 (CTZ) puts were about $2.00 on 08/01/02 break lower at $32, and bid $3.80.

 
 
  Jim Brown   8/5/02,  11:39:53 AM
Swing Trade Signals
Looks like they are trying to make a stand here at Dow 8175, OEX 425. The S&P futures are poised to lead us lower while the NDX futures are trying to rebound above 875. Definitely a market that is undecided.

 
 
  John Seckinger   8/5/02,  11:38:23 AM
I know I said Per 10:22:59 post that 8147 is my objective, but what if the market isn't offering that big of a move today? Currently down 123 at 8188, how would a trader know if a temporary bottom is in? I would speculate that if the Dow rallies above 8203 there would be a decent chance consolidation or slighly higher prices are in store. Why 8203? A five minute chart shows the relative low on August 2nd, and once the Dow fell underneath 8203 today shorts seemed to add to positions and use 8203 as a short term pivot. Could the market rally above 8203 and then tank? Of course, I am simply trying to play psychology and probabilities. Notes: High and close on July 24th: 8202 and 8191; Open and close on July 25th: 8309 and 8186; Open on July 26th: 8192.

 
 
  Leigh Stevens   8/5/02,  11:34:11 AM
INDEX Comments: OEX - New lows for the move now taking the S&P 100 down toward the 422 area, at the 50% retracement level for the last upswing. This is fairly typical or a normal correction - to retrace half the prior move. 413 is potential support implied by a fibonacci 62% correction. If it dips lower than this, the index may be heading back to retest the July bottom.

Nas 100 (NDX) is doing this very thing - retesting its July low at 869 - low so far today is a point lower than this - at 868. Index has rebounded a bit on short covering, as is typical at a prior low. With the SOX making a new low for the move and under 300, it seems unlikely that the Nasdaq is not going to also make a new low.

 
 
  Steven Price   8/5/02,  11:28:54 AM
Danaher (DHR) $57.84 (-1.12) OI put play Danaher has broken support of $58.02, which gave a bounce on the way up on 7/26. This had been the only red candle on its rebound up from $55, and could have served as minor support on the way down. Next minor support at $57.41. After that, it appears to be a straight shot down (in terms of support) to $55.

 
 
  Jeff Bailey   8/5/02,  11:28:24 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jim Brown   8/5/02,  11:26:36 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I have not lowered the stop loss on the open SHORT signal because I am concerned we could get an oversold bounce that could fail in the low 430s. By setting it lower we could be stopped out just as the market rolls over again. Cautions traders can exit whenever they wish A reasonable compromise might be OEX 432.50. I plan on lowering the stop very close as the OEX nears my initial target of OEX 421. Until then I want to keep it lose.

 
 
  Leigh Stevens   8/5/02,  11:23:52 AM
Subscriber QUESTION: "Thanks for all your inputs. Great job. Could you please tell me your idea regarding VRTS Restance and support..."

RESPONSE - - Veritas Software (VRTS) has been in a steady downtrend since its December peak. Since May the lows have been defining the low end of a downtrend channel, with some periodic "oversold" rebounds that take the stock up toward (but not to) its 50-day moving average, which is currently at 19.7 - stock is trading last at 14.7. VRTS is "due" for another of these minor rebounds within a few days I think. But, these rallies have been anemic so far.

We need to look at the longer term weekly chart to get some perspective - 13.3 looks like the first level of long range support - below 13, around 10-10.50

 
 
  Jonathan Levinson   8/5/02,  11:22:57 AM
395M down volume to 72M up volume on the COMPX. That was quite a Whoosh! there, but the TRINQ is only at 2.72, which, while certainly not low, could get a lot higher if serious selling started to come in. I would characterize this so far as an "orderly" decline. The QQV blew off steam and is now up 3.58 on the day to 58.54.

 
 
  Steven Price   8/5/02,  11:15:45 AM
Reader Question: Expedia (EXPE) $43.09 (+0.29) Steve, Your thoughts on EXPE's strength today. Now with the ISM numbers not as bad as expected another round of short covering possible. Would you suggest opening a short position on EXPE if the stock rallies from current levels ? Regards

Response A look at Expedia's chart certainly shows signs of a weak stock. However, the $40 support level has held, and it has previously served as resistance, as well. I would either be looking for a failed rally around $45, for a play down to $40, or a break below $40 to short this stock. $40 has served as support several times over the last year. The bottom of the descending channel the stock has been in since the middle of May shows a price target of $35-36 before a bounce. However, It needs to break $40 first.

 
 
  Leigh Stevens   8/5/02,  11:10:57 AM
Subscriber QUESTION: "Hi Leigh, I tried several different charts of ORCL but I still don't see any up trend line. Could you explain how you see an up trend line in ORCL? "

RESPONSE: I can show it more easily than describe it. First, on trendlines - there are two types basically: "external" and "internal" trendlines. External trendlines are what textbooks teach you in charting 101 where a straight line is drawn between at least 2 of the lowest lows (or highest highs), although preferably this should be 3 or more points. An "internal" trendline connects or "touches" the GREATEST number of lows (or highs) and may therefore cut through the extreme low(s) or high(s) of one or more "bars".

The chart shown at Link -- has both a conventional trendline and an internal trendline (what I use the most) drawn on the ORCL. daily bar chart.

 
 
  John Seckinger   8/5/02,  11:05:44 AM
Looking at a chart of the Biotech Index (BTK.X) reminded me of times when trading became frustrating. Luckily there was a tool that helped. Link

 
 
  Jonathan Levinson   8/5/02,  11:03:38 AM
Does the TRINQ work the same way as the TRIN? Above 1.20 Bearish? Under .80 Bullish? Or how do you look at it in terms of helping at time of Q purchase?

Exactly, Russ. The TRINQ, now 2.08, rises as selling pressure increases. Same as the TRIN. I use it in a general sense to keep a feel on short term market breadth, but more than that, I use it fade the market when it reaches extreme levels. For instance, if the TRINQ spikes to a very high number, such as above 4, I might sell puts, whereas if it dives to below .3, I might buy puts. It's not the only indicator, but used in conjunction with the other usual suspects, it's very valuable.

 
 
  Jonathan Levinson   8/5/02,  10:58:32 AM
The TRINQ is up to 1.66 and the QQV is up a whopping 4.61 as I type. QQ is at 21.90 and only MSFT seems to be holding, currently 44.60. The COMPX has printed fresh lows below 1235.

 
 
  Jeff Bailey   8/5/02,  10:47:01 AM
Qualcomm (QCOM) $24.82 -2.85% .... Looking to leg into some QCOM Sep $25 puts (AAWUE) here at $2.65 x $2.75. Have tried to bid some VZ and SBC puts also that are in the money, but sellers of puts are hard to find.

Bear looks for a QCOM trade at $24 to signal further weakness Link and give triple-bottom-sell signal.

 
 
  Jim Brown   8/5/02,  10:41:59 AM
Swing Trade Signals
The trading range today as been very narrow with several attempts to move up but the trend is marginally lower. Until we break below Friday's closing low of OEX 428.37 the outcome is still in doubt. We are at support across the board and the sideways movement is burning off the oversold conditions. We need to see some more selling quick or the bulls will find some more converts.

 
 
  Leigh Stevens   8/5/02,  10:41:52 AM
INDEX Comments: Chart time frames - on the question of what time frames I reference on my daily commentaries. Just would note that I only look at the weekly charts on my weekly commentary, which I do on Sundays. Normally, I look at daily and hourly charts as these are in common use in trading. As Steven wrote, different time frames give you different perspectives and I also encourage looking at a range of charts in terms of the time periods used.

 
 
  Jonathan Levinson   8/5/02,  10:32:15 AM
There are currently 166M declining shares to 118M advancing on the COMPX, but 115 new lows to a mere 6 new highs. 1,520 decliners to 1,124 advancers.

 
 
  Steven Price   8/5/02,  10:29:37 AM
Reader Question: Thursday night Jim Brown referred to a 180 minute chart of the DJX; Friday he referenced the Daily chart. Leigh Stevens is referencing weekly and hourly charts today. Other times he uses......

Is there a basic process to selecting the optimal Time Frame that can be conveyed readily with caveats for greater accuracy as wannabe (successful) traders become more sophisticated ? Thanks

Response: Different analysts use different time frames to look at different trends. Generally if you are looking at a long term investment you may want to look at the long term trend, and use a shorter term trend for a swing-trade type model. However, these trends can be combined to look at different overall views. It is sort of like zooming in and out on a map. Each view will give you an idea of where you are going from a different angle. The more input, usually the better. If a stock trades within a channel fairly consistently in the short term, you can play theses swings. If, however, you are making a retirement investment, you may want to look at the long term trend in the stock.

 
 
  Jonathan Levinson   8/5/02,  10:29:37 AM
Congestion is right! 1240-50 is the box that the COMPX has to deal with first. The Fed has announced that it has added liquidity to the system, which could explain the sudden show of strength in the markets following the ISM release, but the treasury auction should put a lid on that. Without knowing the amount yet, it's difficult to guess at whether this is responsible for the sudden support at 1235 COMPX. Here's the Link

 
 
  John Seckinger   8/5/02,  10:22:59 AM
Is the Dow heading right towards 8147? On a daily chart, it is the 50% retracement from the relative 7532 low to the high of 8762 set on July 30th; however, there seems to be more at work here. Following the almost 500 point rally on July 24th, the market settled at 8186, five points lower after the spectacular run. The market then almost exactly duplicated the move in one more wave, setting technicians up with a very nice retracement analysis.

 
 
  Jonathan Levinson   8/5/02,  10:13:31 AM
Despite an initial selloff at approximately 10:03 AM, the COMPX is off its lows of the day and back up to 1241. The TRINQ has fallen to .9 though the TICKs are still negative. QQV is up 3.55. Not a lot of direction here.

 
 
  Jim Brown   8/5/02,  10:10:11 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at OEX 429 at 10:02:18. (SPX 855.38, DIA 82.52, SPY 85.94, NDX 886.25, DJX 82.27, Emini 856.00, Compx 1237.85) The ISM number were not as bad as many traders expected and could be giving the bulls something to cling to. I would rather have been in a little higher at 435 but we will play the cards we were dealt. The initial stop loss is OEX 435 (SPX 865) Notice how the support at OEX 430 held for several minutes. This was exactly what we expected and it may not be over yet.

 
 
  John Seckinger   8/5/02,  10:04:49 AM
The yield curve (comparing the difference in yields between 5 and 10 year bonds) is getting farther apart on Monday, with 5's up 4.5 ticks in the futures market and 10's only up 2.5. Doing the math (4.5 times 6 is 27, 2.5 times 4 is 10) there is a (27-10=17) 17 tick steepener and is viewed as defensive for equities. Note: 16 or more is viewed as a strong move, while 32 and higher is significant. Under 10 is considered a non-event.

 
 
  Jonathan Levinson   8/5/02,  10:03:20 AM
Looks like a negative reaction to the numbers on my quote screen.

 
 
  John Seckinger   8/5/02,  9:59:12 AM
Looking at a chart of the cash Treasury Bond (TYX.X), the current 51.90 level eliminates the possibility of Friday putting in a significant relative low. As yields continue to drop, the 51.78 level set on July 24th certainly has a good chance to be tested on Monday. It would take a close above 53 for asset allocation players to begin thinking of selling Treasuries for equities. 51.54 is the closest level downward, with 50.22 being a more obvious intermediate objective for bulls. I say bulls because lower yields means higher prices.

 
 
  Jim Brown   8/5/02,  9:55:28 AM
Swing Trade Signals
After trying to hold near positive until the ISM report it appears fear is beginning to set in and the indexes are heading south. The Nasdaq was the strongest but support is failing.

 
 
  Jonathan Levinson   8/5/02,  9:51:50 AM
The TRINQ is a little lower, dipping below 1 for a few moments, and the QQV is higher, now up 3.35 on the day, and the COMPX TICK has grown more negative. This tells me that there's currently less selling pressure than we've seen recently, but option traders are more fearful. It wouldn't take much selling to bring the COMPX lower, but no one wants to commit ahead of the 10AM data.

 
 
  Steven Price   8/5/02,  9:46:17 AM
J.P. Morgan (JPM) $22.90 (-0.95) Lehman cut its price target on this OI put play, along with Citigroup (C). It cited concerns over economic uncertainty, tough operating environment and "headline risk," or the effect of continued bad news. Lehman lowered C's 12 month target from $55 to $43, and JPM's from $39-$31

 
 
  John Seckinger   8/5/02,  9:45:32 AM
Head and Shoulders: I am seeing a H&S in September Crude Oil, a possible reverse H&S in the September dollar, and the beginning of the right shoulder in the September bond.

 
 
  Leigh Stevens   8/5/02,  9:44:00 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on the Enron probe heading offshore, as the Feds look at whether the company was engaged in bribery of foreign officials to win pipeline orders. Enron indicates that they had anti-corruption rules in effect forbidding such practices - if so, too bad they didn't apply ethics rules to themselves at home!

A story on how Japan is making many new & different models of subcompact cars for its home market. These are tiny cars - the U.S. is going the other way. Judging by the size of the monster SUV that parks next to me, some of these Japanese models look like they could fit in the back of some of our SUV's.

Inside story on Halliburton (and Baker Hughes) being among large energy-related companies that established subsideries in offshore tax havens to reduce their tax bills. As the ex-CEO of Halliburton, the Veep will likely stick to the war on terrorism and not throw too many stones at tax-dodging corporations per the current sport in Washington.

Downbeat economic news and weak job market data are prompting economists to lower second half growth projections - this was part of the Goldman report last week suggesting that the Fed would CUT rates again in Q4. However, Washington, has a "what me worry" attitude - they should be out of work!

 
 
  Jonathan Levinson   8/5/02,  9:40:00 AM
The COMPX is has resumed Friday's struggle in the 1240-50 congestion area, but with CSCO below 12, MSFT struggling to hold 44, and QQQ just above 22, there's not much strength at the open. The TICK.NQ is negative, and the TRINQ is quite tame at 1.36. QQV is up 2.8 to 57.64.

 
 
  Jim Brown   8/5/02,  9:30:13 AM
Guess the Dow - The current numbers for this weeks contest are 9288 on the high side, 7069 on the low side and the average 8082. You still have a few minutes to enter your guess if you want t chance to win the dual monitor video card. Link

 
 
  Jonathan Levinson   8/5/02,  9:29:22 AM
COMPX should have support at 1235-40, then 1220. Resistance is at 1252, then 1280-85.

 
 
  John Seckinger   8/5/02,  9:28:23 AM
One variable to put to the sidelines this month is Corporate Spreads, since there were only $14 bln corporate bonds issued in July, the lowest month on record since late 2000. Nevertheless, morning activity has Sears is wider by 20 bps, Disney softer by 40 bps, and Delhaize weakening by 75 bps. All three companies should see lower stock prices.

 
 
  Jeff Bailey   8/5/02,  9:23:46 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jim Brown   8/5/02,  9:22:17 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
SHORT the broad market with an OEX trade below 429. (SPX 855) The initial stop loss will be OEX 435 (SPX 865)

Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
SHORT the broad market with a HALF position with an OEX trade above 435. (SPX 865) The initial stop loss will be OEX 445 (SPX 888)

 
 
  Leigh Stevens   8/5/02,  9:17:37 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -3.10 at 861.90; Dow Industrials > -20.00 at 8280; Nasdaq > -4.00 at 892.00

"Fair Value" numbers: S&P 500 futures ($SP02U): .70 -- Nasdaq 100 futures ($ND02U): 2.50

 
 
  Leigh Stevens   8/5/02,  9:15:05 AM
Pre-Opening INDEX Comments - We're lower on the futures this morning - last week, saw the second up week in the row so something different is happening. The Wall Street Journal is speculating on a bottom - called "foggy bottom" - a good title. We're down to where I would expect if a bottom is in the cards. At the low end of the trading range in Nasdaq, and a bit more than a 38% fibonacci retracement in the S&P. That's not a bad giveback, if it holds.

We may be forming a bottom, but are some ways from being oversold again on the daily osciallators. As we are in the summer doldrums, what's next. Maybe not much. Today, tomorrow may bring some clarification of what's the next move in the market. Meanwhile as noted by Jim we've got an ISM report due out thim morning. Fundamentally, readings on the economy become very important.

 
 
  Jim Brown   8/5/02,  9:14:14 AM
Swing Trade Signals
The futures had improved slightly as we got closer to the open but have declined again. With the non-manufacturing ISM report not due out until 10:AM there could be some hesitancy for the market to decline until the numbers are known. Estimates are for 55, down from 57.2 in June.

We have three scenarios for the game plan this morning. The most likely event as of 9:AM is an opening drop through the 429 trigger point without moving higher. To recap the three scenarios:

1.) We open down and fall through the SHORT trigger at 429. (SPX 855)
2.) We move up slightly after the open, without hitting the 429 trigger, and trade cautiously above 435 before rolling over again. Open half a position at 435 (SPX 865) and half a position at 440 (SPX 875) or 429, whichever occurs first. The stop loss will be 445 on the entire position.
3.) The market gaps up and over 435 before rolling over. This is not likely at this time. Refer to the game plan for details.

Most likely scenario - It appears we will open down but this type of setup sometimes rebounds after the opening dip only to roll over again. The Nasdaq futures have been improving slightly while the S&P futures have been declining. This bipolar market along with Dow component PG beating estimates is making the open difficult to read. Fortunately we have a clear path in front of us. We will signal a full position SHORT on a drop through OEX 429 (SPX 855) or signal a half position SHORT with a move through OEX 435. (SPX 865)

 
 
  Jonathan Levinson   8/5/02,  8:03:05 AM
The US Dollar Index has spent the weekend chopping along around 106.80, where it is currently trading, with a brief and unsuccessful foray early this morning to just above 107. Equity futures are slighly negative.

 
 
  Jim Brown   8/2/02,  12:33:51 AM
Swing Trade Game Plan - Now for the hard part -
Knowing the market was going down on Friday did not take a rocket scientist. That was like picking up pennies on the sidewalk. Monday will be a little more difficult. We had a strong bounce on short covering and from the filled Dow gap at the close on Friday. Just enough to give bulls some hope and confuse the shorts.

Monday has the non-manufacturing ISM report at 10:AM and the bulls will be praying for some positive signs. They will be trying to spin it every way possible. As long as the report is not a disaster this could be good for a follow on gain to Friday's closing rebound. Unfortunately everything above the current OEX 434 is uncharted area until OEX 440. The only level that can be remotely identified as resistance is 435 and that is only one point away. I seriously doubt we can get a bounce back to OEX 440 but would jump at it like a starving man at a whopper.

Once we get into a new SHORT play (you were expecting something else?) we will be faced with support at 430 again which is the 38% retrace level from the July-24th bottom to the Aug-1st top. The next support level is 421 and the 50% retrace level and dead center in my original 418-423 target. This is where oversold will begin to creep in again and a good exit for any current short.

Market View Chart 1: Link

Game Plan:

There are three possibilities for Monday morning:

1.) - The market sours over the weekend and opens down falling through support at OEX 430.
2.) - The market opens up slightly waits for the ISM numbers and rolls over to fall through support at OEX 430.
3.) - The market opens up, is energized by the ISM or some other bullish event and rallies substantially before rolling over.

Game Plan Chart : Link

1. Using the first possibility where the market opens down and keeps going, we want to SHORT the market on an OEX trade below 429, which is below the reasonable support at 430. The stop loss on this signal would be OEX 435. The target is OEX 421.

2. Under the second possibility I can see the market trading up slightly while waiting for the ISM numbers. There is light resistance at OEX 435. I would SHORT ONLY ONE HALF of my regular position size at OEX 435 and ONLY if it did not gap over it.

Market continues up: If the market continues up SHORT the other HALF of your position at OEX 440. The stop loss on the entire position will be OEX 445. There will be strong resistance at 440 and the 2/5 DMA around 441-442. I would be very surprised if that resistance fails.

Market continues up but does not hit OEX 440: Say the OEX moves up to the 438-439 range before rolling over and misses executing the 440 trigger. You have two choices to fill the other half of your position. Fill it when it falls through 435 again or wait for the trigger at 429. The 435 trigger risks a bounce higher with a full position and the stop loss would have to be set at 440 with that full position and that is right at resistance. You could be stopped only to roll over again a few minutes later. If you were willing to risk a higher stop at say 442 then it could be worth the risk. Waiting to fill the other half at 429 gives up six points on the down side but only on half a position. You also avoid a possible bounce off 430. You then have a full position and the target is 421.

3. The market gaps open or is strongly positive at the open: Refrain from opening the HALF position at 435. Allow the market to run and institute a full position at OEX 440 with a stop loss at OEX 445. If the market does not hit 440 but comes close and rolls over then institute a FULL or HALF position at 435 as it falls back through. If you are cautious and it appears there could still be a bounce just do HALF. If it is dropping rapidly do a FULL position. If you take the half option fill the other half at OEX 429.

Sound Complicated? It Isn't!

There are only three possibilities. Down, up slightly or up strong. All you have to do is decide in advance what you are going to do if each occurs. If you are in doubt just wait for OEX 429 and enter a full position. That is the safest and easiest way to play it. EVERY THING ABOVE 429 IS NOISE and RISK.

I will be calling the possibilities as I see them on Monday morning. Now go back and read this again and decide how YOU want to play it.

 
 
  Jim Brown   8/2/02,  12:32:39 AM
The Market Monitor has been archived for Friday August 2nd. You may review it here: Link

 
 

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