Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
  Jim Brown   8/7/02,  4:11:53 PM
Swing Trade Wrap - No Regrets -
The market today played out exactly as scripted in yesterday's game plan. From the morning bounce, to support at 430 and back to resistance at 440. Even though we were stopped out by $.89 cents at the close there were plenty of opportunities for readers to take a profit. Several got out at the break back over 432, others at 435 and many, according to my email, at 437. Only the gunslingers remained to the very end. Now we are faced with a possible long position for tomorrow. I can't believe my fingers typed those words! (grin) See the game plan for details later tonight.

With economic news still negative, the PPI on Thursday and Productivity on Friday I find it hard to believe the markets can mount a credible rally. However the odds of a rate cut next Tuesday are climbing and investors are trained to think rate cuts = rally. If the markets can break over Dow 8450, Nasdaq 1300 and SPX 877 then we could retest the highs from last week. Volatility is still high but the VIX has fallen substantially to 43.07. Program trades were the main reason for the afternoon bounce. There was a huge futures buy program timed to influence the 3:PM turn at 2:41. Big money is trying to support the markets at this level, which leads you to believe there is support to go higher. Do you always believe everything you see? I don't and we will keep a skeptical eye open going forward. See you in the morning! The game plan will be posted later tonight.

 
 
  John Seckinger   8/7/02,  3:50:25 PM
Economic Releases due out tomorrow morning (all at 8:30 a.m. EST) include Initial Claims for the week of August 3rd (consensus is 385k), July PPI (0.1% consensus versus 0.2 percent last month), and Q2 Preliminary Productivity (0.7% versus last quarter's productivity of 8.4%). Events scheduled for tomorrow look extremely light and should not affect market activity (SBCA Satellite Conference and Acxiom Shareholder/Analyst Meeting - ACXM).

 
 
  Steven Price   8/7/02,  3:48:49 PM
Reader Question: Hi Steve,the action on klac is getting crazier and crazier as time goes,any thoughts at this time??????Thanks

Response: OI put play KLAC $37.01 (-0.23) continues to flirt with the $37.50 closing price stop loss listed in OI. It has traded as low as $35 today. I still believe this company is weak and is a good short. It has rebounded above the midpoint of its descending channel, but the trend is still decidedly down. It is a candidate to follow the Semiconductor Index (SOX.X), which is also showing a rebound, but still remains in a downward trend. If the market shows a continued rebound heading into next Tuesday's rate announcement, this sector may go with it. I'm not going to fight a trend, and will respect my stop, however this still looks like a good long term short.

 
 
  Jeff Bailey   8/7/02,  3:47:29 PM
Trader talk is that shorts a little jittery and perhaps covering into the final hour of trading. Some cited speculation of surprise Fed rate cut next week.

Dow Industrials +175 at 8,449

S&P 500 +16.61 at 875

NASDAQ Comp +20 at 1,280

QQQ +$0.33 at $22.82

 
 
  Jim Brown   8/7/02,  3:44:50 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the open SHORT signal at 15:39:52 when the OEX traded above 441.00. SPX 876.18, DIA 84.57, SPY 88.12, DJX 84.44, NDX 921.93, Compx 1283.23. It sure looked like it was going to hold under 440 but that last little spurt pushed it over the edge. Better out here than stuck at 440 and facing another gap open in the morning. There is always a bright side!

 
 
  Jeff Bailey   8/7/02,  3:34:07 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jeff Bailey   8/7/02,  3:30:19 PM
CNBC saying that some type of "buy program" was triggered, which has created recent hourly bullishness. Nothing has been triggered on my alerts. I will give equal time to "buy" programs as I did this morning for "sell programs." Not playing favorites at all, just not getting the $PREM alerts from my q-charts.

 
 
  Jim Brown   8/7/02,  3:13:44 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Now (OEX 437)would be the time to exit if you don't want to risk our OEX 441 stop loss.

 
 
  Leigh Stevens   8/7/02,  3:12:20 PM
INDEX Comments: ALL - looking at the question if this last rebound is the start of more than a short-term bounce, it looks like an oversold rally - the short-term hourly oscillators were registering oversold, whereas the longer hourly model and the daily stochastics are still pointing down, especially in the SPX, OEX and DJX.

The Nasdaq is closer to oversold levels and that is where we've seen best rebound. Repeating again the the breakout points I think that suggest potential for a further (up) leg:

OEX key resistance at 440, at its May-July down trendline and at the key 21-day moving average; SPX breaks out first on a move above 880, then 895, resistance implied by the June-July down trendline on the daily chart; DJX has some key technical resistance at 84.25, but a definite upside breakout does not occur absent a move above 86.00 at its down trendline.

Key tecnical resistances: 1315 area in the Composite (COMPX), NDX (Nas 100) at 955, and QQQ at 24.00 or its May-June down trendline.

Absent closes over these levels, there is nothing much changed on an intermediate-term basis. It's taking longer for the dips to happen - now the upswings are the short, sharp moves. This is a flip-flop to the way it's been prior to just recently.

 
 
  Jim Brown   8/7/02,  3:11:13 PM
Swing Trade Signals
That thud you heard was the OEX running into resistance at 435 at full speed. The buy program could not pierce it for more than a couple ticks and it appears to have run its course.

Don't doubt for a minute that big money does not try to influence market turns. Triggering that big program 10 min before the 3:PM turn was an attempt to influence the direction after 3:PM. We will not know for a few more minutes if it was successful. With shorts ready to add to positions on a falling market at 3:PM they were forced to think again about the wisdom of their move. In reality the buy program, if it failed, gave the shorts an even better entry point. They have yet to take advantage of it but could at any moment. It is a standoff with each waiting for the other to make a move.

 
 
  Jonathan Levinson   8/7/02,  2:58:30 PM
This bottle rocket has brought the TRINQ back to .55, and the TICK.NQ positive at a whopping 69 (grin), significantly higher than its low readings, however. The COMPX has rushed back up to the Waiting Room, now testing 1265 from the bottom.

 
 
  Jim Brown   8/7/02,  2:53:31 PM
Swing Trade Signals
Pretty strong buy program that fired off at 14:41. It hit about 500 stocks and from the spike in the futures it appears it was futures driven. Nice bounce but let's see what happens when it hits OEX 435.

 
 
  John Seckinger   8/7/02,  2:44:20 PM
Per 12:49:57 Post (support and resistance for the Dow on a five minute chart), I merely extended the bottom line, giving a good illustration of how support turns into resistance (a change in psychology). Please see chart: Link

 
 
  Jim Brown   8/7/02,  2:44:08 PM
Swing Trade Signals
Corrected - With 25 min left before the 3:PM turn I am wondering if the slow drop is telegraphing a reversal at 3:00 instead of the customary drop. We are within 25 points of Friday's low of 8203 on the Dow and that could be the battle line the big money is going to try and hold. Once the Dow goes below that for the week again it is hard to promote a bullish stance in the media. Suddenly you are defensive again and moving into a protective stance instead of an aggressive posture. Just a thought.
(I used the wrong candle in the prior post, sorry)

 
 
  Jim Brown   8/7/02,  2:34:22 PM
Swing Trade Signals
Beginning with last nights game plan we have created a new section under "strategies" on the website. The game plan is now hosted there with the imbedded charts (no links to click). This should make it easier to read and print.

Link

Also, beginning last night I posted game plan charts for the OEX, SPX, DJX so the numbers given can be related to each different index.

I am always open to suggestions if I can do something to help you trade better so fire away.

 
 
  John Seckinger   8/7/02,  2:24:02 PM
Side Note: Spirit Airlines said it will offer free seats to all passengers on September 11th. It is a privately-held, Fort Lauderdale-based company.

 
 
  Jeff Bailey   8/7/02,  2:23:10 PM
Americredit (ACF) $11.96 -25% ... Jeff: Could you please comment short and long term on AmeriCredit (ACF)?

Well.... not bullish with today's trade at $14.00. That was a spread-triple bottom. Combine that with bearish count of $9.00, and I'm thinking ACF going to test 09:00. Will reserve any "bullish" commentary until the stock shows me a buy signal "I'll question that as would have been smart at $18.50." Link

Relative Strength of ACF versus S&P 500 has been bearish since mid-May (after red 5), so stock not just down on market action, but something more stock specific. Link

 
 
  Jonathan Levinson   8/7/02,  2:21:24 PM
Declining volume is now more than doubling advancing volume on the COMPX 748M to 316M. 105 new lows to 8 new highs, 1976 decliners to 1210 advancers.

 
 
  Steven Price   8/7/02,  2:17:35 PM
Reader Question: Hi Steve, Once again there's "put" activity in MMM. August and January 120 strikes both had blocks of 1275 cross. Could this be some kind of spread? Thanks, Molly

Response: If you see a block like this come across, it is most likely a time spread. A spread like this, trading at $8.50-$9.00 is most likely a volatility play. If volatility drops, or the stock moves away from the 120 strike price, the spread will shrink.

 
 
  Jim Brown   8/7/02,  2:16:32 PM
Swing Trade Signals
Looks like the 430 level is failing and the next, very negligible support, is at 428 from the stutter step on the way up at 9:45 on Tuesday. If 430 did not hold 428 should not either but we need to be aware. After 428 there is nothing between us and 420 but air.

 
 
  Jeff Bailey   8/7/02,  2:15:35 PM
Tyco (TYC) $11.98 -6% ... Hi Jeff, Any chance you can take a look at TYC point and figure and give me a read? Thanks.

This is stock I profiled bearish for the Sept. $12.50's in late July. I did get a downside alert at 80.9% retracement of $11.76, stock has traded low of $11.72, but bouncing back a bit here. Still plenty of time for September expiration and things starting to look a bit better for bear near-term. 50-day looks to be "risk assessment" for bear at $13.56. As mentioned not to long ago, would look to close at $10 near-term. Currently feel I would want a close below $11.78 below this retracement level. (retracement from $35.82 to $6.07.)

Point figure chart has further strenth at $14, with weakness at $6.50. Today's trade at $12, was enough for 3-box reversal. First "meaningful" sign of weakness since profile bearish. Link

Only reason I'd close out here, is if there's a better opportunity somewhere else, or I OVERLEVERAGED (which I don't do) and bought too many options.

 
 
  Jonathan Levinson   8/7/02,  2:11:02 PM
The COMPX is making a much more gradual descent than the rocket ride that brought it to this morning's highs. A few days ago I was referring to 1240-50 as a congestion area, and this morning it looked as though the congestion had "levitated" to 1245-55. Either way, above 1240 is sticky, and price takes its time passing through it. The TRINQ at 1.65 indicates that the sellers are back in town. TICK.NQ -394, and QQV is up 2.66 to 59.63.

 
 
  Jim Brown   8/7/02,  1:53:20 PM
Swing Trade Signals
Remember according the game plan OEX 430 has been support. We are about to see if it remains support. Once broken the decline should pick up speed.

 
 
  John Seckinger   8/7/02,  1:50:41 PM
A subscriber's question wondered about a PG 90-95 credit spread, but there is a risk/reward of 4:1. Does this make sense?

Response: As a trader, I think it makes sense to look at all option strategies on a case-by-case basis. PG has a beta of 0.15, which might be a reason to put on the trade and be able to effectively control risk. 4:1 is significant and execution would be critical (as well as factoring in commissions, possible slippage, etc.). Yes, looking at other strike prices definitely makes sense, or just simply selling the 90 calls outright and putting in a tight stop within the option. Of course, one could always buy shares and then do a covered call.

 
 
  Jim Brown   8/7/02,  1:43:40 PM
5-DMA/2-DMA I received several requests for the setup on these averages on the 15 min chart I use. In Qcharts add a simple 52 period average using the "close" price. The 52 periods equates to two days on the 15 min chart.

Also setup a 130 period "exponential" average based on the "average of high/low" NOT CLOSE. This 130 period represents 5 days on the 15 min chart.

These averages are very reliable for predicting support/resistance on slow moves. On explosions like we had at the open today nothing is reliable. If you get these setup correctly you should be able to see a direct correlation of intraday support/resistance over the last two days. Try it, you will like it!

 
 
  Jeff Bailey   8/7/02,  1:43:19 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Steven Price   8/7/02,  1:34:47 PM
Danaher (DHR):$56.90 (-0.47) Reader Question: Hi Steve, Your thoughts on DHR performance today. Looks like the pull to 55 abd below is picking some strength. With break over 58 failing, would you short the stock at current levels ? Regards,

Response: I like the failed rally below $59 on this stock. The overall trend looks to be intact, and with the market falling backwards this short still looks good. I like it as a short better around $58, but the stock continues to look weak. Take a look at last night's update on this OI put play for more analysis. Link

 
 
  Jeff Bailey   8/7/02,  1:33:42 PM
Sell Program Dow -26, SPX -3.04.

 
 
  Jonathan Levinson   8/7/02,  1:14:52 PM
The TRINQ is now, at last, over 1, currently 1.06 as the COMPX prints fresh lows below 1255 and the QQQ below 22.20.

 
 
  John Seckinger   8/7/02,  1:05:53 PM
Can you please comment on PG, especially the August PG 90-95 call credit spread for .90 or 1.0

Response

This Bearish Spread looks to buy the 95 calls (.20) and sell the 90 calls (1.20) for a credit of 1.00. The maximum gain is the net credit, while the maximum loss is the difference between the strike prices minus the net credit. Breakeven is the lower strike plus the net credit. Ok, with that out of the way, a chart of PG shows shares recently having a hard time with a "zone of resistance" right near 90 dollars a share. This should bode well for the credit spread. Currently at 88.39, execution might be better if one waited for a move to near 89 (if conservative). Once back underneath 87.75, shares of PG should have a hard time seeing 90 before expiration.

 
 
  Jim Brown   8/7/02,  12:52:21 PM
Swing Trade Signals
If you are following my 2/5 day moving averages on the 15 min chart you will notice that the Dow and SPX are moving exactly along the bottom 2DMA. Resistance is the 5DMA at 8339 for the Dow, 866 for the SPX. The OEX is more between them and is hugging resistance of the 5DMA at 435.05. A breakout above these averages will produce some buy programs.

 
 
  John Seckinger   8/7/02,  12:49:57 PM
Even though the market rallied slightly during the last five minutes, I still think shorts have not given up. Expectations might be lower, but risk looks to be easily managed. Please see chart: Link

 
 
  Jim Brown   8/7/02,  12:45:19 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The sideways action is leading up to a familiar pattern where we ease up in the early afternoon only to sell off at the close. I want to change the stop loss on the current short signal to OEX 441 (SPX 877), which is just over yesterday's high and over 440, which should still be resistance today despite the opening bounce to 442.39. With our entry point of OEX 437 that is still tight but gives us a little more room. We traded between 438-440 at the highs of the afternoon yesterday. If we repeat that pattern it would take us out at 439 but be safe at 441. If you would rather not take the additional risk then an alternative would be exiting at OEX 437 and reentering at a higher level or on a drop back through 437.

 
 
  Jeff Bailey   8/7/02,  12:32:38 PM
U.S. Dollar Alert (dx00y) 30-minute delayed, but per (11:59:56), looking for GE weakness here. GE trading $30.04 +1.31%

 
 
  Jeff Bailey   8/7/02,  12:26:18 PM
Treasury Watch 13-week YIELD ($IRX.X) 1.562% and really diving lower this morning. Trader's will note that "low YIELD" on this very short-term note, which "mimics" Fed funds rate (currently 1.75%) hasn't achieved its January lows. MARKET really looking for a Fed cut in the not too distant future and perhaps trying to "front run" Fed meeting just in case FOMC does lower rates (many not expecting Fed to ease this meeting).

Regardless, some cash moving into this bond, and a bit bearish for stocks near-term. Risk for beaish equity traders is "response" from MARKET on a rate cut.

One thing I think response would be "favorable" is recent strength we've noted in the U.S. Dollar. I do think some foreign capital has come back to U.S., with thinking that an "easing Fed" gives some upside to US-based assets, compared to "more strict" European rate policy.

I think John Seckinger commented on European policy within the past couple of days.

 
 
  Jonathan Levinson   8/7/02,  12:26:10 PM
Not a lot has changed in the past hour, except for a few more lows on the COMPX and QQQ, as the COMPX squeezed down to 1255. There are now 396M advancing shares and 370M declining shares, and not many of those advancing shares are in a profit zone today. The TRINQ is at .69, TICK.NQ -171. 5(3) stochastics on the 60 and 30 minute bars are in oversold territory but have not crossed up.

 
 
  Jeff Bailey   8/7/02,  11:59:56 AM
US Dollar Index (dx00y) 30-minute delay has dollar sitting right on 50-pd MA of 60-minute chart. Bears that are correlating some trades against recent dollar strength (strength in dollar matching strength in stock) might be on the alert here. Setting downside alert on dollar index near-term at $107.95.

 
 
  Leigh Stevens   8/7/02,  11:57:10 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on YES, the "$6,000 shower curtain"! Front page story on Tyco's ex-CEO excesses in spending corporate funds. The article details the spending - hey, I bet its a nice shower curtain. And, what's wrong with a $125 million dollar in loans that were forgiven by the compnay - $400 million in salary & bonuses over the prior 4 years was tough to stretch. Anyway, this beats the $600 toliet seat on those airforce planes, reported some years back. Oh, and why bother noting those forgiven loans in company reports - details - we're "big picture" people.

In case this above story was not enuf to remind investors of the corporate excesses, there is the front page story on how the "Adelphia Founders face tax probes". Funny, they are accused of using the company as THEIR personal piggy bank - this was not mentioned for Tyco, but it seems that the same confusion of "mine" and "theirs" was in the East Coast air.

And, an inside story is about how only about 5% of the top U.S. firms have complied with the order to certify their financial results. But, hey, there's a week to go and who is going to be early when their necks are on the line - makes me wonder where's the "story" here - guess the Journal has pages to fill.

Just to show that the Chinese can play on the economic stage also, there's a story about how 3 ex-executives of a listed company are charged with accounting fraud.

Wrapping up a single handed "torpedo" of the market rally this morning, we have WSJ story on GM trying to figure how to correctly value employee stock options at the time of issue. Not so easy.

 
 
  Jeff Bailey   8/7/02,  11:56:37 AM
General Electric (GE) $30.11 +1.55% .... monitoring stock here on 60-minute interval and still leaning toward bearish camp and the Sept. $32.5 puts (GEUZ) $3.30. With retracement set at $60.74 to $22.96, have 80.9% at $30.17 and stock has been hovering here for past two sessions. Look for break of session low $29.65 to have downside picking up some steam to $28.50 by the close. I think equity traders wants to see combined "weak dollar" and "lower YIELD" over course of trade. Still targeting $25.

 
 
  John Seckinger   8/7/02,  11:54:19 AM
Is it once again time to think about a parabolic move higher in the September 30-year bond?

Response: September bonds are currently up 25/32 at 107-20, and I believe bonds must first close above 108.12 to warrant such speculation. Such a parabolic move would be defensive for equities and most likely explosive in nature. Please see chart: Link

 
 
  Jeff Bailey   8/7/02,  11:43:40 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jonathan Levinson   8/7/02,  11:37:24 AM
387M advancing shares to 277M declining on the COMPX. Price has reversed just above 1255 support, and is currently at 1260, but there's so far not a lot of spring to the bounce. The TRINQ is at .55 and the TICK.NQ at -271. QQQ 22.40.

 
 
  John Seckinger   8/7/02,  11:26:33 AM
I will never forget going to a "informational seminar" held by a number of Chartered Financial Analysts (CFA), one speaker in particular a Yale graduate and fund manager. His favorite stock: TMP WorldWide (owner of Monster.com). He didn't believe in technical analysis at all. Ticker: TMPW. I should send him Leigh's book, or Bailey's Basics, or any one of Jim's wraps.

 
 
  Jonathan Levinson   8/7/02,  11:22:21 AM
The TRINQ is now .75 and the TICK.NQ -606 as COMPX prints new lows, now negative on the day after filling the opening gap. Current low at 1257.

 
 
  Steven Price   8/7/02,  11:15:29 AM
Reader Question: Hi Steve, Don't you need a towel rack to with it for $500.00? Enjoyed the humor. I wish I could get loans from my bank that are forgiven all the time. Keep up the good work. By the way, where do you think MSFT is going? Seems to be range bound. Thanks, Angel

Response: Microsoft (MSFT) $45.90 (+0.23) does seem range bound. It is currently forming a triangle on the daily chart, which is accompanied by the requisite declining volume. A look at where the stock has come from would indicate a bearish flag, however we have seen significant support around $44 recently and I would wait to see a breakdown from that level before thinking short.

 
 
  Leigh Stevens   8/7/02,  11:14:52 AM
INDEX Comments: Nasdaq - no wonder that the Nas indices and the Q's have fallen back, given that the leader of the morning bounce, Cisco, has fallen back to nearly the level of its upside gap at the high of yesterday at 12.62 - low so far is 12.68. Nasdaq Composite (COMPX) opening spike up, reversed in area of its hourly down trendline intersecting around 1300 currently. COMP looks like its headed to 1250-1252 area or lower. The top of its upside chart gap is 1223. The Nasdaq has had a tendency to "fill in" every upside gap it has made in recent weeks. The QQQ chart gap begins at 21.80, so this becomes a downside objective for the Q's.

 
 
  Jim Brown   8/7/02,  11:06:56 AM
Swing Trade Signals
That last little downdraft took the S&P and NDX futures into negative territory for the first time today and the major averages are not far behind. The +170 Dow gain this morning has evaporated and internals continue to decline.

 
 
  John Seckinger   8/7/02,  11:04:19 AM
How do determine that there's only a 20% chance of a rate cut?

Response: Looking at the August Fed Funds futures, the quote of 98.315 is then subtracted from 100 from to get a yield of 1.685 percent (100 - 98.315 is 1.685). Since Fed Funds are now at 1.75% and futures are at 1.68 percent, 20 percent is the accepted probability. I would imagine that if Fed Fund futures were at 1.55 (much closer to the 1.50% if the Fed does cut by 25 bp), there would most likely be a 70% chance. Note: Fed funds at 1.5 does not mean there is a 100 percent certainty of a rate cut.

 
 
  Steven Price   8/7/02,  11:03:36 AM
Cisco (CSCO) $12.86 (+0.79) It appears Cisco has found its range. Initial enthusiasm over its earnings has waned in light of comments about customers remaining cautious.

 
 
  Jim Brown   8/7/02,  11:02:15 AM
Swing Trade Signals
There is a definite battle of nerves in progress. The NDX futures have a definite top at 918 for the last 45 min. The Dow is also having trouble at its 5-DMA of 8346. The advance/decline ratio is steadily dropping which should give a clue as to the eventual outcome. Still, there is support not far below at 863.50 on the SPX, 910 on the NDX. It will take a break of those levels before any real drop can begin.

 
 
  Jonathan Levinson   8/7/02,  10:54:25 AM
The COMPX has returned to the upper end of the area I'll unaffectionately refer to as Yesterday's Waiting Room, currently 1274. The carpet grew very slowly there yesterday. The TRINQ is at .30, which is still very low, but a lot less low than .10-.22 like we saw yesterday. The TICKs are more negative, and there are now 382M advancing shares to 101M declining. This doesn't feel like a rally waiting to happen, but price is so far holding just above yesterday's s/r area.

 
 
  Steven Price   8/7/02,  10:50:54 AM
Qualcomm (QCOM) : $25.12 (-0.06) New OI put play QCOM is holding just slightly above its trigger point. Look for short entry on trades below $25. This long term support gave in on Monday. The stock rallied back above this level yesterday with the rest of the market, but continues to look weak. The stock is currently working on a bearish vertical PnF count of $16. Watch out for the bear trap, though, as we have a one box triple bottom breakdown. I would use this first move to initiate 1/2 positions, and a trade of $23 to complete the play.

 
 
  Jeff Bailey   8/7/02,  10:47:55 AM
Sell Program Dow +47

 
 
  Jeff Bailey   8/7/02,  10:45:41 AM
KLA Tencor (KLAC) $37.42 +0.61% ... stock subscriber's asked about yesterday from bearish perspective. Trader could be using some comments from this morning regarding the looking at 60-minute interval. If legged into 1/4 or 1/2 position short yesterday, taking a little heat, but not much. Sees 50-pd MA on 60-minute chart serving resistance at $38.00, with 200-pd higher and falling at $41.50. Wait and see approach here, not adding or removing position from yesterday. Like the lower Treasury YIELDS now as potential sign that cash will dry up and stock will resume lower lows and lower highs. Stock just sitting here.

 
 
  Steven Price   8/7/02,  10:39:53 AM
I'd like to thank all the readers who have offered to sell me a shower curtain for $6K. You'll receive my order as soon as TYCO loans me $135 million interest free.

 
 
  Leigh Stevens   8/7/02,  10:37:30 AM
Subscriber QUESTION: "XAU making another move up what do you think?"

RESPONSE: Well, as I've been saying in my Sector wrap section on the Gold & Silver Index (XAU), my objective for a recovery type rebound was back to 65 area, where the index got back to today -"best" further upside I can see - assuming a close above 65 - is to 70. There is an even more substantial resistance overhang in this area. XAU is last at 63.7

 
 
  John Seckinger   8/7/02,  10:25:53 AM
Even though a number of banks are looking for the Fed to cut interest rates next week, August Fedfunds futures are only showing a 20% chance that the Fed will take action.

 
 
  Jeff Bailey   8/7/02,  10:25:29 AM
Utility Index (UTY.X) 270.55 +0.46% ... per this morning's 09:00 Update, simply monitoring the UTY.X right now on 60-minute chart. Have 50-pd MA serving support at 264 late yesterday, but 200-pd MA resistance right here at 274. Trade setup for long just not here right now for a Utility HOLDRS (AMEX:UTH) $69.20 +0.87% trade. Very similar 60-minute technicals present between the two. However, short-term note is that group doing good as Treasury YIELDS decline some, thus trader thinks he/she may be on the right track as it relates to a YIELD/dividend type market right now.

Could always check perhaps against other higher dividend paying type stocks. How's "big MO" doing? Philip Morris (MO) $47.45 -1.69% .... hmmmmmm, not all that good. US Tobacco? (NYSE:UST) $29.39 -1.54% ... hmmmm, not all that good.

Thinking then becomes, must try and stay "utility" specific with the divend thinking right now.

Interesting though.... UST testing similar 60-minute technicals as found in Utilities. UST testing upward trending 50-pd MA on 60-minute interval. Thinkig here.... "if it violates, then look for Utility resistance to be firm at 200-pd MA on 60-minute chart" If UST holds, and bounces, could push Utility above 200-pd MA.

 
 
  Jonathan Levinson   8/7/02,  10:19:30 AM
Volume breadth on the COMPX is still quite positive after the morning's gap up open, 284M advancing to 51M declining shares. There are 29 new lows to 4 new highs. 1,446 advancers to 1,054 decliners. The TRINQ at .26 and the TICK.NQ still negative tell me that we're still sitting at a relative high in buying enthusiasm, but it's faded from the open (duh). The COMPX is sitting just below 1280, trying to decide which way to go. The 5(3) stochastics are all chopped up from this morning's wide swings, so not much direction there yet.

 
 
  Jim Brown   8/7/02,  10:17:41 AM
Swing Trade Signals
The Wholesale Inventory was slightly better than expected at +0.6% but the inventory to sales ratio stayed flat for the third month in a row. Not much help for the bulls but nothing for the bears either. The markets are digesting all the news with many negative articles on the financial sector. The morning bloom faded but so did the speed of the drop. I am betting here that they will try to take them higher and retest overhead resistance.

 
 
  Steven Price   8/7/02,  10:17:28 AM
In listening to reports about former TYCO leader Dennis Kozlowski, I'm wondering just where you buy a $6,000.00 shower curtain. Apparently he was given $135 million in interest free and forgiven loans.

 
 
  Steven Price   8/7/02,  10:13:14 AM
Chiron (CHIR) $35.11 (+0.90) New OI call play CHIR is looking strong with support at $35 on the 10 min. chart. A trade above this round number also looks bullish. Look for new entries on a broad market rebound and a hold above $35. Right now the Dow seems unable to hold, so wait for a sign of strength before initiating a new position here.

 
 
  John Seckinger   8/7/02,  10:06:47 AM
Note: The Dow just missed the 8282 opening by two points, now roughly 40 points higher. These "just misses" or "one-tick new lows/highs" are institutions and market makers playing around, trying to get retail investors to think twice about shorting. These traders are afraid that they might not be able to handle the market if the index goes into the red. Therefore, once underneath 8284, look for another explosive move lower.

 
 
  Steven Price   8/7/02,  10:05:51 AM
I would look for a bounce back up in the broad market before initiating new long entries today. If the rally has run out of steam, we don't want to buy at the top

 
 
  Leigh Stevens   8/7/02,  10:04:50 AM
Subscriber QUESTION: "Just thought I'd point out that IF the cubes make your $24 possible upside target area that they will have broken the downtrend line from May with a double bottom behind them. The daily and weekly stochastics are on their side as well. I bought the Qs all day Monday, was planing to buy more Tuesday. I'm very bullish on the techs......Care to comment on the reverse head and shoulders in the BTK?"

RESPONSE: At 24.00 QQQ is more or less at its down trendline - 23.80 would be a more exact measurement. But .20 further to the even 24.00 level - and the Q's have a tendency to get to the even numbers - is not that significant. Agree that a CLOSE over 24.00 would be bullish, but even then we would need to see this sustained the next day. There are a lot of "false" breakouts to the upside in this market, cause its still in a downtrend so dominant trend is still bearish.

You can see the weak follow through in QQQ this morning as an example of the trouble this market is having in mounting a sustained advance.

The Biotech Index (BTK) has broken out above the "neckline" of a Head & Shoulders type bottom pattern and a measuring objective for this pattern implies upside potential for BTK to the 415 area. However, I'm not entirely convinced of this 415 target unless the index first breaks out above its March-April-July down trendline - BTK has retreated this morning from just under this area - BTK needs to get above 358-359, especially on a closing basis, to "confirm" a technical breakout.

 
 
  Steven Price   8/7/02,  10:04:21 AM
Idec Pharmaceuticals IDPH $42.01 (+0.38) OI call play IDPH has rebounded nicely from support at $40. It continues to show higher highs and higher lows. The trade above $42 continues to look bullish

 
 
  Jeff Bailey   8/7/02,  10:03:35 AM
Verizon (VZ) $28.50 -5.39% .... I'm "surprised" this wasn't one of the stock on Programtrading.com's "received lots of sell program selling yesterday." (grin).

Disclosure... I currently hold bearish position in VZ.

I also hold bearish position in Amgen (AMGN) $44.92 +1.58, so grin isn't so big right now is it?

 
 
  Jonathan Levinson   8/7/02,  10:02:10 AM
The TRINQ is rising, currently .29, and the TICK.NQ is falling, currently -137. QQV is down 1.09 on the day to 55.88.

 
 
  Jeff Bailey   8/7/02,  9:59:31 AM
Sell Program Dow +32

OK... that's the "last" sell program I'll post for now, but you get the feel.

 
 
  John Seckinger   8/7/02,  9:59:13 AM
Hardware (GHA.X), Internet (INX.X), Semiconductor (SOX.X), and even the Gold and Silver (XAU.X) Index is currently outperforming both the Dow and Nasdaq. The SOX.X piques my interest the most, up 5 percent at 315 and still 24 points underneath the 22 DMA. Support is seen near 307, while resistance is felt at 327 before reaching the DMA. Looking at the Dow, I was not surprised blue chips softened after seeing a strong yield curve and relatively underperforming dollar. 8425 should now be considered important resistance. Short term objective is, of course, the 8282 opening.

 
 
  Jim Brown   8/7/02,  9:58:43 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market short at 9:50:32 when the OEX traded below 437. SPX 869.95, DIA 83.65, SPY 87.21, DJX 83.58, NDX 921.46, Compx 1281.44. I really wanted to reenter in the 440 range AFTER the wholesale inventory report but with the rapid point bleed I did not want to miss the drop while waiting. The advance/decline ratio was dropping like a rock and S&P futures were painting solid red candles on a straight drop from 880. This may be the result of a massive sell program trying to take advantage of the morning bounce to unload some significant positions. The initial stop loss is going to be tight at OEX 439. (SPX 873)

 
 
  Jeff Bailey   8/7/02,  9:54:17 AM
Sell Program hit again... Dow +92 points.

With Treasury YILED inching to lows of session, looks lower right now doesn't it?

 
 
  Jeff Bailey   8/7/02,  9:53:45 AM
Program Trading special note here. I won't sit here all day and mention when buy/sell programs are hit. These are used by short-term daytraders.

How I'd use them is to simply understand right now that if shorting Dow diamonds, then stop would go above today's high. Then if you get a gain of $0.50 or more and a "buy program" hits, trader assesses risk to stop and makes trade decision. "Do I capture the $0.50 gain right here, or look for another "sell program" to hit?" Only YOU, the trader, can make that call as it relates to your account and risk management.

 
 
  Jonathan Levinson   8/7/02,  9:52:26 AM
Jeff, your PREM.X trigger worked perfectly. Delivered the breakdown like a pizza. Please keep posting it in your morning update!

 
 
  Jim Brown   8/7/02,  9:48:54 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go Short the broader market with an OEX trade under 437.00. (SPX 870)

 
 
  Jeff Bailey   8/7/02,  9:48:52 AM
Sell Program hit again. Dow +101

 
 
  Jeff Bailey   8/7/02,  9:46:58 AM
Sell program just hit as $prem went $-1.82. Dow was trading up 145 points, now up $120.

 
 
  Jim Brown   8/7/02,  9:46:55 AM
Swing Trade Signals
The bloom is fading from the opening bounce pretty quickly. The advance/decline line stopped climbing rather abruptly and the indexes are rolling over. It is still early with wholesale inventories at 10:00 am but I am going to issue a new entry signal

 
 
  Jeff Bailey   8/7/02,  9:46:13 AM
Amgen (AMGN) $45.06 +1.87% ... Jeff: What do you think of the Sep. 45 puts per your morning comments regarding AMGN as one of the stocks seeing a lot of buy program trading?

Good question and one situation I've seen in past. What this will do in my mind is make me a more "eager" coverer or have me raising my bearish target from $38.19 retracement) to $40 on a near-term basis. I will stick with original game plan as it relates to a stop on any underlying short above the relative high of $46.65 right now. I have retracement from 68.49 to $31.04, which has 50% at $49.76, 61.8% at $45.34 (current levels and looking for market maker resistance) and $38.19 at 80.9% retracement). On bar chart, bears need a break of Monday's low $41.98, and get that MACD to start rolling. Link

"Past situations" I've been short Boeing (BA) and stock was listed as a "buy program" stock, but stock did fall about a week later after consolidating near a relative high. The "buy program" influence may have held stock near its relative highs, but when stock was evidently removed from the "buy program" list, supply outstripped demand is my thinking why stock then trended back lower.

 
 
  Jeff Bailey   8/7/02,  9:41:23 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jonathan Levinson   8/7/02,  9:40:42 AM
I'm itching to short this, but prudence is the better part of valor. If it's going to go down, there's a nice long way for it to go- two gaps to fill now. However, I will not try to catch the top, and instead will wait for a breakdown into this morning's gap, by at least 5 points. Trying to short tops in a trending market is as bad as bulls trying to pick bottoms- witness this whole year- a losing proposition. So, that would put my most aggressive short entry on a break below 1285.

 
 
  Jim Brown   8/7/02,  9:35:36 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the open SHORT signal at 9:30:42 when the OEX traded above 434. SPX 865.61, DIA 84.01, SPY 88.05, DJX 83.01, NDX 932.53, Compx 1290.23.

 
 
  John Seckinger   8/7/02,  9:33:41 AM
When trying to figure out if the Dow's higher opening will hold, I turn to the yield curve, dollar, and technical levels within the Dow itself. The yield curve is still relatively steep this morning, with five year bonds keeping a solid bid versus longer dated maturities. This means fixed income traders are not yet running away from safe haven, shorter maturity securities. Looking at the Dollar, a weaker than expected German manufacturing orders report did maintain the dollar's strength against the euro; however, currency traders also seem to be playing it on the relatively cautious side. Technical levels within the Dow will be covered after the market has opened at least 30 minutes.

 
 
  Jonathan Levinson   8/7/02,  9:33:21 AM
31 point gap up open on the COMPX. Opening TRINQ .22.

 
 
  Leigh Stevens   8/7/02,  9:27:49 AM
Pre-Opening INDEX Comments - Re Nasdaq resistance points -

Key tecnical resistance areas: around 1315 in the Composite (COMPX), NDX (Nas 100) at 955, and QQQ at 24.00 or its May-June down trendline.

 
 
  Leigh Stevens   8/7/02,  9:21:36 AM
Pre-Opening INDEX Comments - - Looks like this rally might have "legs", as we head toward a Cisco/Nasdaq led rally. The break out points, or key resistance levels look like:

OEX at 440, at its May-July down trendline and at the key 21-day moving average

SPX breaks out first on a move above 880, then 895, resistance implied by its June-July down trendline on the daily chart

DJX has some key technical resistance at 84.25 as I measure it, but a definite upside breakout does not occur absent a move above 86.00 at its down trendline.

 
 
  Jim Brown   8/7/02,  9:17:59 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Change the stop loss on the current SHORT signal to OEX 434. (SPX 864.00) We will look to get out on the opening bounce and reenter at a higher level. There is always the possibility that the bounce will fizzle but it is looking pretty strong right now.

 
 
  Jim Brown   8/7/02,  9:15:54 AM
Swing Trade Signals
Bullishness breaking out all over.
After a wild night in the futures they are finishing strongly positive. The record number of mortgage applications and the carry over from Cisco's earnings appears to be setting the markets up for another decent bounce.

In the game plan last night I outlined the possibility of a bounce this morning as the most likely outcome. I did not expect it to be quite this strong. I am going to lower the stop loss on the chance that this sparks a further bout of buying. I will look at the market again after the 10:00 Wholesale Inventories to decide when to reenter.

 
 
  Jonathan Levinson   8/7/02,  9:11:49 AM
THe dollar got just above the year 2000 low and if right at that. The 30 min looks like a head and shoulders. Would you put any validity to that or do you expect it to go higher?

I see it too, but was surprised that the breakdown waited as long as it did after the formation appeared. I expect lower prices before we see higher ones, and the move in gold, which is accelerating, reinforces that.

 
 
  Leigh Stevens   8/7/02,  9:11:36 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > +14.10 at 875.10; Dow Industrials > +100 at 8385; Nasdaq > +25.00 at 931.00

"Fair Value" numbers: S&P 500 futures ($SP02U): .66 -- Nasdaq 100 futures ($ND02U): 2.36

 
 
  Jonathan Levinson   8/7/02,  9:09:28 AM
COMPX support is at 1220, 1235, 1245, 1255, resistance at 1280, 1290-95, 1315-1320.

 
 
  Jonathan Levinson   8/7/02,  7:54:56 AM
The US Dollar Index briefly touched 109 before returning to 108.50, slightly under which it is currently trading. Gold is up correspondingly. Equity futures, however, are back in Oz, NDX + 17.50, S&P +13.

 
 
  Jim Brown   8/6/02,  11:01:43 PM
Swing Trade Game Plan - The Coin Please -
Anybody got a coin we can flip to determine Wednesday's market direction? The spin is in! Cisco has spent the last three hours trying to convince investors and analysts that it was a strong quarter and business is good despite narrowing visibility and a negative book-to-bill outlook for this quarter. Were they successful? The stock closed the extended session up about a dollar and the S&P futures were up +9.00. By 8:PM ET they were back to nearly unchanged. With plenty of dark before morning the eventual number is anybody's guess.

The European markets should be up on the U.S. bounce but they have their own profit taking to tackle. The +8% bounce in the German Dax yesterday and strong showings in Sweden, France and the U.K. as well will probably be met with some selling. I doubt another fund will ride to their rescue tomorrow. The U.S. markets are now back to trading on fundamentals and we have the Wholesale Inventory report at 10:AM to help cloud the picture. Will they buy the Cisco story or sell the news?

The Dow has solid resistance above it at 8400 and not much support below until you near 8000. You can bet that any failure to continue the rally at the open will be met with a horde of hedge funds anxious to win back the money lost today when they closed their shorts in panic. The oversold internals from yesterday have eased and the market is literally free to trade in either direction without much indicator bias. If anything they are back in overbought after just one day.

Until proven otherwise my market view is still down. The Tuesday event was simply an aberration and did not change anything fundamentally for the US markets. We have the continued fear of a double dip, the August 14th certifications and now the stories beginning to appear about a 9/11 anniversary slowdown.

Market View Chart: Link

My market view, using the OEX as our guide, shows the failure at the top resistance today just below OEX 440. It shows a stop of the afternoon drop at support from last week of OEX 430. If you remember from Monday once 430 was broken the descent to 420 was pretty quick. Below 420 there is still a speed bump at 412-413 and then free fall to the 400 range. Note the oscillators are already turning back to negative, which was prompted by the strong drop at the close.

Should another rally breakout the resistance at 440 (Dow 8450) should hold. The next resistance is the longer term down trend at about OEX 450.

My initial target is OEX 420 and my secondary target is OEX 400. This is where the retest buyers will start to appear.

Game Plan:

The Swing Trade model is SHORT the broader market from OEX 434.

My most likely scenario is a bounce at the open on the Cisco earnings with a failure at 435 or 440 again. Should that occur anyone not already short should use it as an opportunity to enter the play.

Change the stop loss on the current short signal to OEX 441 at the open. OEX 440 held today (Dow 8450) and should hold tomorrow. I know this is a wide stop and you may wish to exit earlier and get back in when the trend reverses. OEX 436 would be my suggestion as it is just over the 5-DMA.

The initial target on this signal is OEX 420 with a secondary target at OEX 400-403. I obviously do not think we will get to the secondary target tomorrow but that is my eventual goal.

If the morning bounce does not occur, an entry point for a new position would be a break below OEX 429. OEX 430 was support last time through and we want to get under that support before opening a new position.

Stop losses will be updated during the trading day on the Market Monitor.

OEX Game Plan Chart: Link

SPX Game Plan Chart: Link

DJX Game Plan Chart: Link

 
 
  Jim Brown   8/6/02,  10:27:28 PM
The data for the Market Monitor for Tuesday was lost while archiving after the close. We have been able to recover most of it thanks to a couple readers who had saved it on their PC. Thanks to Kevin and Ira!!!

Read it here: Link

 
 

Market Monitor Archives