Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
  Jeff Bailey   8/8/02,  5:52:59 PM
Western Digital (WDC) $5.19 +10.89% .... Several questions from subscribers via past bullish comments earlier this spring and longer-term calls.

Looks like a "bear trap" at $3.00 and subsequent "triple-top buy" signal at $4.50 and break of trend is bullish. Current vertical count (column of X from $3.25 to $5) is bullish longer-term to $9.25.

Currently, would be hesitant to round to full position if long from $7 area at this time, unless just looking to bring down cost basis. Relative strength versus S&P500 is strong (buy signal, column of X). Should RS chart break to new highs, then more comfortable averaging to full, especially if bullish % charts improve further. Here's RS chart of WDC vs. S&P 500 Link

 
 
  Jeff Bailey   8/8/02,  5:30:28 PM
Torn between two lovers is perhaps the only way I can explain my current "posture." I "love" to trade bullish and bearish, and will do either on a dime. Right now, I'm torn between the two, and I think the bulk of other market participants are feeling the same.

I've mentioned before that I listen to CNBC during the day, but mostly as some background noise. People I listen to for insight and analysis are David Faber (I've been on the same side of the "trade" as his commentary on specific stocks over the years, so I'm a bit biased with some reporting he's done), Rick Santelli (he's in the bond pits, knows the players, and gives excellent scenarios on why something may be happening, which I can test against with the charts), Art Cashin (from Paine Webber, on the floor at the NYSE, gives good insight to what bulls/bears are doing) and Bob Pisani (CNBC reporter at the NYSE, talking to traders, gets a feel for what they are seeing).

Today's late comments from Bob Pisani, combined with recent comments from Art Cashin, has Pisani saying that traders just don't have a lot of "firm" orders in their books right now.

Why is this I wonder? Well.... I think the Dow's close right on downward trend is testimony to just how "torn" traders and institutions are right in here. The lack of "firm" orders on trader's books was noted as one reason we're seeing these 100 and 200 point Dow moves. So why no "firm orders?"

On one hand, economic signals are mixed. The jobless claims numbers continue to show the 4-week average remaining below the important 400K level and at a 17-month low of 379,000. This is a positive and continues to make a bulls case for some type of sustained economic growth, which can lead to firming consumer confidence for those getting some jobs.

Then you've got a more modest economic growth outlook form the GDP data, and a mixed bag of retail sales. A couple of weeks ago I mentioned "seasonal" upswing to some retail stocks, and Gap Stores (GPS) $11.16 +0.08% was one of the stocks I mentioned, that looked rather bearish technically. Today, the stock hardly budged despite GPS saying it expects to top Q2 EPS, even though July comps are going to fall 8%. I could go on and on with the mixed signals that are coming in from the data, but we can all sense the uncertainty of what this is all saying.

My latest strategy of shorting/putting stocks like AMGN and GE that rallied to resistance levels has obviously been having a difficult time. AMGN is probably not considered an "economically" sensitive stock, and looks like investors are going to take the risk with this kind of stock. However, GE can be considered an economically sensitive stock, and this stock has generally been performing "in line" with the market action, if not slightly outperforming. The only think I've done "right" as it relates to these two, is trade smaller positions.

Now, with uncertainty from the economic data, and Bob Pisani's comments that there just isn't many "firm orders" in trader's books, then the only thing I'm rather certian of, is we're going to continue to see some volatile action.

One other thing, and really the main thing, that has be "jittery" as a bearish trader in stocks (regardless of how weak some are) is the bullish % charts. I haven't mentioned these much in the past week, only because they've been little changed. However, the broader S&P 500 Bullish % ($BPSPX) Link , remains in "bull alert" status at just 26.6%. On a broader scale, bears continue to hold the bulk of the risk right now, and why I think we see such "powerful" moves and short-covering when a key near-term level of resistance is broken. It wasn't a "good" sign for a bear when AMGN broke back above retracement resistance at $45.34, and it certainly wasn't a good sign for bears in the stock on the break above $46.65 and then $47. Same thing could be said for General Electric's (NYSE:GE) $32.00 +3.9% break above above retracement of $30.18 and currently just below its relative high of $32.29 and next retracement resistance of $32.39.

Another stock I mentioned from a more bullish perspective, then became cautious on when economic data really seemed to disappoint was Wal-Mart (NYSE:WMT) $49.19 +1.67% Link . The point and figure chart sure seems to hint that there's some demand for the stock on the pullbacks, as a sell signal hasn't been given.

I've gotten quite a few e-mails from bears, that certainly display conviction in their thoughts of a double-dip. As of tonight's close, the Dow's trend was still lower, therefor it should be honored.

For me however, I'm looking to trade lightly right now with 1/4 or 1/2 positions. Sure, it would be nice to have full positions when the Dow gains 255 points of falls 255 points, but I think best thing right now for an options trader is to not get overly weighted on one side or the other.

While a trader is never "forced" to do anything, my account is "weighted" as 57% long underlying equities (risking about 3% to a stop), 34% cash, and 8.3% put options spread among (AMGN, VZ, PIXR). I will be much more aggressive/active with my 57% bullish equity positions on an intra-day basis, but I was somewhat "forced" on a near-term basis to protect against further upside bullishness into tonight's close, rather than risk a "gap higher" type open.

 
 
  Jim Brown   8/8/02,  4:28:01 PM
Swing Trade Wrap - Amazing Strength -
I think I can, I think I can, I think I can, said the market as it slowly ground through bearish resistance one point at a time on the way to last weeks highs. Bearish strength was notably absent with only token attempts to sell the rally. Bulls have got to be glad to see the developments after months of having the shoe on the other foot.

Loans to Brazil and Uruguay, new rules for banks doing business with customers like Enron and continued expectations for a Fed rate cut helped to power the markets to strong gains. Unfortunately the volume was very light. Bears are scared of the Fed meeting on Tuesday and appear to be waiting patiently for the announcement. We have definitely moved out of the sell the rally trend for the time being.

Friday's productivity report will be the key to keeping the rally going and we will start looking for some profit taking to appear. The OEX has very little resistance between 460 and 490 so the next leg up could be strong. The key will be picking an entry point for that run and dodging any post Fed-meeting drop. Nobody ever said it would be easy but you can't beat it for excitement!

 
 
  Jeff Bailey   8/8/02,  4:00:47 PM
Dow Industrials (INDU) 8,707 +2.96% .... looks like it is going to close right on our downward trend, and doesn't that figure! As a trader, this has me a little jittery, and wanting to have account somewhat "neutral" here. Still holding some put positions, but having to offset with some longs. Tomorrow morning is going to be very interesting.

 
 
  John Seckinger   8/8/02,  3:52:40 PM
Looking at a daily chart of the Dow, the question I now ask myself is: Will the Dow finish strong again tomorrow and set up the "bullish triangle" (see Leigh's Index wrap last night) going into the weekend. I "guessed" last Sunday that the Dow would close at 8775, but then Monday morning I wondered about 8825. Those will still be my two objections by Friday's close. It is always my thought that institutions want us to "hope" for the strong techinical move. 8775 or 8825 would set up that "hope". Regardless, if the market closes there tomorrow I will be looking to play volatility.

 
 
  Jeff Bailey   8/8/02,  3:48:41 PM
Micron Technology (MU) $19.23 +2.88% ... have discussed this stock with bearish traders in the past. Be careful if short the underlying near term. I have retracement resistance at $19.49. Combine that with potential double-top buy signal at $19.50, then upside risk becomes retracement resistance of $20.57. Link

Retracement bracket from $25.14 to $16.00, gives 80.9% at $17.74, 61.8% at $19.49, 50% at $20.57, 38.2% at $21.64 and 19.1% at $23.39.

 
 
  Jonathan Levinson   8/8/02,  3:42:48 PM
The TRINQ at .38 still has room to fall on this amazing runup. I've been following my own advice, which has kept me out of the paths of speeding trains so far. Everytime the COMPX feels toppy, it surges up another notch. Congratulations to the bulls who have been emailing me. There are 1,024M advancing shares to 297M declining- a pretty light day, but strong breadth for the bulls. Despite that, the TICK.NQ is a bare +19. The QQV is down an astounding 8.21 to 50.78.

 
 
  Jim Brown   8/8/02,  3:39:41 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We closed the open SHORT signal at 15:33:20 when the OEX traded at 457.00. (SPX 905.38, DIA 87.20, SPY 90.99, DJX 87.01, NDX 948.72, Compx 1315.91) The market is giving us a pretty bullish setup and we could be ready for a strong run. Over 460 there is little resistance until 490 which would be a strong gain.

 
 
  Jim Brown   8/8/02,  3:31:03 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Not going down! The bullish sentiment is too strong. Let's lower the stop loss to the high of 457 (SPX 905) and exit gracefully.

 
 
  Jeff Bailey   8/8/02,  3:30:58 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Leigh Stevens   8/8/02,  3:22:23 PM
INDEX Comments: NDX & QQQ read slightly differently - NDX has now broken out above its down trendline on its hourly chart. QQQ, the way I have its chart, will break out above its down trendline at 23.6.

The still-bearish sentiment in the Nasdaq and for techs, probably holding the tracking stock back a bit due to the effects of shorting going on in the Q's. I should also mention, as with the COMPX, QQQ is right at its "pivotal" 21-day moving average. Above this area, we have the prior high at 24.7 in QQQ as a potential target - my guess is its going to be a slow churn up to retest that prior peak, if in fact we get a retest.

The Chip stocks (SOX) are a drag on the Nas 100, as is only limited rebound in CSCO. MSFT is climbing slowly, but the other key Nasdaq biggies are not on fire. Unlike the S&P, we would have to see more "individuals" coming into tech stocks. The investing public is not socking these things away, but more tending to trade them only - not so quick to get IN, quick to get OUT.

 
 
  Leigh Stevens   8/8/02,  3:15:24 PM
INDEX Comments: The Nasdaq Composite of course lagging the S&P and still well below its prior rally high at 1354, but is well above the top of its hourly downtrend channel. RIGHT HERE (1310) is a key level, at its 21-day moving average also. A close above 1310 and follow through tomorrow suggests a possible retest of that prior peak in the 1354 area.

 
 
  Leigh Stevens   8/8/02,  3:10:37 PM
INDEX Comments: Continuing to CLIMB - Looks like we're not going to see much selling coming in until we touch the prior rally highs - at 458 in OEX, 912 in SPX and 87.6 in DJX.

Looks like the shorts are going to continue to run for cover until and unless those prior peaks prove to be "stoppers". Of course, if the indexes push through these levels we have the start or a real trend turnaround and this could bring in some more technical buying.

 
 
  Jim Brown   8/8/02,  2:57:19 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market short at 14:52:26 when the OEX traded above 455. SPX 901.78, DIA 86.91, SPY 90.66, DJX 86.66, NDX 943.28, Compx 1310.78. Now that we are in somebody give the signal for the sell programs to commence! (grin) The high from last week was 458.48 and I am hoping that high holds. If the 3:PM turn is down we are very well positioned. Keep your fingers crossed! The initial stop loss is still OEX 460. (SPX 920 est)

 
 
  Jim Brown   8/8/02,  2:50:47 PM
Swing Trade Signals
We are coming up on the 3:PM turn. It will be really interesting to see if the bulls can keep it going over last weeks high of 458.48. The gains today have been nice to watch but on very thin volume. I think the bears are scared of the Fed and are content to sit out until Tuesday.

 
 
  Jim Brown   8/8/02,  2:46:06 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the bottom entry point to OEX 450 (SPX 891) from 446. If we fail to hit the 455 top then this will trigger just below the afternoon support. Very extended here!

 
 
  Jim Brown   8/8/02,  2:41:49 PM
Swing Trade Signals
Getting really close to our entry point and all we need is one more buy program. This market is looking bullish from a longer-term perspective but I think we may still get the roll over from 455. The +500 point gains from the last 3 days still need to be digested but I think the next dip will be a long entry point again. If you feel overly bullish already then don't take the 455 short signal.

 
 
  Jeff Bailey   8/8/02,  2:26:18 PM
Amgen (AMGN) $47.33 +3.52% .... personally, I'm going to sell my 200 long position in the underlying stock for $1 gain here. This is an account management decision. In past couple of day's, I've done this twice, scalping $1 per share, and have put option worked down to about $2.30/contract potential loss. The Sept. $45's are still bid near $2.00 and I could sell, but will hold and look for pullback to $45-$43 range, monitoring Treasury action, and sector per a September expiration.

 
 
  Leigh Stevens   8/8/02,  2:07:40 PM
INDEX Comments: Nasdaq - QQQ has also broken out to the upside here - to above its first level of resistance I was seeing at 23. 23.6 is yet to fall which is the top end of the broad downtrend channel that the Q's are in - 24.7 is the prior peak, and the trend reverses to the upside only with a move to above a prior key high like this.

However, probably pointing the way, the Nas Composite (COMPX) is broken out above the upper end of its hourly downtrend channel and next resistance is at the 21-day moving average at 1308. A close above 1308, AND upside follow through tomorrow, is needed to suggest another up leg. Also, the prior high at 1354 in the COMP would need to fall to suggest a reversal of the dominant down trend.

All in all, not the best looking rally I've ever seen, given the way a relatively small number of traders are pushing the market up and down. But, I'll take any trend I can get.

 
 
  Leigh Stevens   8/8/02,  1:57:33 PM
INDEX Comments: Breakouts - OEX, has finally achieved that decisive upside penetration of its daily chart downtrend channel going back several weeks, although the index still has some technical resistance at 455, then at 458, the prior upswing high.

SPX has broken out now above a couple of downtrendlines on its hourly chart, but we have the 912 prior high as a key level.

DJX has broken out above the upper side of the triangle I described recently in commentaries, but we have 87.6 to go, at its prior high. So far, for weeks running now, the indices have failed to break it's pattern of NOT being able to exceed prior rally peaks, which is what has put them in downtrend channels for long. Stay tuned!

 
 
  Jonathan Levinson   8/8/02,  1:53:56 PM
Up volume is now doubling down volume on the COMPX. This ascending wedge on the 10 minute chart projects to the top of the descending channel on the daily COMPX chart. Both of these formations are telegraphing a top at approx 1305, so aggressive bears could look to short a breakdown from that level. Certainly the stochastics are toppy enough. I'd put the stop just overhead at 1310 max, reflecting how uncertain this week has made me. Bear in mind that a violation of the upper descending channel on the daily chart would be a very significant move, and could lead to bulls piling onto the breakout- not a train in front of which you want to try standing. I'd wait for a nice breakdown of at least 5 to 10 points before putting on those puts. Again, there's no need to try to pick the very top. If it *is* a top, there will be plenty of downside from there.

 
 
  Jeff Bailey   8/8/02,  1:50:35 PM
Dow Industrials (INDU) 8,578 +1.44% ... at best levels of the session and currently challenge the 200-pd MA on 60-minute chart from 11:00 Update Link . This has the "bearish" side of me rather jittery here and assessing risk to trend at 8,762 and bull's support firming at the now flattening out 50-pd MA and 61.8% retracement of 8,430. MACD still trending higher, so looking bullish near-term.

Per 11:00 update, Dow Indu. is still within the wedge discussed, so not really looking to initiate any "sizable" put/call type trades.

 
 
  Jeff Bailey   8/8/02,  1:47:16 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Steven Price   8/8/02,  1:41:09 PM
Reader Question: I Steve,how about shorting INTC at this level? Thanks for your valuable comments....

Response: Intel ($17.97 +1.41) looks to have met resistance at the 10-dma of 17.75 and 21-dma of 18.13, however, given its recent forays above $19 with rejection at $20, I'd rather see a rollover from just under $20 before shorting.

 
 
  Steven Price   8/8/02,  1:35:43 PM
Reader Question: Steve, First, thanks to you and all the gang for your helpful and insightful comments during the trading day. I really appreciate all your work. My question; I have a credit spread on the CSCO, Jan. '04, 30/20 puts. With the stock price so low, it seems to me that there should be a way for me to hedge this position, but I can't figure it out. Any ideas? Thanks, Jim

Response: If I understand correctly, you are short the Jan '04 30-20 vertical put spread which right now is trading about $7. It can max out at $10, which would be a three dollar loss, if the stock drops. This is a bull spread, as it is the same as purchasing the Jan '04 20-30 call spread for about $3 (except you get cash in your account instead of paying out). In order to hedge this spread, you need to put on a short position somewhere in case the stock goes down. The problem with this, however, is that with an '04 spread, buying nearer term puts is probably a waste of money, as they will protect you in the short term and then expire and you will have to do the same thing again. you can waste more than your $3 potential loss doing this each month or so. Buying additional '04 puts against this position would be the best way to hedge your risk, but will cost the most as well. If I were in this position and was not bullish on the stock, I would probably close it. If I wanted to keep the position, I would make sure I am willing to lose the extra $3.00 per spread, and if so, ride it out. Your profit potential is the $7 the spread is currently worth and can go to zero. If you hedge this with a long term put, you could buy the '04 12.50 ($3.20), 15.00 ($4.60) or 17.50 ($6.30) puts, but if the stock does go your way, this will take away a significant portion of the $7 possible profit.

Another strategy is to put on a risk reversal, where you buy a put below your spread, and sell a call above your spread, for a zero sum (in the same month). This could give you downside protection at no cost. This protects you on the downside, but can take away some of your gains if the stock rallies through your short upside strike ($30) and then the call you sold above it. If the stock were to rally above the strike you sell(i.e. the 35 call) by the full amount of the spread (in this case $10, reaching $45) you would lose out completely and it might cost you something additionally if it kept going. In any case a look at Cisco's options shows that right now this possibility does not exist, but it is a strategy that is used frequently in many stocks. As I said earlier, in this particular case, I would simply decide how bullish I am, and whether I am willing to lose the $3.

 
 
  Jonathan Levinson   8/8/02,  1:28:30 PM
The COMPX is headed for its highs of the day, still within that ascending wedge. On the daily charts, the long descending channel is going to try to put a ceiling on this move at approximately 1305-10 COMPX. The rest of the day should be fascinating if you haven't OD'ed on Maalox by now. QQQ has just broken 23 and the TRINQ is down at .59. QQV is down 3.54 on the day.

 
 
  Jonathan Levinson   8/8/02,  1:20:16 PM
LOL!

 
 
  Jim Brown   8/8/02,  1:17:23 PM
Swing Trade Signals
Looks like somebody is triggering buy programs every time I make a negative post. Hey, anything I can do to help, I am glad to oblige. I can type negative comments all day long if it will help.

 
 
  Jim Brown   8/8/02,  1:08:48 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The resistance at 449 appears to be holding and the internals are weakening. Let’s put a floor under our SHORT signal at 455. The last two relative highs on the OEX were lower highs and also lower lows. The Nasdaq is threatening to go negative again. THIS IS A HIGHLY SPECULATIVE SIGNAL. Go short the broader market with an OEX trade below 446. (SPX 883) If the market is going to roll over before hitting our 455 signal I would like to catch the drop. The initial stop loss will be tight at OEX 449 (SPX 889)

 
 
  Leigh Stevens   8/8/02,  1:00:53 PM
Subscriber QUESTION: "Are we at the crossroads? I watch the 21 dma and see the market bump up against it and turn. Last time and right now, it seems to be penetrating that line. Considering the description for a change from a bear to a bull market, it seems if the DOW in the present rally closes above 8740, it will establish a higher high after a higher low and confirm the change in trend. The big money seem to be supporting the market, first at 8200 and now at 8400-8450. If the Fed does lower next week, do you think the market will explode and rise to a higher high signaling a change in trend? With all the support for a rally, what would it take to continue the downtrend?

I'm in a short position and need some advice. "

RESPONSE: Definitely at a "crossroads" I think. Am keying off the Dow especially as this is what the big money is supporting. So far, none of the indices have been ablve to achieve technical breakouts, but seem to be consolidating just under resistance. I think events are lining up to support a further rally, but can't say if it will be Fed ease or not.

You have specific "trigger" points to exit shorts at this juncture so can wait and see if you ought to come out of short positions.

 
 
  Jonathan Levinson   8/8/02,  12:44:46 PM
Volume breadth is a little stronger on the COMPX, currently 404M adv to 296 decl. TICK.NQ is still negative and the TRINQ at 1.24. I'm receiving equal numbers of bullish and bearish predictions from friends, readers and associates. My own view is vascillating every few minutes. The COMPX chart is showing me a small ascending wedge, which tend be bearish, but if ever there was a day for weakly drawn patterns to fail, this is it. The 5(3)60 minute stoch is overbought but not yet rolling over. On any other day I'd be flooding the torpedo bays for some puts and working out a firing solution.

 
 
  John Seckinger   8/8/02,  12:41:19 PM
Looking at a 60-minute chart of the Dow, there clearly are "zones of resistance" that will bears ample ammunition. Please see chart: Link

 
 
  Jim Brown   8/8/02,  12:36:56 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Per my previous post. Go SHORT the broader market at OEX 455 (SPX 909 est). We may not reach this level today but if we do I would rate this as a high odds signal. The initial stop loss would be OEX 460. (SPX 920 est) OEX 450-455 is strong resistance and getting to 455 should take a concerted push by the bulls and leave them too exhausted to continue on to 460. (famous last words)

 
 
  Jim Brown   8/8/02,  12:15:34 PM
Swing Trade Signals
Looks like the pressure is building to the upside with a breakout to a new high possible in the next few minutes. This inchworm style of movement is better for building bottoms than the triple digit swings. Could be a stronger afternoon ahead.

 
 
  John Seckinger   8/8/02,  12:07:23 PM
Showing solid strength is the Biotechnology Index (BTK.X), currently up 11.55 points at 363. It is my opinion that the recent sell off to 329 washed out a lot of longs who are now rushing to get back in. In addition, there are shorts likely getting squeezed as well. The short term objective is at 372. A close under 351 would cancel out the recent bullish sentiment.

 
 
  Leigh Stevens   8/8/02,  12:05:36 PM
Subscriber QUESTION: "i cant seem to get your link to work on your 11:29 post. is there an alternate way to get to the chart?"

RESPONSE: Sorry, try it now - it's working.

 
 
  Jim Brown   8/8/02,  12:03:19 PM
Swing Trade Signals
The lack of excitement and thin trading is dangerous and trying to trade the middle is expensive. The next scenario according to the game plan from last night was a half position short at OEX 450 followed by another half position at 455. I am not as convinced now that we should take the first half at 450. While the market is not exciting every point gained puts us closer to buy stops being hit. This can tend to feed on itself. The reverse is also true. The higher we get the closer we get to some heavy duty sell programs. Resistance appears to be hiding behind every point above us. The 448 stop on the last signal was penetrated by 48 cents before selling appeared again. This is highly frustrating but a symptom of trading in the ranges instead of at the extremes when no trend is apparent.

The bottom line to this rambling is I am canceling the plan to go short a half position at 450. We will go with a full position at 455 with a stop at 460. This signal may not be hit today but if it were I would have a high confidence in its success. A break over strong resistance at 460 would generate a long signal with a target around 490. Over 460 is the only point I can rationalize going long as we set up for the FOMC meeting.

 
 
  Leigh Stevens   8/8/02,  12:00:54 PM
INDEX Comments: Technical Resistance - OEX, SPX, DJX, COMP & QQQ have all reversed from at or near their down trendlines on the hourly charts on this last run up - doesn't seem like this is a coincidence! - as traders are looking at the same trendlines I assume. This has been the pattern in recent weeks - the market gets overbought on a short-trem basis, hits technical resistance and turns down. We'll see what final hours of trading bring - stay tuned.

 
 
  Jeff Bailey   8/8/02,  11:43:38 AM
General Electric (GE) $31.28 +1.72% ... 11:00 update more relative here perhaps, as GE is Dow component. Unlike AMGN, GE not yet above recent relative high, but trader holding previously profiled GE puts may have an action plan in place, should GE break above $32.40, combined with Dow Industrials breaking downward trend.

Now... I have a retracement bracket on GE from $41.77 to $23.02. This has $26.60 at 19.1%, $30.18 at 38.2%, $32.39 at 50% (has acted as resistance on 07/31 and 08/01). Very "neutral" here, and most likely will follow broader Dow action. Not doing anything with the Sept. $32.50 puts at this moment.

60-minute interval chart almost "identical" to Dow Industrials with MACD on this time frame trending up after recent cross above zero level. Upward trend is holding however, if taken from the low to the pullback low of $28.27 on 08/05/02.

 
 
  Leigh Stevens   8/8/02,  11:41:45 AM
INDEX Comments: Nasdaq Composite and the Nas 100 (including QQQ) are near to break out levels - QQQ has broken out above the bullish "diamond" pattern I just described. Bullish "confirmation" for a move higher in the Q's would be given on a decisive upside penetration of 23.00, with a further positive suggested if the stock gets above 23.6

The Nasdaq Composite is flirting with key hourly (down) trendline resistance at 1288.

 
 
  Jim Brown   8/8/02,  11:41:36 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORT signal at 11:35:52 when the OEX traded above 448. SPX 888.04, DIA 85.57, SPY 89.17, DJX 85.40, NDX 923.02, Compx 1286.88. Not a roaring rally but it did manage to post a new intraday high and take us out.

 
 
  Jonathan Levinson   8/8/02,  11:41:20 AM
Looks like I posted my last post at 11:14:13 under the wrong name. Sorry, Mark- that was me.

It appears that we've broken that wedge to the north, as the TICK.NQ flips to positiveand the TRINQ falls to .89. The QQV anticipated this move, and has fallen further to 56.52, now down 2.47 today. QQQ is reaching for 23, just nailed it now. One VERY tricky market.

 
 
  John Seckinger   8/8/02,  11:39:42 AM
Per 11:02:46 Post, the 8540 short term objective was met via Bollinger Band study. It was interesting how the middle-band worked well as resistance and then support. Note: My current market conviction still remains low as the market seems to trade "responsively" (see 10:27:55 post) Please see chart: Link

 
 
  Jeff Bailey   8/8/02,  11:39:06 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   8/8/02,  11:35:34 AM
Amgen (AMGN) $46.92 +2.62% .... breaking to a new high here. I hold 2 Sept. $45 puts and will implement same strategy as I did on Tuesday. Going long 200 shares, using the puts now as protection. Will talk about position in next intra-day, but strategy put traders might use.

I "scalped" $1 per share on Tuesday from bullish stock position. So made $200.

Now... I paid $4.30 per contract, so currently working on a $860 loss for this option.

With 50% retracement now upside risk at $49.76, it becomes bull's reward to market maker resistance. If stock trades $49.76, the bullish 200 shares at $46.49 would have underlying stock position gaining about $3, or $600. While not really "making money" in the account, not getting hurt too bad. I could not afford to implement this strategy however (as it relates to equity required), if I had bought 10 put contracts in this account.

 
 
  Leigh Stevens   8/8/02,  11:29:31 AM
Subscriber QUESTION: "Possible diamond pattern forming on 60 minute QQQ chart. Do you see and how would you interpret at this juncture?"

RESPONSE: Both "diamond" tops and diamond bottoms tend to act as reversals of the prevailing trend. Since the prevailing trend of the Q's has been down, I assume that a diamond formation here is bullish.

This is not a common pattern - you can see what I'm talking about at - Link

 
 
  Mark Whistler   8/8/02,  11:14:13 AM
COMPX price is testing the upper descending trendline of that wedge. The TRINQ has fallen to 1.02 on this rise and the TICK is slightly positive. It looks like it's failing as I type, though there's only a few points before it touches the lower ascending line. QQV is down 1.68 on the day, QQQ peaked on this move at 22.76 or so, and is now down at 22.66 in the spae of a few seconds since I started typing.

 
 
  Jim Brown   8/8/02,  11:13:39 AM
Swing Trade Signals
We are nearing the highs of the day and the strength of this bounce is about to be tested. The bears could not push the broader markets (OEX/SPX) into negative territory but it remains to be seen if the bulls can overcome overhead resistance. The internals are weak and this appears to be a low conviction move but the advance/decline line just went positive by 60 issues.

 
 
  John Seckinger   8/8/02,  11:02:46 AM
I have recently become a fan of Bollinger Bands. Looking at a five minute chart of the Dow, these bands are certainly on other traders' minds as well. Please see chart: Link

 
 
  Steven Price   8/8/02,  10:56:35 AM
Semiconductor Index (SOX.X) 301.58-6.07 The recent rebound here has placed the index at the top of a descending channel beginning in the middle of May. The long term trend is still definitely down, which investors should note before jumping back into this beat-up sector.

 
 
  Leigh Stevens   8/8/02,  10:46:02 AM
Subscriber QUESTION: "Are you making any trade recommendation on QQQ?"

RESPONSE: I make QQQ trade recommendations when I see something worth getting into - am waiting to see if Q's can achieve a break out above 23.2 - downside I see currently is back to 22 - with a point downside and a point risk, I don't see a good risk to reward yet on new positions.

 
 
  Steven Price   8/8/02,  10:41:56 AM
Wal Mart: $46.95 (-1.43) WalMart started the day positive after guiding earnings higher. However, the sales below the current range of estimates (4.5% v. 5-7%) has caught up with it and the stock is now down on the day. The chart shows recent consolidation between $45 and $50, and with the stock in the middle of the pattern, a directional play is hard to choose.

 
 
  Jim Brown   8/8/02,  10:35:41 AM
Swing Trade Signals
The OEX/SPX came to a dead stop at their opening levels. It appears there is some support here as could be seen at the close yesterday. We could not make upward progress but the OEX 441 level was holding. Should this level break we could see an acceleration to the down side. The keyword is "could". If you remember trading yesterday the downside drop was very slow and boring as there was a weak underlying bid all day. Once the sellers exhausted themselves and the buy programs kicked in the gains were sharp. We don't know if the new economic data has cancelled those bids today or if the two positive days in a row have exhausted the buyers. The futures appear to have found bids at SP 875, NDX 902.

 
 
  Jonathan Levinson   8/8/02,  10:33:37 AM
Down volume is beating up volume on the COMPX 239M to 74M and there are 47 new lows to 6 new highs. I see price coiling into a wedge on the 60 minute compx bars, and as the descending trendline stretches father back, to the July 30th high, I'd bet on it to prevail, but that's just a guess. The fact that I can think of no reason to justify significant market upside changes nothing, as that's been the case all week, and we've seen plenty of upside so far. The TRINQ is up to 2.22 which shows some concerted selling, but the QQV is negative on the day and price is holding. Still choppy and confusing on the COMPX.

 
 
  John Seckinger   8/8/02,  10:27:55 AM
Will today's trading in equities be more "responsive" (buy at support, sell at resistance) or "initiative" (look to sell low and buy lower, or buy high and buy higher)? "Responsive" trading uses technical levels a little bit better, tries the "one tick new high/lows", and normally makes an attempt to hit stops before reversing. "Initiative" trading goes for the jugular, racing one way to find a "new perception of value" in the marketplace, hits stops and keeps the momentum rolling.

 
 
  Leigh Stevens   8/8/02,  10:27:02 AM
Subscriber QUESTION: "Would you consider shorting C, JPM or GS at this time?"

C (Citigroup) could be starting a break out to the upside, but has to clear trendline resistance at 34.00 - I would wait on this one

ditto JPM (JP Morgan, Chase) - more clear cut on its breakout if its can stay above 25.30 - would NOT short this one

GS (Goldman Sachs) - more questionable on its upside - right at resistance at 72, so it may fail & reverse in this area.

 
 
  Jeff Bailey   8/8/02,  10:23:33 AM
Verizon (VZ) $29.30 -0.35% ... While not a Dow component, per 10:18:07 comments, trader flips to 60-minute chart here, sees how VZ rallied to $30 level, which was support on 60-minute chart, broken yesterday, and early morning rally fails right near $30, which also has short-term downward trend from 07/31 relative high of $33.50. Now.... upward trend on this 60-minute chart is at/near $28.61. Short-term bear understands this trend, wants to see a break and then violation of yesterday's low of $28.23.

Both short-term trends on 60-minute chart show small wedge forming right in here.

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

 
 
  Steven Price   8/8/02,  10:23:10 AM
reader Question: Steve, Thanks for all your insightful commentary. Regarding a post in MM (7/31). You commented on J. Bailey's approach with(out) stop losses on options. I would be interested to hear your approach with stops as it pertains to different stategies, and as it relates to support/ resistance, and if percentages of loss affect your stop positions. Thank you, Stuart

Response: This is a tough question to answer simply. My initial investment plays a big part in my stop loss strategy. If I'm trading deeper options, with high premiums, I will stick to the stock's chart, and hedge as though I'm trading stock. If I invest less than a dollar, I rarely bother with a stop. Sometimes I trade stock against the option position (selling stock when I buy an ATM call, or sell an ATM put),(or buying stock when I sell a call or buy a put), which allows me to benefit from movement in either direction as I buy stock on the way down and sell it on the way up, using the option as protection. When it comes to spreads, I also watch the chart on the stock and keep in mind my time frame. If I have 2 months to go, I may let it ride. If I'm playing a front month directional spread, I may get out as soon as the stock breaks the trend I'm trying to capture. Time spreads and volatility spreads are a little different and require attention to a number of variables. I hope this helps. If you have a specific question about a type of spread we've discussed, or that you are looking at, I would be happy to respond.

 
 
  Jim Brown   8/8/02,  10:22:18 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broader market SHORT signal at 10:16:38 when the OEX traded below 444. SPX 880.90, DIA 84.97, SPY 88.47, DJX 84.87, NDX 905.36, Compx 1270.81. Internals are dropping rapidly being led down by NDX futures at the low of the day. The initial stop loss will be OEX 448 (SPX 889) just over the high of the day.

 
 
  Leigh Stevens   8/8/02,  10:19:33 AM
Subscriber QUESTION: "Hey Leigh, when prices consolidate near the high or low of the day like they just finished doing is it more likely to break out or reverse...or is it just a coin toss? I heard one person say if it consolidates near the high of day it is bullish but you could also look at it as it just can't go higher so is it bearish? Or is it just a plain 50/50 shot?"

RESPONSE: No, consolidations near the upper end of a range is most often bullish. But, "confirmation" must also occur, which would be a breakout above the upper end of the range. Conversely, a break below the recent consolidation is bearish action and suggest a rally "failure".

 
 
  Jeff Bailey   8/8/02,  10:18:07 AM
Choppy Alerts .... nice to see my parameters are set correctly...now what? I got the buy and sell alerts a minute apart. what are we to make of that?

Excellent question. I'd expect these "buy" then "sell" program alerts creates a very mixed/choppy type market condition, and pehraps hints that we're at some type of "key decision" level, where we could expect to see some type of major supply/demand issue at play.

As such, I'm looking at 60-minute interval on Dow Industrials (INDU) .... see that 8,520 level of support from 07/29 to 08/02, which was broken and Dow fell to 8,031? Right now, we've rallied right back to that broken support and may be why we're encountering both buy/sell "disagreement" programs. Eventually, supply/demand will win out, but trader is very alert right in here.

 
 
  Jim Brown   8/8/02,  10:17:12 AM
Swing Trade Signals
I may have been premature on jumping out of that LONG signal this morning but with my overall market view still down and the very negative news about the markets impacting retail sales I wanted to err on the side of caution. With my target of OEX 449 there was not much upside remaining. If the markets do not roll over here the next entry point will be a short in the OEX 450 area. There is significant resistance there and expectations of a rate cut will have to overpower weak economic reports to break though. The weak PPI and falling jobless claims may have dimmed that hope.

 
 
  Jonathan Levinson   8/8/02,  10:13:21 AM
The TRINQ is now 1.56, TICK.NQ -56, QQV +.33 on the day. Price has faded on the COMPX, and the 30 and 60 minute bars 5(3) stochastics are rolling over. Yet, the price has been entirely unpredictable. Everytime a break appears imminent, price reverses, and again, although I personally favor the downside today, I have no confidence in my ability to pick a direction. Set your stops tight or put on partial positions unless you're feeling a lot more certain than me. Perhaps it's the high pressure system that's moving through Montreal this morning, but I'm as confused as I get this morning.

 
 
  Jim Brown   8/8/02,  10:12:19 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the LONG signal at 10:03:00 when the OEX traded below 445. SPX 882.34, DIA 85.17, SPY 88.58, DJX 85.05, NDX 909.11, Compx 1274.39. Direction is still not clear but the initial bullish bloom has faded.

 
 
  Jim Brown   8/8/02,  10:07:48 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market with an OEX trade below 444.00. (SPX 881) Repeat, raise the OEX 438 SHORT trigger to OEX 444.

 
 
  Jeff Bailey   8/8/02,  10:07:06 AM
Amgen (AMGN) $45.67 -0.1% ... For me, its "put up, or shut up" time for me (a bear) in AMGN. Today's trade at $46, is back to relative high and a trade at $47 is further bullish (not good if bearish).

As such, immediately understand that short, underlying stock most likely has to stop out at $47. For me, will look to close out 1/2 position of Sept. $45 puts, should stock drift back to $42, $43, then hold the rest (no stop on options). Then should stock give "sell signal" at $41, will have a bearish count to work with and then be better able to assess the Sept. $45 put position. Link

 
 
  Steven Price   8/8/02,  10:06:57 AM
We can expect to see the markets react to any economic data between now and Tuesday in an exaggerated fashion, as the effect on the Fed's thinking will be analyzed and re-analyzed in trying to predict a rate-cut

 
 
  John Seckinger   8/8/02,  10:05:30 AM
Sector Search: The Pharmaceutical Index (DRG.X), currently at 298, is just underneath its 300 pivotal level. If 300 is penetrated to the upside, look for a move to 309 in the near term. If shorts are waiting at the 300 resistance with conviction, a move back to 284 could take place before the next attempt at 300. In other sectors, Semiconductor and Networking issues continue to underperforming while banks shine bright (BIX.X index higher by 2.67 percent). The BIX.X Index is just below the breakout area of a bullish wedge (295 break out area, BIX.X currently at 294).

 
 
  Jeff Bailey   8/8/02,  10:01:46 AM
Getting multiple Sell Program alerts, but having little impact as broader market averages move higher. This to me hints that bears are covering short positions, trying to get things "squared."

Yesterday, floor trader talk was that shorts were coming in, nervous ahead of next week's Fed meeting, and potential surprise cut in interest rates.

Today's action sees some selling in the Treasuries, which may be indicative that bullish capital is moving toward stocks ahead of Fed meeting too.

One "reason" Fed might surprise cut next week, is that Productivity is HIGH, inflation is LOW.

I read a good comment by an economist on how the higher PRODUCTIVITY is actually a "double-edged" sword. HIGH productivity is very good for keeping inflation low, however, that HIGH productivity, gives industrial/manufacturing sectors plenty of capacity that has yet to be utilized. As such, very little need to increase any type of capex spending, thus a slower rate of growth at the equipment seller's level, and lags on economic growth.

Thinking then may become.... if Fed lowers rates next week, the lower borrowing may actually be "too good to pass up" for corporate borrowing, companies willing to take on some low cost debt, upgrade equipment while cost of borrowing low. Effect is stimulated economy should Fed easing scenario unfold.

 
 
  Jim Brown   8/8/02,  10:00:58 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The internals are beginning to weaken and it appears the retail warnings this morning are weighing on the markets. Let's change the stop loss to OEX 445 (SPX 883) and bail out of this long if hit. With an initial target of 449 we don't have much room.

 
 
  Jonathan Levinson   8/8/02,  9:54:04 AM
This is an excellent market to stay out of. The TRINQ, QQV and the TICK.NQ are dancing from buy to sell territory, and COMPX price is equally undecided. It's a fine market for losing money in. Stops are your second best friend, your first being abstinence (grin). Rememberm cash *is* a position- if in doubt, just wait for the next setup.

 
 
  Leigh Stevens   8/8/02,  9:53:47 AM
Subscriber QUESTION: "I remember you talked about "Fair Value numbers on futures" before. Can you send me a copy of your previous writeup on what it means and how to use it?"

RESPONSE: Sure, it was a past Index Trader Column which you can go back and view at - Link - go to the bottom of that article.

There are a couple of things that I would note about the Index Arbitrage program levels currently - per my pre-opening note on today's "fair value" numbers - the number is shrinking as we get closer to the Sept. expiration (of futures). This means that periods where the S&P futures premium get bid up will "trigger" index related buy programs more readily - that is, the futures premium does not have to get bid up as MUCH to create a futures premium that makes it profitable for the program traders to do their thing. Today, for example, with fair value at only .64, buy programs related to the S&P 500 stocks could get triggered at 2.14 points, Sept. futures (SP02U) over the SPX index.

The second thing is to understand that UNLESS you are paying for real-time futures quotes, the Q-charts "PREM.X" is looking at the difference between a real-time quote on SPX, but a 10-minute DELAYED quote on SP02U, so you are not looking at a premium difference that is real, so to speak.

You can put up a quote on the Mini S&P 500 futurs contract - symbol: ES02U (currently being given in "real-time" by Q-charts) and put an SPX quote below it - to get an idea if the S&P futures premium is running at or above 2.00, which is where Index-related buy programs might be getting triggered.

 
 
  Jim Brown   8/8/02,  9:52:39 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Just in case this rally fizzles let's change the stop loss on the open LONG signal to OEX 440. This is just under the low of the day. SPX 874. There just does not seem to be any excitement in the buying and I want to be overly cautious.

 
 
  Jeff Bailey   8/8/02,  9:51:32 AM
Sell Program

 
 
  Jeff Bailey   8/8/02,  9:47:23 AM
Yesterday's Program Trading action Can be viewed at HL Camp's site at this Link

I see where several "buy" program premium levels were triggered yesterday, but I didn't get one of them. Other subscribers said they did get alerts. I got most of the sell program alerts, so need to figure out why I didn't get the "buy program" alerts.

Since Jim's watching the futures closely in his swing trade model, he saw what appeared to be multiple buy programs and futures jumped. Good job to Jim, and perhaps hints at how a FOCUSED trader can pick up on things.

 
 
  Jim Brown   8/8/02,  9:44:39 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market LONG signal at 9:38:24 when the OEX traded above 442.00, (SPX 877.66, DIA 84.64, SPY 88.17, DJX 84.54, NDX 907.80, Compx 1270.53) The initial stop loss will be OEX 438 (SPX 470). The initial target will be OEX 449. (SPX 895)

 
 
  Steven Price   8/8/02,  9:44:04 AM
The IMF has agreed to a $30 billion loan to help Brazil, whose troubled economy has affected bank stocks here in the U.S. Citigroup (C)$33.14 (+1.62) and J.P. Morgan (JPM) 25.05 (+1.01) have benefited from the news, as both have Latin American exposure

 
 
  Jeff Bailey   8/8/02,  9:43:50 AM
Buy Program $2.14 premium hit.

Dow +33, SPX +4.91, COMPX -6.24.

 
 
  Jeff Bailey   8/8/02,  9:42:22 AM
Sell Program $-1.84 premium alert.

Dow +2.43, S&P 500 +2.07, COMPX -9.46.

 
 
  John Seckinger   8/8/02,  9:40:30 AM
It looks as though both the Dow and September 30-year bonds are looking for direction. With bonds unable to settle above 108-125 yesterday, I could not once again hope for the parabolic move higher. Instead, the intermediate channel held true to form. Please see chart: Link

 
 
  Jim Brown   8/8/02,  9:38:45 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with an OEX trade over 442.00. (SPX 878)

 
 
  Jim Brown   8/8/02,  9:37:26 AM
Swing Trade Signals
Both signals are now active. We have traded in negative territory and did not get an opening bounce. The long signal at 442 is now active

 
 
  Jeff Bailey   8/8/02,  9:37:01 AM
Pixar (PIXR) $41.55 -0.07% ... might be a short-term bearish trader's play ahead of tonight's earnings. Break of inside day (yesterday), gives bear tight stop above $42.21, target $40 by session's end. Recently, been seeing some stocks decline just ahead of earnings.

Have seen positive notes from analysts that seem to now be "movie critics" that have seen previews of next summer Pixar animated movies. The analysts "love" the movies, and "love" the stock.

Technicians eye-balling a potential head and shoulders top, with neckline potential at $38, head at $45. Link

Disclosure. I currently have a bearish position in PIXR. Plan is to close out 1/2 of open position into the close. Then roll the dice on earnings.

 
 
  Steven Price   8/8/02,  9:36:30 AM
Best Buy (BBY) did not benefit from good sales and has lowered EPS estimates by over 40%. The stock closed yesterday at $30.80 and is now trading $21.50.

 
 
  Jim Brown   8/8/02,  9:34:43 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go Short the broader market with an OEX trade under 438.00. (SPX 870)

 
 
  Leigh Stevens   8/8/02,  9:33:44 AM
INDEX Comments: "Symmetrical" triangle - someone asked me more about how you define what this pattern is, such as has been traced out by the indices on their hourly charts.

First - a triangle is simply a consolidation type chart formation, after an up or down trend, that traces out lower rally highs and higher downswing lows - if you draw straight lines through these tops and bottoms it makes two sides of a triangle - the 3rd. side of the triangle being an imaginary line through the first high and low.

Second - A symmetrical triangle is simply a variety of a triangle formation that has "sloping" lines that are of the same angle; e.g., each trendline - the one angling down down and the one going up - has an equally steep or equally "gentle" slope to it.

The two main types of consolidations, rectangles & triangles, will be the subject of a future Trader's Corner article - this, after I finsh my Oscillator series today by looking at the MACD indicator - Part 3 (parts 1 & 2, covered Stochastics & RSI).

 
 
  Jim Brown   8/8/02,  9:32:56 AM
Swing Trade Signals
We got the positive open with no strength and now we will be looking for a failure back through 438 as our SHORT entry

 
 
  Steven Price   8/8/02,  9:31:34 AM
Intel has certified their accounting results, however will not expense employee stock options. There are still over 90% of required companies that have not yet certified their accounting numbers ahead of next Wednesaday's deadline. I can't imagine that there won't be any revelations between now and then.

 
 
  Jim Brown   8/8/02,  9:31:04 AM
Swing Trade Signals
The direction on the open is still up for grabs but the futures are well off their highs and are representing a reversal already. It appears we will be going short at 438.

 
 
  Jeff Bailey   8/8/02,  9:30:52 AM
The 9:00 AM intraday update has been posted. Link

 
 
  John Seckinger   8/8/02,  9:29:30 AM
With wage-push inflation continues to be anemic (PPI -0.2%, core -0.3%) as deflation might become the buzz word once again. It is interesting to note talk of Asian central banks still interested in purchasing five year notes. Bond futures are down across the board, but (as just mentioned) the short end is holding up relatively well. It is my opinion that severe weakness in five year notes (strong move higher in interest rates) could become a strong catalyst for higher equities. This is not the case this morning.

 
 
  Jeff Bailey   8/8/02,  9:29:10 AM
HL Camp Buy/Sell Program levels today are buy=$2.14 and sell=$-1.84. Q-charts symbol is $PREM

Jeff: I've got q-chart, but how the heck do I know if the buy or sell program is triggered without sitting and watching the chart of the $PREM?

With a chart window opened, simply type in the symbol $PREM

A chart window should now have the Premium of S&P 500 futures (front month) over SPS.X, Daily "heading"

Place your mouse cursor inside the window, then "right click" your mouse button. A pop-up window will appear. "Left click" the Add Alert menu option (at the very top of the pop-up window.

Now another window appears. The default for "direction" is At or Above (>=). In the "Target:" portion of this box, type in the 2.14, which is today's "buy program" level, then click the "OK" button. This alert should be set.

Now.... follow this procudure again for the "sell premium" level, but this time, you'll need to change the Direction to "At or Below <=", then type in the $-1.84.

OK, your done, and you can now FOCUS on the stocks you're trading. If the $PREM trades the $2.14 or $-1.84 level during the session, your q-charts trade station will start blinking at you.

 
 
  Steven Price   8/8/02,  9:26:48 AM
It looks like a good day for retailers, as July sales were strong. This led several companies, including Ann Taylor (ANN), WalMart (WMT), Claire's Stores (CLE), Gap Stores (GPS) and Abercrombie and Fitch (ANF) to raise earnings guidance. This increased retail spending also bodes well for the economy after yesterday's credit numbers showed Americans less willing to run up their credit cards in light of falling stock market and portfolio values.

 
 
  Jim Brown   8/8/02,  9:25:22 AM
Swing Trade Signals
The premarket is less than convincing this morning. With futures only slightly positive the possibility of a strong open has weakened. The PPI was not a factor this morning despite the limited inflation pressure in core goods. The markets ended yesterday right on resistance/support as though they just ran out of gas at the close. Up 2 of 3 days this week this could be the pivot day.

We are looking to go short at OEX 438 if the market opens positive and fails to rally. We are looking to go long at 442 if the market trades in negative territory before passing 442. This may sound confusing but the main point is a desire not to buy a bounce/dip at the open only to have it fail. The chances for a reversal are good given the rally at the close yesterday. I will try and call the setup as it occurs.

 
 
  Jonathan Levinson   8/8/02,  9:19:42 AM
The futures have fallen off a cliff in the wake of the economic news released this morning as the PPI and new jobless claims fall. Perhaps that rate cut isn't looking quite as likely. NDX futures now +2.5, S&P +4.60.

 
 
  Leigh Stevens   8/8/02,  9:07:04 AM
Pre-Opening INDEX Comments - - Price action yesterday turned the chart/technical picture bullish in OEX and SPX

DJX will break out on the hourly charts on a move above 85.4 and QQQ above two trendline resistance points, at 23.2 and 23.6 - per my commentaries and analysis of recent price trends found at - Link

 
 
  Leigh Stevens   8/8/02,  8:59:17 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > +7.90 at 883.90; Dow Industrials > +75.00 at 8515; Nasdaq > +6.50 at 925.50

"Fair Value" numbers: S&P 500 futures ($SP02U): .64 -- Nasdaq 100 futures ($ND02U): 2.30

 
 
  Jonathan Levinson   8/8/02,  8:39:03 AM
Are there other companies that do program trading at different prem levels than Camp? Would that explain what happened yesterday afternoon?

There are no doubt many program trading systems, accounting for very significant percentages of market action. As well, there are many people actively trading accounts of every size. What happened yesterday was that everyone decided to buy, then they slowed down, and then decided to sell, and then suddenly decided to buy again. What caused or provoked it is beyond me to guess. Our job is to warn you of the levels where it may occur, to observe it, report on it, and to help you trade it. Yesterday was one of those difficult days in the market, and, for that matter, the past two weeks. I've been leaving the screen with a neckache recently, which never used to occur.

 
 
  Jonathan Levinson   8/8/02,  8:16:27 AM
The US Dollar Index is all over the map, down all night then up all morning, now headed back down. The high this morning was 108.60, and price is currently just below 108.40. Futures are strong however, NDX +18.50 and S&P +14.00.

 
 
  Jim Brown   8/7/02,  10:19:17 PM
Swing Trade Game Plan Complete w/Charts- Link

 
 
  Jim Brown   8/7/02,  9:57:01 PM
Swing Trade Game Plan - What? A Rally? -
After two days of gap openings following very negative closes the market pulled off a reversal on the strength of some huge futures related buy programs. The close over resistance at OEX 440 was positive but the margin of the close was very tenuous at only $.50 cents. The stage is set for a continued rally but also poised on the cliff for a possible drop. The key appears to be the coming Fed meeting and the growing possibility of a rate cut.

Market View
My view today is mixed again. After seeing the morning open gap up and run past OEX 440 only to crash again back to support at 430 I thought we were right on track for the next leg down. When support at 430 held and that monster buy program hit at 14:41 the market was artificially boosted back to that 440 resistance. By closing near the high of the day it sets up the possibility that the possibility of a Fed rate cut next Tuesday could prompt a retest of the highs from last week. The overhead resistance is at 450-452 and again at 460.

If we get positive gaps after a negative close we can also get negative gaps after a positive close. A dip back under 440 resistance at the open would setup a possible downturn. I am not predicting this but it is entirely possible. Nothing fundamental has changed in the markets and the only new outside influence is the irrational exuberance over a possible rate cut. A dip would face the same support levels we saw today. Weak at 434, 432 and stronger at 429-430.

My impression is that there is an underlying bid to the markets. Secondly, shorts have been burned so many times recently that they are reluctant to jump back in on the downside until after the mandatory three days have passed. What I am referring to is the current cycle of at least three up or at least three down days in every move. They want to make sure the buying sentiment has run its course before moving back in.

Regardless of the move tomorrow we are setting up for a fall next week. If the Fed does cut a quarter point then it is already priced into the market. If they don't cut there will be some unhappy bulls. Either way I think the outcome is down from Tuesday. Between now and then we want to keep our options open. We want to be long over OEX 442 and short under OEX 438.

Market View Chart: Link

Game Plan:

The Swing Trade model is FLAT.

There are three possible plays today:

Long over 442 with a stop at 438 and a target of 449 and above.

If we have a positive market and climbing then we want to go long over 442. The fear here is a positive open and then a fall back in the first hour. We need to be patient tomorrow on any positive open and see if the end of day rally will hold. This is not an auto execute setup. We are only going to execute if the market opens down and rebounds to cross this trigger. We will not execute on a positive open that does not trade down before crossing 442.

Short under OEX 438 with a stop at OEX 442 and an initial target of 430.

If we get a positive open that fails after the first 30 minutes then we want to go short at 438 with a target of 430. The problem again is the possibility of an initial drop at the open only to rally back on rate cut expectations later. Again we need to be patient. This is not an auto execute setup. We are only going to execute if the market opens up and then fails above this trigger.

Short HALF position at OEX 450, HALF at OEX 455, stop at OEX 460, target OEX 440 and below.

The biggest problem we are facing on Thursday is the possibility of a strong open. A positive open can run 4-5 points before we decide it is for real and is not going to roll over. This makes the 450 target about five points away and not far enough to really profit from OEX/SPX options. This is a short signal based on resistance at 450 and 455-460. If we get a strong open then we could easily break 450 and continue on to the upper end of the range. We will pass on trying to capture profit with inflated call premiums and limited upside and wait for OEX 450 to initiate a short. A continue run to OEX 455 would trigger the second half of the position.

Recap:

1) Long over 442 only after trading in negative territory at the open. Stop 438, target 449-450.

2) Short under 438 only after trading in positive territory at the open. Stop 442, target 430.

3) Short HALF at 450, HALF at 455, stop 460, target 440

I will call new plays on the fly if circumstances change before the open or we get a total breakdown in the markets.

OEX Game Plan Chart: Link

SPX Game Plan Chart: Link

DJX Game Plan Chart: Link

 
 
  Jim Brown   8/7/02,  9:53:56 PM
The Market Monitor for Wednesday has been archived here: Link

 
 

Market Monitor Archives