Option Investor
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  Jim Brown   8/13/02,  9:33:52 PM
Swing Trade Game Plan - Click here: Link

  Jeff Bailey   8/13/02,  5:49:54 PM
Total Stocks listed Per this morning's 09:45 post regarding total stocks listed on the NYSE and NASDAQ. According to Yahoo! Finance, NYSE breadth today was ADV=1,079 DEC=2,170 UNCH=147, so figuring 3,396 listed stocks on NYSE.

NASDAQ breadth was ADV=1,094 DEC=2275 UNCH=0, so figuring 3,369 stocks listed here.

These numbers will change over time as companies are delisted (WorldComm, Enron, etc.) new companies listed, companies change listing from NASDAQ to NYSE etc, but is starting point as devisor for those wishing to track their own 50-day and 200-day bullish % charts as discussed.

Again, www.stockcharts.com symbols for charts or number of stocks that are trading above their 50-day MA is (NASDAQ)= $NAA50 , (NYSE) = $NYA50 and those above their 200-day MA is (NASDAQ)= $NAA200 , (NYSE) = $NYA200.

Now, I strongly doubt that all listed stocks on the NYSE and NASDAQ are tracked by point and figure charts. After all, most institutions don't care much for stocks that trade under $10 or $5, but using a somewhat constant denominator (total stocks) in a bullish % indicator, then a level of bullishness can be assessed and level of risk understood.

  Jeff Bailey   8/13/02,  3:51:36 PM
Biotech HOLDRS (BBH) $85.09 -4.39% ... Jeff, I'm long the BBH Oct.calls... What is your take on this weakness today? Thanks

Personally, I wouldn't be "overly" concerned at this point. I do think some profit taking in the group. Look for support to firm at $80 level.

May also want to keep an eye on "key" stock Amgen (NASDAQ:AMGN) $45.60 -4.91% and profit taking here today. I'll be helping you out some as I've stuck a sell limit order in on previously profiled AMGN Sep. $45 puts (AMGUI) $2.55 x $2.70 and looking to close this position out near-term as stock was stronger than I had expected. Trying to use the "jacked up" volatility to close out with small option loss here too.

  John Seckinger   8/13/02,  3:44:03 PM
My next pivot in the Dow comes in much lower at 8222. There should be slight support near 8400, and a move back above 8620 should cancel the bearish sentiment. I honestly believe that today's trading was just one more reason why "hope" should not be a part of a trader's mentality. We all do it...I do it; however, the market did give you better odds for a sell-off, Jim took the odds, and traded successfully. Pure discipline, and nice job.

  Jeff Bailey   8/13/02,  3:40:09 PM
Position question Jeff: I'm just a new stock player. Please comment on my position. I'm short QQQ at $23 and holding a QQQ Sep. $24 call at $1.10 and DJX Aug $86 put at $1.75.

OK... the first thing you need to understand is your "risk."

In QQQ position, I consider you bearish the QQQ, but hedged on a move above $25.10 (25.10 = $24 call + $1.10 paid). If the QQQ goes above $24, you're hedged. However, to make money, you need the QQQ to go below the $23 short entry + the $1.10 you spent on the protective call option, so break-even begin at $23-$1.10= $21.90 as it relates to September expiration.

For DJX Aug $86 put, you need a close below $86-$1.75 = $84.25 to make money. The MOST you can lose is the $1.75 x 100 = $175 you invested in 1 contract.

I consider the above positions bearish. Now that you know you "risk" and at what levels you need to achieve for "break-even," you must have some bearish target at which you look to take a profit should the level be achieved.

Since your DJX position is August expiration (this Friday) I'd look to close that out should DJX trade near 83.50.

  Jonathan Levinson   8/13/02,  3:39:58 PM
TRINQ 2.03, TICK.NQ -577 off its low of -800 a few moments ago, COMPX below 1280, QQQ below 22.80. VXN is up 2.19, QQV still flat to negative, -.08. MSFT is well off its highs, currently 47.72. We have a bearish cross on the daily 5(3) stochastic, all shorter COMPX timeframes are 100% oversold.

  Jim Brown   8/13/02,  3:37:57 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Never say never. The markets have gone into free fall and we were triggered on the broad market short at 15:32:40 when the OEX traded below support at 449.00. SPX 890.98, DIZ 85.39, SPY 89.49, DJX 85.31, NDX 917.66, Compx 1282.21, Emini 891.00. The initial stop loss will be OEX 452.50, (SPX 896). If not stopped out we will be holding this signal over night.

  John Seckinger   8/13/02,  3:36:22 PM
September bonds continued their vertical move higher, bypassing the 110 level objective (intra-day high at 110-10, closing up 30 at 110-08). If USU2 stays above 109-16 tomorrow, assets should continue to flow into fixed income securities and away from lower performing assets, equities.

  Leigh Stevens   8/13/02,  3:34:44 PM
INDEX Comments: DJX - broke under its hourly trendline support at 86.0 - next technical support looks like 84.00 area.

  Leigh Stevens   8/13/02,  3:32:23 PM
INDEX Comments: S&P - OEX is falling under the low end of its recent trading range at 450 - hourly trendline support looks like 441-440.

  John Seckinger   8/13/02,  3:30:25 PM
Dow approaching key pivot of 8564. This 8564 level should be used for settlement only. The level began back on July 18th, and has already proved its psychological significance once.

  Leigh Stevens   8/13/02,  3:28:16 PM
INDEX Comments: Nasdaq - QQQ & NDX have sold down from their highs, along with the Composite, but trend is still more or less still sideways. However, COMP is breaking further below its hourly up trendline - also, QQQ below its trendline at 23 and is starting to look weaker - minor support is 22.90, then 22.30.

  Jonathan Levinson   8/13/02,  3:26:41 PM
Do you have a system for picking months when buying Q options? Such as buy current month if buying in first week of current month, for 2nd -4th weeks go to next month, or do you always buy out one month?

Russ, it really depends on how the market looks and how aggressive a position I feel comfortable taking. If I'm uncertain, I'll buy more time, but lately I've been trying to get closer to the action and go shorter out. For a position that I want but where unsure of short term swings, I'll go a bit OTM but buy more time. For a quick run with a tight stop, I'll buy front month ITM. I like to look at the whole option chain to get a feel for the pricing of premium, and try to buy the "cheapest" contract relative to IV and breakeven. Staring at a chain with money in your hand is the best way to develop that feel.

  Jim Brown   8/13/02,  3:23:26 PM
Swing Trade Signals
Traders are lost without something to hope for and with tomorrow deadline on the corporate certifications they don't know how to react to the "good" news from the Fed. We continue to waffle just above support and with 40 min to go in the trading day there is no direction. We will likely go into the close flat without a significant drop in the next few minutes. Tomorrow has about an 80% chance of being a down day in my mind but nothing is ever for sure.

  Jeff Bailey   8/13/02,  3:19:46 PM
The 3:15 PM intraday update has been posted. Link

  Jonathan Levinson   8/13/02,  2:53:43 PM
We remain trapped in the same range we've been seeing for days now, and while the long term trend remains down, the short trend has been up. Bears should be very careful here. While I'm expecting more lows than highs from here, a trader ignores the context at his/her own risk.

  Jim Brown   8/13/02,  2:52:48 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The current downward reversal is picking up speed but we cannot attempt to pick a direction this afternoon. As evidenced by our last stop the volatility is still with us. There is strong support at 450-452. I still expect the markets to sell off despite the "positive?" news from the Fed. I want to protect against a return of the bears by putting a short signal in place below that support.

Go SHORT the broader market with an OEX trade below 449. (SPX 890) The initial target will be OEX 440 with an extreme possibility of failure all the way back to OEX 420. (Wishful thinking!) The initial stop loss will be OEX 452.50.

  Jim Brown   8/13/02,  2:41:11 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORT signal at 14:35:50 when the OEX traded above 456.50. SPX 904.94, DIA 86.72, SPY 90.99, DJX 86.58, NDX 940.05, Compx 1306.05, Emini 905.75. Pretty frustrating. We called it exactly but the market is determined to test resistance again. I will look to enter a new SHORT at 460 or above. I just don't think it can get over that level.

  Jeff Bailey   8/13/02,  2:35:42 PM
5-year Treasury YIELD 3.128% ... did briefly violate the 08/05/02 low YIELD of 3.128% after FOMC decision, so leaning toward the bearish equity view here.

  Jeff Bailey   8/13/02,  2:33:17 PM
Buy Program alert generated here. Getting alternating type buy/sell premium alerts and makes for very mixed type of action. Near-term, monitoring intra-day highs and lows is about all a trader can do currently.

  Steven Price   8/13/02,  2:32:33 PM
A reader mentioned a point of possible confusion on what happens when options expire. The current policy is for automatic exercise of options that are 0.50 in the money, according to Fidelity. This number has changed over the years (it used to be 0.75). Please contact your individual brokers to find out how they handle automatic exercise of in the money options. If you do not have enough in your acccount to cover the resulting purchase or sale of stock, it is very important to find out how this is handled. The reader was under the impression that if you did not exercise these options they will go out worthless. They will go out worthless if they close within 0.50 of the strike price.

  Jim Brown   8/13/02,  2:31:26 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss to OEX 456.50, (SPX 904.50) Could be reaction bounce any minute.

  Jonathan Levinson   8/13/02,  2:30:56 PM
Down volume is now 570M vs. 380M up volume. TRINQ is up to 1, COMPX printed a low of the day at 1297. The TICK.NQ is -582, as negative as I've seen this week. Volatility has yet to catch up to the move, VXN +.64, QQV -1.13 on the day.

  Jim Brown   8/13/02,  2:27:49 PM
Swing Trade Signals
If we rebound from here and get stopped I want to remain flat until the volatility eases. The initial target on the current short signal is first support at 452. Be prepared for anything as the day progresses.

  Jeff Bailey   8/13/02,  2:25:28 PM
Sell Programs have been triggered on a couple of sell program alerts at $-1.86 in last couple of minutes.

Dow -50 points, S&P 500 -1.29 points and NASDAQ Comp -3.20 points.

  Jim Brown   8/13/02,  2:25:00 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the stop loss to OEX 459, SPX 909. The initial sell off is in progress and I don't feel the need to risk the wide range at this point.

  Jim Brown   8/13/02,  2:22:30 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Reinstate stop loss at OEX 463, SPX 915. No immediate spike but some upward pressure now beginning to fade.

  Jeff Bailey   8/13/02,  2:21:50 PM
Treasuries reverse sharply and YIELDS now back at session low. Not looking to chase any bullish stock action here.

  Jeff Bailey   8/13/02,  2:18:11 PM
Buy Program Premium upside alert at 1.80

  Jeff Bailey   8/13/02,  2:17:24 PM
Sell Program Downside alert at -1.86

Dow Industrials -34 points, S&P 500 +0.70 points, NASDAQ Comp. +2.24 points.

  Jim Brown   8/13/02,  2:16:37 PM
FOMC decision = no cut, changed bias to risk of weakness to the economy.

  Jeff Bailey   8/13/02,  2:16:21 PM
Fed decision on interest rates No change in interest rates.

  Jeff Bailey   8/13/02,  2:13:28 PM
5-year YIELD ($FVX.X) 3.232% and back at the unchanged level. Has seen some sharper selling in last 20-minutes. To me, hints no Fed rate cut.

  Jim Brown   8/13/02,  2:08:01 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I want to confirm the game plan as the announcement draws near at 2:15.

If they cut rates we will close the signal immediately and watch from the sidelines for a new entry point.

If they do not cut rates and do not change the bias we will hold unless stopped out.

If they do not cut rates BUT change the bias to loosen then we will deactivate the stop loss for five minutes to allow for the spike up and selling into the spike. We have strong resistance above us but this news could cause that resistance to be tested. If you are not comfortable with removing the stop then by all means keep it in place on your account.

We want to avoid jumping in an out after the announcement. This is typically a period of very high volatility and picking a direction is impossible. This is why we need to follow the plan and stick to it. As we near the 2:15 announcement you should queue up your orders and be prepared to execute them immediately based on the news.

I would have preferred to be a few more points under our entry point before the news but it is too late to whine about it now.

  Jonathan Levinson   8/13/02,  2:03:32 PM
Just watching the carpet grow. 438M advancing shares to 390M declining on the COMPX, 119 new lows to 15 new highs. TRINQ at .70, TICK.NQ -119, QQV down 1.33 at 48.1. 5(3) stochastics are all chopped up, with daily overbought, 60 minute trying to turn up from midway down a bear run, 30 minute ditto from oversold, shorter time frames trying to turn back down from various points. It's at times like these when bulls and bears show their true colors, as there's little direction present at the moment and the promise of a big event coming up shortly. Some are betting on a big move north, and others south. Time will have to tell.

  Steven Price   8/13/02,  1:59:50 PM
Nike (NKE) $44.47 +1.70 Reader Question: Put play NKE is strong today. Is this due to WMT? do you expect a downtrend tomorrow after WMT news is digested? thanks, jean

Response: Walmart raising guidance seems to have lifted retailers and apparel makers across the board. One thing to note is that they did not raise guidance for the full year, at this point not venturing a guess as to how the holiday season will treat them. Our current stop on NKE is $46. there are many charts today that look like NKE's and I would like to see how the overall market reacts to the interest rate announcement before buying into a continued rally.

  Jeff Bailey   8/13/02,  1:40:34 PM
The 1:00 PM intraday update has been posted. Link

  Steven Price   8/13/02,  1:37:01 PM
Reader Question: I have question regarding stock assignment after option expiration. Example: Today you bought 5 contract of MSFT (@48.08) Aug call 47.5 @ 1.60 ($800.00). On Friday MSFT closed @ 49.50 and option value will be say $2.50. After expiration on Monday 500 stocks will be assigned or $1250.00 (2.50 * 500) will be deposited in the account.

(1) If money deposited then no problem.

(2) What will happen if 500 stocks of MSFT are assigned and you have no money in you account (including margin) to buy these stocks ? Thanks

Response: A call to Fidelity gave me some insights on this issue. If the option is exercised automatically and you do not have the money in your account by the time the stock settles 3 days later, you will get a margin call. If you take no action, Fidelity will sell the stock for you, and charge commissions and a penalty. There are different levels of option trading accounts, and you should talk to your individual broker to find out what their policy is.

  Steven Price   8/13/02,  1:20:24 PM
Reader Question: Hi steven, I am wanting to short GS on a further bounce after the fed speaks.What do you think? I shorted on Friday and got out fast on Monday.GS has been good to me if I take profits on quick movements.If the market reacts negatively today and tomrrow--GS should go with it--NO? Thanks ,Jane

Response: A look at Goldman Sachs (GS) $77.52 +2.17 shows that the stock has broken above recent resistance of $77.00. It is well above the 10-dma and 50-dma in the $72 range. On a break above resistance, we usually look at long positions, so going short is contrary to this philosophy. I see resistance above this level around $81 and at the 200-dma of $82.46. The trade of $76 also created a new double top buy signal on the Point and Figure Chart. The bullish count is currently $85. The stock has had quite a run and could experience a pullback, however pullbacks are contrary to the trend. If you are looking to play a pullback, then use a tight stop. I would not go short Goldman right now without some evidence first of a rollover from resistance. Of course if the market dives after the rate announcement, this one has plenty of recent gains to give back. However, I'm still waiting for some technical evidence before shorting it.

  Jim Brown   8/13/02,  12:53:19 PM
Swing Trade Signals
The media has the rate decision setup perfectly. They have analyzed all the possible outcomes and prepared an appropriate response. They have been testing these responses on us over the last several days and have decided which ones would not crack our fragile market. These are their possible responses:

Fed cuts rates = a measured response to stimulate the economy and increase consumer confidence. Expect bullish comments.
No cut, change bias to cut. = no need to cut now, Fed sees conditions better than the market outlook but they are prepared to cut if needed. = Expect bullish comments.
No cut, no bias change. = no need to cut now due to strong underlying economy and no need to consider cuts in the future based on strong economic fundamentals the average analyst cannot see. Expect bullish comments.
No cut, change bias to tighten. = Obviously the economy is much stronger than anyone expected and the market bottom is behind us. Thank goodness the Fed is in control. Expect bullish comments.
Fed raises rates, changes bias to tightening. Obviously the Fed realizes we are in the initial phase of a new bull market and sees a much stronger rebound in our future and has taken the first steps to protect us from rapidly rising inflation stemming from this explosive growth. Expect bullish comments.

Obviously, according to the media, we cannot lose. Whatever the Fed does will be bullish from the media standpoint. Sure glad uncle Alan and CNBC are looking out for our best interests. In any event, expect bullish comments from the media.

  Jonathan Levinson   8/13/02,  12:49:31 PM
Advancing volume of 395M to declining volume of 287M on the COMPX, with the TRINQ off its lows at .60. The TICK.NQ is -157, 106 new lows to 15 new highs, and 1,616 decliners to 1,414 advancers. Price is off its highs at 1317, resting just above the area which has acted as light resistance during past days and now support. An interesting divergence between QQV and VXN- Nasdaq-100 volatility is down 1.22 on the day, while overall Nasdaq volatility is up slightly, +.15. This, I think, reflects that option traders expect any rally to take place in the NDX/QQQ stocks, and not as much in the broader COMPX.

  Leigh Stevens   8/13/02,  12:37:02 PM
Subscriber QUESTION: "Thank you for all your inputs. And also I want to ask your idea on PHTN where do u see it go? support and resistance."

RESPONSE: Looks like support for Photon Dynamics (PHTN) is in the 17 to $18 area, at the lows formed back in early 2001. The stock at 19.3 is trading under the $20 double bottom low of June-Sept. Resistance is therefore 20.00, then in 23 area. If 17 is exceeded, the long term chart causes me to look at lows made in the 9 -10 area as potential support. Right now stock still looks weak.

  John Seckinger   8/13/02,  12:31:07 PM
Now it is time to do some "non-biased projections". With bonds, least resistance appears to be in favor of lower yields (defensive for stocks). For the dollar, the recent bullish pattern has been slightly broken; however, ideally a trader would want to short closer to 108 than the current 107.38 level. Therefore, I will give the dollar a neutral rating. Now it is time to turn to the Dow: What is more likely? A breakout higher, clearing a trendline which began many months ago, or simply prices failing at resistance and going lower? Are bullish traders hoping too much? Yes, bullish traders are "hoping" for a breakout, and not using technical analysis. The odds are against the bulls, even if only 60 to 40. So, what should a trader do? Either short here and put a stop above 8750, or, if prices do go higher, buy above 8750 and use an incredibly tight stop. Remember: If probabilities go in your favor, it is always wise to take the edge.

  Jonathan Levinson   8/13/02,  12:20:22 PM
Do you ever add to a loser to make the loss less? ie avg down?

Yes, I do, but when I do so, I do it with the knowledge that I'm breaking a trading rule, almost a cliché, and so I do so as cautiously as I can and make sure to restrict the position to something that I can walk away from if it goes against me. In order to respect my own cautious nature, I rarely buy a full position, and prefer to leg into it. If I trade 40 or 50 contracts as a full position, my initial buy will be 10 to 20 contracts, and if I'm wrong, I add to it on the way up. However, in no case will I trade enough contracts to nuke the account if I have to bail on the position. In other cases, if I add part of the position on the basis of a presumed move and the conditions change on me, I'll respect my mental stop and get out of the way. In short, my account management depends on the prevailing conditions, but the one thing I never violate is trading positions that are too big for the account. Cash is my favorite position.

  Jim Brown   8/13/02,  12:15:06 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
You can't script it better than this. We were triggered on the broad market short at 12:04:58 when the OEX traded below 458.50. (SPX 908.74, DIA 87.43, SPY 91.27, DJX 87.12, NDX 951. 34, Compx 1317.67, Emini 908.50) We had the pre Fed bounce, failure at resistance, slow bleed back to hover just above our trigger and a final drop through the trigger level as the A/D line begins to weaken and TICKS dipped into negative territory. What we need now is a nice drop to below OEX 455 before the meeting to give us room to maneuver when the announcement is made. The initial stop loss will be wide at OEX 463, (SPX 915) to compensate for the volatility. We could see another attempt at resistance before the meeting. The volume has dried up as everybody sits on their hands waiting.

  Jeff Bailey   8/13/02,  12:14:36 PM
Fiber/storage stocks QLogic (NASDAQ:QLGC) $34.64 -1.8% and Brocade Communications (NASDAQ:BRCD) $14.63 -0.61% showing weakness relative to today's action. Looks to have been some sellers show up in last hour. Per recent observations, look lower.

  John Seckinger   8/13/02,  12:09:05 PM
Let's dissect the last few hours of trading: An explosive move upwards, followed by two red candles on a five minute chart. Then it was time to look for a relative high around the 8725 area. With 8750 not tested, I am not surprised the market did consolidate. I would imagine the pivot during this consolidation is at 8725. Looking at a daily chart of the Dow, the trend line now comes in at 8732. Therefore, a move back above the 8725-8732 range should be bullish. If prices stay underneath, look for weakness to 8683 and then lower near the 8625 level. These are levels that should still hold psychological importance after the FOMC announcement.

  Jeff Bailey   8/13/02,  12:04:10 PM
The 11:00 AM intraday update has been posted. Link

  Leigh Stevens   8/13/02,  11:57:29 AM
Subscriber QUESTION: "QQQ is still within an ascending wedge (redraw awaits 2:15 if needed). Your bias is to the upside lately, but would you short a breakdown of the 30 minute wedge considering all stochastics are now in overbought territory?

Implicit is upside to 24.70ish on positive fomc reaction"

RESPONSE: Well, I see the QQQ wedge pattern you're talking about, but I have to "look" for it, so to speak. It (the pattern) is not quite a "classic" wedge pattern such as one that would "leap out" at me, as was the case with the bullish falling wedge that developed in the Composite & QQQ in early-August, basis the 30min. charts - that said, a breakdown of the trendline you're talking about is a shorting indication - looks like 23.40-23.50 is a break of it right now.

Re 24.70 prior high - at or near does seem like a potential short - if Q's rally above this prior high, then reverses, also a good short as a bull trap reversal. Market doesn't seem ready to go down yet but significant overhead resistances on key Nasdaq stocks are not far overhead, per my 11:20 comments.

  Jim Brown   8/13/02,  11:53:06 AM
Swing Trade Signals
Everything going according to plan. We were expecting a positive move in front of the announcement as retail traders continue to buy hope and shorts cover to avoid a surprise. I say this because I can't imagine professional money managers buying before the meeting since the day after the meeting is normally down even when they cut. We saw the markets stop right at resistance again and has dipped down to just above our trigger but held on the downside. It appears the setup is as good as we could have asked for. Aggressive traders my be thinking about shorting at 460 if it gets hit again but we will hold at the lower number.

  Jim Brown   8/13/02,  11:37:48 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the entry point on our SHORT signal to OEX 458.50, (SPX 908.50) Resistance at 460 appears to have held although we are still 2:45 from the announcement. This is a HIGH RISK ENTRY !!

  Steven Price   8/13/02,  11:37:06 AM
Several readers have asked about CHIR as the Play of the Day, after it was already listed as a play last week. In choosing our Play of the Day, we include both new plays and existing plays, if we feel the existing play is at a good point for new entries. In the case of CHIR ($39.09 +0.20), the stock has exhibited good strength, continued its trend, and we liked new entries at its current level. We focus on what will make money, whether it is new, or continuing.

  Steven Price   8/13/02,  11:31:52 AM
Reader Question: I Steve,what are your thouths on current OI put play KLAC and QCOM? Thanks for your advice.....

Response: OI closed the KLAC $37.99 (+1.20) play last week, but my observations about the stock remain similar to what they were previously. With the semiconductor stocks still warning regularly about lack of customer spending, and these companies serving as KLAC's customers, I still see downside for KLAC. The downward channel from middle of July could be broken to the upside with a trade of $38.50. The recent consolidation between $35 and $38.50 has kept the stock rangebound, so it will need a break from this range for a significant move. If you extend the channel back to April, it is still in the middle of the downward channel, however with more room to the upside. Since we were playing the shorter term downside, I prefer to look at the shorter channel, and close the play if it breaks. See my last entry for an update on QCOM.

  Jonathan Levinson   8/13/02,  11:28:25 AM
Advancing volume is now leading declining volume on the COMPX 331M to 142M as price sits just below its highs of 1324. The upmove has stalled here for the last few minutes, but with relatively light volume, the climb does not have to end here. The TRINQ made it down to the low 40's, though the TICK.NQ has been staying relative low and is currently at -62. Whatever the Fed's packing better be good, given that there's been an extended climb in the COMPX based on little fundamental improvement that I can discern. Eager bears could take a dip here and set their stops tightly overhead, but with the Fed meeting looming, I'd be very disciplined about that stop. The daily, hourly and 30 min 5(3) stochastics are all maxed out in overbought. It would be a no brainer if the weekly was too.

  John Seckinger   8/13/02,  11:27:51 AM
Staying with a five-minute chart of the Dow, we had one but not two red candles to signify a possible relative high. The Dow is overextended, and it will be interesting to see what happens if 8750 is tested. Well, just as I was going to hit submit, we have just gotten our second red candle. Now I would be looking for consolidation (8750 to 8710) before the next move.

  Jim Brown   8/13/02,  11:23:29 AM
Swing Trade Signals
The prior resistance at 459-460 is still holding. The Dow has not quite made it back to 8750 but it is trying. The Nasdaq is the leader and with the multiple negative chip sector comments again today this is bullish. Investors are ignoring bad news and it may not be completely due to hopes over a rate cut.

  Leigh Stevens   8/13/02,  11:20:55 AM
INDEX Comments: Nas 100 - rally is being led by Cisco - the stock you want "leading" a Nas rally - stock is at a new high for its recent rebound, but at 13.88 still has a ways to go to take out its prior swing high at 15.

MSFT is starting to break out to new high for its recent move - it next has significant technical resistance in the 50 to 51 area.

Even INTC is trying to get into the spirit of this little tech fest going on here and is managing a minor rally.

QCOM also breaking out of some congestion, but with significant resistance in the 28-28.25 area.

  Steven Price   8/13/02,  11:19:12 AM
Reader Question: Good morning Steven: QCOM broke above 26.50, do you still like the put play, is the sector still healthy, we hold the Sept 25/puts from yesterday, where do you see exit number, could you be so kind provide the index symbol for the qcom sector, if possible, support and resistance for this index. Thank you.

Response: Qualcomm (QCOM) is showing some strength and is above our $26.50 stop loss. A close above this level would cause us to close the play. If you look at a chart of the Nasdaq Composite, it closely mirrors the the movements of Qualcomm. Qualcomm makes circuits for wireless data, so it actually crosses a couple of sectors. I would watch the Nasdaq ($COMPX), the Combined Telecoms (ITCX) and the Wireless Telecom Index($YLS.X). While I still see weakness in the sector, we may have to look for other candidates. QCOM followed its downtrend the first couple of days after we picked it, but has rebounded. I would not initiate new positions here, so closing the current position may make sense. With this afternoon's rate announcement, we will probably see whipsawing in a number of stocks, and this could be a reason QCOM has taken off this morning. The downtrend channel from the middle of July has been broken, and my guess is that we will see some other strange pattern aberrations throughout today. That being said, we will respect our stops at the end of the day.

  Leigh Stevens   8/13/02,  11:14:21 AM
INDEX Comments: QQQ finally making some more upside headway as its rallied above its most recent prior hourly (up) swing high at 23.7.

Next, as I've been saying is the late-July peak at 24.7 as THE key area in "confirming" or not an emerging uptrend. The Q's are pretty extended here, so I don't suggest trying to play further upside - the hourly stochastic is not "confirming" this new high so careful protection of call profits should be the watchword in case the Q's reverse this afternoon.

  Leigh Stevens   8/13/02,  11:05:11 AM
Subscriber QUESTION: " While scratching my head as to trying to find a 'top' for this BTK run, I did some retrace projections and wondered what you thought

In mid March, the BTK was at about 545ish. In mid July, the bottom of the downtrend started in March, it was at about 275ish. Today it closed at 383 which nearly marks a perfect 38.2% retrace of the downfall.

If you then take a few top BTK stocks such as AMGN, IDPH and CHIR, they all follow that chart of the BTK perfectly. With the massive spike from July 22nd or so to now, and then assume at least a 38.3% retrace of that, you got a nice short opp, don't you think for a short term trade? "

RESPONSE: Well, I wouldn't assume that the Biotech Index (BTK) is a good shorting opportunity just because it has completed a 38% retracement - the most common retracement level is actually 50%. In a "weak" stock or index 38% is often about all that you can expect. However, once the retracement goes beyond 38%, you have to start thinking 50% as a possibility. 409 is the 50% retracement level - the next major level of technical resistance implied by the prior (up) swing highs in May, is in the 430-433 area.

On the other hand a retreat below 380-378, especially on a closing basis would suggest that another correction was underway.

  Jim Brown   8/13/02,  11:03:15 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market with an OEX trade below 457. (SPX 906) This is just below that last little intraday plateau between 10:40-10:55. We are very close to those highs from Friday and nearing the resistance point. If we get a breakout over 462 We will follow it up with a higher SHORT trigger. 457 may seem a little low but with two hours before the announcement I want to keep my distance to avoid volatility.

  John Seckinger   8/13/02,  11:01:47 AM
As I wait for a relative high in the Dow, I guess I should not have been "nervous" about calling 8628 a pivot when the Dow was near 8655 (Per 10:25:40 post). I will wait until 2 red candles (five minute chart) before looking for patterns (would not be surprised to see even 8800 tested). I got an email stating that "Rick Santelli was saying that the buying in the 10 year reduced the OI and really represented unwinding of short positions." Remember, traders were buying five-year notes and selling 10's (defensive towards stocks). Now they are simply taking profits, which reduces Open Interest. I agree with Rick.

  Leigh Stevens   8/13/02,  10:53:59 AM
Subscriber QUESTION: "Leigh, I have seen some say the TRIX (triple exponential moving average) is a good indicator/market timer. What do you think of it? I have Q-charts, is it on that?"

RESPONSE: An exponential moving average option is available on Q-charts - with a chart window open, click on Studies, then highlight the moving average and click on Edit - besides length setting you can check a box for "exponential".

TRIX is a momentum indicator that displays the percent rate-of-change of a triple exponentially smoothed moving average of Close. TRIX is exponentially "smoothed" once - this is normal exponentially smoothing calculation, then smoothed again and then once more - 3 times. TRIX supposedly "works" well in trending markets, but generates "whipsaw" signals in sideways markets. If it's so smoothed out, it is going to be best in a strong trend - which we don't have currently. And, if the indicator is primarily "good" in a trending market, it is not a good general market timing indicator in my estimation

Anyway, Q-charts doesn't have this variation of an exponential moving average. Q-charts is not a advanced technical analysis application product the way say, TradeStation or MetaStock is - it's a good "basic" charting and technical analysis product at a moderate price.

  Jonathan Levinson   8/13/02,  10:48:01 AM
The TRINQ is down to .47 as the COMPX stopped just at the top of its 1315-20 resistance area. Advancing volume is 2.3 times declining volume, total of 346M so far. There are 65 new lows and 12 new highs on the COMPX.

  Jim Brown   8/13/02,  10:44:17 AM
Swing Trade Signals
Amazingly bullish for pre-Fed trading. Nearly all the negatives have disappeared from the markets despite the flood of bad news this morning. Definitely a bid under the market and it is giving me some concerns about shorting it even though historically it is the right thing to do. We are nearing that resistance at 459-462 and the plan remains to short a breakdown from there. This move is probably more short covering before the announcement than honest buying.

  Steven Price   8/13/02,  10:37:30 AM
Agbgenix (ABGX): OI call play ABGX has experienced a pullback of $0.11 to $10.10. The hold above $10 looks bullish and I like a new entry on a rebound into the green from this level. Look to initiate new positions at $10.25. One note of caution today. With the rate annoncement coming this afternoon, I would institute only 1/2 positions long, or wait until after the announcement to see where the market heads. We could have some wild swinging immediately afterward, and there may be better entry points available on long plays. The strong possibility also exists of the market giving back some of its gains which were made on anticipation of a possible cut.

  John Seckinger   8/13/02,  10:25:40 AM
Using hindsight, it looks as though 8628 was the pivot and not 8622. This gets me nervous to say, but 8628 really should not be tested in the near term. If 8628 is penetrated to the downside, expect much more selling. Key note (looking at five minute chart): After the series of lower relative lows ceased (8607 and then the next five minute candle had a low of 8619, stopping the pattern), this 8607 was not re-tested. This is important, since it lets us think of the "b" distribution pattern (to be detailed tonight).

  Steven Price   8/13/02,  10:14:02 AM
Reader Question: Hi Steven, NOC is back down around 113.5. Do you still like this call play right here? And do you think a September call is enough time for it to work, or would you go longer out? Thanks.

Response : Northrop Grumman (NOC) $112.29 (-1.82) OI call play Northrop Grumman has experienced the pull back we discussed int the Call Play description. Support and a reverse up from this point looks bullish as it continues the series of higher highs and higher lows. I would wait for the rebound to go long, preferrably after the Fed announcement. If the overall market dives, the sinking tide will lower all boats. Plenty of time for September to work on this mover.

  Jonathan Levinson   8/13/02,  9:58:50 AM
Advancing volume is leading declining volume 80M to 55M on the COMPX, which is headed north in a narrow channel, current HOD at 1309. The TRINQ is now at .64, TICK.NQ +71. Interesting, the QQV is positive, actually just flipped to slight negative as I was typing that, currently down .11 on the day to 49.32. I guess even option traders are starting to relax.

  John Seckinger   8/13/02,  9:51:55 AM
With yields near historic lows, one issue of key importance is the two year note. Currently trading at 2.03%, the 2-year bond was underneath 2.00% just a short while ago. A close under 2% on Tuesday should make headlines and attract retail traders to bonds instead of stocks. Not surprisingly, the 2-year note has been consolidating ahead of the FOMC meeting; however, the five year note has not - down in yield significantly today. What to make of this? Traders still like shorter-maturity issues (analogous to preferring blue-chips to technology), but the 2% in the two-year note is a little too close to the 1.75 fed funds rate. Remember, the bond market in itself is very dynamic; fortunately, if you know what to look for, movement in indices can start to make more sense. Example: Headlines say "bond prices lower". Well, if we were in bear market and the 30-year bond tanked while the five year bond remained unchanged - not exactly reason to load the boat on stocks, since the defensive component of buying short-term issues still exists.

I wish I had this quote yesterday, "Standing in the middle of the road is very dangerous; you get knocked down by traffic from both sides" (Margaret Thatcher)

  Jim Brown   8/13/02,  9:50:25 AM
It was just a coincidence that ADRX and CBUK found accounting errors reflecting how sales and earnings were inflated only a day before the August-14th deadline, right? Seems the CBUK CFO resigned and the companies have requested an extension to file their 10Q reports. An extension on the 10Q would also be an extension on the requirement to file a certification. Amazing coincidence.

  Jeff Bailey   8/13/02,  9:44:09 AM
Stocks above their 50-day MA Yesterday, a subscriber asked about Dorsey/Wright and Associates shorter-term indicator for a bullish % above 10-week. Last night, another subscriber guided me to www.stockcharts.com's NYSE Stocks above 50-day MA ($NYA50) Link . There is also respective 200-day MA NYSE=($NYA200) and NASDAQ=($NAA200).

In order to calculate our own bullish % for each, we can take the total number of stocks listed on the NYSE (approximately 2,800). If 380 stocks on the NYSE are above their 50-day (as depicted by the $NYA50) then bullish percent is ... 380 / 2,800 = 13.57%. On a piece of graph paper, 2% box, could simply begin charting 3 X's from 8% to 12% to begin a chart. However, note that the recent "low" reading was 40 on the $NYA50. One can understand the "bullish %" for 50-day MA was clear down at .... 40 / 2,800 = 1.4%.

Now, do we perhaps see how this is a "shorter-term" and quicker moving bullish %, when simply compared to the NYSE Bullish % ($BPNYA), which is measuring the percentage of NYSE listed stocks on point and figure buy signals? Link

  Jonathan Levinson   8/13/02,  9:41:39 AM
After an initial gap down to 1299, the COMPX is printing highs of the day at 1303. The TRINQ is staying just above 1 so far and the TICK.NQ is dancing back and forth around the zero mark.

  Leigh Stevens   8/13/02,  9:35:28 AM
Wall Street Journal (WSJ) - This morning's WSJ has front page story on Intel (INTC) ready to unveil a new technology for making computer chips that company hopes can overpower its rivals - the market doesn't seem to believe there is much they can do to boost its profits, given the recent weakness in the stock and earnings downgrades.

American Airlines to overhaul its operations in an attempt to combat discount carriers - the result of some of its proposed measure will increase waits at hub airports - good luck! - just what the air traveler wants is more delays!!

Bush convenes a U.S. Economic forum today, a day before the CEO certification deadline.

The Financial Services Forum, a group of CEO's from the largest banks, insurers and securities firms, plan to announce that they will expense options. They are not the biggest option givers, but any group like this increases the momentum toward this accounting change.

And last but not least, in Marketplace, the WSJ reports on more than 20 years of research that appears to indicate that beer is good for your health - better than red wine even - protecting people who drink a brew a day against heart attacks, stroke, hypertension, and dementia - that last one important for traders! This report opens up a lot of possibilities for beer drinkers as they can claim to be drinking to their health - this BUD's for you!

  Jeff Bailey   8/13/02,  9:32:10 AM
The 9:00 AM intraday update has been posted. Link

  John Seckinger   8/13/02,  9:29:23 AM
The September Bond (USU2) continues it vertical move higher, currently up 13 (13/32) ticks at 109-23. The intra-day high is 109-27, while the low has been 109-09. Yes, higher bond prices is defensive towards equities. It would now take a move under 109-07 before I look for assets flowing into stocks. Looking at the Dow, I am going to use 8622 as a short term pivot; however, as said yesterday, 8564 is still my "line in the sand".

  Leigh Stevens   8/13/02,  9:20:52 AM
Pre-Opening INDEX Comments - The indices, OEX, SPX, DJX and the Nasdaq Composite and Nas 100 have been consolidating under key resistance levels acting like they could rally again soon. Do I trust this? Not really, but they could and that is keeping me from making any bearish plays. It seems like they are hanging up around current levels without anyting but a hope and a prayer. Fed action on easing seems to be the great hope but consensus is that they won't. I'm on the sidelines until the indices either break out or break down.

  Jeff Bailey   8/13/02,  9:18:36 AM
Treasury watch YIELDS headed lower this morning with 30, 10 and 5-year all taking out yesterday's lows. Near-term, eye will be on 5-year YIELD ($FVX.X) 3.17% to see if 52-week low from 08/05/02 of 3.128% is taken out. If so, then defensive posture from bond market. Again, this may be just some "front running" before today's FOMC decision on interest rates, but looks defensive early on.

  Steven Price   8/13/02,  9:14:07 AM
WalMart (WMT) $48.41 WMT said it expects 3rd quarter results to exceed expectations. Analysts had been expecting $0.37/share and the company sees earnings at $0.40-0.41. It maintained full year expectations of $1.76-1.78

  Jim Brown   8/13/02,  9:13:20 AM
Swing Trade Signals
Moody's downgrade of Brazil appears to have come as a surprise to most investors only a week after the political Band-Aid was applied. I told everyone at the time it was not going to work and was only a political move to keep our markets from self-destructing until after the elections. How this will play into the Fed decision today is unknown.

The accounting problems have not gone away with ADRX and IMDC revealing investigations. Retail Sales came in as expected and showed no evidence of a hibernating consumer. This should be a positive impact on the Fed meeting and a reason for them not to cut.

The game plan for this morning is still to short on any bounce to resistance at 460-462. If we do not hit this number we will wait until after the meeting to pick an entry point.

  Leigh Stevens   8/13/02,  9:10:16 AM
Pre-Opening INDEX Comments - Some of the bellwether stocks that were acting like they had more to go on the upside, especially Cisco (CSCO) & GE, are off slightly in pre-opening trading.

The Euro rose a bit, to 97.90 ahead of the FOMC meeting today - the currency still looks to me like it'll go lower in the coming week.

Oil was higher yesterday as the lead futures contract rose a buck relating to the ongoing U.S./Iraq tensions.

  Jonathan Levinson   8/13/02,  9:01:40 AM
Retail sales rose 1.2 percent last month, down from a revised 1.4 percent in June. Excluding auto sales, core retail sales rose 0.2 percent, compared down from a revised 0.5 percent in June. Expectations were for sales to rise 1.2 percent and core retail sales to rise 0.3 percent.

  Leigh Stevens   8/13/02,  9:01:27 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -6.00 at 896.50; Dow Industrials > -50.00 at 8620; Nasdaq > -6.00 at 937.50

"Fair Value" numbers: S&P 500 futures ($SP02U): .54 -- Nasdaq 100 futures ($ND02U): 2.10

  Jonathan Levinson   8/13/02,  8:14:47 AM
COMPX resistance is at 1315-20 and 1355. Support is at 1290, 1285, 1260-65 and 1245.

  Jonathan Levinson   8/13/02,  8:00:53 AM
The US Dollar Index is holding the same range we've seen from yesterday, and is currently hovering just above 107.40. Equity futures are NDX -5.50 and S&P -6.0. QQQ is trading down about .1 from yesterday's close of 23.40.

  Jim Brown   8/12/02,  10:39:57 PM
Swing Trade Game Plan - Click here: Link

  Jim Brown   8/12/02,  10:38:48 PM
The Market Monitor for Monday August 12th has been archived. Click here to view it: Link


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