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  Jim Brown   8/22/02,  9:25:04 PM
Swing Trade Game Plan - Click here: Link

  Jim Brown   8/22/02,  4:29:42 PM
Jim, This was my best day in two weeks. My internet was down all day, so I seized the moment to get some things done around the house. My wife will be pleased. Tom.

I hesitated to print this as housewives out there may be tempted to sabotage the phone lines in order to accomplish this feat. Remind her you are a trained professional and are much more valuable to her as a trader.

  Jim Brown   8/22/02,  4:25:25 PM
TRADER ALERT - Pay attention to this one!! A fool proof way to beat this market

Jim, I made money today because I mistakenly sent the wrong order. Didn't notice until I decided I'd had enough pain and went to exit but found a profit instead of a loss!!! I now intend to reconfigure my trade station to go short when I want long and vice versa. More proof the market knows what you're thinking - not just what you do - it would rather inflict mental anguish than take your money. I'm sure it really wants both! Thanks, Andrew

OK, beginning tomorrow, short means long, buy means sell. Thanks Andrew!!! (I am not poking fun at him, I have done the same thing.)

I bought 20 contracts of AOL $90 calls in Dec-1999. After watching them for a week while AOL fell to $75 from $85 I went to sell them and saw a "short" position in my account instead of a long. I went back and checked the trade and found I had clicked "sell open" instead of "buy open". That was one of my better trades that month. Other transcription errors have not worked out so well. I bought stock in SDLI at $200 and wrote the $220 calls. The stock ran up to $240 before expiration. When I went to close the trade I had no stock. Checking the records the stock buy was never executed because I clicked limit instead of market. It never hit the limit and expired at the end of the day. Fortunately it was only five contracts.

This simply emphasizes you must be very careful when entering your own trades. In the bubble days I was doing over 1000 trades a month. It was very easy to miss one in the heat of battle with stocks moving $20-$30 a day. In today's markets the damage may not be as serious but the liability still exists. Proof your trades !! Now remember, long means short, buy means sell, etc. Thanks Andrew for the tip.

  Jonathan Levinson   8/22/02,  4:00:44 PM
Thanks, Valter. Backing up the truck now! (grin) Actually, if you could sell a few bazillion worth of futures, that would probably do it for me.

  Jim Brown   8/22/02,  4:00:44 PM
Have fun tomorrow, I'm taking suggestion 1 - playing golf. Weldon

Now that makes it official. If Weldon is playing golf we have a -300 point drop ahead of us!

  Jeff Bailey   8/22/02,  4:00:34 PM
Forest Labs (FRX) $75.00 .... gets another X and a "buy signal" on the p/f chart. Link

"FRX, FRX pickup sticks."

  Jim Brown   8/22/02,  3:59:17 PM
do not give up, today is going to be the D day.....from tomorrow the short will be rewarded bigggggggggggggg....... I promise it will go down....have some more faith and we won't be stopped today, so we can enjoy the down ride from tommorrow.......Valter

We can all relax, Valter promised me the market was going down tomorrow.

  Jeff Bailey   8/22/02,  3:58:52 PM
Activision (ATVI) $30.45 +1.53% ... wast stock I mentioned a couple days ago via subscriber e-mail. Broke above "inside day" today and looks strong. Good 1/2 bull position here, tight trader's stop under $30.50.

  Jeff Bailey   8/22/02,  3:57:17 PM
Jeff: Good job on BGEN, made $500.00 Could you please give us one-two day traders idea per day like this ? Thanks !

I'll try. Takes some time to get the silly charts set up before the stock sometimes moves. For most part, day-trader's risking about 25-cents for every 50-cent reward.

  Jim Brown   8/22/02,  3:56:01 PM
My apologies to the bears. I damn near gave in and bought those OEX 500 calls a few minutes ago at 8+. been looking at them for 10 days since they were 1.5. bet if I'd bought 'em that woulda turned this market south. Eyman

Apology accepted this time because Linda already capitulated today and stopped the rally at 487.42. We may need your help tomorrow though!

  Jeff Bailey   8/22/02,  3:50:53 PM
BGEN day-trader's target hit at $38.95

  Jonathan Levinson   8/22/02,  3:47:36 PM
LOL! That reminds me of a funny quote I heard months ago, back when the market was doing the same thing it's doing now, but to the downside:

It's a good day for the dip buyers to buy something special for the wife and kids...like a .38 Wesson pointed backwards.

  Jim Brown   8/22/02,  3:47:09 PM
Capitulation! My thoughts are that that is just what the manipulators want. Everybody goes long and boom- market falls. There isn't one good reason for all of this bullishness. For example- who in their right mind would be buying airline stocks right now. Sure it's taken a heck of a hit but wouldn't you want to see if they were going bankrupt first?! Nothing but manipulation from the PPT. Must be nice to have the taxpayers paying for this folley. Must admit, extremely frustrating! G&L.

Come on now, capitulate, join the party. It is the only way we be assured of a reversal!

  Jim Brown   8/22/02,  3:44:22 PM
Hi Jim, Just got clipped on the SPX 962 stop. I looked at your SPX stop, followed the logic, made sense to me, so I placed a 963 stop on the SP Futures contract. Just frustrating, mkt goes up against all logic. So I'm flat here and looking at perhaps a new short at higher level. Any thoughts? Thanks Jim K.

Have you considered taking up golf? Checkers? Russian Roulette? I am considering using a gun loaded with all six bullets. My wife will have 5 left to sell with the gun if we get stopped out again today.

  Jim Brown   8/22/02,  3:35:51 PM
Dear Jim, Last year from Aug 27 to Aug 31, the market dropped 473 points. Consumer confidence went from 117 to 114 and GDP was .2 %. Are things any better now? Or, is this market bi-polar in need of Prozac? Thanks for your insight. MAC

Definitely bi-polar. Bullish mornings, bearish lunches, bullish closes. Pass the Prozac please.

  Jim Brown   8/22/02,  3:33:38 PM
Ok, I give up. I'm turning bullish. ML

Finally capitulation! I think I will join the club too.

  Jonathan Levinson   8/22/02,  3:32:35 PM
Here we go again. The COMPX is printing fresh highs at 1425, the QQQ trying for 26.15, with the TRINQ less overbought at .44 and the QQV down 1.47 to 38.11.

  Jeff Bailey   8/22/02,  3:27:43 PM
The 3:15 PM intraday update has been posted. Link

  Jeff Bailey   8/22/02,  2:55:06 PM
Day Traders always looking for short-term breaks of trend. Biogen (BGEN) $38.53 +0.83% 5-minute chart on break above $38.55 bullish to $38.95. (5-minute chart interval) Link

  Jeff Bailey   8/22/02,  2:41:41 PM
Biotech Index (BTK.X) 397 +2.23% ... today's trade at 395 and then 400 gives firmer break of bearish resistance on $10 box scale Link

Sector bellwethers AMGN Link

According to Dorsey/Wright and Assoc., sector bullish % is "bull confirmed" at 34%.

Biotech HOLDRS (AMEX:BBH) $91.90 +2.39% gave 5th consecutive buy signal today at $91. Vertical count remains $101. First sign of weakness would be trade at $85, which would negate current bullish count (coulumn of X from 68-78). Link

  Leigh Stevens   8/22/02,  2:34:16 PM
Subscriber QUESTION: "It seems ORCL is on its way to your target at $12.Looking at the daily chart, I see Rounding Bottom and maybe a Head & Shoulder Bottom as well. What was your thought process back then when you took the Long positions and set the target at $12?"

RESPONSE: ust as you say, based on the "minimum" upside objective implied by the "neckline" breakout above a Head & Shoulder's bottom pattern on Oracle (ORCL). A "measured move" objective is to 11.65 - this assumes that a subsequent upswing will be at least as much as the first rally from the June low (7.25) to the 10.5 high in July, added to the lowest low on the downswing that followed (to 8.4).

  Jonathan Levinson   8/22/02,  2:32:45 PM
Hopefully my comments have not been construed as making me bullish. I characterize my position as mostly nervous. Perhaps cautiously bearish would be more accurate.

  Leigh Stevens   8/22/02,  2:13:35 PM
Subscriber QUESTION: "Doesn't the Oct 1998 and the July 2001 pattern that indicates an SPX Head & Shoulder's pattern, portend a further drop of large proportions in the SPX? It seems most of OIN is Extremely Bullish? Am I Wrong? "

RESPONSE: Ah, I see - using the bullish or bearish "level" of O.I. commentators as a "contrary" indicator! Pretty foxy of you. But maybe off the mark in terms of assessing most of O.I.N. as extremely bullish.

I have been bullish up to a point - that "point" is around 9000 - possibly 9200 - in the Dow and 955-960 in SPX. Closes over these levels would suggest a more major turnaround than I see currently. In terms of OEX, bullish best case I've had is 490-495, maybe 500. Reason I focus on 960 in the S&P 500 (SPX) is that a decisive upside penetration of this level would negate the bearish rising wedge on SPX that has been traced out since its bottom. This pattern still presents a bearish picture IF there was a rally failure around 960 AND, at some point a close under 930. (I know I said lower than this on one point, but you have to look at the rising support trendline where it is each day and its a fairly steep one currently.) Based on the rising wedge pattern, such a break would suggest a rally "failure" and the start of another correction down into a possible Sept/Oct. low.

I think what you're seeing on OIN is a recognition that this rally has been pretty strong and benefit of the doubt given to the upside - until and unless key support levels are taken out and we stop having the pattern of higher highs and higher reaction lows.

The point about the possibility of a multiyear Head & Shoulder's (H&S) pattern in SPX is that it is a multiyear formation, and the H&S normally develops over a 1-3 month period - this way, the Head is in "relationship" to the shoulders. What we have in the big rounding multiyear top pattern you're looking at, is an "elephant" size head on "human size" shoulders - given this, a downside measurement of the Head to neckline (for possible deduction from a neckline break) that gives a target way lower than recent lows, is probably not valid.

  Jeff Bailey   8/22/02,  1:58:02 PM
Maxim Integrated (MXIM) ... I added this "bar chart" with retracement shown, along with some comments regarding past levels of semiconductor bullish % to the 13:44:05 post. Here's the chart I added. Link

  Jim Brown   8/22/02,  1:49:30 PM
Swing Trade Signals
The bottom just fell out of the A/D line. We fell from a 750 net advancing issues to 450 in less than 2 min. It appears that sell program just dumped a large basket of stocks, possibly futures related. This could be the beginning of a change in sentiment if it triggers a round of sell stops that become self perpetuating.

  Jeff Bailey   8/22/02,  1:45:56 PM
The 1:00 PM intraday update has been posted. Link

  Jeff Bailey   8/22/02,  1:44:05 PM
Maxim Integrated (MXIM) $37.62 -0.23% ... several e-mail questions today ragarding MXIM. I may have mentioned as bearish in recent sessions, but also profiled at premierinvestor.net as bearish, but with downside trigger for trade.

I have mixed feeling on stock right here. I did buy some puts a couple days ago, but decided to close out for small loss this morning and stock just seems to bid along with SOX.X right now.

What I "like" for short is stock has rallied right under bearish resistance Link at $38. This also correlates with past retracement from the October lows of $32.20 and December highs of $61.45, putting 19.1% retracement right here at $37.76. Link

Now... for what I don't like. I don't like the "result" of my past bearish profile in AMGN, which is biotech, but similar supply/demand characteristics at bearish resistance Link . As we see, AMGN did trade down $4 from bearish resistance, but demand slowly outstripped supply and had AMGN generating another buy signal at $47, and this bugger just won't die for me (still holding previously proviled Sept. $45 puts too and watching them erode.)

The other thing I don't like is the semiconductor bullish % from Dorsey/Wright and Assoc. has the semiconductor bullish % at "bull confirmed" at 40%, which is quite similar to biotech bullish % when I profiled AMGN bearish.

While biotech and semiconductor are two different sectors, current supply/demand relationship very similar, thus rather cautious on shorting MXIM here. Trader really bearish on MXIM can short here, stop at $39 though, using past action in AMGN as a guide.

  Jonathan Levinson   8/22/02,  1:28:05 PM
The TRINQ is back to .44 and the QQV is down .96 at 38.70. COMPX 1420 seems to be keeping the lid on for the moment. QQQ is trading both sides of 26, and the TICK.NQ is slightly negative at -25. Advancing volume is beating declining volume 793M to 318M.

  Jonathan Levinson   8/22/02,  1:15:18 PM
ROFLMAO! Thanks, Kevin.

  Jim Brown   8/22/02,  1:13:31 PM
Martha Stewart Living Behind Bars
A reader sent us this and I thought I would share it with everyone as a bit of intraday humor. This is not a suggestion, implied result, etc. It is just a bit of humor for those that are tired of listening to the constant "reporting" of the news about her problem. Link

  Jonathan Levinson   8/22/02,  1:13:13 PM
Hello,in your last post I could not undersdand the "sustained move"...you think is going to be up or down...thank you

Sorry for the confusion. I was referring to the possibility of a sustained move up.

  Steven Price   8/22/02,  1:10:37 PM
Reader Question: My personal trading habits in the options market are "not" to go to expiration but take profits if they become available, i.e. trade them like equities. I do this constantly in the cubes. In-and-out if you will. Also, Do you ever give opinions on QQQ plays? This brings to mind another question. In your opinion, is it better to stay away from spreads if you don't plan to go to expiration and just go with calls or puts as a better methodology? And what if, lets say, you go with a call, protect it with a put maybe? Thank you j

Response: Leigh and I take questions on the QQQs, so you can direct email to either of us. As far as spreads, I think they are a good strategy, regardless of whether you hold them until expiration. They are a lower cost investment with lower profit potential, so I usually view them as a percentage play (i.e. pay $2 for a vertical spread and look for a 50% profit of $1.00, since they are limited, but cost less to put on). The only consideration is added commissions, as you are trading more options. You'll have to ask your individual brokerage company about spread commissions. As far as protecting a call with a put, this type of spread is called a straddle if it is the same strike, or a strangle if it involves out of the money strikes.

When trading a straddle, you are paying extra premium, in exchange for the chance to make money in either direction. This, of course requires a big enough move in either direction to pay for the cost of both options.

  Jonathan Levinson   8/22/02,  1:02:16 PM
at what point will you go short or long on the qqq. also it looks like klac is in consolidation it looks like it would be a break out above 41.00 I would like your views on klac and the semiconductors thanks you ARE doing a great job

I would not go long except for quick scalps with tight stops until the extreme readings I've been discussing have been worked off. I would go short on a break below COMPX 1400, but would expect at least a bounce from 1380. It's a very tricky, tight market with this week's volatility, and I see no easy money here. A short on the SMH from the 29.50 level with a stop slightly overhead would be nice, but we might not see it, given that the SMH is banging up against its upper bollinger band and the stochastic is way overbought. KLAC looks the same- what I believe to be a shooting star candle is printing today with the stoch peaked and trying to roll over. If the COMPX is going to blast north again, I'll rethink those entries- the problem is that, with most of my indicators maxxed out, it's difficult to time an entry well. Thus, the tight stops on any play in either direction, which unfortunately increases the chances of being whipsawed out of the play.

  Jonathan Levinson   8/22/02,  12:53:43 PM
I can see your point, but with equity options at .32, would this not be a contrarian indicator. I realize that the trinq and qqv are in bullish territory, but have both been increasing as the day goes on. My feeling is that the institutions are setting us up to be bagholders.

This is my point exactly. The TRINQ and QQV and p/c ratio are too far too fast into bullish territory. The only bullish interpretation of all of these readings is that we are witnessing the beginning of a huge wave up that is burying all of these indicators into overbought. The lack of very heavy volume refutes this interpretation, in my view, but nevertheless, bears have to consider that we are witnessing what amounts to a bullish anomaly preceding a sustained move. I don't think we are, but it's possible.

  Jeff Bailey   8/22/02,  12:30:34 PM
Lockheed Martin (LMT) $62.50 -1.48% ... not much market reaction to last night's successful launch of A5. Trader that implemented yesterday's profiled straddle and was looking for some type of sharp reaction most likely disappointed and may choose to take small profit in puts, offset by small loss in calls and move on.

  Jonathan Levinson   8/22/02,  12:16:00 PM
I noticed that you are using the "total" number of puts/ calls. Doesn't this skew things a little as institutions use index options to hedge. To me the ratio should be more like .32 (rounded) just using equities options. Keep up the "great" work guys. As a newbie I couldn't get along without you folks.

Good point. I follow the total ratio and have developed a "feel" for it. Both the equity ratio and the total ratio are saying the same thing as the QQV and TRINQ- there is *very* little bearishness present in the market.

I agree with your comments, but because of the different purposes that options serve, it's difficult to isolate different areas of the options market to get a "clear" reading. A trader might buy calls to hedge a short stock position, or buy calls to go long the stock using a naked position. Instead of puzzling over it, I watch the total ratio and try to feel the range. Right now, it feels way too bullish, same as the TRINQ and QQV. But, this has been the case for 2 weeks now.

  Jim Brown   8/22/02,  12:12:02 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 12:00:52 when the OEX traded below 483. SPX 955.93, DIA 90.14, SPY 96.05, DJX 89.97, NDX 1036.46, Compx 1411.14, Emini 955.75. The initial stop loss will be OEX 488, just slightly above the high of the day. (SPX 962) If the bulls decide that 9000 is history then they could decide to head for the barn. Sellers have definitely shown more aggressiveness over the last hour and appear determined to prevent a breakout over the current levels. Of course now that we are short the green light is on for buyers.

  Jeff Bailey   8/22/02,  12:11:10 PM
RF Micro Devices (RFMD) $8.02 -7.93% ... sudden weakness in past hour on RUMOR that RFMD Link has lost an unspecified NOK Link order to TriQuint (TQNT) +3.83% Link .

  Jim Brown   8/22/02,  12:07:39 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out on the open LONG signal at 12:00:52 when the OEX traded below 483. SPX 955.93, DIA 90.14, SPY 96.05, DJX 89.97, NDX 1036.46, Compx 1411.14, Emini 955.75. With the Nasdaq leading the markets down and declining volume increasing rapidly we could finally be seeing the decline begin.

  Jonathan Levinson   8/22/02,  12:00:37 PM
Looking at the daily COMPX chart, I see what shall hereinafter be referred to as The Dubya Formation, so named for the President during whose administration it appeared.

The COMPX is off its highs of the day, but still well above 1400 support. The TRINQ is "up" to .47, and the TICK.NQ has weakened, currently 82. QQV is down 1.47 to 38.11. If it continues at this rate, it could reach it's low levels seen during the March high by the end of August.

  Jim Brown   8/22/02,  11:43:43 AM
History Lesson A reader reminded me that market movement during August of 2000 was similar to the current month. There were many bearish reasons for the market to drop but it kept rising despite the negativity. There had been a sell off in July and bulls felt it was a buying opportunity. They continued to push it higher on very light volume.

Chart of August: Link

When September came, historically the worst month of the year for the markets, there was a severe sell off as earnings warnings began to flow in earnest. All the August gains were lost and then some. Nearly -1400 points were lost in Sept and early Oct.

Chart of September: Link

Comparisons are hard to make due to the extreme selling we had the last 90 days but the Sept/Oct selling season has been a historical fact for decades. Since institutional buyers are far more astute than retail traders this is probably why the volume on this rally has been extremely light. The big money is waiting for lower numbers ahead.

Comparison charts: Link

  Jonathan Levinson   8/22/02,  11:42:54 AM
Let's add the CBOE put to call ratio, currenly .49, to the list of indicators that have gotten comfortable in extreme zones. You can view the day's range at this Link

  Jeff Bailey   8/22/02,  11:34:19 AM
All sectors green All sectors in my US Market Watch are now in the green. Laggard are Forest/Paper (FPP.X) 313.89 +0.3%, Transports (TRAN) 2,447 +0.62%, Gold/Silver (XAU.X) +0.74%, Retail HOLDRS (AMEX:RTH) +0.67%, Banks (BIX.X) +0.52%.

Notable gainers have Wireless (YLS.X) +5.19%, Airline (XAL.X) +4%, Fiber Optic (FOP.X) 3.47%, Internet (INX.X) +3.28% and Oil Service (OSX.X) +3.5%.

  Jim Brown   8/22/02,  11:24:26 AM
Swing Trade Signals
That was close! It really appeared that the markets were going to roll over and fail at 9,000 again, and they still might, but the internals are starting to improve again. It is amazing, I said all last week that 9000 was only psychological resistance but the media kept assigning real importance to it. Slowly it took on a stronger importance than we had initially assigned to it. Now that it has been broken the media has begun stressing that 9000 was not really important resistance in reality and the correct number is xxxx, (fill in your favorite number here). Those "real" analyst numbers did not appear until the first number, 9000, was broken.

I am becoming increasingly alarmed that the Dow may not hold here. The lack of follow through is telegraphing more weakness than earlier expected. We need to set a new high here soon or I will start thinking about bailing from the LONG signal.

  Jeff Bailey   8/22/02,  11:23:34 AM
The 11:00 AM intraday update has been posted. Link

  Steven Price   8/22/02,  11:23:33 AM
Reader Question: Hi - I am a new subscriber to your service and would first like to say how I value your opinions and advice. Now for a question: I am a conservative investor and have wondered about using a strategy that uses covered calls deep in the money to generate income - taking advantage of the time decay on the option. I would employ this in a non-taxable account. Am I missing something (other than the upside potential on the stock). I guess I am willing to forego that for the gains received. Is there a alternate strategy I should look at? Thanks in advance for your reply. Jim

Response: Jim, A "covered call" strategy (sometimes called a "covered write") is generally considered selling an out of the money call against a long stock position. Deep in the money calls can be a substitute for the long stock, however are not generally sold as a "covered call." Another strategy is purchasing LEAPS and selling near term options against them (the time decay in the near term option helps defer the cost of the premium in the LEAP). Selling out of the money calls against your stock allows you to collect time decay, and gives you some downside protection as well. If the stock drops, you get to keep the money from the call sale to mitigate your loss on the long position. As long as you are willing to give up some upside potential, this is a valid and possibly very profitable strategy.

  Jonathan Levinson   8/22/02,  11:23:14 AM
The COMPX has decided to pause at the 1420 level. The TRINQ at .31 is reflecting continued, sustained buying hysteria. The are 530M advancing shares to 131M declining, and the QQV is now down .63 on the day to 38.95. QQQ is holding just above 26, currently 26.03.

  Jim Brown   8/22/02,  11:06:31 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's go SHORT the broader market with an OEX trade below 483.

  Jim Brown   8/22/02,  11:06:19 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the current LONG signal to OEX 483. This dead stop is bothering me. I will be issuing a SHORT signal as well.

  Jim Brown   8/22/02,  11:02:42 AM
Swing Trade Signals
Dead stop. That bullish feeling appears to be fading as sellers are keeping the lid on the rally right at our entry point of 9025. The A/D line is flat with down volume increasing. There is a very good chance that the OEX 485 short target from the last week was the real entry point and Dow 9000 (now 9025) was the price magnet that attracted the sellers. The battle is in progress and we should have a winner soon.

  Leigh Stevens   8/22/02,  10:57:49 AM
Subscriber QUESTION: "Looking at the 60 min charts on OEX SPX and DJX (from WED.) is there a bear flag forming?"

RESPONSE: There was, as I noted in my Index Trader comments of the Tues. night (at Link ) - but with the break out above the top end of the "flag", the pattern is negated so to speak - what is also called a pattern failure, such as I talked about on my Market Monitor comment at 10:50

  Leigh Stevens   8/22/02,  10:50:17 AM
Subscriber QUESTION: "Would you please go over the predictive implications of the up sloping wedge on the DJI and OEX that has formed since mid July - from the previous downtrend is this formation one that tends to be a reversal or continuation? we are certainly getting to the "point" where it looks like something has to break"

RESPONSE: Well, as you note, the ascending or rising wedge pattern normally suggest a bearish reversal - but a bearish wedge is also most often seen after an up trend that has been underway for some time, whereas this one has formed after a long decline so may not have the same "predictive" value.

SPX breaks out ABOVE its bearish rising "wedge" by a move above 960 - the wedge pattern in question was outlined in my Sunday weekly commentary at Link

If so - that is, if there is a decisive upside penetration above 960, then the wedge is no longer a pattern with a bearish implication. With chart patterns, there are always a certain number of pattern "failures" - simply put, outcomes OTHER than what we anticipate from the "usual" outcome.

  Jeff Bailey   8/22/02,  10:44:54 AM
Drug Index (DRG.X) 308.85 +1.07% ... looking strong and trying to break from consolidation-type handle. Link

Recently profiled longer-term bullish play in Forest Labs (FRX) $73.86 +0.69% challenging profiled 08/15/02 levels. Need a break at $75 to get another "buy signal" on p/f chart. Today's trade at $74 should have p/f chart back in column of X on 3-box reversal. Link

Disclosure ... I currently hold bullish position in FRX.

  Jeff Bailey   8/22/02,  10:39:18 AM
Semiconductor Index (SOX.X) 365.25 +1.08% .... tech-eyes on this sector. Back above 50-day and close there could have techs really unraveling to the upside, close above Monday's high of 366.56 more bullish and have sector. Just like we've been using late Octeober/early November action in major market averages and 50-day MA breaks higher as some sign of technical bullishness, similar thoughts here with SOX.X. Link

  Jim Brown   8/22/02,  10:38:45 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the LONG signal at 10:29:38 when the Dow printed over 9025. OEX 484.98, SPX 959.13, DIA 90.52, SPY 96.49, DJX 90.27, NDX 1048.03, Compx 1420.60, Emini 960.50. The initial stop loss will be OEX 481, (SPX 951, DJX 89.75 est) Here come the sellers!. Just as we broke over 9025 a sell program kicked in and our position may be tested quickly.

  Jonathan Levinson   8/22/02,  10:38:18 AM
The TRINQ is back down in the cellar at .22, as QQQ breaks above 26 and the COMPX prints a sea of green above 1420, current high 1422. The QQV is currently down .36 to 39.22, and I'm now looking at its March low, which was 30.23. This has been a very rapid decline in the QQV.

  Jeff Bailey   8/22/02,  10:33:38 AM
Good comment from Jim regarding some "wiggle room"(10:26:46) Yesterday's observations from "inside day" had several stocks breaking above, then below prior day's range, only to then close rather unchanged to higher (opposite was true).

  Leigh Stevens   8/22/02,  10:33:11 AM
INDEX Comments: OEX/SPX/DJX - no sooner did I comment on how, unlike Nasdaq, the S&P and Dow were still churning around at the upper end of their recent consolidation trading ranges, and they BREAK OUT and run. OEX, as I've been saying in my end of day Index Commentaries has one technical objective to around 495, at top end of its hourly uptrend channel and objective implied by break out of bull flag on the daily chart.

SPX resistance implied by the top end of its hourly uptrend channel intersects closer overhead currently (as compared to OEX channel) - around 963.

DJX resistance, at top of its current hourly uptrend channel, is in the 90 area - DOW 9000 is perceived at "THE" resistance level currently by the floor.

  Steven Price   8/22/02,  10:31:34 AM
Reader Question: Steve,I know you have already in the recent past commented on brcd,but I'm about to go very short on it.....what is your opinion at this particular time??????Thank you....

Response:Brocade (BRCD)$16.44 +0.58 is moving mostly sideways right now. The PnF buy signal does not come until $17.50, although it is currently in a column of X's. There is some congeastion on the PNF chart at $16.50 and $17 that the stock would have to work through to make a run to the upside. The 50-dma of $17.63 might also provide resistance. On Wednesday, the stock broke out of its short term down channel, begun on July 16. The chart looks very much like the Nasdaq Composite, so I would keep an eye on that as well. Right now, I don't see BRCD as a great short candidate. I would probably look for a downturn in the stock before going short, and then re-evaluate at that time. Possible strategies might be to wait for either a rollover below the 50-dma, or a PnF reversal down.

  Jim Brown   8/22/02,  10:26:46 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
As I mentioned numerous times a break over 9000 would be bullish. While I am not a believer in the current bullish trend I do not want to fight it. Let's go LONG the broader market with a Dow print over 9025. This should give us wiggle room if any sell programs kick in at 9000.

  Jeff Bailey   8/22/02,  10:24:11 AM
Sector Weakness rather limited with Semiconductor (SOX.X) -1.5% and just off worst levels of the session. Gold/Silver (XAU.X) -0.98%.

Sector Strength rather broad with most showing marginal gains. Standouts have Wireless (YLS.X) +3.79%, Airline (XAL.X) +3.6%, US Home Construction (DJUSHB) +2.5% and N. Amer. Tel (XTC.X) +2.3%

  Leigh Stevens   8/22/02,  10:21:19 AM
Subscriber QUESTION: " Your toughts about a further sell-off came true yesterday, but as you know it rallied in the end. I heard so many analysts saying the market is very bullish. In your opinion now that we pushed above 1,400 on the NSADAQ would it now go much further? Wouldn't this rally end sometime in early September when the vacationing big Traders return?

I have been accumulating a portfolio of December put options on the QQQ's and DJX. If there are signs of further upside going beyond the Dow 9,000 and NASDAQ 1,400 then I will sell my puts and stay on the sidelines. Will you please let me have your thoughts on it?"

RESPONSE: I would need to see a push above 1400 in the Nas Composite (COMPX) and maintenance above this level, to suggest that the very short-lived correction we've had so far is all that we'll see in Nasdaq until we get well above current levels.

And, in SPX/OEX/DJX, these indices are still churning around at top end of end of their recent consolidation. While a correction could just be sideways for awhile in a "time" correction only, rather than a time AND price correction - this would be pretty unusual, especially with Sept. & Oct. (& Q3 earnings) ahead. In the near-term however, the long-suffering bulls are not letting the fat & sassy shorts off the hook so easily.

This turn in sentiment is quite something - but, as seen over and over in market history, investor/trader "sentiment" tends to move from extreme to extreme. It seems that investors are reveling in the "perp walks" and the squirming of Enron execs as the Feds start to tighten the noose - and, there's always Martha! I think investors feel the corporate insiders have not shared the pain of the decline in portfolio values but now that some are, hey it’s a more just world. Recently read a bio of Dwight Eisenhower and one reason he was so popular among the soldiers was that he identified with them, spent time with them, & seemed to really understand and share the tough times and situations they faced.

  Jim Brown   8/22/02,  10:19:43 AM
Swing Trade Signals
Definite resistance at 9000 as the last attempt triggered a sell program at 8999. Looks like we are headed back up to try again. I am fighting the urge to go short again at OEX 482 as the bullish sentiment does not seem as strong today.

  Jeff Bailey   8/22/02,  10:15:03 AM
Dow Industrials (INDU) 8,981 +0.26% ... flirted with 9,000 at recent session high of 8,998.92, which just edged above Monday's high of 8,994.12.

  Jeff Bailey   8/22/02,  10:13:24 AM
S&P 100 (OEX.X) 482.78 +0.57% ... breaking above recent 3-day session highs. May trigger some further short-covering action by bears.

  Jonathan Levinson   8/22/02,  10:13:24 AM
To you prefer trinq over trin or do you trade mostly nasdaq so you watch it's breadth indicators mostly? Does one tell you more than the other?

I have followed the COMPX most closely this year, and so follow its indicators. Because of the divergences between the different indices, I'd recommend watching the TRIN (and VIX and TICK) for non-Nasdaq indices, and the TRINQ, VXN, QQV and TICK.NQ for the Nasdaq.

  Jim Brown   8/22/02,  10:02:58 AM
Dear Mr. Jim Brown: Please be prepared that the market will rally into 9.11 American will not put the bears on the 9.11 monument, for sure. So, hurry up, put your bull jacket on. Y.H.

I am trying to visualize a bullish September but with consumers withdrawing into their home circles over the next three weeks it is hard for me to imagine it until after 9/11. The markets do not normally like uncertainty and that appears to be our immediate future.

  Jim Brown   8/22/02,  9:58:31 AM
Swing Trade Signals
The weakness in the markets this morning is typical of what I have been shorting this week only to see a rebound in the afternoon. Eventually we will get a sizeable drop from one of these dips but I am gun shy until there is more to key on. The bounce took us back up to 8982 again as traders continue to test that 9000 resistance level.

  Jonathan Levinson   8/22/02,  9:52:01 AM
Is it time to short QQQ, compx near 1400?

I'd wait for a break of 1395-1400, and use a stop. Note that 1380 will be support, and so if you do go in, be prepared to get out quickly. After 1380 comes 1355-60.

  Leigh Stevens   8/22/02,  9:50:58 AM
Subscriber QUESTION: "Reading your Tues. night Index Trader wrap, I wanted to share some observations with you regarding the top 20 stocks on the NDX. I last updated the list on Jul 17 after WCOM was dropped. Here is my summary:

- The top 20 stocks of the NDX account for 55.39% of the total index weight. Of these 20 stocks:

- 5 are in the software sector and account for 18.39% of the total index weight; 6 are in the semiconductor sector and account for 16.33% of the total index weight; 2 are in Biotech and account for 4.94% of the total index weight. -- As you can see, on a weighted basis, software outpaces semiconductors now and has for several months. Semiconductors can't take the index very high if the software sector is a real drag on the NDX. They must both go up/down together to have any meaningful impact.

PS - One stock I watch VERY closely is MSFT because: 1) it accounts for almost 11% of the total NDX; 2) is heavily traded; and 3) easier to scalp money on options for ITM call or put plays."

RESPONSE: Thanks for sharing this info. and reminding me of relative weight of Software sector - I also watch MSFT very closely and like it as trading stock/stand-in for the Nas 100 (NDX) for reasons you mention - premium levels are not as rich as NDX and stock trades very well technically.

  Jonathan Levinson   8/22/02,  9:41:56 AM
The TRINQ has made it all the way up to .61, nosebleed territory compared with yesterday's range, but still signalling healthy buying. QQV is up .22 on the day but still below 40. Bond yields have pulled back a little but are still green on the day. The COMPX is holding above 1400.

  Jeff Bailey   8/22/02,  9:31:57 AM
Qualcomm (QCOM) 29.23 ... ticking higher at $29.51 after Morgan Stanley says that a recent meeting with Korean carriers and handset suppliers leads them to believe that current conditions for QCOM are solid, new opportunities abound, and Korean CDMA carriers are in a strong financial position. Raising FY02 estimates by a penny to $0.04, based mostly on a more optimistic outlook for CDMA handset replacement demand. Price target is $60. Link

P/F chart remains longer-term bearish and below trend. Recent trade at $24 looks like potential "bear trap." First sign of strength is trade at $32. Vertical count still bearish (column of O from $30-$24) to $16. Dorsey/Wright and Assoc. has stock classified as "telephone" and sector bullish % just recently reversed up to "bull alert" at 18%.

  Steven Price   8/22/02,  9:31:02 AM
Reader Question: A reader requested a profile on Siebel Systems (SEBL) as a long play last night

SEBL ($9.39) I see some significant resistance at $10, which has acted as a ceiling since the gap down on July 18. That follwed an earnings miss, and Siebel's remarks that there just isn't a lot of IT business right now. The next target to the upside, after $10, would be $10.85, which would fill the gap. Above $10.85 would be the 50-dma of $11.13. We've seen the 50-dma act as a signficant barrier, as well as support once crossed, in the broader markets and this may give SEBL some problems to the upside. This number will be declining as time goes forward without significant upside movement from the stock, which means a lower ceiling. The Point and Figure chart does show a reversal up, but the first buy signal would not come until $15.50, which doesn't do much good for us at this point.

I don't see SEBL as a long candidate which will end up $3-$4 above the 10 strike by September expiration, which was the reader's target.

Alliant (ATK) Current OI call play Alliant ($68.00) recommended by Merrill Lynch this morning as an Iraq play - they must be reading our commentaries.

  Jeff Bailey   8/22/02,  9:30:22 AM
The 9:00 AM intraday update has been posted. Link

  Jim Brown   8/22/02,  9:27:39 AM
Swing Trade Signals
Futures are dropping on comments from Merrill that there may not be a tech recovery until 2004-2005. Moody's said it may cut its debt rating on JPM based on its current prospective reliability. Merrill also lowered estimates on LEH, GS and MWD.

Key resistance today remains Dow 9000. This level is poised to make or break the current rally and today could be the day. 8993 was the high for the current rally back on Monday with the high yesterday at 8974. There are no economic reports today to provide the bulls any hope so stocks will be free to trade on their own merits.

I will be looking for a break or failure at 9000 as the key to play direction but I am not in any hurry to enter a trade today.

  Leigh Stevens   8/22/02,  9:26:00 AM
Pre-Opening INDEX Comments - Market hanging pertty tough, particularly in tech. S&P/DJX still looking toppy. Was hit on my suggested buy stop on short 25.25 position I recommended earlier in the week in QQQ, at 27.70.

No suggestion on re-entering shorts. 1-day correction is like 1-day wonder after months of bear market. Who said the market goes from extreme to extreme? - oh, I did!

  Jeff Bailey   8/22/02,  9:23:48 AM
Stock futures continue to weaken into the open from 09:00 AM EST update. S&P -1.9 points at 950.40, NASDAQ -1.5 points at 1,036.50 and Dow -10 at 8,965.00.

  Jeff Bailey   8/22/02,  9:21:07 AM
St. Jude Medical (STJ) $38.46 ... receives FDA approval for Epic ICD. Link

P/F chart bullish and trades ABOVE trend. Recent triple-top buy signal at $39 and vertical count bullish to $53. First sign of weakness is trade at $34. Dorsey/Wright and Associates classifies the stock as "healthcare" which shows bullish % for this group "bull alert" at 33.3% after low reading of 18%. Would currently take a reading of 58% to achieve "bull confirmed" status.

  Jonathan Levinson   8/22/02,  9:19:43 AM
Futures have flipped negative, NDX -1.00 and S&P -1.90. MSFT is trading at 52.85, QQQ 25.73.

  Leigh Stevens   8/22/02,  9:18:15 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -2.20 at 950.10; Dow Industrials > -10.00 at 8965; Nasdaq 100 > -1.50 at 1036.50

S&P Futures "fair value" numbers: S&P ($SP02U) = +.36 -<>- Nasdaq 100 futures ($ND02U)= +1.72

Complete explanation of program trading fair value numbers & index futures arbitrage buy/sell programs can be found in my Trader's Corner article at Link

  Jonathan Levinson   8/22/02,  8:54:18 AM
Having spent last night digesting yesterday's market action, and having just read Jim's Game Plan, my main comment is, "What he said." The bullishness I've seen in the past two weeks is astounding. The VXN's collapse might have set a record, as did the consecutive low daily ARMS readings. Speaking with a friend of mine yesterday, a practitioner of cycle analysis, he was arguing that if the 6 month cycle has formed a trough and is turning, then the massive readings in these indicators would make sense, because a reversal of that much energy will bury the more sensitive indicators at an extreme in the first days and weeks of the new trend. This explanation also covers the extreme overbought readings on the MacD and stochastics, as can best be seen in Jim's charts. The last times the two oscillators got this overbought simulatenously preceded big declines. But then, if the tide is truly turning, that would explain these readings and negate my view that they're signalling a strong pullback.

My last observation is the rising wedge formations seen on the charts. According to Bulkowski, this formation tends to break south, with an average decline of 15%-19%. The volume trend is downward until the breakdown. The formation fails 24% of the time, though it seems to fail more often when I notice it (grin).

The bottom line as I see it is that bulls here are buying what some indicators are identifying as a top, while bears are selling what could well be a substantial and sustained rally. If, like many traders this year, you've done well and have some profits to protect, don't let trading turn into gambling. Follow the plays in the Monitor, but if you feel insecure about it, just park your cash on the sidelines until the uncertainty passes. At the very least, set your stops carefully and leave them on. That stop triggered yesterday at COMPX 1405-1410 hurt, but not as much as being trapped in a put position for what looks to be a gap up open today. In any event, the coming weeks will be very interesting.

  Jonathan Levinson   8/22/02,  8:18:01 AM
The Corinthian Geiser shot up at 5AM today. Let's not speculate why the delay this morning. As well, Microsoft was upgraded and is currrently trading at 53.44. NDX futures are up +7, while S7P futures are down .80. The US Dollar Index is hovering on the 107.40 support line, and QQQ is currently trading at 25.90.

  Jim Brown   8/21/02,  10:27:32 PM
Swing Trade Game Plan - Click here: Link

  Jim Brown   8/21/02,  10:27:20 PM
The Market Monitor for Wednesday has been archived. Click here to view it: Link


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