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  Jonathan Levinson   8/29/02,  8:52:27 AM
New claims for unemployment benefits rose to 403,000 in the week ended Aug. 24 from a revised 395,000 the prior week, against an expected 385,000 new claims.

 
 
  Jonathan Levinson   8/29/02,  8:48:34 AM
The final 2nd quarter GDP numbers remain unrevised at 1.1% growth, and this seems to be putting a bid under the US Dollar Index, but equity futures and bond yields continue to decline, with NDX now -10 and S&P -4.50. QQQ is now trading 23.18.

 
 
  Jonathan Levinson   8/29/02,  8:22:59 AM
The US Dollar Index got hit again, giving back its slight recovery last night to come down to the 106.60 level. Futures are slightly off, NDX -6 and S&P -2.90. QQQ is currently trading 23.37 and bond yields are down.

 
 
  Jim Brown   8/28/02,  7:19:05 PM
Swing Trade Game Plan - Click here: Link

 
 
  Jeff Bailey   8/28/02,  6:55:58 PM
Citigroup (C) $33.15 -3.07% ... looks good short, stop $37 (risk averse stop at $35.35) and target $29-$30. Link

Relative strength versus Dow weak and August rally not enough to get back in X Link

According to Dorsey/Wright & Associates, they have C categorized as "banking" and this sector is currently "bear correction" at 62%, after turning "bear alert" at 82% in June, then "bear confirmed" at 54% in late July. It would currently take a reading of 56% to have sector reversing back into "bear confirmed" status or a reading of 90% to have sector achieving "bull confirmed" status. In essence, don't be short C if banking sector reaches "bull confirmed."

 
 
  Jeff Bailey   8/28/02,  6:37:15 PM
Bearish September? Dow Industrials (INDU) p/f chart gave a triple-bottom sell signal today at 8,750 and has outward appearance looking weak technically (talked about this level in last night's market monitor at 05:31:40 Link ) . Here's a Dow Chart at $50 box scale Link Will want to monitor the Dow Bullish % ($BPINDU) for any reversal and internal confirmation Link and if we get it, look out below as bullish support trend (currently at 8,150) very much in play.

I looked at a bar chart and 10-minute interval of Dow Indu. Interesting how afternoon "rally" to 8,740 got "whacked" lower to intraday low, then late afternoon "rally" to 8,731 found some sellers into the close.

Also talked last night in Market Monitor about S&P 500 and less conventional $5 box and a trade at $930 being bearish on this scale Link . Isn't looking good for the bulls is it? Again, will have to monitor the S&P 500 Bullish % ($BPSPX) for internal damage and reversal. Link

Look for bears to begin stepping up their shorting on both of these technical breakdowns and bulls to be monitoring positions for weakness and having hedge strategies in place. Best account management for bear is to LEG into bearish positions, but you DON'T want/nor need to all of a sudden add 10 bearish positions in a day.

IMPORTANT NOTE! Triple-bottoms in INDEXES were NOT part of Professor Davis' study. His study was STOCK specific. However, these breakdowns we're seeing at triple-bottoms tell us that where there was enough DEMAND (X's) in the past to hold support levels, is now being overtaken by SUPPLY (O's)

 
 
  Jeff Bailey   8/28/02,  5:38:35 PM
Translation Please! Cuco, Compre puts AOLMV Enero 12.50 a 2.3 ahora dime cuando combiene vender. Ore!!!

Me no abla en espanol! (I don't speak spanish!)

But, what I remember from high school spanish is that this subscriber is saying that he bought some AOL January $12.50 puts (AOLMV) for $2.30 and wants to know when to sell. I think he "bought" the puts, but he may have "sold" them too. "vender" sounds like english "vendor" where some type of transaction took place.

I see some "pattern recognition" in AOL dating back to late last year and right now, this is about all a trader has to work with. Here's a p/f chart of AOL and what I'm seeing. I'm currently leaning toward the bearish camp as it relates to January expiration. I think if AOL stays below the $15.00 level, it could well be a "tax loss sell" candidate into the end of the year and $2.30 paid for the put is just about what a stock trader's risk would be to resistance of $15.00. However, option trader that DOES NOT overleverage has less risk in a bearish trade than a stock trader at current levels. Example: If I bought 1 contract (100 shares) and AOL jumped to $20 one day, a stock trader short 100 shares carries much more risk than an option trader holding 1 contract. Here's the chart! Link

Note: My spanish is terrible. I couldn't even begin to understand German, Japanese or Russian. I even have difficulty with Pig Latin. Some subscribers will point out that my English aint too good.

 
 
  Leigh Stevens   8/28/02,  3:53:39 PM
Subscriber QUESTION: "Thanks for all your inputs..what you think on COMPAX on short term? thank you"

RESPONSE: I assumed you mean CompaQ, now trading under the merger name of HPQ - Hewlett-Packard Co?. [COMPX? - I'll look at Nas Composite on my Index Wrap tonight] HPQ is trading in a downtrend channel on the daily chart - recent rally took it up to near the top end of it. I think its lower from here.

Short-term, the stock has some support around 14.00, a bit under where its trading currently and just below its 50-day moving average. Below 14, support levels are 13, then 12. I could see stock drifting down to 12-12.5 area. Key resistance is 15.3-15.9 and I would sell rallies to this area.

 
 
  Jeff Bailey   8/28/02,  3:43:42 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Leigh Stevens   8/28/02,  3:41:15 PM
Subscriber QUESTION: " Let me first say it has been a great pleasure being with you and the rest of the Option Investor team. I have been a subscriber for two years. During that time your team's insights have helped me not only generate a nice income but taught me a lot about the markets, options, and business itself. For that I want to thank you and the rest of the gang.

Now to my question. I saw the bear technical I believe you showed this past weekend. Great call! I charted IBM last week when it hit over 80 and charted a sell off to 71-73. What do you think about heavy resistance? I see it around 73 then 70. The market today has sold IBM deep but it seems 75.50 is a resistance point. Do you see it as strong resistance or just today's level of support awaitng another downturn before cracking lower? "

RESPONSE: Your complements and positive feedback goes to the OI staff here - the IBM play was not from me - thanks for them. I also take your note of "resistance" (e.g., at 73, then 70) as a typo and that you meant "support".

Technical support begins at the TOP end of IBM's late-June to early-August trading range at 74 - what was resistance, once broken, tends to "become" support on a subsequent pullback to it. The low end of that same range, at 66-67, is the "heavy" support, as I see it. 76.4 is intraday resistance right now. Near resistance on the daily chart is at 77-77.3, at the chart gap (difference between yesterday's low and today's high). Above here resistance is 78.00, then 80. I doubt IBM will get back above 78, especially on a closing basis.

 
 
  John Seckinger   8/28/02,  3:36:59 PM
It is times like this that tests a trader's patience. 8740 and 8700 have become pivots for blue chip investors, while the QQQ's, Semi's, Biotech's, Oil, and of course Networking issues continue to under perform the major indices. Gold did manage to stay above the 200 DMA (66.39), but it will be much harder to rally over the 50 DMA, currently at 67.36. With the 2Q GDP report due out tomorrow morning (estimates for 1.1% increase), traders appear to be squaring positions before the main event takes place. In fact, it is my opinion that the Dollar and yield curve traders will wait for the announcement as well.

 
 
  Steven Price   8/28/02,  3:35:24 PM
OI Stop Loss Update: I am lowering stop losses on several of our Put Plays in order to lock in profits.

MXIM: Entered $36.60 Current $31.58 New Stop Loss: $34.00

QLGC: Entered $36.60 Current $34.45 New Stop Loss: $36.00

IBM : Entered $77.96 Current $76.20 New Stop Loss: $78.00

EBAY: Entered $57.20 Current $55.72 New Stop Loss: $57.50

GS: Entered $79.53 Current $76.60 new Stop Loss: $78.50

 
 
  Jim Brown   8/28/02,  3:34:08 PM
Swing Trade Signals
Several readers have asked about new targets on the SHORT signal. The first obvious target is to break 460! Once that has occurred traders may want to take profits around 452 which was intraday support on August 12th or if we are lucky 445 which was the dip bottom on August 14th.

Several people have asked about holding overnight. First, please do not wait for me to issue a sell/close etc. If you are comfortable with the current profit then by all means take it. We could have a rocket bounce at anytime in this bipolar market. Just because I think we will see lower numbers this week does not mean we will not see higher numbers first. If you are happy with your profits then take them! Just don't send me an email later and ask when you should get back in. I already had several readers say they took profits on the bounce to 465 intraday and now want to get back in. I can't give you individual advice. (SEC rules) I will try to mention in the monitor during the day if I see what I feel is a new entry point but the bottom line is up to you. Before you get out you should have a plan on where you want to get back in.

Nice little bounce just appeared while I was typing this. Maybe a good time to rethink that exit paragraph above.

 
 
  Jonathan Levinson   8/28/02,  3:28:04 PM
The Compx is at the top descending trendline of a bullish descending wedge on the 5 minute chart. I'd prefer not to be seeing this here, and if any sees any flaws in the pattern I'm scoping out, I'd love to hear it. The TRINQ at 3.58 is off its highs of the day but is at a high enough level to justify a bounce. From a bear's perspective, the TRINQ was buried below .30 for days on end during this month's bull run, so sustained extreme readings are possible here as well. The QQV is not yet up 10% today, but it's close, +3.91 to 47.27. QQQ is flopping around at 23.50m and the TICK.NQ is reading -294.

 
 
  Leigh Stevens   8/28/02,  3:23:45 PM
Subscriber QUESTION: "Do you think we meet our short targets? Is it time to go long?"

RESPONSE: I've haven't met the targets I have for the major indices per my index trader wrap last night. Momentum is down - there is no reason to go long with only brief pauses in the downtrend so far and hardly that in Nasdaq. Technically, some kind of "basing" pattern is needed to suggest buyers are coming in in any force. It's true that the market is oversold on a short-term basis, but it was overbought for much of the recent run up - the trend is the primary focus.

 
 
  Steven Price   8/28/02,  3:16:44 PM
Semiconductor Index (SOX.X): 303.57 (-13.30) The SOX has now given up 75% of its gains since its rebound from a low of 283.91 August 5.

 
 
  Leigh Stevens   8/28/02,  3:16:38 PM
Subscriber QUESTION: "Your suggested placement of an OEX Stop loss?"

RESPONSE: For long OEX puts, given the current hourly chart & technical picture I suggest - Tight/close stop - at 467, just over the neckline of the Head & Shoulder's top pattern, as a move back above this line would suggest unexpected strength based on the hourly chart - pretty much consistent with where Jim has the stop (468) on his short OEX position currently.

Position trade stop (e.g., you want to stay short unless there is evidence of a definite trend reversal) - at 483, above the prior (up) swing high.

 
 
  Jim Brown   8/28/02,  3:05:59 PM
Swing Trade Signals
This is worse than watching paint dry. We should be happy that the market is going in our direction and according to plan but every one of these little bumps brings back memories of bounce to stops last week. Now that we are at the 3:PM turn it will be interesting if we can pick a direction and hold it. The Emini S&P and NDX futures were being sold heavily at exactly 3:PM but have eased over the last minute. The Dow is holding its ground and battling for every point above 8660. The A/D line is very close to the low of the day. By every account it looks like we should go down hard but there has not been a break yet and that worries me that the mystery buyers will again appear.

 
 
  John Seckinger   8/28/02,  2:41:49 PM
With the Volatility Index (VIX) up over 10 percent, the first thoughts that come to my mind are: Dollar is higher, which doesn't exactly make sense - therefore adds to uncertainty and should bid volatility. Five year notes are relatively weaker, not rational and also explains rise in VIX. Also, Dow is under 8700 (previous solid support level) and there is a good chance we will see an explosive move in the near term. But John, dollar is higher based off weak German IFO and five year notes lower due to supply pressures; therefore, isn't it rational? It would only be rational if the Dow was in the green. Clearly it is not.

 
 
  Jeff Bailey   8/28/02,  2:41:17 PM
Per 09:00 and 01:00 Intraday Updates Now sell or buy signals generated so far today that would have a net change in the Dow Industrials Bullish % ($BPINDU).

Stocks currently showing a "buy signal" on their charts are, AXP, C, CAT, GM, HD, HPQ, IBM, INTC, JNJ, JPM, MMM, MO, MRK, MSFT, PG, SBC, WMT and XOM. If any of these were to give a "sell signal" then would take away 3.33% from current 60% bullish reading. Trader/investor then envisions that it would take 2 stocks 6.66% to have bullish % reverseing the needed 3-boxes to have Dow Bullish % reversing to "bull correction" status, and hint of some meaningful type of supply beginning to outstrip demand scenario.

 
 
  Jonathan Levinson   8/28/02,  2:18:54 PM
The decline on the COMPX has stalled in the 1320-25 area, but the bounce is carrying a lot of lead, with the Qubes never making it back to the 20 DMA at 23.94. The QQV and TRINQ are staying high, both climbing with the TRINQ now above 3. With the QQQ failing on this bounce attempt and down over 3% so far, this has the makings of a very disheartening day for Mr. Bull. The light volume so far, (COMPX having traded just 928M today) is doubtless a point of hope, and we'll have to wait for the rest of the world to return from vacation. Nevertheless, over declining shares account for almost 800M of that volume.

 
 
  Jim Brown   8/28/02,  2:16:45 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I have hesitated to move the stop loss until now after being stopped out by a point or two several times in the last week. We are now far enough below out entry point that moving it down slightly to prevent a loss makes sense. If the OEX rallies from 460 back to the high of the day then my premise for the move is wrong anyway and we should be out of the play. Let's lower the stop loss to OEX 468 (SPX 928). My target for this trade is closer to the Dow 8400 range and with the indexes hitting new lows now after that 12:00 bounce we should be on the right track.

 
 
  Jeff Bailey   8/28/02,  1:49:05 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Steven Price   8/28/02,  1:46:50 PM
Goldmans Sachs (GS): $76.90 (-2.20) OI put play GS has now broken below $77.00. This level had served as previous resistance on the way up, and the break below looks especially bearish. Watch for this level to serve as resistance once again. The next level of support looks like $75 on the PnF chart, which was resistance on four previous occasions on the way up.

 
 
  John Seckinger   8/28/02,  1:44:02 PM
9 out of 10 times when I make this Pattern Recognition statement the market goes against me; nevertheless, the observation is that the Dow immediately traded lower from the open and has yet to define a solid relative low. What does this mean? The Dow should continue to trend lower, as longs are rather impatient and shorts are getting greedy. I would also not be surprised if the Dow closed on its low, or is on its low as the bond market closes. The pattern is called "open drive", meaning the market opens and just "drives" one direction the entire session.

 
 
  Jonathan Levinson   8/28/02,  1:37:46 PM
During the short time in which I was getting my lunch, the COMPX experienced a slight reversal of fortune, and is now trading 9 points off its lows. The TRINQ blew off some its oversold steam and is back down to a more sustainable 2.7 reading. Gold has come under pressure with HUI down 1.23. Bond yields are down across the board, and QQQ has just traded back under 23.80 as I type. The COMPX still has its unfilled opening gap 10 points away at 1340, but so far, there doesn't seem to be much spring in this bounce. The QQV up 3.51 confirms this, indicating that option traders aren't feeling any more bullish on this move.

 
 
  Steven Price   8/28/02,  1:22:52 PM
Reader Question:Hi Steve, Just want to start off and mention what a great job you guys are doing. It's much appriciated. The question that I have, now that we are out of the EDS 40 call, what about changing sides and playing a Sept 40 put. What do you see as support on the way down?? Regards Rob

Response: EDS $40.00 (+0.02) I'd like to see $40 act as resistance before playing EDS short. Right now $40 is acting in this capacity, as a look at the 5 min chart shows. My only real problem with playing the stock short is that it has been in a rising channel since the end of july, with the bottom of that channel right around $39. Today's low of $39.30 may be indicating a bounce from that bottom trendline. I would wait for both $40 to show resistance, with a rollover and a breakdown from the rising channel before shorting EDS.

 
 
  Leigh Stevens   8/28/02,  1:19:28 PM
Subscriber QUESTION: "Thanks for your great charts. I was wondering if you think the OEX will stop at the 21dma and 50dma {merge} on your charts or continue down to 445 range? I'm holding OEX puts at this time."

RESPONSE: Well, OEX has traded slightly under its 50-day moving average (50dma) today, but could rebound above this level on the close - 50dma being 463.19 today. The 21dma at 458.93 is a bit lower - 21dma being another key moving average - more so, even than the 50-day, from a trading perspective (versus a more "investment" oriented yardstick) - but both averages are important - more traders & investors will pay more attention to the 50-period average (and 200-day also) as the common ones that are discussed.

Anyway, in answer to your question, given the downward momentum as measured by the 14-day stochastics and the chart pattern, I don't think that these two moving averages will "contain" the decline. However, of course, if they do, that's significant. But I then look for 2-3 consecutive days where the moving average(s) holds.

It's fairly common for short-covering and some speculative buying in the area of the key moving averages to cause prices to pause or hold this area for a time - until some further bearish "news" takes the index under them. I think there is enough bearish news and concerns out there to cause such a break.

 
 
  Steven Price   8/28/02,  1:13:45 PM
Reader Question: Long CPN at a profit--does it look like time to take off table--seems to be holding up here and volume buying Thanks! Denise in HOT Phoenix

Calpine (CPN): $5.36 (+0.12) In spite of my overall feeling that the market may be heading south, CPN took out recent resistance at $5.25-$5.35 and has crawled back today from $5.00. A look at the 5 min chart shows buyers just under $5.00 and resistance at the 200-period moving average of $5.47. The stock traded as high as $6.20 yesterday, but $5.75 still looks like a tough level to hold above. The stochastics had turned, giving a sell signal, but have leveled off and found some support. You may want to take 1/2 profits here, but I still like its future potential. Your attention to the volume buying is significant and the trades of $5.50 and $6.00 established and advanced the point and figure buy signal.

 
 
  Leigh Stevens   8/28/02,  1:05:25 PM
Subscriber QUESTION: "Leigh, what exit target would you have on QQQ shorts? "

RESPONSE: Per my Index Trader wrap of last night, a "minimum" downside objective I have is to 23.00 on QQQ, an implied target arrived at by the "measuring" implications of its hourly Head & Shoulder's top - this is not to say that the Q's can't or won't go down further than this. I have learned that these objectives sometimes are the most that will be realized on a move. Since I am usually trading and not holding for a long move, I suggest taking profits at these technical objectives - in this case, it would be to cover QQQ shorts at 23.00 if reached.

 
 
  Steven Price   8/28/02,  12:59:26 PM
Reader Question: Hi Steve: what would be your approximate target for ADI? Thanks

Response: ADI $24.54 (1.30)I see support at $21.50 and $20. My current target is approx. $20.00, although I would probably take a 1/2 position at $21.50.

 
 
  John Seckinger   8/28/02,  12:46:07 PM
Oil continues to come under pressure following OPEC's statement of increased output; thus pressuring the CRB Index and most likely helping the dollar bid higher, albeit slightly. It is my opinion that the Dow will have to follow-through lower on Thursday before the dollar heads to 106. Also, the Dow probably has to settle under 8750 before bears go for the jugular and weak longs bail at any expense. The yield curve continues to trade relatively flat; however, after supply is done there is a good chance the front end catches a bid and further hurts the blue chips.

 
 
  Leigh Stevens   8/28/02,  12:38:58 PM
Subscriber QUESTION: "Thanks again for you brilliant analysis. I'm short the oex, djx and smh and loving it! Question - I am long on CPN and missed selling it at $6 yesterday--does it and utilities look good for defensive holds next several days as I believe we see more downside--or does its violation of the 50dma today mean I should pull the plug?"

RESPONSE: You shouldn't use those words "brilliant" and my "analysis" in the same sentence as it may go to my head - more than is good for me.

Calpine Corp (CPN) has broken out of its daily downtrend channel on its recent rebound, so that is to the good for being long the stock. And, so far today, CPN has held its 50-day moving average at 4.99 - stock last at 5.19. I suggest, per your thought on it, to use a close below the 50-day moving average (50dma) as your stop or exit point - if 50dma is pierced, especially on a closing basis, downside is back to maybe 3.50 and if you're holding CPN as a trade, doubtful you want to take chance of riding it back down.

 
 
  Mark Whistler   8/28/02,  12:33:02 PM
In today's Technology Cata-List report by Lehman Brothers, the analysts state that they remain cautious on the semicap equipment space, with looming budget risk for the remainder of the year. The report goes on to say that order trends "may not meet expectations". Lehman expects NVLS to sustain a cautious stance at its mid-quarter update on 8/29.

 
 
  Leigh Stevens   8/28/02,  12:24:47 PM
Subscriber QUESTION: "As the averages have broken down they are beginning to build the downward 30 min trend channels. Is it too early to treat these channels as trading limits? (Looking specifically at dia - 30 min)"

RESPONSE: It's not too early to work with the 30min. chart channels - but would keep them at broader points such as my chart at Link The main thing you need to be concerned about is an upside reversal and the upper DJX boundary of the emerging downtrend channel is well enough defined to be usable for that purpose.

 
 
  Jonathan Levinson   8/28/02,  12:13:04 PM
The 5(3) stochastics gave a sell signal on the COMPX weekly chart today. All shorter time frames are currently oversold, but it looks like we're seeing the mirror of what happened to the upside earlier this month. Internals on the COMPX continue to weaken, and the QQQ and COMPX continue to print new lows. The TRINQ is at 3.34 now and the QQV is up 2.28 to 45.68. There are 542M declining shares to just 77M advancing on the COMPX. Even HUI, the unhedged gold index, is back in the green after struggling today, currently up .19. XAU, the hedged index, is down .16.

 
 
  Leigh Stevens   8/28/02,  12:06:34 PM
Subscriber QUESTION: "Per your OIN writeup last night, you suggest selling rallies backup to the 25-25.50 area. However, if QQQ rally passed 24.60 neckline, would that violate the H&S price pattern?

For Entry Strategies for H&S, would you suggest entering half position when Right Shoulder starts to show, and entering the other half position when neckline breakdown is confirmed?"

RESPONSE: You're right and I know - this apparent inconsistency in my market strategy - as, a move back above 24.60 in QQQ would regain the neckline as you say - was that the Q's might have done this, but still be making a top. I felt some conflict regarding shorting with the hourly stochastics at oversold levels - it would "normally" take a substantial rally to get those readings back up to a more neutral to overbought zone. So, if QQQ had rebounded today, my thinking was that a rally could carry back to 25-25.50 but this would ALSO "negate" the H&S top formation. Of course, the H&S (Head & Shoulder) is not the only top pattern, as the Q's might also form a rounding or double top for example.

YES, on your strategy suggestion - its exactly what a study of the H&S patterns would suggest - they are quite reliable for a top, once they form.

 
 
  John Seckinger   8/28/02,  11:53:56 AM
With the Dow down 124 and the Dollar fractionally higher, I can't help but visualize the Greenback (currently at 106.99) falling towards 106 in the near term. I rise back to 107.30 should null this bearish thinking; however, I believe it would take a strong rebound in the Dow to pull the domestic currency higher. The Dow has "caught up" to the dollar by falling under 8750, and it appears to be a wait and see attitude by currency traders. The yield curve is beginning to see bids in the short end, obviously not helping equities.

 
 
  Leigh Stevens   8/28/02,  11:51:38 AM
Subscriber QUESTION: "I know the Market Monitor is more of a very short term tool, but I am curious about your thoughts on the QQQs over the next 12 months? I personally am thinking one will be better off with the SPX or even DIA."

RESPONSE: I will look at the longer-term technical outlook on Nasdaq/QQQ in my weekly Index Trader wrap at the end of the week. I also think that SPX or DIA is a better "bet" for the coming year.

 
 
  Jeff Bailey   8/28/02,  11:46:56 AM
Alcan (AL) $27.73 -3.98% ... hmmm... an "aluminum" stock like Alcoa (AA) and very similar p/f chart Link

 
 
  Leigh Stevens   8/28/02,  11:44:14 AM
Subscriber QUESTION: "What kind of downside potential does BIX indicate to you?"

RESPONSE: Well, the S&P Banking Index (BIX) has had a strong run up, from its July lows down in 243 area - last at 302.6. Yesterday it reversed from the area where I would expect substantial supply (stock for sale) in the 309-310 - the move to 309 was a 75% retracement of the steep May - July decline. I don't think there will be much further upside in BIX before a correction, such as back down to technical support in 290 area at a minimum. Would watch 302, at 200-day moving average - a break of 302 sets up a possible test of the 50-day average at 294 area.

 
 
  Jeff Bailey   8/28/02,  11:43:50 AM
Shoot! When I was writing this morning's 09:00 Update last night, I had placed Dow Component Alcoa (NYSE:AA) $25.10 -5.99% Link

 
 
  Jim Brown   8/28/02,  11:37:27 AM
Swing Trade Signals
Starting to pick up speed as we near the lunch lull. Probably not going to be a lot of long lunches today. Huge block trades starting to come through at bid, which would indicate sellers jumping on or off the train depending on your point of view. A/D line now showing better than 2:1 in favor of decliners and getting worse.

 
 
  Jeff Bailey   8/28/02,  11:37:03 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   8/28/02,  11:23:16 AM
Qwest (Q) $3.15 +13.7% ... stock rising on market talk that company may be having some success renegotiating credit lines with Bank of America (NYSE:BAC) $70.46 -1.3%.

 
 
  Jonathan Levinson   8/28/02,  11:19:42 AM
The COMPX is breaking down again as the TRINQ hits 3.00. The QQV is up 2.02 now, and sellers are piling in. The QQQ is hitting new lows for the day at 23.80, and the slow of today's decline, visible on the 5 minute COMPX chart, is steady and roughly equal to that of yesterday's decline. COMPX breadth is strongly negative with 6 declining shares for each advancing, on total volume of 468M after the first 1 3/4 hours of trading.

 
 
  Steven Price   8/28/02,  11:16:53 AM
United Health (UNH): $87.27 (-0.98) New OI put play on a slow and steady decline. Since breaking $88.00 to the downside, there has been no real effort to rebound on the short term (2 min.) chart. $87.50 took a few minutes to get through, and $87.25 will most likely do the same. Most limit order trades are entered at 1/4s, 1/2s, 3/4s or round numbers. These are easy points for investors to target, and easier points to hedge other combination trades. When trading options in combination with stock, it makes for an easier ratio combination, as well.

Stocks have only traded in pennies for a short time, and many traders still think in fractions.

 
 
  John Seckinger   8/28/02,  10:55:04 AM
Quoting Tony Crescenzi, former trader at Lehman Brothers, The closest thing that the bond market has to a crystal ball is the yield curve. For decades it has foreshadowed major events and turning points in both the financial markets and the economy. The yield curve is thought to be a better predictor of the economy than the stock market and can therefore give you an edge if you follow it. Indeed, studies have shown that the yield curve predicts economic events roughly 12 months or more in advance while the stock market is thought to foretell events 6 to 9 months in advance.

My yield curve consists of the net change in price between the 5 and 10 year notes, since there are supply issues in the 30-year and 2-year becomes too heavily influenced by foreign central banks. I take the net change in five years (FV02U) and multiply by 6, then use the net change in 10's (TY02U) and multiply by 4. Then subtract the two numbers. If fives relatively outperform, that is a "steepener" or "more positive yield curve" - usually defensive towards equities; but it does depend on what part of Fed cycle we are in. Amazing how many variables end up in the equation; nevertheless, if the curve is "steep" and equities start falling...a trader will feel more comfortable getting aggressive with positions.

 
 
  Jim Brown   8/28/02,  10:53:29 AM
Swing Trade Signals
Heck of a battle going on at this level on all fronts. I have been watching MSFT on level II and the time and sales on the QQQ and SPY. Every time the Dow breaks 8750 there is a pickup in volume on the buy side in big block trades. If this support finally breaks I think we could see those blocks reverse into sells. Everything just went red as the QQQ/SPY began trading at the low of the day.

 
 
  Steven Price   8/28/02,  10:51:36 AM
Reader Question: I Steve,currently very short QLGC-MXIM,where shall we pull the plug?????Thank you

Response:

MXIM: OI put play Maxim, originally entered by OI at $36.05, now trading $32.24, for almost a $4.00 gain, may justify taking some profits, possibly 1/2 off the table. The next support level I see is $31 and then $30. We will be lowering our stop loss on this play from $36.00 to $34.00, just above yesterday's low of $33.87.

QLGC: OI put play QLogic, originally entered at $36.60, now trading $34.77, has just re-entered the descending channel, as per my earlier entry. If you have been short this stock and are looking to take profits, I still see some downside. The top of this channel, now around $35.50, is just above today's high and may be a good place to put a stop loss if looking to lock in gains. You could also place it a touch higher, just above yesterday's low of $35.61. There is previous support at $34.31 and $33.82, but if the techs keep heading south, this could wind up at next support of $30.20.

 
 
  Jonathan Levinson   8/28/02,  10:49:27 AM
Please clarify how the FED actions re injections of capital tie to the markets. Is this new money they are printing up - i.e. an infusion of cash? If so how does this get into the market? Is it "given" to the major banks who use the liquidity to go buy investments right away? I don't see how the FED keeps "buying" stocks.

As I mentioned when we first started discussing the PPT a few weeks back, my understanding of macro-money flow is in its infancy. My limited understanding is that the FED, through its 22 broker dealers, is able to acquire securities. I have observed, like Russ, that the bigger the ned add, the more potential for a market jam. These funds can find their way into bonds, equities, or currencies, I'd imagine, though the effect is likely to be felt most strongly in equities, and of those equities, I'd look to those that are listed across multiple indices, such as MSFT. Whether the Fed is buying MSFT shares or not is anybody's guess, but the bottom line is that on days when the fed is adding large amounts that aren't required to refund expiring amounts from prior additions, the markets have a much stronger bid. This is not a hard and fast rule- just based on my own observation.

 
 
  Steven Price   8/28/02,  10:35:32 AM
Maxim (MXIM) $32.31 (-1.57) OI Put Play MXIM has attempted to rebound from this morning's drop, but a look at the short-term chart shows new resistance around $32.50 and $32.80

 
 
  Jonathan Levinson   8/28/02,  10:34:35 AM
Looks to me Fed has injected 4 billion which , in past, has resulted in an up day.

That's right, Russ, but there was 2.25B expiring today which had to be refunded in order to avoid a net drain of that amount. The 4B add leaves us with a net advance of 1.75B, which looks modest to me.

 
 
  John Seckinger   8/28/02,  10:32:04 AM
Profit-taking is taking its toll on the Gold and Silver Sector Index (XAU.X), currently down 1.79 percent at 66.27. The 50 DMA is at 67.30, while the 22 DMA is below at 64.86. The 200 DMA is at 66.39. I would be surprised to see prices fall underneath the 22 DMA, since that would most likely mean a higher dollar (not expected). The Gold index should find its way back to 68 in the next few days, eventually testing short conviction and possibly squeezing players higher towards 70. Note: India is the largest consumer of Gold in the world. In the 1Q, the country's demand was 149.8 tonnes and 20% of global demand. Demand in the U.S. was 95.6.

 
 
  Steven Price   8/28/02,  10:31:35 AM
QLogic (QLGC) $34.77 (-1.14): OI Put Play QLGC has made it back down into its previous descending channel, which it broke out of on August 20. The channel was begun on July 17.

 
 
  Jonathan Levinson   8/28/02,  10:28:05 AM
The FED's open market operation today results in a modest net addition of $1.75B.

 
 
  Jim Brown   8/28/02,  10:19:14 AM
Swing Trade Signals
The Dow is hanging by its fingernails to support at 8750. It is the only thing between us and the big drop. The other indexes were trading at the lows of the day and right on the edge of the cliff but the Dow kept them from taking the plunge. I still think it is only temporary and once the Dow breaks the cradle (of support) will fall. (Sorry, could not resist it)

 
 
  Jonathan Levinson   8/28/02,  10:10:25 AM
The COMPX is printing fresh lows below 1335 and the 21 dma on QQQ just gave way, as price breaks to fresh lows below 23.90. The TRINQ and QQV are both up, TRINQ at 2.84, QQV up 1.82, and this break looks to have just sparked another rush to the exits. Bears have a dilemma here, as to whether to dive in or wait for to short on a rebound. There's no easy answer. Per my discussion this morning, below, this would be the place to get in short, but I'd be setting a tight stop over it to cover the whipsaw scenario we know so well. Don't act if you're feeling panicky or rushed. I guarantee that we'll have another set up, whether long or short.

 
 
  John Seckinger   8/28/02,  10:00:21 AM
Networking, Oil, and Semiconductor shares currently underperforming the major indices, while fixed income securities and the U.S. dollar continues to hold gains. The dollar seems to have come under more "technical damage" than the Dow; therefore, blue chips most likely have to catch up. As far as bonds, it is my opinion that supply is holding down the short end and only a massive sell off in the Dow will change that mindset.

 
 
  Steven Price   8/28/02,  9:59:53 AM
Analog Devices (ADI): $24.93 (-0.91) OI Put Play ADI found support on Monday just above $25. Not anymore - the stock has broken support and a look at the 5 min. chart shows resistance to the upside now at $25.

 
 
  Jim Brown   8/28/02,  9:56:31 AM
Swing Trade Signals
Dead stop - The indexes came to an abrupt halt on serious support. The Dow stopped at 8750 and the OEX at 467, numbers I outlined in the game plan last night. The SPX spiked down to 925 for a moment but is struggling back towards 930. All these critical levels must hold for the market rally to continue. The post open reversal bounce, which normally occurs in the 5-15 min after the open appears to be losing steam and with it the hope of the bulls. The A/D line is 2:1 in favor of decliners.

 
 
  Steven Price   8/28/02,  9:54:24 AM
IBM $76.69 (-1.27) New OI Put Play IBM already shedding some weight this morning. Look for support arouond $74 and 50-dma of $72. $74 was the point of its previous breakout. The server biz is shrinking, down 13% for the top 4 companies.

 
 
  Leigh Stevens   8/28/02,  9:54:14 AM
INDEX Comments: SPX & OEX are following lead of DJX and falling below support implied by the trendlines that connect their various recent hourly lows - especially, SPX which has made a more decisive downside penetration of this trendline - OEX has dipped a bit under this line and then popped back up slightly.

These trendlines can also be viewed as "necklines" of Head & Shoulder's Top patterns per my commentary and chart markings outlining the pattern as can be seen at Link

If this technical analysis is correct and the indices continue to retreat below the aforementioned necklines, then this sets up eventual potential downside objectives to the 900 area in SPX and to around 450 in OEX. Stay tuned!

 
 
  Jeff Bailey   8/28/02,  9:42:34 AM
Sell Program at premium execution level of -1.24

Dow -69, SPX -7.8 and NASDAQ Comp -10.68

 
 
  Jonathan Levinson   8/28/02,  9:41:08 AM
We have Nasdaq-100 volatility as measured by the QQV up 1.73 out of the gate, and the TRINQ just above 2 as QQQ stuggles just above the 21 dma at 23.97. The COMPX found support at 1335, which was a key congestion area in mid-July and in mid-August.

 
 
  Jeff Bailey   8/28/02,  9:35:02 AM
Sell Program at premium execution level of -1.24.

Dow -56, SPX -5.29 and NASDAQ Comp -10.28

 
 
  John Seckinger   8/28/02,  9:34:00 AM
The 10-year surplus estimated at $5.6 trillion a couple of years ago has been trimmed to less than $1 trillion in the latest estimates. In other news, refinances are nearing record levels once again and this demand should help the supply going to hit the Treasury market today (27 billion in 2-year notes, as well as 5 billion in corporate supply). Oil should be interesting in the next few days, following OPEC stating they will raise output at its next meeting. Current prices are above OPEC's price band of $22-$28. Turning to the dollar, a weaker German IFO survey pressured the Euro and most likely is reason for the slight bid in the Greenback.

 
 
  Jeff Bailey   8/28/02,  9:32:06 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jim Brown   8/28/02,  9:21:27 AM
Swing Trade Signals
Wow, finally a gap in our direction! Looks like SPX 930 support is history and that could be the break we have been waiting for. Nortel warned again, which should not have been a surprise to anyone and GS downgraded SUNW based on weak IT spending. SUNW has its mid-quarter update tomorrow and GS thinks they will miss their estimates and guide lower.

The stop loss on the current short signal is still OEX 476, (SPX 944.50) I am not planning on changing it at this time.

 
 
  Steven Price   8/28/02,  9:21:16 AM
Goldman Sachs said it believes Sun Microsystems will miss earnings estimates and that revenue will be at the low end of estimates.

Keep an eye on the Semiconductor Index (SOX.X) 316.87, which has turned south after a 28% gain earlier in the month. A break below 300 would alert us to the possibility of another major slide. The previous low was 282.75 intraday on August 5.

 
 
  Jonathan Levinson   8/28/02,  9:15:54 AM
I closed my QQQ short position at 3:50 yesterday. (IT was a much bigger position than I usually hold and I didn't want to lose my profits if somehow the market had a big bounce.) I would like to re enter the short. Do you have a suggested entry point? Also, where do you see the next support level for the Q's. Thanks so much for your great insight.

Flattery will get you everywhere. First off, well done in reducing that big position. When it feels like I'm trying to navigate an 18-wheel truck with a position that's too large, I try to get off the road quickly and safely- capital preservation and all that.

I strongly suggest reviewing Leigh's excellent QQQ analysis last night. The link is posted below. The oversold 21 period stochastic on his 60 minute chart should be signalling short term caution for bears. However, a strong break of the 24 level (ie the 21 day moving average at 23.96) would be an appropriate momentum entry for a put play, as it would indicate that the longer 14 day cycle is dominating. I prefer to enter puts at relative tops than to try to catch continuation legs, and the reason is the difficulty in setting an appropriate stop. Your account management and loss tolerance is key. I tend to set my stops too tight because I dislike losing money, but of course this causes me to lose smaller amounts of money more often. The sloping neckline of the hunchback h&s formation would be an appropriate stop for me (not necessarily for you), at approximately 24.50 as illustrated on Leigh's chart.

Here's that Link

 
 
  Steven Price   8/28/02,  9:14:25 AM
After Nortel's warning that they would miss sales forecasts for the third quarter, close facilities and cut 7,000 jobs, look for the Nasdaq to continue its slide.

 
 
  Leigh Stevens   8/28/02,  9:10:08 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -6.00 at 930.50; Dow Industrials > -45.00 at 8790; Nasdaq 100 > -11.50 at 969.50

S&P Futures fair value numbers: S&P ($SP02U) = +.28; Nasdaq 100 futures ($ND02U) = +1.60 (NOTE: Complete explanation of program trading fair value numbers & how index futures arbitrage buy/sell programs work - check my Trader's Corner article at Link)

 
 
  Jonathan Levinson   8/28/02,  8:37:08 AM
The US Dollar Index is back down to 106.80 after a brief struggle last night. The 3AM futures ramp failed again, this time around 6:30AM, and the NDX futures are down -13.50, S&P -7.50. QQQ is trading 24.10. Bond yields are all in the red.

 
 
  Jeff Bailey   8/27/02,  10:08:21 PM
Market Monitor has been archived. To view Tuesday's comments, simply click this Link

 
 
  Jim Brown   8/27/02,  12:56:06 AM
Swing Trade Game Plan - Click here: (corrected) Link

 
 

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