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  Jim Brown   8/29/02,  9:02:51 PM
Reader Survey

We recently changed to a different format on some of our chart images in the Swing Trade Game Plan. The new images use a smaller file type that allows for faster loading over dial up lines. Several readers complained that the images were broken. We have traced the failure back to readers still using Windows 95 and Netscape. We switched back to the larger .GIF type images for Thursday's Game Plan.

We would like to know how many readers are still using Windows 95 or any other operating system that does not recognize the new images. Please click on the link below and send me an email ONLY IF YOU CAN'T SEE THE CHARTS!

Link to Wednesday's Game Plan with new image format: Link

If you cannot see the charts please send me an email with your Operating system, version, browser and version. Like Win95, Netscape 5.7.

Only send the email if YOU CAN'T SEE THE CHARTS!!

Thanks - jim@OptionInvestor.com

 
 
  Jim Brown   8/29/02,  8:52:03 PM
Swing Trade Game Plan - Click here: Link

 
 
  Jeff Bailey   8/29/02,  5:22:25 PM
Bema Gold (AMEX:BGO) $1.36 +10.56% ... Hi Jeff: BGO on a .05 scale P&F chart broke a triple top at $1.30 yesterday. Looks like a vertical count to $1.85, but more realistically resistance at $1.45, any comments?

I've got a couple of comments here.

OK, I have no problem with a trader "changing the scale" on a p/f chart to a smaller scale, which introduces more noise and may help define shorter-term levels of supply/demand support and resistance.

However, stick with the "conventional" scale of a stock's p/f chart when calculating bullish and bearish counts and pattern recognition. In the case of BGO, conventional scale is $0.25 box so this is what conventional chart would be Link .

Now, as trader probably sees, this $0.25 box scale does a trader little good and one reason perhaps that institutions don't like to build very big positions in stocks under $5.00 let alone $10.00.

Now, the above comments are really pointed toward traders that start messing with box scale on stocks above $10.00 as what can happen is that a bullish traders adjusts the box scale so that the chart looks bullish and confirms prior bullish thoughts, or a bearish traders "adjusts" scale so that the p/f chart still looks bearish, even though the conventional box scale begins to move against the trader's trade.

Moving on.... Now, lets look at BGO, which in the past my thoughts have been, 1) Good stock to at least monitor for how aggressive "gold bugs" are in the sector, with thinking being that as bullishness builds, market participants more willing to "speculate" on smaller priced stocks and 2) any trader trading BGO long or short other than on an intraday basis and treats it like an option and "risk capital." I've never traded BGO short other than on an intraday basis (I won't hold a short in BGO overnight) only because I feel too much upside risk in such a small priced stock, but will trade long and willing to hold overnight as I'm only risking $1.36 to zero.

Now... I do kind of "like" what trader has done with BGO on $0.05 scale for 2 reasons only. 1) Gives him some "noise" and price action which $0.25 conventional scales doesn't, but 2) I can "back test" some things and find some decent type of correlation. Here's a $0.05 chart scale Link

The way I would "back test" is to go back and do some past vertical counts and pattern recognition and see if the "changed" scale has any merits. According to Dorsey/Wright and Associates, the gold sector as a whole turned "bear alert" in June (red 6). If we look for a red 6 on BGO's chart, we find the stock trading in a column of X at $1.55. BUT!!!! Do you see the "bearish triangle" that was triggered just to the left of the "red 6" at $1.60? The sell signal at $1.60 and resulting column of O to $1.35 created a bearish vertical count column that hinted at $0.80. Equation would have been $1.80-((10*2)*0.05). Stock did trade $0.95 but then gave a negating "buy signal" at $1.35.

Now, that "buy signal" at $1.35, created a bullish count to $1.80. Equation was $1.20+((4*3)*0.05), and stock did trade close to that at $1.75 before giving a negating sell signal at $1.40.

OK... $0.05 box seems to have some "credibility" with vertical counts. Also has some "credibility" with Professor Davis' study regarding BEARISH triangle at $1.60 when bullish % was "overbought" and "bear alert" (Professor Davis' study showed 87.5% chance of 33.3% decline in 2.5 months) and from $1.60, a 33.3% decline would have been to $1.06 and the stock achieved and exceeded that to the downside.

Also see a "triple-bottom sell" at $1.25 (Professor Davis study showed a 93.5% chance of 23% decline in 3.4 months) and from $1.25 a 23% decline would have been to $0.96 and the stock did trade $0.90 not long after.

That has me liking and giving some credence to the $0.05 box scale.

Now... Dorsey/Wright & Associates shows the gold sector as "bull allert" at last night's reading of 34%, so no problem using Professor Davis' study for the triple-top in BGO as 87.9% chance of 28.7% gain in 6.8 months. From $1.30, target becomes $1.30 * 1.287 = $1.67.

Vertical count column currently under construction and hints at $2.00, equation is $1.10+((6*3)*.05).

Good work from subscriber here, just want to back test scale changes.

Hey! I've seen similar technicals somewhere else. Triple-top and break of trend. Oh yeah... that was in the Gold/Silver Index (XAU.X) at $68.00 today on the $1 box. Link

 
 
  Jim Brown   8/29/02,  5:21:50 PM
After Hours News

SUNW warns - SunMicro warned that business spending appeared to be worsening and sales would come in -10% to -15% less than expected.

NVLS warns - Novellus warned that it was experiencing significant order delays from major customers as capex spending continued to shrink. They are seeing a -10% to -15% drop in orders. They said drastic drops in consumer spending had more than offset any slight gains in business spending.

 
 
  Leigh Stevens   8/29/02,  4:15:24 PM
Subscriber QUESTION: "When you say a rally back to the neck line is a "selling opportunity" are you saying the stock will go back down. ie sell short??"

RESPONSE: Exactly - as in sell short or to buy puts - sorry, I sometimes forget and use trader jargon.

 
 
  Leigh Stevens   8/29/02,  3:58:44 PM
Subscriber QUESTION: "Thanks for all the great insights; I have found your book very helpful.

I am following the OEX and was confused about what would technically nullify the head and shoulders pattern. Is the pattern considered a failure at an upward break of the neckline (467), or is it a failed pattern once it reaches the top of the head (487)? Is the pattern less reliable since it an index and the H&S is printing in a shorter time period e.g. the hourly chart?"

RESPONSE: The Head & Shoulder's (H&S) top in the hourly OEX pattern - currently intersecting at 466 would tend to be "nullified" IF OEX had a rebound back ABOVE the neckline, especially on a closing basis. A return TO the area of the neckline is seen sometimes with this pattern - and, that's usually a selling opportunity.

A related point - a return rally like I am talking about WHEN the neckline of an H&S Top slopes up to the right will sometimes touch or return to the neckline at a level that is even EQUAL to the top of the Right Shoulder (RS) - this creates a complex H&S pattern with a "double" shoulder - this can also be a valid H&S top - you'll sometimes even see a double Left Shoulder AND a double Right Shoulder. Hi Leigh,

 
 
  Jeff Bailey   8/29/02,  3:51:50 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jeff Bailey   8/29/02,  3:51:13 PM
Gold/Silver Index (XAU.X) $69.22 +3.65% ... trade at $69 on the $1 box scale Link now negates the "bull trap" type of technicals a p/f chartist may have been concerned about. Bullishness building and now look for some confirmation from Newmont (NEM) $28.01 +3.43% and a move above $28.18.

 
 
  Leigh Stevens   8/29/02,  3:45:57 PM
Subscriber QUESTION: "Thank you for all your input. Based on trading today i would like to get your idea on COMPX - do you see it to be up tomorrow or sharply down?"

RESPONSE: Well, the Nasdaq Composite (COMPX) doesn't look like it has much further upside potential then seen today - this recent rebound looks like a bear flag on the hourly charts. And, I would note also that the COMPX rally reversed after it had filled in its chart gap that formed after the lower opening of yesterday. Downside gap areas often act as resistance and that appears to be the case here. The rally also "threw off" some of the near-term oversold condition - looked like a short covering type rally to me. QQQ got right to the level I expected based on the downside objective implied by the H&S top that formed on the hourly chart.

 
 
  Jim Brown   8/29/02,  3:44:29 PM
Swing Trade Signals
Don't forget we have a flurry of economic reports tomorrow. Personal Income/Spending at 8:30, Chicago PMI and Consumer Sentiment at 10:AM. The markets appear to be racing to a neutral close with the Dow down about as much as the Nasdaq is up. After the bell today we get midquarter updates from SUNW, FLEX and NVLS. This could color trading at the open tomorrow as well. If you are not comfortable with your current position now is the time to exit. Even bad news from the tech trio may not tank the markets as we saw from the downgrades this morning.

 
 
  Jonathan Levinson   8/29/02,  3:34:02 PM
This last hour has moved the COMPX back to near the day's resistance, as QQQ chops along both sides of 24, coinciding with the 20 dma at 23.98. Volume on the QQQs looks quite light compared to yesterday, though we have 3 advancing shares for each declining on the COMPX. It took a lot of those 30,000 share bids to sustain the QQQ today, and, with my stop loss in place, I'm fairly comfortable holding over the close. The TRINQ is back down, not quite extreme, at .42, and while bond yields recovered throughout the day, they've still had a negative day, and gold has had a very positive day. Bonds up, gold up and equities up on light volume is a combination I can live with from a bearish equity perspective.

 
 
  Jeff Bailey   8/29/02,  3:16:26 PM
Bristol Myers (BMY) $23.93 -4.5% ... stock dropping suddenly in last 5-minutes after company announces that the SEC inquiry into its wholesaler inventory situation has become a formal investigation. In BMY's 10-Q filing on August 14th, the company disclosed the expectation that this would occur.

 
 
  Jonathan Levinson   8/29/02,  2:44:16 PM
The TRINQ called the top of today's rally perfectly (well, so far, anyway). It's now at .67, which indicates more sustainable buying pressure for the moment, but if it continues to climb the bulls will have something to worry about. Apparently Dick Cheney is preparing to speak, and this could be a bear's delight, but we'll have to see. The COMPX has found support at 1325, currently trading 1326. The QQV is back to positive, signalling the return of fear in the options market. With these breadth indicators currently neutral, the last hour will be crucial in determining direction.

 
 
  Jeff Bailey   8/29/02,  2:38:05 PM
Harmony Gold (HGMCY) doing some checking here.... removed bid in the QHGJV of $2.35, just to check market maker. Sure enough, bid dropped to $2.30, then market maker quickly lowered to $2.25 after that. Hints a bit that stock might edge off a little as he/she left offer at $2.50.

 
 
  Jonathan Levinson   8/29/02,  2:24:05 PM
LOL Jim! Duly noted.

 
 
  Jeff Bailey   8/29/02,  2:16:43 PM
Harmony Gold (HGMCY) $13.95 +6.32% ... going to take the exits here in my underlying stock position as I don't want to carry this much cash exposure during vacation next week when I can't watch things (will be in remote mountians; no phone, papers, computers). Instead, will look to lower risk, and turn to option's market.

October $12.50's (QHGJV) are bid/offer $2.30x$2.55. With NEM trading below previously mentioned retracement, will work between at $2.35. If filled, will then follow with a Good-till-cancel (GTC) order for $3.40 just in case stock jumps further next week.

 
 
  Jim Brown   8/29/02,  2:15:07 PM
I remember the silver scam by the Hunts back in the 70s. I was working for a computer broker at the time who had hired 50 semi trucks to go around the country and buy old xrays from hospitals. He would microfilm them then salvage the silver off the xrays. He was getting about 50,000 oz a month and storing it in his basement because he was convinced silver was going to the moon. We all know how that story ended. He lost his butt because he did not believe the crash and kept spending from $7-$10 an oz to acquire the xray silver until long after the sliver fell back to $4.

I swore off commodities back in the early 80s when I was playing sugar, copper and currencies. I would go to bed at night and be up +$50K and wake up the next morning and be down -$50K because of trading overseas. The first call of the day was my broker wanting another $25K in margin.

You want an editors play in commodities I will give you one. Send me $25K and I will send you a copy of one of my old statements showing where I (you) lost it all. This way you can share my pain and I can profit from the experience!!

 
 
  Jonathan Levinson   8/29/02,  2:06:44 PM
Yes, I remember the movie. I'm still trying to figure out how they manipulated the commodities market so easily. Maybe it would make a good Editor's Play, think about it. -John

What do you think, Jim? Pork bellies or OJ?

 
 
  Jeff Bailey   8/29/02,  1:57:54 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Jeff Bailey   8/29/02,  1:57:33 PM
CDW Computer (CDWC) $42.21 -0.63% .... Hi Jeff, Any thoughts on CDWC on as a put play on a pull back to the $44 area?

Good eye from this trader. Funny, but a couple of day's ago, I was flipping through some NASDAQ-100 component charts looking for stocks that were on a "bu signal" where a "sell signal" would have the bullish % starting to weaken. Well, I did see this one before yesterday's triple-bottom sell at $43, but at $43, I thought the stock wasn't really going to be a 'mover' and wanted to see a "rally" back to $47 as an early entry point, you know.... short/put 1/2 position then round to full on a break at $43. Link

Now... with that thought in mind, I do like CDWC here, but only 1/2 short/put. Then if a rally back to $45-$46 takes place, then could round to full. I do like the "triple-bottom" correlation with what we saw in the SPX $5 box yesterday.

 
 
  Jonathan Levinson   8/29/02,  1:56:13 PM
The title of Jeff's update just reminded me of one of my favorite movies a long time ago. Anyone remember Aykroid and Murphy in "Trading Places"? Remember Clarence Beakes? Randolph and Mortimer?

 
 
  Jim Brown   8/29/02,  1:55:34 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market SHORT at 13:49:06 when the OEX traded below 461.50, SPX 916.41, DIA 86.85, SPY 92.16, DJX 86.64, NDX 961.51, Compx 1334.39, Emini 916.25. Looks like a sell program knocked some wind out of the bulls to trigger this signal. Hopefully they will show some more fatigue and traders who bought the dip will decide some profit is better than none and run for the exits before the close. The stop loss on this signal will be OEX 466 (SPX 924) Would rather have been in at 468 with the other signal but waiting on that could have left us unfulfilled. (grin)

 
 
  Jonathan Levinson   8/29/02,  1:42:27 PM
Some more of those 30,000 share bids have just appeared on QQQ as price dipped below 24.

 
 
  Jim Brown   8/29/02,  1:41:52 PM
Swing Trade Signals
Suddenly it looks like the markets stood still. "Never short a dull market" works for markets in a down trend but "shorting a dull market in an upswing" also works well. The loss of upward momentum could be an indication of pressure building for a new leg down. We had a nice rebound from oversold but there was no follow through. We will hold the current signals and wait for confirmation.

 
 
  Jonathan Levinson   8/29/02,  1:41:21 PM
The TRINQ is still in an extreme zone at .26, but seeing it all the way down at .18 made me salivate to buy puts. For all that, the COMPX are QQQ are staying within their range near the day high, with the TICK.NQ slightly negative at -84. I wouldn't be surprised to see the completion of the gap fill that was started an hour ago, but I expect 1350 resistance to hold. XAU and HUI are extending their good day, with XAU +1.61 to 68.41, and HUI +3.46 to 125.94.

 
 
  Jim Brown   8/29/02,  1:17:25 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
In case the recent dip does not hold let's see how strong this bounce really is. OEX 468 is the intraday high yesterday and 470.86 was the close on Tuesday. Let's go short the broader market with an OEX trade at 468 with a stop loss at OEX 472. (SPX 929, stop 936) A trade in the mid 470 range would represent a fill of the Wednesday gap down. This is a risky signal as it is an effort to pick a top in a bipolar market. Please do not act on this signal if you do not agree with the analysis.

 
 
  Steven Price   8/29/02,  1:14:12 PM
Reader Question: Good morning Steve,thank you again for your amazing work......now,would you short VRTS and CHKP at this level? Thank you....

Response:

Veritas: VRTS $17.06 (+0.63) VRTS could hit $15 rather easily, however my stop loss would be at recent resistance of $20, and I'm not sure I like the risk/reward. The recent high of $20 was a rollover from the top of the descending channel from May, which is aiming at $12, however it has to get through $15 first. If I were to play the descending channel I would put my stop at about $18.50.

Checkpoint :$17.43 (+0.36) CHKP has a lot of noise on the chart between here and $12.75, with support levels every 1/2 dollar or so. It has also been rising slow and steady (until the last three days)since the beginning of July, so I probably would look for better shorting candidates.

 
 
  Jim Brown   8/29/02,  1:14:11 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the entry point on the breakdown to OEX 461.50. (OEX 915) This is just below the 12:20 dip. The oscillators are rolling over along with the A/D line.

 
 
  Jonathan Levinson   8/29/02,  1:13:31 PM
I'm trying to put on a QQQ short here, noting the stop at 1345 (50% of the yesterday's gap), and the low TRINQ and QQV readings today. Tight stops are in order, and I intend to bail quickly if we exceed yesterday's top gap s/r line by more than a couple of points. However, let your own account determine the level most appropriate to you.

 
 
  Jeff Bailey   8/29/02,  12:54:25 PM
Newmont Mining (NEM) $27.91 +3.06% .... took a different retracement than used in the past to try and "expain" technical selling at $28.00 from 07/19/02. If I simply take top retracement from 06/04/02 high of $32.75 to gap low open of $20.80 from 07/24/02, then that correlate a 50% retracement at $26.77 and 61.8% at $28.18. That 61.8% level of $28.18 then becomes technicians near-term resistance. Close above that level then has 80.9% of $30.46 in play.

 
 
  Jim Brown   8/29/02,  12:50:42 PM
Swing Trade Signals
I highlighted OEX 465 as an ideal SHORT entry point on an intraday spike in the game plan last night. We are there but I am still cautious. The A/D line is moving up steadily and the markets are moving against the bad news this morning. I would hold on that recommendation until we see some weakness appear. I am going to initiate a new position at OEX 468.

 
 
  Jonathan Levinson   8/29/02,  12:44:35 PM
We have a panic TRINQ reading of .20 as the COMPX tries for its second gap fill. The top of the bearish wedge projects to approx 1345-50, best seen on the 5 minute COMPX chart.

 
 
  Jim Brown   8/29/02,  12:44:17 PM
Jim; I am participating in the DJXUG and opened the position at 8710. Do you think we should add to the position with strength in the DOW under 8800. Pete.

I would only add to the position on a further drop. The current bounce is bothering me. Anything that goes counter to the trend should be looked at carefully. Trading against the trend can be hazardous to your health.

(My reply to your email bounced. galvestonbay.net is screening OptionInvestor.com email as spam. You should speak to them about this)

 
 
  Jeff Bailey   8/29/02,  12:43:32 PM
Newmont Mining (NEM) $28.00 +3.39% .... had an upside alert set here. On 07/19/02, rather large seller came into stock from $28.10 and sold hard into the close that day. Stock fell sharp over next two sessions. Will monitor here to see if sellers still around or if perception has changed. Link

 
 
  Leigh Stevens   8/29/02,  12:39:48 PM
Subscriber QUESTION: "Great work on calling the 23 area in QQQ. With SOX up and the Q's heading above 21 day MA, would you re-enter a short? If yes, where?"

RESPONSE: Yes, I would sell a QQQ rally back to 24.95, a 62% retracement of the recent decline.

 
 
  John Seckinger   8/29/02,  12:26:05 PM
Case-in-point on the September Bond (USU2) not exactly trading opposite of equities. Bonds stayed higher by 25 ticks for most of the Dow's run back to 8700. No frantic selling as the Dow recovered. Why? Well, bond prices and Dow should actually trend the same direction. Both have set higher relative highs over the last few months, and evidently it is not time for bond prices to tank while the Dow "catches" up with fixed income holders. Other reasons? Dollar, Oil, Utilities, and yield curve are beginning to hold more weight. Dollar will be in focus on Friday with the Chicago PMI report, and bond holders most likely are taking the lead from currencies. Don't you just love how dynamic the markets get? I promise, the aforementioned indices (ok, plus Gold and the commodities index) is all that needs to be analyzed when trying to establish a solid Intermarket Relationship.

 
 
  Jim Brown   8/29/02,  12:24:09 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Ok, let's see if we can get back into this market. Let's go short the broader market on a breakdown on a trade below OEX 458.50 (SPX 910). I am not willing to shoot for a higher failed rally target yet until we see what the next 30-45 min brings us. Until then I will be content to wait below intraday support.

 
 
  Jonathan Levinson   8/29/02,  12:21:41 PM
The 30 minute 5(3) stochastic is topping out, and this morning's launch pattern on the COMPX is rounding out below 1335. It could be gathering its breath before an assault on the 1340 gap resistance, but this has been a big move so far. With the TRINQ at .37 and the QQV just below flat on the day, with bond yields not far off their daily lows, I'm not feeling very concerned about much further upside from here. QQQ 24 has so far held as resistance, and on the 15 minute COMPX chart I see a bearish ascending wedge. Bear in mind that we're on light volume today, and it will get a lot lighter tomorrow, so while I'm bearish here, I'm also feeling very cautious about putting on new positions.

 
 
  Jeff Bailey   8/29/02,  12:21:09 PM
Anglogold (AU) $22.95 +0.21% ... I don't know what it is about this stock, but I have "learned" not to trade this gold stock bullish. It seems to severely lag an advance in the sector, but lead a decline. In past trading, I've noticed that the stock has "lagged" an XAU.X advance, tried to trade bullish in AU thinking stock would "catch up," but for most part, stock just never did. I've concluded I don't need to "know" why the stock trades like a pot-belly pig, just that it does/had so not interested from the bullish side.

 
 
  Jim Brown   8/29/02,  12:12:27 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The closing numbers for the SHORT signal were OEX 463.09, SPX 919.58, DIA 87.10, SPY 92.46, DJX 86.94, NDX 965.11, Compx 1336.45, Emini 919.50. This was an early exit even though our stop loss was OEX 468. With all indexes trading at the high of the day and in positive territory after huge amounts of negative news at the open I feel caution was the best move. Of course it appears my capitulation was at the high of the day and we are seeing some weakness again. I will issue a new entry point signal in a few minutes.

 
 
  Jeff Bailey   8/29/02,  12:10:42 PM
Citigroup (C) $32.95 -0.51% .... Will look to establish 1/2 position in the C Oct. $35 puts (CVG) on any type of potential rally back near $34.

Trading account bottom line has gained about 1% in the last two sessions and feel I need a little more put exposure and C fits the bill.

Did take a little more than 1/2 of the GE Sept. $32.50 puts off the table, but will hold remainder. Next week I'll be out on vacation and per previously outlined plan, wanted to lighten up on that position a bit ahead of vacation and have good feeling psychologically ahead of vaction.

Also closed out the AMGN Sept. $45 puts as stock just wanted to hold level this morning. 1/2 bearish position there was a mistake and didn't want to even think about "I wonder what AMGN is doing" next week. Out of mind now and loss taken at about 60%.

Current personal account positions have... 1/2 bullish FRX Jan $70 calls (no stop, target $94) : Full bullish FRNT Nov $10 calls (no stop, target $13) : 1/2 bearish GE $32.50 puts (no stop, target $29-$30) : short-term stock position full in Harmony Gold (HGMCY) $13.50 cost and 50% cash.

Note: I disclose this only to try and get subscribers to perform some account management practices. Monitor the bottom line of the account, measure against what the MARKET is doing (perhaps SPX as a measure) to see how your account and current trade analysis is doing as it relates to what the MARKET is doing. I'm not doing it to prove how good/bad a stock picker I can be at certain times.

 
 
  Jim Brown   8/29/02,  12:06:21 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
OK, I give up! Let's close the open SHORT signal here at 462.83 and move to the sidelines. I do not know where this bullishness is coming from but I am not going to fight it.

 
 
  Jeff Bailey   8/29/02,  11:48:51 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Steven Price   8/29/02,  11:38:05 AM
Note on holiday trading. Tomorrow we have University of Mich. Consumer Sentiment and Chicago PMI, as well as Personal Income and Spending. After these numbers are out, expect some activity, and then VERY light volume during the afternoon session. In seven years on the trading floor, I can't remember seeing more than 1/3 of the traders being around after noon on the Friday before labor day weekend.

 
 
  John Seckinger   8/29/02,  11:32:26 AM
The Dollar, a coincident indicator with the Dow, did manage to take out the relative low of August 12th at 106.34 (intra-day low of 106.27) before short covering aggressively took the contract back to 106.70 (currently at 106.66). If the Dollar falls under 106.50 in the near term, equity holders should also experience downward pressure. Also noteworthy is the decline in both Utility and Oil Indices, both lower by roughly 1.65 percent. The Oil Index (XOI.X) fell underneath its 22 DMA, while the Utility Index (UTY.X) went underneath its 50 DMA but is just above its 22 DMA. It is my opinion that both the Utility and Oil Index can be fantastic leading indicators for the Dow Jones Industrial Average.

 
 
  Steven Price   8/29/02,  11:13:30 AM
Reader Question: On SOX where do you see downside target, please? I am short thanks! Denise

Response: If the SOX.X can get through its previous low of $282.75, I think 250 looks like the next logical level. The descending channel actually heads lower than that, but let's not get greedy until we cross that barrier. The index has just dropped 60 points, and some slowdown in selling can be expected. With this morning's downgrade of the some of the chip equipment makers, we are just adding to the pile of bad news. I still haven't heard anyone comment on an increase in IT spending, and until we see that I'm not sure of a scenario that would boost the sector.

A rising tide tends to lift all boats and I think that's what we were seeing the last few weeks as the index rose over 360, with the rest of the markets. One note though - it was not able to hold over its 50-dma like the Dow, S&P, NDX and COMP.

 
 
  Jim Brown   8/29/02,  11:01:59 AM
Swing Trade Signals
OEX 460 just failed and those who jumped out should have jumped back in. Does everybody see today's resemblance to Tuesday on the five minute chart? Strong reaction drop, nice denial rebound and then a slow bleed the rest of the day. If the pattern holds true we could see OEX 450 before the day is out.

 
 
  Jonathan Levinson   8/29/02,  10:55:04 AM
The TRINQ is staying low here, and the COMPX found resistance at yesterday's 1330 congestion area. QQV is back up from negative territory, +.63. I'll be surprised if this bounce is more than a headfake, but I'm still stunned from the first 3 weeks of August. As I was typing that, the QQV flipped back to -.33. I'm watching the stochastics and the price level, and below the 1330 level, I expect a revisit to the day lows.

 
 
  Steven Price   8/29/02,  10:42:49 AM
Microsoft (MSFT): $49.62 (+0.24) If this bounce is for real I would expect MSFT to make it back over $50. Right now it has found resistance, as the 1,2 & 5 min chart look like it has hit a ceiling. If there are really buyers getting back into the techs, this stock should get a bigger boost than it is right now.

 
 
  John Seckinger   8/29/02,  10:40:56 AM
Looking at the 30-year cash bond (TYX.X), Thursday's free-fall in yields began with a gap lower and test of a retracement level at the 4.95% area. Currently at 4.96%, Treasuries should continue seeing lower yields and a test of August 14th's 4.82% low is not out of the question. However, a move back above 5% will most likely null the recent gap move. Remember, lower yields means higher prices. Note: Yes, it is my opinion that the bond market right now is not as great of a leading indicator as it was just a few months ago; nevertheless, it should not be long before all eyes turn towards bonds for guidance.

 
 
  Jim Brown   8/29/02,  10:39:00 AM
Swing Trade Signals
This was an interesting bounce as Jonathan already outlined. There is strong buying on the Nasdaq led by two strong buy programs at 10:10 and 10:28. Despite the multiple chip sector downgrades, transportation and airlines the markets are holding up well. Why anybody would trigger a buy program today, other than to cover an already short position, is beyond me. The volume in everything but QQQ/SPY is very light and leads us to believe it is the mini hedge funds battling it out today. If you exited on the dip I would be looking at a break back below the OEX 460 level as a new entry point.

 
 
  Jonathan Levinson   8/29/02,  10:31:49 AM
Great insight on the Fed's open market activity and the stealth buying conspiracy theory. Where can I obtain current data on the open market activity you were supplying yesterday? Keep it guys. You are invaluable !

Here's a good starting place: Link

 
 
  Jonathan Levinson   8/29/02,  10:25:56 AM
This has been an interesting bounce. The move into the gap telegraphed the climb to resistance at 1320 COMPX, and the TRINQ almost collapsed, getting down to .45. The problem for bears is that the pop, which verged on hysteria buying, happened too fast to work off the oversold stochastics readings on the intraday stochastics. Only the 5 and 1 minute bars became overbought. The QQV collapsed on an intraday basis as well, dropping nearly 2 points on the move. On a pure volatility basis, QQQ puts became a buy at that point, but of course, price is the only action, and those puts could get cheaper if the COMPX 1320-25 ceiling fails to hold. Bulls are noting that there's an unfilled gap starting at COMPX 1340. Like Jim, I'm not particularly bullish for the rest of this trading week, and this may well be a put buying opportunity. However, I'm inclined to leave a perfect entry aside and wait for a confirming breakdown back into this morning's gap to avoid the possibility of trying to short a rocket launch on the COMPX. It looks like we may be getting it as I type.

 
 
  Leigh Stevens   8/29/02,  10:25:06 AM
Subscriber QUESTION: "QQQ goes from 25.5 to 23.02 in 3 days. Logical Stops would be set at 25.6 (just above the Right Shoulder)and 24.7 (above the Neckline). How would you set the Trailing Stops after that to protect profit and avoid being taken out prematurely? "

RESPONSE: Well, when you use "trailing" stops you ALWAYS have the risk of being stopped out prematurely. Its a numbers game. More often then not trailing stops will keep you in the trend - then again, how "tight" you keep trailing stops is a big variable.

Right now, trailing stop on QQQ could be set at 24.05, just above the 23.95 swing high on intraday charts like 30 min. I myself favor taking profits at objectives - such as 23 based on H&S top pattern and keeping stops loose - but this approach doesn't "work" for everyone's trading temperment and philosophy.

On taking profits at ojectives - in the example of a QQQ objective at 23 - after a sell off of this much, and with an even number objective like 23.00, my buy order (to cover shorts) would be in at 23.05 or 23.10 as you can figure that the sellers will back off from offering as the stock nears the even number.

 
 
  Jim Brown   8/29/02,  10:06:29 AM
Swing Trade Signals
We are seeing a little dip buying here and traders wanting to take profits from the current SHORT position may want to consider the merits of getting out now and getting back in at a higher number. The fall back position would be to reenter at 454 if the bounce fails. Just an observation. I still expect it to go lower by tomorrow but that is just my opinion. As Jonathan observed there was a lot of 30,000 share buys on the QQQ this morning which Xfiles conspiracy theorists speculate is the Fed trying to hold up the market.

 
 
  John Seckinger   8/29/02,  10:06:20 AM
Looking for Patterns: Dollar weaker, Dow lower. Dollar weaker, Gold Higher. Yield curve "more positive," Dow weaker. Here are a few new ones: Oil and Utility Index lower, Dow lower. All of these correlations appear to be "normal" and rational.

 
 
  Jeff Bailey   8/29/02,  10:05:23 AM
Bearish Channels P/F chartist will use the technique called "channeling" to look for various technical channels that may serves as support on a downward move or upward move. These channels are "similar" to regression channels a bar-chartist will use. However, unlike a bar chart, where a longer period of observation is needed after/during a potential topping breakdown, the p/f chart allows earlier identification of channels. Here's a chart of the S&P 500 (SPX.X) on a $5 box. Link

 
 
  Leigh Stevens   8/29/02,  9:57:27 AM
INDEX Comments: QQQ - Have met the "minimum" downside objective implied by its Head & Shoulder's top pattern by the decline to 23 this morning - well, the intraday low so far is 23.02. Hey, 2 ticks. Anyway, next anticipated support, below 23, is the prior swing low in 22.50 area. As I've been suggesting, 23 is an area to take some profits on short positions given the potential for a bounce based on Q's & Nasdaq being quite oversold now on a short-term basis.

 
 
  Steven Price   8/29/02,  9:54:53 AM
Greenspan will begin speaking shortly in Jackson Hole Wyoming, so expect some choppiness as his comments progress.

 
 
  Steven Price   8/29/02,  9:52:24 AM
Semiconductor Index (SOX.X) : 293.99 -9.81 the SOX has broken support at 300 and is now back into its descending channel from the middle of April.

 
 
  Steven Price   8/29/02,  9:48:30 AM
Analog Devices (ADI) $23.45 (-0.85) OI put play, entered at $25.96, found support late yesterday at $24.00. After today's lower open the stock attempted a rebound, but has now found resistance at that $24 level. $23.38 previous daily low could provide mild support and $22.50 below that. First level of real support looks like $22.

 
 
  Leigh Stevens   8/29/02,  9:48:07 AM
Subscriber QUESTIONS: "Do you know the symbol for Program Trading (premium value) in Tradestation. I know everyone watches PREM in Qcharts, just can not find its counterpart in Tradestation."

RESPONSE: "PREM" in Q-charts doesn't mean all that much unless you have real-time futures quotes. If you have, in TradeStation you can do a Spread chart - one symbol minus the other. In a chart window - Insert Indicator - Spread - enter the two symbols.

AND -- "Hi Leigh: I use trade station. When I put $SP02U or $ND02U, it says invalid symbol."

Don't use $ sign. In a TradeStation chart window, do insert Symbol -Futures - Lookup (description) - type in "S&P 500" and it will list all the S&P futures symbols. "SPU02" for Sept. S&P futures; if you do the same for "Nasdaq 100" - Sept. futures = NDU02.

 
 
  Jeff Bailey   8/29/02,  9:45:13 AM
Gold/Silver Index (XAU.X) $68.25 +2.17% ... $1 box chart shows XAU.X giving triple-top buy signal and breaking trend here. This is bullish technicals that "gold bugs" were looking for. Link

Dorsey/Wright & Associates and most institutions will view on $2 box to take out some of the volatility that XAU.X will offer. Link which shows more formidable resistance near the $75 level.

 
 
  Jonathan Levinson   8/29/02,  9:43:51 AM
A slew of 30,000 share bids just appeared in QQQ on that little 5 cent drop and the fall was briefly arrested.

 
 
  Jim Brown   8/29/02,  9:43:37 AM
Swing Trade Signals
No bounce yet and considering the number of Emini-S&P contracts going through at the low of the day I suspect we may not see one. Shorts are smelling fear and backing up the truck.

 
 
  Steven Price   8/29/02,  9:43:12 AM
Goldman Sachs: $75.95 (-1.13) OI Put play, entered at $79.53, traded as low as $75.50 this morning. There may be some psychological support at $75.00, and conservative traders may want to take 1/2 profits around that level. There may also be support at $74.00, based both on the daily chart and the 50-dma of $73.84

 
 
  Jeff Bailey   8/29/02,  9:41:08 AM
Kronos (KRON) $24.85 -7.42% ... software stock down rather sharp after Fulcrum Global Partners said it believes that "sell-rated" KRON may be overstating 2002 EPS by about 10% due to their practice of capitalizing R&D; while the capitalization of R&D may be commonplace in some industries, in the software industry product development is considered the primary shource of comptetitive advantage and is a real cost of doing business. Price target for Fulcrum is $23.00. Link

 
 
  Jonathan Levinson   8/29/02,  9:37:46 AM
The TRINQ seems awfully low at 1.08 given the gap down open on the COMPX. The weekly 5(3) stochastic is now in a bear roll, and every other shorter 5(3) stochastic is buried in oversold. Bond yields are strongly down, and HUI and XAU are up nicely at the open.

 
 
  Jeff Bailey   8/29/02,  9:36:56 AM
General Electric (GE) $30.37 -3.03% ... stock down after Lehman cuts GE's 2003 estimates to $1.75 from $1.81 (below consensus of $1.81) base on the following items: Believes GE's pension income could be $300 million lower in 2003, worth $-0.02 EPS, expensing stock options could cost another $-0.01; and firm's updated Aircraft Engines and Power Systems 2003 forecast has a combined negative impact of $-0.02 EPS. Link

 
 
  Jeff Bailey   8/29/02,  9:35:16 AM
The 9:00 AM intraday update has been posted. Link

 
 
  John Seckinger   8/29/02,  9:32:36 AM
Current Events: There is a story out of Israel that the US has secured plans to attack Iraq by the end of November. This story could be partly responsible for a weaker dollar and short squeeze in Treasuries. Volume is thin, however. Other news: Talk of Asian Central Banks buying five years notes and selling US Dollars to help their local currency. All of these events should weigh on equities.

 
 
  John Seckinger   8/29/02,  9:27:00 AM
The Dollar continues to trade technically weak, down -0.55 at 106.53 and should test near the 106.13 level during trading on Thursday. The five-year note continues to trade relatively strong, up 15/32nd's and allowing the yield curve to become "more positive". In this market environment, bids in the five-year note is defensive towards equities. Note: There is a $3 billion Italy deal today, priced 45 basis points over Treasuries (100 basis points equals 1.00%) and could affect both the five-year note and the yield curve. Supply certainly was an issue yesterday.

 
 
  Jim Brown   8/29/02,  9:22:49 AM
Swing Trade Signals
Did somebody say August drop? Looks like we are going down again and fast. I would expect a post opening bounce as most of these gap down openings are followed by dip buying before the trend continues. Based on the futures I think I will leave the stop where it is at 468. The game plan is still to remain short until tomorrow unless the trend changes. This SHORT signal should make up for several that did not go our way recently!

 
 
  Steven Price   8/29/02,  9:14:50 AM
UBS Warburg downgraded several chip equipment makers, based on valuation, in cluding Novellus (NVLS) $24.18

 
 
  Jim Brown   8/29/02,  9:14:43 AM
Swing Trade Game Plan - Click here: Link

 
 
  Jonathan Levinson   8/29/02,  9:14:33 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.

 
 
  Jonathan Levinson   8/29/02,  9:14:20 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,  9:14:11 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.

 
 
  Leigh Stevens   8/29/02,  9:14:05 AM

S&P Futures fair value numbers: S&P ($SP02U) = +.26; Nasdaq 100 futures ($ND02U) = +1.55 (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)

 
 
  Leigh Stevens   8/29/02,  9:13:55 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -9.90 at 906.60; Dow Industrials > -82.00 at 8600; Nasdaq 100 > -13.00 at 933.00

 
 
  Jeff Bailey   8/29/02,  9:13:42 AM
General Electric (GE) $31.30 Lehman lowered earnings estimates for 2003 on GE from $1.81 to $1.76.

Semiconductor Index (SOX.X) 303.80 With the Nasdaq opening down look for the SOX to break support at 300. Previous low 282.75 intraday.

 
 

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