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  Jim Brown   9/6/02,  11:37:37 PM
Swing Trade Game Plan - Click here: Link

 
 
  Steven Price   9/6/02,  5:07:55 PM
I would like to thank all of our readers for their "Ask the Analyst" suggestions. I received many requests and will do my best to answer the ones I received the most requests for, as well as trying to get to some of the others on next week's edition.

 
 
  Steven Price   9/6/02,  4:53:04 PM
IBM: Last month I profiled a long IBM Sep 65-70-75 butterfly, priced between $0.80 and $1.00. When IBM broke out to the upside a couple of weeks ago, I received several questions from readers regarding whether or not to close it, as it moved away from the strike. My response was to hold the play, since it was initiated at a low cost and still had time to go in our favor.

The butterfly is now bid at $1.25, with $1.80 of intrinsic value. The spread can max out at $5 if we close at $70 on expiration and it will be worth $0.00 if the stock is over $75 or under $65. I thought I would update current holders of the play who might be considering getting out for a very small profit (which may actually be zero with commissions). I would still continue to hold the play, as IBM has been turned back from its old resistance level of $74 (which would be break-even on the play), and still has the potential for a nice reward with little risk.

 
 
  Jim Brown   9/6/02,  4:00:59 PM
Jeff will be back on Tuesday. Be sure and give him a hard time!

 
 
  Jim Brown   9/6/02,  3:55:39 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
And the answer is ------ I am holding over. I think the downdraft at the close as well as the likelihood of bullish sentiment fading over the weekend make the risk/reward acceptable. Sure would like to get under OEX 446.

 
 
  Jim Brown   9/6/02,  3:50:22 PM
Swing Trade Signals
Did somebody yell FIRE? The declining volume is going vertical on my chart. The order on close orders must have been sells and not buys or we would be going the other direction. Big money may be heading for the barn.

 
 
  Jim Brown   9/6/02,  3:34:34 PM
New OIN Call plays for Monday = LLL, OMC, BYD, TRMS, MSFT
Read the details in this weekends newsletter. No new puts.

 
 
  John Seckinger   9/6/02,  3:33:28 PM
Time to glance at next week's economic reports. I will give you my unbiased feeling on each. Monday: Wholesale Inventories (market won't care) and Consumer Credit (getting more important; gets a 6/10 rating). Wednesday: Fed's Beige Book (not sure, since Wednesday is September 11th). Thursday: Initial Claims (might get knee-jerk from market, but that is it; 4/10). Export and Import Prices (weakening dollar gives rise to import prices, so I think this is old news; 2/10). Q2 Current Account Deficit (should go from -112 to a negative 125 billion, should have more weight than people think; 7/10). Friday is the big day, with Sept Michigan Sentiment report released (should actually hold more weight than PPI and Retail Sales; gets highest weekly rating of 10/10). Retail Sales, released on Friday, is somewhat priced in following Wal-Mart's same-store sales news (7/10). PPI is really becoming a non-event, since we know there is no pipeline inflation and it now makes sense to wait for CPI for a better feeling of deflation (5/10).

 
 
  Jim Brown   9/6/02,  3:31:56 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We will close the open SHORT signal at 3:50 if we are not stopped out and it is not below our trigger point of 448. We still have plenty of time before the close and we could still see a decent drop. If we are far enough below 448 at the close we will hold over. A sell off into the close could continue on Monday morning. Event risk is on our side over the weekend.

 
 
  Kent Barton   9/6/02,  3:22:05 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jonathan Levinson   9/6/02,  3:08:14 PM
Breadth has failed to improve with those Shelley-activated buy programs. COMPX volume shows 891 advancing shares to 118 declining, and the TRINQ is still at .29. Volume overall is light, 1.02B shares traded so far. I can here Tom O'Brien already crowing over it: "OK folks, wattawe gat ovah heyah, light valume on the Naz, big upmove on declining valume folks, battam line is they gonna run the price right back down theyah."

 
 
  John Seckinger   9/6/02,  3:04:08 PM
Shares of utility company Allegheny Energy Inc. (AYE) are lower by 8.44 percent at 17.56 following the company's decision to dismiss its top power trader. This trader was found to have violated internal conflict of interest policies.

 
 
  Jim Brown   9/6/02,  3:02:00 PM
Swing Trade Signals
The 3:PM buy program that attempts to juice the markets over current resistance was right on schedule. It failed on the first attempt. It will take a lot more volume than we have seen in the last hour to break out of this trading range. I am not saying it won't happen but this is some strong resistance.

 
 
  John Seckinger   9/6/02,  2:58:39 PM
Following the cash: The US Dollar is higher by 0.63 percent, but more importantly has tested the 22 DMA of 106.76 for the first time in seven sessions. The contract is currently just underneath at 106.64. Bonds are clearly seeing an exodus of funds, as the 30-year futures contract is lower by one full point and 21/32. Lower bonds usually means higher Commodity prices, and the CRB index is up by 0.88 percent. The interesting move is the resilient gold market, up 1.28 percent at 73.05. Next resistance appears to be just above 74.

 
 
  Jim Brown   9/6/02,  2:57:56 PM
Iraq - British media announced today that 100 British and American planes attacked command and control centers in Iraq. The US admitted it but said the number of planes could be exaggerated. They also admitted this was the second such strike in a week. The area attacked was what would be a launch area for scud missiles at Israel if Saddam has any left. It is interesting that this did not make bigger headlines on CNBC. Link to story: Link

 
 
  Jonathan Levinson   9/6/02,  2:46:13 PM
What about laddering in some more QQQ puts, like in Jim's Dow put plan? Or am I just dooming us all to failure if I go more short? :)

Laddering makes sense as long as you're laddering at different prices. Target shooting in a narrow range only increases your exposure to the position without really improving your entry. Don't try to hit the perfect price- getting in range should be good enough.

 
 
  Jonathan Levinson   9/6/02,  2:39:05 PM
Shelley tells me that she just put on her short position a few moments before that program hit, and sends her apologizes to the rest of us.

 
 
  Jim Brown   9/6/02,  2:33:52 PM
Jim: Arch Crawford, Went short at SPX 893, stop at 902. Still short QQQ from yesterday. Thinks there will be a hard decline today or Monday (if Monday, as a result of a news event). However this also could be a bottom forming (!) Expects gold to go up sharply next week. Just FYI SH.

Had a couple buy programs come through in the last few minutes that I bet Arch wishes were sell programs instead. I know I was. Could be some hedge fund short covering as we near the close.

 
 
  Jonathan Levinson   9/6/02,  2:27:46 PM
A buy program has just erupted on the COMPX.

 
 
  John Seckinger   9/6/02,  2:15:19 PM
Crude Oil futures above $30 for the second time in two weeks as President Bush looks to Russia, China, France and the U.K. for help in ousting Saddam Hussein. If curious on relationship between Crude Oil futures, the XOI Index, and specific stocks; please go to this page Link

 
 
  Jonathan Levinson   9/6/02,  2:12:35 PM
It looks like one beautiful setup from here, if we don't get whipsawed out of it! Picture perfect.

 
 
  Jim Brown   9/6/02,  2:05:24 PM
Swing Trade Signals
These are some of the factors I was looking at when I pulled the trigger on that SHORT signal. The resistance was solid and internals were dropping. This is a telling graphic. Chart link: Link

 
 
  Jonathan Levinson   9/6/02,  2:03:48 PM
This looks like the long awaited COMPX rollover. The 60 minute 5(3) stochastic is crossing south from overbought, but I'd prefer to see another 10 cents' worth of confirmation out of the QQQ's to 22.85 to reduce the risk of a whipsaw. The TRINQ was rising along with price for the past half hour, which is a divergence that signals distribution to me. The TRINQ is still low at .28, and QQV is down 3.18 on the day. Bond yields are pulling back from their highs and precious metals are holding their gains on the day.

 
 
  John Seckinger   9/6/02,  2:03:14 PM
Disclaimer: I cannot, per SEC law, answer specific stock questions. I apologize for any inconvience. We cannot answer questions that relate to stocks in your personal portfolio because we are not brokers and have no way of establishing suitability requirements based on your financial status. We can answer educational questions in general in the monitor for all to read regarding any specific stock. It is a thin line but the rules say we cannot give any individual investor individual advice. We are a newsletter not your personal financial advisor.

 
 
  Steven Price   9/6/02,  1:57:57 PM
Reader Question: Steve, Whats your opinion of SAP as a near term short (Sep/Oct). It's seems very week on a otherwise strong day. As always thanks for all the lessons and info. Gary

Response: SAP $16.57 (-0.27) SAP is looking extremely weak today, as you pointed out. The August 5 low of $16.09 is providing support right now and I think a trade below $16 would make this a good short candidate. A trade of $16 also provides a double bottom breakdown sell signal on the PnF chart.

 
 
  Jim Brown   9/6/02,  1:48:41 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Sorry about that last entry. I barely got it posted before the bottom fell out on the 1 min chart. We were triggered on the SHORT signal at 13:51 but I doubt anyone got in at the OEX 448 level. The averages at the trigger point were OEX 447.69, DJX 84.36, Compx 1297.97, NDX 926.72, SPX 894.85, DIA 84.55, SPY 90.00. The initial stop loss will be OEX 451 (SPX 901, DJX 85.10) This should give the averages plenty of room to run but take us out on a real breakout.

 
 
  Mark Whistler   9/6/02,  1:45:46 PM
Moody's announced earlier that they were changing the outlook for the life insurance sector from stable to negative. Several companies were put on review for potential downgrades including: JHF, MET, and MNY.

 
 
  Jim Brown   9/6/02,  1:40:50 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I think we are about to fail. Go SHORT the broader market with an OEX trade below 448.

 
 
  Steven Price   9/6/02,  1:38:19 PM
Reader Question: AIG seems?!@? to be hitting resistance at 60, at 2.5% increase compared to the IUX at 1.5%. Doesn't seem to be much down volume though. What do you think?

Response: AIG $59.88 (+1.56) A look at today's 5 min. chart shows AIG being repeatedly turned back from $60. I would not close the short position unless we see the stock trade decisively over $60. Our current stop loss is $61.00, and I think this is about right. I also would not initiate new shorts until we see a rollover from this level. I'd like to see a trade below today's low of $58.57 to initiate new shorts. Like many short positions, we are seeing rallies to resistance right now. Although AIG is showing a higher percentage gain than the Insurance Index (IUX.X)(259.35 +3.68), the IUX is showing a very similar 5 min. chart with respect to resistance at 260. I have a hard time seeing this sector get through resistance pre- 9/11, however a rising tide does lift all boats and it will be interesting to see how strongly the broader markets rallyinto the close heading into next week. If the market shows a close near its highs of the day, I may want to close some shorts as this may indicate the buyers on the sidelines have already started to get back in.

 
 
  Jim Brown   9/6/02,  1:36:52 PM
Swing Trade Signals
Sure looks like we are about to see a directional move. The OEX is very close to Wednesday's high of 449.74. With resistance at 450 we are very close to a breakout or a breakdown. The Dow has finally broken through the resistance at 8450 but is also still wedging up very slowly. With 2:20 left to go in today's trading there is plenty of time for a major move. I am watching the A/D line which has been flat for the last 30 min even as the averages press upward.

I am wondering if there are a lot of investors that really want to hold over the weekend. Shorts should have covered by now so where will the buying come from to hold it up?

Seriously considering a short right here with a tight stop.

 
 
  Jim Brown   9/6/02,  1:23:49 PM
Back from the depths of frustration. About 10:AM I noticed my browsers were running very slow. I clicked on an email and got a message

"C Drive not formatted
Format now Y/N"

Anybody familiar with PCs knows what comes next. I have lost four C drives in the last two years across three different computers. I am the poster child for reasons to backup your data so nothing was lost but it is an exceedingly frustrating fire drill. Buy a new drive, reinstall the operating system and every program you ever downloaded. Hopefully you saved the passwords, registration keys, authorization codes, etc. Once running you get to spend a week reloading all your bookmarks, favorites, usernames and passwords from all the sites you visit including bank accounts, credit cards, etc.

This is the good scenario and assumes you backed up all your critical data! I am only recounting this for the benefit of anyone who does not do regular backups. Please, take a few minutes this weekend and copy all your important files to a different drive. I bought a 120GB 7200 drive at Best Buy this morning for $249. You will easily lose more then $249 worth of time and data WHEN your drive crashes. Every drive crashes if used long enough. It is a fact of life.

Now, did anything happen while I was out? (grin)

 
 
  Jonathan Levinson   9/6/02,  1:20:24 PM
Breadth has weakened somewhat despite this move up on the COMPX, now with 708M advancing shares to 83M declining. The TRINQ is "up" to .27. Many readers are asking for targets- I'm sticking by mine from earlier, being 1300-1310 on the COMPX. However, note the ascending wedge and be sure to wait for a stochastic rollover and a clear violation of the uptrend before getting in, and if you choose to do so, remember to set your stops.

 
 
  Mark Whistler   9/6/02,  1:10:43 PM
The 1:00 PM intraday update has been posted. Link

 
 
  John Seckinger   9/6/02,  12:46:11 PM
There are not many Dow stocks in the red today; nevertheless, shorts do not appear worried when selling shares of MCD and MO. McDonalds (MCD) is currently down 3.50 percent, and the intra-day low of 20.97 almost touched yesterday's 52-week low reading of 20.81. With shares at 21.22, only a rally above 21.75 by the close will save the recent bearish sentiment. Looking at MO, shares are down 4.54 percent and strong support most likely will not come into play until just under 45 (shares currently at 46).

 
 
  John Seckinger   9/6/02,  12:39:05 PM
Fox News erroneously reported a commuter jet was being escorted by fighter jets.

 
 
  John Seckinger   9/6/02,  12:14:44 PM
Price compression in the Dow, confirmed by a tightening of Bollinger Bands. The Upper Band is currently at 8437, while 8393 represents the lower band level. Therefore, a significant move in the Dow is expected shortly. Unfortunately, such price compression only explains that volatility will increase; not which direction the market will head. My gut does say lower. Speaking of volatility, the VIX.X index is currently lower by 4.40 percent.

 
 
  Jonathan Levinson   9/6/02,  12:11:50 PM
Breadth has weakened slightly from "astounding" to "almost astounding", with 602M advancing shares versus 40M declining. The TRINQ has "spiked" all the way to .16, still buried in overbought extreme. The QQV is lower, however, down 2.54 on the day. Readers have been noting the bullish move in metals, with the HUI up 1.66 and XAU up 1.22.

 
 
  Jonathan Levinson   9/6/02,  12:07:33 PM
That glossy brochure is unfortunately as of September, 2000. Try this Link

 
 
  Jonathan Levinson   9/6/02,  12:03:05 PM
Is there a place to find the top stocks in the OEX. The ones that have the biggest % moves or holdings that affect it.

Here's a very cool, full color Link

 
 
  John Seckinger   9/6/02,  12:02:13 PM
Bonds. The December 30-year contract is now down over one full point (32/32), usually meaning that a recovery back to unchanged will not happen. This weakness might be providing the underpinning bid in equities. The Dow has now used the 22 PMA (five-minute chart) as support on at least three occasions, and this average is currently just below at 8407. One of these times sellers will win the battle and take prices down to the 50 PMA at 8381. What could be the catalyst for weaker equities besides INTC coming under pressure? A lower utility average for one, currently only up 0.07 percent and looking "heavy".

 
 
  Jonathan Levinson   9/6/02,  11:59:01 AM
You're not the only one eyeing that pattern on the QQQs. I'm hoping to jump into some puts on a roll over in the $23.10 area. This area also coincides nicely with the 50 PMA on the hourly chart and also where the stochastics "should" go into roll over mode. Thank you to all the OI crew; your inputs are invaluable.

I note as well that the 20 day sma is 2 cents away from the 50 day sma on QQQ, 24.05 and 24.07, respectively. A cross would be bullish to me, but if it doesn't break north, that will look like a "kiss of death".

 
 
  Steven Price   9/6/02,  11:54:24 AM
If you would like to see a particular stock analyzed in this weekend's "Ask the Analyst" column, please send me an email with "Ask the Analyst" in the reference line. Although I will only be able to do a couple of these, you will get an in depth analysis with some accompanying charts to illustrate my points.

 
 
  Steven Price   9/6/02,  11:44:20 AM
Reader Question: Re: IBM - what do you think about going short here ($73.66)? thanks much.

Response: I still like IBM, as well as WY and AA as shorts. All are showing weak percentage gains compared to the Dow. However, I would still wait for a rollover in the broader markets before initiating short positions. Although I am predicting a sell-off before 9/11, there is still the possibility that the buyers are feeling more comfortable as we approach that date and are sneaking back in a little early trying to do some bargain shopping before a post 9/11 rally. We would need a 380 point gain to end the week on a positive note, so I am not yet a believer in the rally. However, I am not going to fight what I see.

 
 
  Jim Brown   9/6/02,  11:37:46 AM
Jim is currrently experiencing computer issues and is offline temporarily. He will be back online in a few hours.

 
 
  Steven Price   9/6/02,  11:31:30 AM
Reader Question: Hi Steve, The other day KBH gave a great double bottom BUY at $45 (DB, stochastics, candles, multiple days down) whlie the MM was looking for a new PUT buy below $45.70 , LOD, with support at $45. My question is simple. With the positive data released on KBH and all of the indicators looking for reversal why wouldn't you shift positions to the long side rather than just being stopped on the SHORT. Any comments welcomed , thank you ....

Response KB Homes (KBH)$49.00 (+0.10) Several other homebuilders (RYL, CTX, TOL) were struggling with their 50-dmas, as is the DJ Homebuilders Index ($DJUSHB). There is also a 200-dma looming above in the index. The sector has been on such a tear, and heading into the winter, it seems it will have trouble sustaining its recent rally. Piling onto an extension following good news is a tough play, as you most often get caught chasing. The positive earnings guidance from LEN and HOV came after this quarter has already been profitable and does not necessarily mean the trend will continue. While interest rates are low, the talk amongst Fed Governors has been more skewed toward raising rates than lowering again. A look at KBH's chart shows a lot of resistance between $51-$52, as well. The other builders also have significant resistance just above where they are currently trading. With all of these factors weighing against a long play, I would need to see a significant breakout in the index, or KBH trading above resistance to go long on KBH. Thanks for the question.

 
 
  Jonathan Levinson   9/6/02,  11:30:42 AM
Squinting at the COMPX 5 minute chart, I see a bearish ascending wedge projecting to just above 1300. These are not the most reliable of chart patterns, but without consulting my copy of Bulkowski, I note that the intraday 5(3) stochastics are starting to top out, and the projection on the rising wedge coincides with a resistance level that kept a lid on Wednesday's rally. That's the first level to look for a rollover- COMPX 1300-1310.

 
 
  Steven Price   9/6/02,  11:20:27 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Steven Price   9/6/02,  11:14:55 AM
Weyerhauser (WY): $50.19 (+0.09) new OI put play WY looks very weak on the market rally. This looks like a great short entry candidate on a market rally failure. With September 11 coming up next Wednesday I expect some selling, however, I would wait to initiate shorts until we see an actual turnaround. WY found support this morning at $50.00, so look for a trade beneath this level, confirmed by a rollover in the Dow to initiate a short position.

Keep in mind that any short positions should be closed by the end of day next Tuesday. Thus shorts are short-term plays. While the basic economic problems will not change after 9/11, there are no doubt investors on the sidelines waiting until after the anniversary to go equity shopping. The word on the trading floor is that there will be some buying on Tuesday, but most likely we will see a rally on Wednesday or Thursday.

 
 
  John Seckinger   9/6/02,  11:13:05 AM
What about the yield curve and its implication towards equities?

Response: Following a lower-than-expected unemployment rate, fixed income traders certainly took profits in the five year sector; thus "flattening" the curve or making it "less positive." Five-year notes are down 11.5 ticks, while 10's are lower by 13. Weakness in five year notes is freeing up cash; however, I do not think that all of the cash is being put into stocks. Most likely, as was the case with Institutions I dealt with while in Chicago, firms are exiting to the sidelines and waiting until near the close for confirmation. If stocks waver, the cash usually goes right back into the yield curve.

 
 
  Jonathan Levinson   9/6/02,  11:11:12 AM
We have 477M advancing share versus a mere 26M declining on the COMPX. There are 42 new lows and 9 new highs, 2000 advancing issues to 770 declining. The TRINQ remains buried at .15 and the QQV is down 1.84. The question is whether this level of bullishness is sustainable, particularly given that other than a few minor spikes, the best we've seen is a slow, creeping advance upward since the gap up open with resistance close overhead.

 
 
  John Seckinger   9/6/02,  11:02:01 AM
Pattern Recognition: Starting with the Dow, the downside pivot may be the 22 PMA on a five-minute chart. This moving average is currently at 8384 and has already acted as support on two separate occasions. Turning to Oil, the session's high of 480.70 just took out the relative low of 479.42 set on August 29th before falling back to current 476.80 readings. The 22 PMA on a five minute chart within the XOI.X index also seems to be psychologically significant; however, more importantly will be whether the index settles above 480.70.

 
 
  Jim Brown   9/6/02,  10:55:59 AM
Bonds Better Than Stocks? - There is an interesting article by Bill Gross on the Pimco website this morning. Bill makes a strong case for Dow 5000 in our future. While it is in Bill's favor for stocks to go down and bonds to go up he is a well respected analyst/market guru. You might take a few minutes to read it but be aware that their website is slow today after being mentioned on CNBC this morning. Now, how much are those 2005 Leap puts?
Site Link: Link

 
 
  Jonathan Levinson   9/6/02,  10:50:50 AM
Where do I get the fed info that was in your 10:34 response?

You can access it at the link below. Note that you have to do the math and track it daily to determine how much is expiring each day.

Link

 
 
  Jonathan Levinson   9/6/02,  10:34:17 AM
Fed accepts 3 billion overnight repos. 8.5 billion expire today for a net drain of 5.5 billion. Prediction: markets swoon by end of day. - Russ

Those numbers coincide with mine exactly. Well done, Russ. If our analysis holds true, there should be insufficient liquidity for a concerted push beyond these levels. I am viewing anything near the day highs as a good short entry, but will look to the indicators for confirmation of a rollover instead of blindly attempting to pick a top. On that note, the TRINQ continues to read .14. This is a very extended move.

 
 
  Jim Brown   9/6/02,  10:26:52 AM
Swing Trade Signals
Now is the time to see which direction the market is headed. After selling off much of the mornings gains we have now seen a new pickup in buying. Those traders that did not want t buy the opening bounce have decided to go bargain hunting now. The key here is if they have enough conviction and volume to make the bounce stick. Since we are not at any significant support/resistance point the best plan for me is to watch patiently. Let the volatility ease and see who wins the battle.

 
 
  Steven Price   9/6/02,  10:23:51 AM
IBM $73.53 +1.35 OI put play IBM (picked at $77.96) has behaved in textbook fashion this morning. While it is up slightly, it has met resistance at $74, (today's high is $73.99) which was the ceiling on its earlier 7-week rectangle. Since the stock dropped back into this pattern, which held it between $66 and $74, it has been once again trapped with an overload of supply at $74.

 
 
  John Seckinger   9/6/02,  10:22:42 AM
How does SOX look?

Response: The SOX index was at the bottom of its daily Bollinger Bands yesterday (discussed in Index Trader Wrap), giving some concern over risk when shorting. Nevertheless, the index was below the 282.75 pivot and least resistance was still lower. However, the SOX actually gapped above the 282.75 pivot as Friday's session commenced. If short the index for the long term, 317 can be used for a stop area. If more aggressive, a stop above 300 makes sense as well. If even more aggressive, a close above 282.75 can be reason to take 1/2 profits off the table and wait for the dust to settle. During trading on Friday, as INTC goes, so goes the Semis. Further resistance in shares of INTC can be seen at 16.50 and 17. If shares lose momentum and profit taking sets in, support is felt at 15.85 and 15.27. Watching shares of INTC and executing positons on the overall Semiconductor Index is a viable trading strategy. Chart of the SOX as of yesterday's close: Link

 
 
  Jonathan Levinson   9/6/02,  10:16:43 AM
This pullback on the COMPX should be encountering support here, just above this morning's opening gap. Either we get another bounce to the day highs or a gap fill. I prefer to short rollovers at the peak or slightly below the peak of a move than to wait for a confirming breakdown, but a break of the day lows would be an appopriate short entry as well. Bear in mind that you might or might not want to hold this position beyond today or Monday depending on how you feel about the chances of a pre- or post-911 rally.

 
 
  Steven Price   9/6/02,  10:12:39 AM
Reader Question: Good morning Steven: Looks like QCOM now is not a short position anymore, we were long on Tues. than short on Wednesday what do you think, is this a trap, just don't see where INTC did so great, they would not give guidance, sales down, so many negative indicators from them, then analyst now say it was not as bad, what where they looking for, becomes sort of a guessing game with the analysts not all of them, so the real last resort would be charting, Charts give facts, your professional comments are appreciated for this morning on MM. Thank you, Michael

Response

Qualcomm (QCOM) $27.80 +1.07 Qcom is right in the center of its recent range between approx $25 and $30. The next buy signal in QCOM does not come on the PnF until $31.00 and even that level has some resistance. The real buy signal I see is $32. The stock is currently in a column of "O"s and would require a trade of $30 to reverse that negative sign. Right now it is looking up with the rest of the techs after the Intel remarks spurred a Nasdaq rally. While Intel's news was not as bad as expected, it still falls into the category of negative news, which is all we are hearing recently. The jobs report was encouraging, but as far as the techs are concerned, things are not getting better, they may just be a little oversold in the short term. . While some investors who piled on short are no doubt covering after the news wasn't as bad as expected, this is still a revenue lowering. If I wanted to play QCOM, I would probably wait for it to either meet resistance around $30-$31 and look for a rollover, or wait for a drop to around $25 and look for a break in support to go short or a rebound to go long. With it in the middle of its range, turning up on the daily chart but down on the PnF, it's very hard to pick a direction in the stock right now.

 
 
  Jonathan Levinson   9/6/02,  10:06:27 AM
The COMPX is breaking to new highs here, currently 1292, with QQQ trying for 22.90. The TICK.NQ has gone positive at +327, and the TRINQ has eased a little to .15, which continues to be an extremely overbought reading. The QQV is back below 50, down 1.51 on the day, and the shorter intraday stochastics are buried in overbought, while the longer 30 and 60 minute stochs are well on their way.

 
 
  John Seckinger   9/6/02,  10:06:25 AM
With INTC higher by nine percent, it should not be surprising that the Semiconductor Index is up over 6 percent. Other sectors outperforming the Dow (up 1.76 percent) include Biotechs, Oil, Internet, Software, and Telecom. Sectors underperforming are Gold, Treasury Bonds, Utilities, and Healthcare.

 
 
  Jim Brown   9/6/02,  10:04:22 AM
Intel - Several readers have emailed their success with the Intel lottery play from yesterday. Congratulations! Those of us who held the market short overnight hoping for a bigger Intel miss and lower jobs are going to sit in the corner and lick our wounds while you celebrate!

 
 
  Jim Brown   9/6/02,  10:01:13 AM
Swing Trade Signals
The SPX took out Wednesday's high by less than two points before rolling over. The OEX missed hitting the Wednesday high by a point. The Dow also rolled over within 8 points of its high. There is a very strong possibility we have seen the high of the day. I don't have the faith however to try an intraday short here. In the game plan for the week I was going flat for the weekend. I wanted to avoid the possibility of a weekend event and a Monday morning drop before going long for 9/11. This may be a good day to regroup and clear the mind of any bias. It is hard to do that if you are in a position.

 
 
  Jim Brown   9/6/02,  9:51:06 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The closing levels for short signal were OEX 446.31, SPX 891.08, DIA 84.66, SPY 90.09, DJX 84.12, NDX 918.87, Compx 1286.70 QQQ 22.84, Emini 895.25.

 
 
  Jim Brown   9/6/02,  9:50:02 AM
Swing Trade Signals
I am not going to raise the QQQ entry level yet. We have an open signal at 21.50 which seems well out of range but I would rather be late on this than buy too high. If Intel fades this afternoon I will reevaluate the entry. There is no rush to enter and waiting until Monday or even Tuesday would not be out of the question if we see some more weakness.

 
 
  Jim Brown   9/6/02,  9:47:17 AM
Swing Trade Signals
After the initial bounce the markets appear to have caught a second breath and are moving up again. While the rally is based on better than expected numbers from Intel we need to remember how much that stock dropped since the CEO made cautionary comments two weeks ago. Since trading at 19.50 the stock lost nearly 25% of its value to trade at $15 yesterday. Since Intel lowered revenue only slightly it would be reasonable to assume it will move back up to near its prior range. It should not do that today. There were enough dodged comments last night to limit the recovery.

The markets appear to have run out of steam at resistance of Dow 8450 and OEX 450. It is too early to attempt and pick a direction as any dip now could be met with additional buying or it could fail entirely. I think it is time to stand aside for awhile until the froth evaporates.

 
 
  Jonathan Levinson   9/6/02,  9:45:07 AM
I'm recalling the action Wednesday afternoon from 3PM onward. It looks the same here. COMPX 1300 held then, and I'll be surprised if it breaks 1300-1310. I will look for a rollover in that area and consider fresh puts there for a quick play. Given the speed of this rise and the continuous .13 TRINQ reading, it looks like the bulls are trying their best to blow out all their buying at once.

 
 
  John Seckinger   9/6/02,  9:42:41 AM
The two percent gain in the Dow has the blue-chips approaching August 14th's opening at 8479. This area should offer strong resistance. Looking elsewhere, both the Oil and Utility Index has not made up the "signficant technical damage" seen over the last few days; moreover, the rise in the US Dollar (106.39) has still not tested its 22 DMA (106.74) in seven sessions. There is slight weakness in the Gold Index (down 0.70 percent to 71.61) as the dollar rises; however, it would take a close under 70 before sentiment changes from "slightly bullish" to more "neutral" levels.

 
 
  Jonathan Levinson   9/6/02,  9:34:58 AM
Put'er there, Steve. I agree. However, there is a buying frenzy at the open, with the TRINQ reading an astounding .13. The TRINQ is more likely to give lopsided readings at the open when volume is still relatively thin, but so far we have a unidirectional wave of buying hysteria going on. The COMPX gapped up 30 points at the open.

 
 
  Steven Price   9/6/02,  9:26:57 AM
I find it hard to jump on the bandwagon when the best news to hit the market is that Intel didn't lower revenues as much as expected. The jobs data is also encouraging, however keep in mind that yesterday's data showed layoffs occuring at an increasing pace.

 
 
  John Seckinger   9/6/02,  9:25:28 AM
The 30-year Treasury Bond (TYX.X) has risen in yields from 4.7 percent to an intra-day high of 4.827. This is significant because 4.827 was a significant relative low set on August 14th, evidently turning into solid resistance. If Treasuries are going to come under significant pressure and help stocks, this index will have to settle above 4.827 by the end of trading on Friday.

 
 
  John Seckinger   9/6/02,  9:23:58 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jim Brown   9/6/02,  9:23:37 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Close the open short signal at the open and move to the sidelines. The current stop loss is OEX 443 (SPX 881, DJX 83.20) These numbers are likely to be hit on the opening tick. Based on the futures there is no level within range that will allow us to ride out the open with a higher stop and maintain the short. Close the trade and move to the sidelines.

 
 
  Jim Brown   9/6/02,  9:15:51 AM
Swing Trade Signals
The jobs report showed that the government hired 41,000. The majority of gains came in services, government and construction amounting to about 100,000 jobs. Manufacturing lost another -68,000 jobs and was the largest loss of the year. This report is not nearly as bullish as it appears on the surface but the market does not appear to care. The futures have sold off slightly since the +10 point spike when the numbers were announced. Still the markets appear to be headed to a strong open.

We will try to exit out short position at the open and then see what direction the markets take when they hit the next resistance level.

 
 
  Steven Price   9/6/02,  9:15:30 AM
Not to rain on Intel's parade, but a look at the bullish percentages show that the NDX, OEX, Dow and S&P 500 have all reversed in a column of "O"s.

 
 
  John Seckinger   9/6/02,  9:12:41 AM
According to HL Camp and Company, fairvalue for the S&P 500 today is $.16. That price will not change during the day. Program buying is set at $1.52, while program selling should be triggered at $--1.42. FairValue for the NDX 100 today is $1.18. The September S&P futures are currently higher by 8.30 at 891.50, while the Nasdaq futures are up by 15.50. Turning to the Dow, indications via September futures are for an initial move higher by 27 points (contract at 8340).

 
 
  Jonathan Levinson   9/6/02,  9:08:07 AM
The US Dollar Index has spiked to just shy of 106.50 with bond yields up across the curve.

 
 
  Jonathan Levinson   9/6/02,  9:04:27 AM
On cnbc it was mentioned that most of the jobs were gov't jobs, not industry. I suppose many were hired for the upcoming 9/11 events. Without real hiring do you see this as a positive event? Suzanne

Well, the addition of 39,000 new jobs benefits the economy by the so-called "multiplier effect" whereby salaries are circulated through the economy, benefitting a wide number of participants, etc. However, it's certainly not as positive as if the jobs had been created by private industry due to increased demand for products and services. I also note that the numbers are preliminary. For the moment, however, the market is celebrating the data, and we trade what we see.

 
 
  Jonathan Levinson   9/6/02,  8:36:01 AM
CNNfn reports that "The U.S. unemployment rate fell to 5.7 percent in August, a surprising decline. The number of new jobs rose 39,000, a little more than expected."

The Qubes spiked 20 cents in a single tick and are trading 22.57. S&P futures are now up 7.8, NDX futures up 10. Gold dropped $2 off its high above $321.

 
 
  Jonathan Levinson   9/6/02,  8:05:05 AM
The 15 minute US Dollar chart shows increasingly volatile price action, with currently trading just above 106.00. This chart looks bullish to me at the moment, but the employment data could change all that in a heartbeat. The futures are in the green, with NDX +10.00 and S&P +2.00. Again, that's guaranteed to change shortly. Gold hit a six week high yesterday and briefly broke $320. Combined with firm bond prices, this is anything but good news for equities, but again, the jobs data to be released shortly will impact all of these markets. Stay tuned!

 
 
  Jim Brown   9/5/02,  8:53:07 PM
Swing Trade Game Plan - Click here: Link

 
 
  Jim Brown   9/5/02,  8:52:55 PM
The Market Monitor for Thursday has been archived. Click here to view it: Link

 
 

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