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  Jim Brown   9/17/02,  8:55:46 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   9/17/02,  5:29:30 PM
Oracle (ORCL) $9.03 -2.6% ... trading $8.50 for better part of extended-hours after reporting Q1 earnings and revenues that were inline with expectation. Company comments that visibility still unclear to "predict" full year numbers. Link

Oracle represents 3.2% weighting in the Q's.

Microsoft (MSFT) $47.29 -1.02 trading $46.75 in extended hours. Represents 13.4% weigting in Q's. Link

 
 
  Jim Brown   9/17/02,  4:38:05 PM
JPM - Dow component JP Morgan warned after the close that they would miss earnings substantially for the quarter. They said corporate credit losses (-$1.4 billion) were up substantially and they had experienced weak trading performance. Non performing assets were to increase by over $1 billion.

 
 
  Jeff Bailey   9/17/02,  4:37:11 PM
How did your account do today? In the past, I've talked about how I look at the bottom line of my trading account each day. At the beginning of the month, I sweep any gains from my benchmark out to my saving/checking account as that's my paycheck each month.

At yesterday's close, I was smiling as bottom line of account was up roughly 6.6% for the month. Then.... it happened. I was holding a gold stock (BGO) overnight and felt stock would bid today. Unfortunately, I hadn't thought of a potential Iraq concession being in play. While I didn't sell today's low in BGO at $1.29, I came close at $1.30 as account management dictated too much cash esposed, however short-term oriented I was toward the trade, and was too much exposure based on information at hand.

As such, account took a 6% hit near the open as puts went away from me, and BGO from the long side went away. Only FRX Jan. calls held tough, but faded as the day progressed. By session's end, account fell just 3% only due to other put options paying some dividends into the close.

Each day, I like to post what my ending account value is in my calendar. Heck, would be fun to eventually build a point and figure chart of it overtime, adding back in the monthly withdrawals (from profitable months). "The best" would simply be a chart filled with X's wouldn't it?

If you're "business/accout plan" states you're goal is to make 10% gain each month, then take your account balance, figure out what 10% is of total. Then with about 20-days of trading each month, figure out how much money you need to make to bottom line of account each day. If you're goal is $1,000 for the month, then get out a piece of graph paper, and have each box on the piece of paper equal $50-box size. I'll almost guarantee the p/f technician in you will look to take some profits if you get a column of X from $10,000 to $11,000 in just a week. You'll say... "Ugh!... this bugger is looking a little overextended." You'll probably assess risk/reward to expiration in your account, remove the trade that offers the most unfavorable risk/reward (if even a partial position taken off the table) and journal some gains to cash, which don't fluctuate on a daily basis.

Just an idea.

 
 
  Jim Brown   9/17/02,  4:02:11 PM
Swing Trade Signals
The market drop stopped just below our exit at 439 so maybe we did the right thing in taking a profit. The indicators are oversold and Oracle spin doctor Larry Ellison will be on CNBC tonight. Hopefully he can spin a 50-75 point bounce at the open that will let us back in.

 
 
  Jeff Bailey   9/17/02,  3:56:44 PM
Knight Transport (KNGT) $16.35 -9.36% ... Dear Jeff, Knight Transportations (KNGT) about which you've been bearish is showing a break down as you said it would. That's another great call by you. Do you have any downside target for KNGT? Thank you for your excellent analysis on the sectors, stocks, and the market.

KNGT certainly took its time didn't it? I couldn't answer target earlier, but today's trade at $16.50 now has bearish vertical count of $14. Link

Still need some weakness to $15.50 to get that spread-triple-bottom sell signal going.

Then, will use past trading in ROAD to understand how we might want to set a ner-term target just above the bearish count. Remember that day in Market Monitor when ROAD traded a low of $20.58, just above its bearish count of $19? Link

Understand that strong rebound on ROAD to get feel one must not be overleveraged in KNGT or complacent. "Easy come, easy go" sometimes. ROAD's rebound was triggered by another trucker going bankrupt. Supply/demand traders know that customers from bankrupt trucker may be looking for new trucking shipper,thus ROAD and YELL rallied strong. However, KNGT didn't really budge. Me thinks CSFB (today's downgrade) most likely selling the bearish resistance trend in KNGT before today's downgrade. How about you?

 
 
  Jeff Bailey   9/17/02,  3:48:39 PM
QQQ trader likes the Biotech Index (BTK.X) 330 -0.96% and GSO.X 91.29 -2.67%. Both have given up about 1% since earlier comments regarding weighting of biotech and software in QQQ. QQQ now $22.30 -1.58%, after being unchanged earlier.

 
 
  Jeff Bailey   9/17/02,  3:46:46 PM
Charles Dow might roll over in his grave if he saw this chart. One is that Mr. Dow would not have yet charted the "green X's" from 8,300 to 8,450, because today's trading was still underway. Now we see a trade at 8,200 having the true point/figure chartist charting a continuing "O" under the prior column of O at 8,200. This is a double-bottom sell signal at 8,200 and firmer break of trend. Link

DIA traders checks his/her chart and today's low trade at $81.99 a bit suspicious as there may have been a bunch of stops just under $82. Never know for sure, but specialists know where the stop are and not beyond them to come and get them. Still, double-bottom sell and break of trend. Supply looks to be outstripping demand, and this is what bear wanted to see. Link

Retailing components in Dow.... HD $33.18 -2.4% Link , WMT $54.51 -0.43% Link and somewhat retailing MCD $19.05 -12.17% Link .

 
 
  Jim Brown   9/17/02,  3:36:38 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The exit numbers for the closed SHORT signal are OEX 438.79, SPX 873.91, DIA 82.45, SPY 88.06, DJX 82.19, NDX 898.12, Compx 1261.09, QQQ 22.33, Emini 874.75. There may be more downside left but with the 50% retracement and strong support at 437 I thought getting out before the ORCL earnings announcement was the wise move. I have been hammered on holding over earnings announcements/updates recently. Of course I am watching the bottom fall out of the market as I type this with 25 min to go. (cuss)

 
 
  Jeff Bailey   9/17/02,  3:35:55 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jeff Bailey   9/17/02,  3:34:59 PM
Index Trader's getting downside alert at 19.1% retracement in Dow Industrials (8,262). From Index Trader's Wrap, this was the first major index we noted some flirting with upward trends. Signals weakness and bears monitor into the close. Also monitoring the 09/05/02 low of 8,217.05. Close below there has swing-traders target of 8,045 in play, which marks the relative low close of 8,043.

 
 
  Jim Brown   9/17/02,  3:27:16 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
There is strong support here at OEX 439 and below, with the 50% retracement level at 437. Let's close the SHORT signal here for a profit and avoid any overnight ORCL bounce risk.

 
 
  Jonathan Levinson   9/17/02,  3:17:40 PM
The long-awaited breakdown has just arrived, but with little sound or fury yet. The QQV has just started to move up, currently 50.37, ditto the TRINQ at 1.9, and most notably TYX, whose bowler might have just slipped off his noggin, now finally in the red. So far the COMPX is not seeing an avalanche of selling, just a sideways drift downward. Watch for a lower high below 1270 for confirmation of impending lower prices.

 
 
  Jeff Bailey   9/17/02,  2:58:08 PM
Best e-mail of the day While I enjoy all.... I like this trader's quesion as to "What is a full position."

Jeff; first, I rally enjoyed your "carrot in a juicer" piece last Sunday. Second, re. cpb, I assume you picked-up Nov $22.50 calls, but what is a full position?

Answer: A full position is unique to each individual trader and it all starts with your "business/account plan" that you put together before you ever ran a trade.

How much money is in your trading account? From there, how much capital are you allowed to risk (as stated in your business plan) in any one investment (long or short) as it relates to the underlying stock?

For instance, general guideline might be a trader trading a $100,000 account (round number) is allowed to only risk $10,000 in any one trade as a FULL position. A trader looking to limit his/her risk could par back a bit with 1/2 position, which would be $5,000 or 1/4 position of $2,500.

Now.... for an option trader, a full position of $10,000 in an underlying stock trading at $22.00 like CPB would equate to ... $10,000 (divided by) $22.00 = 454 shares. Can either round up, or round down then to 5 contracts (500 shares) or 4 contracts (400 shares).

Now... people always question me as to why I don't use stops. Think about it. The above system allows one to trade the option, just as you would the underlying stock, as long as you HAVEN'T OVERLEVERAGED and went berzerk with 20 call options, which would be equivalent to 2,000 shares, which you would NOT be able to trade unless you deviated from your "business/account plan." You know what happens to company's when they suddenly diverge from an original play. Heck, Enron used to be a very successful energy company, then they deviated from that plan and become a trader of energy derivatives, didn't know what they were doing, OVERLEVERAGED and found themselves on the wrong side of things, and the rest is history. Don't "laugh" at Enron if you're doing the same think in your option's trading account, as you're most likely following down the same path to ruin that Enron did.

Now, if you bought a "full position" and say it was 500 shares of CPB, where would your stop in the underlying stock be as it relates to technicals and seasonality scenario? A $1? If so, do I put a stop at $1 in the CPB Nov. $22.50 calls at this point, and get back $50.00 less a $12.00 commission? Nope, but as an option trader, not using stops, I assessed RISK first before ever running the trade.

True... a trader using such a strategy may not get RICH overnight, but he/she won't get poor either.

 
 
  Jim Brown   9/17/02,  2:55:57 PM
Swing Trade Signals
If the current trading range (last 30 min) gets any tighter we will get chart burns. The buyers and sellers are slowly coming together at Dow 8280 and somebody has got to cry uncle soon. The OEX is trapped between 442-443 (really) and SPX 880-882. Going to be a fight at 3:PM, Got your tickets yet?

 
 
  Jim Brown   9/17/02,  2:53:36 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
In anticipation of some higher volatility around 3:PM let's raise the stop loss to OEX 446.00. (SPX 889, DJX 83.50) Hopefully this will give us enough room to avoid being taken out on a bounce.

 
 
  Jim Brown   9/17/02,  2:28:54 PM
Swing Trade Signals
That is some tough support at SPX 880, OEX 442. Every time we penetrate to that level there is an instant positive reaction. Unfortunately there is just as strong resistance overhead. Every bounce has been slammed back to earth just as quickly. Eventually one of these moves will break and we are likely to see a strong move. With the 3:PM turn still 34 minutes away there is plenty of time for it to be either direction. I am expecting one last climax spike before 3:PM and I am thinking about raising the stop loss to avoid being taken out on a pre-3 buy program. Stay tuned.

 
 
  Jeff Bailey   9/17/02,  2:26:17 PM
Campbell Soup (CPB) $22.25 ... talked with CBOE and December expiration won't be available until after OCTOBER expiration as currently 2-months forwared covered in the Oct. and Nov. expiration exists. As such, took full position in the Nov. $22.50's at $1.10 offer.

Thinking becomes... by end of October expiration, stock should have already started making it's seasonal move higher. Again, history is no guarantee of the future, but this is my thinking for a seasonal bullish play.

Hey! I bet you think CPB stock symbol is bases off of CamPBell. Nope.... CPB is Campbell's Pork & Beans! Cool eh? I didn't realize this until the CBOE help desk guy named "Mike" said..... ahhhhhh.... Campbell's Pork and Beans.

Maybe this winter, seasonal bulls will also be saying .... "ahhhhh.... Campbell's Pork and Beans!"

 
 
  Linda Piazza   9/17/02,  2:18:06 PM
Reader Question: In a short term index swing trading situation, what are your thoughts for choosing an option with high delta, say maybe at least .75 or more? Response: That's a great question, Richard, but the answer differs according to the trader's style, the length of time before options expiration, and other factors. For example, during options expiration week, some traders buy deep-in-the-money, high-delta options, while others, expecting a big move across their strikes, buy OTM, low-delta options. They capitalize big if the markets move as they expect, and are willing to lose the cost of the cheap options if the markets don't. Here's a great article by Mark that explains more than I can about the Greeks. Link

 
 
  Jim Brown   9/17/02,  2:16:08 PM
Re: 1:37 post. That pennant with the blue and red lines looks pretty level. Which way is it likely to blow? Alec

We already tried the upside today. I vote for the same size dip to the downside. Any takers?

 
 
  Jonathan Levinson   9/17/02,  2:02:17 PM
It would appear that TYX's superior breeding and character have inspired TNX and FVX, who are wiping their noses and straightening up, back to positive. The QQV is back above 50, and the COMPX might be in the process of putting in a lower high on the 5 minute chart. The TRINQ is just barely above neutral at 1.11 and the TICK.NQ just below at -65. The longer this persists without a bounce, the more difficult it will be to generate one, and this is starting to look like a descending triangle on the COMPX, which is a bearish continuation pattern. However, I'm really squinting here, and will let price tell the story.

 
 
  Jim Brown   9/17/02,  1:57:08 PM
Swing Trade Signals
Your right! What was I thinking. Of course there does not have to be a fundamental reason for the market to rally. It is a technical thing. If support at SPX 880 holds we will easily rebound to 10,000 soon. Is that bullish enough for you?

I got killed on that last post. (grin) Everybody agrees fundamentals are important just not important when traders are looking for a reason to go long and they don't match.

In reality we did just have a successful retest of 880 again and a double bottom in some traders minds. Of course we are speaking in the sub atomic chart interval terms as one trader complained about last week. A bounce on the 1,2,5 min charts is not really a bounce just a blip. We need to keep these terms technical. (grin)

Don't bombard me with email, I am just trying to inject a little levity into this afternoon's range bound trading.

 
 
  Jeff Bailey   9/17/02,  1:55:20 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Steven Price   9/17/02,  1:50:08 PM
MGIC (MTG): $43.75 (-4.95) I'm lowering the stop loss on MTG to $46.00.

 
 
  Jim Brown   9/17/02,  1:46:29 PM
Swing Trade Signals
The TRIN is climbing, currently around 2.18 which shows the majority of the volume is to the downside. The key here is the S&P futures at 880. The last bounce was the stops being triggered at that level and it lasted for about an hour. Now at 880.20 again we are looking at stops at 878 and then 875. Once below there we could go into freefall. Getting below there is going to require a lot more sellers than we have seen today. The bulls are nibbling everytime we get this low and who knows when the bears will run out of conviction. There are a lot of readers who want to go long here. I agree the technicals look promising but the sentiment is very weak. Fundamentally stocks look terrible today with warnings in almost every sector. If we get a bounce what would power it?

 
 
  Jonathan Levinson   9/17/02,  1:45:19 PM
TYX is standing there gripping his handcarved ebony walking stick and carefully not looking around, keeping a stiff upper lip and holding at +.11, each and every steely gray hair smoothed in place, while QQV has already started jive-talkin and mackin in his face, moving up .5 to just under 50, and FVX and TNX have already started wimpering and heading for the door. How long can he hold out? The COMPX had his glove on the 2nd rope but slipped off as FVX keeled over onto him, and the negative TICKs are rising like a tropical rash.

 
 
  Jim Brown   9/17/02,  1:37:46 PM
Swing Trade Signals
Take a look at this chart from yesterday. I did not redraw the lines but it is very telling about our current environment. Link

 
 
  Jonathan Levinson   9/17/02,  1:30:23 PM
The COMPX appears destined to print every decimal at 1271 before choosing a direction. The shorter time frams have become overbought on this move, while the 30 and 60 minute 5(3) stochastics are in the process of giving bullish crosses. As I type that, price took a jump and is now moving back up toward resistance, which I see at 1277-80, still 5 points away. Bond yields have dropped to just about flat, which is anything but bullish, and yields flipping to negative could act like an anvil to the head of a COMPX that is just starting to try to pick itself up.

 
 
  Steven Price   9/17/02,  1:30:02 PM
Reader Question: Steven, With their pullback today based on what looked origonally good news out of Iraq (yea right !!!), would you consider INVN & LLL for long plays? Thanks, /Roger....

Response: These stocks are experiencing pullbacks that are news related.

LLL $54.51 (-2.99) My comments on yesterday's MM about taking profits in LLL, as the stock traded around $58 were based on technical levels, and the stop loss of $56.75 was based on risk/reward from that level. I do not know whether this morning's gap will have a longer-term impact on the stock, but we are currently stopped out on the play (the end of day price is where we base our stop loss, as our plays are published in the end of day newsletter). The stock is holding above the 200-dma. However, it appears the U.S. is considering sending weapons inspectors into Iraq under certain conditions. While LLL still looks technically resilient, a sell-off of the defense sector could certainly take LLL along with it. I would wait for a test of the 200-dma ($52.89) to initiate long entries again.

INVN $35.33 -0.94 INVN actually looks like it may hold. The prospect of invading Iraq has a smaller effect on its product, which will still be needed, as securing the country will be a priority regardless of whether or not we invade Iraq. I would look for INVN to recover today's losses, as the stock actually opened higher today. A trade back above yesterday's close of $36.28 would look bullish and could provide a long entry point.

 
 
  Jim Brown   9/17/02,  12:56:24 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We are getting closer to real support at OEX 440. The S&P futures have strong support at 880, only one point below their current level. Let's lower the stop loss to OEX 444.50. (SPX 885, DJX 83.10)

 
 
  Linda Piazza   9/17/02,  12:53:21 PM
.XAU finally testing the waters above 75. Earlier, it had looked to be rolling over just under this level, without much inclination to close the gap.

 
 
  Jim Brown   9/17/02,  12:48:00 PM
Swing Trade Signals
A London paper is now reporting that inspectors can only inspect military sites as specified by Iraq. Also, they will have a limited time for the inspections and require sanctions to be lifted at the end of the period if no problems are found.

Let's see, you can look in this closet I have cleaned out for you but you can't look in my multiple storerooms in the weapons bunkers. You only have 5 min to look and you have to wear sunglasses and spin around ten times before I open the door. By the way the lights are out. Sounds reasonable to me.

 
 
  John Seckinger   9/17/02,  12:44:39 PM
The Bank-of-Tokyo Mitsubishi chain store sales, compiled from seven major discount, department and chain stores across the country, was reported unchanged following a 0.1 percent rise the prior week. Note: Consumer spending accounts for two-thirds of U.S. economic activity, and the retail sector has been lagging in recent months. Job security and overall weak economy are most likely the culprits.

 
 
  Jim Brown   9/17/02,  12:32:00 PM
Swing Trade Signals
If we get another breakdown here remember the Dow low of 8247 and the OEX low of 440 from last week could provide the next bounce.

 
 
  Jonathan Levinson   9/17/02,  12:27:51 PM
I'm hoping it won't be the case, but we could be staring at the beginning of some rangebound chop between 1277 and 1270. The TRINQ has certainly done so, staying in neutral sell territory all through that small bounce, and is currently at 1.20. The QQV is now flat and the TICK.NQ -461. The chop this morning managed to blur most of the formations I was looking at, and I'm not confident in what I'm seeing in that respect. The stochastics are chopped up from the past hour, but are still bearish.

 
 
  Steven Price   9/17/02,  12:27:05 PM
Reader Question:How can you have a 200 point swing in the DOW (down), a 30 point swing in the NASDAQ (down) and a 11 point drop in the OEX and have the VIX flat? Does the VIX take time to recover from large pops at the open (up or down)? Does this mean that option premiums, at least the part based on volatility, need to catch up to the action? Thanks, Chris

Reponse: Market Volatility Index (VIX.X)- The VIX generally goes down on rallies and up on drops. It reached a low of 38.50 this morning on the initial rally and then gained back its loss on the drop. Some see this as a contrarian indicator. I think it tends to react in a timely fashion to what is going on. A look at the chart over time does show that extreme VIX spikes are usually followed by rallies, but another indicator during yesterday's trading was the put/call ratio, which made over 1.00, indicating more puts trading than calls. This will also push the VIX higher, as no one likes to sell puts cheaply. While they are involved in a finite equation with calls, traders get suspicious when there is a lot of activity in the puts and generally keep volatility a little higher.

 
 
  Jeff Bailey   9/17/02,  12:23:29 PM
QQQ per previous Index Trader's notes .... see how heavy sector weightings in Biotech (BTK.X) 338 +1.43% and Software (GSO.X) -1.65% have QQQ $22.57 -0.2% relatively unchanged?

Bear wants GSO.X to continue weakness, but also need BTK.X following suit.

Similar perhaps to past notes regarding SPX and OEX traders that are bearish, which want the Retailers as discussed with the Retail HOLDRS (RTH) $82.25 -0.9% to find resistance at $83.00 retracement. Bear in OEX/SPX still needs/wants RTH back below its 50-day SMA which resides at $79.12 with 19.1% retracement still support at $77.27 (tie in with 19.1% discussed in Dow Indu., SPX, OEX). Bears not out of the woods yet and wants strength sectors to turn into weakness as discussed.

 
 
  Jeff Bailey   9/17/02,  12:12:46 PM
Natural Gas Index (XNG.X) 133 -2% ... now seeing this sector "catch up" with declines in OIX and OSX. Earlier thought from 09:44:28 and action here has me thinking a break below $131 may be signal from sector and perhaps MARKET that weakness in Nat. Gas stocks might be more indicative of "economy" than "Iraq factors" with technical downside to $120. Again, most natural gas isn't an export/import, but a locally produced item and transferred by pipeline, not ship. The Iraq factor and potential war, would have impacted exports. True, some gas lines in Middle East could be at threat, but here in U.S. prices more dependend on demand from industrial side of things, not imports. Link

Kerr McGee (NYSE:KMG) is rather "dependent" stock on natural gas prices. Acquired HS Resources last year, which bought a lot of Amoco natural gas reserves in mid-continent U.S. prior. Link

KMG is XNG.X component. Looks to be leading weakness from similar XNG.X technicals.

Day trader "all over" the break below "indside day" from yesterday on the downside, stop $44.40 in KMG. Then wants a "confirming" break lower in the sector to act like a hammer driving a post into the ground.

 
 
  John Seckinger   9/17/02,  12:02:29 PM
McDonalds (MCD), lower by 9.17 percent at 19.73 and at levels not seen since 1995, has just announced a $500M Buyback at $19.79.

 
 
  John Seckinger   9/17/02,  12:00:30 PM
30-year Treasury Bond (TYX.X) is seeing YIELDS higher by 0.46 percent to 4.762%. The 22 DMA remains higher at 4.915, while the 50 DMA is above at 50.83 percent. I believe we are in a period when lower YIELDS in the 30-year translates into lower equity prices. The objective to the downside is 4.70%. If the Dow does manage to get back above 8350, it will be interesting to see what YIELDS do. They should be higher.

 
 
  Jim Brown   9/17/02,  11:51:25 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The internals are improving and it is entirely possible the bulls are sneaking back into the market. They were unable to push the Dow under 8300 again. If this continues I don't want to be stopped out for a loss. We will move to the sidelines and let the volatility ease. Let's lower the stop loss on the open SHORT signal to OEX 447.50. (SPX 891, DJX 83.75) Traders wanting to book profits should exit in the OEX 446 range.

 
 
  Jim Brown   9/17/02,  11:36:44 AM
Swing Trade Signals
Resurrection? The indexes are seeing a bit of buying but the Dow has to move over 8340-8350 and the Nasdaq 1275 to win any converts. The SOX is coming off its lows of 265 and MSFT is finding buyers again at 47.50. INTC and DELL are also positive. ORCL and CSCO are still slightly negative. Every dip lower seems to attract a new trickle of buyers with just enough strength to get the Dow back above the 8300 level. This is going to be a critical day. With the majority of traders back at work and no shortage of stock news this could be a pivotal trading session. The European exchanges all closed in negative territory and could be a leading indicator for us as well. Evidently they do not believe Iraq either.

 
 
  Jeff Bailey   9/17/02,  11:35:46 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   9/17/02,  11:32:23 AM
Aetna (AET) $38.29 -2.4% ... Still short AET, any comments?

No new comments really. Stock broke lower from "inside day" this morning. Short-term bear could "pretend" he/she is short on break of yesterday's low (even if you shorted put above $41), then follow with stop above yesterday's high of $39.50. From here, will take note of yesterday's morning's comments regarding Mr. Cramer (see 09:34) and see if he defends position he "loaded up on" during Friday's weakness. If so, then looking for "Cramer Support" near $37, which is where volume picked up on 5-minute chart for Friday, and most likely where Mr. Cramer's The Street.com started buying weakness. 5-minute interval chart of AET... Link

 
 
  Jonathan Levinson   9/17/02,  11:29:04 AM
This is when the summer blahs hits earnings estimates and the entire house of cards crashes in the winds of fall.

Pure poésie, Jim.

We're getting a COMPX bounce here off the lows, and the CBOE put to call ratio at 1.12 was a good indicator that things were getting a little too bearish a little too fast for a continued whoosh south. The TRINQ is still higher at 1.39, and the sellers are showing either discipline or a lack of commitment. Look for first resistance on this move at COMPX 1275.

 
 
  Jim Brown   9/17/02,  11:21:33 AM
Swing Trade Signals
There is a rumor on the street that a $500 million tech hedge fund is going under and has been selling the SOX stocks hard. I think this is just a rumor since the chips have been committing suicide on their own on a daily basis with multiple warnings of slower sales and higher inventory. We need to remember this is September and the worst tech month of the year historically. This is when the summer blahs hits earnings estimates and the entire house of cards crashes in the winds of fall. By mid October analysts suddenly see the light at the end of the tunnel and we start the nine month rally all over again.

 
 
  John Seckinger   9/17/02,  11:16:38 AM
It is my opinion that the first 10 ten minutes of trading was a "false breakout." The implications are still being seen; longs exiting with an urgency and shorts going for the jugular. Nasdaq now at the 1267 area. Things could get exciting.

 
 
  Jim Brown   9/17/02,  11:15:20 AM
Swing Trade Signals
I think you can kiss that 50% retracement level goodbye. The sentiment has changed with the big gap and crap this morning and we may be testing the lows from the last week at 8247 soon. The next support level under those lows could be as low as 8100. We did reach a low of 8217 back on Sept 5th which could be a pausing point. The SOX hit five year lows yesterday and has given back all of its gains already today and is trading at new lows of 265. When a broad cross section of sectors, software, chips, restaurants, brokerages, banks, health care and food stores all warn on the same day that industrial production fell -0.4% there is not a lot the bulls can point to for support.

 
 
  Steven Price   9/17/02,  11:04:23 AM
Semiconductor Sector Index (SOX.X) 266.70 (-2.52) The SOX is at yet another 52-week low. Last night's positive guidance from MCHP wasn't quite enough to light a fire after it was one of 15 companies in the sector that had their earnings estimates for 2002 and 2003 lowered by Bank of America and Prudential yesterday.

 
 
  Jonathan Levinson   9/17/02,  11:01:09 AM
Declining COMPX volume is leading advancing volume 313M to 182M, as the TRINQ rises to 1.35 and the QQV remains almost flat, +.12 to 49.54. The COMPX is just off its lows of the day at 1272, and the 1275-80 level should now serve as resistance. With little oomph to this bounce off the low, I'm waiting to see how long we hold at this level. The daily and shorter 5(3) stochastics are all oversold, but showing no signs of reversing just yet.

 
 
  John Seckinger   9/17/02,  10:57:27 AM
In the last hour, the Utility, Oil, Dow, and 30-year bonds all reversed. The 253.70 low set yesterday was taken out (Tuesday's intra-day low at 253.03), Oil easily traded under 464 (currently down 2.55 percent at 460.90), and the Dow paused at 8350 but then continued its downward trend. I have to imagine there were a few longs caught during this morning's initial bid. The December bond is now down 10 ticks at 112-15, much higher than its low of 111-22.

 
 
  Steven Price   9/17/02,  10:53:49 AM
Reader Question: Steve: AET price is stagnant around the levels 38.60 - 39.50 any comments if you expect further fall and by when? I know it is a difficult question. But is AET going to behave like a put play should? Look forward to your comments. Thanks Sunil

Response: Aetna (AET) $38.97 (-0.27) You are following my thinking. AET has not behaved as an OI put play should, since rebounding from the dip to $36.55 when earnings warning rumors surfaced last week. We did not make the pick based on those warnings, and the technical picture still looks weak. I would wait for a break back below $38.30 to enter short, however, as the support from July 23 still seems to be in place. I don't consider the fall on rumors to be a significant break in support, given the impressive recovery. The point and figure chart does not distinguish between rumor and fact, so until the rumor becomes truth, I will discount the "O"s at $38 and $37. However, even without these boxes, we are still on a triple bottom breakdown. If the stock does continue its stagnant trading range, I will consider dropping the play.

 
 
  Jim Brown   9/17/02,  10:52:42 AM
Swing Trade Signals
The 50% retracement level at Dow 8305 has been critical support for several days and the drop this morning again stopped when that level was reached. This is far from a rally but the continued support at this level indicates pent up orders and until those orders are filled we will not see any new September lows. With the rate of earnings warnings accelerating there should be a few of these buyers rethinking their positions soon.

I can't help but think the -175 point Dow drop from the highs on supposedly good news today should have bulls worried. Bears should be encouraged and I would think a break below 8300 would cause a rash of double down bets. The battle line is drawn and were it not for the Nasdaq strength today we might have already broken it.

 
 
  Jonathan Levinson   9/17/02,  10:49:26 AM
On the 30 minute QQQ chart I see a rising megaphone. I assume this is a bearish pattern?

Yes, Russ, correct. I learned that formation as the "Bull-oney Bullhorn." However, Mr. Bulkowski describes this formation as having a 24% failure rate. Fair enough. In a bullish market or on a good news day, perhaps that failure rate would be lower, and I doubt if today will have a particularly bullish outcome.

 
 
  Steven Price   9/17/02,  10:45:27 AM
MGIC Investment Corp (MTG): $45.80 (-2.90) I am lowering our stop on OI put play MTG to $48.50, just above yesterday's low, in order to lock in profits. Previous support was at $45.00, so I would not recommend new entries until that level breaks. If it does, I will reassess the entry level at that time. The intraday chart will have an impact as to whether we close the play for a profit, or pile on and lower our stop again. Conservative traders may want to take their $9.00 profit here, as we approach support.

 
 
  Jim Brown   9/17/02,  10:38:27 AM
Swing Trade Signals
I really regret closing the open signal this morning at the open but nobody ever knows if we are going to have a gap and run or gap and crap. It is a tactical decision that must be taken for successful account management. We could just as easily been at OEX 463 right now instead of 443.

While I am very pleased to see the sharp drop from our new entry point we need to remember that the volatility has not disappeared. This is a triple witch options expiration week and anything is possible. It is entirely possible we could finish back in the green today. (not likely with all the earnings warnings but possible)

 
 
  John Seckinger   9/17/02,  10:27:35 AM
Looking at a five-minute chart of the Dow, 8350 is trying to hold on a closing period basis. Solid resistance should be back near the opening range (8386). Five year note still relatively weak; however, the key could also be in the Nasdaq, currently at 1278 but should see more selling pressure once under 1267 (Monday's low).

 
 
  Steven Price   9/17/02,  10:26:55 AM
Crude Oil (CL02V) : $28.83 (-0.84) Crude Oil Futures showing a big red candle after the Iraq news. While Oil Futures have given up almost 3%, it will be interesting to watch, since OPEC meets Thursday to discuss increasing supply. The Iraqi news may give them a reason NOT to raise supply, and keep prices high, as they could simply take the position that no increase is necessary if weapons inspectors are allowed to do their jobs.

 
 
  Jonathan Levinson   9/17/02,  10:18:40 AM
There goes COMPX 1277. We have bearish crosses on the 30 and 60 minute 5(3) stochs, and the bullish cross on the daily has just unprinted itself as the stochastics are so charmingly wont to do. Yields are still positive, but the metals are off their lows, and, factoring in the fed action, or lack thereof today, as well as the bad economic and corporate announcements, I'm beginning to think that the day may have already shown us its high. Time will tell.

 
 
  Jim Brown   9/17/02,  10:17:47 AM
Swing Trade Signals
The gaps have now been filled. With all the indexes except the Nasdaq now trading in negative territory all the gaps have been filled and now will be the critical test. If the Dow can hold at 8350 and the S&P at 890 then the bulls have a chance for a rebound. If these levels fail then a quick test on strong volume at 8300 appears likely. If 8300 is broken today after a +100 point Dow open this will be very negative for market sentiment and could lead to the next leg down.

 
 
  Jeff Bailey   9/17/02,  10:15:10 AM
Fiber Optic Index (FOP.X) 34.75 -0.74% ... breaking just below yesterday's low. Not a good sign perhaps for bulls that still have taste for fiber and sector bear wants a trade at $34 or $33 for new lows to hint of institutional dumping into end of 3rd quarter. Link

QLogic (QLGC) $31.05 -3.27% triggering downside alert on my q-charts trade station, which is double-bottom sell signal. Was bearish this name for October puts with bearish vertical count target of $27. Link

 
 
  Jonathan Levinson   9/17/02,  10:12:37 AM
It's good to have indicators to quantify what are otherwise often non-linear emotions. For instance, it felt like a wave of rabid sellers, and yet the TRINQ is only up to 1.14, just barely north of neutral. Ditto the QQV, which is up a mere .45 to 49.87. The TICK.NQ at -431 is showing relatively broadbased selling. This COMPX decline has made it to 1278 so far, and a break of 1277 brings yesterday's range into view.

 
 
  Steven Price   9/17/02,  10:09:15 AM
MGIC Investment Corp (MTG): $47.50 (-1.20) OI put play MTG continuing its fall. Our stop loss was lowered to $50 last night. The next level of support looks like $45 from April-July of 2000. The stock is down $7.50 in the last two days, so some form of rebound would not be a shock and a failed rebound may be an opportunity for additional short entries. However, my target is now $45.00, so keep in mind risk/reward when considering new shorts.

 
 
  Jim Brown   9/17/02,  10:08:47 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I hated to let those four points bleed off the OEX while waiting for the 10:AM bounce but this is normally when the buyers will step back into the dip and I wanted to see if that was going to happen today. I may have jumped the gun slightly as the long red candle exactly at 10:AM triggered the signal almost immediately. OEX 449, SPX 894.31, DIA 84.35, SPY 89.92, DJX 84.01, NDX 917.76, Compx 1283.74, QQQ 22.83, Emini 893.25. The initial stop loss will be OEX 454. (SPX 903, DJX 85.00)

 
 
  John Seckinger   9/17/02,  10:08:33 AM
A move under 8350 in the Dow should easily turn most Intermarket relationships to more neutral readings. Currently, Gold, Oil, and Natural Gas are underperforming both the Dow and Nasdaq. Sectors outperforming include Biotech, Semiconductor, Retail, and Airlines.

 
 
  Jeff Bailey   9/17/02,  10:05:55 AM
Campbell Soup (CPB) $22.50 -1.05% ... stock jumped above still falling 50-day SMA, then sees selling after higher open, much like many stocks and broader market average. Still bullish this "seasonal" play. Saw a little quip on Television last night regarding the Farmer's Almanac prediction of colder than usual winter in the North, North East. Last year, Farmer's Almanac predicted mild winter, which was a correct prediction. Link

From CPB bull's perspective, brief break above 50-day is somewhat bullish. Next test is to get a close above that level. (One day does not make a trend).

Subscriber e-mail the other day asked about November calls versus December calls, which would get trader a little more time in CPB and further into winter season. I agree that December would be better as I always like to buy more time that I think I need. However, December calls not yet offered, but will be available on Monday (I think) after this month's option expiration. November gets bulk of seasonality is/was my thinking as MARKETS trade ahead, then look to sell the "good news" when presented.

 
 
  Steven Price   9/17/02,  10:03:24 AM
Autozone (AZO): $76.25 +1.00 OI call play AZO continuing its pattern of higher lows. A trade over $76.85 would be the 4th higher high as well and an excellent point for new entries.

 
 
  Jonathan Levinson   9/17/02,  10:01:30 AM
6.5B in overnight repos will expire today, and the FED has just announced that it will not be replacing them today.

 
 
  Jim Brown   9/17/02,  10:00:25 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The 10:AM bounce is failing and it appears the sellers came back from vacation. Let's go SHORT the broader market again with an OEX trade below 449.00 (SPX 895. DJX 84.00)

 
 
  Jeff Bailey   9/17/02,  9:59:30 AM
Index Traders From Index Trader's Wrap......

Dow Industrials (INDU) 8,430 +0.59% ... still below 50-day SMA of 8,459 so not thinking overly bullish at this point. Would still look to close out any Sept. puts on more near-term basis on weakness, or tighten a stop just above morning's high. Link

S&P 500 (SPX.X) 896 +0.59% ... found opening resistance at 50-day SMA. Link

S&P 100 (OEX.X) 450 +0.8% ... found resistance at 50-day SMA. Link.

QQQ $22.93 +1.01% ... found resistance at both the 21-day and 50-day SMA's. Link

 
 
  Jim Brown   9/17/02,  9:51:18 AM
Swing Trade Signals
The opening bounce appears to have runs its course with sellers piling on at resistance. If we are going to see anyone buy the dip it should be soon as we approach 10:AM. Once we see what the 10:AM direction looks like we will have abetter idea of the game plan.

 
 
  Jeff Bailey   9/17/02,  9:49:16 AM
Knight Transportations (KNGT) $16.83 -6.5% ... previously profiled short/put here in market monitor based on technicals and sector news as it realated to ROAD. Stock weak after CSFB cuts firm's rating on stock to "neutral" from "outperform," based on valuation. Link

Disclosure... I currently own 1/2 bearish position in KNGT

 
 
  John Seckinger   9/17/02,  9:48:27 AM
Shares of Tyco (TYC) halted after the company filed its 8k detailing various investigations and loans to executives. Shares were at 16.54 before announcement.

 
 
  Jeff Bailey   9/17/02,  9:44:28 AM
Sector weakness has Oil Index (OIX.X) -1.5%, Oil Service (OSX.X) -2.6% and Natural Gas Index (XNG.X) -0.93% weak in the energy stocks, with Nat. Gas. not getting hit has hard as not an import from Middle East. Also Gold/Silver Index (XAU.X) -3.9% as some "war premium" removed.

Strength across the other sectors with Semiconductor (+2.43%) bouncing from yesterday's 52-week low close, Biotech (+2.2%), Airline (XAL.X) +2.17% and N. Amer. Telecom (XTC.X) +1.8%.

 
 
  Jonathan Levinson   9/17/02,  9:43:47 AM
The COMPX is just commencing what could be a fill of the opening gap up. If it continues, look for support around the 1280 level. Of note is the HUI, down a whopping 5.6 to 131.39 and XAU down 3.01 to 73.68.

 
 
  John Seckinger   9/17/02,  9:41:30 AM
Checking the Intermarket Relationships: Dollar higher, Gold is lower by 3.22 percent (normal, bullish relationship for equities). Yield curve very weak (bullish). Utility Sector higher by 2.14%, but it will be important that yesterday's low of 253.70 remains untested. Oil remains weak, but the 0.88 percent loss to 468.80 can fall to near 464 without setting off a red flag to bullish traders.

 
 
  Jim Brown   9/17/02,  9:40:16 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The open SHORT signal was stopped out at the open. OEX 449.50, SPX 894.74, DIA 85.01, SPY 90.88, DJX 8408.82, NDX 929.44, Compx 1295.18. QQQ 23.12, Emini 903.00. The Dow has slowed just below 8500 as the short covering is losing momentum.

 
 
  Jonathan Levinson   9/17/02,  9:39:09 AM
There is a bullish cross on the 5 day stochastics, with all intraday 5(3) stochastics buried in overbought from this morning's opening blast up. The TRINQ opened just below .80 and is falling, currently .59. The opening run stopped just short of COMPX 1300, and I'd be calling that the top but for the relatively bearish p/c ratios we've seen this week, which is contrarian sentiment indicator- if more people are buying puts, then the market will be likely to rise in its unending effort to separate the greatest number of traders from the greatest number of dollars. Bears should be cautious here, particularly during op ex week. Watch those s/r levels.

 
 
  John Seckinger   9/17/02,  9:31:43 AM
The US Dollar is above it's weekly 200 DMA (108.71) and could test its weekly 22 DMA (109.37) in the near term. It will take a move under 107.42 to change sentiment. Also bullish is the relative weakness in the five-year note, down 9.5 ticks (10-year is down 10 ticks). The December 30-year is down 21 ticks to 112-04, and prices can fall to 110-00 before the bullish trend is tested. Note: I am using exponential values for the 22 and 50 averages, while the 200 period average is a simple calculation.

 
 
  Linda Piazza   9/17/02,  9:29:00 AM
Sometimes it's useful to look at weekly charts, too. The dollar ($USD on Stockcharts) is just above its weekly 200-period MA, listed at 108.70 on Stockcharts, but daily stochastics (21)(3)(3) are trying to roll over, so it's not clear that dollar can hold above that level. That weekly average appears to have been capping the dollar's upward movement for a while.

 
 
  Steven Price   9/17/02,  9:27:39 AM
McDonald's (MCD): $21.69 Hold the lettuce! MCD cut its earning's outlook for 2002 due to lower than expected sales in the U.S. and Europe. Not a good economic sign. The stock had found support recently at $20, and the next level of support looks like $18 from 1995, but it's been so long that today's open will most likely define it's new support range.

 
 
  Jeff Bailey   9/17/02,  9:27:23 AM
Industrial Production fell 0.3% in August, below the 0.2% consensus and ends a streak of eight straight increases. However, the news may not be taken as negative as headline number suggests as July increase was revised up to 0.4% from 0.2%, and August weakness was focused in two areas; autos -1.4% and utilities -2.5%. Some economists cite record low inventory/sales raitos, with August production most likely an aberration.

 
 
  Jim Brown   9/17/02,  9:24:27 AM
Schwab - Charles Schwab Corp warned that weak trading volume would impact earnings. They said the daily trade average was 117,500 trades in August and that was down -25% from the July numbers. They said trades fell below 100,000 in the first few days in September and the low volume would make it difficult to hit their earnings estimates.

 
 
  Jeff Bailey   9/17/02,  9:23:22 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   9/17/02,  9:21:58 AM
Eon Labs (ELAB) $21.30 ... Jeff: I'm playing breakout (bullish catapult) on ELAB (just broke resistance at 21) and wondering where to set my target. its at an all time high. thanks

Good work. ELAB is classified as "drug" and according to Dorsey/Wright & Assoc. "drug sector" is "bull alert" at 42%.

The point/figure chart of ELAB is bullish after recently giving a spread-triple-top buy signal at $19.50. Current bullish vertical count is $25.50 (column of O from $16.50-$19.00 is vertical count column). Link

According to Professor Davis' study, the spread-triple-top is profitable 85.7% of the time for an average gain of 22.9% in 7.7 months. From $19.50, a 22.9% gain would be approx. $23.96.

Combined, the vertical count along with Professor Davis' study give bullish trader a target range of $23.96-$25.50.

 
 
  Jim Brown   9/17/02,  9:20:12 AM
Industrial Production The IP numbers came in at -0.3% which is much less than the expected +0.2% number. This is giving a boost to bonds and taking some of the steam out of the futures. The economy is still weakening but many investors refuse to accept the facts. Prior to today's announcement the chances of a quarter point rate cut by October was hovering around 10%. This news could give those chances a boost.

 
 
  Steven Price   9/17/02,  9:19:47 AM
Industrial Production showed a decline of 0.3% in August, the first decline since December, and below expectations of a 0.2% increase. July's output was revised from a 0.2% gain to a 0.4% gain.

 
 
  Jim Brown   9/17/02,  9:14:25 AM
Swing Trade Signals
On the one year anniversary of the market reopening after the 9/11 attack the markets are set to open higher. The tactical announcement from Iraq that they will now let inspectors in with no conditions has prompted a strong spike in the futures. Since Iraq has never followed through with anything they have ever said it is irrational to believe that this time will be different. Still the markets will open up on short covering from last night's announcement. The key point for us will be when will the rally fail.

After the bell today Oracle announces earnings and this should put a damper on tech stocks. JDAS warned after the close yesterday that business software sales were still slipping and it is doubtful that Oracle escaped the carnage. They have not warned but nobody really expects them to beat estimates.

The S&P futures are hovering around 907 and are well off last nights highs of 915. S&P 912 is strong resistance followed by 920-925. To have a chance of success the S&P must trade and hold above the 912 level. The Dow futures are just below 8500 which is also strong resistance. On first glance it appears we will have a moderate opening fueled by short covering and a pause somewhere in the 8500 level.

We will go flat at the open and wait of the sidelines for the smoke to clear. We will not try to trade the bounce as premiums will be out of site at the open and any attempt to buy calls would probably be at the premium high of the day.

 
 
  Jonathan Levinson   9/17/02,  8:59:05 AM
The futures started to grind slowly down early this morning, but in the time it took me to shower they were back up to near their highs, with NDX +18 and S&P +14.10. The US Dollar Index is trading just south of 109, and QQQ is at 23.12, strongly up from its close of 22.66.

The COMPX will find resistance at 1300, then 1310 and 1325. Support is at 1277-80, then 1260-65 and 1240-45.

 
 
  Jim Brown   9/17/02,  8:55:03 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   9/16/02,  9:26:35 PM
The Market Monitor has been archived. To view today's comments, simply click this Link

 
 

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