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  Jim Brown   9/23/02,  6:34:19 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   9/23/02,  4:14:22 PM
Swing Trade Signals
There were a lot of sell on close orders. It appears the mutual funds got a lot of withdrawal notices today and needed to raise cash at the close. There are also a lot of traders that are worried the Confidence numbers will take another hit at 10:AM tomorrow. The OEX finished exactly were the opening drop stopped. Attempting to trade after the opening drop would have been a losing proposition in hindsight.

 
 
  Jeff Bailey   9/23/02,  4:00:31 PM
YIELD Options What options, including leaps, exist that track 10 and 30 year bond yields?

Not all, but here's a quick look at the 10-year YIELD options near-term. Link from my q-charts option montage.

 
 
  Jeff Bailey   9/23/02,  3:52:31 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Steven Price   9/23/02,  3:51:59 PM
Reader Question: Hi steve my question is regarding BRCM. Do you see a short term rally? It broke the support at 13.40 and I have a short position. I am reading the chart and I see a short term rally to 15 what do you think?

Response: I see the resistance at $15 that you are referring to, but I'm not sure what impetus would lead to a rebound. $15 served as support throughout the beginning of September before the break below that level on the 13th. It then served as resistance on the 16th and 17th. In the case of a tech rebound, I would exit the short position above $15

 
 
  Jim Brown   9/23/02,  3:45:41 PM
Trading Systems There are only three of the dual flat panel trading systems left. If you are considering one then don't wait long. Link

 
 
  Jim Brown   9/23/02,  3:41:39 PM
Subject: any chance to go long overnight to catch a pre fed run up..can buy the qqq for the price of an oex option atm

I would be worried about the Consumer Confidence in the morning. A bad number could produce a major gap down with all this negative sentiment. Also, what if IBM warned tonight?

 
 
  Jim Brown   9/23/02,  3:36:48 PM
Swing Trade Signals
After that initial drop the OEX has traded in a narrow four point range but it is trending lower into the close. There has not been any bounce but the 414 level has been firm. This is what I expected for the day only about six points higher.

The MSFT warning by Ballmer and the Iraq news pushed us lower than expected before the Fed meeting. There may be a small boost before the close as shorts cover before the Fed but I feel like expecting it would be like believing in the Easter bunny.

There is very little speculation that the Fed will do anything. With Consumer Confidence at the open tomorrow that might be another reason we could get some short covering before the close. A very slim reason. The bears have been preaching retest for a month and it appears a sure thing now.

This is the heaviest week in the warnings cycle and so far it has been filled with some minor potholes with major ones still ahead. My only hope is that something positive happens before the Fed announcement to enable us to get in the post Fed trade from a higher level.

 
 
  Jonathan Levinson   9/23/02,  3:28:17 PM
There are 1B declining shares versus 183M advancing on the COMPX. Obviously, my TRINQ indicator is broken today, reading 1.45. The QQV bad-ticked up to 57.75 but is currently 52.55. One might call this current move a bounce, but the COMPX at 1178, down 42.05 on the day, looks like it's barely even twitching. Was it QCOM that was supposed to get to $1000/share? Oh, the humanity.

 
 
  John Seckinger   9/23/02,  3:23:54 PM
It looks as though the closing and opening levels set on July 22nd and 23rd (7784 and 7785, respectively) may not be tested in the Dow as the Nasdaq completely falls apart. Remember, there is always a chance the Nasdaq will rise above the July 24th low (1192) and try to set a "bear trap" at current levels. Time will tell.

 
 
  Jonathan Levinson   9/23/02,  3:12:32 PM
Here is my latest update on the Nasdaq, courtesy of flybrady.com: Link

 
 
  Jonathan Levinson   9/23/02,  3:08:57 PM
Apparently I wasn't clear enough in my mention of FNM. My point was that if CNBC can even find someone to say anything bullish about Fannie Mae, then complacency and bullishness are still very prevalent, and bearishness is nowhere near peak levels. I consider FNM to be a sell, as do all of the readers who have emailed me so far.

 
 
  Steven Price   9/23/02,  3:04:02 PM
Reader Question: Dear Steven, I am short some contracts of Agilent and it's working pretty well so far. What do you see as first levels of support and at what point might you consider taking profits. Thanks alot, Marc

Agilent (A) $13.28 (-0.69) Agilent has some PnF support at $13 and some support on the daily chart at $12.75. It traded at $12.76 on September 3, which is its lowest point since being spun off from HP in 1999. The current bearish vertical count on the stock is (-1.00), so it doesn't really help us in establishing a target. I can see the stock test $10, but it bounced once from $12.75 and that is a level I would target as a pivotal point.

 
 
  Jeff Bailey   9/23/02,  2:58:03 PM
El Paso Corp. (EP) $7.15 -39% ... stock getting hit lower on heavy volume of 32.5 million shares after unfavorable judge ruling. Company defends itself saying that the proposed finding that El Paso Natural Gas did not make all of its capacity available is unsupported by the evidence and is inconsistent with FERC policy, and that all time, EP operated its system to maximize the amount of capacity available to California; evidence demonstrates that the pipeline was full to the extent permitted by safety and operational considerations and, therefor, EP could not have exercised market power.

 
 
  John Seckinger   9/23/02,  2:45:48 PM
Note: YIELDS on both five- and 10-year issues fell to levels not seen since 1958. Moreover, the two- and 30-year bonds are at their lowest recorded YIELDS since first being introduced in the 1970s.

 
 
  Jonathan Levinson   9/23/02,  2:43:39 PM
Hi john thanks for all your hard work.my question is that everyone is bearish on the markets compx at 1050 dow 7400 dont see a short term rally ?is strange when everyone knows something market does the other way would like to hear your idea on this.

You're thinking the same way as I, except that our facts differ. The put to call ratio touch 1 once today, and has been other wise below 1, showing more bullishness than we saw last week. Similarly, as Russ pointed out, the COT data shows commercials adding to bullish positions. I didn't hear it directly, but apparently CNBC had an interviewee recommending FNM as a "great value" right now. The TRINQ at 1.47 isn't nearly as bearish as it should be on a day as critical as this. Only the bond market is behaving as you and I would expect. The QQV is in the middle of its recent range, nowhere near extreme levels. The bottom line is that complacency is still far too prevalent to be going long as a contrarian trade against excessive bearishness. This is, of course, just my opinion. With the COMPX at 6 year lows, many would call this a bottom, but I am not among them.

 
 
  John Seckinger   9/23/02,  2:41:46 PM
Interesting bid seen recently in the dollar, now higher by 0.34% to 107.90. The intra-day high has been 108.13. Note: 50-DMA lower at 107.53 and should act as support going forward. Turning to other markets, the Nasdaq, currently at 1188, did come close to testing its intra-day low of 1184. This tech-laden index should pull the Dow lower if weakness does develop. Why isn't a stronger dollar helping equities? Too many other bearish factors to contend with: lower bond yields, weak Utility Index, and lower Oil Index.

 
 
  Steven Price   9/23/02,  2:22:39 PM
Reader Question: Steve, Does IBM look as though it has support just under here at 60 - 61 according to the P&F charts? It is hitting prices not seen since July of '98, or is this level no support at all. I was thinking of going long a 60-55 October put spread for about $1.30 (to make $5), what do you think? Thanks Bob

Response: IBM $63.03 (-0.89) IBM looks awfully weak. We were looking for a failed rebound at $66 for a short entry. My Sunday Ask the Analyst column shows an analysis of IBM, which has a downside measuring objective of $58, based on its previous rectangle pattern Link. The only problem with relying on this pattern is that it was broken to the upside, so the current drop is not technically a drop from the pattern. I like the idea of the $1.30 investment on the put spread, but if it achieves its minimum measuring objective, it will only be worth $2 at that point. Given the current downtrend in the techs, it may well surpass that minimum on the way down, however, I'm still in the camp that's looking for a rebound for a better entry.

The current bearish vertical count is $57, as well, but the current column of "O"s looks pretty extended and I would expect a 3-box reversal at some point before reaching that objective. The count is based on the current column so it could change to a lower target for each round number to the downside that IBM achieves in the current column. The 3-box reversal would be the entry point I'm looking for. Keep in mind I was also looking for a better entry before the recent drop.

 
 
  Steven Price   9/23/02,  2:12:15 PM
Reader Question: Hi Steve, Sold my shares of FNIS @23.70 looking to get back in where would be a good entry point? Rick

Response: FNIS $17.60 (-2.59) Nice sale. I wouldn't recommend a buy point in the stock right now. It will most likely test support between $15-$16. I'd wait to see what happens at that level before jumping back in. One interesting observation for those looking to short the stock: The point and figure bullish support line is right at $17.50 and would be broken with a trade of $17.00. The only reason I wouldn't short it at that level is the small profit potential down to the previous support range.

 
 
  Jonathan Levinson   9/23/02,  2:07:34 PM
The last runup on the COMPX cleared 1192 resistance and then reversed just shy of reaching a 50% retracement of the day's decline. QQQ is back to the 21 support level, just above its lows of the day. There's not much of a pattern on today's chart beyond a classic dead-cat bounce. Most interesting to me is the tame TRINQ, which is very different from the action at the July lows, when the TRINQ was much higher. We have 756M declining shares to 174M advancing, with a TICK.NQ of -585. The lack of extreme readings on the TRINQ is telling me only that there's nothing breadth-wise to point to a reverse of the downtrend we're currently seeing. Even the QQV is now in the middle of its day's range, +1.44 to 51.49. Complacency appears to reign for the moment on the COMPX.

 
 
  Jeff Bailey   9/23/02,  2:04:26 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Linda Piazza   9/23/02,  1:59:33 PM
Gold: Like many of you, I watch bond yields, VIX and QQV, and the XAU to help me gauge the behavior of the markets. Bond yields down, volatility indices and gold up: the markets generally go down. Opposite values in each of these: the markets generally go up. But is that always true?

Not according to market gurus who have studied many market cycles. Gold is a commodity used in industrial production. It’s also accumulated as a hedge against inflation. Martin J. Pring advises that gold rises in a bull market as it’s needed for industrial production and as a hedge against inflation, and falls in a bear market as both inflation and production ease. Gold’s movement usually lags that of the equities, he suggests, but at some point in the cycle, they move in concert. Could the markets be moving into the part of the cycle when gold and equities move in concert?

I’m concerned about the weekly .XAU and $Gold charts, with weekly stochastics threatening to top out with .XAU and $Gold failing to reach equal or higher highs. If gold is topping out, does that foretell a lessening of fear in the market or does it instead foretell a further downturn in the equities, as production eases even more? I don’t know the answer, but as a self-taught investor who has not yet observed many market cycles, I want to be observant of changes in the market cycle. If any of you were around in early 2000, hanging on to your old way of doing things a bit too long, you'll know what I mean when I say that this time, I want to be a step ahead and not a step behind in my understanding of the markets!

 
 
  Steven Price   9/23/02,  1:54:50 PM
Reader Question: Hello Stephen! Panera Bread Co. (PNRA) What do you think this former OI put selection will do from here. Some of us subscribers may still be long November puts. Richard

Response: PNRA ($26.58 -0.17) I heard an interview with the CEO this morning, where he explained his recent selling of the stock as simply diversifying his portfolio. Still makes me a little nervous. The stock rolled over right at previous support, which now looks like resistance. It broke the trend we were attempting to capture, which is why we closed the play. Today's low was $26.00 and the intraday chart shows $26.20 acting as support as well. Because it has not defined a new trend yet, it is hard to tell exactly which direction it will head from here. A break below $26 would have me bearish once again. A close over $28 would also have me closing any short plays in the stock.

 
 
  Steven Price   9/23/02,  1:47:02 PM
Note on JCI: As I typed entered last entry, the stock broke $75. There is some support at $74 and below that $72.

 
 
  Steven Price   9/23/02,  1:44:23 PM
Johnson Controls (JCI) $75.04 (-2.00) OI Put Play JCI is now below its bounce point from Sept 18 ($75.60). For those not in the play, look for a break of $75.00 as a short entry point.

 
 
  John Seckinger   9/23/02,  1:40:53 PM
October Crude Oil rose exactly to $30 before profit taking set in. The CLV2 contract is currently at 29.61, and reasons for the rise included tropical storm Isadore causing thousands of oil workers to evacuate key producing regions in the U.S. (notably the Louisiana Offshore Oil Port). Of course, concerns over war are also keep an underpinning bid in oil. Note: Oil prices are up 50% this year.

 
 
  Steven Price   9/23/02,  1:34:00 PM
Reader Question: Hi Steven! What do you think about BBOX price action today? Got lift from inline announcement but looks week. Martin

Response: Black Box ($30.81 +0.81) This morning's announcement did give the stock a boost. A look at the intraday chart shows the stock struggling with $31 after the initial surge faded. While it looks like $31 is acting as resistance, I hesitate to recommend short entries with a green engulfing candle in front of me. I think I'd look for a break back below $30 to enter.

 
 
  Steven Price   9/23/02,  1:25:10 PM
Reader Comment: Re: PAYX

Hi Steven, Could the fact that the CEO is running for Governor of NY and that his chances are improving be a factor in keeping the stock down? Jane

Response: Interesting theory

 
 
  John Seckinger   9/23/02,  12:54:11 PM
I believe the recent move upwards in the Dow is simply shorts covering once the 22 PMA (five-minute chart) at 7825 was cleared. A better test for longs should come at the 50-PMA, currently trending lower at 7855. Note: The Nasdaq came close to testing its 22 PMA at 1189 and may be the index leading all others on Monday.

 
 
  Jonathan Levinson   9/23/02,  12:44:00 PM
COMPX is breaking down again, now below 1185, with QQQ trading below 21. The TRINQ is somehow still at 1.30, despite a negative TICK.NQ of -628. QQV is near its highs of the day as well at +2.42, 52.45. Yields are getting slammed, and the XAU and HUI are down slightly on the day.

 
 
  John Seckinger   9/23/02,  12:29:24 PM
Treasury YIELDS (TYX.X) hitting new lows once again. This should accelerate the allocation out of stocks and into bonds. Yields are now at 4.68% for the 30-bond.

 
 
  Jonathan Levinson   9/23/02,  12:27:30 PM
MSFT is doing the damage. Broke 46 (62% retrace 41.41 to 53.45). The big guys like MSFT always lead a rally but lag a decline. Could this mean 41 in the near future? Scary where that would put the Q's.

MSFT looks like a distinct possibility. Note that DELL is also getting smoked today. With AMD and INTC showing no good news for months, it's just a matter of time before investors connect the dots. No one needs operating systems and boxes if they don't also need CPUs. We might be seeing the beginning of that process today.

 
 
  Jonathan Levinson   9/23/02,  12:07:47 PM
We have fresh lows on the COMPX taking us now to 1185, with the TRINQ reading an indifferent 1.31, though the QQV jumped again, now to 52.54, which is still a pretty tame reading compared with what we had at the July lows. The TICK.NQ is should broad selling at -750. QQQ is resting on 21 support.

 
 
  Steven Price   9/23/02,  12:06:52 PM
Paychex (PAYX) $24.32 +0.20

Reader Question: Hi Steve, I am trying to understand the strength in PAYX. The stock has been in a tight range and I can't figure out why it is even up today? Is there a head and shoulders pattern developing on the daily chart? Any help would be appreciated. Thanks, Angel

Response: PAYX saw an increase in earnings and revenue, released last Wednesday. I assume this is what is holding the stock up. However it does appear to be forming a bear flag on the weekly and point and figure charts. There appears to be resistance at $26.00, so this would be a good stop loss on a short play. However, with support at $23 on the daily chart, I'm not sure about the risk/reward relationship from this level. If I were to play the stock, I would certainly be looking at it short, rather than long (unless it breaks above $26). As far as the H&S pattern, I don't really see that formation, which would require the head to be above the shoulders. One other concern for shorts would be the series of higher lows since the July drop.

 
 
  Jonathan Levinson   9/23/02,  11:55:01 AM
COT data shows sharp reduction in S&P short position. Are big boyz saying we are in for a bounce? - Russ

I used to follow the COT closely, and then gave up because it wasn't helping my trades. Da Boyz could be seeing a bounce, or covering shorts ahead of the end of quarter to book their profits. It's one to keep in mind, but I don't trade based on it.

 
 
  John Seckinger   9/23/02,  11:45:37 AM
Any thoughts on either the Semiconductor Index (SOX.X) or Gold (XAU.X)?

Response: Starting with a chart of the SOX, the 3.49 percent loss to 240.23 will most likely have this index down 7 out of the last 8 months. Currently at 240, retracement analysis shows support down at 223. Resistance (as seen in a 60-minute chart) is felt above at 252, 263, and 275. An aggressive trader could use either 242 as an entry point, or just above 240. With the index free-falling, stops have to be tight (i.e. buy puts on SMH based on Sox activity with SOX at 242, an exit point could be either at 244 or 247. Turning to Gold, this index still needs to breakout. Currently at 75.28, longs could either look for a dip to 72.80 or the 22 DMA at 72.19. If the index trades above 76.35, expect a quick move to 78. Beware of a false breakout.

 
 
  Jonathan Levinson   9/23/02,  11:44:52 AM
And just who is the SEC protecting with this regulation ?? Looks like NASD to me.

Your guess is as good as mine. Archipelago's feed, which used to display Redibook, Archipelago and Island, is now displaying just the first two. Strange indeed.

 
 
  Jeff Bailey   9/23/02,  11:40:57 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Steven Price   9/23/02,  11:38:45 AM
Reader Question: Hi, Recently, a judge approved suits in the tobacco industry as class action status and I am wondering where their targets (RJR, MO) would be as both have double bottom breakdowns? thanks Arnold

Response:

Philip Morris (MO):$42.99 (+0.30) The bounce in MO after Friday's sell-off looks to be of the "dead cat" variety. There is support just above $41, which is less than $2 away.

RJ Reynolds (RJR) $47.44 (+0.22) There is PnF support here at $47.00, as well as $44.00. I profiled this stock as a short on Friday morning up around $49.00, but by the time we put out our end of day recommendations, we felt it was extended and the downside might not have enough profit potential for option traders. I would be cautious about entering short, however, the bounce was not very strong and I think a play to $44 looks reasonable. The fact that these stocks are holding in on a big down day across the market may indicated that sellers have exhausted themselves temporarily and I would look for a drop below Friday's close ($47.22) to initiate a short position.

The lawsuits were brought by MO against dot coms for using trademarks in their names and advertising, and illegally importing cigarettes for sale. I'm not sure how much difference this will make to the tobacco companies.

 
 
  Linda Piazza   9/23/02,  11:36:16 AM
I have to weigh in on inflated options prices, too. This morning, I posted an analysis of a trade I made last week. That trade would still have been working in my favor, with the OEX (currently 415.99) now eleven points below my entry. Because I was expecting a big move over a couple of weeks, I'd decided on an OTM strike for my put position. Even with that eleven-point drop, I'd barely be profitable, with the put pricing about $1.00 more than it was Thursday afternoon. The OEX hit another of my triggers this morning (417), but I didn't enter a put position because of those inflated prices. We needed a move up to resistance again, with VIX dropping, to deflate those prices, but we didn't get that opportunity. It's tough to see the markets make a big move and not be in a play, especially when you correctly predicted the movement, but sometimes risk/reward parameters just don't work in favor of a play.

 
 
  Jonathan Levinson   9/23/02,  11:32:12 AM
My Island Level II bookviewer used in Medved's Quotetracker software went haywire this morning. Here's why Link

 
 
  Jim Brown   9/23/02,  11:21:36 AM
I am sorry to see Leigh's name drop off the Monitor. Did I miss an announcement? SR.

Leigh is in New York for the 9/11 memorials and to meet with other Cantor Fitzgerald friends to heal the wounds. His office was on the 105th floor but he was out of town the day of the attack.
After that he has to go to Spain for two weeks to take care of some personal business. Once back he is moving to a new home. He is taking a month to six weeks off to do all of this. There was no reason to keep his email on the monitor since he is not contributing during this time. He is still writing traders corners (three last week). Once he gets moved he will be back on line.

 
 
  Jim Brown   9/23/02,  11:17:51 AM
Swing Trade Signals
The game plan for today called for staying flat until after the Fed meeting. However the charts showed support and resistance levels with projected entry points. Those numbers are for the benefit of readers in suggesting possible entry and exit points.

With the game plan calling for staying flat today I looked at the first drop this morning to Dow support of 7875 as untradable and I am sure you all agree. With that level acting as support as outlined, the risk/reward ratio of going short at that support was slim. With premiums already over inflated any puts would have had a very limited chance of profitability.

The break of that support at 10:AM could have been for 20 points or 120 points but nobody ever knows for sure. I got several heated emails about not going short on the 10:AM dip once OEX 420 was broken. That was not the game plan. The OEX chart said "YOU can go short on a breakdown below 420 if YOU are not worried about a surprise Fed rate cut". The GAME PLAN said " The game plan for Monday will be to remain flat until option premiums deflate and prepare for a Tuesday afternoon entry."

There are many readers who have their accounts traded for them using the Preferred Trade Live system. I can't justify an entry into extremely overpriced options on Monday after expiration with several support levels just below us. The possibility of a loss even if the trade went in our direction is too great.

I am sorry we missed a five-point move this morning (419 to 414) but the markets may continue to be very volatile and I deem the risks due to high premiums as unacceptable. Readers are always free to trade their own accounts. There is no requirement to wait for my signals to trade. If we miss the move then we missed it and will catch the next one when the direction is clearer and premiums are reasonable.

 
 
  John Seckinger   9/23/02,  11:14:42 AM
Volatility Index higher by 4.28% to 46.46. Dow did hold support area from 7775-7800 area, and the 22-PMA (five minute chart) is trending lower from 7857. This average should come into play in the near term. Moreover, the 7866 low before the L.E.I. number should be psychologically important going forward. Dow is down 2.14 percent, and sectors underperforming include Biotech, Semis, and Software issues. Bonds still setting new lows in YIELD (higher prices).

 
 
  Jonathan Levinson   9/23/02,  11:13:57 AM
The TRINQ has fallen to 1.44, with barely a 2 point corresponding rise in price from the COMPX. QQV as well is back down to 51.75, up 1.72 on the day. The TICK.NQ is at -365. COMPX 1200-05 will be the first major level to watch for a confirmation of a bounce. 1192 should act as first resistance, followed by 1200-05.

 
 
  Steven Price   9/23/02,  10:54:47 AM
I have started receiving my email and will address some of the specific questions I received this morning. Thanks for your patience.

 
 
  John Seckinger   9/23/02,  10:52:13 AM
Nasdaq at Six-year Low.

 
 
  Steven Price   9/23/02,  10:49:06 AM
Bear Stearns (BSC) $56.41 (-1.31) I am lowering the stop on BSC, originally entered at $58.21, from $61 to $59.00, just above Friday's high. New entries look good here, with the stock trading on its lows of the day. I do expect the drop in the market to slow as we approach the July 23 Dow closing low of 7702, so keep this in mind with new entries. I would be using tight stops on short positions as we get into that area. We may get a dead cat bounce, but even a dead cat may bounce a few hundred points from the recent fall. I'd like to lock in profits, play the bounce up briefly, and look for a new short entry point if that happens (all of this would take place as scripted in a perfect world, of course).

 
 
  Jim Brown   9/23/02,  10:46:36 AM
Swing Trade Signals
Part of our problem today appears to be Smith Barney. According to several different sources they are a huge seller of S&P futures today and are driving the futures hard. Do they know something everybody else doesn't or are they just early to the post Fed drop? Eiter way they are leaning heavily on the traders in the pits.

 
 
  John Seckinger   9/23/02,  10:45:48 AM
Quick recap: 30-year YIELDS at fresh new lows as traders evidently are not afraid to extend duration and capture a 4.69 percent rate. Dow close to support at 7775-7800 area, and helping equities go lower might just be the Oil Index - only lower by 2.89 points but at the low of the session and seemingly picking up downward momentum.

 
 
  Jim Brown   9/23/02,  10:39:52 AM
Qwest The Qwest T1 line to our office is down this morning and this is impacting our email. It is hit or miss until they get the circuit to stabilize. We are getting a burst of connectivity every few minutes but only long enough for a couple messages to slip through. This same problem is preventing Jeff from posting to the monitor. Please bear with us until Qwest gets their act together today.

 
 
  Jonathan Levinson   9/23/02,  10:39:39 AM
Note that on the COMPX, the TRINQ is not significantly higher than it was at the open. The TICK.NQ has deteriorated a touch, but the QQV, TRINQ, TICK.NQ and CBOE p/c ratio are all pretty tame considering that the COMPX is at or near multiyear lows and fading fast today. HUI and XAU are actually down. The only market that seems to be taking any of today's action seriously is the bond market. Whether the buying in bonds is defensive or something else I don't know.

 
 
  Jim Brown   9/23/02,  10:33:00 AM
Swing Trade Signals
The Selling is getting worse with the A/D line hitting a new low for the day. We should be at minor support or just below it on the Dow but sellers continue to pile on. The bottom is falling out and the VIX and TRIN are rocketing to new highs. It appears nobody wanted to wait around for the Fed meeting to sell. I am surprised shorts are willing to short this heavily before the Fed which brings up a serious question. Maybe it is not shorts and instead it is funds blowing out stocks to cover withdrawal requests that came in over the weekend. Either way it is an ugly post expiration Monday.

 
 
  Jonathan Levinson   9/23/02,  10:28:34 AM
So much for COMPX 1200. It will now act as resistance.

 
 
  Jim Brown   9/23/02,  10:23:32 AM
Swing Trade Exit Point Alert - QQQ
The QQQ hit the stop loss of 21.25 on that last dip and we are now flat the QQQ.

 
 
  Jonathan Levinson   9/23/02,  10:21:14 AM
The CBOE put to call ratio came in at .85 for the first half hour of the trading day. Like the TRINQ at 2.45 and the QQV at +1.31, I'm suprised at the complacency on what is so far a very ugly day in the markets. Obviously there's a lot of faith in the support levels that the price is currently resting upon. While the day following options expiration could skew some of these readings, the numbers still surprise me.

 
 
  Steven Price   9/23/02,  10:21:04 AM
Wal-Mart (WMT): $53.05 -1.65 WalMart said its sales would be at the low end of previous forecasts. This is becoming a consistent theme for WMT and other retailers and I like a short play in the stock down to about $50.

 
 
  John Seckinger   9/23/02,  10:19:58 AM
Following the LEI reading of -0.2% (consensus estimates of -0.1%), the Dow failed to test the intra-day low of 7866 and then proceeded to rise above 7900. Most likely either the low after the L.E.I. report (7872) or the 7866 level will become important to bullish traders during the rest of trading on Monday.

 
 
  Jonathan Levinson   9/23/02,  10:08:07 AM
The Fed is taking no open market action today, which effectively gives us a net addition of 1.75B due to the expiring weekend MSP in the same amount from Friday.

 
 
  Steven Price   9/23/02,  10:01:20 AM
Barr Labs (BRL) $61.75 (-1.90) I am lowering the stop in OI put play BRL, originally entered at $66.32, to $63.75, just above Friday's high. Conservative traders may want to take some chips off the table after a nice gain on the play.

 
 
  Steven Price   9/23/02,  9:57:03 AM
American International Group (AIG): $55.75 (-0.60) AIG Filled its earlier gap from July 29. The stock is trading near its lows of the day and I like the current level for new entries. More conservative traders can wait for a trade below Friday's low of $55.39 or a break below $55

 
 
  John Seckinger   9/23/02,  9:55:08 AM
Apparently 7 of the 10 components within the L.E.I. are known prior to its release, so I do not expect this number to be particularly tradable. L.E.I. is due out at 10:00 a.m.

 
 
  Jonathan Levinson   9/23/02,  9:48:05 AM
Bond yields are getting hit again, while precious metals are barely in positive territory. The QQV is up 1.4 to 51.43, and the TRINQ remains at 2.18. It looks like equities and options traders expect 1200 to hold as support, while the bond market isn't taking any chances.

 
 
  Jonathan Levinson   9/23/02,  9:45:43 AM
The one minute 5(3) stochastic is telling the story so far, as the COMPX made an attempt at a gap fill and reversed as soon as the stoch topped out.

 
 
  Jim Brown   9/23/02,  9:45:39 AM
Out - Anyone who held a SHORT over the weekend might want to look at the 7875 level as an exit. Brave souls may want to hold for lower numbers but I would not count on it. Use your own judgment.

 
 
  Jim Brown   9/23/02,  9:43:00 AM
Swing Trade Signals
The morning dip was pretty strong and not tradable for anyone not already in the market. The opening gap down only increased the volatility premium in options. The first support level is 7865 and it looks like the dip came within 8 points of that level before rebounding. If you were going to try a long play today the dip to the 7875 level should have been your trigger.

 
 
  John Seckinger   9/23/02,  9:40:18 AM
With the Dow lower by 100 points, it is interesting to see a lack of bids in the five-year sector. Five-year futures up 8.5 ticks, while ten-year bonds are higher by 14.5. This is actually a flattener to the yield curve, and will have to be watched closely going forward. The December 30-year is setting a new contract high (+25 at 113-27), and it could be traders extending duration or even mortgage related buying. The Dollar, at 107.38, is still straddling both its 22 and 50 DMA's (107.28 and 107.50, respectively). Gold is fractionally higher, while both Utility Sector and Oil are in the red. Support should be found near 7775-7800 in the Dow.

 
 
  Jonathan Levinson   9/23/02,  9:39:18 AM
The COMPX is struggling weakly after its initial gap down, with the TRINQ in moderate sell territory at 2.11, the TICK.NQ showing moderately broad selling at -334, and the stochastics all oversold and getting moreso as the COMPX prints fresh lows at 1205.

 
 
  Jim Brown   9/23/02,  9:33:46 AM
Swing Trade Exit Point Alert - QQQ
If we get a bounce today or tomorrow let's exit the QQQ long with any trade at 22.50. This may be wishful thinking since the pre-Fed bounce never occurred. The stop loss is still 21.25 and that is more likely the exit point on weakness today. If we don't get stopped on either side we will look to exit on any post Fed announcement bounce.

 
 
  John Seckinger   9/23/02,  9:32:31 AM
Morgan Stanley cuts their S&P 500 earnings estimates to $47.50 from $50 for 2002 and to $55 from $58 for 2003. Reasons include a weak economy. Also, their 12-month price target for the S&P 500 has been cut to the 1050.

 
 
  Linda Piazza   9/23/02,  9:31:03 AM
Analysis of a Trade: Newer traders may not be experienced at analyzing their trades, so here’s how I analyzed a trade decision I made last week. Wednesday, the OEX 429-430 area provided support. OEX was breaking or threatening to break through the neckline of the H&S pattern. The H&S pattern was a classic one, with volume confirming the pattern. Volume dropped with the formation of each shoulder, but rose again when OEX fell through the neckline. The OEX seemed ripe for a put play of several days to a couple of weeks, just the kind of play I prefer. Thursday morning, I looked back at old charts and noticed that OEX 427-428 had formed resistance for a week in July. I settled upon a break of 427 for my entry. OEX fell through 427 that afternoon, and I entered, buying October puts. I set a stop loss of 431 for Friday. I was prepared for a short-covering rally after the OEX hit an area of prior support in 419-420, but expected it to roll over at resistance again. Unless it moved through my stop-loss point, I intended to stay in.

Friday morning, the value of my put position deflated, so that even in the 420 area, my position was barely breaking even. I decided to sell. I could get back in that October position early this week, I reasoned.

Result: The OEX didn’t hit my stop loss, and this morning the markets appear ready to open down. My original plan might have worked just fine, although that remains to be proven. If the OEX hits the target projected by the failure at the neckline of that H&S pattern, I still would have made lots of money even if those OEX October puts were inflated when I bought them Thursday afternoon. On a further fall, a rising VIX should have inflated them again. I should have trusted my own plan. It was a long-term plan, and I let Friday’s noise influence me unduly. Traders must monitor intra-day noise, but longer-term traders must give more credence to their long-term plan. However, I broke even, minus my commissions, and I can set a new entry now, so I’m trying to stop kicking myself for my prudence in getting out of the trade.

As you prepare for trading this week, think about your own trading style. Not all suggestions made on this Monitor will fit all trading styles. As traders, it’s our responsibility to determine whether a suggested trade does or does not fit.

 
 
  Jim Brown   9/23/02,  9:27:25 AM
Swing Trade Signals
How do you spell unconditional? Evidently Iraq does not know since it has decided that inspectors will not have unconditional access. (surprise) This helped push the S&P futures into the deeply negative territory this morning. However, the Nasdaq is holding up well despite a downgrade on MSFT this morning. Looks like the markets are shaping up as just another September Monday.

I went back to look at the last six post expiration September Monday's and the trend was actually flat. There was high volatility but the average points won/lost were very close to the flat line. The rough average over the last six years, not counting 2001, was +20 points.

Today is likely to start down and rebound sometime during the day to finish near zero. I am not going to recommend any new plays today. With option premiums very high and a Fed meeting tomorrow any play has less than a 50% chance of profitability even if we get the direction right. We need to let today pass and wait patiently for the post meeting entry point.

The ideal scenario would be an eventual rebound today to a close somewhere in the 8250-8300 range. The worst scenario would be an extended drop of a couple hundred points. This would leave us close to the July bottoms and leave the post Fed direction in doubt.

Sit back and relax and let's watch from the sidelines this morning.

 
 
  Steven Price   9/23/02,  9:25:16 AM
Now that the Dow has closed below 8000 once again, it will be interesting to watch this level for signs of continued resistance on any rebound attempt.

 
 
  Jonathan Levinson   9/23/02,  9:20:52 AM
I watch the futures almost everyday do that weird stuff at 3:00 in the morning too. I have been trying to find out what would cause that move and the only thing I could think of is the opening of the Europe markets. Is this what you are finding too or is there something else at work?

I'll have to open this one up to our readership- what do you think? It was the early morning JDS Uniphase warning that caused the reversal.

 
 
  Steven Price   9/23/02,  9:19:05 AM
Semiconductor Sector Index (SOX.X): 248.87 The index got only a slight bounce from support at 250 on Friday before rolling over and breaking this level. This morning CSFB cut estimates on chip eqipment makers, which should keep the group heading downward, including current OI put play Maxim (MXIM) $24.20. New entries can look for a trade below Friday's low of $23.73

 
 
  Jonathan Levinson   9/23/02,  8:48:45 AM
The Corinthian Geyser Formation appeared on the futures charts at 3AM today, and got croaked at 6AM as we've seen so many times. Right now NDX futures are down 7.50 and S&P futures down 8.10, and they're pointing nearly straight south. The US Dollar Index is slightly off its lows, hovering just above 107.30.

 
 
  Jim Brown   9/20/02,  1:37:44 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   9/20/02,  1:37:35 AM
The Market Monitor for Friday has been archived. Read it here: Link

 
 

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