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  Jim Brown   10/2/02,  7:35:43 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Steven Price   10/2/02,  7:11:47 PM
Reader Question: Hi there! You folks are really on top of breaking news, and that's a great thing. I've come to rely on your updates a bunch. As a shiftworker in a steelmill it's fantastic knowing I can catch a few hours sleep during market hours when I'm home, and get an instant feel for what I've missed by scanning the MM.

Been looking to re-enter my put position in IBM on strength, but it aborted today before hitting my target. In your opinion, was the million share sell order going into the close part of the $622 million mistake? If so, can we expect a million share buy order on the open tomorrow to offset the busted trade? Will that also occur in the other stocks traded as part of the basket? Short term exaggerated lift equals great short/put opportunity. Any thoughts are appreciated. Thanks. Tom

Response: IBM ($59.60) That was probably the catalyst, however IBM recovered well from the drop that took it down to $58.50. I'm not sure how the specialists will handle this problem in the morning, and whether Bear Stearns will cover the error on the open, or attempt to "bust" some of the trades. They may also wait to cover at better prices. I think Jim's comment about seeing which stocks are on the "sell list" is accurate. I do like IBM's failure under $60 for a possible short, though.

 
 
  Jeff Bailey   10/2/02,  5:54:29 PM
What was that? The sudden and sharp drop into the close. CNBC reported that a clerk at Bear Stearns accidently entered a $4 billion sell order, instead of a $4 million sell order at approximately 03:40 PM EST in the S&Ps. This perhaps explains the sudden drop late in the day and "bad ticks" that were not bad ticks.

I'm guessing that trading curbs went into effect as the Dow fell 160 points, the trader at Bear's desk may have checked his/her "$4 billion sell order" to see if it was completed and discovered the mistake. "Thank goodness for trading curbs!" says a bull. Of course this second paragraph is my thinking of what took place.

What might be interesting is the declines or lack of declines that traders saw in stocks they're trading.

For a bearish trader holding some Agilent (A) $12.50 -4.21% and Duke Energy (DUK) $19.17 -4% (DUK fell to $17.50 on that program), perhaps their declines hints these two stocks are on the "program sell" list of stocks that institutions have for their basket of weak stocks.

It's interesting too that Johnson & Johnson (JNJ) $58.29 +3.5%, didn't really "blink an eye" when the sell programs were triggered.

Just an observation relating to some stocks weve talked about lately.

 
 
  Jim Brown   10/2/02,  5:51:02 PM
Four Billion Error   The news was just released that an error at Bear Stearns caused a sell order for $4 million of S&P stocks to be entered as $4 BILLION instead. Most of the order was cancelled before filled but $622 million got executed. BSC claims they have hedged the short position already. (good luck)

 
 
  Jeff Bailey   10/2/02,  4:40:24 PM
Duke Energy (DUK) $19.17 -4% ... Hi Jeff Crazy 8 mins in DUK at 15:40, a portend of things to come I hope. Any idea what that was?

I think those were "bad ticks" to $17.50, but lets hope it was a "key punch error" at a trading desk where some institution is placing a protective stop. Funny isn't it that $17.50 number. What could possibly happen at $17.50? Link

Disclosure... I currently hold bearish position in DUK

 
 
  Jim Brown   10/2/02,  4:32:42 PM
AMD Warns   AMD said weak PC sales would cause it to post a significant drop in earnings estimates for the 3Q. This is a -15% drop in revenue and will cause them to post a significant 3Q operating loss.

 
 
  Jim Brown   10/2/02,  4:27:19 PM
Sell Program There is confirmation from multiple sources that somebody may have entered a sell program for a large basket of stocks in error. They are suggesting that this caused the end of day drop. If anybody looks at the futures, S&P and NDX as well as the Russell-2000, there was a huge drop across the board. If this was an error then somebody is in deep trouble. This could have been a billion dollar error. I find this hard to believe that a clerk could make a billion dollar error. I guarantee he won't do it again!

 
 
  Jeff Bailey   10/2/02,  4:17:14 PM
Option Quotes ... I think we get 10 to 20 calls a day from subscribers wanting to know where they can get options quotes from. On the front page of OI, Tools there's a link for Option Quotes, which will take you to the CBOE site. These are 20-minute delayed, but unless a very fast market, should be good for those that aren't using a charting/quote service. Link

Once you've opened up the CBOE quote page, simply go to your browser and add it to your "favorites" list. Then you've got it at the ready.

 
 
  Jim Brown   10/2/02,  4:09:13 PM
IBM   Somebody wanted out of IBM really bad at the close. There was well over a million shares in a five minute period and the stock dropped from just over $60 to 58.50 almost instantly. It did recover most of the drop but was still trending down at the close. Maybe somebody knows something?

 
 
  Jim Brown   10/2/02,  4:01:34 PM
Swing Trade Signals
We have support below us at 408-412 which would be roughly equivalent to Dow 7700. It is my intention to ride this signal as long as it lasts and not jump in and out. You know my overall outlook is down with a retest of the lows. This may not happen this week but it should happen. The Fed is no longer expected to cut before the November meeting. This means the economic reports on Thursday and the Jobs Report on Friday will be the key. I am not lowering the stop today.

 
 
  John Seckinger   10/2/02,  3:57:36 PM
One sector coming under pressure is the Biotech Index (BTK), lower by 3.35% at 320. I use the 22 DMA (exponential), and the BTK has tested this average five times in the last few week - each time failing to settle above. Today's high was 337, while the 22 DMA is currently at 331. The 50 DMA remains slightly higher at 341 and has not been tested since August 30th.

 
 
  Mike Parnos   10/2/02,  3:56:45 PM
Attention TradersMany thanks to all of you who sent me questions and comments today. I enjoy hearing from you and hope that I've helped. I had a lot of questions on bull call spreads. Check out my column tomorrow (Thursday). I think you'll enjoy it and get a good idea of how they work.

One other comment. Can anyone tell me why, when the market has been going down for two years, people insist on going long? Look at all the stocks that are under $10, under $5, under $1. Does that tell you anything? At every level on the way down there's huge overhead supply from retail knife catchers.
There are a few stocks in a few sectors that are holding their own. Isn't it better to bet on a horse that's living rather than trying to resurect the dead. A dead horse will only yield ALPO -- at best. If a glass of milk was once full and is now 90% empty, how is it going to be full again when there are no cows in sight?

Give someone you love a big hug tonight. Make someone smile. Life can be good, but it's up to you to make it that way.

 
 
  Steven Price   10/2/02,  3:40:19 PM
Reader Question: Hello Steve,in the last hour semi collaps,is this a good time to short some more?

Response: Semiconductor Sector Index (SOX.X) 249.00 (-0.90) The failed rally does look bearish, but the intraday higher high makes me a little nervous. I will probably miss out on a short opportunity by waiting for a lower low (below 231), but for the moment I would put on only a 1/2 position short. A close below 250 will make me more comfortable with a short here.

 
 
  Jim Brown   10/2/02,  3:36:54 PM
Swing Trade Signals
Remind me again what happens when the market moves in the direction of your play? It seems like light years since that 15 point winner on Monday. Do we lower the stops or something now? (grin)

 
 
  Steven Price   10/2/02,  3:30:15 PM
Reader Question: Hi Steve, I'm short Allamerican Financial, AFC, and I wonder how low you think it can go. Thanks, LB

Response: Allmerica Financial (AFC) $11.34 -0.03 After the recent debt downgrade, the stock has sought out new all-time lows. With a stock of this nature, where there is very little support to hang your hat on, as far as establishing a price target, I like to simply lower my stop loss and let it drop. You can keep a tight trailing stop, so that you don't give back too many profits on a rebound. I would be concerned if the stock rallied back above $13.55, its high on Friday, that the current downtrend had found support. For right now, $11 is providing support and after the extended drop, some type of bounce can be expected. The fact that the company relies on stock market strength to cover its insurance and investment payouts leaves it vulnerable to the market on an almost daily basis. If they are able to sell-off assets and re-organize (as has been discussed) there could be some re-newed interest from buyers, but if you use a tight stop, you should be able to lock in profits. There is still "gap risk" of course, if they were to announce a reorganization when the market is closed, and you will have to assume that risk if you want to keep your profit possibilities open.

 
 
  Jeff Bailey   10/2/02,  3:28:29 PM
The 03:15 PM Update has been posted Link

 
 
  John Seckinger   10/2/02,  3:07:30 PM
Bond market is now closed. The December Bond did recover late in the session to finish up 6 ticks at 113-16. Going forward, the two levels to be concerned about are 114-08 and 111-30. Since the settlement may not give direction during the last hour, traders might want to turn to the Utility Index (UTY), which is down 0.43 points to 257 and failed to remain above its 22 DMA (258). The UTY index can at times be a great leading indicator for stocks.

 
 
  Jeff Bailey   10/2/02,  3:06:28 PM
Qualcom (QCOM) and Broadcom (BRCM) ... hi jeff thanks for all your hard work. iam long in QCOM and BRCM can you see on the chart what is the support and restance. thanks a lot

Hmmmm... I can't share any enthusiasm with you on either of these trades. Telecom and networking are my least favored groups of stocks to be trying to trade bullish in. Too much "landmine" potential.

As for support levels. I think QCOM support is $28. This was recent level of resistance.

As for BRCM, the recent 52-week low of $10.40 is support.

Good luck with both. I do hope you are a VERY AGGRESSIVE BULL that has built some handsome gains this year and is willing to take on some risk with both of these trades. QCOM is your stronger stock, while BRCM may rank "high" as a tax-loss sell candidate.

 
 
  Jeff Bailey   10/2/02,  2:55:41 PM
Awesome! ... Jeff: I am into 1/2 position of JNJ Jan 55 CALL yesterday @$4 according to your MM comments. Now with JNJ >57 and the triple buy signal, should we proceed to round out to full position now even when the DRUG BP% is bearish like you said today. If yes, should we stay at the same strike and month?

Subscribers beginning to grasp trade management and strategy (very important). OK... you've got a great grasp on how important sector and even "market" bullishness is for a call trader. Since you've claimed an initial stake, you could "care less" if JNJ goes up to $70 from here. However, you can no show some discipline. Look back at this morning's comments at 09:43:43 and the comparison made between FRX and JNJ. Since sector bullish % and even Dow Industrials bullish % is still weak, a trader with 1/2 bullish in JNJ waits for a pullback near 200-day SMA to round out (if that's within your risk level). Then, if a pullback does take place, a trader/investor will probably get more "observations" from daily market statistics from the drug group bullish % and even the other market bullish %.

True... FRX really bucked the trend and shot higher, but we now know the catalyst for that move. I do think today's news provides similar catalyst for JNJ, but you and I know that coated stent is probably not a HUGE portion of JNJ revenue. Yes, it spurs growth potential, but not 40-50% like FRX's new drugs.

So... I'd either wait for a pullback in JNJ to the 200-day SMA as a rounding out position point, or wait for bullish % to turn higher.

Say "What!".... I'm guessing some are thinking... Why would any trader long a stock want it to pull back?.... Good question. But institutions won't "chase" a stock unless there's some type of euphoric discovery just made that really changed their previously bullish thoughts. Yes, JNJ bulls that had been building some positions prior to today probably added, but they won't chase and will look for a pullback to also round out some positions. A bull that has claimed an initial position should want to think the same way, especially if he/she is thinking.... "oh darned... I should have bought more yesterday!"

 
 
  Jim Brown   10/2/02,  2:41:07 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 14:31:16 when the OEX traded below 421. SPX 837.78, DIA 78.55, SPY 84.05, DJX 7850.15, NDX 856.87, Compx 1199.06, QQQ 21.31, Emini 837.75. The initial stop loss will be OEX 425 which is just above the last two bounces to 424 over the last hour. The Nasdaq broke 1200 just as this signal was triggered and it looks like it attracted some buyers. We are 25 minutes from the 3:PM turn and maybe our luck has changed. Instead of a closing rally we may get a closing crash. Again, with the intraday rallies on bad news nothing is for sure until the bell rings.

 
 
  Jonathan Levinson   10/2/02,  2:38:52 PM
The COMPX has just sliced through support at 1200, apparently violating the ascending trendline I've been watching. Pirce found support at 1199, however, and I won't try to cut it too fine with my arbitrary placement of my trendline. A move south from here should trigger another wave of selling. The TRINQ is in neutral sell territory at 1.34 and yields are coming off their highs.

 
 
  Jeff Bailey   10/2/02,  2:29:15 PM
Index Trader comments Jeff: I can't believe today's market action as described in last night's index wrap. What do you make of this little "trap" today in the XAU per last night's comments. Is it a trap?

Aha! And this perhaps is where today is an "observation day" where a trader trading the XAU scenario does nothing, but monitors tomorrow's action. For instance.... thinking becomes, if MARKET sells the more defensive XAU and gold stocks, then why are they doing that? Has something changed where the defensive gold stock play no longer fits a prior scenario for a need to be defensive? Converseley, if XAU bids higher and it looks like the trap we correlated back to on March 8th, then perhaps its the major market averages that end up suffering the consequences in the coming sessions.

This will be interesting indeed.

I'm also watching those Treasury YIELDS, and 30-year ($TYX.X) 4.725% has YIELD back in the red and not able to break above yesterday's high or the short-term 21-hour SMA.

 
 
  Jonathan Levinson   10/2/02,  2:16:44 PM
Thanks everyone for the Qcharts updates- looks like it's back online for everyone now.

 
 
  John Seckinger   10/2/02,  2:11:34 PM
Looking ahead: The weekly claims report scheduled for Tomorrow at 8:30 a.m. could garner some attention, especially as it relates to fixed-income traders possibly squaring accounts ahead of Friday's non-farm release. For the week of September 28th, claims are expected to come in at 405k versus 406k, week prior. Above 400k is noteworthy. The four-week average is at 3.54 million and slowly trending higher. Remember: A higher claims number usually means higher bond prices and lower yields.

 
 
  Jim Brown   10/2/02,  2:10:31 PM
Swing Trade Signals
The current trigger is a long way from where I would have liked to get in at 430. I chose to wait for the lower entry because of the earlier intraday support. It is not below the low of the day at 419.33 but that was a reaction low in my opinion. It looks like the bulls are finally on the run but we will not be sure until the bell rings.

 
 
  Jonathan Levinson   10/2/02,  1:59:16 PM
Is anybody experiencing problems with Quote.com

I assume you mean that it isn't working, and not just printing quotes going in the wrong direction (grin). My deadcharts is working fine. Anyone else still having trouble?

 
 
  Jonathan Levinson   10/2/02,  1:58:16 PM
Short interest for Nasdaq stocks can be found at the link below. It's set for IBM, but can be toggled for different stocks:

Link

 
 
  Jim Brown   10/2/02,  1:58:08 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
CORRECTED Let's go SHORT the broader market again with an OEX trade below 421. I was hoping for a rebound to 430 for a better entry but it is not happening. CHANGED FROM 422 TO 421.

 
 
  Jim Brown   10/2/02,  1:56:57 PM
QCharts   The INDU quotes on QCharts are incorrect. They were down for everybody about so min ago but some systems are coming back up. QCharts is still broken.

 
 
  Steven Price   10/2/02,  1:42:46 PM
Semiconductor Sector Index (SOX.X): 257.74 (+7.84) As I see the rally fail in the Semiconductors, I am torn as to how much importance to give the intraday high. A close below 256.45 would keep in tact the series of lower closing highs. However, even in that case I think stops should be kept tight in the sector, as we may have seen the first sign of a rebound with the higher intraday high.

 
 
  Steven Price   10/2/02,  1:37:29 PM
Reader Question: HI, would value your thoughts on FNM, from a price of 77, on Sept 9th to Mondays low 58.85. I was thinking to take a short trade around the 50% retracment of 67.91 or so .What dos P&F say ?? Regards, Eamon.

Response: Fannie Mae (FNM) $66.48 (+1.26) I still believe this former OI put play has some troubles ahead, so looking for a new short entry point seems to be a valid plan. The recent rebound put the stock back on a PnF buy signal, with bearish resistance at $70. The $70 level coincides with the 61.8% retracement of $70.06. Because I would not want to go long on this buy signal, I will look for the rally to fade at $70 for a short entry. The 50% retracement is a valid point, as well, since there was some daily and PnF resistance at that level and it is where the bounce failed after the big drop from September 10-18.

 
 
  Jonathan Levinson   10/2/02,  1:32:32 PM
Mon ami, can you tell me where I can get the short interest for a smallish NYSE company?

Le voici, mais pour tous les compagnies du NYSE: Link

 
 
  Steven Price   10/2/02,  1:25:12 PM
Semiconductor Sector (SOX.X): 262.20 +12.30 The Semiconductor Index has now established a higher high, the first time this has happened since the August rally. The previous recent intraday high was 261.07 on 9/25, with a close of 256.45. If it holds over 260, I will stay away from short plays on the sector, until I see a decisive failure. Current OI short play QLGC ($27.03 +1.78) fits into this group and a close above $27 will have me rethinking the play. I would not recommend new entries here unless we get a break back below $27 and signs of intraday resistance forming at that level.

 
 
  Mike Parnos   10/2/02,  1:24:51 PM
Bottom?
I suspect that Ralph Bloch's bottom is behind him -- and that's all he has first hand, and maybe second hand, knowledge of.

 
 
  Jim Brown   10/2/02,  1:13:57 PM
Bottom?   It is official, the bottom is behind us. Ralph Bloch said so on CNBC today. I am sure that is very reassuring to those traders who follow his market calls. If we can just get Ralph Acompora to call it too then we know Dow 5000 is dead ahead. (grin)

 
 
  Mike Parnos   10/2/02,  1:06:20 PM
You asked for it!
Reader Question:Any comment on CRUS? Has it hit bottom?

Response:What would lead you to believe it's hit bottom? The stock is at $1.89. You can't even buy a Quarter Pounder with Cheese with that.
Don't try and catch a falling knife! I suspect it's a little late. Your hands are probably sliced up pretty good because you have owned this since it was $20 and have been averaging down -- all the way down (just a guess, I hope I'm wrong). Is there any more risk? Yep, all the way down to zero. Take the $1.89 and buy a Big & Tasty and fries.

 
 
  Jonathan Levinson   10/2/02,  12:59:51 PM
I'm feeling out of control a bit on premiums. The december 22P, have a b/e price of 20 which I don't think is by any means a walk in the park.

When you look at time and premiums do you look at the options with the idea that you will be trading the swings regardless of the ultimate resolution? Or do you seek an option that projects out profitably on your chart if you were to hold to expiration?

My approach has evolved this year. Studying a steady trend can do that in ways that a textbook (even by The Master, George Fontanills) cannot. I used to buy contracts with a view to what you term "ultimate resolution". But, the greatest appreciation occurs from OTM to ATM on a contract. For this reason, and because I never hold contracts to expiry, I now buy OTM, usually with an extra month just in case, and try to target the strike that I think will be ATM relatively quickly, which is my exit point. If the move really goes my way, I'll hold the contracts ITM as well, but that's not the goal. Hope that helps.

 
 
  John Seckinger   10/2/02,  12:54:03 PM
Fed President Guynn (non-voter) is speaking at the moment, and does not seem to be looking for continued rate cuts by the Fed. The yield curve remains weak and does portend higher equities; however, solid corporate supply and a higher refi index (supporting 30-year bonds) has made the curve slighly difficult to read. With no economic reports released today, there is a good chance most curve traders are waiting for Friday's non-farm release.

 
 
  Jeff Bailey   10/2/02,  12:51:11 PM
Johnson & Johnson (JNJ) $58.82 +4.4% ... pounding out some further gains and helping lead a Dow charge perhaps. This may be a "key stock" for Dow bulls to be monitoring. Daily volume is brisk at 9.1 million and I'd like to see something north of 12 million on today's breaking of 200-day SMA to show some hint of longer-term commitment.

 
 
  Mike Parnos   10/2/02,  12:49:36 PM
Picking a direction is tough!
Reader's Question: What do you think about HGSI as a long candidate?

Response: Looks like HGSI may trade between 10 & 15 for a while. I try to avoid picking a direction on stocks. I'm not that smart. Here's an idea to consider. If you have some cajones, some patience, and the appropriate trading approval level, you could sell the Nov. 12.50 put and Nov. 12.50 call and take in $3.30 in premium. That's called a short straddle -- no, it's not about a midget and a hooker, it's a real trading strategy.

The ideal scenario is that HGSI finish at $12.50. Both the put and call would expire worthless and you'd keep the $3.30. You would make a profit if HGSI finished anywhere between $9.20 and $15.80.

On Nov. expiration Friday, you would need to buy back the short put or call - whichever is in the money. And you get to keep the rest. There would be a maintenance requirement in your account for the duration of the trade, but only in one direction. Check with your friendly brokerage firm to determine the exact amount.

 
 
  Jeff Bailey   10/2/02,  12:46:42 PM
Dow Diamonds (DIA) $79.70 -0.37% ... can take partial positions here. From p/f chart, first "hurdle" is to get a trade at $81. A trade at $81 would negate the bearish vertical count of $74 (came close at $74.60) and get things more bullish. Link

 
 
  Jeff Bailey   10/2/02,  12:44:29 PM
Dow Industrials (INDU) 7,947 +0.10% (8.5 points) .... first time in positive ground today.... most likely look for a rally to 8,000 here and will also have NASDAQ market makers firming some bids and taking some offers.

 
 
  Steven Price   10/2/02,  12:35:01 PM
Reader Question: Thanks Steve, What do you think is the target on downside is for BAX. GG

Response: Baxter $27.10 -2.52 is fast approaching the first level of support at $26. My next target is $22. After the extended drop we are likely to see a bounce at some point, so new entries should probably put on only a 1/2 position at this level and then wait for a break of $26, or a failed rebound to round out a full position. Conservative traders may want to stay away until one of those two things happens.

 
 
  Jonathan Levinson   10/2/02,  12:30:10 PM
As John B. correctly points out, COMPX price is now dueling with the descending upper trendline which projects to approximately 1215 COMPX going back to Sept. 16th, 26th and 27th on the 60 minute chart. Intraday stochastics are overbought here. It should be a very interesting lunch hour.

 
 
  John Seckinger   10/2/02,  12:13:28 PM
Jeff, good point on the 30-year bond. Looking at the yield curve, five's are down 7.5 ticks while 10-year is off by 8. This is certainly a flattening of the curve, and could manage to get stocks above yesterday's high. Regardless, strong resistance seems to loom overhead near 8000. Note: Sox index currently higher by 2.64% and above the mid-regression line of 253. This regression line was started back in March, so should hold some psychological significance. Short-term objective is 267, and top of regression channel comes in at 300 (coinciding with the 50 DMA). A move under 247 should nullify the bullishness.

 
 
  Jeff Bailey   10/2/02,  12:04:07 PM
30-year YIELD ($TYX.X) 4.74% ... hmmmmm... YIELD now positive and seeing some selling in Treasuries.... Daily chart shows 30-year YIELD back to challenge the 21-day SMA. Short-term bear in equities on the alert and sticking with some stops just above yesterday's highs. Link

 
 
  Jim Brown   10/2/02,  12:03:19 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORt signal at 11:58:52 when the OEX traded above 426. SPX 848.11, DIA 79.44, SPY 85.10, DJX 79.28, NDX 873.03, Compx 1214.35, QQQ 21.70, Emini 848.00. The next resistance os OEX 430. We will look to reenter in that area.

 
 
  Jeff Bailey   10/2/02,  12:02:08 PM
Speaking of targets... One target also discussed in the 09/12/01 Index Wrap was the Dow Diamonds (DIA) and its bearish vertical count target of $74.00 from the point and figure chart. So far, low has been $74.60 (09/30/02. Hmmm.... maybe a reason to be somewhat bullish the Dow Diamonds with a rebound from the $74.60 level. Maybe that was a bottom near the bearish vertical count of $74.00? Boy, oh boy, would be kind of neat if the Dow Bullish % ($BPINDU) Link reverses back up.

 
 
  Mike Parnos   10/2/02,  11:58:33 AM
Re: QQQ Strangles Reader Question:
Mike, thanks for your fascinating column. Regarding the QQQ strangle playing the 3-pt move over 2 months, I did it once successfully with a near-free long position. My question is about re-implementing the same strategy at the lower strikes. If the Market sentiment is very negative, e.g. with the head and shoulder stuff on almost every indices, the prevalent downtrend etc, is it alright to leg in the put side first of the intended strangle and buy the call side later? Or would that risk taken defeat the whole purpose of the couch-potato mentality? Fortunately or unfortunately, I have a full time job and do not have access to the computer screen all day.

Response: I'm not sure I would rush into the strangle strategy at this point. It's already moved down more than three points. For it to continue to move down another three points would essentially create a 6-point plus move.

It's OK to leg into a strangle, but you're taking the chance of the market moving against you while you wait and the strangle costing a lot more than if you were to enter both positions simultaneously.

If you are not able to monitor these trades during the day, you would almost have to have the ability to put in day orders to buy or sell positions when they reach certain predetermined levels. There's a lot of wierd stuff that goes on during the day that you don't want to miss out on. I'm glad you like the strangle strategy and that it has worked out for you.

 
 
  Jeff Bailey   10/2/02,  11:55:26 AM
Head and Shoulders Targets .... OK.. this was discussed in the 09/12/01 Index Trader Wrap, where we looked only at the OEX, but was also showing up in the other indexes Link . I had calculated, based on OEX head/shoulder pattern, an OEX target of 380. So far, the OEX as traded a low of 399 (09/30/02 low). Target from pattern would still be in play, but my thinking is that it would only be in play still if the 435 OEX level holds as resistance.

 
 
  Jeff Bailey   10/2/02,  11:49:52 AM
Excellent question! Jeff have the down targets from the recent Headnshoulders for the Dow, S&P and Naz been hit? If not what are they? Thanks!

I don't know? I'll have to go back to one of the Index Trader Wraps and find out. Hold on....

 
 
  Jonathan Levinson   10/2/02,  11:44:43 AM
The CBOE put to call ratio is down from its intraday high of 1.11 to .91, which is good news for bears. Generally, an excess of put buying signals short term bottoms in the market, based on the premise that the market's primary job is to make the greatest number of traders wrong. On the other hand, the move down in the p/c ratio coincides with a return of strength in the COMPX, which is currently trading just below the 1207 pivot that we've seen since yesterday afternoon. The TRINQ is a little lower at .90, and until a successful challenge of the morning's gap resistance at 1213, I expect to see more rangebound trading.

For those readers still in dropped put play BSC (like me), price at 57.50 seems to be forming a wedge but has yet to violate yesterday's uptrend on the 30 minute chart. Bad news out of Merrill Lynch has me hopeful for a sympathy dip in BSC, but we'll have to see.

 
 
  Jim Brown   10/2/02,  11:39:41 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower our stop loss on the current SHORT signal to OEX 426 from the current 427.50.

This should get us over the resistance up to 425.50 but get us out a little quicker if this level breaks. If stopped we will look to get back in around 430.

 
 
  Mike Parnos   10/2/02,  11:35:32 AM
I live for thisReader Question: I was reading the MM this morning and you wrote that you would be participating on the MM today and that if someone had any questions just send them in. Soooooo....... I said to myself "Hey let's check this guy out and see what he has to say!!:-). I am a believer in giving people opportunities to show and state their know how.

Would you comment on CEPH. It appears that it is nearing resistance on the PNF charts and to me there appears to be a rising wedge on the 15 minute charts. I am looking to go short on a turnback and am wondering what may happen when it nears 38.

Response: Gee whiz -- an audition. This is my lucky day. I'm a spread trader and so are my CPTI students. So, it looks to me like CEPH is in a range from the mid-30s to the mid-40s. It's till below the 50-day MA and hasn't broken its longer term down trendline. I would consider putting on a condor.
1. A bear call spread. Sell the Nov. 45 and buy the Nov. 50 for a credit of $1.45
2. A bull put spread. Sell the Nov. 35 put and buy the Nov. 30 put for a credit of $.90.
You would have brought in a total of $2.35. You have a worst case scenario risk of only $2.15. CEPH would have a 10 point range in which to bounce around.

If you've got the brass and the account size, you could simply do a short strangle.
If you know how to adjust the trade properly, there would be very little, if any, exposure -- even if the short strikes were violated. Let me know if you have any questions. I've addressed this Iron Condor strategy in a number of my columns. Check out Traders Corner and Option 101 in the OI archives. Gee, how did I do?

 
 
  Jim Brown   10/2/02,  11:34:55 AM
Swing Trade Signals
Today is shaping up suspiciously like yesterday. We are seeing higher lows and lower highs with even worse news than on Tuesday. I may close this signal early if conditions continue to improve. The resistance at 424.50-425.50 is still there but the rising support is giving me a Maalox moment. I don't want to jump out and trigger the drop to 400 but I don't want to fight the tape either. Just a little gun shy today and thinking out loud.

 
 
  Steven Price   10/2/02,  11:31:04 AM
Omnicom (OMC): $53.56 -3.14 Earlier profiled OMC has broken below the $53.75 level I referred to. Because the stock has dropped severely today, conservative traders can look for entry on a failed bounce below $55. I would use a stop of $57, and a failed rebound at that level ($55) would provide better risk/reward. I think a 1/2 short position here is reasonable, with a full position on either a failed bounce or a break at $53.00, which would be a bearish catapult breakdown on the PnF. Initial target on the play is $47, but there is likely to be some support at $50, as well.

 
 
  Jeff Bailey   10/2/02,  11:28:31 AM
11:00 Update has been posted. Link

 
 
  John Seckinger   10/2/02,  11:20:07 AM
One index worth keeping on the radar screen is Gold (XAU). Currently at 67.52, the XAU is now in the process of testing a psychological level that began back on August 12th (high 67.48). It was on on August 29th when the 67.50 resistance area became strong support, as the index opened at 67.62 and never looked back. I have to imagine current price action will be more than just a friendly battle between bears and bulls. Note: 50% retracement of last leg up is at 66. Please see chart for illustration: Link

 
 
  Steven Price   10/2/02,  11:11:16 AM
QLogic (QLGC): $26.37 +1.12 OI put play has rebounded to a level just under the previous $27 PnF support, which was also its bearish vertical count. We talked about this possibility in the play write-up, and will look for a rollover below $27 as an entry point.

 
 
  Jonathan Levinson   10/2/02,  11:08:19 AM
All intraday 5(3) stochastics have given bearish crosses, but the longer that price action operates within this narrow range, the more directionless the oscillators will become. The TRINQ is sitting on the fence at 1.0, as neutral as it gets, and with the TRINQ at -70, we have almost a dead heat between the bears and the bulls. Declining Nasdaq volume is leading advancing volume 300M to 187M. Shorter yields are still green, which is what I assume has been fueling the buying, while the TYX is still negative.

 
 
  Mike Parnos   10/2/02,  11:05:23 AM
Attn: JNJ Call Buyer
Are you a longer term trader or looking for a quick hit and run trade?

If you bought JNJ calls recently, and it's up substantially yesterday and today, consider this. There is near term resistance at $60 and more at $65. I'm guessing you bought the Nov. calls. Why not turn your calls into a bull call spread by selling the Nov. $60 calls and put $1,600 in your pocket? It will protect some of the profit you already have and there is still room for JNJ to move up another $1.50 before it bumps its head on the near term resistance. Good luck!

 
 
  Jim Brown   10/2/02,  11:03:25 AM
Swing Trade Signals
The OEX has recovered lost ground and it back at our entry point of 423. There is significant resistance at 424.50-425.50. This would be the first battle ground. Should that range break the next major resistance is in the 430 area. This is very strong resistance and should not break. If you are looking for another entry point I would think a failure just below the 424-425 area would be a good entry but if we break 425.50 then wait for a failure at 430. There is amazing strength in the market considering the number of negative earnings events this morning.

 
 
  Steven Price   10/2/02,  11:02:12 AM
Baxter (BAX) $27.45 -2.17 I am lowering the stop on OI put play BAX from $33.50 to $32.50, just above Thursday's high. This will most likely be lowered again if we don't see a rebound, but I want to give it some bounce room after yesterday and today's sell-off.

 
 
  Steven Price   10/2/02,  10:46:12 AM
Baxter (BAX) $28.38 -1.24 New OI put play BAX now below recent support at $29.00. The trade of $29.00 created a spread triple bottom breakdown on the PnF and underscores our bearishness on the stock. I like this level for short entries

 
 
  Jonathan Levinson   10/2/02,  10:44:00 AM
LOL!

 
 
  John Seckinger   10/2/02,  10:40:54 AM
Two-year notes back yielding 1.75%, equaling the rate of Fed Funds. Staying with the cash market, the spread between the 10-year yield and 5-yr yield is 99 basis points. Falling back under the 100 area could be a quick catalyst for traders to book proifts and enter more productive assets. What are those productive assets? Either 30-year bonds, or oil issues, or even some technology issues (Sox higher by 1.60 points to 251).

 
 
  Jeff Bailey   10/2/02,  10:37:21 AM
Trade management Jeff: Thanks for your astute observations. I picked up 10 contracts of JNJ yesterday and it's off to a very nice start today. With the overall market looking pretty weak how would you proceed if you were holding calls on JNJ. Thanks a bunch.

Hmmm... I have no clue as to what strike or expiration, so of little help here. However, I will ask the trader this... By purchasing 10 contracts, you are then saying you are comfortable buying 1,000 shares of JNJ and that such a purchase probably wouldn't constitute more than 10% of at $550,000 trading account.

If you are trading a $550,000 account, then you're not worried in the least about 10 contracts. However, if you're trading a $50,000 account or smaller, then I think you've OVERLEVERAGED, and I'd take some gains off the table, get things under control considering the current market environment.

 
 
  Mike Parnos   10/2/02,  10:35:35 AM
Poor Poor MarthaIt's hard for me to work up a lot of sympathy for Martha. On her next show I understand she's going to be teaching how to make a cake with a file in it.

 
 
  Jim Brown   10/2/02,  10:35:33 AM
IBM   Another reader pointed out that the IBM acquisition of Price Waterhouse could provide ample opportunity to hide piles of earnings problems under the guise of charges related to the merger. Also, the PWC business brings them a new line of top line revenue that will distort the previous earnings patterns. This could also provide them cover for any earnings miss for the quarter. Nothing is ever guaranteed. IBM has earnings on Oct-16th and using the prudence rule I would suspect no warning by next Tuesday would suggest no warning.

 
 
  Steven Price   10/2/02,  10:34:48 AM
Omnicom (OMC) $54.45 -2.25 OMC is seeing some heavy selling and a trade of $54.00 would lead to a 3 box PnF reversal down. $53.00 is needed for a sell signal on that chart, but $53.75 would break recent support and I would probably put on 1/2 short positions at that level.

 
 
  Jeff Bailey   10/2/02,  10:32:01 AM
Sector question Jeff: I'm rather impressed with JNJ and bucking of broader market trend today. I see you quote some sector bullish percent info from someplace. Can you tell me what sector I would follow with JNJ and what its sector bullish percent is?

Yes.... According to Dorsey/Wright and Associates, they classify JNJ as a "drug" stock. According to Dorsey/Wright, the Drug sector is currently "bear confirmed" at 28.4%. It would currently take a reversal back to 36% to have the sector reversing into "bear correction" status, and then a continued move to 44% to get sector "bull confirmed."

One of the reasons I felt FRX bulls should take some partial gains off the table last week was because the drug sector had reversed back into a "bear" phase. While I was "wrong" for selling some FRX near $83, it created a gain for most bull's accounts. However, I'm as willing to admit a mistake as the next guy, and perhaps I had a little cash laying around for a trade in JNJ, which is also a "drug stock."

Maybe there's always an OPPORTUNITY around the corner.

 
 
  Jim Brown   10/2/02,  10:27:49 AM
Earnings Warnings & Quiet Periods   There is a common misconception that there is a "quite period" before a company announces earnings that prohibits them from issuing a warning. There is no quite period for warnings. A company can warn up to the day before they announce complete earnings.

When a company issues guidance they are responsible for that guidance. Investors buying the stock based on that guidance can and do sue if a company announces earnings significantly different than the guidance. By warning they make a good faith effort to keep investors informed about the status of the company. A miss of only a penny or two does not always need a warning if it is within the range of original guidance. If the range was 55-58 cents then a 55 cent number would not suggest a warning was mandatory. This is why the ranges have been getting broader.

The quite period is normally reserved to the two weeks before earnings and it is used as an excuse to not give guidance, positive or negative, by talking about various aspects of the business that could influence investors. Saying that the "plastics business is weak" or "server sales are stronger than expected" can give investors the impression that the business is weaker/stronger than previous guidance when in reality those comments only impact a small portion of the overall projections. To avoid the potential "loose lips" problems most companies voluntarily restrict these comments in the two weeks prior to earnings and blame it on a "quiet period". Basically it is considered a quarantine period to prevent foot and mouth disease.

 
 
  Jonathan Levinson   10/2/02,  10:26:40 AM
Not a lot of strength on the COMPX so far this morning, but not enough weakness to violate the uptrend started yesterday on the 30 minute candles. 1190 is the support level I need to see broken before I relax back into my shorts. The TRINQ is rising but at a mere 1.42, we are far from being decisively in a sellers' market. QQV is up 1.27 today, but like the choppy yields, is not signalling an end to yesterday's bullishness. Be careful here.

 
 
  Jeff Bailey   10/2/02,  10:22:26 AM
Gold/Silver Index Chart (XAU.X) 68.09 +0.69% ... minor bid above the rounding out 50-day SMA of 67.50. In last night's Index Trader Wrap, this was/is my near-term swing sector for DIVERGENCE. Not getting the little "trap" I was looking for today.

Hint.... do you know where I come up with the little "trap" observations? It comes from the point and figure charts, but I relate back to a bar chart.

For instance... yesterday, when discussing JNJ point and figure chart, remember that little "sell signal" in JNJ at $52, where we thought it might have been a little "trap" where the last of the weak hands pass off the stock, then move higher of JNJ? Just as there may have been a bunch of trailing stops in JNJ at $52, that the specialist so gladly came down and "got" I'm expecting we could see a bunch of stops lined up under XAU.X 67.50. The question then becomes, will "in the know" gold bulls come in and drive the XAU.X higher, or have they lost their catalyst for further bullishness? Remember... traders, espicially institutional, trade SCENARIOS. When the scenario is no longer in play, only then will they abandon the scenario and the stocks that played into the scenario.

My belief is that once a trader understands the point and figure charts and just how important supply/demand can impact stock price action, then the bar charts will begin to show certain shorter-term elements of supply/demand that a trader can attempt to use to his/her advantage.

One of the processes of technical analysis is to try and FIGURE OUT just what type of scenario is in play by the MARKET, then EXPLOIT that scenario to our advantage.

 
 
  Jonathan Levinson   10/2/02,  10:19:33 AM
Thanks to Russ, who accompanies me on fed-watch. The fed has just announced 3.5B in 2 day repos, only partially refunding the 6B in 5 day repos expiring today, for a net drain of 2.5B.

 
 
  Steven Price   10/2/02,  10:18:44 AM
General Motors (GM) $39.60 (-1.04) OI put play GM didn't spend much time back over $40. It looks to be forming a bear flag and I like this level for short entries. The only kink in the pattern is that we have not seen decreasing volume during the formation, which is needed for a textbook flag. Conservative traders will want to wait for a break below recent support of $38.

 
 
  Steven Price   10/2/02,  10:13:14 AM
GlaxoSmitKline (GSK): $41.36 (+0.87) New OI call play broke the $41 level, which is referred to in our play as the bearish resistance line on the PnF. A trade of $42 is needed to constitute a breakthrough of bearish resistance. I would probably wait for the trade of $42 for new entries at this point, given the overall market weakness. However, this morning's move is impressive and this is one to keep an eye on if we get any hint of a Dow turnaround.

 
 
  Mike Parnos   10/2/02,  10:09:44 AM
BBH Update
If you've been following our hypothetical BBH Iron Condor trade in my columns, you know that we want BBH to finish between $80 and $110 by October expiration.

For the last two weeks BBH has been hovering around the $80 support level. We've been covering our short position by shorting share when it dips below $80 and covering those same shares when it pops back above $80.

We've been bounced around and have probably made at least a half-dozen round trips with the stock, but our profits are pretty much intact. At this writing, BBH is trading at about $81. Aren't having a plan and a little patience a wonderful thing?

 
 
  John Seckinger   10/2/02,  10:09:05 AM
The Dollar has failed to remain above its 22 DMA (113.86), currently at 107.07 and unchanged for the session. Weakness in the Greenback could be pressuring dollar denominated assets, including equities. A move under 107.20 should accelerate the downward pressure.

 
 
  Jim Brown   10/2/02,  10:08:53 AM
IBM   A reader researching prior IBM warnings found that IBM warned before the open on April 8th of this year. This was the Monday before earnings began to be announced. If they follow the pattern then Monday Oct-7th could be a possible warning date. I know I have had numerous emails from readers short IBM regarding this possibility. I had suggested that no warning before Friday would suggest that they may not warn. This research by Rick could expand that window. The DOW warning this morning shows that all the bad news is not out. Thanks Rick!

 
 
  Jeff Bailey   10/2/02,  10:05:34 AM
Index Traders ... For Dow Diamond bulls, refer back to our Dow Industrials Chart, with the retracement set from 9000 to 7,451 (retracement we used before "rolling down" retracement). I would think a Diamonds bull would ideally like to wait for a INDU near 7,750, which was 19.1% retracement. Hey... if the Dow is going to pull back, then let it, to a potential support level!!!!

Note: I keep two charts open in my q-charts trade station. For the Dow, I keep one retracement "rolled down" on one chart (9000 - 7,086) and the other I keep my first retracement (9000-7451). This way, I have "rolled down" retracement support right now at 7,817, and a lower retracement support at 7,750 from the first retracement. Don't let this confuse you... just think of it as two different retracements and pehaps 1/2 of the market is trading one retracement, while the other 1/2 is trading the other retracement. Only with the break of one level, does another come into play.

 
 
  Jim Brown   10/2/02,  10:00:26 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 9:50:58 when the OEX traded below 423. SPX 842.24, DIA 78.83, SPY 84.50, DJX 78.74, NDX 868.59, Compx 1209.23, QQQ 21.60, Emini 842.00. The initial stop loss will be OEX 427.50.

I had hoped to get in higher so we could stretch the stop to OEX 432 but it did not play out that way. The high on Sept-26th was 430.75 and would make 432 a great stop but that is a long way from our entry point. Hopefully we will not need that broad a range.

 
 
  Jeff Bailey   10/2/02,  9:55:17 AM
3M (MMM) 115.27 -0.86% ... another "key stock" for Dow Industrial Index traders. While JNJ tries to "lead" with a break higher, Dow bull would like to see a longer-term bullish component show some muster at upward trending support trend. Link

For Dow Diamonds (DIA) $78.80 -1.38% trader, he/she begins to put together potential pieces of the puzzle for the Dow to hold the low. In brief... wants JNJ to continue higher, then get MMM to eventually make a breakout move above 130.

 
 
  Jim Brown   10/2/02,  9:47:20 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
This may be our bounce high. Let's go short here at a trade below OEX 423.

 
 
  Jim Brown   10/2/02,  9:46:24 AM
Swing Trade Signals
Considering all the bad news it is amazing that we did not fall straight to 400. Warnings from Dow, CMA, GDT, POS, ADVS, ARMHY, PLCM among others and earnings cuts on CSCO and SUNW. Still the markets are attempting to bounce. Positively amazing. We may get that better opening after all.

 
 
  Mike Parnos   10/2/02,  9:46:00 AM
The talking heads are talking about DELL. When is the last time you bought a computer? I haven't bought one in almost two years -- and have no plans to buy one soon. The typical computer user can't tell the difference between Pentium II or a Pentium IV speed. Computer marketing companies will try to convince the public that they "must have" the newest and fastest, but we know the truth, don't we?

 
 
  John Seckinger   10/2/02,  9:44:47 AM
The fact that the Nikkei is close to the 9000 level (9049) seems to be getting a lot of press this morning. The index closed down 1.2% overnight, and the rumor is a close under 9000 will cause even more problems within the Japanese banking industry. Note: Dollar/Yen at 123.10.

 
 
  Jeff Bailey   10/2/02,  9:43:43 AM
Johnson & Johnson (JNJ) $57.80 +2.8% .... talked about this one as bullish yesterday. Turning to bar chart, stock testing it longer-term 200-day SMA here. Link

Per previous comments as to similar supply/demand as previously profiled bullish trade in FRX from $74, will "understand" the 200-day SMA and potential impact on trading. Link

Both JNJ and FRX "looked bullish" below their 200-day's. Will note slight volume "spike" in FRX on gap higher at 200-day, and would like the same from JNJ today. Move some shorts off JNJ, just like FRX and then get the move higher going. See how FRX bears and committed bulls supported FRX on pullback to 200-day once broken?

 
 
  Jonathan Levinson   10/2/02,  9:43:36 AM
We have a true lack of direction on the COMPX off the open, with a partially unfilled gap just above, intraday 5(3) stochastics overbought, a TRINQ prining on both sides of 1, and teh QQV up .78 so far. I expect 1225 to be resistance on this move and 1200-05, then 1190, to act as support.

 
 
  Jeff Bailey   10/2/02,  9:37:25 AM
Index Trader's Dow Diamonds (DIA) $78.94 -1.25% ... would be eyeballing bullish trade from last night's update. Getting Johnson & Johnson (NYSE:JNJ) $57.97 +2.8% upside alert at $57, which is triple-top buy signal. This "buy signal" in JNJ will add 3.33% to Dow Industrials bullish %, which was reading 9.99% bullish last night. Now a Dow bull would like another component to generate a buy signal.

 
 
  John Seckinger   10/2/02,  9:34:42 AM
Five-year notes down 4 ticks while the 30-year December bond is higher by 7. This seems to be the result of a 11.5% increase in the MBA (Mortgage Bankers Association) refi index. With the 30-year at 113-17, there is a chance today will keep the long bond in a relatively tight range. Going forward, a break above 114-12 or below 111-30 should be the catalyst for another explosive move.

 
 
  Jim Brown   10/2/02,  9:31:25 AM
Swing Trade Signals
What a difference we see in the markets every day. Gap up, gap down, gap up. We missed being triggered on the short at the close by .04 cents. After the close Dell "raised" guidance and the futures were up strongly. Then I was glad we were not short with the hopes of getting in higher this morning on a Dell bounce.

But, we are in October. The Dell news faded fast and we are going to gap down again. I don't want to short the open but look for a bounce off the dip. Hopefully we will not drop far and get a good rebound to provide a less volatile entry point. If not we will look for a break of lower support.

 
 
  Jeff Bailey   10/2/02,  9:30:35 AM
Short-term Index Trader that hold positions for hours or a day or two, may come in at the open, stops above yesterday's highs and monitor against the 30-year Treasury YIELD ($TYX.X) 4.72%, which is seeing modest buying this morning. On a technical basis, may see YIELD try to fill its gap back lower and that action may have the indexes dipping back in a more defensive move as equity traders keep an eye on YIELD. In play on the 30-year YIELD is the 21-day SMA, which has served as resistance. Link

A pullback in YIELD to the 4.6% level may then have an index trader monitoring a bearish trade covering point. Again... this is for SHORT-TERM trader.

 
 
  Mike Parnos   10/2/02,  9:28:56 AM
Good Morning Traders!
Are you ready for another day at that giant casino we call the stock market? CPTI traders -- Get ready to take all those speculative bets.

PALM has just announced a 1 for 20 reverse stock split. Gee, I'm going rush right into that one.

I'll be participating in the Monitor today, so feel free to send along questions and/or comments. Give me your best shot.

 
 
  Jeff Bailey   10/2/02,  9:18:59 AM
The 09:00 Update has been e-mailed and should be posted soon.

 
 
  Steven Price   10/2/02,  9:16:43 AM
Ryland (RYL) $49.01 said that new orders rose 30.1% in the third quarter from a year ago. The homebuilders have looked on the verge of rolling over several times, but rates have apparently kept people buying, in spite of layoffs. I still can't convince myself to go long on these stocks, as rising foreclosures and a weak economy seem to be lurking beheind the scenes, as well as a downturn in existing home sales. However, it appears I'll have to wait for the short opportunity I was looking for.

 
 
  Steven Price   10/2/02,  9:11:28 AM
We have now bounced 3 times right around 7500 in the Dow and seen rebounds stopped short of 8000. It looks like this morning will follow this pattern. When we do break in one direction, it should be good for a few hundred points, given the width of this recent pattern. The fact that we are pulling back, in spite of Dell's positive news, looks awfully bearish, however after a 300+ point gain some pullback can be be expected. I still would have expected some follow through after the announcement though, if it were truly a bullish sign. Remember that the increased guidance was not due to PC sales.

 
 
  Linda Piazza   10/2/02,  8:35:24 AM
I will be away from my desk today and unable to contribute to the Monitor. Good luck trading! If I were at my desk, I'd be watching carefully to see what happens as the markets approach the upper trendlines of their descending channels. As a patient trader in a long-term bear market, I don't usually trade breakouts. What would I need to see to convince me to trade one? For one thing, I'd need to see a close above that upper trendline of a descending channel, and not just an intraday move above it. I'd also need to see a retest of that trendline, and to see it serve as support. That means I lose out on the first movement of a new trend, but it also means I avoid being faked into entering plays that soon fail and it also often means I avoid paying too much for my calls when the VIX is still high on an initial move above the trendline. Those quick on the draw can play both directions, but I want to be sure of the primary direction before I enter plays. Until the overall bearish trend has changed, I'd be quicker to enter a failure at that trendline. Look to your own trading style as you decide how or whether to trade on pivotal days like today.

 
 
  Jonathan Levinson   10/2/02,  8:05:50 AM
"Blood simple" is a state originally attributed to murderers, in which the heat of moment renders the killer "blood simple", simpleminded, etc. Well, those of you who traded in 1999 and Q1 2000 might, like me, have become blood simple. It was a straight line up, or awfully close to it. I rode Nortel straight north for one year, and started buying OEX puts in March 2000. I was blood simple, but not stupid, and knew that the blowoff had to reverse, which it did. Well, this year has been not quite that easy, but the weekly chart is pretty unequivocal. Pride and profits can make traders blood simple. The good news is that stop losses and account management are the cure. Jim's trading yesterday was a textbook example of how to trade safely. Getting stopped out emotionlessly when the market trends unexpectedly is the only way to guarantee that you'll never get your account blown out. Just my $.02.

The bloom has been coming off the futures all night, and NDX futures are currently -8.00 and S&P futures are -5.50. The US Dollar Index is trading at 107.30.

Welcome, Christopher, who I met last night at the TD Waterhouse President's reception. Those brokers I used to freak out at (before they gave me the magic number) are really nice people!

 
 
  Jim Brown   10/2/02,  2:40:00 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   10/2/02,  2:38:33 AM
The Market Monitor for Tuesday has been archived. Click here to view. Link

 
 

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