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  Alan   10/3/02,  10:44:42 PM
The Futures Trader Wrap has been posted: Link

 
 
  Jim Brown   10/3/02,  10:39:12 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Steven Price   10/3/02,  4:56:21 PM
QLogic (QLGC) OI put play QLGC is trading $22.50 after hours, down $2.15 from the closing price.

 
 
  Jim Brown   10/3/02,  4:15:26 PM
EMC trading halted

 
 
  Steven Price   10/3/02,  3:59:21 PM
Reader Question: What's your take on GS?

Goldman Sachs (GS): $62.86 (-2.69) Everything about GS looks like a short. The fact that they have IPO problems only adds to the bearish sentiment. The quadruple bottom breakdown on the PnF also looks very bearish. I haven't had much luck personally with this one, as my co-workers like to remind me, but it has all the makings of a short play. I would actually like to enter on a rebound under $64.50, as we could get a bounce after the news led to today's sell-off.

 
 
  Jim Brown   10/3/02,  3:58:45 PM
Swing Trade Signals
I just got an alarm on the IWM (Ishares on the Russell) They traded under $71. I am looking on going long long term on the Feb-$75 call when we hit a bottom in the next week or so. (grin - maybe I can talk it down?) I will keep a watch on it and keep you posted. When real rallies occur the Russell is the fastest mover.

 
 
  John Seckinger   10/3/02,  3:58:31 PM
Some "big picture" analysis: Economy still weak, dollar slightly bearish, Nasdaq seems to be under "technical pressure", bond prices are near record highs, interest rates near record lows, yield curve very steep, and both Utility and Oil Index looks to make another wave lower. With this said, odds are equity valuations will continue to go lower. Just my opinion.

 
 
  Jim Brown   10/3/02,  3:53:48 PM
KLAC   There is a persistent rumor that KLAC will warn after the close. I have had 3 emails in the last five minutes.

 
 
  Jim Brown   10/3/02,  3:52:00 PM
Swing Trade Signals
I have been hovering over the "close play" button for the last 20 min but there is no strength going into the close. Will IBM or somebody else warn? Will the Jobs Report tomorrow be negative? Who the heck knows but with 7 points under our belt I vote to hold overnight.

 
 
  John Seckinger   10/3/02,  3:51:23 PM
Dow still stuck in a range between 7700 (support underneath at 7683) and the 200 PMA (currently at 7805). Yield curve is still steep, albeit slight. I am sure most traders, myself included, are waiting for tomorrow's non-farm report.

 
 
  Jeff Bailey   10/3/02,  3:23:16 PM
Sungard Data (SDS) $16.01 -16% ... looked at the point/figure chart. Current bearish vertical count is $6.00. Aggressive bears can take 1/2 position in the October $17.50. As of late, these "types" of technicals have been followed with "bad news." No stop and target below $13.85 for October expirations.

 
 
  Jeff Bailey   10/3/02,  3:08:14 PM
Alternating buy/sell programs Something may be up, I'm getting buy and sell program premium alerts. Dow buiding some gains +50, SPX +1 and NDX +2.96 points.

 
 
  Jeff Bailey   10/3/02,  3:04:55 PM
Don't ignore your alerts! Sungard Data (SDS) $16.11 -15% ... I did this morning in SDS as I had alert set at $18.50. This was on OI's watch list last week or a break below $18.50. Thinking here was that "fundamental" mutual funds may have dumped the stock near a low, when SDS was added to the S&P 500 on July 19th. If stock broke $18.50, could be sign something very wrong. Link

I see no news currently to explain current trading.

 
 
  Jonathan Levinson   10/3/02,  3:02:43 PM
It's amazing to watch CSCO struggling to regain $10. I remember playing calls on it and making a nice profit around the 65 level or so, back in the good ole days. (daze?)

The COMPX looked ready to run at 1180, but it bounced down from the top ascending trendline in this narrow channel. 1174-5 would appear to be the lower trendline, so we'll have to see. The longer intraday 5(3) stochastics are reflecting the ascending channel as both are in bullish ascents from oversold, but of course can curl over anytime. Watch the upper and lower limits of this small 6 point channel for a break. Of course, zooming out to the 30 and 60 minute candles, the descending channel within which this smaller uptrend is playing out has yet to be decisively violated. Patience and stop losses are the key. In the meantime, most of my indicators are chopped up and ambivalent, reflecting this upswing within a larger downswing.

 
 
  Jeff Bailey   10/3/02,  2:38:51 PM
Sell Program Dow (unch), SPX -1 and NDX -7.4 (points)

 
 
  Linda Piazza   10/3/02,  2:38:18 PM
H&S patterns on daily charts on all the indices; possible reverse H&S pattern on the hourly COMPX charts; possible H&S pattern on the fifteen-minute OEX charts: readers' heads must be spinning. The truth is that H&S patterns often show up within other H&S patterns. For example, one shoulder of a H&S pattern might consist of a smaller H&S pattern. These aren't necessarily contradictory.

Regarding the possible sloping, sloppy H&S pattern that I'd noticed forming for the last couple of days in the fifteen-minute OEX chart, the neckline has so far held as support, and prices have not penetrated that neckline. Martin J. Pring notes that H&S failures sometimes result in rallies, since traders realize their pessimism has been misplaced. However, as always, I caution against giving too much credence to such a short-term pattern, particularly when it was a sloppily formed one. Any rally predicted by a fifteen-minute chart might be likely to be a short one. If it brings prices through an important resistance level, however, the rally might build on itself. Pay attention to those critical resistance levels Jim mentioned.

 
 
  Jim Brown   10/3/02,  2:37:24 PM
Swing Trade Signals
If I have not answered your email today it is because I have not had email since 9:45 this morning. This Internet outage has made it very quite today! It makes watching this paint dry even more boring. I just got off the phone with a service tech at my ISP and he sounded like he was ready slash his wrists. With tens of thousands of users all experiencing outages that were related to the backbone issues upline from him he was a little testy to say the least. The bottom line was no estimates of when the problem would go away. We will continue to expect intermittent availability.

 
 
  Jim Brown   10/3/02,  2:27:03 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
After much deliberation I have elected to maintain the current stop loss at OEX 424. The resistance points just below there are 421.40, 422.50 and the high of the day at 423.47. Setting a stop loss at 420-422 may get us out with a minimal loss but the weakness in the market today could mean the current bounce will fail at one of those resistance points just after we were stopped out.

My risk profile allows me to take that chance today. If you are not willing to take that risk then I suggest a stop in the 418 range to get out with a break even.

 
 
  Jonathan Levinson   10/3/02,  2:25:37 PM
We see a definite rounding pattern that would coincide with the last shoulder of a potential reverse h&s pattern on the COMPX, as price rises to 1180. I have less confidence in bullish formations within a bear market, but nevertheless it bears watching. The TRINQ is falling and is currently at 1.14, and the TICK.NQ is likewise bullish at +246. Yields remain in the red but are recovering. There's not much guidance from the 5(3) stochastics, with the shorter intraday averages topping out while the longer intradays are giving bullish crosses. 1180 remains resistance and is clearly the number to beat in the near term.

 
 
  Jeff Bailey   10/3/02,  2:20:21 PM
Buy Program Dow +33, SPX -1.27 and NASDAQ-100 -4.35 points.

 
 
  Steven Price   10/3/02,  2:18:11 PM
Baxter is all over the place and it will be hard to gauge actual sentiment until it trades for a few minutes. It is now showing a trade back down to $24.95.

 
 
  Steven Price   10/3/02,  2:16:58 PM
Baxter (BAX): $27.20 (+0.82) Baxter has rebounded after the news release. Apparently the stock repurchase issue was much larger than the sales issue.

 
 
  Steven Price   10/3/02,  2:09:53 PM
Fiserv (FISV): $24.00 (-3.23) Update for readers still short FISV from last week. I would place my stop at $26.00 just above intraday resistance..

 
 
  Jeff Bailey   10/3/02,  2:05:00 PM
Reverse head and shoulders? .... was just looking at the Dow Industrials (INDU) 7,771.15 +0.2% on 60-minute time interval. With the Dow having recently come very close to our "head and shoulders top" from daily bar chart price objective of 7,440, found what could eventually be a "reverse head and shoulders" shaping up on the 60-minute chart. Currently, bulls need to defend the 7,650 level, which was close to being tested in the last hour. Link

Current view is Dow is range-bound, but breaks of ranges defined could drive market action. Oscillators on this time are "neutral" with Stoch's "oversold," but MACD starting to roll and more bearish.

Will now have close eye per yesterday's comments regarding 30-year Treasury YIELD ($TYX.X) 4.725% and continued resistance in YIELD at its 21-day SMA of 4.571%. Perhaps a "signal" for a bullish move higher in equities could be triggered from this YIELD on YIELD break higher at 4.765%. Link

The 30-year is "riskiest" Treasury and in my mind, would be first to "sell" on some type of asset allocation toward stocks.

Interesting dynamics present in 10 and 30-year. Lots of bond traders may have been trying to "front run" Fannie Mae hedge strategy, which Fannie Mae said it never really had to do. If bond bulls OVERLEVERAGED in the 30-year, then selling could trigger a higher YIELD in both 10 and 30-year. Tight range the past three sessions.

 
 
  Jim Brown   10/3/02,  1:52:19 PM
I bailed already! This bird in the hand theory echoes constantly! Got back in @8.50 and out at 13. I've stopped holding my breath for the day. Jane

Congratulations! Looks like you got the bottom and the top. Pat yourself on the back and consider the rest of us afflicted with a severe case of trader envy!

 
 
  Steven Price   10/3/02,  1:48:31 PM
Baxter lowered sales and earnings forecasts due to competition in the plasma-derived therapeutics market. However, it also said that the company's equity forward agreements now mature in 2003 and it intends to exit all of these contracts over the next several months. These are the contracts I referred to in this morning's MM. I'll post an update as soon as I get a new print on the stock.

 
 
  Jim Brown   10/3/02,  1:44:34 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
This current bounce from the retest of 411 at 1:30PM could be seen as a double bottom intraday and could produce some higher numbers. If you want to exit with a decent profit (the 410 put is now $11.50 compared to the $9.50 at the entry point) then an exit at an OEX trade above 415 or 416 would be my choice.

I am still looking for a break of the 410-411 level. Maybe not today but I do think it will break. The official stop loss is still OEX 424 but I will lower it to a breakeven in a few minutes.

 
 
  Steven Price   10/3/02,  1:43:16 PM
Reader Question: Good morning Steve; yes, I like the OMC odds. I'm also watching Kohis drop into a reversal. Should we be adding this back to the list of puts? Thx, Jim

Response: $55.90 (-3.67) KSS looks like a short, but I'm afraid to chase it at this point. However, I hope there are readers still short from last week's play at $64.09. I like the break below July's low, as well, but I'd prefer to enter on a bounce.

Baxter (BAX): $24.95 OI put play Baxter is still halted, but has lowered sales forecasts.

 
 
  Jeff Bailey   10/3/02,  1:38:02 PM
01:00 Update is posted Link

 
 
  Steven Price   10/3/02,  1:30:30 PM
Reader Question : Steven, What do you think about buying ATN at 18.80 and selling the Apr 03 22.50 call at a premium of $3.20. Thanks

Response Action Performance (ATN) $19.38 (-1.62) I actually like this idea. I wouldn't normally recommend a long stock, short call play on a diving stock, but this one seems to make sense. The company cannot book $5.7 million in 4Q revenue because of the west coast port lockout, but the stock bounced at $17.25. The company says it can still achieve 2003 estimates and after the lockout is over, hopefully it can make up some of the loss, as well. You are effectively lowering your purchase price on the stock below the support bounce. If the stock does take off, you will still have a nice profit. One word of warning: if the lockout continues, or other factors come into play to slam the stock lower, your only protection is the premium from the call. If the stock breaks $15 I would get out of the play.

 
 
  Jim Brown   10/3/02,  1:24:12 PM
Swing Trade Signals
My Internet is still on/off. If you see something happening and I am not saying anything on the monitor then please take action on your own. At this minute I have connection to the monitor but not to the outside world. This could change at any minute.

The support at 410-411 did provide a bounce as the dip buyers tried to buy that support in anticipation of a bounce. For our current short signal we are looking for a break below that 410 level to start the next leg down. That next leg should last to OEX 402 if it comes.

 
 
  Steven Price   10/3/02,  1:21:43 PM
Baxter (BAX): $24.95 -1.43 OI put play Baxter has been halted with news pending. I'll let you know when I hear more.

 
 
  Jonathan Levinson   10/3/02,  1:11:58 PM
Mike, if you're ever in Montreal, I'll give you a tour of our better pool halls. Lessons? Just play for an hour or two a day. After about 1 year, you should be picking em off.

That bounce has managed to add another 3 COMPX points in the last forty minutes. I won't bother reporting on the lack of action in the indicators. Kevin has pointed out that the 60 minute chart is showing what could be a reverse head and shoulders formation with the last shoulder in the process of forming now. Again, this could bring us to the top of the week's range, but there's hardly evidence of much energy behind this move so far. Declining volume is just under 2x advancing volume of the COMPX, though the CBOE put to call ratio is currently 1.08, which is too high to indicate significant downside from here. Again, this is what the inside of a range looks like. Nothing to do but get comfortable, check the stops, and watch the action.

 
 
  Mike Parnos   10/3/02,  1:00:13 PM
Have A Profitable Afternoon
I'm signing off for today. I'm going to my pool lesson. Any 9-ball players out there?

If I didn't get to your question today, I'll get back to you tomorrow. Thanks again for the questions and I'll return soon. Read tonight's column. It's on bull call spreads. It's really a good strategy with low risk and nice return potential. Then contact me with your questions.

 
 
  John Seckinger   10/3/02,  12:47:26 PM
Support under 7700 is felt at 7683, and a few sectors that could push the Dow there are the Oil and Utility Indices. The XOI Index is fractionally lower at 454.69, but 11 points below its intra-day high and 5 points under its 22 DMA. Turning to Utilities, the UTY Index is also below its 22 DMA (256) at 250 and appears to be heading back towards the 240 relative low area. Further weakness in both the XOI and UTY Indices should help bearish equity traders.

 
 
  Jeff Bailey   10/3/02,  12:43:09 PM
JP Morgan (JPM) $17.78 -2.63% ... per subscriber question a couple of days ago.... I'm sure glad we talked him/her out of selling some out the money naked puts. New 52-week low as KBW Bank Index (BKX.X) 858 -4.9% looks to test its 07/23/02 close of 636.

 
 
  Jim Brown   10/3/02,  12:38:36 PM
Swing Trade Signals
We are nearing the next level support of OEX 410, Dow 7700. I would look for a bounce here as the dip buyers spend their money.

 
 
  Jim Brown   10/3/02,  12:38:10 PM
Internet   It appears there are serious backbone problems all over the internet today. They are being attributed to a WCOM outage. I am getting tons of emails complaining about intermittent server problems. I am also getting emails talking about other sites being down as well. This morning I could not get Yahoo for 15 min. I am getting emails now that were mailed at 8-9 am this morning. Appears to be very widespread but since most of the traffic goes through several choke points a failure at that point impacts huge amounts of traffic.

If you get server errors on the monitor today - it is not us. (at least this time!) Just be patient and it will come back.

 
 
  Jeff Bailey   10/3/02,  12:33:23 PM
Gold/Silver Index (XAU.X) 67.01 -0.22% ... still monitoring for potential downside "trap," but not much bullishness today. Should have broader market equity bears staying rather disciplined and not getting OVERLY put/short in their accounts. This sector is more "defensive" and will trade bullish when investors become "uncertain" about things. Perhaps this morning's economic data helped squash some fears near-term. Not much movement in XAU today, but keeping an eye on things.

 
 
  Steven Price   10/3/02,  12:31:06 PM
Baxter (BAX): $24.95 (-1.43) I am lowering the stop on OI put play BAX, originally entered at $29.62 from $30 to $28, where it found significant intraday resistance on Wednesday.

 
 
  Linda Piazza   10/3/02,  12:21:35 PM
Fifteen-minute charts show a sloping, sloppy H&S pattern (Sounds like a tongue-twister, doesn't it?) forming on the OEX over the last couple of days. The neckline of that pattern lies now at about the 412 level, a level of previous support. A strong move through that level predicts a fall to the 395-400 level, depending on where you draw the neckline, but so far, the OEX has refused to fall through that level. H&S patterns do occasionally fail, especially ones formed in the intraday charts, although they're usually a reliable formation.

 
 
  John Seckinger   10/3/02,  12:17:36 PM
This may not be market moving, but Richmond Fed President Broaddus (non-voter) will speak on the economy at 12:30 p.m. Bonds, like stocks, are near unchanged levels at the moment and there could be some position squaring ahead of tomorrow's non-farm payroll report. Estimates are for a rise of 6k versus August's increse of 39k. The unemployment rate is expected to rise from 5.7% to 5.9.

 
 
  Jeff Bailey   10/3/02,  12:10:43 PM
Cisco Systems (CSCO) $9.89 -1.6% ... Dear Jeff- Sr. moment here-can't remember who to e-mail for this question.I'm holding cisco now, where do you see the downside and a comment on the q's would be appreciated. Thanks for your time. Love the monitor and I keep learning from all of you.

Not sure if "holding" long/short, but I'm hoping short. After giving a triple-bottom sell signal at $11.00, stock has fallen to conecutive 52-week lows. While the bearish veritical count is currently $4.50, I'd use Professor Davis' Triple-bottom sell signal probabilities inwhich he found this pattern to be profitable 93.5% of the time, for an average gain of 23% in 3.4 months. As such, from the 09/30 $11.00 trade, my current bearish target would be $8.47, with further downside risk potential to $4.50. Link

On a side note... I've alway thought CSCO was 3-times the company of any other "networker." With CIEN at $2.50 Link , I think CSCO target of $8.47 not unreasonable.

As for the Q's, I comment on them pretty much every night in my Index Trader Wrap. The Q's are down 1.64% here with NDX.X -1.07%. No change in my thinking from past couple of weeks/months. Put, put, put. This morning QQQ rally came to $21.40, which was just under our 38.2% retracement of $21.44. Still targeting $20.20 and 19.1% retracement near-term.

 
 
  Jonathan Levinson   10/3/02,  12:06:58 PM
LOL Jeff! Mikey likes it.

We're seeing a bounce of sorts, good for 5 points so far on the COMPX, but 1180 is now resistance and the 5 minute 5(3) stoch is topping out. There's not much to say about the range we've been in this week, and until 1160 gets taken out, the best approach is to scalp for "singles" within the range. If you are bearish longer term, which I am, the strategy boils down to adding puts/selling calls at resistance and selling puts/covering calls at support. I personally won't be putting on any bullish positions without seeing a clear bullish breakout. Instead, I'm trying to be constantly holding at least some puts for the breakdown, if and when it comes. I'm mitigating the risk within this range by holding slightly out of the money back month puts, which will appreciate quickly on a breakdown while depreciating more slowly on the rises. I will get stopped out of these if I see that clear bullish breakout.

 
 
  Jeff Bailey   10/3/02,  11:57:50 AM
Campbell Soup (CPB) $22.68 +1.9% ... Jeff: I know you don't want to talk about CPB, but could you just give us "seasonal bulls" a little update? Are things still looking pretty good for $28 by November experation?

(grin)... Hey... as long as they don't come out with a product called "technology in a can" I'm still bullish on CPB. Hey!... since August 30, CPB is down -1.8%, versus the S&P 500's -9.8% in the same time. I think the "seasonality" portion of CPB has kept the stock firm, but most likely need some type of broader market recovery to get to $28. I did see a new commercial on TV where CPB has come out with some soups that are packaged in a plastic container that you simply pop in the microwave and heat. Packaging is kind of like one of those cups of coffee you buy at a 7-eleven and is non-spill. Since I own some CPB Nov. $22.50 calls, I guess I'd better go to my favorite grocer and get some. If they don't have them, I'm going right to the customer service counter and raise the roof!

 
 
  Linda Piazza   10/3/02,  11:48:03 AM
A scan of broader market health or weakness shows Morgan-Stanley cyclicals, SOX, BIX, and utilities down, but transports stubbornly refuse to turn negative and fall below recent support at 2160. Ten-year-yields are down, although coming up from their lows. Gold is up, VIX is up, dollar is down, and declining volume is ahead of advancing volume. Still, there's that pesky hourly stochastic trying to turn up again and also the memory of lots of recent Thursdays when the perfect put play presents itself, only to succumb to end-of-week short-covering.

 
 
  Jim Brown   10/3/02,  11:42:21 AM
Swing Trade Signals
All the indexes slowed as they neared resistance. The SPX stopped at 821 when the futures hit strong support at 820. The OEX is in congestion between 410-414 dating back to Sept-24th. The Nasdaq could not break 1175 on the first attempt. They could all see a little bounce here as dip buyers who were encouraged by the drop stop start to nibble.

 
 
  Steven Price   10/3/02,  11:38:18 AM
Reader Question: Hi Steven. Thanks for all the tips. What do you think of ATH?

Response: Anthem Inc. (ATH) $66.49 (+1.49) I like the potential of ATH up to $70. The recent surge in Blue Plan membership (Blue Cross/Blue Shield) seems to be driving the stock, as has increased profits for most health insurers. The fact that ATH has held up at its 50-dma is also encouraging and can be used as a stop loss. (50 dma of $64.13 = SL of $64.00). The past few days the stock struggled with $65.00, before today's breakout. Ideally I'd like to see a pullback and hold above $65 for a more profitable entry point. One thing to note as far as the stop loss is that the stock did dip below the 50-dma on several occasions, but was bought up to close over that level. Therefore, you may want to watch it closely and judge at the end of the day, rather than leave a resting order. A resting stop can be placed at the 200-dma, which has also provided support, but it is all the way down at $61.48 and probably does not provide good risk/reward.

 
 
  John Seckinger   10/3/02,  11:37:22 AM
Per 10:30:02 post, one reason for the Banking Index collapse is last night's 3Q warning from Bank of New York (BK). Shares are currently down 10% at 24.05. The intra-day low was 22.90. This 22.90 reading level has not seen since November 1997.

 
 
  Mike Parnos   10/3/02,  11:32:37 AM
Reader Question
> Hi Mike. Where would you look to enter another QQQ ITM strangle? Also any suggestions on an OEX ITM strangle?

Response
I like the OEX because the numbers are so darn big, but the problem is that the bid/ask spreads are equally as large ($1 -- sometimes more). It makes me feel like I'm working for the market maker -- having to give back $2 (for a spread position) on the way in and another $2 on the way out.

By the same token, the QQQ bid/ask spreads are only $.10 and, if you're a good trader, $.05. Plus, QQQs have strikes at $1 increments. That gives an incredible amount of flexibility and choice. DJX spreads are also reasonable and the strikes are close as well.

Another ITM strangle on the QQQs might be ill advised because it has already come down 5 points since my original column. Looking for another 3 point decline might be pushing the envelope a little.

Are you getting an itchy trading finger? Remember, it's perfectly OK to not be in the market all the time. Wait for all the planets to line up and then pounce. Keep the percentages in your favor -- as much as possible. Be a market stalker -- not trader.

 
 
  Jeff Bailey   10/3/02,  11:31:53 AM
11:00 Update is posted Link

 
 
  Jonathan Levinson   10/3/02,  11:30:35 AM
Looks like I nailed GE pretty well- 80 cents ago. The COMPX is printing fresh lows below 1175. That fed drain could be serious today. A friend of mine just got off the phone with the New York Fed who confirmed that they did not renew the expiring 28 day repo today, which is rare for them. In the meantime, yields have gone red and the QQV has gone green, while the TRINQ continues to tell us that there's some selling, nothing more, with a reading of 1.59. My love affair with the TRINQ is waning- lately it's been giving neutral readings. It seems that this indicator works best on strong trending moves, when the oscillators flatten. In narrower prices ranges, it points out bias but is useless for calling tops and bottoms the way it does so well in big impulsive moves.

 
 
  Mike Parnos   10/3/02,  11:09:54 AM
Reader Question
Mike - I like your non directional approach. Wish you could feature more of these plays in OI and the MM. CPTI ... ya gotta love it!

ResponseThanks for the kind words. Actually, there are only so many strategies to discuss. The idea is to find a neutral strategy you like and learn it backwards and forwards. Know how you're going to deal with any scenario that comes up before you consider trading.

You should also have a directional strategy at your fingertips that you could use if the market starts to trend. It's always good to have too many guns in your arsenal. You never know when you might need them. Again, know your risks, know your adjustment levels, and know what you're going to do -- BEFORE it happens!

If you don't know exactly what you're doing -- or going to do, you turn a potentially profitable trade (percentage wise) into a crapshoot. You may as well just flip a coin and buy a put or a call.

 
 
  John Seckinger   10/3/02,  10:58:52 AM
Looking at the yield curve for direction, the 5-year note is down 1.5 ticks while the 10-year is off by 3.5. This is a slight steepening of the curve and neutral to mildly bearish towards stocks. Ten-year cash is at 3.70% and there does seem to be solid support around the 3.75 area; most likely a level where mortgage players will become involved. Note: 2-year note right at the 1.75% Federal Funds rate.

 
 
  Jim Brown   10/3/02,  10:54:23 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 10:42:00 when the OEX traded below 420. SPX 833.64, DIA 78.78, SPY 83.61, DJX 78.60, NDX 853.43, Compx 1190.12, QQQ 21.23, Emini 832.50. The initial stop loss will be OEX 424.

Hindsight is 20:20. I should have left the stop loss at 425 this morning but you never can tell where those vertical short covering spikes will stop. Limiting the losses in an unknown situation is always preferred. For reference the OEX 410 put had gone from $9.20 when the last signal was initiated to $8.40 when we were stopped out this morning. That represents an 80 cent loss on the option for that trade.

Current support levels are 415, 410, 402.

 
 
  Steven Price   10/3/02,  10:51:06 AM
Omnicom (OMC): $53.25 (+0.97) I profiled this stock short yesterday morning around $54.45. The stock tanked for a total loss of over $4 by the end of the day. I was looking for a rebound for new shorts, just under previous support of $53.80 and it looks like this morning's bounce is giving us that opportunity. The stock formed a bearish catapult on the PnF, which is a triple bottom breakdown, followed by a double. The stop loss on this play is the key, to achieve the proper risk/reward. I think stops need to be placed all the way up at $56.75, just above yesterday's high and previous PnF support. The downside looks like $47, so this trade is not for the faint of heart or wallet. If you are not willing to give up the $3.50 for a chance at $6.25, then stay away from the trade.

 
 
  Mike Parnos   10/3/02,  10:43:54 AM
Reader Question Morning Mike, Sorry for the dumb question...you must be asked it 1000 times already. What is a CPTI student & where / how is the course available?

Response
Shame on you. You're not taking full advantage of the OI site. You haven't been reading my columns (Sunday & Thursday) on OI. CPTI is an acronym for "Couch Potato Trading Institute." My readers are my students and, since I started writing for OI in July, we've learned a variety of option strategies that don't require picking a direction in the market in order to make money.

Check the OptionInvestor archives under Traders Corner and Option 101 and look for my columns. I think you'll enjoy them and see how many creative, and conservative, ways there are to combine options to increase your probabilities of success. Check them out, and, if you have questions, please send them along.

In addition, the other OI writers offer a wealth of information spanning the entire spectrum of option trading, technical analysis, etc.

 
 
  Jonathan Levinson   10/3/02,  10:39:15 AM
We're getting bearish crosses on the shorter intraday 5(3) stochastics, and it looks like this pop on the COMPX might have been just that. Price never touched 1200, reversing from 1198. I guess even computers (which accounted for a record 35% of Q3 2002's trading) can get impatient. In any event, yields are still positive on the day, and so I would hesitate before breaking out the bearish party hats. I've just purchased some backmonth OTM GE puts (December contracts), my reasoning being that GE is getting jammed by traders who know BSC has to cover its "accidental" shorts. Also, I suppose, because I'm still bearish on GE. My stoploss will be at around 26.50, which would constitute a breakout to me.

 
 
  Jim Brown   10/3/02,  10:37:58 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
It looks like the short covering is over and I want to reenter the SHORT signal at a trade below OEX 420. I was hoping we would get a second wind bounce in the buying to put us up closer to the 428 high from yesterday. We may still get it but I don't want to miss the breakdown if it happens.

 
 
  John Seckinger   10/3/02,  10:30:02 AM
One Index not participating in the recovery rally is the S&P Banks Index (BIX), currently lower by 2.61% at 264. Moreover, the index is trading at levels not seen since July 25th. The short-term objective should be for a move to 252. Resistance is seen at 267 and 273.

 
 
  Steven Price   10/3/02,  10:29:35 AM
Kohl's (KSS): $57.80 (-1.77) We got stopped out of this short play on Tuesday's 346-point Dow rally, after lowering our stop to $61.25. However, for those reader's still playing it short, I would place a stop at $60. The play was originally entered at $64.09, so I'm kicking myself for missing out on the extra $3 (would have been a total of $6.30 to this point) almost as hard as Jeff B. kicked himself for selling FRX $8 too early.

 
 
  Jim Brown   10/3/02,  10:20:11 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORT signal at 10:13:54 when the OEX traded above 423. SPX 839.15, DIA 79.23, SPY 84.26, DJX 79.06, NDX 859.05, Compx 1196.85, QQQ 21.35, Emini 839.00

The bounce is being fueled by short covering on the positive ISM number. It looks like the bounce may have already failed but it could just as easily gone back to yesterday's highs. We will look to reenter once the initial volatility has failed.

 
 
  Mike Parnos   10/3/02,  10:18:35 AM
Good Morning!
I'll be around for the remainder of the morning. Send along any questions and/or comments and we'll have some fun.
Looks like the market is trying to bunce this morning. If you're in a directional trade -- I sure hope it's going in your direction. Gosh, even CSCO has spiked back up over $10.
However, if you're a shrewd CPTI student using a neutral strategy, it probably doesn't matter where the market goes. Feels good, doesn't it?

 
 
  Steven Price   10/3/02,  10:18:12 AM
Intermune (ITMN) $34.09 +0.83 OI call play Intermune is up again today, but found resistance yesterday at $35, trading up to $34.99 intraday. I would suggest new entries wait for a breakthrough of $35.

 
 
  Jonathan Levinson   10/3/02,  10:17:22 AM
A sea of green! Major resistance for today with be 1207, which has been a key pivot all week. Yields are all green and there's no doubt so far where that money's been going.

 
 
  Jim Brown   10/3/02,  10:13:35 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's exit the current short signal with an OEX trade over 423. The ISM numbers have sparked a rally.

 
 
  Steven Price   10/3/02,  10:12:19 AM
GlaxoSmithKline (GSK): $42.35 +1.34 GSK's trade of $42 registered a breakthrough of the point and figure bearish resistance line. This is the move I was was looking for yesterday for more conservative traders to jump on board.

 
 
  Jonathan Levinson   10/3/02,  10:10:54 AM
The FED has just announced that it has added $3B by overnight repos, which constitutes a large drain, given $3.75 billion in expiring overnight repos, along with $2.5 billion in 2 day repos and the $3 billion in 28 day repos. There is a net drain of $6.25B occurring today, and if my theory holds (and if no further reserves are added today), today should finish in the red. Liquidity to support the market could come from the bond market, with yields currently climbing off their lows. We'll have to see.

 
 
  Linda Piazza   10/3/02,  10:09:32 AM
Interesting side note about broadband, John. A few months ago, I read a book about the Spindletop oil fields in Texas. After the discovery of those oil fields, many companies sprang up and speculation was rife. Many made fortunes, but many companies ultimately failed because oil production outstripped the need at the time. The companies who survived went on to become wildly successful, of course. I tried to think of a comparable situation today, and decided the build-out of broadband was one. Perhaps fiber optics is another?

 
 
  Jim Brown   10/3/02,  10:09:04 AM
Swing Trade Signals
The ISM numbers came in at 53.9 which was much higher than expected. This is the services component of the survey and is not as critical as the manufacturing number out earlier in the week. The initial market pop could have been shorts that expected a negative number covering on the news.

It could also have been Bear Stearns deciding to cover on the news after waiting for the number and hoping for a disaster to bail them out of their shorts from yesterday's program error. Either way the number would also serve to prevent the Fed from cutting rates before the November meeting.

 
 
  John Seckinger   10/3/02,  10:06:13 AM
August Factory Orders unchanged, versus estimates for a 0.3% drop. In July, factory orders rose 4.4%. Also in July, a record low inventory/sales ratio was reported. The August ratio rose slightly to 1.32.

 
 
  Jonathan Levinson   10/3/02,  10:04:18 AM
The ISM data has so far been good for an 10 point pop on the COMPX and has turned much of my quote screen green.

ISM Services came in a 53.9%, versus consensus of 51.4%.

 
 
  John Seckinger   10/3/02,  9:58:45 AM
Another side note: Apparently, fewer than 15 percent of American households pay for broadband service. Covad, a company that filed for bankruptcy after building the infrastructure to deliver broadband, says consumers are unwilling to pay even 21.95 a month for high-speed access; explaining that there is no compelling reason to switch. It was not long ago when I thought the catalyst for higher technology valuations was more broadband use by consumers.

 
 
  Linda Piazza   10/3/02,  9:49:56 AM
Monitoring various sectors for signs of market strength or weakness, I noticed that the banking index BIX, currently at 263.56, has moved below the 266 that has served as the base of the broadening triangle formed over the last ten days or so. Broadening formations are usually signs of impending weakness and today's break of that level may be confirming that weakness.

 
 
  Jim Brown   10/3/02,  9:47:26 AM
Swing Trade Signals
Just another fun morning in the tech world. Back online now.

The markets opened with the Nasdaq down with the AMD warning impacting chip and PC stocks. The Dow opened up on the Dupont news and the hopes for a short squeeze from the program trade error at yesterday's close. That initial bloom has now faded.

With the jobless claims already out and much higher than expected the markets are now trading in fear of the ISM non-manufacturing and Factory Orders numbers at 10:00.

Primary support for the OEX is 410-412, SPX 820, Dow 7700. Those levels will probably hold until after the 10:am reports.

I am keeping the stop loss on the current short at OEX 425 until after those reports.

 
 
  Jonathan Levinson   10/3/02,  9:47:10 AM
The COMPX is headed for first support in the 1175 area. Declining volume is almost tripling advancing volume thus far, though the TRINQ has recovered a bit and is now down to 1.5, indicating light to moderate selling pressure. There clearly aren't a lot of bids so far.

 
 
  John Seckinger   10/3/02,  9:43:18 AM
Interesting side note: I believe that the Dollar/Yen spread held from October to January has been profitable every year for the last ten. Reasons include a weak Japanese economy, disappointing fiscal reform attempts, US preference for a strong dollar, and (as is usually the case) Japanese government preference for a weaker currency. Currently the USDJPY is at 122.83.

 
 
  Jonathan Levinson   10/3/02,  9:33:36 AM
We have a small gap down of 3 points on the COMPX, although CSCO opened below 10 and is currently trading 9.95. The opening TRINQ was 2.22 and the TICK.NQ -340, showing some selling enthusiasm beyond the small gap down. Yields are all slightly in the red.

 
 
  John Seckinger   10/3/02,  9:32:48 AM
The US Dollar is weaker this morning, down 0.34% to 106.79. This was portended with yesterday's trade under its 22 DMA (currently at 107.25). The Euro, on the other hand, is above 0.99 and currency traders are most likely waiting for tomorrow's non-farm payroll report. Note: The rise in Initial Claims during the week of September 28th should mean higher bond prices and lower yields.

 
 
  Steven Price   10/3/02,  9:30:13 AM
Jobs data showed an increase of 5,000 first time filers, to 417,000, which was higher than expected, coming in over 400,000 for the sixth straight week. The 4-week moving average rose to 423,000, a 5-month high.

 
 
  Jeff Bailey   10/3/02,  9:26:35 AM
09:00 Update has been posted. Link

 
 
  Steven Price   10/3/02,  9:18:10 AM
Baxter (BAX): $26.38 This OI put play, picked at $29.62 has been fighting fears that a stock repurchase contract could cost the company. Goldman Sachs tried to defend the possibility, but investors so far have been fleeing the stock. We have lowered our stop to $30, in case there is a rebound after Goldman's comments.

 
 
  Steven Price   10/3/02,  9:08:21 AM
Semiconductor Sector Index (SOX.X): 249.95 Yesterday's high of 263.39 made me a little nervous about shorts in this sector, as it appeared that the pattern of lower highs would be broken. However, the sell-off below 250 has me thinking "dead cat bounce." After AMD warned, targeting earnings at just over half of previous estimates, citing weak PC sales, we should get a good look at just how resilient the sector will be. I don't expect us to break the recent intraday low of 231, but a drop below 240 might have me back in the game short. Our OI put play QLogic, $26.32 failed over $27, which had been previous PnF support (although $26 is the actual failure point on the PnF). I would wait for new entries below $26 after yesterday's action, just to confirm the failure.

 
 
  Jonathan Levinson   10/3/02,  8:30:41 AM
The Nikkei had a bad night- after being in the green slightly after the open, it began a slide that brought it to close at the lows of the day below 8950, setting new 19 year lows. Our futures bottomed at 3AM almost to the minute, ramped up and then sold off just after 6AM, as we've seen so many times. NDX is currently -10, S&P -4.10. Gold took another run at 325 before being turned back. The US dollar index is off this morning and has been dipping below 106.70.

 
 
  Jeff Bailey   10/2/02,  10:27:25 PM
Check your account! Yesterday (Wednesday) I see that there were 4 put options traded in the Duke Energy Jan. $20 puts (DUKMD) at $3.00. This may have been a OI subscriber's trade that was triggered on today's S&P error from Bear Stearns as this option traded at 03:43:01, which was right when the Bear Stearns $4 billion S&P order was placed.

If you had any pending option/stock orders with downside triggers on them, you too may want to double check your account tonight/this morning.

 
 
  Jim Brown   10/2/02,  10:15:46 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   10/2/02,  9:47:31 PM
The Market Monitor has been archive. To view Wednesday's comments, simply click this Link

 
 

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