Option Investor
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 Alan   10/7/02,  19:45:12
Index Futures
Don't forget, Pres. Bush on at 8pm

 Steven Price  10/7/02,  16:40:24
Reader Question: I'm holding puts on MER. It's at 3-year low. PnF shows bull reversal. What would you rec. for target and stop? Thanks to all at oi for your distinct value-added help.

Regards, Chris

Response: Merrill Lynch (MER) $28.43 (-1.74) A look at the PnF shows a series of bearish wedges and the daily chart shows a consistent downtrend for the year. The news of more Wall Street layoffs today continues to look bearish for the group, as investment banking, M&A, and trading revenues are all on the decline. However, that doesn't mean we won't see some type of rebound after the hard drop of the last few days. The current bearish vertical count is $18, but I would certainly expect a rebound before reaching that level. The new round of layoffs still has me leaning short on the group and if MER had a failed bounce under $30 I would even think about adding to the position. I would probably place my stop at $31 to get out of the way of a rebound and then look to short again later if it crossed that level.

 Jeff Bailey   10/7/02,  16:32:34
Swing Trade Signals
The swing trade model is currently holding SHORT from OEX 399.00 entry at 15:05. My near-term target of OEX 390 was not achieved as the OEX traded a low of 394.80. After our OEX trigger was initiated, the OEX traded a high of 397.83.

 Steven Price  10/7/02,  16:31:49
Cigna (CI) $57.99 (-4.19)for those readers still holding puts in CI, I would lower my stop to $60.25, just above resistance intraday at $60. Sorry for the late update, I had some technical difficulties this afternoon.

 Alan   10/7/02,  16:17:59
Index Futures
At 345-350pm, Futures were : ES 782, YM (Dow) 7385, NQ (Ndx) 801. From that point into their 415pm close, they caught a bid with 25min of buying (possibly on last minutue short profit taking). ES upticked 6pts to close at 788, Dow upticked 55 pts at 7440, NQ up 12 points at 813s

 Alan   10/7/02,  15:58:51
Index Futures
353pm I'm having some tech problems posting here. Once ES (SP futures) lost that 792-93 support, now hitting the mentioned lower support at 783-85. YM (Dow futures printing 7388 as Dow cash looks to test 7400. NQ (NDX futures) at 801 as QQQs lose 20.0 rather firmly. Next (and last) support for ES is July's lows of 775. Broken record comment of "New Multi-year lows on many stocks and key indices" yet again today.

 Steven Price  10/7/02,  15:32:59
Reader Comment: Can I chime in on your comments to Raymond? He described me when he described himself. I have been at it for about 5 years with limited success. All of your points are excellent and I have printed them out as a reminder. But one of the most important changes that I have made with my trades is to ALWAYS use stop losses to protect myself in case I am wrong as well as to take the emotion out of the trade. Small losses not matter what. Yes, sometimes they work against me, but I am always alive to make another play on another day. There is always another day. Brian D.

 Jonathan Levinson  10/7/02,  15:22:18
GE has just broken below 23 with a print at 22.90.

 Jeff Bailey   10/7/02,  15:14:06
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 15:05 when the OEX traded 399. SPY 79.32, SPX 791, DIA 75.00, DJX, 74.81, NDX 807.50, COMPX 1,123, QQQ 20.10.

 Jonathan Levinson  10/7/02,  15:03:02
COMPX low of the day, 1124.83.

 Alan   10/7/02,  14:58:43
Index Futures
I see 3 scenerios for the close today on ES (SP Futures). 1) Total chop between 792 and 798; 2) hard selling if it goes under 790 firmly as traders focus on it's July lows of 775, or 3) short-covering upticks if it climbs over 800 firmly. The Advance/Decline volume line remains bearish and at day lows. Market "feels" much lower than it's Dow - 30, SPX -7, Comp -11 levels. Watch the BKX bank index for it's reaction to the 3pm Consumer Credit numbers. Notice how MSFT at 1230pm at 45.0 confirmed that market exhaustion 'top'

 Jeff Bailey   10/7/02,  14:58:25
Swing Trade Signals
Close but no cigar. OEX traded 399.45, but not our trigger point at 399.00. Little bugger wants to hold our 19.1% retracement of 399.47 for second time today. Time will tell.... still keeping order open for SHORT on OEX trade at 399.00.

 John Seckinger  10/7/02,  14:57:25
After responding to a number of subscribers, I just want to make it clear that it is ok not to trade. I told myself this morning (per earlier post) that I only wanted to trade if two levels in the Dow was hit. They were not. Furthermore, the bond market was neutral, and the yield curve was flat. Did I learn something today? Absolutely. Patience truly is a virtue, and "noise" within the marketplace is just that.

 Jeff Bailey   10/7/02,  14:45:07
Swing Trade Signals
Dow Industrials trading 7,501 here (-28 points). My thinking is... "if the bulls give up on the Dow, then they'll give up on the NASDAQ Comp, NDX (which I think they did a long time ago). If the bulls give up on the Dow and it breaks the 7,400 level, should act like a sledge hammer and drive things lower.

 Linda Piazza  10/7/02,  14:39:12
Speaking of the retail sector looking like doo-doo (see Steven's 14:18 post), Costco (currently 29.58) is falling prey today to a double whammy: Sears' warning this morning and the continued dockworkers' strike. Costco (COST) is the fourth largest importer at the West Coast yards affected by the strike. Costco gave a sell signal today from a double-bottom breakdown, with a target of 23 on the P&F charts. It's reached a 52-week low on higher than average volume. I also like to buy puts on stocks that have dipped below round numbers, as that sometimes induces retail investors to sell, if there are any retail investors still left in the stock. However, stochastics are buried in oversold. Also, Bush's intention to appoint a board of inquiry into the lockout is a first step toward invoking the Taft-Hartley Act. This act allows him to order workers back to their jobs for 80 days. The invocation of that act could send Costco back up, releasing the stochastics from oversold and offering a better and less risky entry to a put play. Watch the MA's, though,and wait for a clear rollover before entering a put play, as a move up through those MA's could signal a change in sentiment toward this stock.

 Steven Price  10/7/02,  14:37:26
Cigna (CI): $59.31 (-2.87) For those readers still holding the CI put play from last week, I would lower my stop to intraday resistance of $61, as this would signal not only a rebound through the $60 support, but an additional step up and might signal a rebound.

 Alan   10/7/02,  14:36:00
Index Futures
Consumer Credit report coming up at 3pm, this isn't usually a large market moving report. There are no economic reports tomorrow and no earnings of market importance either on Tues. Since the 1230pm Market exhaustion "top", attempts at rallies have been Sold. ES appears to be losing it's 793-94 support but could see 790(or lower) in a heartbeat if this 793 support is lost. Dow cash clings to 7500 support along with OEX 400. If flat, too late to safely short, too dangerous to safely open a long. Wait and watch that Dow 7500, OEX 400 for a directional move.

 Steven Price  10/7/02,  14:31:37
Reader Question: Hi, I am looking to get back in FNIS after selling all my shares @ 23.70 what is your opinion? Rick

Response: Fidelity National Information Solutions (FNIS) $14.06 (-0.39) FNIS is still in a downtrend and now looks to have resistance just over $15. It has rebounded slightly after recent drops, only to drop further. I would be looing at it short rather than long, and would want at least a higher high and higher low before going long on the stock.

 Jeff Bailey   10/7/02,  14:31:07
Gold/Silver Index (XAU.X) 65.62 -2.13% .... Jeff: didnt you mention this as a key level? if so, what is it telling us?

By itself, gold stocks look to be breaking down. However, combined with lower Treasury YIELD, I think it tells us "now fear of inflation, and slow economic growth." The breakdown in gold stocks comes despite the December Gold Futures (gc02z) 323.10 (unchanged). This disparity between the commodity future and stocks may also hint that sector bulls see losses in gold stocks starting to mount a bit and selling comes in with broader weakness as the "gold stocks" aren't offering the downside protection. I sure would have thought gold stocks would have gotten some buyers with all the banking concernes that some seem to be focused on.

 Jonathan Levinson  10/7/02,  14:28:59
GE is getting croaked on relatively heavy volume, 25,262,000 shares so far against an average daily volume 31,058,090, currently down 3.50% or .84 to 23.12. A print below 23 would be a failure of a triple bottom, and with volume this heavy bears (myself included) are optimistic. The COMPX got hit with a sell program at 1134 and is now trying to bounce from 1130. The TICK.NQ is -435 and the TRINQ remains bullish on its face at .72. If this is bullish, I'd hate to see what bearish readings will do the price. 1125 remains The Number. Other than that, it's a relatively slow day.

 Steven Price  10/7/02,  14:26:03
In my last post I actually forgot the biggest rule I use - Always make sure you can come back and play tomorrow! When you bet the house, it's a pretty empty feeling to know you are done and there's nothing to do about it.

 Steven Price  10/7/02,  14:18:19
Reader Question: Dear Steve, I have a question or two about trading professionally. I really enjoy and am fascinated with trading options. I have my own business selling office furniture and it gives me alot of time to watch the markets online. I've been trading for about 3 years off and on and have made some money only to lose it all back. So far my stock trading experience has been comparable to my usual luck at the casinos.

I would really like to do better. I don't consider stock trading a game or get rich quick scheme. I have devoted hundreds of hours reading books, absorbing info from web sites like yours, and have made about 100 live trades in my trading history. I'm 48 and I would like to trade into my retirement and hopefully one day learn how to make money trading on a consistent basis. But how do you do it?

What's the key? What seperates real traders from the chumps? I would truly appreciate your thoughts if you can find the time.



Raymond, Your questions are similar to many, many other traders. While I don't have "the key," I can offer a few tips that I have learned from both successful and unsuccessful trades.

First, I would suggest getting comfortable with a couple of methods and relying primarliy on those. I would also pay attention to what other signs are telling you, as the more input, the better. However, mastering a couple of methods that you have had the most success with usually is the place to start. Once you have done that, you can expand into other areas.

Second, always look at the big picture, meaning don't go long Wal-Mart when the rest of the retail sector looks like doo-doo. Many times a stock which has had a big drop gets investors thinking, "Well it was $10 higher a month ago, so the chances of getting back to that level seem pretty good." NOT! This can be extended to the overall market. If we are in a downtrend, as we have been in for the last couple of years, be very careful selecting long plays - a sinking tide usually takes down all boats, so if you are going to go long and the trade goes against you, be quick to cut your losses. That is one of the hardest things to do - let your winners run and stop your losers quickly.

Third, only trade an amount of capital that makes you comfortable. When you have too much on the line, it is hard to keep a clear head. Like your Vegas reference, when you have a lot riding on one hand in Blackjack, you may hit when you shouldn't have, in an effort to not lose.

Fourth, make wise decisions based on solid information. Getting a tip from a friend is one of the quickest ways you can lose money. My mother called me to tell me that her neighbor just got in on this great stock. It was trading $43 and had recently been over $100. I tried to convince her that it had dropped for a reason, but the idea of doubling her money just seemed too great. That stock was CMGI, currently trading at $0.33.

Fifth, it is a perfectly valid trading decision not to trade. If it's not there, don't try to force it. Boredom leads to an awful lot of bad trades, and I've certainly made my share of forced trades while sitting in the pit looking for something to do.

Sixth, think about your trade from this moment in time. Rather than thinking "Well, I'm down $2, so I have to get that back," think whether you would initiate the trade at this time. If you wouldn't put on the trade at this moment in time, then you shouldn't be in it.

Given enough time, I could probably come up with many more suggestions, but these are the biggest ones that come to mind. Your reference to losing $ over the last 3 years tells me you have probably been attempting long plays in a sinking market, like many other investors. So don't beat yourself up too hard. Remember, you can make money in both directions - that's what puts are for.

 Alan   10/7/02,  14:18:08
Index Futures
If you took that ES (SP Futures) resistance short at 809, Dow Cash 7635; or opened one on the failure to get back over 805 - it appears with ES failing the 800 restest, currently at 793s, Dow Cash 7500 to retest today's double bottom at 793, this would also match Fri's Lows. At ES 793, Dow cash 7500; I'd take short profit here and consider a long with VERY tight stops once it's over 795. On the bearish side, it's possible ES make's a new day low at/under 790.

 Jeff Bailey   10/7/02,  14:17:52
Swing Trade Signals
Market fading once again and back near session lows. Despite some "positive" words from Intel's CEO regarding potential turn around, MARKET seems to be ignoring and SOX looks ready to test morning low of 220.84. Want some exposure for a downside move should OEX break at 399.00.

 Jeff Bailey   10/7/02,  14:15:04
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
GO SHORT the markets on an OEX trade at 399.00. Stop 407.00, target 390.00

 Steven Price  10/7/02,  13:56:40
FLIR Systems (FLIR): $29.85 -2.88 I am lowering the stop on OI put play FLIR to $33 - let's lock in some profits.

 John Seckinger  10/7/02,  13:50:20
It is all about increasing your odds. With President Bush scheduled to speak tonight, traders apparently are comfortable waiting until after Mr. Bush's address to the nation regarding Iraq. It is interesting, to me at least, that the volatility index is actually higher by 2% at 47.17. If you are a pure speculative trader, I would be watching the 22 PMA (five-minute chart, currently at 7548) as a pivot (closing period only) level. The Dow is currently at 7522.

 Linda Piazza  10/7/02,  13:36:09
Be careful if you're watching .XAU down 2.51% and thinking that's predicting a move up in equities. Although .XAU often moves in opposition to the equities, it doesn't always. From July 19-22, while S&P 500 fell from 880 region to just below 800, .XAU was also falling, from 74 to just over 58. The next day, both made a new recent low and then proceeded to rally.

 Linda Piazza  10/7/02,  13:15:52
Reader Question: Doesn't the fact that the Dow is significantly rising now in the face of horrible news accross the board, suggest that we're likely gonna move substantially up? Would you start dumping DIA Oct puts?

Response: Today's mid-day rally was pretty unconvincing so far. The DJI is still firmly within that descending channel that's been forming for a few weeks and today's action has been rangebound ahead of important news. With that said, though, VIX is high and there's not that much trading time left in those OCT puts. Any updraft is going to deflate the value of your puts (and of calls, for those of you thinking of going long). I also don't know how much profit you might have sitting in that position. As Jonathan mentioned earlier in the Market Monitor, this becomes a question of account management and depends on personal factors that I can't answer. However, on days like today, when any number of geopolitical and economic factors could send markets one way or another, I'd be likely to take some profits off the table and watch further developments, looking for an opportunity to get back in. I'm a cautious trader, as options traders go. Before today, I'd decided to stay flat ahead of Bush's speech tonight, and Bush's intention to call a board of inquiry to look into the dockworkers' situation and the expedited FOMC meeting only add to the uncertainty of the markets. I often exit in front of important market pivot points and get back in when the markets have chosen a direction.

 John Seckinger  10/7/02,  13:02:41
Looking at a five-minute chart of the Dow, it appears that we are in a channel that, at the moment, is pretty directionless. Of course, a few key catalysts are not far away. Plese see chart: Link

 Jonathan Levinson  10/7/02,  13:02:34
The air became awfully thin above 1140, and the COMPX managed to hold out for 15 minutes before falling back to earth, with price currently below 1139. The TRINQ made a low of .53 and is currently .59. The QQV touched 52.9 before moving back up, currently 53.29. My strong feeling is that the COMPX is going to take out 1125 on one of these runs. We have a lower high so far, and the downtrend from October 3rd is still intact. With a TICK.NQ currently reading -569 and a lower high still drying on the chart, bulls have nothing to cheer about.

 Alan   10/7/02,  12:48:32
Index Futures
sorry to post so quick again. ES (SP futures) did indeed pop very hard once over the 805 resistance but stopped dead in it's tracks at the next mentioned resistance of 809 (Dow cash 7635, NQ (NDX futures) at 830, MSFT 45.0 and has quickly reversed lower from that ES 809 level now at 803.50 (which needs to hold for bulls to remain happy). If flat, wait for direction back over ES 805 or under 802. If you shorted that resistance at 809, consider taking 1/2 short profit here at 803s with a stop around 806 on rest, keeping your eye on Dow 7600. Overall comment, ES (SP futures) have spent time UNDER that key 800 level on Friday and Today, it becomes increasing bearish if it can't hold above 800 later today. Lunchtime,bye.

 Jeff Bailey   10/7/02,  12:42:58
Swing Trade Signals
Currently, the swing trade model has NO open order entry levels in play. As a quick reveiw, I was looking for a rally in the OEX to 410-412 earlier this morning and never got it. Then was looking for a break below 399 and never got that. In "my mind" this defines a rather "tight range" right now on an intra-day basis. When I consider option volatility and other things, I feel I need more of a range to really trade in. The time taken so far lets me gather some observations and I haven't gathered any at this point to have me thinking this range doesn't hold for awhile. As such, risk/reward for trade setup just no here yet.

 John Seckinger  10/7/02,  12:38:35
The December Bond is underneath 114 (113-31), but yield curve still not showing clear directional movement. Utility Index is outperforming Dow, higher by 1.52% and back above 240 at 242. A daily chart of UTY shows the possibility of a bottom forming; however, 240 cannot be tested again in the near term.

 Jeff Bailey   10/7/02,  12:35:08
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Will cancel previous GO SHORT on OEX trade of 399.00. OEX trading 408 here and best levels of the session.

 Alan   10/7/02,  12:30:52
Index Futures
From the 1212pm mentioned possible short scalp from Dow cash 7600 covered at YM 7656 as ES didn't lose the key 800 support. Next upside resistance on ES is 805-06, 809, 812, 815. Since the 1115am lows, market has been buy the dips and take fast short scalps. If anyone did take that 1117am Long Signal and is still holding, raise your stops to lock in profit. Bulls really need ES (SP futures) to take out 805 to the upside which might cause more short-covering. Gone to to about 2pm.

 Jeff Bailey   10/7/02,  12:28:34
Air cargo carriers FedEx (FDX) $49.58 -2.89%, United Parcel (UPS) $59.60 -3.18% and Airborne Freight (ABF) $11.18 -1.58% lower today after Morgan Stanley downgraded FDX Link and UPS Link to "underweight" from "equal weight." Firm says both stocks are trading at the high end of their historical valuations, while most other names in the universe are in line or below historical levels.

As a side note. This weekend I spent a few hours in a muddy lake with a fellow that used to be in charge of Hewlett Packard's Puerto Rico manufacturing facility. They made a lot of small chip sets and their plant was right next to an old military "airport" where FedEx would fly into and out of. They shipped ALL of their smaller components via air, not sea. Interesting conversation and HP's strategy was to pay a little more for air shipping, but get benefit of lower inventory costs as their time delivery was cut shorter by air transport and didn't have to carry large inventories. Could "react" to market supply/demand at the production level quicker.

Conversation continued into "tax benefit" of Puerto Rico facility. As long as a manufacturere can sell a "stand alone" product, then gets some tax benefit from offshore manufacturing facility. I guess the "tax code" is that the thing you manufacture must be able to have a "list price" for that product you mfg. If however, the component you mfg. is "part" of some other component, then you can't realize a tax benefit. Kind of complex, but interesting how much strategy goes into things. At least I think so.

I'm thinking that Morgan's call this morning is most likely due to "economy" call, but also perhaps factors in a West Coast lockout settlement of some sort.

Disclosure ... I currently own a bullish position in FDX.

 Alan   10/7/02,  12:12:32
Index Futures
Would exit the longs from the 1117am post, as ES (SP futures are up about 10 from that level, and DOW Cash about +100 to +120 from that 'high risk buy area'. If Flat, would consider a short here near Dow Cash 7600 (either a short scalp -or- something to hold for a bit. ES 803.50 here also matches the 1025am highs.

 Steven Price  10/7/02,  12:07:35
Reader Question: Steven, Any news on MRK? Looks as if it is pulling right up to resistance at 46 and is setting up nicely for a short entry.

MOVI looks to have hit resistance and, at least for one day, is rolling over. ANy thoughts on potential put play?

Finally - thanks again for the insight on QLGC in the analyst section a few weeks back. Closed out Friday for 100% return!!



Merck (MRK): $45.34 (+1.08)I like the failure in MRK at resistance of $46. I would probably wait for a break back below $45 to enter.

Movie Gallery (MOVI) $16.18 (-0.85) MOVI has rolled over, but is holding above the 50-dma of $16.03. It is right between support at $13 and resistance at $18, so I don't have a real feel for which way I'd want to play it, although I'd lean toward a short under $16.

Glad to hear about QLogic!

 Jonathan Levinson  10/7/02,  12:06:18
The COMPX has recovered less than 10 points, but it's been enough to relieve the oversold pressure on the stochastics and let the QQV ease back from redline. QQV is now +3.34, at 53.52. The TRINQ is actually moving toward overbought at .71, still in neutral territory. Yields have recovered slightly and metals continue to sell off. I'm getting questions from readers looking for a ... well, the "C" word. I don't know where liquidity is going to come from to jam the markets into a rally, and while many of us are bearish, many are looking for a bottom here. I've dusted off my helmet with the GE and MRK puts, but am mostly on the sidelines and will walk away from the puts if need be. I don't see why the market would rally here, which is about the most bullish thing I can think of to say at this moment- it tends to happen when I don't expect it. The total put to call ratio has moved from .77 to .90 today, which is far from extreme. Short covering could fuel the bounce, but I don't see it yet.

 Steven Price  10/7/02,  11:59:48
Stop Loss Updates: I am lowering some stops on our short plays:

Whirlpool (WHR) $42.58 (-1.14) From $46.50 to $45.00

FLIR Systems (FLIR)$31.13 (-1.60) From $35.25 to $34

Closed Play still heading down:

Cigna (CI)$60.55 (-1.63) new stop $62.50 - there has been some support right at $60.00, so conservative traders may want to tighten the stop even more to $61.00 to lock in some significant profits from entries over $70. If the stock does break $60 to the downside, next support looks like $57.

 Jonathan Levinson  10/7/02,  11:59:07
I am holding ibm puts, oct 60s and 65s for a good profit currently. Obviously no warning yet if at all. In your opinion, hold or close. I can't possibly see "good news" coming but maybe not the horrendous news everyone has expected. Thanks Bill

If in doubt, you can take some off the table. You're now at a personal "account management" question, one of the toughest of all for traders. My test, beyond technical levels, is whether I could stand to give back the profits that are on the table. Often I take some or all of the profits off at that point (usually, for me, too soon). You have to be the judge. Recall that October contracts expire in 9 trading days.

 Jeff Bailey   10/7/02,  11:58:50
Swing Trade Signals
OEX session low has been 399.63 and now recovers back to 404.67. Rather range-bound session in early going between 400 and 406. For an intra-day trader, kind of like trying to pick up pennies on a morning stroll, but when you bend over to pick up the penny, risk dropping a quarter out of your shirt-pocket to pick up that penny.

 Alan   10/7/02,  11:48:13
Index Futures
I've tried to read as many of your emails re Futures that I could; and there most likely will be a "Index Futures Basic Information" article tonight on the website answering some of those questions.

 Jeff Bailey   10/7/02,  11:41:49
The 11:00 update has been posted. Link

 Alan   10/7/02,  11:37:22
Index Futures
Would exit 1/2 the Longs from the 1117am post on 'high risk long trade here' when ES was 792s as ES (SP futures) now at 50% retracement of 797.25 (791 low, 803.50 1025am High). Dow moved up 50+ points from that post. At 1110am, ES did go lower than Fri's Lows of 793s, trading down to 791. CSCO comment: traded under $9 30min ago.

 Jonathan Levinson  10/7/02,  11:22:03
The COMPX is back to Friday's 1125 support area. Similarly, GE is at 23.50, both right on the edge of the proverbial cliff. For a change, the market seems to be noticing it, with QQV up almost 10%, +4.82 to 55. The TRINQ is somehow below 1, at .86, indicating a buy-side bias even as the index heads lower. Yields are deep in the red, and metals, the HUI and XAU, are also selling off, which I remember seeing on July 24th early in the morning when the selloff was in full force. I've followed the OIN put recommendation on MRK and added a 1/4 position in the November contracts, and so am now mostly flat but holding 1/2 position in GE Dec puts and MRK Nov puts.

 John Seckinger  10/7/02,  11:21:15
December bond did rise above 114-08, but that didn't seem to be the reason for the move in the Dow under 7500. It seems to be mainly a technical trading session in equities, with a possible emphasis in range-bound activity. A move back above 7540 would be needed to semi-prove that theory. If not range-bound, Dow could possibly test 7400 and market participants' conviction.

 Alan   10/7/02,  11:17:14
Index Futures
ES (Emini SP Futures) making new lows for the day, has gap filled the 793 area (Friday's Lows) but as attracted no buying off that double bottom as of yet. NQ Ndx Futures at day lows, 808; QQQ 20.04 Is Today the day that the QQQs go sub 20? Dow Cash near serious support at 7450-60. OEX under 400 at 399.98 The market feels as if it either will bounce hard here, or sell off harder. Don't imagine shorts are too worried at the moment. My guess is that buying comes in, but it's a high risk trade.

 Jeff Bailey   10/7/02,  11:13:43
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
With Treasuries seeing buying and equities weak, will GO SHORT at OEX 399.00. Follow with stop at 407 and near-term swing trade target is 390.

 Jeff Bailey   10/7/02,  11:10:55
Swing Trade Signals
Old order to GO SHORT at OEX 411 has been cancelled.

 Jeff Bailey   10/7/02,  11:09:38
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Have not been filled on GO SHORT 411 entry. With OEX at session low of 401.04, will cancel prior GO SHORT 411 order here.

 Jeff Bailey   10/7/02,  11:01:03
Swing Trade Signals
OEX trading 401.59 and still no trade back into the 410-412 level. Current SHORT entry point is 411. (see 09:46:25). I had previously defined the 410-412 area, but need to be more specific. Therefore, 411 would be my specific price entry point. "If the OEX tradeds 410.90 and I'm not triggered, then trades lower to 400, I'd be a little upset. Rules are rules though.

 Steven Price  10/7/02,  10:59:31
Reader Question: Mornin' Steve. What with the banking problems world wide and the Brazilian elections going as they are- possible debt default with Lulu, I've been thinking GS would be a good short with a vertical count down to 53.00ish, MACD down and RSI heading down as well. Could a guy get a run down on this please? TIA Grant

Response: Goldman Sachs (GS) $60.39 (-1.68) GS has come up many times as a possible short in our recent OI meetings. I haven't wanted to chase it as it looks so extended. Apparently it had room to go. The stock bounced this morning just under $60 ($59.96). The run-off election in Brazil is Oct. 27 and should make for some good rhetoric leading up to it as polling results come in. Ideally I would love to get a failed bounce in GS under $65, which is the point of its quad breakdown, but short of that, I'd like to see intraday resistance at $60 after another break below, to initiate a short.

 Steven Price  10/7/02,  10:54:08
General Motors (GM): $36.12 (-0.30) Look for a break under $36 to initiate new shorts in GM, along with Dow under 7500 and OEX under 400.

 Alan   10/7/02,  10:51:42
Index Futures
Compression morning: ES (Emini SP Futures) have been in 10point range so far today; with most of the day actually in an extremely tight, choppy 4-5 point range (797 to 802). Most of the chop continues to occur around the 800 level. Bears won't get worried until ES firmly over the 805, currently 796 and downticking from yet another failed attempt to take out that wall at 800. Here comes the DOW cash 7500 test, and ES test of Friday's lows at 793-94. Watch Dow 7500 cash. Dow is now -100 points off it's 939am morning Highs.

 Jeff Bailey   10/7/02,  10:50:55
Retracement bracket settings That I showed in Sunday's Swing trader model have upper and lower retracement levels of...

OEX = 480.21 - 380.42

SPX = 950.60 - 762.97

DJX = 89.95 - 70.70

QQQ = 25.45 - 18.96.

 Linda Piazza  10/7/02,  10:50:05
As is usual when the markets move into a consolidation or reversal patterns, stochastics aren't particularly useful today. On the OEX, the 15-minute stochastic is moving up, but the hourly is having trouble picking a direction.

 John Seckinger  10/7/02,  10:30:25
Looking at a five-minute chart of the Dow, there is a pattern of higher lows and lower highs. This price compression should portend volatility to increase in the near term. The last relative high bulls will need to see taken out is at 7601, while bears should gain temporary control once under 7500. This pattern may only be relevant for short-term traders, but significant price action has to start somewhere.

 Linda Piazza  10/7/02,  10:30:17
Both AMGN and IBM are up more than 2% this morning. Last week, both were rumored to be warning, but so far those warnings have not materialized.

 Alan   10/7/02,  10:27:11
Index Futures
ES (Emini SP Futures) after making a higher low at 1010am at 796; have upticked 5points to challange the 802-805 level on thin, choppy trading. Currently at 803s. Dow Cash looking higher as well. Possible pause coming at gap fill ES 805-06, Dow cash 7600 -or- those levels could be breakout if firmly taken out, with next higher ES target 809, 812, 815. Bulls need 805 to be taken out to upside.

 Jonathan Levinson  10/7/02,  10:21:37
The COMPX sure is trading heavy today. 1140 was a brick wall and price just can't pick itself up. The TRINQ has been falling and is currently .87, yet price has been loath to budge. With yields down, metals down and equities slightly higher, something's going to have to give.

 Jonathan Levinson  10/7/02,  10:19:05
On that Fed meeting: This type of meeting is not without precedent, the last of which occurred on Sept 30th. It looks like a non-issue based on the following Link

 Steven Price  10/7/02,  10:16:48
Pulte Homes (PHM) $37.84 -1.30 OI put play PHM found some temporary support at $38.00, but not as much as I would have expected at the round number. The last time it was at this level was Nov 2001. One note of caution - with the Dow still above 7500 and the OEX still above 400, we are still in possible bounce territory. However, the SPX breaking 800 has me less worried about that possibility. I would look for the OEX to break 400 before initiating shorts.

 Linda Piazza  10/7/02,  10:15:07
DJ Transports, Morgan-Stanley Cyclicals, and the BIX banking index have all dipped below Friday's lows.

 Alan   10/7/02,  10:08:14
Index Futures
Prior post seems correct, to cover ES (Emini SP futures) at the 796 level, it got as low as 794.75 and caught a bid, currently challanging 800 (which is also a 50% retracement area of today's low/high 795/806. Monitor that 800 level, which matches DOW 7560 pivot as well.

 Jonathan Levinson  10/7/02,  10:07:23
The FED has announced that it is taking no open market operations today. Clearly the real news is yet to come at their expedited meeting later today.

 John Seckinger  10/7/02,  10:05:49
Checking the Intermarket Relationships: Dollar basically unchanged at 107.57 after coming close to testing 108 (intra-day high at 107.86). Gold also not showing strong directional movement. Utilities and Oil marginally higher, while Dow is near unchanged. With this said, there are no strong patterns which portend strong asset allocation movement.

 Jeff Bailey   10/7/02,  09:59:08
Swing Trade Signals
OEX breaking back lower at 401.61 and not looking like I'm going to get that little spike back into 410-412 at this point. Will wait patiently at this point, but looks like we're going lower.

 Alan   10/7/02,  09:58:47
Index Futures
Selling continues. If you shorted the ES (Emini SP Futures) upside gapfill at 805-6 at the posted resistance level, consider taking some profit here at 796 level which was the 930am level, next lower support is 793 (Friday's low). A short from Dow cash 7600 resistance applies the same; cover some, wait to see if Dow cash loses 7500. Bears remain in control.

 Steven Price  10/7/02,  09:55:41
Tech Data (TECD) $24.87 (-0.66) OI put play TECD has broken psychological support at $25. The last time it traded here was Jan 3 2001, but rebounded from $24.93. I would look for some resistance on the intraday chart at $25.00 before initiating new shorts, or a break under $24.50

 Steven Price  10/7/02,  09:50:29
QLogic (QLGC)$20.08 (-0.87) We closed this OI put play on Friday for some profit taking, but it continues to look weak. If it can break $20, then for those readers who wish to hold the position, I would lower stops to $22, where there was some significant intraday resistance on Friday.

 Alan   10/7/02,  09:47:59
Index Futures
The rally from the open's gap down lasted from 930am to 936am, when ES (SP futures) did an upward gap fill to 805-06 (where it closed Fri at 415pm), Dow Cash touched 7600. Markets have leaked lower since then, currently ES 801, YM (dow futures) 7547. NQ (NDX futures) and SOX index off it's 939am highs. Continue to watch ES futures 800-805 area for either upside or downside break. Market trend remains "down"

 Jeff Bailey   10/7/02,  09:46:25
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
With stocks near best levels of session, OEX builds a gain to 406.25. In anticipation of a move higher between 410-412, GO SHORT at 411 with initial stopp loss of 416. First downside target if entry achieved would be 400.

 Jonathan Levinson  10/7/02,  09:46:01
The COMPX is back up to resistance at 1140 and appears to be drawing a h&s top on the 5 minute bars. The TRINQ never made it below 1 and is now climbing, currently 1.35, while the TICK.NQ is at -255. I'd be more aggressive about shorting this... well, I would be shorting here, except that I'm nervous about what the fed might have up its sleeve, which is likely the point of that announcement. I'm still in my GE puts, no long short the QQQ, which I'm now regretting, as has happened so many times this year.

 Jeff Bailey   10/7/02,  09:43:22
Media reporting that President Bush will intervene in lockouts with Board of Inquiry. Stocks nearing best levels of the session.

 John Seckinger  10/7/02,  09:43:00
Looking at the yield curve, fives up 8 and tens are higher by 11. This is basically flat and doesn't appear to be giving any signal towards equities. As far as equities are concerned, in the OI wrap on Sunday I discussed how the Dow is outside its regression channel (monthly chart) and 7442 was the pivotal level to the downside. The Dow would also have to rise above 7689 to get back into the channel. Therefore, not terribly surprised with morning bid; however, would like to see price action if either 7442 or 7689 is tested.

 Jonathan Levinson  10/7/02,  09:39:18
Regarding the Fed meeting: Unless the wording of the announcement is standard, the inclusion of the legislative provision authorizing the meeting under "expedited procedures" seems to hint at something that would be newsworthy. The fed has been draining aggressively for the past few days- aggressively insofar as the markets seemed to be dying for that liquidity, and at similar times this year, there's always been a decent addition of funds to protect against the plunge. Well, here the PPT has been draining and is now announcing a meeting under expedited procedures and invoking its legislative power to do so. Perhaps a case will be made to justify the meeting and a rate cut? Or perhaps an announcement of some kind of financial catastrophe will be made. No way to know, but the fed isn't in the business of causing sudden extreme plunges- I believe the risk is to the upside, but am not sure- the market didn't bounce on the announcement last Friday. Ultimately I can't reach a conclusion, so I recommend playing it safe and tightening stops.

 Alan   10/7/02,  09:38:59
Index Futures
ES (SP Futures) caught a bid from the 930am market open, as the gap down has been bought/covered. ES opened at 796s about 10pts under it's Fri 415pm; and now is 804. Resistance higher: 805-6, 812, 815, 818, 823. All Cash indices are now Green

 Jeff Bailey   10/7/02,  09:36:42
Swing Trade Signals
Just taking in some observations in the early going. The OEX is 403.71 +0.13%. Would like to monitor a move higher near 410 for potential bearish entry swing trade signals. Getting some buy and sell program premium alerts and most likely some positioning and squaring of inventory going on.

 Linda Piazza  10/7/02,  09:35:41
With two big unknowns lurking in the wings today--the Fed's expedited meeting today and the nature of Bush's announcement tonight--cash may be the best position for today. If you're already in the market, watch those stops.

 John Seckinger  10/7/02,  09:33:47
The December Bond is higher by 15 ticks at 114-03, but the contract will most likely will have to remain above 114-08 (intra-day high at 114-10) in order to get equities terribly concerned (asset allocation into bonds at the expense of equities).

 Steven Price  10/7/02,  09:32:28
Sears (S) $37.64 Sears warned that they would miss 3Q earnings estimates. The stock actually recovered well intraday Friday from a big early drop in what looked like it could have been a reversal pattern. No such luck for the company. A number of reatailers have warned consistently over the last several months that same store sales woud be under estimates (WMT & FD have each had to lower their sales estimates for the last three months) so the fact that the earnings numbers may not line up should not be too surprising.

 Alan   10/7/02,  09:31:21
Index Futures
ES (SP Futures) selling hard from 9am when they were 802 (and above the key 800 support), currently 796.50. YM (Dow Futures) currently 7480, NQ (NDX futures) 815. Next lower ES (SP futures) supports are : 793, 783-85, and the July lows of 775

 Jeff Bailey   10/7/02,  09:29:07
Got this from a subscriber Surprise Fed cut Link in the wings? Not sure, but the FOMC is letting people know of this meeting.

 Alan   10/7/02,  09:27:21
Index Futures
Had posted this Sunday, but worth a read if you missed it. The Federal Reserve is holding a previously unscheduled meeting today. Read it here Link

 Steven Price  10/7/02,  09:22:37
In addition to the Intel comments Prudential cut several chipmakers this morning, so we'll be watching the Semiconductor Index (SOX.X) 226.95 for signs of another break lower. The intraday low on Friday was 223.57and the next significant level of support looks like 200.

 Alan   10/7/02,  09:17:55
Index Futures
Sears (S) issues an Earnings Warning. MER is downgrading UPS and FDX on valuation concerns.

 Alan   10/7/02,  09:11:53
Index Futures
9am: Europe opened lower, but are off their lows, but still red. An explosion on a French oil tanker off Yemen is being investigated as a possible terrorist action. Talks broke off on the West Coast dock works strike as it enters it's second week. ES (SP Emini Futures) overnight: low of 796-7 area (matching Fri's 330pm area), overnight high of 803-4, currently 801.50. YM (Dow Futures) currently at 7520, and NQ (NDX futures) 817.50. ORCL had bearish things to say re European software recovery. INTC Ceo Barrett said this weekend he expects a tech recovery in PC business in early 2003. WSJ reports JPM to layoff up to 4000 people. President Bush speaking at 8pm tonight.

 Jeff Bailey   10/7/02,  09:10:42
09:00 Update is posted Link

 Linda Piazza  10/7/02,  09:07:26
Investors and traders woke to troubled worldwide markets this morning. The Nikkei dropped 339.55 to a level not seen since 1983. In Japan, Europe, and South America, financials were under particular pressure. In Japan, some fear that government policies may lead to more corporate failures. Rumors swirled around Germany’s Commerzbank, although Commerzbank denied the rumors. S&P Futures are currently down 4.60 to 801.20.

 Jonathan Levinson  10/7/02,  09:05:11
I have only just received 125 emails from Friday. To all who emailed me, my apologies.

 Jonathan Levinson  10/7/02,  09:01:24
Gold got turned back yet again below 325/oz, though it made a lower high below 324. The US Dollar Index got ramped all weekend, as is often the case, but it failed to sell off last night and is currently trading above 107.60. The futures have been volatile and currently NDX and S&P are both down 6 points each. QQQ is trading at 20.24.

 Alan   10/7/02,  02:11:04
Index Futures
Current 2am prices: ES (Emini SP Futures): 798.5; NQ (NDX futures) 813; YM (Dow futures) 7492. Evening Lows once 800 was lost. Nikkei 8650-8700 (down about 300 from Fri's close) and making new lows. Area to watch Monday is ES (Emini SP Futures) at Fri's low of 793. If that is lost, next lower supports are 783-5, and the EXTREME support of 775 which was July's low. US Markets on Monday: no important earnings, only econ report is 3pm Consumer Credit data. The way things look now, (realizing anything can happen by 930am), it appears the market will open under those key benchmarks of SPX 800 and Dow 7500.

 Alan   10/6/02,  21:52:09
Index Futures
SP Futures: Current 800.75 the bounce attempt from 800 earlier tonight failed at 803, and now SPoos is struggling to hold 800 key support. DOW Futures closed Fri at 7565, now down over 50 at 7510-15. Obvious levels to watch tonight are SPoos 800 and DOW futures 7500. Japan's Nikkei has sold from the open, is now at 8700 and yet another new 19yr low.

 Alan   10/6/02,  20:21:26
Index Futures
SP Futures: 800 at Fri's 4pm Cash close, 805-806 at Future's 415pm close. Since the Sunday Futures open at 630pm EST, they have opened at 805, touched 800; and are now sideways at 801-802. NDX futures are lower by a few at 817. Dow Futures are not yet open.

 Alan   10/6/02,  20:13:49
Index Futures
It appears the Federal Resevere has a previously unscheduled meeting on Monday, Oct 7. You can read it at below link
Link Advance Notice of a Portion of a Meeting under Expedited Procedures It is anticipated that a portion of the closed meeting of the Board of Governors of the Federal Reserve System on Monday, October 7, 2002, will be held under expedited procedures, as set forth in section 26lb.7 of the Board's Rules Regarding Public Observation of Meetings, at the Board's offices at 20th Street and C Streets, N.W., Washington, D.C. The following items of official Board business are tentatively scheduled to be considered at that meeting. Meeting date: October 7, 2002 Matters to be Considered: 1. Review and determination by the Board of Governors of the rates of discount to be charged by the Federal Reserve Banks. The next regularly scheduled FOMC Meeting is Nov 6th.

 Jeff Bailey   10/5/02,  21:53:17
The Futures Trader Wrap has been posted: Link

 Jeff Bailey   10/5/02,  21:33:55
The Swing Trade Game Plan has been posted: Link

 Jeff Bailey   10/5/02,  20:45:46
The Market Monitor has been archived. To view Friday's comments, simply click this Link


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