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  Jim Brown   10/16/02,  10:21:57 PM
The Swing Trade Game Plan has been posted: Link

  Alan   10/16/02,  9:59:45 PM
Index Futures
10 PM: ES 876, YM (Dow) 8180, NQ 937

  Alan   10/16/02,  5:47:23 PM
Index Futures
Futures continue their UP trend off of IBM: ES 873 (almost at day highs), NQ 936 (above day highs of 933)

  Steven Price   10/16/02,  5:33:49 PM
IBM is trading over $70.00 after the bell, an increase of over $5. QLogic (QLGC) also beat expectaions and is up $2.50 to $25.86 after hours.

  Steven Price   10/16/02,  5:08:03 PM
IBM is currently trading $67.70 after hours up $2.80 from the closing price

  Alan   10/16/02,  4:59:40 PM
Index Futures
IBM stock comes off its Halt, at 4pm it was 64.50-65, currently trading higher at $66.50 level. ES (sp500 futures) choping around 855, Dow futures 8060-70 level, NQ ndx futures sideways at 923.
Futures volume not very high as IBM conference call hasn't gotten to the important Guidance yet.

  Alan   10/16/02,  4:53:04 PM
Index Futures
Futures Quotes on 4:45 reopen:
4:45 ES 866, YM 8069, NQ 923 (up a few points from their 4:15 PM close) following the dissection of IBM's earnings). Still no forward looking guidance on IBM's conference call as they are still discussing Q3 numbers.

  Alan   10/16/02,  4:32:55 PM
Index Futures
INTC: No reaction to the simply terrible AMD earnings which just came out. AMD missed by 7 cents (and this number was reduced after they warned pre-earnings, in other words, AMD missed their own numbers by 7 cents but INTC remains sideays at $13.50s as it appears more bad news from the Semis "is already priced in"
Just in case you thought there wasn't enough to watch with so many earnings, there are many Thursday morning economic reports out. Thursday preopen key earnings are: EMC, NOK, MO, S; and MSFT the important one Thursday after-hours.

  Alan   10/16/02,  4:26:00 PM
Index Futures
IBM 4:30 PM Earnings Conference Call can be heard at Link

  Alan   10/16/02,  4:25:02 PM
Index Futures
As the other aspects of the IBM earnings are dissected, futures have leaked lower a bit as IBM's hard-drive business is somewhat confusing on its impact. 4 PM Cash close: ES 860, YM 8020, NQ 914
Aprrox 4:06 PM (off the first piece of data on IBM beating by 2-3 cents), futures saw highs of ES 867, YM 8060s, NQ 925
At the 4:15PM ES and NQ close, quotes are ES 863, NQ 919
YM(Dow $5) currently 8043 and is still open until 5 PM. Futures Signals remain Flat. On the bullish side: Dow cash did not go under 8000, ES support of 852-55, held with 2 attempts to take it out, NQ held the 905 support; and perhaps to the surprise of some Bears, IBM did not "miss"
On the bearish side: Dow Cash 7950-8000 support level is very close, and could be tested to the downside should say some terrible things looking forward on their conference call.

  Alan   10/16/02,  4:08:25 PM
Index Futures
4 PM Cash close: ES 860, YM 8020, NQ 914
IBM appears to have beat by 2 futures upticking hard, ES 865, YM 8060, NQ 922

  John Seckinger   10/16/02,  4:02:55 PM
Approximately 44 companies are scheduled to release earnings after-the-close today. Should be exciting.

  Alan   10/16/02,  4:02:31 PM
Index Futures
4 PM Cash close: ES 860, YM 8020, NQ 914
IBM catching small bid into the close as some IBM shorts take profits.

  John Seckinger   10/16/02,  3:57:03 PM
Remember, Initial Claims, Housing Starts, Building Permits, Industrial Production (with Capacity Utilization), and Phila. Fed is on the economic docket tomorrow. The first three reports are due out at 8:30 a.m., while the last two should be released at 9:15 a.m.

  Alan   10/16/02,  3:50:46 PM
Index Futures
ES and NQ futures close at 4:15 PM, Dow futures remain open until 5 PM. No idea what time IBM will report, but there could be a Futures Trade signal off of IBM.

  John Seckinger   10/16/02,  3:47:49 PM
I am still waiting for the Dow to trade 8000 and test buyers' conviction. The Utility Index is also at its session low (213.72), while the SOX index is just above its intra-day low (244) at 245.

  Alan   10/16/02,  3:46:48 PM
Index Futures
ES (sp500 futures) has provided a somewhat weak support twice this afternoon at 856 level (50% retracement of 852 and Tue's high of 882). The Level 2 book on ES is showing very large Ask sizes. If ES firmly loses the 855-56 support, next lower is 848-852.

  Jonathan Levinson   10/16/02,  3:46:42 PM
The CBOE put to call ratio continues higher, currently 1.26. While this is more likely to occur during options expiration week, I must reiterate that bears should be prudent with their positions. Don't overleverage. While a meltdown is possible, we've seen that meltups are too, and with the p/c ratio out of whack, along with a very high TRINQ all day, the ingredients are there for extreme moves in either direction. Be careful out there.

  Steven Price   10/16/02,  3:43:44 PM
Also not that WLP hit our intermediate target and conservative traders may want to take some profits here on entries from $80.00.

  Steven Price   10/16/02,  3:42:41 PM
Wellpoint (WLP): $86.33 (+1.53) WLP finally made it through resistance at $86.25. I'll watch the intraday chart for support at that level, but I see this as a bullish sign in a sinking market.

  Jeff Bailey   10/16/02,  3:39:46 PM
Duke Energy (DUK) $18.67 -1.9% ... Jeff: Could you comment on DUK chart and what may be there.

Only "key level" I'm currently monitoring is the 09/25/02 open of $18.30. Today's low is $18.38. The reason I see this as "key level" near-term is that this $18.30 price was the price that DUK recently issued a secondary offering. Stock discounted this level on 10/08/02, then traded 52-week low on volume of 20 million shares. Thinking here is that an institution may have taken some of the DUK secondary offering, and when it dicounted from $18.38, pulled the plug. What usually happens is the investment banking firm that did the deal will try and defend the offering. I think that's what is taking place currently and in recent sesssions. Daily stochastics are reversing lower from "overbought" and still looking or some type of flush lower.

  Steven Price   10/16/02,  3:35:49 PM
Reader Question: Hi, Jonathan with tonight's earnings of IBM and QLGC, is there a possibility of putting in straddle or strangle? or the premium too high? Thanks!

Response: I've never been a fan of buying long straddles or strangles just ahead of earnings, since the premiums are at their highest. If you are going to bet on earnings, I'd prefer a vertical spread, which lowers the cost overall, since premiums will most likely come in right after the earnings release. The short option will help pay for the long one, while still giving a trader some profit potential. If you are attempting to capture movement in either direction, then a short ATM butterfly may be the answer, where you purchase the straddle and sell the strangle. The butterfly loses money as you get away from the strike, so if you are short it, the long straddle at the center strike gains value, while the strangle limits profits, but pays for decay in long options of the stock doesn't move that far. However, keep in mind that butterflies are generally lower cost positions and your profit is limited to what you sell it for.

  Jeff Bailey   10/16/02,  3:29:28 PM
03:15 Update is posted Link

  Steven Price   10/16/02,  3:27:00 PM
Mandalay Bay Group (MBG): $29.42 -2.38 A note from Lehman on business interruptions in Gulf coast riverboat casinos, due to Tropical Storm Isidore, has hurt MBG and other gaming stocks with operations in the region. I don't like MBG's failure at the 200-dma of $29.76 and will consider closing the play if it can't find support at that level.

  Jonathan Levinson   10/16/02,  3:18:11 PM
The COMPX bounced off 1229 and is now up to 1236, easing the TRINQ down to 3.35. The TICK.NQ is a modest +143, and I'm not seeing much of anything to motivate me either bullish or bearish from here. The FVX has been flipping from green to red and back again. In any event, if this week is any indication, the big moves will happen after the close anyway, and so traders need only ask themselves (a) if their risk tolerance permits a 40 point (COMPX) move against them before the open; (b) whether they truly "believe" in their positions. I recommend lightening up so that these big (ridiculous?) premarket moves don't prove lethal to your accounts. Alternatively, go with back month contracts that can accomodate these unpredictable swings. For what it's worth, I expect to hold my December puts through the close, based primarily on my feeling that what's going on in the markets is anything but healthy or indicative of a return to bullishness. My positions are of manageable size and duration just in case I'm wrong.

  Jim Brown   10/16/02,  3:05:17 PM
Swing Trade Entry Point Alert - QQQ
I stated in the game plan last night that I was recommending a LONG position in the QQQ with an entry at 22.50. Several readers have asked why I did not trigger the signal with the QQQ low showing 22.07 today. That is a false low. There was a bad tick this morning and the actual low is 22.52 from 2:15. This signal is still active and the stop loss will be $21.75. Conservative traders may want to wait until tomorrow and after IBM earnings before entering the trade.

  John Seckinger   10/16/02,  2:55:23 PM
With the 200 and 20 PMA's converging (Dow, 5-minute chart), we could see some added volatility during the last hour (bond market closes at 1 p.m.). Speaking of the bond market, prices are at 109-23 and a settlement underneath 110 should keep the trend of dollar-denominated asset selling intact.

  Jeff Bailey   10/16/02,  2:51:41 PM
Hartford Financial Svc. (HIG) $45.50 -3.08% ... lower in last 30-minutes on talk that debt may be cut by S&P.

  Alan   10/16/02,  2:49:55 PM
Index Futures
Thank you OI reader Rick for pointing out a human error on my prior post. Two hours ago, and several other times, I had mentioned i was looking for ES 852-855 support level to be tested. I thought I had added the phrase "at which point I would look to either cover shorts, or open a long", in the mindset of 'buying large support, shorting large resistance'. While that was the intent, I now see those words were not included 2 hours ago. It's moot as ES did not trade at 855.0, [low was 856] but thank you Rick for pointing this out to me. And if ES trades at 855.0 later this afternoon, I would be more concerned at opening a long there so late in the day as it could still see 852 today; and that's why i wrote "buy 855.0 ES signal cancelled"

  Jeff Bailey   10/16/02,  2:47:00 PM
Genesis Microship (GNSS) $11.66 +8.4% ... stock bucking the semiconductor trend today. On the move in last hour from $10.58 on trader talk that the company has won a contract from Gateway (GTW) $2.66 -3.62%. Yesterday, GTW announced that it will make flat panel displays standard on its PCs.

  Jim Brown   10/16/02,  2:41:28 PM
Swing Trade Signals
The 2:15 bounce came right on schedule but seems to be running out of steam already. We are currently SHORT 1/2 position on the broader market. With IBM earnings tonight there is the strong possibility that they will hit estimates but not say anything positive. Coupled with the strong bounce in IBM over the last week any lack of good news could cause them to sell off. However, is there anyone left that still thinks there is a recovery in progress? With the Intel miss and warning all the bad news could be priced into the market.

If we are not stopped out before the close every investor must decide in advance whether they will hold over or close the short position to avoid further risk. Remember, this is October and investors are conditioned that the last two weeks of October are up, even in bad years. That means bad news can be overlooked due to the bullish expectations.

I have to leave at 3:30 today and will not be able to make recommendations going into the close. If the current trend continues we may not have to worry about it as we are nearing 438. If we do not stop out you need to decide in advance what you are planning to do.

  Steven Price   10/16/02,  2:37:19 PM
Reader Question: Have a nice profit in IBM 65 puts purchased yesterday at .80 cents would you hold past the earnings announcement this evening in light of all the other bad news that has surfaced today

Response: IBM $64.79 (-3.69) This is a tough one. You profited from both movement and an increase in implied volatility of the options, which almost always decreases after earnings - unless there is a big downside move. I can't imagine IBM giving us a positive surprise, given recent statements from the other techs, as well as the EDS numbers last month. However, if I were holding the position and we get a continued sell-off into the close, factoring in bad news, I'd probably cash in at least 1/2 of the puts to lock in some profits. That doesn't mean it won't go further, but I usually like to lock in my profits when everyting goes my way. If a trader can lock up a profit and leave a few puts on to capture additional downside movement, that would seem to be the ideal scenario.

  Alan   10/16/02,  2:29:59 PM
Index Futures
IBM earnings and Futures: It was much too complicated to cover here in Market Monitor, but tonight I shall have an article on the website explaining how one could have used YM (Dow$5) futures to hedge an IBM Credit options position of 'selling' the IBM option premium and hedging with Dow Futures.

  Jim Brown   10/16/02,  2:25:25 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Cancel the current LONG signal at OEX 441. This late in the day I do not want to be long over the IBM earnings. The early day bounce did not occur as hoped.

  Alan   10/16/02,  2:23:12 PM
Index Futures
As ES (SP500) futures did not trade at 855.0 (the top part of the expected 852-855 range), the buy to open Long signal is now cancelled. It came very close at 856.

  John Seckinger   10/16/02,  2:15:12 PM
Cash is beginning to enter five-year notes once again, as the index is fractionally higher at 112-12. This seemed to occur following the Dow dropping underneath its 200 PMA of 8042 (five minute chart). Note: The 22 PMA, which has been solid resistance all session, remains higher at 8054. In other notes, the SOX is lower by 9% and the Utility Index is down 3.81%. Also, there was a Homebuliders Index report that showed a slight drop in October. The present sales index still rose to its highest level since Nov 2000, and mortgage rates remain near multi-decade lows.

  Jim Brown   10/16/02,  2:05:57 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We just hit OEX 435. You should now have a 1/2 position on the market SHORT. We will go to a full position at Dow 7975. The stop loss is still OEX 438.

  Jonathan Levinson   10/16/02,  1:53:43 PM
The COMPX has just printed some new lows at 1231 as the TRINQ gets back up to nosebleed territory at 6.02. QQV is +.13, signalling a serious divergence between options volatility and market breadth. The TRINQ is showing extreme selling pressure while option volatility is a hair above flat. As we saw yesterday with the extremely low TRINQ readings required to move the markets within a very narrow range, we're seeing the reverse but to the downside. This would tell me that a reversal is imminent here, but I don't think that's the case. The total put to call ratio has been edging higher, currently 1.15, which reflects the lopsided sell bias we have today, and it too points to a reversal. We have 9 declining shares for each advancing, which is actually more neutral than yesterday's lopsided buy bias, where the ratio exceeded 15 a few times during the day. An interesting and confusing day.

  Linda Piazza   10/16/02,  1:52:59 PM
The hourly stochastics had made a bullish cross and hinged up, but this latest push down has reprinted them, turning them down again. They're in oversold territory, though. I dimly remember reading in one of Nison's books on candlesticks that support (or resistance) tends to come in about the middle of a long candlestick, such as the long white one we had yesterday morning. We've been sitting about halfway for a while now.

  Steven Price   10/16/02,  1:43:01 PM
Reader Question: Hi. Yahoo is over extended and with resistence at the 200mva. Yesterday I bought jan puts but with today strenght i'm thinking to get out. Any thought about it? thank you, daniel

Yahoo (YHOO) $14.45 (+0.03) I wouldn't be punting on Jan Yahoo puts just yet. With recent warnings about internet ad revenues down, and Yahoo relying on fee based services to make up for the glut, I think the risk/reward ratio, with the 200-dma looming above and plenty of resistance at $16, is still in the put-holder's favor.

  Jim Brown   10/16/02,  1:40:34 PM
CNBC must be hard up for content. That ACE coop piece was exactly the same one they ran yesterday afternoon. Or is it that I am in a time warp?

  Jeff Bailey   10/16/02,  1:35:35 PM
01:00 Update has been posted. Link

  Jim Brown   10/16/02,  1:34:54 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY - restatement of 12:27 entry
Remember, if this drop in the OEX continues we will add 1/4 position with a drop below 435, which is just below the low of the day. We will add the final 1/2 position once the Dow trades below 7975. That 8000 level could provide some support or even a bounce so we do not want to go full strength until we break below there.

  John Seckinger   10/16/02,  1:29:33 PM
The recent downdraft in the XAU index could very well be responsible for the slight bid in equities. However, the Utility Index lower by 3.54% and still under 219 has to be on traders' minds. What about the bond market? There was some life as equities fell; however, the theme of selling dollar-denominated assets continue at this time.

  Jim Brown   10/16/02,  1:18:47 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the stop loss on the current SHORT signal to OEX 438.

The A/D line had only been showing a slight improvement but with the market setting new records for dull there is always the chance of a sudden afternoon rebound. I keep thinking that all the bad news will weigh on investors worried about the IBM earnings tonight. I do not expect them to miss but they could easily echo Intel's comments about negative outlook for the 4Q. With the big gains in IBM over the last week they could easily retest the lows. If traders were thinking about holding over the IBM announcement the Intel news could have given them second thoughts. Lower the stop to OEX 438 but stay short.

  Steven Price   10/16/02,  12:56:45 PM
Reader Question: wanted to get your thgought on IBM. everyone seems be ingnoring the drop on IBM and I have not found anything with regards to the drop.

IBM: $65.06 (-3.42) Comments from Intel and Novellus about the fourth quarter were not promising. With earnings out after the bell today, investors are getting out ahead of possible similar comments from IBM. IBM had a nice rally yesterday, but still failed its 50-dma, which has given it trouble on previous rallies. After a loss of over $3 already I'm not sure I'd jump on at this point, but I expect IBM to also issue cautious statements about the fourth quarter. As a lottery play, I could see buying the Oct 65-60 put spread for $1.50, but that's not that cheap and a trader has to be willing to lose it all since it expires this week. An alternative is the Nov 65-55 put vertical for $2.95.

  Jeff Bailey   10/16/02,  12:52:42 PM
Gallaher Group (GLH) $43.75 +5.14% Link ... stock up on trading floor rumor that this UK tobacco company may be in play as takeover candidate. Potential suitors are Philip Morris (MO) $39.22 -1.99%Link , British American Tobacco (BTI) $19.29 -2% Link , Altadis, or Japan Tobacco.

  Jim Brown   10/16/02,  12:47:25 PM
Swing Trade Signals
The OEX 436 level is providing support as it is the bottom of the uptrend channel from the last five days. Once 436 breaks that should be the signal for a continued drop. I am not forgetting the Dow 8000 level either. Both must fail for a significant drop.

  John Seckinger   10/16/02,  12:46:06 PM
One index that seems to be nicely correlated with the Dow is Gold. Trading inversely throughout Wednesday's session, the XAU Index (+2.07% at 62.47) has been in an aggressive bullish pattern since the opening bell. Prices are now hitting its 22 PMA (five minute chart), and this recent selling might help explain the very small rebound in the Dow during the last few minutes. Will be interesting to see if the XAU continues this inverse relationship during the next few hours.

  Alan   10/16/02,  12:41:00 PM
Index Futures
Many readers have asked about how one might 'find' support numbers.
ES: Yesterday's Market Monitor I had talked about the ES gap lower level at 852-855, those numbers also were mentioned in last night's very brief website Wrap, as well as today. ES at 12:10 PM came "close" at 857 to the upper range of that 852-855 level.
Also, Dow Cash came "close" at 8030 to the pysch support of 8000, and the chart support at 7950-70.
NQ (NDX futures) had large prior resistance at 905-08 which will now act as support (NQ High was 950s yesterday). Also at 12 noon today, it came "close" to the 905-08 levels at 911.
Why you ask did they only come "close" and not actually get there?
Because if traders realize the numbers of ES 852-855, Dow cash 8000, NQ 905-08 ARE indeed the numbers Shorts are looking to cover at, then a Short might decide to cover a few points higher to beat the rush. One also needs to factor in the the Lunch hour: someone who shorted around 10 AM today, might decide to take some Short covering profits before leaving for lunch.

  Jonathan Levinson   10/16/02,  12:36:35 PM
The COMPX has only dropped 7 points since the 1241 level, but those seven points seemed to sway sentiment and discourage the bulls en masse. Un particular, the five year yield went negative, and QQV broke the 50 level, +.61 on the day. The TRINQ is higher still, 4.26, showing continued aggressive buying. Metals have moved up, with HUI +2.62 to 113.19. As we've seen all week, the big move of the day was made before the markets opened, but the continuation seems to be significant today.

  Jeff Bailey   10/16/02,  12:34:34 PM
S&P is busy today! Sun Microsystems (SUNW) $2.78 -10% ... sharply lower in last hour after S&P cuts credit rating of SUNW to BBB from BBB+

  Jim Brown   10/16/02,  12:27:33 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
If we get another drop in the OEX we will add 1/4 position with a drop below 435, which is just below the low of the day. We will add the final 1/2 position once the Dow trades below 7975. That 8000 level could provide some support or even a bounce so we do not want to go full strength until we break below there.

  Steven Price   10/16/02,  12:25:09 PM
Wellpoint (WLP) $86.10 (+1.30) WLP keeps steaming ahead, but we are right up against resistance at $86.25. Those long play holders should be keeping on eye on $86.25 now that we are so close to that level.

  Jim Brown   10/16/02,  12:24:00 PM
GM   With the debt cut by S&P GM fell below the $36 level which I had mentioned for a new short. The actual entry point mentioned in yesterday's Monitor was a trade below 35.50 and anyone following that recommendation should be short again. Congratulations!

  Alan   10/16/02,  12:18:50 PM
Index Futures
Followup to yesterday's real-world example of using futures to hedge an OEX position. Yesterday Jim Brown had suggested buying OEX calls at the open and I had mentioned later in the day (at Dow Cash 8200 ) that one could have hedged by Shorting YM (Dow$5 futures) at that level. In best case, if you had existed the OEX calls at the close (gain of 2-4 OEX option points), you would now have a gain of 200 YM points per contract, which is $1000 (200 YM (Dow$5) points x $5) for a gain of 125% based on $800 margin per contract.

  Jeff Bailey   10/16/02,  12:18:17 PM
General Motors (GM) $34.22 -6.75% ... stock turning lower rather quick after S&P cuts GM's long-term debt to BBB from BBB+

  Jim Brown   10/16/02,  12:17:03 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the 1/4 position SHORT signal at 12:08:40 when the OEX finally traded below 436. SPX 859.14, DIA 80.64, SPY 86.22, DJX 80.41, NDX 909.38, Compx 1232.75, QQQ 22.62, Emini 859.00. In hindsight we should have shorted the second bounce to 442 this morning but as you saw the reluctance to break below 438 to test 437 support for almost two hours there was a good reason for waiting. The initial stop loss will be OEX 441.00. We are already down nearly -12 points for the day and -216 Dow points. The downside here is to a target of 425 but we are already oversold to some extent. We will need to be careful on this signal and only add to it on another break below the 435.41 low. If we do move back above the 440 level we will switch sides and go long.

  Jeff Bailey   10/16/02,  12:05:18 PM
AOL Time Warner (AOL) $12.27 +1.15% ... stock trading against broader trend today and may hint of some further short-covering on broader market weakness. Company announced today that it would eliminate its window "pop-ups" in an attempt to draw back lost ISP subscribers. Link

Trade at $14 would be positive and bulls would like to see another relative strength "buy signal" at RS 15.50 to hint the stock starting to gain some favor after losing longer-term favor back in February 2000. Link

  John Seckinger   10/16/02,  12:03:24 PM
The Utility Index is at its session lows (215.75) as liquidity concerns in Utility shares begin to surface once again. Speaking of sectors in trouble, the SOX Index is now lower by 8.55% and close to its lows as well. Recap: Bonds lower but recovering, Utility and Oil Indices weak, and Dollar in the red and between 107-108. Looking at company specific news, shares of NKE are lower by 2.6% following reports that the West Coast Port strike might result in some customers cancelling orders.

  Alan   10/16/02,  12:00:00 PM
Index Futures
There's no "logic" to this, merely an observation. ES futures and SPX cash often trade around levels 10 and 20 points higher/low than prior day(s). Yesterday, ES had a 'battle' at 872-875 (and that battle was won by bulls). Today, from aprrox 10:30 to 11:30 AM, ES had a battle * 10 * points lower at 862-865, with the bears winning that one as ES makes day lows at 861

  Linda Piazza   10/16/02,  11:57:39 AM
Ten-year yields are now dropping, momentarily turning negative before popping back up a bit. With the down volume far ahead of up volume, dollar also down, and .XAU and .VIX up, this now makes me feel better about a put play, but I'll still be cautious about stops. I'm not sure those dip-buyers aren't lurking just underneath us somewhere.

  Jim Brown   10/16/02,  11:55:55 AM
Swing Trade Signals
The 50% retracement at 437.50 is being tested and it looks like we will be going short unless we get a bounce very quickly. I am going to leave the LONG trigger at OEX 440 to avoid as much risk as possible.

  Jim Brown   10/16/02,  11:48:02 AM
Swing Trade Signals
We appear to be weakening some now. The indicators, MACD, STO are clearly turning down even on the 60 min charts. The Futures are also trending down and the Russell is breaking to new lows. The A/D line is also setting new lows. Looks like the bears are winning. We will wait for the break of 437 and enter a short at 436 with a target of 425 which is next support.

  Jim Brown   10/16/02,  11:43:40 AM
EBAY   I reported yesterday that EBAY was going to be a put play today. When writing up the play we realized that EBAY had earnings tomorrow. We do not hold over earnings so that cancelled the play. We went with a put on Citigroup instead. Sorry for the confusion.

  Steven Price   10/16/02,  11:43:01 AM
Reader Question: Even thought the WLP play was closed. Do you still see good upside to the original $90 target? What kind of resistance do you see at $86 and the probability that it will breakthrough that level? Thanks... Greg.

Response: Wellpoint (WLP) $85.72 (+0.92) As I mentioned in my earlier post, we closed WLP to take some profits in case a market pullback sunk all boats. If the stock can break through the $86.25 level, I still like its potential to $90, based on previous patterns. With a volatile market, sometimes we will take protective profits that we may otherwise let ride in a trending market. Since we are approaching that $86.25 level, we will be watching it closely. A rollover from that resistance might be a good indication to take profits. If it breaks through that level, I would lean toward holding the position for a shot at $90, with a tight trailing stop. With UNH reporting earnings tomorrow, and trading at a new 52-week high, I would be tempted to let this one run a little, since many health care providers have beat earnings. Still, there is a nice profit here and a gap could certainly erase some of that.

  Jim Brown   10/16/02,  11:39:59 AM
Swing Trade Signals
Looks like the battle is between the 440 bears and the 438 bulls. We can't seem to break out in either direction. I would love to see a real test of the 437 retracement and then a rebound but we will take what we can get.

  John Seckinger   10/16/02,  11:31:59 AM
The NY Fed's manufacturing index fell 16 points; however, this index only has 15 months of history behind it and the correlation between NY and the Phila Fed number is still unclear. As far as the bond market is concerned, the 30-year Dec bond is still down 14 ticks at 109-23 and has not tested its 50 PMA (five-minute chart) since October 10th. The 50 PMA is currently at 110-02 and trending lower. A rise above 110-02 could be the catalyst for some short covering in the bond pits.

  Steven Price   10/16/02,  11:27:02 AM
General Mills (GIS): $42.36 (-0.45) This OI put play got a bit of a bounce yesterday with the broader markets, however did not react to the previous rallies. While it did manage to hold its 50-dma yesterday, it is back below once again. A recent debt downgrade by Moody's could make it more expensie for GIS to refinance $4 billion worth of commercial paper by the end of the year. The company claims to have hedged this risk with interest rate swaps. There is some disagreement between analysts over how effectively hedged GIS actually is. From a technical standpoint, the stock has bouced off the PnF bullish support line, currently $41, several times now, so I would probably look ofr entry on a failed test of that support. I like the relative weakness in the stock, but I think we should be patient with this one from the current level.

  Jonathan Levinson   10/16/02,  11:21:21 AM
"They call me Dubya." - Dana Carvey.

  Jonathan Levinson   10/16/02,  11:10:18 AM
For those who care, the Bank of Canada has just left its interest rates unchanged. Many tried to convince me that a 1/4 point hike was likely, but I expect to see many countries who could otherwise do so choosing not to raise rates in support of the US Dollar.

  Linda Piazza   10/16/02,  11:06:49 AM
Down volume far outweighing up volume, dollar down, VIX and .XAU up: these point to a down day, but there's just the troublesome selling of bonds to spoil the perfect picture.

  Alan   10/16/02,  11:05:15 AM
Index Futures
Agree with Jim's 10:58AM post. ES futures often "react" at the round number of 20 points - don't ask me 'why' they do, merely something i've observed. Tue's High was ES 882, Wed's low so far was 862 (882-20=862) and that's where a bounce attempt came in. However, chart-wise, ES trend remains 'down' until 868 level is firmly taken out to upside as we still have Lower Lows/Lower Highs from the 10 AM top at 874.

  Jim Brown   10/16/02,  10:58:15 AM
Swing Trade Signals
Very faint signs of an intraday bottom beginning to form but not strong enough for me to lower the 440 LONG entry point. Better a late entry today than jumping the gun in the wrong direction.

  Alan   10/16/02,  10:57:09 AM
Index Futures
Futures Signal 1 (Short) : EXIT target hit at ES 863.50 at 10:44 AM with ES trading 862.75x863.00. On the ES (Emini SP500 futures) short signal from 871.50 which had 1/2 position size still short. The 8 pt ES target hit with the buy to cover order of 863.50 (gain of 8 ES points, $400 (8x$50), or 40% return.
Signal 1: 10:10 AM Short Entry Signal ES 871.50
1/2 position size : 3 ES points, $150 gain per contract, Gain + 15 %
1/2 position size : 8 ES points, $400 gain per contract, Gain + 40 %
(based on $1000 margin per ES contract)
Futures Model currently FLAT (as a note, extreme downside target for today remains ES 852-855), day low so far is 862; which is also a possible bounce point as 862 is 20 ES points lower than yesterday's High.

  Jeff Bailey   10/16/02,  10:53:07 AM
Intel (INTC) $13.72 -16.94% ... Hi Jeff, Was lucky enough to pick up a few INTC oct/15/puts yesterday......am using first 15 minute candlestick high from today (14.12) as point to sell them, thinking that if INTC can rise above 14.12, it may continue. Would appreciate ur thoughts on selling these puts, which expire friday (entry price 30 cents) As always, ur good work is appreciated!!

Hmmmmm.... I took some Nov. $15 puts near the close yesterday. I didn't stick around and dumped 1/2 of them at the open. I wouldn't risk a "gap up" with expiration so near for October and look to close out before session's end.

  Jim Brown   10/16/02,  10:50:57 AM
Swing Trade Signals
If we are going to see a bounce at OEX 437 market conditions better improve quickly. Everything appears to be picking up speed to the downside with the Russell leading the drop. 437 is the 50% retracement level on the OEX and that is why I am keying on that number.

  John Seckinger   10/16/02,  10:46:57 AM
Checking the intermarket relationships, the Utility Index is back under 219 (UTY, -2.32%) and could be adding to the selling pressure seen in equities. Other sectors that are coming under pressure include Airline (-5.35%), Semiconductor (-7%), and the Dow Transports (-3.30%). Note: I am still short the yield curve (sold fives/bought tens) but will exit if the OEX trades 436. Shorting the curve is done in this enviornment if one thinks equities will show relative strength and interest in safe-haven five-year notes dry up.

  Jonathan Levinson   10/16/02,  10:46:27 AM
The TRINQ means business today, currently at 3.5, well into deep sell territory. QQV is up slightly, +.46 to 49.91. With bonds still selling off and equities not exactly rallying, I'm wondering where the money's going. Not precious metals, with HUI only +1.09 to 111.66. I'm wondering how much damage is being done by the selloff in bonds. It can't be good news for companies exposed to the credit markets, particularly as the price of money rises as reflected in the yields. COMPX is breaking down again, trading under 1240, and I'm thinking of all those bulls trapped on yesterday's island. It gapped up, they bought on high volume, and it gapped right back down again. I'll view yesterday's range as very strong resistance if and when we see those levels again.

  Jim Brown   10/16/02,  10:38:32 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Change the 440 LONG signal to 1/2 position.

  Jim Brown   10/16/02,  10:33:29 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with an OEX trade over 440. This should be a 1/4 position to avoid a continued drop. We will add to the position over 440 and again over 443. The initial stop loss will be OEX 435. I will lower this entry point if we see the expected strength at 437. I just want to protect against a sudden rebound.

  Jim Brown   10/16/02,  10:31:36 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT the broader market with an OEX trade below 436. This should be a 1/4 position to avoid a sudden reversal. We will add to the position under 434. The initial stop loss will be OEX 441.50. I am going to issue a LONG signal as well if we see a bounce at 437 as expected.

  Alan   10/16/02,  10:31:30 AM
Index Futures
Futures Signal 1 (Short) : Lower trail stop. On the ES (Emini SP500 futures) short signal from 871.50 which now has 1/2 position size still short. Lower the Trail Stop to 868.50 (to lock in minimum of 3 ES points, keeping the buy to cover order in at 863.50 (which would produce gain of 8 ES points, $400 (8x$50), or 50% return.

  Steven Price   10/16/02,  10:30:52 AM
Reader Question: Hi Steve,what's going on with gm? It's very strong lately even if things are getting worse,thinking of shorting it.....what are your thoughts?? Thank you

General Motors: $36.62 (-0.08) We have been considering GM as a short as well. In spite of beating earnings, they still face huge pension exposure, a decline in sales and pricing pressures in both new and used cars. With 0% financing already in place, there is not much to do about pricing pressure that won't lower profits. I would like to see a little more weakness, however, before shorting. I would look at it again if we can get a break below $36, but would also want confirmation of a sinking Dow. You can be sure this one is on our radar and we'll be watching it for a short play.

  Jonathan Levinson   10/16/02,  10:29:53 AM
I've just gotten off the phone with the NY Fed, concerning the counting on that 6 day repo. It expires tomorrow, and so my correction was incorrect. We have $2.75B drained today, and $5.75B expiring tomorrow. We count the 6 day repo as calendar days, skipping the first day and including the last.

  Jeff Bailey   10/16/02,  10:29:36 AM
Cisco Systems (CSCO) $10.15 -7.6% ... stock weak and may be in a bear market "earning's run" after last night's news from Intel. Wouldn't be surprised if CSCO defensive into its November 6th earnings. Stock rallied right back to its recent triple-bottom and looks to be getting rejected. I like the Nov. $10 puts, no stop, look for negativity from earnings. Link

  Jeff Bailey   10/16/02,  10:25:55 AM
Dick's Sporting Goods (NYSE:DKS) $12.63 IPO opens for trading

  Jonathan Levinson   10/16/02,  10:20:00 AM
Correction- let's add $5.75B expiring from last week's 6 day repo, which expires today. There's therefore a drain of $8.5B today, which is a relatively large number. I expect further weakness in equities.

  Jim Brown   10/16/02,  10:19:54 AM
Swing Trade Signals
We are getting close to the 437 pivot area that will generate a trade signal either long or short. I am going to key on the A/D line as well. If the A/D does not improve soon it may be a short signal.

  Alan   10/16/02,  10:19:33 AM
Index Futures
Futures Signal 1 (Short) Exit 1/2size: The ES short from 871.50 obtained the 3 point target rather quickly at 868.60 on 1/2 position size, lower the trail stop for balance of short to 870.50. Additional selling comes in if ES firmly loses 867 (yesterday's low), extreme target is ES 852-855; however, lets place a buy to cover order at 863.50
Gain from the 3 ES Point Short: $150 (3 ES ptsx$50), 15% Gain based on $1000 margin per contract.

  Steven Price   10/16/02,  10:18:52 AM
Wellpoint (WLP) $85.50 (+0.70) We closed this play last night to take some profits, in anticipation of a market pullback. The stock, triggered for long entries at $80.00, continues to look strong and those traders who would like to hold the play are being rewarded so far. I would probably tighten the stop to yesterday's low of $83.45 if I were holding the play.

  Jonathan Levinson   10/16/02,  10:16:07 AM
The Fed has just announced an overnight repo of $2B, partially refunding yesterday's expiring $4.75B repo for a net drain of $2.75B. This would generally signal further weakness for equities, but with the selloff continuing in the bond market, there's a large source of potential liquidity there. Nevertheless, I expect to see further weakness in equities today.

  Steven Price   10/16/02,  10:15:27 AM
Eli Lilly (LLY): $64.90 +0.89 OI call play LLY is approaching the 200-dma of $65.45. The rally will most likely slow down in this area and consevative traders may want to think about taking some profits. I'm raising the stop to $61, but if it continues to buck the trend, I'll probably raise it again by the end of the day.

  Alan   10/16/02,  10:13:43 AM
Index Futures
Futures Signal 1 (Short): Use a 1 point stoploss from the ES 871.50 short, with a target of 3 ES points or 1/2 Size of your position, placing stop at 870.50 on the remaining half.

  Steven Price   10/16/02,  10:09:34 AM
Intermune (ITMN): $37.05 (+1.54) OI call play ITMN is approaching resistance in the $37.50-$38.00 level. I am raising the stop loss to $33

  Alan   10/16/02,  10:08:09 AM
Index Futures
Shorts trying to push ES futures under 867 (Tues's lows) but failed, and short covers came in, sending ES up to the 872 pivot area that saw a great deal of "chop" yesterday. The truly large moves lately have come in the morning gap ups and gap downs. ES Signal Short on ES trading under 871.50 with target of 3 points.

  John Seckinger   10/16/02,  10:08:02 AM
Thinking out loud: The weakness in bond prices (30-year lower by 11 ticks) makes me think that investors are still "forced" to sell bonds and most likely roll their cash into equities. Equities, on the other hand, are lower after INTC, JPM, etc. but could see an earlier-than-expected rise this morning once traders stop fighting the weakness in bonds. Time will tell.

  Jim Brown   10/16/02,  10:04:38 AM
Swing Trade Signals
We did not reach the 437 level and it appears there is a bounce underway from 440. The internals are still negative and not recovering enough to warrant making a trade in my opinion. Expiration week has seen some flat mid week days recently and with the lack of excitement today I am in no rush to enter a trade. We are not getting any conviction either up or down.

  Jim Brown   10/16/02,  9:52:23 AM
Swing Trade Signals
I seriously thought about going short on that failed bounce over OEX 442 but with the 50% retracement level at 437 there was just too big a chance of another bounce at that level. The plan remains to buy a bounce at 437 or short a breakdown below 436.

  Alan   10/16/02,  9:51:57 AM
Index Futures
ES 870, YM 8126, NQ 924; Trend : Down
Last nite at 1:30 AM had outlined 3 possible scenerios for today's open, so far scenerio 3 seems to be playing out, which was the gap down being bought, but then quickly starts to rollover. Watch ES 870 and Dow 8100 for market direction.

  John Seckinger   10/16/02,  9:45:56 AM
The US Dollar remains within the 107-108 range established back in July, currently lower on Tuesday by 0.22 at 107.56. Reasons for slight weakness in the Greenback include reports that the ECB might in fact cut rates over the near term. Moreover, weaker equities certainly are not supportive of the domestic currency. As the dollar weakens, gold is on the rise (XAU +1.3% at 61.96).

  Alan   10/16/02,  9:44:23 AM
Index Futures
Futures have been dip bought from the open so far; with NQ (NDX futures) leading the way;
930AM ES 869-870; YM (dow) 8130, NQ 918 9:40 AM ES 873, YM 8140, NQ 928 and has now filled there gap back to their 9-10 PM levels of last night. Note: believe it or not, but at 3AM last night, ES was 884, 2 points HIGHER than day highs on Tue.

  Jonathan Levinson   10/16/02,  9:39:32 AM
We have a TRINQ reading of 6.94, which is the highest I have seen... maybe ever. TICK.NQ only -82. The COMPX filled 5 points of its gap and is easing off. Looks like a short term bottom, according to the TRINQ, though this early in the trading day makes for extreme readings on most measures. Let's wait for it to settle a bit.

  John Seckinger   10/16/02,  9:35:23 AM
Even with equity prices lower, the bond market continues to come under pressure. The December Bond is lower by 2 ticks at 110-03, while fives are down 1 tick at 112-10. Looking at the US02Z, a move above 110-15 should attract buyers towards the 111 area. On the downside, further weakness should send the contract towards 108-16.

  Jonathan Levinson   10/16/02,  9:33:07 AM
41 point gap down open on COMPX.

  Jeff Bailey   10/16/02,  9:32:25 AM
Citigroup (C) $34.14 ... Echoing Keefe Bruyette's comments from yesterday, Prudential estimates that C earned $0.71 in operating earnings, $0.02 below consensus as Pru feels company viewed a gain on sale of its headquarters as core, yet Pru says the classification of such a gain as if it were a recurring business activity appears to fall short of C's desire to exemplify "best practices" in corporate governance. Pre rates C as "sell" with price target of $28.

  Jim Brown   10/16/02,  9:30:05 AM
Swing Trade Signals
No fireworks today! At least not yet. JPM reported substantially lower earnings and plans to cut -2000 jobs. They said bad debts and lack of underwriting revenues impacted their results. Merrill Lynch beat estimates by 3 cents but warned that the 4Q may not lead to an increase in revenue.

Intel continues to be the biggest drag on the markets and is trading at 13.55 after closing at $16.50 yesterday. This is impacting all the chip stocks and most of the tech sector. The Nasdaq futures are down -31.50 on the news.

The game plan for this morning is to buy a rebound from the OEX 437-438 area or lacking a drop that deep sell resistance on any rebound. See the game plan from last night for complete details.

  Steven Price   10/16/02,  9:26:11 AM
Semiconductor Sector Index (SOX.X) 269.10 The SOX broke the series of lower highs by taking out previous rebound levels of 256 (closing) and 263 (intraday). It was also a breakout from th etop trend line of the current regression channel. Kind of ironic considering Intel's disappointment after the close. While I fully expect to land back in the channel this morning, the centerline of the channel has served as support since the beginning of September, as opposed to the bottom of the channel prior to that. Right now that centerline coincides with 200, but I can't help but thinking we should be careful after last night's technical development. The intraday high of 263 I referred to did come after the cllosing level of 256, so maybe we are simply not playing by the rules here, but it is something we need to be aware of while shorting the sector.

  Jeff Bailey   10/16/02,  9:23:50 AM
09:00 Update has been posted. Link

  Jonathan Levinson   10/16/02,  9:12:18 AM
This is great stuff! But I have to ask you ,in light of such massive intervention what happens to technical indicators? Not only the Fed but from 30 to 45 % of stocks on the N.Y. Stock Exchange are program trades...Such massive intervention seems to supersede the merits of the indicators...I just spent the last year reading every technical book I can get my hands on(I'm 51 years old ,had my own company and retired in DEC 2000) .Now that I'm loaded with all this knowledge I'm asking myself : how is it relevant? The o/b and o/s indicators ,BB bands ,stochastics etc. are better than nothing(no indicators) in terms of establishing entry /exit points..But so many unpredictable elements are at play here that it may be that any semblance of rationality is left at the door....Thanks for the input ! Vince

Your sceptical question (in the philosophic sense) is well-placed, but unnecessary. It's possible that the market is so complex as to be random or chaotic, but it's not unplayable. The plethora of indicators is a symphony of different voices. Most traders glance at the patterns and look for "signals", while the true analyst tries to feel what each indicator is saying, to assist in constructing a complete picture of what the market is doing at that instant. Indicators do not tell the future- they only describe the present. The trader's art comes in extrapolating to the future and putting on the winning position in the present. The fed's activity is a decent leading indicator, but only as to overall liquidity. Will it go into stocks, bonds or currencies or commodities? The different charts and their indicators are your windshield, and are the prime factor that differentiates the market from a casino. The interventions and other "externalities" are all reflected in the charts at every moment. The fed has been intervening in the markets since... well, Jesse L. discusses it decades before that fateful meeting at Jekyll Island that created the fed, but it became official in 1987. Watch your charts, the indicators, and keep track of as much as possible, and of course follow us here at OIN. Trade as well as possible (or not at all) and let your stop losses do the rest.

  Jonathan Levinson   10/16/02,  7:56:12 AM
There was another incredible blast from the Corynthian Geyser at 3AM, but nobody bought it, and the futures are coming back down to earth, with NDX -27, S&P -10.40, and QQQ trading 22.84 in the premarket. INTC spoiled the party yesterday, F tried to revive it, and then JPM and KO spoiled it again. Today should be interesting indeed. The US Dollar Index is trading just below 107.70, and gold below 315/oz. All eyes should be on the bond market, which made a spectacular move yesterday. My only observation is that the market is treacherous right now, with huge gaps in every direction. Many traders are being blown up by these pre- and post-market moves, and with bonds becoming as volatile as stocks, it's easy to imagine different funds and investors also getting blindsided. Be careful out there and preserve your capital. We are not here to gamble, and if we can't trade without gambling, then we should sit on our hands and ride it out. Keep your stops in place and your eyes open.

  Alan   10/15/02,  11:01:40 PM
Index Futures
10:45pm futures quotes: ES 873, YM (dow) 8165, NQ 929
ES Tue day Low 867, High 882, 50% retracement is 874.
I had some internet connection trouble around 6pm, and was unable to write the Futures wrap tonight. When I returned tonight, post Intel news, I was surprised to see that the Nikkei was Green and almost at 9,000. I was surprised to see ES bounce at 870 at 5pm and continue sideways at the current 50% retrace level of 874. NQ (ndx futures) dumping 30 points from their close to re-open at 4:45 pm (post-INTC) made sense. Dow futures remain sideways from their 5pm close at 8165.
Most traders would now expect the market to have a Dow -200 Long profit taking day on Wed - perhaps even sell off the rest of the week. However, a Trader must also have a "What If" thought in their head - what "if" Wed's gap down gets "bought" and not sold. Technically, ES does not rollover into "sell" mode until about 6 points lower at 868. INTC $14 (down 2 from its 4 PM close) : does the market feel that $14 now has all the bad news priced in?
For the last 10 days or so, most large gap Downs have been faded (that is bought), the very negative INTC earnings "should" cause a Profit taking Wednesday, but form some thoughts just in case the market is still in "Buy/Cover on the bad news" mindset.
Prior to INTC, the market was wishing for a retracement so Longs could buy that dip - do they still have the same plan post INTC's simply terrible earnings comments ?

  Jim Brown   10/15/02,  10:57:48 PM
The Swing Trade Game Plan has been posted: Link

  Alan   10/15/02,  1:51:07 AM
Index Futures
I'm not a great Candlestick chart reader, but i THINK the NDX made a candlestick formation called "abandoned baby" on today's chart.

  Alan   10/15/02,  1:37:03 AM
Index Futures
1 AM: Here's the Nikkei chart for tonight. Nikkei opened Green, came close to 9000 during its morning session, and the afternoon brought selling to take the Nikkei back to flat (8850). I wouldn't read much into this, as a normal day would have Nikkei having resistance at the 9000 level Link US futures continue sideways: ES 874, YM (Dow$5) 8164, NQ 928
Three possible scenarios for the open :
1. Wed morning's gap-down gets Bought....Shorts say "oh sh*t", and back up we go.
2. Wed morning's gap-down tries to uptick, but the weight of the INTC earnings (and concerns over Wed after-hours IBM earnings provides too heave a weight and we have a Dow -200 type day of "sell any and all Pops" [vs. the 'buy any and all dips' we've is the current trend]
3. Wed morning's gap-down gets bought at the open, upticks for a bit, and quickly succumbs to Selling (and becomes a 'trap' for those who bought the Wed gap-down expecting scenerio # 1 above to play out and they quickly reverse when that doesn't occur.


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