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  Steven Price   10/22/02,  9:28:02 AM
Semiconductor Sector Index: (282.29) One of the keys to any sustained rally will be the chip stocks. They are a measure of IT spending and consumer PC demand. Back in August, when the Dow, NDX and S&P and Nasdaq Comp all blew through their 50-dmas, the SOX was unable to hold its 50-dma for more than a day. That failure semed to foreshadow an end to the late summer run. After Texas Instruments (TXN)warned last night that revenue would be down 10% this quarter, the stock is trading down almost $4.00 this morning and will most lilely take the SOX with it. The SOX finally broke the 50-dma yesterday for the first time since August.

 
 
  Jonathan Levinson   10/22/02,  9:23:10 AM
I understand the manipulation of option expiration day, but would you explain the Monday holdover action?

Monday is the first trading day after the exercise of expiring option contracts. In our case, the rally probably resulted in a relatively large number of ITM calls being exercised, requiring the call writers to buy or replace the stock being called away. This is just speculation, but as Jim has often pointed out, the op-ex volatility continues through Monday as positions are squared. This should largely have been completed by today.

 
 
  Jim Brown   10/22/02,  9:19:07 AM
Swing Trade Signals
Looks like another bipolar morning. Earnings are coming in better than expected in a lot of the second tier stocks but techs are trading lower off of the TXN news. THQI warned this morning and is knocking the stuffing out of the video game makers.

Will the bulls buy this dip or will we actually see a couple days of profit taking before the next bounce begins? I am betting on buying the dip.

We will look for a bounce off support, IF WE GET A DECENT DIP, and go long. If we just get -100 Dow points or so then we will look for overhead resistance failure instead.

 
 
  Jonathan Levinson   10/22/02,  9:01:56 AM
Futures are down, NDX -21, SPX -9.40. The Nikkei gapped down and traded lower through the session to close at its lows. The US Dollar Index dived below 108 and has rebounded to just below 108.10. The only bullish indicator I see is that bonds are still selling with yields modestly higher this morning, FVX up 1 basis point. QQQ is trading 23.75 from its close of 24.29. We will see a substantial gap lower on the COMPX, and the question is whether to buy/cover shorts at the dip. The short answer is that I don't know, but with op-ex week and Monday behind us, the market should be freer to trade on its own weight, and after this substantial a runup with a plethora of bad news ignored along the way, a significant pullback is a very reasonable expectation.

 
 
  Jim Brown   10/21/02,  8:09:35 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Steven Price   10/21/02,  6:10:35 PM
Reader Question: On your last entry re MMM, do you mean "a red flag" for bears or shorts?

Response: I was referring to a firm coming into a pit and buying options after the stock market closed on a day before earnings, or before an announcement that the public may not have gotten wind of yet. While trading at the CBOE, the pattern of a firm coming in just after the bell and buying puts the day before a stock dropped, or calls the day before good news came out(buyout or earnings that were positive), seemed amazingly consistent. Not to be a conspiracy theorist, but when I heard that there was a big call buyer at 4:01 NY time, it seemed apparent that MMM would have a big day today.

 
 
  Jeff Bailey   10/21/02,  5:45:38 PM
Texas Inst. (TXN) $17.12 +0.11% Link ... released for trading. New York ECN at $14.10.

In sympathy... Intel (INTC) $15.45 +6.84% Link , trades down at $14.87.

 
 
  Steven Price   10/21/02,  4:52:00 PM
Random thought on 3M (MMM) $129.00 (+3.69) The option market stays open 2 minutes after the NYSE closes. On Friday afternoon, about a minute after the NYSE close, a firm came in and bought a bunch of MMM calls from the market makers ahead of earnings. This is usually a red flag in the direction of the trade and bore itself out that way once again.

 
 
  Alan   10/21/02,  4:50:38 PM
450PM : On ES and NQ futures reopen: futures are lower off TXN: ES 895s, YM 8476x79, NQ 969

 
 
  Alan   10/21/02,  4:41:13 PM
441pm YM at 8491x8492 leaking about 15 points lower, perhaps from the TXN warn

 
 
  Alan   10/21/02,  4:33:16 PM
appears TXN is halt and warn; TEXAS INSTRUMENTS SEES Q4 REVS DOWN 1O PCT FROM Q3; ES and NQ are closed, YM was 8505 x 8510 at time of TXN's halt and warn.

 
 
  Alan   10/21/02,  4:32:12 PM
appears TXN is halt and warn

 
 
  Alan   10/21/02,  4:22:01 PM
Index Futures
4:00 PM Cash Market Close: ES 899.50, YM 8520, NQ 981
4:15 PM Futures Close: ES 898.50, YM 9509, NQ 980
ES day low 872.50, day high 901.75 (immediately under 902-905 next higher resistance)

 
 
  Alan   10/21/02,  4:12:39 PM
Index Futures
VRTS higher after hours off their earnings. Bullish for tech storage sector. Stock went out at $15.90, trading $17.00 here.

 
 
  Jim Brown   10/21/02,  4:03:36 PM
Personal Emails - I probably have over 25-30 emails in my inbox today asking about EBAY, GM, C, etc. I am sure Steve and Jeff have that many or more. We would love to answer them all but tomorrow there will be that many more asking the same questions. Steve is answering the generic questions about the plays like EBAY and GM in the market monitor. This is the only forum we can answer. The SEC prevents us from giving specific trading advice to any individual based on your current positions. We can answer the questions generically in the Monitor to everyone but we cannot answer it in an individual email. Every trader is responsible for making his own decisions based on the information given when the play is entered and then updated in the Monitor and the newsletter play updates. Thanks for understanding our limitations in this matter.

 
 
  John Seckinger   10/21/02,  3:52:17 PM
With only ten minutes left, the Utility Index (UTY) is on its session highs (233) and could test its 22 DMA (234.87). The UTY has been a good coincident or leading indicator with equities and should be placed on the radar screen during trading on Tuesday.

 
 
  Alan   10/21/02,  3:49:46 PM
Index Futures
Dow Cash 8550, currently at exact 50% retrace of 8350 breakout level and the 8750 resistance level last seen on Sept 11th at its morning open.

 
 
  John Seckinger   10/21/02,  3:48:04 PM
Note: There are no economic reports on the docket for Tuesday. As far as events are concerned, the StL Fed Governor Olson is scheduled to speak on community development. This should be a non-event. Therefore, earnings will most likely be in the spotlight once again.

 
 
  Jim Brown   10/21/02,  3:42:31 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's cancel the OPEN short signal at OEX 453. It looks like we could get some more follow through at the open tomorrow and another shot at the initial target of 458-460 and Dow 8600.

 
 
  Alan   10/21/02,  3:39:26 PM
Index Futures
As ES futures trade right at 900 level, right under the next higher 902-905 resistance; the temptation to short is strong. However, I have a rule that when SP futures trade the first time at a century level, such as this 900, to let someone else besides me make (or lose) money finding out that strength (or weakness) of said century-level. Unless something changes quickly, there shall be no additional trade signal for today as we are very close to the close. Watch ES 900 level obviously for a direction into the close.

 
 
  Jim Brown   10/21/02,  3:28:30 PM
Swing Trade Signals
So far we have a lower high on the OEX at 455 on the current move. The resistance high at 456.11 at 14:20:11 appears to have lowered to the 455 level and the post 3:PM bounce has stopped for a second wind. If we do roll over to trigger the 453 entry I am going to hold it over night. The rally has lasted too long to avoid profit taking eventually. The bank rumors on the horizon. I did a quick scan of the earnings scheduled for tomorrow and while there were hundreds of companies there were not any real market leaders. This should serve to confuse traders with information overload and no real lightning rods to focus on.

 
 
  Jonathan Levinson   10/21/02,  3:23:35 PM
Index volume looks set to come in on the light side, and yields look set to close below their day highs. The day highs, which coincide with significant resistance levels, have held so far. This is about the extent of the comfort available to bears on this run up. Bulls must be pretty excited by the absence of any significant pullback. MSFT has been a lead anchor on the indices, reinforcing the upside resistance. We'll all have to see how it plays out going into the close.

 
 
  Steven Price   10/21/02,  3:18:39 PM
Reader Question: Got a TGT Put 30 last week. Want to know your stop loss on it? Thanks

Response: I profiled Target (TGT) $31.36 (+0.49) as a possible short last week. I would be looking at $33.05 as a stop loss on the play here, which is just above the 50-dma of $32.85. There is still some reistance at $32 as well, so conservative traders can use that level as an alternative.

 
 
  Alan   10/21/02,  3:14:08 PM
Index Futures
Markets have retraced from day highs of Dow Cash 8512 and ES 899s stopping at current double ES bottom of 893, and currently back at 895 pivot. For almost 3 hours, ES has chopped in 6 pt range of 893 to 899. Does SPX want to follow the other indices and get over 900 yet today ? (Dow has traded over resistance of 8500, Compx has (over 1300), OEX has (over 450), NQ futures has (over 972); but as of yet, ES/SPX has come SO close at 899s but not quite...and the question becomes "does Dow close above or below 8500 today?"

 
 
  Jim Brown   10/21/02,  3:11:25 PM
Swing Trade Signals
That 3:PM turn was a pretty sharp sell program but they held the line just above Nasdaq 1300. Maybe this is our new line in the sand. The OEX came within .02 cents of hitting the SHORT trigger so we are still flat. We could see some more short covering and train chasing between now and the close. It should be interestig!

 
 
  John Seckinger   10/21/02,  3:07:53 PM
Will today be the day for the Semiconductor Index (Sox)? Currently the Sox index is higher by 3.87% at 278.48 and above its 50 DMA exp. (278.42). If the Sox closes above this moving average, it will be the first time since April 19th. That is a good six months.

 
 
  Alan   10/21/02,  2:52:03 PM
Index Futures
Two key Telco stocks report tomorrow: ATT (T) and BellSouth (BLS). As the telco sector was one of the weakest from spring into summer, it shall be interesting to see what they say re Telco CapEx spending.

 
 
  John Seckinger   10/21/02,  2:51:00 PM
Arbitrage. The yield curve in the futures pit (5/10) is 18 ticks flat (read: fives underperforming tens, which is usually bullish towards stocks); however, the cash market has fives outperforming tens (cash is 12 ticks steep). What is important is spread in yield between fives and tens in the cash market is now over a full percentage point wide (101 bps). I will have to wait until the close and look at Open Interest in the bond pits. With the Dow higher, I have to suspect that traders are re-thinking the possibility of further rate cuts by the Fed.

 
 
  Jeff Bailey   10/21/02,  2:42:54 PM
Sap Ag (SAP) $19.00 +4.68% ... Hi Jeff, SAP the second.Maybe you didn't recieve my first em.I'm looking for a short play in SAP @ $ 19 .My question is what are you think about this,when you take a look at the p&f chart ?

Nope, I saw it. Lots of others too on other stocks.

P/F chart of SAP has given a "low pole warning" and under current bullish market environment, I'd want to wait for some type of 3-box reversal, otherwise, could throw the dice, but stop goes above $22 currently. Link

According to Dorsey/Wright and Associates, SAP is "software" stock and that group's bullish % is currently "bull alert" at 20%, after reversing up from early October's "bear confirmed" status at 10%. Sector is still "oversold," thus would want to wait for some type of weakness in SAP before getting aggressive on the downside.

 
 
  Jim Brown   10/21/02,  2:38:34 PM
Swing Trade Signals
It appears Dow 8500 and SPX 900 are being tested again and the OEX set a new high at 456.12. We are getting very close to the initial target but I don't want to catch a falling knife yet. The indexes have diverged from previous patterns with the Dow and the SPX running behind the OEX.

Based on the intraday charts the Dow could run to 8575-8600 before the resistance heats up again. The SPX could run to 908 if we get another short covering bounce. The same level on the OEX is still 458-460 as I outlined in the game plan on Friday. The 458-460 level is the first level I would consider shorting resistance with a stop at 466.

 
 
  Jonathan Levinson   10/21/02,  2:34:04 PM
The 21 day stochastics are now at the same level as they were at the peak of the August rally, which was the last time they saw this level. The 24.35 QQQ resistance looks like a logical place to try to pick a top to this move, insofar as we're willing to play with falling (rising, in this case) knives. Shorting here with a tight stop is an aggressive but not unreasonable trade. The TICK.NQ is falling, currently +68- I just wish that more of the breadth and sentiment indicators (p/c ratio, TRINQ, QQV) were at more extreme levels.

 
 
  Alan   10/21/02,  2:25:33 PM
Index Futures
Dow has peaked over the magical 8500 level with high of 8512, ES (SP500) futures have come oh so close, 899s but no 900. The market may be at serious resistance levels, but there is no 'true' sell signal yet.

 
 
  Jonathan Levinson   10/21/02,  2:19:12 PM
The COMPX just set off a string of new highs to 1307 now. Yields are spiking again as well, with FVX now up 10 basis points. QQV is down 1.11 and the TRINQ, unfortunatetly, is squeezing slightly lower but is not in particularly extreme territory at .51. I see no signs of a top in any of my indicators, all of which remain slightly tilted bullish. However, the upslope on the COMPX price has eased into a rounding pattern on the shorter time frames- it's either the buyers taking an hour for lunch, or the beginning of some kind of top. With stochastics peaking, there is that potential, unless the market starts to trend higher from here. We watch and wait, QQQ bears begin to get itchy on the trigger... whatever you do, use and respect your stops in this difficult market.

 
 
  Alan   10/21/02,  2:05:59 PM
Index Futures
Market remains in "Buy the Good / Inline News/Earnings and Ignore any Bad News"
15 Minutes ago, Ford (F) said they saw October car sales weaker than expected. No negative reaction as of yet in F, GM stock or the market in general from that bearish statement relating to continued weakness in consumer spending. The only chart bearish comment so far is that from 12:45 (day highs) to present, ES had made lower highs, but held the 893 50% retracement that first time it printed there. ES currently 896 (2 pts off day highs), Dow cash 8480, and Compx held 1300 on the first attempt to take it lower. [grins - that's it for the bulls, CNBC now throwing the Dow 9000 number out, the same folks who talked about 'learning to short' at Dow 7500 and just kidding]

 
 
  John Seckinger   10/21/02,  2:04:44 PM
Per 10:11:13 Post, the Utility Index continues to power ahead, higher by 4% at 230 and coming close to its 22 DMA (exp) at 234. Above 234, there should be resistance at just under 240. This level was derived by drawing a trend line from the August 27th's high that bisects the high set on October 2nd. Historically, this index has been a good leading indicator of equities.

 
 
  Steven Price   10/21/02,  2:02:28 PM
Reader Question: Steve: Just lost on EBAY. What do you think safe to go on GM Puts now? Sunil

General Motors (GM): $36.17 (+1.86) There is resistance in GM at $37. I would like to see a rollover from that level for new short entries. However, with the Dow now past resistance in the 8300-8400 range, I would wait to enter until we see some resistance there, also, since GM is a Dow stock and can be lifted with the rising tide, in spite of its internal problems.

 
 
  Jeff Bailey   10/21/02,  2:02:17 PM
Dow Industrials (INDU) 8,481 +1.9% ... session high has been 8,498.21, so just a smidge under potential "psychological" resistance of 8,500. For bull looking to round up further to bullish position, may want to wait for a CLOSE above 8,500. On September 9th, Dow closed back above 8,500, then two sessions later traded the 8,717 level of our retracement.

 
 
  Jim Brown   10/21/02,  1:58:52 PM
Disable Refresh - should be fixed now.

 
 
  Steven Price   10/21/02,  1:57:18 PM
Reader Question: Hi Steve, What is your opinion of UNS? Rick

Response:

Unisource Energy (UNS) $15.76 (+0.16) UNS has been on the rise for the last couple of weeks, but has not yet broken the trend of lower highs and lower lows. There is also the 50-dma of $15.90 looming above. I'd like to see a break in that resistance, with a trade over $16, AND support above that level before considering a long play. It did break the 50-dma temporarily in August, but support only lasted a few days, before it fell back with the rest of the market. There is also quite a bit of support at $14, so I probably wouldn't short it here.

 
 
  Alan   10/21/02,  1:54:17 PM
Index Futures
ES currently at 893, which is 50% retracement of the breakout level of 888 and today's high at 898. I still believe Dow Cash 8500 level shall provide serious resistance, BUT the other reason such tight stops were suggested is that it was very possible that when ES held 895 for 30 minutes, the futures pit would play one of their "games". Much like how stock and option market makers have their "games", so does futures. "They" could have pulled all their offers and easily ran ES (SP500) up a fast 3-4 points in one buy program to send ES to 900 and perhaps kicking in large buy programs based off that 900 price level - and that causing a rocket 1-2 minutes move to 902-905 (and then immediately dropping once 'your' stop has been triggered) to create one of those Future's spikes that you've seen on your charts that has you going "what the *&^%& was THAT?". So close to such large resistance levels, caution is always prudent. And in the 5 minutes this took to type, ES is back to it's new pivot of 895.

 
 
  John Seckinger   10/21/02,  1:50:10 PM
Looking at the December 30-year, prices are currently lower by '18 ticks at 108'04 and just above last Thursday's low of 108'02. Support should be found at 108, which might be a reason for the consolidation in the Dow during the last hour or so. We should get a confimation soon out of the bond market.

 
 
  Steven Price   10/21/02,  1:47:17 PM
Electronis Arts (ERTS): $71.28 (+1.14) We were looking for either a pullback to previous support, or evidence of support over $70 for entry on this OI call play. So far the stock found resistance at $72 and I'm looking for support on the pullback. If we get that support over $71, then I like entries here. Support at $70 would work, as well.

 
 
  Jim Brown   10/21/02,  1:43:13 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The OEX failed to reach the 458 level I had targeted but the SPX did hit the 896-900 level exactly. The Dow also hit the 8500 level I had targeted. I think we are close enough to take a shot here since there has been no major move up in the last hour.

Go SHORT the broader market on an OEX trade at 453. The stop loss will be 457.

 
 
  Alan   10/21/02,  1:35:13 PM
Index Futures
Futures Trade Signal Short EXIT
Trailing stop hit for +10 YM Dow$5 Futures (Gain of + $50, or + 6% based on $800 margin per contract) from short entry and is now FLAT awaiting a new entry signal. YM (Dow $5 futures) Short entry was 8464 at Dow cash 8480
At 1:27 PM ES 896, YM 8466, NQ 976
This was not the desired gain naturally, but it appears this was just another "shake" and not "true" selling. The reason I kept the stop so tight was it was/is possible to get a short-stop run sending SPX over 900 and Dow over 8500.

 
 
  Jonathan Levinson   10/21/02,  1:20:45 PM
There are now 634M advancing shares to 262M declining on the COMPX. The CBOE made it down to .71 and then back to .80 during for the last half hour's reading as some bears traded puts at the intraday top. The TRINQ remains low at .54, and as Alan points out, there's nothing substantial to suggest that the bulls' party has ended yet.

 
 
  Alan   10/21/02,  1:10:02 PM
Index Futures
Futures Trade Signal Short ENTRY
YM (Dow $5 futures) Short entry was 8464 at Dow cash 8480
Currently: ES 894, YM 8440, NQ 973
Lower your stop from 20 points above your entry, to 10 points below your entry on the short. In other words, lock in at least 10 points of short profit. Using above signal, this would lower the short trailing stop to 8454.
So far, this is just a shake and not a "true" sell signal as ES has only retraced 4 points from its high before finding some buyers. "Could" this be a great short to hold as SPX 900/Dow 8500/Compx 1300 are obvious large pysch resistance areas (but they could also be the 'last straw' for existing swing shorts - Only time will tell.

 
 
  Steven Price   10/21/02,  1:03:17 PM
Reader Question: Hi Steven: Do you have any further information justify today's move +2.30 on EBAY, high P/E, outlook economy not greatest, OIN & MM stock on put list. We were short as 60 was resistance..trading range 50/60, next move up to 62 to give it room then further downside. Stock now broke out, where do you next targets, Appreciate your input. Michael

EBAY : $62.71 (+2.75) Without specific news, this may be a delayed reaction to their earnings, now that the tide is rising around it. Over $62 resistance, we are stopped out on the play entered under $60. There is resistance again around $64, and I might reconsider after watching action if it gets there, but so far on this play, we have been the the bug. If it fails the $62 level, it could be considered a failed test of resistance.

 
 
  Alan   10/21/02,  12:57:04 PM
Index Futures
One possible target for the Dow cash short from 8480-8495 is 8425, 50% retracement of breakout level of 8350 and 8500. A dow short now wants to see ES futures lose 895

 
 
  Steven Price   10/21/02,  12:53:53 PM
Reader Question: I am relatively new to option investing and thought you might be able to help me out with a situation that seems to arrive quite often. The best way to ask the question is with an actual example.

I owned 25,000 shares of GNSS at an average cost of $12.00. The stock tanked but I believed it would eventually rebound so I held on and prayed. When the stock moved up from its lows I sold Mar $10.00 calls for $2.00 and lowered my cost to $10.00. In recent days the stock has moved up beyond $12.00 and actually even beyond $13.00. Obviously I wished I hadn't sold the calls as I would be even if I hadn't sold them. Now I'm trying to figure out if there is a way I can get out earlier than the March 2003 option expiration. I've tried to figure out what price the stock would have to go to now so I could buy back the calls and sell the stock and get even. Or I've wondered if there is a way to buy some Puts to protect me from the stock dropping below the $10 level. Can you offer some general help in this area as seems to happen to me quite often. I guess the general question is --Once you've committed to a covered call situation is there a way of exiting earlier or are you stuck waiting for the option expiration date? Any help you can offer or reading references you can supply would be greatly appreciated.

Thanks Earl

Response: Any American style option can be exercised at any time, or bought back for the offer price in the open market if you have sold it. Unfortunately, one of the risks in selling covered calls is limiting your upside, which is the case here. If you want to buy the calls back, you can do so through your broker and that will leave you with the long stock position (and the loss on the short calls, which will be offset by the gains in your stock). If the stock is over $10 at expiration, you will sell it at $10 and keep the premium you sold the calls for, essentially selling the stock for $12.00. If the stock goes down, you can still lose on the trade if it drops from the purchase price by more than the premium you sold the calls for (although I do not know where you bought the stock); but if it goes up, your profit will not change from this point, as you will sell it at $10 and keep the $2, regardless of how high over $10 it closes on expiration.

 
 
  John Seckinger   10/21/02,  12:47:12 PM
Per 11:39:16 Post concerning daily chart of the Dow, I have drawn just a few more lines in order to try to find (1) reward for bulls, and (2) possible risk. Please see chart: Link

 
 
  Alan   10/21/02,  12:44:21 PM
Index Futures
Futures Trade Signal Short ENTRY
YM (Dow $5 futures) Short entry was 8464 at Dow cash 8480, ES 895-96. Use a tight 20 point stop as this trade signal was on technical resistance levels and not market sentiment which remains bullish.

 
 
  Alan   10/21/02,  12:40:54 PM
Index Futures
Futures Trade Signal ENTRY
SHORT YM (Dow $5) at market, at any price above 8460, Dow cash currently 8480

 
 
  Alan   10/21/02,  12:39:23 PM
Index Futures
Compx over 1300, all eyes now turn to ES/SPX 900 level and Dow cash 8500 as it appears we are near an exhaustion top. ES 897, Dow cash 8490, NQ 974. In other words, if everyone is now expecting Dow cash 8500 and Spx 900 to be large resistance, it would be logical to take some Long profit ahead of those levels.

 
 
  Jonathan Levinson   10/21/02,  12:38:04 PM
A bear groan it is. All 5(3) stochastics are overbought, from weekly to the shortest time frames. The weekly cycle called the top in the August rally, but it's still pointed straight north and shows no sign of slowing just yet. I see heavy congestion between COMPX 1300-10, and this is now the level to watch. The TRINQ is low but sustainably so at .56, and the QQV has at last gone negative, currenly -.02 on the day- very slight given the point gain we've just seen on the COMPX. The TICK.NQ is quite bullish at +520.

 
 
  Alan   10/21/02,  12:29:31 PM
Index Futures
ES 892.50, and day highs, now coming into the mentioned next resistance of 892-895 once the quad top at 888 was broken to upside. Dow cash 8450. One note: without any 'real' news or amazing earnings; the market still maintains its pattern of buy the dips bullish tone.

 
 
  John Seckinger   10/21/02,  12:07:53 PM
The yield curve is starting to move, now 13 ticks flat as the five year continues to come under pressure. This should give equity bulls one more reason to be aggressive. The Dec. 5-year is currently down '10.5 ticks at 111'18, underneath its 50 DMA (111'21.5). Speaking of equities, bulls should remain in control unless 8370 is broken to the downside.

 
 
  Alan   10/21/02,  11:55:10 AM
Index Futures
Market day Highs: ES 890, Dow Cash 8430 +105, NQ 960, Compx 1288 as the market continues to "Leak Higher" since the 10 AM Lows. Now back to the same 888-890 ES levels last seen Thursday night after MSFT's earnings, YM (Dow) is higher now than last Thursday by about 50 pts.

 
 
  Jeff Bailey   10/21/02,  11:53:04 AM
Reversal of fortune for Treasuries as they've turned "red" on price and look to confirm bullishness for equities we're seeing.

 
 
  Jeff Bailey   10/21/02,  11:51:27 AM
J.P. Morgan (JPM) $20.10 +6% .... stock trading strong versus counterpart Citigroup (C) +1%, and JPM now biggest Dow gainer. Trader talk is that JPM may be acquired by Bank One (ONE) $39.19 +0.79%, which has previously been speculated as a buyer of FleetBoston (FBF) $22.29 +1.27%.

 
 
  Jeff Bailey   10/21/02,  11:48:17 AM
Dow Industrials (INDU) 8,400 +0.95% ... Trade at 8,350 was "double-top buy signal" and trade at 8,400 more firm break of trend Link . Hase some near-term upside here to 8,700 (per Index Trader Wraps).

 
 
  Steven Price   10/21/02,  11:41:26 AM
Reader Question: Hi Steve, do you have any information that justify today move in GM??? Thank you

Response: General Motors (GM) $35.65 (+1.34) Fiat, which is already 20% owned by GM and owns a put to sell the rest of the company to GM, has said they will entertain the idea of a government bailout for the money-losing company. It also said it has no plans to sell the company to GM before 2004 (which could be after a bailout rescues its books). The fact that GM may not be taking ownership so soon of a money pit may be the reason for today's strength.

 
 
  Jonathan Levinson   10/21/02,  11:39:51 AM
The CBOE put to call ratio dropped to .74 with that move, which is heartening to bears who seek to fade bullish sentiment.

 
 
  Alan   10/21/02,  11:39:24 AM
Index Futures
JPM: 20.15 Someone thinks there's something to the rumor of JPM being bought out as its up over 1.50 from the open.

 
 
  John Seckinger   10/21/02,  11:39:16 AM
There is a pretty obvious daily bearish trend line in the Dow that should be getting traders' attention. Please see chart: Link

 
 
  Alan   10/21/02,  11:34:46 AM
Index Futures
Resistance was as noted: ES 883s, Dow Cash 8350; and after a very brief lower dip the breakout higher continues. One guess, Shorts came in at ES 883, and when it only dipped 2 pts and did not trade under the 879-880, they quickly covered as once again, light volume can move em rather quickly. Bulls need ES to take out current 885, next higher is 888-890, 892-895, 902. Dips are being bought since 10:05 AM. ES supports: 877, 879.50, 881

 
 
  Jonathan Levinson   10/21/02,  11:33:56 AM
1290 COMPX should be the next resistance area.

 
 
  Jonathan Levinson   10/21/02,  11:31:53 AM
OptionXpress is claimimg a delay in reporting executions based on exchanges volume and delays. I have had a limit that should have been executed 1 hour ago. Can't sell if the fill is not confirmed. Anyone else experiencing similiar problems

I haven't traded today. Anyone else?

 
 
  John Seckinger   10/21/02,  11:30:20 AM
Bulls have to be somewhat excited about the recent price action. Looking at the Dow, the 8331 level was taken out and never tested again. Weakness back under 8331 would get me slightly concerned.

 
 
  Jonathan Levinson   10/21/02,  11:28:16 AM
The 30 minute COMPX chart shows me an ascending wedge verging on a triangle, because of the almost flat slope of the upper trendline. This last bounce was from the lower trendline, and the ceiling should be about 1 to 2 points above today's high of 1280.

 
 
  Jonathan Levinson   10/21/02,  11:25:07 AM
From the Online Slang Dictionary:

golf-clap n 1. a quiet clap, originating at golf competitions, whereby one pats the base of one palm lightly with the fingers of the other hand. Used because it is quieter than "normal" claps. 2. an accomplishment worthy of a golf-clap. ("Whoa, that A on your test is really a golf-clap!")

 
 
  Alan   10/21/02,  11:22:26 AM
Jonathan : "bear groan" i got, but what does "golf clap" mean? [grins, I"m not a golfer]

 
 
  Jonathan Levinson   10/21/02,  11:10:28 AM
This move is going to elicit either a golf clap or a groan from bears, but it's too early to tell. The COMPX has just zoomed back up to the top end of the range, and is currently trading 1277. QQV fell off a bit, currently +1.3 on the day, and the TRINQ is down to 1.01. A break above 1280 should bring Friday's highs back into view.

 
 
  Alan   10/21/02,  11:09:39 AM
Jonathan : "bear groan" i got, but what does "golf clap" mean? [grins, I"m not a golfer]

 
 
  Steven Price   10/21/02,  11:06:31 AM
Reader Question: Your thoughts on General Mills ( GIS ). seems to be showing strength day after day. I dont see anything in the news that would be helping this move.

Response: General Mills (GIS) $42.17 (+0.48) I mentioned on the MM last week that I would really prefer a move under $41.00 to open a short position from this level, given recent support. My sentiment has not changed.

 
 
  Alan   10/21/02,  11:01:26 AM
Index Futures
Reader Question: Do Futures carry any premium the way stock Options do?

No, not at all. Today, November options are very expensive as Oct options just expired on Friday, and Nov options still have one full month to expiry. There is no difference in premium from trading futures last week to currently. The current ES futures contract is December, but during the entire 3 month period it is traded, on average, there is only +1 to -1 (on average) difference between the ES (SP500) future and SPX Cash value.

ES remains in the same 3-4 pt range the last hour (878s to 875); and if you clicked on Friday's ES chart, you can see where today's current resistance at 879s came from. Let's hope it breaks in a clear direction shortly.

 
 
  Steven Price   10/21/02,  11:00:34 AM
The last time we broke the 50-dma in the Dow, it provided little resistance in August. I would be quicker to shift to the long side if we weren't struggling so much with that level this time around. The current 50-dma is 8256. This time around, we also have significant resistance above from 8300-8400.

 
 
  John Seckinger   10/21/02,  10:48:32 AM
Alternative symbols for bond futures: ZB02Z (30-year), ZN02Z (10-year), and ZF02Z (5-year). Looking at a chart of the 30-year, the inside day continues as the intra-day high (109'07) failed to take out Friday's high of 109'10. Looking at the yield curve, there is a slight flattening as fives are down 4 and tens are off by 3. This could be due to either a lower dollar/euro spread or good mortgage buying. Possibly both.

 
 
  Alan   10/21/02,  10:33:18 AM
Index Futures
ES (day lows 872s, highs 879 double top). If you look at the ES chart from Friday which was included in Sunday's Futures Wrap article and is shown here, you can see the importance of the 877 and 879.50 quite easily as both were 50% retracement levels on Friday and are impacting today's levels now. Link

 
 
  Jeff Bailey   10/21/02,  10:29:20 AM
S&P Insurance Index (IUX.X) 266 -1.2% ... some weakness after Goldman Sachs downgrades insurance names Torchmark (TMK) $34.97 -3.5% and Jefferson-Pilot (JP) $43.34 -2.25% to "market underperform" from "market perform," and MetLife (MET) $23.89 -3.9% to "market perform" from "rec. list." Goldman now believes that the persistently low interest rates and reduced capital management flexibility will add to the list of challenges that could impede future earnings growth. As investors look to stabilization in the economy and corporate profits, life insurance stock price performance could lag. Leads Goldman to cut its Life Insurance sector weighting to "underweight" from "equal weight."

 
 
  Alan   10/21/02,  10:28:23 AM
Index Futures
ES (Emini SP500 futures) and YM (Dow$5 futures) currently at 877, 8240s and the same levels they were at 2 AM this morning, NQ (Emini NDX futures) 943 and the weakest index today is about 10 pts under its 2 AM levels, mostly due to MSFT's weakness. For second day in a row, the morning gap down continued into the 10 AM and reversed. Let's watch and see if Dow can break out above 8300, or if ES can take out the 880 levels - if they do, they make continue higher, if they do not, make provide a short entry on failure to make new high.

 
 
  Jonathan Levinson   10/21/02,  10:27:23 AM
The opening put to call ratio came in at .86, right at the centerpoint of the daily bollinger bands, and no big concern for bears at this level. Like the TRINQ at 1.17 currently, this reading is right on the fence and commensurate with rangebound trading at levels that might prove to be either a midterm top or bottom. Patience remains the order of the day.

 
 
  Jeff Bailey   10/21/02,  10:22:08 AM
Adolph Coors (RKY) $66.46 +7.3% ... strong move above 4-month resistance of $65 after Bank of America and Morgan Stanley. Link

 
 
  Jonathan Levinson   10/21/02,  10:21:32 AM
GM has more problems than thought....I went to buy a Yukon XL last week, came to an agreed upon price, put my $500 down....got a call the next morning saying I couldn't have it for that price as I was quoted a 2002 price and if I wanted a 2003 it would be $2K more!! geez, no wonder I was the only "customer" there.

Sympathies, Brad. Other problems include their pension shortfall, and while most stocks and indices managed to become stochastically overbought, poor old GM couldn't even make it up to the 50 line. It looks like one very weak stock to me. Be careful, though, because it looks weak to everyone else, too, and the premiums are pretty "juiced" on the put options.

 
 
  Jeff Bailey   10/21/02,  10:17:04 AM
U.S. Steel (X) $13.18 +2.72% ... Reported Q3 EPS of $1.00, which was $0.37 better than consensus of $0.63. Revenues rose 15.3% year-over-year to $1.91 billion versus $1.72 billion consensus.

 
 
  Jonathan Levinson   10/21/02,  10:15:48 AM
The COMPX is now at 1270, which is another key s/r line. Yields have recovered, and some might argue that selling in bonds could fuel buying in equities, though more likely it's selling in treasuries that will fuel buying in corporate bonds. I don't know the answer to that one. Either way, FVX has just flipped positive as I type, though the TRINQ is higher at 1.6, QQV is +1.58 to 48.06, and Citicorpse, GE and QQQ are at or near their lows of the day.

 
 
  Steven Price   10/21/02,  10:15:36 AM
Sigma Aldrich (SIAL): $46.03 (-0.67) After filling its gap, SIAL rolloed over, broke back below the 200-dma, and I am looking for a move under $46.00 for short entry. I would also look at intraday resistance under the 200-dma ($46.91) as a short opportunity. Earnings are out tomorrow, so I'll hold off until then, but it's on the radar.

 
 
  Alan   10/21/02,  10:12:16 AM
Index Futures
10AM ES 873,YM 8222,NQ 942 Hasn't been much to say. ES remains in a tight 6 point range from the open, and as Fri 10am was the time of Fri's bounce, so far, ES's level at 10:05 AM (872s) is day lows. But as Jim said, there's still no "fat pitch". The Monday after OPtion Friday is sometimes quiet as traders await option market makers to adjust any Stock inventory (either long or short) that they have carried over from hedging their October option contracts.

 
 
  John Seckinger   10/21/02,  10:11:13 AM
Mainly due to strong earnings from El Paso Energy (released before the market opened), the Utility Index is showing strength. El Paso, a Houston-based company, reported eight quarters of record cash flow while posting a 0.21 net income from 0.09, year prior. Getting back to the UTY.X (currently at 225, +2%), this morning's strength has the index breaking out higher and should test the 22 DMA of 234 in the near term. If this index fails to maintain its bullish momentum and trade back underneath 219, selling pressure should greatly increase as bulls will feel they just got trapped.

 
 
  Jeff Bailey   10/21/02,  10:10:07 AM
Leading Indicators fell to -0.2%, which was in line with consensus. Economists say that fourth straight decline for this economic report is consistent with sluggish recovery rather than double dip recession.

 
 
  Steven Price   10/21/02,  10:09:04 AM
Kohl's (KSS): $53.13 (-2.02) OI put play KSS looking very weak, trading near its lows of the day. new entries should realize that our initial target on the play is $50 when looking at risk/reward.

 
 
  Jonathan Levinson   10/21/02,  10:05:10 AM
The FED has just announced that it is taking no action today, and so 1.75B will be drained from the markets. I expect no significant strength today, and, all things being equal, the markets should close lower today. All things are never equal, but nonetheless... Citigroup (C) just started making new lows as I started typing, currently down 2% on the day.

 
 
  Jeff Bailey   10/21/02,  10:04:03 AM
3M (MMM) 124.50 -0.64% ... reported in line earnings this morning. On conference call, company remains cautious on business conditions in Q4 (Dec) and 2003 citing higher advertising costs, the impact of the West Coast dock strike, traditional Q4 seasonality, and a challenging economic outlook. MMM cuts Q4 capex spending by $100 million to $900 million, sees sequential weakness in its telecom business, and expects volumes to be up 1% YTD... announced Q3 debt levels rose $295 million over Q2 levels.

 
 
  Jonathan Levinson   10/21/02,  9:57:04 AM
Declining volume is just under double advancing volume on the COMPX, with 1263 declining issues to 928 advancing.

 
 
  Jeff Bailey   10/21/02,  9:56:44 AM
Very early but... Per Index Trader wrap, Russell-2000 (RUT.X) -0.38% showing a little relative strength versus Dow Indu -0.79%, SPX -0.91%, OEX -0.97%, NDX -1.12%.

For individual stock option traders.... here's a Link for the 2000 components of the RUT.X.

 
 
  Steven Price   10/21/02,  9:53:44 AM
Trimeris (TRMS) : $49.85 (-0.06) One of the stocks on my radar (and the OI Watch List) broke through $50 on Friday for the first time since May, trading up to $50.94, although it has touched $50.00 a couple of times since then. It has done this before and NOT taken off, but this time maybe a little different. The company was approved for "priority review status" by the FDA on Friday for its new HIV drug Fuzeon, which will be the first in a new class of AIDS drugs. The FDA is supposed to act on the application by March 16 and there is already a lot of pent up demand waiting for approval. The drug could bring in $1 billion per year in revenue. I am looking for some intraday support at $50, which I haven't seen yet.

 
 
  John Seckinger   10/21/02,  9:48:13 AM
I imagine I am like most traders, waiting for prices to breakout of the range that began early morning on Thursday. Looking at the Dow (5-minute chart), 8250 has been roughly the pivot area, while 8331 and 8147 seems to control sentiment. The key will be for the market to make a strong break and then use either 8331 as support or 8147 as resistance.

 
 
  Jonathan Levinson   10/21/02,  9:46:34 AM
I spoke too soon about those bounces, though it's amazing what a focal area this 1277-1280 s/r line has turned out to be.

 
 
  Steven Price   10/21/02,  9:43:30 AM
3M Company (MMM): $125.00 (-0.31) MMM had earnings this morning that showed a revenue and profit increase, and were in line with expectations. I'm looking at a bull pennant formation and waiting for a break in one direction.

 
 
  Jonathan Levinson   10/21/02,  9:41:39 AM
There's a complete lack of strength in the bounces so far, but the indicators don't show very aggressive selling pressure, with the TRINQ at 1.61 and the TICK.NQ -111. Yields are down modestly, with FVX off 2 basis points to 3.105. The first CBOE put to call reading at 10AM will be interesting.

 
 
  Linda Piazza   10/21/02,  9:35:30 AM
I am traveling today and will not be able to contribute to the Monitor.

 
 
  John Seckinger   10/21/02,  9:33:22 AM
As equities weaken, bond prices are edging higher. The cash 30-year (tyx.x) is yielding 5.045% and has support at 5.015%, last Wednesday's high. The 50 DMA is below at 4.91%. If yields get back above 5.084%, selling pressure should once again take over. 200 DMA is much higher at 5.24%.

 
 
  Jonathan Levinson   10/21/02,  9:31:21 AM
11 point gap down open on the COMPX, QQV + 1.3, TRINQ modest 1.39 for such a quick drop.

 
 
  Steven Price   10/21/02,  9:24:03 AM
Apparently Microsoft CEO Steve Ballmer said MSFT's earnings surprise would most likely be a one shot deal, calling it "kind of a one time anomaly" due to the change in the wasy it bills customers, adding that the current business environment was still reasonaably tough.

 
 
  Jim Brown   10/21/02,  9:14:27 AM
Swing Trade Signals
The markets appear tired from last weeks gains and are poised for a lower open. For the Monday after expiration current month options are very expensive. Also, recent post expiration Mondays have ended relatively flat. Volatility is normally high as positions are squared but markets are not directional.

The game plan is to wait for a fat pitch. This is a bounce to OEX 458-460, SPX 896-900 for a short entry or a dip to OEX 436-437, SPX 860 to go long.

I picked up a bug over the weekend and will not be posting again this morning. If either of these levels are reached the plan is clear. Wait for the fat pitch.

 
 
  Jonathan Levinson   10/21/02,  8:36:46 AM
There is 1.75B in weekend repos expiring today which needs to be replaced by the Fed if it is to avoid draining liquidity from the markets. 1.75B is a relatively modest amount but still relevant. The announcement should be made around 10AM.

 
 
  Jonathan Levinson   10/21/02,  8:10:25 AM
The futures remain down, with NDX -8.50 and SPX -4.00. The US Dollar Index is back to the 108.10 range, back off its highs to levels not seen since Thursday. Gold is positive above $313/oz. Bloomberg reports that 3M's third- quarter net income rose 38 percent to $545 million, or $1.38 a share, from $394 million, or 99 cents, in the year-earlier period, while sales rose to $4.14 billion from $3.96 billion, which is being characterized as "inline". Futures were not helped by this data. QQQ is trading 23.55 from its close of 23.81 and GE is down .06 to 26.59 in the premarket.

 
 
  Alan   10/21/02,  2:06:37 AM
Index Futures
2 AM ES 878-879, YM 8257 NQ 955
Nikkei slightly red, between 9000 and 9100 Don't forget: 3M (MMM) A Dow stock, earnings pre-open

 
 
  Alan   10/21/02,  1:53:57 AM
Index Futures
Tue 2 AM: For the 3rd day in a row, we'll have a gap down lower...
Headlines tonight in national media about Dow 8500...and as i type this, YM Dow futures print 8435, ES 10pts lower than close at 889s currently. Off TXN warn and Japan bank concerns. Nikkei -300.

Will Tue be the first day the 10 ES pt gap down is not bought? Both Fri and Mon saw -10 ES from prior close at/near 10 AM.
Good night.

 
 
  Alan   10/21/02,  1:38:29 AM
Index Futures
130 AM: Nikkei hard selling, -300 at 8700
US Futures: ES 891, YM 8440, NQ 962

 
 
  Jim Brown   10/20/02,  11:55:49 PM
JPM-ONE-BAC   I reported on the monitor late Friday night that there was a strong rumor that Bank One (ONE) was going to take over JPM. The rumor has spread to include possibly Bank of America (BAC) in on the takeover as well.

If either of these rumors are true then we could have a serious problem. First, it would be a good deal to see JPM getting bought. JPM is rumored to have nearly $30 trillion in derivatives that may have gone bad. Any deal for ONE/BAC to take them over would make this even more public. Any deal could also have Fed implications.

Since Citigroup is not mentioned as a player does that mean C is not strong enough to play?

I think this could be very bad for the markets if there is ANY truth to the rumor. It would bring fears of a huge bank failure and the highflying bank sector from last week would be toast. Also, the financials are down in Europe overnight and there continues to be rumors of a couple of big insurance company failures that will be announced this week. This will also be negative for money center banks who loaned to the global insurers.

Shaping up to be a really interesting week.

 
 
  Alan   10/20/02,  11:26:39 PM
10:01:56 PM Index Futures
10AM ES 879s, YM 8265, NQ 957
Futures have leaked lower, ES currently -4 from Fri's close/Sunday's open, Dow - 40s, NQ -4

 
 
  Alan   10/20/02,  11:26:24 PM
7:16:18 PM Index Futures
ES 882-883, NQ 960
Good evening. Sunday night futures opened sideways from Fridays's close

 
 
  Jim Brown   10/20/02,  11:26:03 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   10/20/02,  11:25:45 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

 
 

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