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  Jim Brown   10/22/02,  9:24:20 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   10/22/02,  8:54:47 PM
Johnson & Johnson (JNJ) $59.82 -2.1% ... last "tick" in after-hours was $60.50. Haven't found any news on the wires regarding FDA comments. Checked the FDA site Link and nothing there. Nothing at JNJ site Link either.

 
 
  Alan   10/22/02,  7:59:39 PM
8 PM: Given the degree of KLAC's warning tonight; (KLAC guiding Dec qtr revenue to $330 mln and EPS to $0.14 vs current estimates of $381 mln and $0.24. In after hours trading KLAC fell to $29); one would expect futures to be much lower.

They are not.
At 4 PM ES 889s, NQ 967
At 415 PM futures close: ES 891.75, NQ 973
KLAC warned after 5 PM
8 PM: ES 891.50, NQ 970

Appears to be 'trade the charts and not sentiment or news'

 
 
  Alan   10/22/02,  5:31:31 PM
Post KLAC conference call, trading lower at 29.00 from the prior $31s level as its earnings and guidance are digested

 
 
  Alan   10/22/02,  4:23:18 PM
Now we await KLAC's guidence going forward, KLAC is also one of the tech companies "famous" for managing earnings numbers., $31.18 Perspective: KLAC has been 26 to mid 30s in the last 2 weeks.

 
 
  Alan   10/22/02,  4:18:38 PM
KLAC appears to have beat earnings by 3cents, up 1 buck at 31.55

 
 
  Alan   10/22/02,  4:06:39 PM
KLAC 5 PM Conference Call : 800.370.4480 to listen

 
 
  Alan   10/22/02,  3:53:56 PM
2 big earnings tonight are KLAC (semis) and CA (software and services)

 
 
  Alan   10/22/02,  3:48:49 PM
3:47 PM As we've seen other times, 3:30 PM sometimes marks a reversal period on bearish days as shorts take some profits. ES double bottom was at 883 support at that time level and has now bounced back to the ES 890.50 pivot mentioned several times earlier today.

 
 
  Jonathan Levinson   10/22/02,  3:48:04 PM
The COMPX is back within the wedge and coming up against its upper descending trendline on the 10 minute chart.

 
 
  Jim Brown   10/22/02,  3:35:59 PM
Swing Trade Signals
The indexes refuse to die. It appears the dips are only profit taking and we will be bouncing again soon. Because we are closing near the lows and we could get some more negative earnings news after the close I am going to hold the SHORT overnight if we are not stopped out. We only have a 1/2 position so I am willing to look for a drop at the open to exit.

 
 
  Alan   10/22/02,  3:31:22 PM
It's now 3:26 PM: As I continue to have technical posting problems to the Market Monitor, I am leary of suggesting any type of Trade Signal into the close given these problems as one comment might go through but not a second one. With that in mind, there shall be no more Trade signals given today.
ES has double bottomed at 883 support, Dow cash remains sideways at 8400

 
 
  Jim Brown   10/22/02,  3:02:25 PM
test

 
 
  Jonathan Levinson   10/22/02,  2:47:34 PM
Declining volume is exceeding advancing volume on the COMPX 766M to 506M, despite the TRINQ staying stubbornly below 1. As the price channel curls over beneath COMPX 1310, I'm thinking that we are either witnessing the beginning of the failure of this rally, or that it's simply taking a breather before the next blast through the next resistance level. With the weekly 5(3) stochastic overbought and beginning to turn, and the amazing array of terrible news that the market has so far ignored but that won't magically disappear, I'm in favor of downside from here, but the market will do what it wants to do. In the meantime, the market won't be getting far with MSFT, IBM and GE, all of which have been trading heavy throughout the day.

 
 
  Jeff Bailey   10/22/02,  2:41:55 PM
Johnson & Johnson (JNJ) $58.95 -3.5% ... Trader's citing a Bloomberg report that JNJ received a deficiency letter in September from the FDA regarding coated stent, and is working with officials to resolve the deficiencies in its application. An FDA advisory committee is scheduled today to debate whether to recommend approval for JNJ's Sirolimus-coated Cypher stent. Link

Currently bullish, but traders that may have OVERLEVERAGED in calls or puts should be cautious ahead of this FDA meeting.

 
 
  Alan   10/22/02,  2:24:53 PM
Index Futures
Now appears breakout levels for higher are : ES over 885, Dow cash over 8405

 
 
  Jonathan Levinson   10/22/02,  2:21:33 PM
I'll take a mulligan on the wedge comment and observe that the daily 5(3) stochastic is now in a bear roll with the COMPX trading 1284. The TRINQ has not broken 1 yet, and so breadth still favours the bulls. The put to call ratio is at its lows of the day with two consecutive readings of .82. Is it bottoming? I hope not- anyone in bearish positions prefers to see the p/c ratio low, the lower the better. The more the market is bullish, the better the chance that it will tank. The TICK.NQ is at -161, FVX has gone negative, and HUI and XAU are booming, with XAU +5.19 to 111.56 and XAU +2.63 to 62.52. The daily chart seems to be forming a rounding top under 1310 COMPX, forming the beginnings of an "archway" formation (just made it up) that I've shorted successfully many times.

 
 
  Alan   10/22/02,  2:12:14 PM
Index Futures
ES paused at one of the mentioned supports of 883, went up to 885 and found sellers, next lower targets are 879.50, then 877. Ever since that posted rumor a few hours ago of an extremely large sell SP futures order came thru, we've seen all Pops (upticks) sold/shorted.

 
 
  Jim Brown   10/22/02,  2:05:03 PM
JNJ - Dow component hitting multiday low of $58.65. I have a personal interest in seeing this stock under $62.50 by the close! Direct questions to Steve or Jeff. (grin)

 
 
  Jeff Bailey   10/22/02,  1:59:36 PM
Time lines... On August 12th, the NYSE bullish % ($BPNYA) from www.stockcharts.com reversed higher to "bull confirmed" status, from same level as yesterday's reversal. The next day, October 13th, the markets traded lower, then again just after the open on Monday, 08/14/02, only to reverse sharply higher by session's end (Monday's range was 473-494).

Combined with last night's Index Trader Wrap, and time line discussed there regarding MACD, might expect a lower sesson tomorrow, then a dip at the open on Thursday, with potential rally.

Can't be certain this would happen, but certain technicals very similar and something for bulls and bears to be monitoring. Either we'd get SIMILARITY or DIVERGENCE.

Trader's that have an action plan ready for either most likely stand to benefit.

 
 
  Jim Brown   10/22/02,  1:53:53 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The broad market SHORT signal was triggered at 13:52:18 when the OEX traded at 449. SPX 884.36, DIA 84.02, SPY 88.75, DJX 83.93, NDX 958.85, Compx 1289.03, QQQ 23.83, Emini 883.75.

This is below two levels of support that held all morning and the 62% retracement level. The initial stop loss will be 453.50 but we will move it down quickly if we see some momentum developing. Remember, only 8 trading days ago the OEX was under 390.

 
 
  Steven Price   10/22/02,  1:47:04 PM
General Motors (GM): $35.85 OI put play GM now finding intraday resistance at $36. After yesterday's failure to hold above previous resistance at $37, I like new entries for 1/2 position here. I would wait for the full position on a break below $34.99 (low of the day).

 
 
  Steven Price   10/22/02,  1:37:49 PM
EBAY: $61.67 (-1.35) For those readers still holding EBAY short, a look at the daily chart shows that once the stock broke back under $62, there has been a ceiling on it at that level. I really like the resistance from a short standpoint. Unfortunately the resistance was a day late for OI, but shorts can monitor this level.

 
 
  Jonathan Levinson   10/22/02,  1:27:07 PM
Jim coined the phrase, but we have a bona fide "Attack of the Program Trades". Take a look at the 1 minute COMPX chart.

 
 
  Alan   10/22/02,  1:21:55 PM
Index Futures
Futures Trade Signal EXIT
Buy to Close Short as 888.50 hits for ES +1.25

Trade Signals are now flat. With ES printing 888.25x888.50; the Profit trail stop was hit for Gain of +1.25 points, the desired 3 pt target had printed earlier at 886.75, but you didn't see my post. Sadly, we cannot control technical issues such as ISLD going down, nor occasional posting problems to the Market Monitor.
It appears now there was a 5 point ES bounce from the 886 double bottom, and stalling at the new resistance of 890.50 (the 50% retracement of today's low/high) and that 890.50 area also seems to match Dow cash 8450. From 11 AM to current, market has made series of lower highs. Lunchtime for me.

 
 
  Jonathan Levinson   10/22/02,  1:17:51 PM
I hit "Submit" a little too late- it looks like we're getting our break, and it is to the upside unless this candles blows off into a spike.

 
 
  Jonathan Levinson   10/22/02,  1:16:39 PM
Well, it looks like a wedge on the 15 minute COMPX chart, the upper declining trendline commencing at yesterday's high. I'd call it a symmetrical triangle except that the trendlines are not symmetrical. As a triangle it would be a continuation pattern, pointing to an upward break, but here it is not. It could break either way, and I'd be guessing that after spending the better part of the past 9 or 10 days going almost straight north, we might expect some kind of pullback, but what's another week's rally between friends (just kidding there). The put to call ratio has reached its low of the day at .85, which is unfortunately still above yesterday's closing low of .71. Note that .71 was as low as it got, and as with so many indicators, the absolute reading is far less important that its reading relative to prior readings- well, we're still in relatively high territory in this range, as can be seen on the charts. The symbol on stockcharts.com is $CPC.

The QQV is falling, now up just .67 from earlier readings above +2 on the day, and the TRINQ remains bullish at .79. Yields are all positive. TICK.NQ at +117. The only divergence left is that HUI and XAU are up strongly today. But they're in the minority. Today looks sustainably bullish from where I sit, and while this wedge might break north or south, the indicators are favoring north at this point in the day.

 
 
  Alan   10/22/02,  1:01:37 PM
Index Futures
Futures Trade Signal ENTRY
Due to a continuing technical posting issue, the actual SIGNAL ENTRY FILLED post did not appear in the Market Monitor window as I had typed it earlier (along with the corresponding short target from entry), which I just now have realized before leaving for lunch; however as the 11:32 AM post was "ES continues to chop at the 890-892 level, it's a long above those levels and a short below it" the first side of that Trade suggestion was indeed triggered with a 'short under 890' giving a fill of Futures Trade Signal Short ENTRY ES 889.75
ES currently is 887s at 12:59 PM, I would suggest placing a PROFIT trailing stop bid at 888.50 to lock in 1.25 points minimum of profit OCO (One Cancels the Other) and place a cover bid order at 886.75 to create a 3 ES point gain.
Apologies for any confusion on this Trade Signal. In other words, we are looking for 3 points of short profit at 886.75 but will lock in a 1.25 pt profit at 888.75 if the market does not go lower and hit our 886.75 target.

 
 
  Jeff Bailey   10/22/02,  12:59:42 PM
Sinclair Broadcast (SBGI) $13.45 +5% ... stock jumps from $13.00 level after television broadcasting company said it expects to exceed previous Q3 guidance for net broadcast revenue, broadcast cash flow, and after tax cash flow per share. Puts after tax cash flow at $0.44 versus previous guidance of $0.32-$0.33 per share. Link

 
 
  Jeff Bailey   10/22/02,  12:40:47 PM
Duke Energy (DUK) $19.20 -4.38% ... Dow Jones reports that DUK had $124 million in "inappropriate" accounting. According to the auditor, DUK intended to underreport regulated profits.

 
 
  Jim Brown   10/22/02,  12:40:18 PM
Swing Trade Signals
We are approaching the support on the OEX at 450 with the 62% retracement level at 449.18. If this support fails we will be short the broader market at OEX 449.

The 15 min chart is showing a very clear lack of momentum and a rounding top forming. This should be interesting.

 
 
  Jeff Bailey   10/22/02,  12:38:15 PM
Duke Energy (DUK) $19.25 -4% ... there's some pretty heavy action in the DUK Nov. 20 Calls (DUKKD) at the offer, so I'm thinking there might be a hedge fund short the stock, looking for it to have discounted below recent secondary offering price of $18.30. With stock showing some recent strength and today's p/f chart action, may have come in as a seller, get price down, then hedge with the calls. Never certain, but action hints of such activity.

 
 
  Jim Brown   10/22/02,  12:33:46 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The LONG signal was closed at 12:31:08 when the OEX traded at 451. SPX 888.05, DIA 84.36, SPY 89.13, DJX 84.28, NDX 966.45, Compx 1296.83, QQQ 23.99, Emini 888.25.

The SHORT signal entry point at OEX 449 remains active.

 
 
  Jeff Bailey   10/22/02,  12:31:47 PM
Duke Energy (DUK) $19.24 -4.18% ... sharp drop in last 10-minutes... volume brisk at over 600K in last 5 minutes.

 
 
  Alan   10/22/02,  12:29:32 PM
Index Futures
One possible reason for dead volume may be the ISLD stock exchange, "ISLD had major problem at 12:09:27 core system failure" and may be a good time for lunch.

 
 
  Jim Brown   10/22/02,  12:28:36 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We got a lower high and internals are weakening. Close the LONG position now at an OEX trade at 451. Let's don't wait for the bottom.

 
 
  John Seckinger   10/22/02,  12:27:51 PM
The Utility Index is now back below its 22 DMA (234) at 231 and could be a reason for the recent downdraft in equities. Another index I will be watching is Gold, higher by 3% at 61.73 and nearing solid resistance at 62.68. The bond market remains under 108, but should be a non-event for the remainder of the session.

 
 
  Alan   10/22/02,  12:10:06 PM
Index Futures
Was mentioned in last night's wrap article, but as a repeat:
Single Stock Futures (SSFs) which were to start trading this Friday have been delayed until at least Nov 8th. www.onechicago.com has more info.

 
 
  Jeff Bailey   10/22/02,  12:09:37 PM
Jeff: I had to write you this e-mail. I used to trade options with stops, but after being a subscriber for some time, your past comments on trading options only to the amount of the underlying stock you would buy, has had a positive impact on my account. Yesterday, I couldn't believe it, but this summer, you profiled a bullish call play in Coors. I bought a couple of calls for January expiration at the $65 strike. While I was beginning to think these were toast, I understood the risk. Your comments at 11:14:21 may ring true as to how options should be used as an investment/trading tool if not abused. Normally I wouldn't write an e-mail, but I really found my recent bullish trade and strategy suggested by you to make sense and have a more positive impact on my account's bottom line. Thank you.

Well.... that's good to hear. This is actually a strategy I learned from Tom Dorsey and his book that combines very well with the point and figure charts. RKY's looking bullish again after that triple-top. Link Still some time to January expiration!

 
 
  Alan   10/22/02,  12:02:51 PM
Index Futures
My thoughts is resistance is now Dow Cash 8450-70, ES 892-895 as the market did gap down to the opening levels at 11:45 AM and found a Bid. Continued sideways chop between ES 890-892. ES 890.50 50% retracement does indeed appear to be a current pivot. IF ES does not take out 892-93 to the upside, the 888 dip buyers may decide to sell, creating down targets of 885-886, 883, 879.50

VIX was 50 around Oct 10th, even after a 1300 point Dow rally, VIX remains at/near 40, so there's still a great of 'fear' out there.

 
 
  Jonathan Levinson   10/22/02,  12:01:08 PM
The total put to call ratio came in at .92, next update due in about 10 minutes. I don't know why, but the market action is making me feel particularly tense today- it could be last night's lack of sleep because of my new puppy dog having nightmares and waking me up every half hour, or it could be that price is coiling into a wedge. In any event, the relatively high p/c ratio, combined with anecdotal evidence that Jim Cramer is still vocally bearish, continues to concern me about the inability of the market to fall. With enough bearish positions, the market will continue to bounce off the dips, because bears are the ultimate buyers in a down market. QQV remains high at +2.05 on the day, TICK.NQ -49, TRINQ .79. Divergences and conflict between the indicators spells choppiness ahead.

 
 
  Linda Piazza   10/22/02,  11:51:24 AM
Reader Question: FWRD(17$) looks short under 16.4$. Triple Bott. Sell ,Target 10$, Stop 19$. What do you think?

Response:FWRD reports Wednesday, October 30, and was cut last week by CSFB. Investors may be bailing out ahead of the earnings report. Historical support/resistance in the $19 area allows you to set a clear stop loss on a short play, but the RSI, stochastics, and MACD aren't giving good clues as to future direction. As a general rule, I avoid trading in stocks that average less than 250,000 shares daily volume, as it's too easy for these stocks to get moved on a relatively small buy or sell program. Short positions can easily comprise a disproportionate percentage of positions, risking a short-covering rally with any bump up in price. Oscillators and trendlines aren't as helpful in predicting prices with these stocks, either, and I like every edge I can get.

 
 
  Jim Brown   10/22/02,  11:51:16 AM
Swing Trade Signals
If the dip buyers are going to buy now is the time. The Dow is back to its opening levels but the Nasdaq, SPX, OEX are struggling to keep from being dragged under. Now is the time that the holdouts should appear that did not buy the first dip. If we can show any strength here we could attract a crowd again. A break below Dow 8420 should signal lights out.

 
 
  Alan   10/22/02,  11:42:58 AM
Index Futures
Reader Question: What is the difference between YM and YJ Dow Futures?

YM (YM02z) is Dow $5 futures,that is, each 1 point Dow move is $5
YJ (YJ02Z) is Dow $2 futures, and each 1 point Dow move is $2
The YM contract is much more liquid with higher volume. YJ however offers the possible advantage of building a longer term position for smaller accounts, as it uses less margin. For shorter term trades, I would suggest the YM contract.

 
 
  John Seckinger   10/22/02,  11:38:31 AM
With the huge 2yr note auction happening tomorrow, is it safe to assume that there is a lot of money on the sidelines that will not come into equities because it is already earmarked for the notes?

Response: Possibly. However, I am more worried about the overhead supply coming from mortgages lifting their hedges than anything else. I further believe that we could get a short-covering rally in the near term out of the bond market that supercedes movement in either equities or action by the Treasury. If this was a month ago, I would look for a high bid-to-cover in the two year sector and expect a lot of money on the sidelines; however, thoughts over a Fed ease seems to be slightly lessening. If there is a big sell-off in equities today, I would be more inclined to think it was technical in nature. If the yield curve says otherwize and steepens a ton, then I bet you are exactly right and tomorrow's auction will have to be watched carefully.

 
 
  Jim Brown   10/22/02,  11:32:28 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The Dow appears to be rolling over and all the major indexes are following. The A/D line is continuing to worsen. The bounce off the opening dip is in danger of failing completely. Wouldn't it be ironic if this was "the dip" that took us back -300 to -500 points and we were long the first time in a week.

Just in case we do get "the drop" let's start a 1/2 position with an OEX trade below 449.

 
 
  Alan   10/22/02,  11:32:27 AM
Index Futures
Apologies. Had tech problem posting for last 15 min when trying to suggest short entry on mentioned triple top ES failure at 895-96. ES is now chopping at 890.50, 50% retracement of today's 885 low and 896 high. There is a totally un-confirmed rumor repeat RUMOR of an extremely large SP futures sell order being worked over the next few days, the type size order that takes to fill, not just a few hours. If we start seeing upticks being sold into vs. dips being bought, I might tend to believe it.

ES continues to chop at the 890-892 level, it's a long above those levels and a short below it.

 
 
  Steven Price   10/22/02,  11:22:59 AM
Reader Question: Hi Steven, PQE losing suport at 26$, Looks like a very good short. Opinion?

Proquest (PQE): $24.75 (-1.75) PQE is certainly looking weak ahead of this afternoon's earnings release. The fact that they provide information and content to the education industry is most likely contributing tho the fall, as well. Career Education Corp (CECO) is down $8.49 to $43.90 after earnings last night and this morning's downgrades and is taking a number of education related companies along with it. While I think PQE looks weak, the event risk of earnings tonight leaves me on the sidelines. If they post decent numbers, the recent drop could be reversed quickly, most likely on a gap. While I am not predicting what the company will say, gaps don't give much opportunity to close a play profitably if they go in the wrong direction.

 
 
  Jim Brown   10/22/02,  11:14:32 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The internals are weakening with the A/D line dropping. Let's raise the stop loss to OEX 450. If the bullishness continues traders will appear to buy the dips but just in case they don't I want to snug up the stop. I will try to move it to the breakeven or better as soon as possible.

I still have no faith in being long at this level but this seems to be the way everyone wants to go.

 
 
  Jeff Bailey   10/22/02,  11:14:12 AM
Option vs. Stock stops Question ... Jeff, I noticed that you were very precise in your wording (SHORT) re DUK recent print above 20.00. Is this based upon your interpretation of risk, i.e. if short stock risk is unlimited, if long puts risk is known? So I better understand your comments, is your trading style to be willing to risk all of the investment in a put? Is this why you do not have a loss cut on the option movement? Thanks for all the discussion regarding risk/reward assessments. I am new to this (less than a year and a half) and this appears to be the key to long term success.

Not only is risk unlimited in stock, but as mentioned before, I didn't like the short on the underlying, only because of the current dividend.

As for the put, when profiled several times, the "risk" in the option if NOT OVERLEVERAGED and kept equal to the number of shares a trader/investor would normally short, the RISK in the option was LESS THAN the RISK in shorting the underlying stock, to the point and figure buy signal. My thinking in bearishness on DUK (which is still bearish, you coudn't twist my arm to get me to buy the stock) is that the January options buy the trader PLENTY of time to see how things pan out. Will they cut their divedend? Why did they go to equity markets to raise cash, instead of debt markets at historically low borrowing levels?

A short in the underlying really can't wait to find out, yet an option trader, that assessed risk, DID NOT OVERLEVERAGE in the put options, took the same amount of capital risk in the options as the stock trader took with a stop just above $20.00.

Will note that TXU gave a "buy signal" at $19.00 Link . Still, a stock short would most likely have had to close out at $19.00 as RISK then became up to $33. Only a put trader that had already limited risk in the puts could have perhaps held comfortable, as long as he/she went into the trade understanding the risk, and limiting it in the put.

 
 
  Steven Price   10/22/02,  11:13:17 AM
Reader Question: Good morning Steven: Yesterday stock broke through resistance of 62.00 to low 63 range, with today's action, do you see support at 60, or is this an opportunity to go long, we are still holding puts. Your comments on MM welcomed. Thank you

EBAY $61.81 (-1.21) We were stopped out on the play when the stock closed over $62.00, but the stock did stop at resistance just under $64.00. I wouldn't be looking at a long play here, because of that resistance level, but I am wondering if the move through $62 to the next resistance level is a lesson in setting wider stops during the extreme volatility of earnings season. With the stock back below $62.00 I'm not sure I would close the put play if I were still holding it at this level, but a move above $64 would definitely have me out of a short play.

 
 
  John Seckinger   10/22/02,  11:11:43 AM
The 30-year fell back underneath the 108 handle as equities rose above their 22 and 50 PMA's on a five minute chart (should use these averages as support going forward). The dollar is back above 108, and the Utility Index is showing strength as well (currently right at its 22 DMA of 234.7). One sector not performing well is Oil, lower by 3% and in free-fall mode.

 
 
  Jonathan Levinson   10/22/02,  11:10:56 AM
Further to Jeff's comments about BPNDX and the other bullish percent measures, which have been accurately calling the major turns, I'm also watching the weekly 5(3) stochastic, which is clearly dominant in this wave up. It called the top in the August rally as well. Readers are asking me if I'm bullish, and my best response is that I'm still watching fundamentals too closely to be bullish. The charts and price are the final arbiter, but the chart formation looks bearish to me. I believe that a great deal of this rally can be explained by the preponderance of bearishness we've been seeing. The put to call ratio hit 1.40 last week, a clear sign that the bears have begun tripping all over each other. This reinforces every support level as bears rush to cover their shorts. This is just a guess. I will watch the BPNDX and the weekly 5(3) stochastic on the COMPX to signal the turn. Obviously the indices are overbought, unless you go to the monthly candles. Until then, bears and bulls need to be very cautious- the market doesn't care who it takes out. Don't overleverage, obey your stops, and don't be afraid to wait for that fat pitch in cash if you're nervous or uncomfortable. Cash *is* a position.

 
 
  Alan   10/22/02,  11:06:04 AM
Index Futures
ES now has overhang in the 895-96 triple top range, with first level of support at 892. On this 3rd attempt to take out 895-896 at 11 AM with volume becoming light. Dow top remains 8490 (under the pysch 8500 level), and NQ is sideways at day highs 980 triple top.
Shorts may now press on the triple top failure.

 
 
  Steven Price   10/22/02,  10:59:43 AM
Reader Question (PNRA): PNRA moving along nicely. Where is your target on this stock?, and are you now trailing the stop loss?

Many thanks to all of you for all your work and educational efforts. duggo

Panera Bread (PNRA) $32.94 (+0.58) My initial target for OI call play PNRA is $35.00, which has resistance on the daily and PnF charts. There is some resistance above that point at $36, as well. I would raise the stop from $28.00 to just under $30 as this is round number support and just below the 200-dma of $30.50.

 
 
  Jeff Bailey   10/22/02,  10:55:33 AM
NASDAQ-100 Index (NDX.X) 976.28 -0.3% ... marginal losses after some negative tech news in last night's post-market and this morning's pre-market. Hints of strength building intra-day.

Treasuries also see selling, with YIELDS higher, hints of cash freeing up from "perceived safety" of bonds.

What does a bear have to do to get a break? Hmmmm.... how about wait for the bullish % charts to weaken?

 
 
  Steven Price   10/22/02,  10:51:41 AM
Correction: ERTS has earnings on October 24. While I had the date right, I had a brain cramp and thought it was tomorrow. The earnings are on Thursday.

 
 
  Alan   10/22/02,  10:51:40 AM
Index Futures
Futures Trade Signal EXIT
Short stop hit at ES 893.75 for -1.25 points.

 
 
  Alan   10/22/02,  10:46:33 AM
Index Futures
Futures Trade Signal ENTRY
Short at 10:46 AM, ES Short entry 892.50, use 1.25 point stop, 3 point gain target.

 
 
  Alan   10/22/02,  10:43:35 AM
Index Futures
Futures Trade Signal ENTRY
ES top a moment ago at 895, SHORT signal under ES 892.50

 
 
  Linda Piazza   10/22/02,  10:41:02 AM
KO: I've been following Coca-Cola for about a week to show what a new option trader might consider when thinking about an option play. While I have a conservative position in January KO puts, I didn't feel the risk/reward was good enough to recommend it as a play on the Monitor, especially since a continued rally in the broader markets was likely to float KO back up, too. However, here's a recap of what's happened so far. KO is on a P&F sell signal. After reporting earnings last week and disappointing, it fell through a consolidating triangle formation and below 22, 50, and 200-dma's. It threatened to fall through years' long support in the 43.50-45 area. I'd written that I wouldn't be surprised for KO to bounce back up when it hit that level, perhaps rolling over in the level of those MA's and then retesting. With the help of an upgrade yesterday from Thomas Weisel, KO indeed is moving up to challenge those MA's (49.41, 50.15, and 50.77) and historical resistance between 49-50. Currently at 47.60, KO hit a high of 48.74 this morning before falling prey to selling. As KO has moved up, I've watched volume patterns, too. So far, volume has been lighter in the last couple of days, when it's been moving up, than it was during the period when it was selling off. This volume pattern fits what would be expected for a put play. My original plan was to buy a conservative position first, which I did, then add to it if KO bounced up and began rolling over again. However, in a market that's seen buying despite a troubled outlook, I'm hesitant to do that after all.

 
 
  Jonathan Levinson   10/22/02,  10:39:26 AM
The COMPX is right back to where we started, a few points away from a fill of the opening gap at 1309. The TRINQ gave up almost all of its gains and is at .74, while the QQV is back to flat. Bonds have resumed their selloff with yields modestly positive. The next question will be what happens when 1309 is reached. The opening put to call ratio was .91 for the first half hour of trading, a spike up of .2 as traders rushed into puts, and increased to 1.05 for the half hour just ending. This much bearishness makes me doubtful of a significant decline in the market today, but I have trouble believing that the rally is going to set new highs. In any event, my guess is to the upside for today, and 1309 will be the first significant hurdle to clear along the way.

 
 
  John Seckinger   10/22/02,  10:38:29 AM
The U.S. Dollar is back underneath 108 at 107.92 and could come back and test its 22 and 50 DMA's (107.64 and 107.57) during the near term. A test of these averages would be a solid opportunity to judge traders' psychology going forward. These averages also correspond with the high set on July 2nd. Can you say pivotal? Of course, that word has been over used when referencing the Greenback.

 
 
  Jeff Bailey   10/22/02,  10:26:02 AM
General Motors (GM) $36.24 -2% ... New York Times reports that GM officials expressed doubts about achieving their goal of capturing 29% of the U.S. market for new cars this year, which company blames Korean and Japanese auto companies, saying they have gained an unfair advantage through devalued currencies and marketing actions. Link

According to Dorsey/Wright and Associates, their auto&parts bullish % (BPAUTO) recently reversed up into "bull alert" status at 28% bullish after a relative low of 18% in mid-October.

 
 
  Alan   10/22/02,  10:25:01 AM
Index Futures
ES remains in 4 point range: 886 to 890; looking for possible breakout higher if over 892, or breakdown under 884; neither of which has yet happened. Dow remains sideways at 8420-40, interesting is that NQ bounced the hardest so far this morning.

 
 
  Jim Brown   10/22/02,  10:20:01 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the LONG entry at 10:15:30 when the OEX traded at 452. SPX 890.23, DIA 84.48, SPY 89.36, DJX 84.39, NDX 964.76, Compx 1294.61, QQQ 23.99, Emini 889.75.

The initial stop loss will be OEX 448, just under the low of the day.

 
 
  Steven Price   10/22/02,  10:12:44 AM
General Motors (GM):$36.10 (-0.90) OI put play GM rolled over from resistance again yesterday, and I think we simply got a better entry point. New entries at this level can look at $37.50 for a stop loss, which is a good risk/reward ratio on a short play.

 
 
  John Seckinger   10/22/02,  10:09:16 AM
There are plenty of rumors in the bond pits that mortgage-related selling will cap any attempted rally; however, the Dec 30-year is slowing edging up as the trading session unfolds (108'04). Will this mean more selling of equities? Current conditions do show the Dow underperforming; however, there does appear to be some relative strength in the OEX contract and could trade more technical in nature than opposite of bond prices.

 
 
  Jeff Bailey   10/22/02,  10:08:48 AM
Bull Confirmed! The very broad and more institutionally held/traded stocks that compise the NYSE Bullish % ($BPNYA) Link from stockcharts.com reversed back up into "bull confirmed" status yesterday. Last Thursday, Dorsey/Wright's NYSE Bullish % (BPNYSE) reversed higher.

Again... the "lag" between these two is most likely stockcharts.com going back and adjusting their p/f charts to reflect dividend payments by various stocks that pay dividends, where Dorsey's is more of a "true" p/f system. The stock traded $35, then it trades $35, not $34.50 to reflect a $0.50/share dividend payment.

Only the very broad and less institutionally held, but actively traded NASDAQ Composite Bullish % ($BPCOMPQ) Link remains in a column of O's.

 
 
  Alan   10/22/02,  10:03:19 AM
Index Futures
ES remains in 4 point range: 886 to 890; looking for possible breakout higher if over 892, or breakdown under 884; neither of which has yet happened. Dow remains sideways at 8420-40, interesting is that NQ bounced the hardest so far this morning.

 
 
  Steven Price   10/22/02,  10:01:30 AM
Semiconductor Sector Index (SOX.X): 263.47 -18.82 The chart of the SOX is looking eerily similar to the rollover from the 50-dma in August. That occured just as the broader markets began to fail the rally that had begun on July 24, after a 1500-point Dow gain up to August 22. This time we have seen about a 1350 point Dow gain before the SOX rollover. The SOX broke its 50-dma yesterday.

 
 
  Jim Brown   10/22/02,  10:00:36 AM
Swing Trade Signals
I like the dip that is currently underway. Finally a little profit taking. I would like to have been in on it but the gap down at the open makes it impossible to play. I do not feel comfortable shorting the breakdown and per the game plan from last night I will look to go long from a lower level if this dip continues. We have our relief valve entry in place at 452 so that gives us plenty of room to be patient.

 
 
  Jonathan Levinson   10/22/02,  9:59:38 AM
Remember 1277 to 1280? Well, the COMPX has just found support just above that crucial congestion zone. A break below will be very bearish, and a bounce from here will bring in all of the levels we explored yesterday, at 1290, 1300, 1310 COMPX. The fact that the TRINQ has not really eased off by going below 2 is encouraging to bears, as is the decline in treasury yields. Bullish is the failure to violate the 1280 level. And so we watch. The Fed has nothing expiring today, and I'm awaiting the annoucement regarding today's action. Speak of the devil- $2B in overnight repos has just been announced. As we saw yesterday when 1.75B was net drained by the lack of action, this is a modest sum and will not overcome the action in the bond market and its effect on equities. If bonds rally from here, expect lower equities. If they stay flat, expect equities to show a bit of strength.

 
 
  Alan   10/22/02,  9:57:56 AM
Index Futures
TXN which warned last night is the world's largest maker of chips that go into cell phones, so I was surprised to see QCOM down less than a buck this morning.

We've seen morning market bounces after Friday and Monday's gap down, today's gap down at -12 ES, -100 YM, -25 NQ has the market in a tight opening range so far with ES trading between 885 and 890; and Dow cash 8410 to 8435. Two thoughts: if the shorts can't press Dow under 8400 the market might find a bid, or if Dow does look to begin to rollover under 8400, the selling may increase.
I shall use ES 885-887 and Dow cash 8410-30 levels for sense of direction.

 
 
  Jim Brown   10/22/02,  9:55:55 AM
Swing Trade Signals
I like the dip that is currently underway. Finally a little profit taking. I would like to have been in on it but the gap down at the open makes it impossible to play. I do not feel comfortable shorting the breakdown and per the game plan from last night I will look to go long from a lower level if this dip continues. We have our relief valve entry in place at 452 so that gives us plenty of room to be patient.

 
 
  Steven Price   10/22/02,  9:47:10 AM
Electronic Arts (ERTS) $68.10 (-4.04) ERTS appears to be finding buyers after this morning's drop, which looks positive. The company has earnings tomorrow, so we will have to drop the play tonight. For those readers considering holding the play through earnings, there was a note from Soundview that it believes the issues affecting THQ do not affect ERTS's fundamental strength.

 
 
  Jim Brown   10/22/02,  9:44:57 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We did not get as big a sell off as I would have liked but the buyers appear to be showing again. Let's go long with an OEX trade above 452. I would not use more than 1/4 to 1/2 position until we break above yesterday's closing high. OEX 452 is just over the opening gap down during the first 3 min.

 
 
  John Seckinger   10/22/02,  9:42:49 AM
Speaking of Gold, a daily trend line can be drawn from the July 26th low (54.67) through the low of 58.75 set on October 10th. This positively sloping line acted as support on October 17th (59.04 low) and currently comes in at 59.25. The XAU contract is at 61.32.

 
 
  Jeff Bailey   10/22/02,  9:41:22 AM
Duke Energy (DUK) $20.22 +0.64% ... profiled here and in intra-day commentary as bearish. Trade at $20 has p/f chart back on a "buy signal." If SHORT the underlying stock, would look to trim to 1/2 positions, or move to the sidelines near-term. Link

According to Dorsey/Wright and Assoc. DUK is classified as "electric utility" and sector recently reversed up into "bull alert" status at 24%, from previous low reading of 18%.

Disclosure: I currently hold Jan put position in DUK

 
 
  Alan   10/22/02,  9:40:54 AM
Index Futures
For the 3rd day in a row, we'll have a gap down lower...
Nikkei was -300 on banking concerns in Japan
At 2 AM this morning, ES was 889s, YM 8430-40, NQ 963
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 and bounced hard
9:40 AM ES 886, YM 8405 (-100 from TXN Mon's 4:30 PM warn), NQ 956

 
 
  Steven Price   10/22/02,  9:39:48 AM
Reader Question: Hi Steve, Do you know if companies buy options on their own stock? Would it be illegal to buy calls when the news was good? (eg 3M) Any way to find this info out? Thanks Scott

Response: Scott's question is in response to the comment I posted last night about purchasers of calls on Friday afternoon in MMM just after the market closed, ahead of earnings. The same rules apply here as they would to any other insider trading scenario. As far as I know, the purchaser was not Martha Stewart.

 
 
  Jonathan Levinson   10/22/02,  9:39:09 AM
It appears that gold, which is in positive territory today, has just made a higher low at $310 per ounce. We'll watch to see how it holds. HUI is currently +2.69 to 109.06, XAU +1.34 to 61.23.

 
 
  John Seckinger   10/22/02,  9:34:59 AM
The December 30-year is showing some life this morning, only down fractionally at 108'01. If prices fall underneath 107'16, selling pressure should take over once more. Note: Daily RSI (14) is at 30.50 and at a new low for the contract. If the 30-year begins to rise (resistance at 108'22) and a short-covering rally takes over, it should be at the expense of equities.

 
 
  Steven Price   10/22/02,  9:34:41 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.

 
 
  Steven Price   10/22/02,  9:34:32 AM
Electronis Arts (ERTS) : $67.30 -4.84 Call play ERTS is trading down after #4 game maker THQ warned last night on the next two quarters. We will look for buying at this level and intraday support to determine whether we are seeing a long entry opportunity, or if it is time to punt.

 
 
  Jonathan Levinson   10/22/02,  9:34:18 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,  9:33:57 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.

 
 

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