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  Jim Brown   10/28/02,  9:35:06 PM
The Swing Trade Game Plan has been posted: Link

 
 
  John Seckinger   10/28/02,  4:27:43 PM
I know that the week is still young; however, a look at a weekly chart of the Dow makes it clear that technicians are paying attention. Link

 
 
  Alan   10/28/02,  4:22:40 PM
Index Futures
Futures quotes: ES YM NQ
4 PM cash close: 890 8351 982
415PM Futures close: 892 8361 986
ES high was 893.25 at about 4:13 PM

 
 
  Alan   10/28/02,  4:14:42 PM
Index Futures
Futures Trade Signal EXIT
At 4:12 PM, with ES at 892.75 x 893.00, the Long signal was exited at 892.00.

Frankly, given the new-ness of futures to many of you, I remain reluctant to suggest holding a position overnight with such a tiny cushion of 2 ES points.

 
 
  Alan   10/28/02,  4:11:16 PM
Index Futures
Futures Trade Signal EXIT
Changed my mind, with ES printing at 892, exit the 1/2 size LONG from 890 here at the 891.50 to 892 area for a minor gain of 1.5 to 2 ES points. It seems 892 is now firm resistance going into the close. We shall approach tomorrow FLAT.

 
 
  Alan   10/28/02,  3:57:33 PM
Index Futures
Futures Trade Signal ENTRY
ES is currently upticking off 885 support and right under 892 resistance level 1; Futures Trade signal is long 1/2 size from approx. 890; which is very near current levels. Your own risk tolerance must dictate whether to take this position home. Stop is 884, and would suggest a 'sell to close' order of 903.75 if it gets there before the 4:15 PM close

 
 
  Jonathan Levinson   10/28/02,  3:44:25 PM
New low of the day at COMPX 1311. They ran the OEX to just below 450 before reversing- currently COMPX at 1314, OEX 451. The TRINQ is back at 1.16. Will the dippers jump all over this rebound from support? Will the shorts cover? HUI and XAU still climbing. Great action today- a real cliffhanger. Still no idea where price will go from here to the close.

 
 
  Alan   10/28/02,  3:44:05 PM
Dow low a moment ago was 8320, which you may recall was the number that was needed on Friday to close the week 'green' (which it did)

 
 
  Alan   10/28/02,  3:40:21 PM
Index Futures
Futures Trade Signal ENTRY
With a 1/2 size LONG ES position of approx. 890, and with ES clinging to its old support of 885 near 3:30PM, we will maintain this position with a stop at 884 (1 point under day lows).

 
 
  Jeff Bailey   10/28/02,  3:39:26 PM
Bull Trap> .... potential "bull trap" in the SPX today with the trade at 905, then quick 3-box reversal lower at 890. Link

Pattern is a favore among short sellers when the Bullish % charts have reversed lower into a more bearish phase. Still, we have yet to see the bullish % charts reverse lower, but did make mention in this week's Index Trader Wrap, that the S&P 100 Bullish % ($BPOEX) Link did see a net LOSS of 1 stock to a sell signal on Friday. Is this a near-term top? Difficult to say, but Treasuries did see some buying again today. Would want at least 1/4 bearish position in an index, especially if holding some calls in individual stocks. Help hedge a bit.

 
 
  Alan   10/28/02,  3:29:11 PM
Index Futures
Futures Trade Signal ENTRY
Add second 1/4 size long at ES 888.50 or better, making ave of long 891 as the Dow clings to its 8350 pivot support

 
 
  Jim Brown   10/28/02,  3:24:53 PM
Swing Trade Signals
Major Dow losers are PG -3.56, MMM -2.56, UTX -2.14, IBM still positive +1.75 on "Zero percent financing" announcement.

 
 
  Jim Brown   10/28/02,  3:15:05 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Remember we have a SHORT signal at 8300 as well as a STOP on the current LONG.

 
 
  Steven Price   10/28/02,  3:13:35 PM
Reader Question: Steven: Thanks for update on MM today 09:52:04 EBAY now at 60:52 61 was broken, do you see that as light resistance other than 65, were do we find new support, we are still in puts/short. Appreciate your comments.

Response:$60.46 -1.56 EBAY's move under $62 was a break of intraday support and a three box PnF reversal down. There is support at $60 on both daily and PnF charts, and some noise between $55 and $60. If were holding puts, I would hang onto them on the $61 breakdown and start looking for intraday resistance again around $61 or $62 to confirm the short position. My initial target from here would now be the 50-dma around $57.50.

 
 
  John Seckinger   10/28/02,  3:12:09 PM
Is the yield curve telling us something significant? Looking at the cash market, the spread between the 10- and 5-year note is an impressive 111 basis points wide (4.08% yield on 10-year note, minus a five-year yield of 2.97%). Historically speaking, this should be a new five-year high for the spread. This price action could be based on Fed ease expectations, but I think it is even more significant. War with Iraq? I have no idea. Please send me an email with thoughts on curve steepening.

 
 
  Jonathan Levinson   10/28/02,  3:11:02 PM
Jim called it- "bit by bit". That's the COMPX fading, the TRINQ, QQV and VXN rising. But bear in mind that these are small, grinding moves- as if someone switched off the trading computers for awhile. The COMPX has support below at 1315-17, then heavier just below 1290. I don't see this being an easy moment for bulls OR bears- in other words, the market is being a fine market right now.

 
 
  Jim Brown   10/28/02,  3:07:58 PM
Swing Trade Signals
If anybody is going to buy this dip they better hurry. The 11:AM low was 8367 and that should be the trigger for new buys and below that for new sells. If we do drop here with a 65% chance of a rate cut then the retail traders have completely given up. Institutions would not take the bait with no confirming fedspeak but retail traders normally do. Could be a sign of things to come.

 
 
  Steven Price   10/28/02,  3:07:08 PM
Reader Question: Hi Steven, FNN just reported that IBM is up after offering 0% financing for IT services. Sounds like a company desperate to book business. Thanks K

Response: IBM has lowered its financing threshold from 100k to 25k and is lowering rates to 4.2% for companies with 100 of more employees on certain hardware, and down to 3.1 % on purchases of its WebSphere application-server and DB2 database product. It is also offering a 90-day deferral of financing payments. This is aimed at getting customers to spend on projects they would otherwise put off. The company says the move is not in response to tougher business conditions in the fourth quarter. And pigs fly.

 
 
  Alan   10/28/02,  2:59:40 PM
Index Futures
Futures Trade Signal ENTRY
At 2:56 PM, Long signal hit; LONG 1/4 Size at 894:

 
 
  Jim Brown   10/28/02,  2:52:21 PM
Index Futures
Futures Trade Signal ENTRY
LONG 1/4 Size : ENTRY ES 894.00 LIMIT

 
 
  Jim Brown   10/28/02,  2:45:04 PM
Swing Trade Signals
The bullish sentiment is fading bit by bit. No big changes just drifting down. We are still above support and the days lows so I am not willing to change the stop yet. There is a decent chance that funds could buy the dip after 3:PM.

 
 
  Alan   10/28/02,  2:39:19 PM
At 2:30 PM, ES has 4 key numbers working: 892 (Friday afternoon and this morning's Low), resistance levels of 902 and 905, with 897 being a 50% retracement figure. With Dow cash currently at 8400, IF the ES shorts cannot get ES back down to 892, some shorts may take more profit. Thursday end of day saw hard selling, Friday end of day saw strong buying. The next lower ES support under 892 is 887, which would match Dow cash 8350.

 
 
  Jeff Bailey   10/28/02,  2:31:09 PM
Endo Pharma (ENDP) $6.48 -31% ... stock down sharply today after announcing that in a Phase III trial of MorphiDex there was no statistically significant difference in MorphiDex compared to the morphine sulfate alone group. The study also did not meet its secondary endpoint. At this time, ENDP does not believe it has sufficient data to support filing of an amendment to the MorphiDex new drug application (NDA). Link

 
 
  Jonathan Levinson   10/28/02,  2:28:30 PM
The COMPX is sitting on the ascending trendline of a clear up channel from October 23rd. The TRINQ has come back out of bull territory at a current 1.11, still far from strongly bearish. The TICK.NQ at -443 is seeing broadbased selling as the QQQ approaches support at 24.40, current price 24.52. The FVX down 6.4 basis points tells me that the bond market remains cautious but not outright bearish, and certainly not bullish either. As I type, the COMPX is printing 1326- guess I'm not the only one watching that trendline.

 
 
  Steven Price   10/28/02,  2:27:18 PM
Reader Question: Steven With IBM up more than $2 today and giving a new buy signal on the P&F, would you still short ?

Response: IBM $76.67 (+2.11) I don't like the break over $76 for shorts from this point. If it remains over that level, I'll close the play and look for better entry - possibly under $78 or $82. I think there is also a risk in going long here, since the IT environment has not changed and is subject to bad news at any time.

 
 
  John Seckinger   10/28/02,  2:20:18 PM
Wondering why 30-year bond prices are lower as the Dow is in the red? Well, there are a few factors to consider. When the curve steepens (as is happening today with strong bid in five year sector), traders are buying shorter-end notes and selling longer-dated paper (10- and 30-year). Also, there is at least 1.5 billion in 30-year corporate bonds issued today. When the deal is priced, traders "lift their hedges" and sell 30-year bonds.

 
 
  Jim Brown   10/28/02,  2:20:16 PM
Swing Trade Signals
There are multiple schools of thought on the mutual fund year end movement. Some think that today is the last day funds can buy based on the time to clear. Other feel that clearance is not relative and funds can continue to buy through Thursday. Either way their results are based on the Oct-31 month end. This means they could continue to do "mark up" buying to prop up stock prices to try and put on the best possible face until Thursday's close.

This could be putting a base under the current market that they can exploit over the next couple days.

 
 
  Steven Price   10/28/02,  2:15:47 PM
Retail Index (RLX.X): 294.20 -2.79 The RLX continues to find resistance at 300. There is also resistance just above around 310. Wal-mart's news that its sales were on track for the predicted 2-4% gain this month sounded great on the surface. However, the fact that Halloween candy and costume sales were below plan is troublesome. The same store sales target has already been lowered from previous months, and if holiday shopping for a minor holiday is not up to par, then retailers must be concerned about a much bigger effect if the trend continues into the major shopping holidays. J.C. Penney raised guidance, based on strong sales of fine jewelry, home furnishings and shoes, which would indicate strength across all sectors. However, most analysts are expecting a tough holiday shopping environment and I'm starting to look for shorts among some of the higher end retailers. After the recent rise into resistance for many retailers, I'm looking at:

Federated (FD) $31.25 (-1.59) Rolled over from resistance at the 50-dma of $33.24. PnF reversal down at $30, resistance at $36. Look for breakdown below $30.

Nieman Marcus (NMG.A) $29.04 (-1.00) Hanging just above 50-dma of $29.02. PnF reversal at $27, but I like a breakdown of $29.00 for possible short. Resistance at $32, for stop loss above 200-dma of $32.77.

Tiffany (TIF)$26.57 (-0.45) Still on PnF upside breakout with resistance at $32

 
 
  John Seckinger   10/28/02,  2:14:54 PM
Monday's range in the Dow is 8531 to 8367. The 38.2 retracement is almost exactly at current prices (8429 versus Dow now at 8431). Checking Intermarket activity: Dollar lower, long bond lower, Dow lower. Makes sense, but was not this consistant earlier. Oil has come off its highs with the Dow, so still a correlation there. Also, Nasdaq still far from the 1346 level (Right Shoulder set back in mid September).

 
 
  Jim Brown   10/28/02,  2:08:27 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's lower the SHORT trigger to DOW 8300 from DOW 8350 to be consistent with the stop loss on the current LONG signal. Go SHORT the broader market with 1/4 position at DOW 8300.

 
 
  Jim Brown   10/28/02,  2:06:31 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Restating the STOP LOSS on the current LONG signal. The current stop loss is Dow 8300. There is significant instability in the indexes with bad news starting to weigh on them as we accelerate into the afternoon. There is significant support in the 8325-8375 level and I would like to see that broken before we change direction.

 
 
  Linda Piazza   10/28/02,  2:05:47 PM
Reader Question: What is your take on COST now? It has been hovering around $34-36 in the past several days. What do you think the down side is? Do you think it would still go to $23?

Response: This is a great question that allows a consideration of the importance of volume considerations when initiating or reviewing a play. The day before President Bush took steps to invoke Taft Hartley, I noted that Costco was down significantly, violating some important supports. Costco is the fourth largest importer using the West Coast docks affected by the lockout. I mentioned that COST might bounce if and and when Taft Hartley was invoked, but that I expected it to roll over below its moving averages and important resistance. It did bounce when the announcement was made, but it popped up on strong volume. I mentioned that strong volume in the Monitor that day and said that made me cautious. Volume seemed to be supporting a move up when a bearish player would want that move up to occur on light volume. For that reason, I didn't issue a suggestion that day to buy puts on the rollover. COST did turn down the next day, allowing anyone who had jumped into the play to exit with a profit. Because my mail alerted me that some had jumped into the Costco play, I mentioned that following day to watch for another bounce when Costco approached a recent low because volume considerations were not favorable to put plays. Costco hit the recent low I'd mentioned and bounced strongly, again on stronger volume than was healthy for a put play. Either that day or early the next week, I warned that a move above the MA's should be the last-ditch stop loss. Costco did move above those MA's, and in the process gave a new buy signal on the P&F charts, negating the previous sell target. Although Costco hit previous resistance at 37 and now looks ready to roll over again, those MA's (33.49 and 33.75) now lie beneath current prices, ready to provide support as Costco turns down. Costco's move today is on lower-than-average volume. Although it's not as necessary that strong volume confirm a down move as it is an up move, this still predicts that those MA's may provide support for Costco's price. While fundamentally, I don't see a reason to be bullish on this sector and Costco may plummet again, technicals don't lead me to expect a precipitous fall. Link

 
 
  Jeff Bailey   10/28/02,  1:59:58 PM
Amerco (UHAL) $3.81 +33.8% ... Friday night, I was snooping around looking at some stocks with large volume. Amerco (UHAL) was one that struck me as interesting. Weekly chart shows HUGE volume spikes near stock's top of $45, but now see "book end" volume coming back in. May be sign that "smart money" that left, may now be coming back in. While company has different subsidiaries, the one that interests me is the rental trailer division. Could it be the slightly better than expected jobless data the past two weeks that now has the 4-week moving average for claims back below 400K a positive? If so, then may start seeing some people moving around the country in the future, increasing business at UHAL. Link

Old saying... "volume preceeds price action."

 
 
  Alan   10/28/02,  1:44:39 PM
ES futures are currently chopping above 900 but below 902-905 resistance. In my view, the afternoon trading shall be dictated by whether it closes above or below that level. Currently the trend is 'down' from the failure to take out 905 to the upside 15minutes ago.

 
 
  Jim Brown   10/28/02,  1:41:11 PM
Spin - Linda - Spin - Everbody must be seeing a different spin on GE than we are. Either that or traders are so confused from being "spun" they don't know which way is up.

 
 
  Kent Barton   10/28/02,  1:37:08 PM
Semiconductor Index (SOX.X) still hovering near 300. The current 2.1% gain isn't too shabby, considering the NASDAQ is basically flat. AMD, INTC, AMAT, and TXN are leading the group higher.

 
 
  John Seckinger   10/28/02,  1:36:40 PM
As far as the dollar weakness is concerned, there was an article in Sunday's NY Times that had Bank of Canada governor Dodge saying that it would be better for the US Dollar to depreciate in an orderly fashion. This depreciation by the Greenback, according to Dodge, would be better than an outright rise in the Canadian Dollar. Note: The Canadian Dollar (CAD) is currently higher versus the Dollar, as the USD/CAD spread is at 1.5639. Still historically high, and, in my opinion, stagflation (high prices during an economic pullback) will be not be easy to get rid of in Canada.

 
 
  Linda Piazza   10/28/02,  1:23:49 PM
GE now 26.55, up $0.29 from fifteen minutes ago. Quote services must have been mixed up. Immelt must have reported sky-high growth instead of lower growth!

 
 
  Jim Brown   10/28/02,  1:14:03 PM
Swing Trade Signals
If the market does rally later today after the GE news then nothing should impact it for the next two days. (no major economic reports) However, later in the week the calendar is full!

 
 
  Jim Brown   10/28/02,  1:08:39 PM
Swing Trade Signals
Unbelievable response to the GE news that GE CEO Immelt said that the economy would have to be extraordinarily strong in order for GE to post double digit growth in 2003. Considering this is essentially a profit warning and the markets did not crash I am amazed.

However, the internals are turning over. This could be the last straw that will turn the bulls still on the fence to step back instead of going long. I am going to leave the current LONG signal open although the conditions for a breakout over 8550 are much less certain after the GE news. The stop loss is still Dow 8300. If internals continue to deteriorate I will raise it to 8350.

 
 
  John Seckinger   10/28/02,  12:59:37 PM
It is interesting how the Nasdaq came one point from testing the top of the Right Shoulder (1347 set on September 11th) during trading on Monday. Nasdaq currently at 1330, and has an intra-day high of 1346.

 
 
  Alan   10/28/02,  12:59:37 PM
Index Futures
Futures Trade Signal ENTRY
SHORT YM (Dow futures) at 8410 or better, current 8420; stop loss is Dow CASH at 8465

 
 
  Jeff Bailey   10/28/02,  12:50:31 PM
KLA-Tencor (KLAC) $35.73 +6.21% ... Jeff: I'm wondering when is a good time to short KLAC. This stock is up 6 since it warned about Q4 earnings. Do you see any reason why this has gone up as strongly as it has? I thought the market is suppose to punish stocks that warn. A little confused so any explaination will do.

Never sure, but last week, Lehman Bros. turned more bullish on IBM. As such, some may be making the assumption that semiconductors are experiencing "trough quarter" and that outlook for sector now more positive.

Today, DELL says it's seein some marginal increase in demand for hardware, also a bit positive perhaps for semiconductors as they are large compenent of PC/computer/server.

Lots of shorts in the sector and bullish % from Dorsey/Wright and Associates still "bull alert" at 35.2% after being quite oversold at 8% in late September. That relative low reading of 8% was matching low bullish % of 8% back in early August. Note that in August, semiconductor bullish % rose to 42% before reversing back lower, so thinking here is that sector may still have a little more bullishness near-term. However, this doesn't mean that sector can't shoot up to 70% or more bullish.

As such, would be very EARLY at this point to be looking short/put. If so, then would limit bearish traders to 1/4 or 1/2, similar to that strategy outlined this morning with indexes, and this weekend's Index Trader Wrap.

 
 
  John Seckinger   10/28/02,  12:49:06 PM
Merrill Lynch is calling for a 25 basis point cut at next Wednesday's FOMC meeting.

 
 
  Alan   10/28/02,  12:48:58 PM
Reuters 10/28 13:42:35)is reporting this General Electric news, "GE says expects slower growth in 2003", GE $26.31. That time period ties in with ES climbing up to its 50% retracement of 900 and failing on its first attempt to climb over it (matching Dow Cash 8450)

 
 
  Jonathan Levinson   10/28/02,  12:48:19 PM
The CBOE put to call ratio came in at .84, then up to .85 for its last reading. This type of intraday spike in bearishness often portends a move up as the market goes about its business of fleecing the greatest number. But .84 or .85 is much lower than we've seen, and so I'd hesitate to get too bullish on this indicator alone. The five year yield has come back a little, now up 7 bps. The QQV has been bouncing between +1.7 and +2.25 on the day, so option traders remain on their guard. The TICK.NQ is giving us a -120.

The thing is, it feels like every indicator is far too subtle for the moves we've been following- last week was, generally, narrow and rangebound, but that represents quite a feat in the face of news as bad as we've seen. Don't get lulled to sleep by the action we're seeing. I think that the bond market is telling attentive bulls to be careful. Everything else is telling bears to be careful. We're sure to have easier market conditions to trade in the future.

 
 
  Alan   10/28/02,  12:43:05 PM
Index Futures
Futures Trade Signal EXIT
YM (Dow futures) is currently 8425 bid. Merely as an FYI for anyone not stopped out during the CBOT price feed outage, YM at 12:32 PM did hit the 8435 exit target for +50 from entry. Given the unusual nature of this signal's stop; (and with ES currently at 900 battle area, if you are still long from the 8385 (or better) long entry; exit the balance of the YM long at market and we'll await a new 'clean' signal.
Futures Signals is currently FLAT.

 
 
  John Seckinger   10/28/02,  12:40:58 PM
As a trader, I constantly try to look for a correlation between an index and the Dow. During trading on Monday, I fail see the connection with bonds, the dollar, or Utilities. However, as noted earlier, the Reverse H&S in Oil (XOI) is getting my attention. The XOI.X is higher by 0.34 at 434.23, and well off its lows of 428 (which was set roughly at the same time as the Dow). The right shoulder is becoming more defined, and should be getting traders' attention.

 
 
  Jim Brown   10/28/02,  12:40:53 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The long signal was triggered at 12:32:24 when the Dow moved above 8450. OEX 457.20, SPX 900.32, DIA 84.55, SPY 90.35, DJX 84.50, NDX 992.39, Compx 1332.08, QQQ 24.68, Emini 900.00. The initial stop loss will be Dow 8300 instead of the 8350 I initially mentioned. There is strong support at 8360 as we saw this morning and I want to avoid getting a minor penetration of that support to touch our 8350 and stop us out. Repeat: The initial stop loss is now Dow 8300.

The market still has a top to fight at 8550 and that is likely to be a tough battle. The market is trading on the hopes for a 13th rate cut on Nov-6th. This is simply a momentum play and not a fundamental play. The bulls got their dip and those that bought that dip will now be tested.

 
 
  Steven Price   10/28/02,  12:25:30 PM
International Paper (IP): $36.30 -0.20 OI put play IP bounced just above its 50-dma of $35.83 (reaching a low of $35.89 on the day). I would look for a break below the 50-dma before initiating new shorts here.

 
 
  Alan   10/28/02,  12:24:40 PM
Index Futures
Today's ES 50% retracement of its low/high of 892/908 is interestly the psychological number of 900.

 
 
  Linda Piazza   10/28/02,  12:21:48 PM
Keeping KO company today as it falls are other consumer staples, such as PEP, MO, and K. Kellogg (K) today reported sales of $2.14 billion in the latest three months, down from $2.19 billion in the same period a year earlier. Analysts expected $2.2 billion. Perhaps these slower sales reminded KO investors of KO's caution from two week's ago.

 
 
  Alan   10/28/02,  12:11:10 PM
Why did the selling stop at 11:30 AM? If you look at the ES chart from Friday at the below link, you can see the importance of ES 892 support. It got that low today, shorts tried to press it under that to perhaps the 887 level, when it became clear 892 would hold, Shorts took some profit from earlier today.
Link

 
 
  Alan   10/28/02,  12:03:37 PM
Index Futures
Futures Trade Signal
I had set an alarm for YM < 8360 and had walked away from the computer shortly after 11 AM. The alarm never went off. YM now (at 11:54 AM is 8377). I have just learned that twice in the last hour, CBOT lost its price feed for approx. 5-8 minutes each time. This doesn't happen often, but both CME and CBOT at times lose their price feed for a few minutes. Some online futures brokers have your Stops sitting on their server, others have stops sitting "client side" or on your computer, and some of you may use "Manual Stops" where you the human push the button if the stop hits once an Alarm goes off.

It now appears that during those 2 CBOT price outages, that YM did indeed trade under 8360 (at the 8350 level). In other words, technically the stop should have hit, but its possible that given the CBOT glitch, it wasn't triggered for when the feed was restored both times, YM at that point was over 8360. A similar example would be holding OEX options with a stop at Preferred Trade, and Preferred Trade went down for 30 minutes, your stop was hit, but since they were down, it never filled and when they came back up, the option was trading above your stop.

Bottom line, the YM long from 8385 (or better) technically got stopped out for 25 point loss, but its likely in the real world (given the CBOT glitch) would not have been (especially if you were using manual stops)

 
 
  Jim Brown   10/28/02,  12:01:12 PM
Swing Trade Signals
I agree with Linda. I don't see any reason to be fundamentally bullish despite the comments from Dell. The market is showing an underlying bid due to the 65% chance of a rate cut next Wednesday as evidenced by the Fed funds futures. However, if we go higher we will hold our nose and go long at 8450 until the market tells us otherwise.

 
 
  Linda Piazza   10/28/02,  11:50:14 AM
Fundamentally, I don't see any reason to be bullish this market, but a look at the daily OEX chart shows that prices are holding in a steady range while the (5)(3) stochastic cycles down and RSI flattens, somewhat bullish signs. The 22-dma is rising, also bullish, and the 50-dma has flattened beneath current prices, perhaps providing some support should prices test that 440 level. However, today's action in the dollar, the ten-year yields, and gold hints that perhaps prices may begin to fall along with that falling (5)(3) stochastic. If they don't and the stochastics cycle all the way down to oversold without a corresponding drop in prices, this bullish trend is stronger than many thought. Link

 
 
  Jonathan Levinson   10/28/02,  11:46:53 AM
The five year yield is now up 8.2 basis points, while the COMPX has gained 7 points off its lows to the current 1324. The TRINQ is staying up at 1.26 (not very high overall but the highest I've seen in days), while the QQV is holding on to most of its gains. The put to call ratio came in a .71, spiken to .90 and is now at .79, back into the upper end of its recent range. This remains a confusing market, though the strength in yields and precious metals is bearish for stocks. The 5.25B 3 day repo is a wildcard, and could support either stocks or bonds. Caution is a very good policy today.

 
 
  Steven Price   10/28/02,  11:38:05 AM
Reader Question: Hello Steven,Would appreciate your view on BBOX. I have DEC 40 PUTS with a .50 profit now. Thank you for your hard work. Jane

Response: Black Box (BBOX)$41.67 -1.48 We considered this stock as a short in our meeting Friday, with a target of $40. I like the rollover at the 200-dma and the fact that it remains near the lows of the day. Things to watch:

There is daily support at $40.50 and if it reaches that level I would think about lowering my stop. $41 was the point of the PnF breakthrough of BBOX's bearish resistance line, so a breakdown of that level looks bearish. It is also the point of a 3-box reversal, which would look bearish to me. Still there is support on the daily chart at $40.50.

The next support I see below $40 is $37, so I like the downside if BBOX gets to $40. Right now the intraday chart is trending downward, so if I were holding puts, I probably wouldn't close them yet. However, I would be weary of a bounce from the above levels and keep a tight stop.

 
 
  John Seckinger   10/28/02,  11:36:07 AM
The Greenback might be called the Redback before the day is done, as selling pressure in the dollar has significantly picked up during the last hour. The DX00Y contract is lower by 0.53% at 107.32, and has fell underneath both its 22 and 50 DMA's (107.69 and 107.60, respectively). If the US Dollar can rebound to close above 107.42, a neutral rating will be given. Nevertheless, as it stands now, there is a good chance 107 will be tested in the near term and pressure equities as foreigners likely exit "risky" dollar-denominated products (read: even 30-year bonds, but not five-year issues). Time will tell.

 
 
  Steven Price   10/28/02,  11:13:12 AM
Reader Question: steve, thanks for the good work, keep it up...:)

per your comment this morning on MM, why does a dropping vix mean instititions are selling premium, meaning less downside fear ??? Neil

Response: The Market Volatility Index (VIX) measures premium levels on the OEX, but is also a measure of market wide implied volatility levels (the volatility % at which a product must move to justify the option price level). Premiums are generally higher when there is downside fear in the marketplace, because stocks (and the OEX, which is based on the S&P 100) usually fall faster than they rise. If a market begins to drop, market makers increase the prices of puts they sell to offset the risk in selling them. The downside also tends to gap more than the upside, which increases the risk further.

Calls and puts are involved in a finite relationship and when put premiums are raised, so are call premiums. Otherwise risk arbitrageurs could take advantage of the market maker for a profit.

In a rising market, the most common option transaction is the covered write, where investors purchase stock and sell out of the money calls to reduce the cost (therefore limiting upside, but hoping the calls expire before reaching the strike, and still taking profits if the stock goes up quickly). If calls are under pressure, then premiums (and implied volatility) are lowered. If calls are lowered, then so are the puts, due to the aforementioned relationship.

Basically rising markets see volatility (VIX) contraction. In a product like the OEX, where there is usually heavy volume and many market makers, it takes a lot of selling to lower premiums by 10% and institutional selling would be the only way to achieve this volume. When volatility is high, as it has been latley, premiums are high, and decay at a faster rate, since the number of days to expiration does not change. Premium sellers collect this time decay, while hoping the market does not move too far against their short option positions.

Going back to the original question, if the market trends upward at a slower rate, then all other things being equal, institutions will be more aggressive selling premium and capturing time decay in an uptrend. If they are fearful of a drop, they will not sell premium because of fear of the swift downside move going against them. A sideways market works just as well, but at least an uptrend gives an indication that the downside is further away.

 
 
  John Seckinger   10/28/02,  11:08:50 AM
The Gold and Silver Index (XAU) is higher by 1.81% at 63.44, but the intra-day high of 63.97 is basically in-line with the 22 DMA (63.86). Support is far below at 59. If the 22 DMA is taken out, the 50 and 200 DMA's are above at 66.21 and 67.09. If equities continue to trade soft, I do expect more bids to enter gold. If, on the other hand, the XAU fails to settle above the 22 DMA, risk for entering a long position certainly increases.

 
 
  Jim Brown   10/28/02,  11:00:41 AM
Swing Trade Signals
That sell program came to a dead stop at Dow 8395 again. Strong support at that 8400 level. I think we are set up correctly for the rest of the day. LONG trigger at 8450 and SHORT trigger at 8350. The SPX/OEX are much stronger than the Dow/Compx and even the Wilshire 5000 is slightly stronger. It would appear that there are some bargain hunters out there nibbling at the small/mid caps. The RUT is only down -.44. The A/D line and advancing volume were moving up steadily until that last sell program but have now gone flat. Plenty of indecision today.

 
 
  Jeff Bailey   10/28/02,  10:59:02 AM
Cisco Systems (CSCO) $11.47 -2.63% ... stock turns defensive after Morgan Stanley cuts to "equal weight" based on valuation. Link

 
 
  Jonathan Levinson   10/28/02,  10:57:23 AM
The COMPX low of the day is at 1324, which is in a major support/resistance area. A break below will bring into view our 1315, then 1295 congestion areas. The TRINQ is the highest I've seen in days at a modest 1.27, with the TICK.NQ just above flat at 21. QQV has risen and is now +2.25 on the day. FVX down 7 basis points.

 
 
  Linda Piazza   10/28/02,  10:52:15 AM
KO Update: Coca-Cola 45.86 -1.11 Last week, KO rose and tested the descending trendline, but never approached the 22, 50, and 200-dma's, now all clustered just above 49. As KO rose and tested that trendline, volume was lower than it had been during the previous week's fall. A bearish player would want to see this volume pattern. The (5)(3) stochastics and RSI are now turning down again, without reaching overbought levels. When I originally started covering KO, it had fallen precipitously after warning of difficult global markets in the next year. It was near 6-year lows, but it looked as if KO might retest that descending trendline and MA's before moving down again and retesting that six-year support area between 43.50-45.00. Perhaps this week, we'll be able to see what happens when KO retests that long-term support. Disclaimer: Although I have a conservative put position in KO, I didn't think risk/reward parameters were good enough to recommend it as a play on the Monitor. I've been following it for new option traders, to see how a conservative trader might use technical analysis to enter and then re-evaluate a play.

 
 
  Steven Price   10/28/02,  10:48:51 AM
IBM: $75.17 (+0.61) Short entries on OI put play can look at IBM at this level. We have found resistance once again at $76. I don't have a lot of market conviction here, but using $76 as a stop loss on a break back below $75.00 provides good risk/reward. Traders here need to be aggressive about managing the position if the stock gets above $76.

 
 
  Jim Brown   10/28/02,  10:47:56 AM
Swing Trade Signals
The long signal at 10:42:50 is based on improving internals and support holding at 8400. There is still a top to be dealt with at 8550 and SPX 905, OEX 460. However another run at those levels today from 8400 could drag some bulls off the sidelines. I am not trying to predict a rally here but if we are going higher I would like to have a few points under our belt when we retest that top again.

 
 
  Alan   10/28/02,  10:46:28 AM
Index Futures
Futures Trade Signal ENTRY
ES is coming up on large psychological number of 900, what it does from that will dictate what the Dow does, our YM Long is currently in the green a very tiny amount, BUT we needed to be prepared to take whatever profit is there IF ES looks to fail 900 (or lose 896.75).

 
 
  Jim Brown   10/28/02,  10:42:50 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with 1/4 position on a Dow trade over 8450. The initial stop loss will be Dow 8350 which is also the trigger to go short.

 
 
  Jim Brown   10/28/02,  10:42:19 AM
Swing Trade Signals
With the OEX/SPX green and the Dow holding 8400 I am leaning more bullish. The broader markets are showing increased buying and the Dow is down on MMM and PG. I am giving serious thought about lowering the long trigger to 8450. HOWEVER, the OEX has a top at 460 and the SPX at 907 which matches the Dow at 8550. Traders taking the next symbol should be aware of this.

 
 
  Jeff Bailey   10/28/02,  10:41:42 AM
Campbell Soup (CPB) $21.85 -3.4% ... negative action here. For me, holding November $22.50 calls not looking good. Don't like stock breaking back below a rounding higher 50-day SMA. As such, will look for any rally back near $23.00 as exit opportunity and move on.

 
 
  Alan   10/28/02,  10:40:40 AM
Index Futures
Futures Trade Signal ENTRY
From the YM Long at 8385, place a sell to close order at 8435 on 1/2 size, maintain orignal 25 point stop loss

 
 
  Alan   10/28/02,  10:36:11 AM
Index Futures
Futures Trade Signal ENTRY
At 10:35 PM, LONG YM Entry at 8385, maintain tight 25 point stoploss.

 
 
  Jeff Bailey   10/28/02,  10:34:49 AM
Dow Industrials (INDU) 8,397 -0.55% .... OK... per Index Trader Wrap Link , now begin to monitor for similar supply/demand technicals found from the 9,000 level. Today's reversal up to 8,500 sets stage for potential triple-bottom sell at 8,250. Link

Have already noted similar supply/demand technical in Dow component Procter & Gamble (PG) Link

As time passes, will want to monitor PG Link for potential support at bullish trend near $84-$85, especially if short/put the Dow Industrials based on buying in Treasuries.

 
 
  Alan   10/28/02,  10:33:52 AM
Index Futures
Futures Trade Signal ENTRY
Go LONG YM (Dow futures) at 8390 or better.

 
 
  Jim Brown   10/28/02,  10:32:19 AM
Swing Trade Signals
Where are those dip buyers today? If you were leaning bullish this week, going long on this drop to 8400 would be a good entry. "Good" only if we see a rebound. Because of the top at 8550 I am going to wait. I am just surprised those dip buyers did not jump on 8400.

 
 
  Alan   10/28/02,  10:31:43 AM
Index Futures
Futures Trade Signal ENTRY
ES 896, YM 8380, NQ 989
Now seeking Long entry, but not yet confirmed as there has not been any real dip buying yet this last 30 minutes. ES has returned to its prior pivot area of 892-897; matching Dow cash 8400. My thoughts is that Shorts are now 'pressing' seeking to get ES under 892 and Dow 8350...if it appears over the next few minutes they can't; some cover buying is likely to come ine.

 
 
  John Seckinger   10/28/02,  10:24:18 AM
The listless US Dollar remains under 108 at 107.81 (slightly bearish for stocks), but the Greenback should have found a bid after the German IFO report hit a nine month low. The Oil index is also lower, but the XOI Index could be outlining the right shoulder in a daily Reverse H&S formation. The Utilities Index (UTY) is higher by 2.3% and nearing its 50-DMA (248), and this could be a result of the strong bid in the five year market.

 
 
  Jim Brown   10/28/02,  10:20:25 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I want to err on the side of caution on going short today. Since I missed the 8500 trigger and there is some support at 8400, let's lower that short trigger from 8400 to the game plan trigger of 8350. I am trying to be more careful about not entering this one early. Sorry about the jumping around but I am concerned about the internals.

 
 
  Alan   10/28/02,  10:19:29 AM
Jim, total agreement with you : I feel the same way regarding the ES Short pondered at 908 on the gap up, but we've also seen Gap ups just 'run' right from the open and until 10 minutes ago, ES had been range bound 903 to 906. Sometimes 'careful' is intelligent, sometimes its not [grin]

Futures have basically closed their gaps to the Friday 3:30 PM levels, question becomes if the 'dip buyers' can get ES back over 900.

 
 
  Steven Price   10/28/02,  10:16:37 AM
Market Volatility Index (VIX): 34.98 -1.29 The VIX has been crushed the last couple days. This tells me institutions are selling premium aggressively, indicating some of the downside fear in the market is abating. The VIX hovered close to 40 all of last week, until a sell-off on Friday. Under normal market conditions (which we haven't seen in a while), we see Friday premium sellers, who try to capture time decay over the 3-day period (including Monday). Because of the recent uncertainty, the Friday sellers seem to have gone into hiding - until last week.

 
 
  Jonathan Levinson   10/28/02,  10:15:39 AM
MSFT is off .33 to 52.35 as the COMPX prints new lows at 1330. Old resistance, now support, is in view. The TICK.NQ is -213 and the TRINQ has risen to neutral bull territory at .76. Strange action today.

 
 
  Jim Brown   10/28/02,  10:15:33 AM
Swing Trade Signals
No guts, no glory! I should have taken that 8500 short entry off the 8531 high. Just wanted to be careful!

8400 is now the entry trigger.

 
 
  Jeff Bailey   10/28/02,  10:15:28 AM
Per Index Trader Wrap Dow, NASDAQ Comp, NASDAQ-100 Index now in the red. Buying in Treasuries looks defensive and may be taking its toll. 1/4 or 1/2 puts positions look good here.

 
 
  Alan   10/28/02,  10:15:01 AM
ES has seen seen its hardest selling of this morning, losing 5 points in 4 minutes, currently 899

 
 
  Alan   10/28/02,  10:03:05 AM
A bull really wants to see today's CLOSE prices of ES over 900, Dow over 8500, NQ over 1000, SOX over 300; for if not, today is just another failed rally attempt above those key pivot numbers.

Trend remains chop, with lower highs being made so far, but ES has not lost 902 'new' support, the next lower ES support is 897, then 892; resistance is 905, 908, 912

 
 
  Jonathan Levinson   10/28/02,  10:00:43 AM
The fed has just announced a 3 day repo in the amount of 5.25B. With nothing expiring today, this is a significant net add and could explain the simultaneous rise in bonds and equities this morning. I expect to see a bid under the market today.

 
 
  Steven Price   10/28/02,  10:00:12 AM
I have had several inquiries about where traders can get information on Single Stock Futures. Here is a link Link

 
 
  Jeff Bailey   10/28/02,  9:59:57 AM
Procter & Gamble (PG) $86.70 -2% .... defensive here as today's trade at $87 has this Dow component giving triple-bottom sell signal at $87 Link . Longer-term trend still positive, but action will that 1 stock away from the Dow Industrials Bullish % ($BPINDU) .

 
 
  Jeff Bailey   10/28/02,  9:57:51 AM
Tenet Healthcare (THC) $43.45 -11.9% .... Stock down after UBS Warburg downgrades to "reduce" to "hold" and cuts price target to $38 from $54 based on what firm believes to be unsustainable growth in the company's revenue from Medicare outlier payments. Link

Today's trade at $47 is bearish as break of bullish support trend and triple-bottom sell signal at $47.

 
 
  Jim Brown   10/28/02,  9:56:46 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The 8550 level was not reached but we came close enough for me at 8531 to raise the breakdown trigger. Since we have not hit the 8550 level yet I am going to change the trigger to a Dow print under 8400. Go SHORT the broader market 1/4 position with a Dow print at 8400. This will allow us to trade below the open of 8448 before hitting the trigger. If we move up from here to 8550 I will raise the trigger back to 8500. It could be the bulls just want to see a pull back for entry instead of buying the spike. (grin)

 
 
  John Seckinger   10/28/02,  9:54:22 AM
Trim Tabs is reporting that US Equity funds had inflows of $2.6 Billion last week; first time since early September. The company also reported that corporate activity could be key this week, as 42 buybacks took place last week for a price tag of $5.6 billion dollars.

 
 
  Steven Price   10/28/02,  9:52:04 AM
Reader Question: Re: EBAY - we are short/put, if possible give comments on support/resistance, where do we see EBAY go from here, thank you for posting on MM.

EBAY: $62.60 (+0.61) I'm not getting a good feeling in one way or another for EBAY. It has been floating the last couple of days and seems rangebound. It bounced just above the PnF reversal point of $61 on Friday and has resistance at $65. On a trade of $61, I like it short, $65 would be another resistance break. While I have a hard time seeing myself going long at $65, sentiment would be bullish.

 
 
  Alan   10/28/02,  9:48:05 AM
Index Futures
ES dipped 5 points lower and found support above the 902 level, you may recall that ES two highs last week were 902 and 905; ES retraced about 1/2 of the 10pt gap up from the open, found buyers at 903s and is now 906s. Tight 3-4 point range so far from the open, with once again the big move occuring in the morning gap.

 
 
  John Seckinger   10/28/02,  9:46:06 AM
There is a Washington Post article out this morning suggesting that Al Qaeda has nuclear weapons. This also could be helping five-year notes, albeit slightly. Also affecting Treasuries is John Berry (Washington Post) explaining why he believes the Fed will cut by year's end. "...Officials are concerned that the economic recovery is giving signs of a near-stall..."

 
 
  Steven Price   10/28/02,  9:44:00 AM
The SPX has had no luck staying over 900. Now trading 904, I would be more bullish if we get a re-test of 900 support and then another move higher.

 
 
  Linda Piazza   10/28/02,  9:42:54 AM
In the first few minutes of trading, up volume is above down volume on both the NYSE and Nasdaq, contributing further to the divergence Jonathan mentions.

 
 
  Alan   10/28/02,  9:40:24 AM
SOX printing over 300

 
 
  Steven Price   10/28/02,  9:40:24 AM
Semiconductor Sector Index (SOX.X) 302.11 (+9.63) SOX finally broke through 300 this morning after a high of 299 on Thursday. The last time it broke 300 was Sept 10-11, when it reeached a high of 310 intraday, with a close of 301. That looked bullish at the time, before rolling over and heading down to 211. So let's not get too excited about the break until we test 310.

 
 
  John Seckinger   10/28/02,  9:37:43 AM
The November funds futures market is showing the probability on an ease at 45%.

 
 
  Alan   10/28/02,  9:37:08 AM
Index Futures
First 10 minutes of trading has seen futures leak slightly lower by a small amount on some long profit taking. ES's high last week was 905.00; it opened today at 908s, has retraced to 906 but so far is holding 905 as support.

 
 
  Jim Brown   10/28/02,  9:37:04 AM
Swing Trade Signals
So far we have not seen a high enough level to enter the SHORT at 8500. We need to get to the 8550 level to activate the 8500 SHORT entry trigger. The initial pop has slowed considerably already and this level may not be reached. Be patient.

 
 
  Jonathan Levinson   10/28/02,  9:36:09 AM
Another divergence- NDX volatility as measured by the QQV is up a whopping 2.54, and FVX is now up .70. Yields and volatility are moving 180 degrees opposite to what equities would have them ordinarily do.

 
 
  Jim Brown   10/28/02,  9:34:47 AM
Swing Trade Entry Point Alert - QQQ
Because of the gap up on the QQQ to $25.00 I am going to raise the stop loss to 24.25. I know there were no entries at the suggested 24.75 level but anybody who did pull the trigger should consider the 24.25 level as an exit point. I do not recommend going short the QQQ this week.

 
 
  John Seckinger   10/28/02,  9:34:42 AM
Another round of "buying the yield curve" taking place this morning, as the Dec five-year is higher by 9.5 and tens up by only 8.5. Since equities are higher as this short-term bond buying materializes, thoughts of a rate cut on November 6th should be at least in the back of traders' minds. Note: I do not believe the Fed will cut, but this Friday's Nonfarm report could have an impact.

 
 
  Jonathan Levinson   10/28/02,  9:31:22 AM
Gap up open on the COMPX to 1345, at resistance. TRINQ at .51.

 
 
  Jim Brown   10/28/02,  9:31:19 AM
Swing Trade Signals
I want to remind everyone of the game plan. We are going LONG over Dow 8575. We also need to be prepared to go short with a Dow print at 8500 if the Dow 8550-8575 fails again. We are looking for a pop at the open and if that pop continues we will go with it. If it fails we will go with that as well. If we fail to reach the 8550 level on a failure we will wait for a trade in the 8350 level to go short.

 
 
  Steven Price   10/28/02,  9:31:00 AM
Let's be careful about entering put plays until we see some weakness. I don't want to try picking tops in a rallying market.

 
 
  Jonathan Levinson   10/28/02,  9:29:13 AM
So bonds are up and rising, gold is up and rising, and equities are up and rising. At last, I can make an iron clad, unhedged prediction: this trend won't last. Of course, we have no way of knowing which of these three will crack.

 
 
  Jim Brown   10/28/02,  9:26:49 AM
Swing Trade Entry Point Alert - QQQ
Go LONG the QQQ with 1/4 position with a trade over 24.75. The initial stop loss will be 24.00.

 
 
  Alan   10/28/02,  9:25:53 AM
Index Futures
At 9:20 AM, ES 908s, YM 8539, NQ 1011
Futures have leaked higher all night long and currently are at night highs. NQ is new month highs by 11 pts, ES new month highs by 3, Dow is lagging as its about 20 pts under new month highs. ES and NQ have broken out above resistance levels of 900 and 1000

We'll need to wait and see if this large Gap Up holds...

 
 
  Jim Brown   10/28/02,  9:25:33 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with 1/4 position on a Dow trade over 8575. This is +15 points higher than the game plan. The initial stop loss will be Dow 8500. This is not a bullish market statement but just an attempt to trade in the direction of the trend.

 
 
  Jim Brown   10/28/02,  9:21:26 AM
Swing Trade Signals
Interesting morning shaping up with the futures up +10. The JPM rumors are flying again but this time it is $170B in hidden losses to Russia, Argentina and WCOM. Rumors claim that Spitzer is all over them and charges to be filed soon. I have heard various versions of this all weekend but this is practically impossible due to the size. The futures are ignoring the possibility and considering I have seen the rumor in multiple places I am sure others have too.

Dell said it was seeing some pickup in the PC business on a global scale and that is helping the premarkets trading. Citigroup & Merck were up in preopen after Lehman upgraded C and BAC upgraded MRK. Dan Niles upgraded HPQ citing higher printer sales. Everything is shaping up for a continued rally this week in advance of the elections and the Fed. However, we are going to continue to trade what the market gives us and try not to be bullish or bearish.

The game plan was to go long over Dow 8560, which just gets us over the 8550 double top from last week. I am going to raise that a little bit to 8575 to get us just a little farther over the critical area. The QQQ strategy was to go long over 24.75. That is unchanged.

 
 
  Jonathan Levinson   10/28/02,  8:36:09 AM
Bond yields are once again down while futures are up. This is the third day we've seen this divergence.

 
 
  Jonathan Levinson   10/28/02,  7:58:45 AM
Futures have been drifting up with both NDX and SPX rising above round number resistance, NDX at 1008 and SPX at 905.20 for gains of 15.50 and 6.50 respectively. Gold is up, however, currently just below 314/oz. Both C and JPM are showing gains in premarket trading, and QQQ is up 40 cents to 25.02.

 
 
  Alan   10/27/02,  11:56:00 PM
1155pm Futures up all night, now at night highs
ES 904s, YM 8490, NQ 1001

 
 
  Jonathan Levinson   10/27/02,  8:09:26 PM
from briefing.com 1 year ago 10/29/01

"14:12 ET Market Weakness : Traders noting a host of reasons for market weakness today. The main catalyst being cited is market being marked up last week to boost yr- end numbers for mutual funds; due to t +3 trade settlement, funds needed only to prop up stocks through Friday for 10/31 yr-end....."

 
 
  Jonathan Levinson   10/27/02,  8:09:16 PM
For those who follow the TRIN, here's a very telling chart of the 10 DMA TRIN. Note the recent low reached and compare to prior relative lows.

Link

 
 
  Jim Brown   10/27/02,  8:09:07 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   10/27/02,  8:08:48 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

 
 

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