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  Jim Brown   11/1/02,  6:14:28 PM
Java Monitor - We have received many comments and suggestions from readers who downloaded the Java Monitor this week. We also developed a list of problems, which need to be corrected before we release it for general use.

We thank everyone for giving it a good test. We are deactivating it until these changes are made. We have also made some changes in the current monitor to speed up the refresh rate for new content. Please continue to use the current monitor until we release the next version of the Java product.

  Kent Barton   11/1/02,  4:23:48 PM
Federal judge green-lights most provisions of MSFT antitrust settlement. MSFT trading heavily in the after-hours session...seeing ticks go by near $54.75 after shares closed at $53.00

  Linda Piazza   11/1/02,  3:58:02 PM
KO Update: 46.70 +0.22 It's good that I added that disclaimer that the day was young when I posted an update on Coca-Cola this morning, or I might have lost all credibility. It's up nearly a point since that earlier post, rallying with the DOW. However, KO continues to fall back when it approaches resistance in the 47.25-47.50 area, today reaching a high of 47.06 before falling back again. Volume is just under 5M, considerably less than the 6.5M average daily volume. Volume has not yet confirmed the move up, resistance continues to hold, and so will I for the time being. I'll keep my conservative put position over the weekend.

  Jeff Bailey   11/1/02,  3:48:20 PM
Microsoft (MSFT) $53.15 -0.58% ...stock has rallied strong in the last 20-minutes from the $52.00 level prior to the close. Decision from Judge is expected after the close.

  Jeff Bailey   11/1/02,  3:39:28 PM
03:15 Update Link

  John Seckinger   11/1/02,  3:26:19 PM
The Nasdaq has now gone above the left shoulder of its head & shoulders formation that started back in late July. This shoulder is at 1354.48, while the right shoulder is at 1347. Thinking about volatility, the vix.x index is lower by 5.3% at 34. I do expect a rise out of the index in the near term, especially with the vix.x looking like it is catching bulls right now.

  Jim Brown   11/1/02,  3:22:23 PM
Hi Jim, HAAAAHHAAAAHHAAAAAHHAAAAA. I can't stop laughing. Just how bad does it need to get. I notice the market started to improve even more after GM reported sales. It seems the big boys must have gotten lessons from car salesman and lawyers. If I hear another postive spin on this data put on by one of these traders on CNBC I'm going to puke right on the TV. (I would throw a brick at it but I need it.) Somewhere down the road (in the near future I hope) I will wake up from this bad dream. Ohhh, I am awake. Darn!!!! Have a great weekend.... Angel

It is not that funny! There is going to be some serious damage done to investor spirits if we don't get a rate cut. Back up the truck on Wednesday.

  Jim Brown   11/1/02,  3:18:33 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out on the SHORT signal at 15:14:56 when the Dow traded above 8500. OEX 457.64, SPX 899.62, DIA 85.18, SPY 90.40, DJX 103.14, NDX 1015.76, Compx 1354.49, QQQ 25.26, Emini 900.00.

We are now flat over the weekend and the MSFT announcement.

  Jeff Bailey   11/1/02,  3:17:47 PM
Alert! S&P 500 Index SPX.X trading 900 here. NDX making way higher from 1,010 here at 1,016. This per past converstion of NDX bull needing some "confirmation" from SPX. Link

This trade at 900 now negates prior bearish vertical count and has SPX bullish one again.

  Jeff Bailey   11/1/02,  3:14:25 PM
Rational Software (RATL) $6.93 +4.69% ... similar action on 5-minute chart as found in PSFT earlier. Decent day trade here after break above short-term resistance of $6.95, little pop to $7.00. Look long here, stop below $6.80, then rally to close on break above $7.00.

  Jim Brown   11/1/02,  3:14:23 PM
For those with CNBC did you notice that the last two guest commentators were either expecting no rate cut or a minimal cut that would not help anything? Appeared that Maria did not like the answers and wanted to get off the topic when the guests did not share the "predominant" view that is propelling the market. Of course they have never been accused of having a balanced viewpoint.

  John Seckinger   11/1/02,  3:13:48 PM
The December bond closed slightly above the profiled 110'07 level, and that was most likely done due to short covering since the Dow really might test 8500 during the last hour. Traders of the yield curve seemed to take a slighly bullish stance in the close, as the five-year notes closed down 12.5 ticks at 113'11. The index I am still watching is the Sox index, now above good resistance at 310 (310.90) and trying to get real buyers involved.

  Jonathan Levinson   11/1/02,  3:12:47 PM
So much for narrow ranges. The COMPX has printed new highs at 1353. This could be a routine "running of the stops", or a breakout on the way to 1375. TRINQ .29.

  Jonathan Levinson   11/1/02,  3:05:41 PM
GE is up 1.78%, but on light volume, lighter than yesterday's volume (a slight up day), which was less than the prior day's heavier downside volume. The stock could continue higher, but as volume dwindles with each up day, a decline becomes increasingly likely.

The TRINQ has squeezed lower as price on the COMPX climbs to the top of this narrow range, currently 1347. TGIF.

  Jim Brown   11/1/02,  2:58:35 PM
That 8443 level is holding. Definitely support for the green week! Never discount the big money and their ability to move the markets!

  Jeff Bailey   11/1/02,  2:54:41 PM
PeopleSoft (PSFT) Here's a short-term trader's chart of PSFT on 30-minute. Will follow here with a 5-minute, which really shows what I was talking bout earlier, but the 30-minute gives a little broader scale view of what's going on. Of course, the p/f gives the bigger picture, but it too rather bullish.

P/F chart of PSFT Link

30-minute chart of PSFT Link

5-minute chart of PSFT ... Link

  Jonathan Levinson   11/1/02,  2:53:50 PM
Here's a fine example of why my brain hurts:

2:27PM GM Oct. U.S. sales fall 32 percent from '01 (GM) by August Cole

General Motors (GM) said Friday that October sales fell 32 percent to 391,070 vehicles, well off last year's strong results stoked by cut-rate financing and other incentives. Truck sales fell 26 percent while cars lost 40 percent. Shares rose 77 cents to $34.02.


  Jonathan Levinson   11/1/02,  2:49:55 PM
Although this week has been very trying on my mind, for some reason the most disturbing thought I've had yet is of Ace and Alan playing bridge together. I mean, they wage war all day and night, and then play bridge to unwind? I prefer to tiptoe through the tulips during my time off :)

  Jim Brown   11/1/02,  2:48:15 PM
Microsoft Strangle - With the odds for a major move in MSFT on Monday and with MSFT dead between strikes at $52.25 there is an interesting trade developing. The Nov $50 put is $1.30 and the most likely winner in a denial of the antitrust settlement. The Nov $55 call is only $1.20 and very cheap insurance against an approval.

Unfortunately a "gray" ruling, something that leaves the outcome in confusion could end up with MSFT between both strikes. Investors are urged to use caution when "betting" on an unknown event.

If I was going to bet on MSFT I would probably just buy the put because any gray decision or negative decision will be helped by any post rate cut decision market weakness as well. Even a positive decision could be met with a sell the news event. Bottom line: If you want to bet I would chose the put.

  Alan   11/1/02,  2:41:07 PM
For some reason, the "Oliver Stone conspiracy" person within me seems to come out stronger on Fridays. After thinking about it, Dow close over/under 8430 truly does become very important. ...Does the string of Green weekly closes continue -or- is November 1st (and the last weekend ahead of the Elections)the first RED week since Oct. 10th 'bottom' does seem to "feel" a bit more important the closer we get to 4 PM. Sign me, a true believer of the stock market "they" (and whoever 'they' might me) /grins

  Jonathan Levinson   11/1/02,  2:40:59 PM
That sound might be traders grinding their teeth as the COMPX compresses itself into a five point range. We now have put to call readings below .70 for 2 1/2 hours. The TRINQ is very low at .37, while the QQV has dropped 1.19 to 43.53. These readings all tell me that significant bullish sentiment has already been traded, and yet the price is holding in this range. However, the 30 and 60 minute 5(3) stochastics have given bearish crosses and are headed down, but without a corresponding drop in price on the COMPX. This could spell another assault on the highs if and when the stoch becomes oversold and crosses back up.

  Jim Brown   11/1/02,  2:38:22 PM
Jim, On that rate cut survey you mentioned earlier it is interesting that Bear Stearns is the only firm to nix a rate cut. Chairman Ace Greenberg plays bridge regularly with Alan. To be the only one to go against the consensus makes me suspicious. Bet he knows something. NYC

Good point! It is really nice to have several thousand knowledgeable readers to sift the market and compare facts. My only concern would be that Ace probably doesn't talk about his bridge conversations with his traders but you can bet his personal view (and impressions from the game) are represented in the company's market direction. I personally do not think there will be a cut and I think anybody reading my comments over the last week would see that. It was also interesting on CNBC just a minute ago that the bond guy was throwing water on the rate cut idea as "no real help for the economy."

I am getting out of the way to avoid being run over by the herd on Monday/Tuesday but I am backing up the truck on Wednesday

  Jeff Bailey   11/1/02,  2:38:15 PM
Per 02:19:27 Hey... I've been in on both sides of that phone call. Want to have some fun? Tell him you're interested, and ask him what he's looking at. Take down the stock symbols. Ask him what the upside potential is, and what the downside risk is.

Then, get off the phone, pull up some p/f charts. Do your vertical count calculations, sector bullish % readings. Jot down your own notes. Do they match what he/she is pitching?

Either way, you'll find out if they're pitching inventory or if the guy is on the right track.

  Kent Barton   11/1/02,  2:37:31 PM
Ouch. That's another nail in the fundamental coffin for GM. Falling sales, huge pension liabilites, and overall economic weakness make it very difficult to justify holding long-term positions in the stock.

  Alan   11/1/02,  2:35:59 PM
MSFT becomes the wildcard for at 4:30 PM today - there is news of the years-long DOJ (Dept of Justice) anti-trust case against MSFT. Logic says nothing really 'new' will be learned, but watching MSFT into the 4 PM cash close will likely dictate how the general market closes. As well as the 'magic' Dow number of 8443.

The simply horrible 230PM GM news on their Oct. sales is yet another 'bearish' economic piece of news.

  Jim Brown   11/1/02,  2:29:03 PM
GM auto sales drop -32 % in October The numbers were just announced. Autos off -40%, trucks off -26%.

  Jim Brown   11/1/02,  2:24:48 PM
Jim, Any thoughts from you or any of the gang on why GM is only auto maker to not yet announce October sales? Sounds a little fishy to me. Thanks for all the info and insight from you all.

You don't mean a personal phone call from Greenspan suggesting it would be in the country's best interest to wait until after the close? Come on, that would be a conspiracy! Next you will be having us believe there is a Plunge Protection Team propping up the stock market. You probably believe in a rate cut too! (grin)

  John Seckinger   11/1/02,  2:22:49 PM
I am curious if 30-year will close above 110'07. Currently down '20 ticks at 110'01, the contract remains underneath the 38.2% retracement level. With almost two hours to go, it seems as though we are going to have to get some downward movement in other sectors also, including the Sox (higher by 11.61 points at 306.76). Moreover, it would be nice to see some sell programs that hits when the Nasdaq trades near 1350. I do like the fact that resistance is seen by traders at 8500, but before all these aforementioned factors happen, there is a good chance Dow traders "need" to go up there and see what stops are there before letting sellers take over.

  Jim Brown   11/1/02,  2:19:27 PM
Jim, Just received a "cold call" from a Merrill Lynch broker soliciting my business. He cited the emergence of the next "leg up" and "the market bottom is behind us". He made it clear "I still have time to get in ahead of the crowd". (Yeah, probably a year or two!)

You don't think they are attempting to unload some of the junk inventory they've acquired over the past few weeks now do you (grin)? Keith

You mean they still have brokers? Obviously brokers with nothing to do as well. Beware strangers with trade ideas

  Jim Brown   11/1/02,  2:15:39 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the stop loss on the current SHORT signal to 8500. Holding over the weekend in light of the positive bounce and the MSFT news is an unacceptable risk. Further short covering is likely for Monday.

  Jim Brown   11/1/02,  2:14:29 PM
Swing Trade Signals
Thoughts for the end of the day. We are not seeing any weakness in the early afternoon and there are several events still to occur today which could impact the close. GM has yet to report their drop in auto sales and could be dragging their feet to minimize time for a market reaction. Also, after the close the judge in the Microsoft antitrust case will announce the verdict in the penalty portion of the trial. Because she took four months to rule it has been suggested that she will deny the settlement and rule in favor of the nine dissenting states. Obviously a denial would hurt MSFT stock and we could see a major drop on Monday at the open while an approval would cause a bounce. Holding over the weekend with the MSFT news and what appears to be a positive close would be an unacceptable risk for Monday.

Since we are nearing the highs of the day and approaching the close I am going to lower the stop loss to 8500, just over the high of the day. Even if we are not stopped I will close the signal before the close. Use any dip to exit between now and then.

  Kent Barton   11/1/02,  2:13:06 PM
GSO.X Software index (101.01, +1.28) following the SOX.X to new relative highs. The break above resistance at 100 is a bullish sign, but I'd be suspicious of any sector rally that doesn't include MSFT. Mr. Softee is moving lower from its 200-dma today ahead of this afternoon's antitrust decision.

  Steven Price   11/1/02,  2:08:47 PM
Reader Question: Steven, quick question with regard to IP, do you still see weakness in this stock. Even though the market is up, the stock doesnt seem to catch steam. Is the 35 mark now its resistence even though it passed it earlier and has came back down. Also did you happen to see that Prudential lowered it rating to Sell on IP. Thanks for all the info!!

International Paper $34.91 (-0.02) As a Dow stock, IP will often find buyers on up days in the Dow. I think the current weakness is evident from its failed rebound over $35, in spite of the Dow rally, which also failed just below the 50-dma of $35.59. I think $35 is still a resistance point, as far as a closing basis, but it looks like the 50-dma is even tougher than the round number. More importantly, $35 had been support, which is now gone.

  Jeff Bailey   11/1/02,  2:02:31 PM
Starting to think further... Hmmm.... NDX trading 1,003 +1.39% and off of the 1,010 alert at 12:38:56. As I look at various charts and even recent experience of my own in various stock trades, one thing a trader might want to do ahead of FOMC meeting on a more cautious note is trade smaller position (long/call or short/put) as we've talked about, or even WAIT until a CLOSE is found at/above a trigger point.

I'll trust a market maker or specialitst about as far as I can throw him/her right now. Last night, when speaking to the Denver Trading Group, I saw a lot of nodding of heads and grins when discussing the potential "bull trap" in the SPX $5 chart. Now... the $10 box of the NDX is not conventional by any means. The ability of the NDX to "inch" higher to a new relative high is encouraging, but when day trading some stocks recently, I got a couple losing trades trying to buy some intra-day breaks higher. Since then, I've been have better success looking for stocks that give the little move higher, then buying the pullback to support on a 5,10,15,30,60 minute chart where the moving averages have been serving as support, then day-trade targeting. What I think is going on is that market makers are still trying to get a feel for order flow, see what kind of "panic" buying is there from bears on a little break above resistance, while also getting a feel for "new bull" buying and any sign of aggressiveness on the move above resistance.

PeopleSoft (PSFT) $18.64 +3% is a good example today. Breakin above 9-day horizontal resistance, but rather tentative. Gave a little pullback after printing relative high of $18.67.

Will show a chart in a minute.

  Kent Barton   11/1/02,  2:00:23 PM
Human Genome Sciences (HGSI, $8.98 -0.79): Trading at fresh multi-year lows after giving a quad-bottom p-n-f sell signal earlier this week. Wouldn't be looking to chase this one lower, but another failed rally at the $9.40 area would give aggresssive bears a possible entry point. HGSI missed earnings by 20 cents on Tuesday. The company has several drugs in the pipeline, but none on the market. This lack of revenue could force HGSI to start raising operating cash as early as next year.

  Jim Brown   11/1/02,  1:59:18 PM
Reuters just announced this survey:
The latest survey of primary dealers, who work directly with the Fed in the open market, was conducted after the October employment report and Institute of Supply Management manufacturing survey were released on Friday.
Here is a summary of results:
-- 19 of the 20 surveyed expect a rate cut at the Nov. 6 policy meeting, up from six in the previous survey on Oct. 7. In the earlier survey, 10 expected a cut in either November or December.
-- 14 of the dealers who expect a rate move on Nov. 6 forecast a 25 basis point cut, while five see a larger 50 basis point move. One firm -- Bear Stearns -- sees no change in rates.
-- 17 dealers expect fed funds will end the year at 1.25 percent, meaning that most expect another rate cut in December.
-- 11 dealers expect the federal funds rate to remain at 1.25 percent through the end of June 2003. The range of views, though is wide, from rates at 2.00 percent by mid year to as low as 0.75 percent.
-- The median chance that the U.S. economy will fall back into recession has risen to 30 percent in the latest poll, double the 15 percent chance when the question was asked on Sept. 24.
-- Two of the dealers could not be contacted.

The entire story has a breakdown by dealer and shows their changes in thought process over the last several months. Link

  Linda Piazza   11/1/02,  1:53:59 PM
Reader Question: What is your opinion about long GE at $25.7? It has just broken the inside [day], to the upside. Stop just below the low of the inside day at $24.85. Target first $27 in one week and then $29.5 in one month. What do you think most likely: stop out or meet the 1st target?

Response: We really do have the smartest readers, scanning stock charts for formations such as inside days. I'd have to be wishing evil on Jonathan and his GE put position to recommend GE calls, but I promise to look with total objectivity at the charts! First, I read a couple of days ago about a potential strike in one GE plant, supposedly to occur last night. This morning, I haven't been able to find any news about the strike, so I'm not sure if it was averted, and whether that would have any impact on today's actions. This survey will consist only of what I see in the charts and not what news might impact further stock movement.

GE's move carried it above the 22-dma at 25.24, and also some historical resistance and gaps that come in about that level. A close above these levels will also complete the third candle of a somewhat imperfect morning star pattern. (5)(3) stochastics are beginning to hinge up, and RSI is beginning to move up above the 50 level. The 22-dma has cupped upward a bit, seeming to provide support for recent prices. These are all bullish indicators.

However, balance these bullish indications with the fact that GE is still on a P&F sell signal, and it will take a trade at 28 to give a new buy signal. Before that 28 level is reached, GE faces more resistance at 26.25, the 50-DMA at 26.73, and further historical resistance just above 27.50. Couple this with the bearish divergence formed when stochastics recently turned down from overbought with prices at a lower high than the last time stochastics were in overbought territory.

If I ever had predictive abilities, the upcoming elections and FOMC meeting have erased my abilities. Until we get past that time period and see how markets react, I'd consider committing my money to partial positions only. Even back when I was a more reckless options trader, I often stepped aside before FOMC meetings and let the dust settle before entering the markets. You've chosen a rational stop loss on this, and getting out at that level will mean your losses are minimalized if GE does turn back before reaching your targets. Still, I'd worry about GE being turned back at those gathering DMA's and resistance levels before it can reach your ultimate targets. If you decide to go forward with this play or already have entered, watch how quickly stochastics rise as the price rises. A quick move up into overbought level with only a little movement in the price might indicate more propensity for the stock to get turned back at resistance.

  Jonathan Levinson   11/1/02,  1:53:29 PM
The CBOE put to call ratio came in at .64 and .65 for the past hour. While it is impossible to tell because of the complex option strategies available, my guess is that this is indicating a much higher level of bullish speculation compared with this morning, and so, the market being what it is, the door now appears open for the next pullback.

  John Seckinger   11/1/02,  1:39:22 PM
Checking the Intermarket Relationships: Bonds lower at 109'29. A close above 110'07 should be bearish for stocks. Gold higher by 3.5% and just under its 50 DMA (XAU at 65.69 while DMA at 66.04). Utility Index higher but seems to be "topping out" as the 50 DMA (247) looms large above (UTY at 245.8). Dollar right at 106, but chart reading is bearish (weaker dollar is bearish for stocks).

  Alan   11/1/02,  1:38:17 PM
1:30 quotes: ES 893s, YM 8443, NQ 1006
NQ earlier made a new weekly and monthly high when over 1011
Last Friday, the "magic" number was Dow 8320, for that was the number the Dow needed to close over to form the 3rd green weekly close. Today's magic number for the Dow is 8443 and this appears to now be the pivot battle heading into the afternoon's close.

In other words, close > 8443 and 'they' can say, "4 th weekly green close" ahead of next week's elections.
Close under 8443, and the Bears can say, "November starts with the market doing its first Red weekly close since the Oct. 10th rally" (and also would be my Futures Wrap title for Sunday - [grins]}

  Jeff Bailey   11/1/02,  1:35:47 PM
01:00 Update Link

  Jim Brown   11/1/02,  1:17:20 PM
Jim, I pride myself on looking at what the market is "doing" and not what I think it should be doing. With that in mind I'm bearish and think you and your staff have been doing an excellent job with not getting emotional through this bizarre week. I'm just baffled at the strength in this market but If I sell my puts I'll feel like a sucker when the market does break-down! Any words of wisdom to help me stay convicted and do the right thing. Rob.

Stay the course below Dow 8550. Let the market tell you when to quit.

  Jim Brown   11/1/02,  1:13:44 PM
Another view: Seeing a rate cut almost certainly coming on Wed, many investors (vs traders) will want to get in before the jump that happens afterward. Knowing this, the shorts may give up and cover positions until after the fed. They won't want to be short come Monday when Ma and Pa Kettle read the weekend paper and find out that a rate cut is almost assured.

Based on how many times I knew a drop was coming on Friday and instead short-covering made the Friday close higher, I would beware. There's no more bad news coming to fuel a mkt drop. Why should someone stay short between now and Fed mtg? Ron

Ron, you have clearly hit the nail on the head. For traders that believe there will be a rate cut and a huge market rally afterwards there is no reason to be short and every reason to be long. The keyword here is "believe" since the economic numbers today make that chance much less likely. Some of the commentators on TV have been acknowledging that fact already. Also, have you heard ANY Fedspeak about the need to support the economy further? I haven't. Ma and Pa investor are still thinking rate cut and we could be seeing some buying due to this but I think more relative is the "short covering" to avoid a positive surprise by the Fed. I have been warning about that in the QQQ all week. I just did not expect the Dow and the broader markets to be impacted this much. If we see more buying that pushes us over the strong resistance from the last two weeks (8550) we will close and move to the sidelines as well. If the news changes to a "rate cut not assured" then I think you will see weakness return. I did not even touch on the possibility for a sell the news crash on any decision by the Fed.

  Jonathan Levinson   11/1/02,  1:08:09 PM
In agreement with Steve. Check your volumes! Volume is very light on the stocks whose options I hold. A quick run to resistance on a light volume day shows a lack of conviction, and makes me a more comfortable bear. Continue to watch your stops and resistance levels, but this has me sitting easier.

  Jeff Bailey   11/1/02,  12:47:04 PM
Agree with Steve's 12:41:44 post, but would look to SPX as "confirmation" type trade at 900. In recent sessions, NASDAQ-100 as much as I hate to admit it, has been leadership major Index. Smaller-cap Russell-2000 (RUT.X) 378 +1.23% also making some "noise" above its 50-day SMA.

  Steven Price   11/1/02,  12:41:44 PM
As long as the SPX can't manage to hold above 900, I don't see the bulls gaining much steam and I think short positions are safe. That is not to say there isn't money to be made on the long side in a short term move ahead of the FOMC meeting, but I would not run to sell out my long puts just yet.

  Jeff Bailey   11/1/02,  12:38:56 PM
Alert! Per last night's Index Wrap and unconventional $10 box of he NDX. Getting upside alert here at NDX.X 1,010 +2.26%. Link Has upside here to 1,050 and with selling in Treasuries, looks bullish.

  Jeff Bailey   11/1/02,  12:31:12 PM
Excellent Question First, let me compliment you on your thorough discussions in the updates. Always enjoy a full explanation. I think I followed the whole thing up until the end. Thinking that a rate cut will happen and that it will be bullish for stocks, so bonds will sell off and interst rates will rise. So you buy calls on the interest rate. Question: why do you go out to March if all this is to occur next week?

The potential "end" for interest rate cuts could become the "beginning" for higher Treasury YIELDS. As such, why not buy as MUCH time as possible. As mentioned in the 11:00 Update, the 30-year YIELD bullish vertical count is 63.50 or 6.35%. I'm not thinking 6.35% next week, but the MORE TIME I buy, the more opportunity I give the 30-year YIELD trade to work. I really DON'T care if I buy too much time. I've lost more money in an option by NOT buying enough time that I have in buying too much time.

Now... maybe I need to make something clear. The reason I like a YIELD call today, versus an equity index type call, is that I think there is the potential for more DOWNSIDE RISK in an equity index call around the FOMC meeting that a YIELD call.

There's an old market saying... "buy the rumor, sell the news." Well... so far I think the "buy the rumor" part has been done with stocks and Treasuries. Will the MARKET sell the news next week? If you're holding YIELD calls, you sure hope so. If you're holding equity calls, you hope not.

Now.... we've calculated some bearish counts in our index trader wraps and "know" where some bullish trends are. Guess what. If the MARKET decides to "sell the news" next week and we get "lucky" and Treasuries sell off with the thinking of ... "that's it, no more rate cuts for awhile" and stocks pull back to support, then we have some conviction perhaps to get some stocks on pullbacks.

  Jim Brown   11/1/02,  12:20:22 PM
Swing Trade Signals
The Dow 8450 resistance is still holding and should that fail there is strong resistance at 8500 which is also the 100 DMA today. Since most professional traders expected a big drop today without positive economic numbers they were shocked when the buy program blew through. I have been warning everyone all week that the short interest on the QQQ was extreme and there was a good chance we could see some strong short covering there before next Wednesday.

The failure to drop this morning and the sudden bounce has thrown the bears into a strong caution state of mind. Suddenly the picture is not so clear for them although there has been several commentaries today saying the 50 point rate cut chances are now zero and a 25 point cut is now in question. This would appear to be bearish but the bounce scared them into paralysis of analysis. This afternoon should be really interesting. Strong overhead resistance, weakening economy, no fundamental reason to buy and the chances of a Fed rate cut slipping. Am I missing something here?

Ford reported that auto sales fell -33% in October. GM has not released its numbers yet but they added a $2000 cash back option to their Zero, Zero, Zero program. That suggests that sales have been less than stellar.

  John Seckinger   11/1/02,  12:17:19 PM
A 60-minute chart of the Dow shows prices at the top of its channel (read: lower highs) and it would take a close above 8500 (60-minute chart) to gets shorts to really cover. Looking at support, if the Dow falls under 8400, there is a good chance the bottom part of the channel will be tested at 8300.

  Jeff Bailey   11/1/02,  12:02:34 PM
Retailers (RLX.X) 284.43 +0.54% ... per Steve's comments. A quick look at the p/f chart from Dorsey/Wright shows RLX.X recent battle with bearish resistance trend at 295 ($5 box scale) then 3-box reversal lower at 280. It would take a trade at 300 to get RLX.X above downward trend and a trade at 310 would be a triple-top buy signal.

Unfortunately, I can't find a p/f chart of the RLX.X at stockcharts.com, but here's a chart of the Retail HOLDRS (AMEX:RHT) $75.00 +0.53% Link which looks very similar to RLX.X.

According to Dorsey/Wright and Associates, retail sector is "bull alert" at 31.94%. It would take a reading of 46% to get the sector "bull confirmed", while a reversal lower to 26%, would be a reversal back into "bear confirmed" status.

  Jim Brown   11/1/02,  12:01:26 PM
Swing Trade Signals
I know this bounce has concerned many traders but we need to focus on the longer term picture. We have not even come close to yesterday's highs an are struggling at resistance of 8450, SPX 894, OEX 455. The program trading has triggered lots of buy to cover stop losses and traders are confused.

I have received several emails about the possibility of market manipulation before the election. If it was going to happen today is the likely day. They may want to close the markets on a positive note today to aid in those candidate selection conversations across the dinner table this weekend. If the Plunge Protection Team really does intervene then today would be an ideal day, especially if the Fed has a negative surprise on the agenda for Wednesday.

  John Seckinger   11/1/02,  11:57:44 AM
The 30-year bond (ZB02Z) is now down the 'magical' one full point (32/32), which should mean equities will have an underpinning bid for the rest of the session. What could be another catalyst? The Nasdaq at 1347, 30-year cash yield at 5.1%, and sellers determined to settle the Dow lower for the week. I should also mention the SOX above 300 (now at 304.88), and the Volatility Index (vix) right at 35 (somewhat pivotal area).

  Steven Price   11/1/02,  11:51:11 AM
Retail Index (RLX.X): 285.24 (+2.34 ) The rally has taken some of the retailers up, but the RLX stopped short of its 50-dma of 285.97. It broke over the 50-dma intraday yesterday, but failed there, and unless it can break above and hold, I still think the short entries on retail plays are safe. I confess that I'm bearish even on a breakout leading up to the fed meeting, as the trend in the sector still shows lower same store sales and monthly disappointments. I can't imagine a robust holiday shopping season, given the recent initial jobless claims and Consumer Confidence numbers.

  Jeff Bailey   11/1/02,  11:45:35 AM
11:00 Update Link

  Jonathan Levinson   11/1/02,  11:39:52 AM
I have to agree with Alan. It looks like short covering to me. In any event, the COMPX is now chopping along between weak resistance at 1335 and stronger resistance at 1343, while the US Dollar Index is bouncing off 105.80. This has been the longest, most interminable month I've ever traded, and, alas, it looks like October isn't over yet. Perhaps Jim jinxed it by celebrating its passing last night? (tired grin)

  Alan   11/1/02,  11:39:43 AM
So far, this selling is just a tiny "shake" and "real" selling. NQ held 1000 level, ES held the 888 support so far.

  Alan   11/1/02,  11:35:42 AM
Index Futures
Futures Trade Signal EXIT
Signal is SHORT YM from 8442
Place a buy to close (cover the short) bid in at 8392 which would provide a Gain of +50 points on 1/2 your position size.

  Jim Brown   11/1/02,  11:31:35 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The rocket ride from that buy program is fading. If you are not in the current short signal a Dow trade under 8400 (OEX 452, SPX 888) would be a new entry point. If this 30 min green candle fails it would reinforce the short side picture. The buy program caught many traders off guard and there were a lot of stop losses triggered. The key here will be to see how quickly they jump back in.

  Alan   11/1/02,  11:29:57 AM
Index Futures
Futures Trade Signal EXIT
Signal is SHORT YM from 8442
11:24 AM YM (Dow) shorts now want to see ES lose its 890 support, as well as NQ losing its 1000 level. Currently ES 890.50, NQ 1001, YM 8423

  John Seckinger   11/1/02,  11:26:44 AM
Who says the bond market doesn't follow retracement analysis? See chart: Link

  Steven Price   11/1/02,  11:25:16 AM
Reader Question: Hi Steve, I am currently holding the TEVA March 65 call with a cost basis of 8.00. Also just heard it will be added to nasdaq 100 on November 7. What would be your upside target? I'm thinking about closing shortly after Nov. 7 . Any Thoughts would be appreciated. Thanks, Mike

Teva Pharmaceuticals (TEVA): $78.18 (+0.75) It is tough to pick a target on a stock with an artificial catalyst. Fund managers will have to add the stock to their Nas-100 portfolios, but I've heard the number of shares will be 3-4 million, which is about 3-4 times the ADV. One thing I would note is that I would look to sell ahead of Nov 7, when the buying should be complete.

  Alan   11/1/02,  11:24:09 AM
Index Futures
Futures Trade Signal EXIT
Signal is SHORT YM from 8442
YM (Dow) shorts now want to see ES lose its 890 support, as well as NQ losing its 1000 level. Currently ES 890.50, NQ 1001, YM 8423

  Steven Price   11/1/02,  11:12:59 AM
Watson Pharmaceuticals (WPI) $28.25 (+0.76) I like the bullish engulfing candle in OI call play WPI. new entries can look to initiate here, over yesterday's high of $28.19, or wait until the stock breaks $28.50 for a more decisive move.

  Alan   11/1/02,  11:09:12 AM
Index Futures
Futures Trade Signal ENTRY
As a note: YM's high was about 8455 a few moments ago.

  Jonathan Levinson   11/1/02,  11:08:40 AM
The CBOE put to call ratio came right back to its normal range on this blast, latest reading at .72. Once again, I believe that 1348-50 should be the high on this move, if the COMPX makes it that far.

  Alan   11/1/02,  11:07:41 AM
Index Futures
Futures Trade Signal ENTRY
New Signal, go SHORT YM (Dow 5 futures) at 8435 or better.

  Jeff Bailey   11/1/02,  11:07:06 AM
Laughing.... not at John Seckinger's 11:01:15 post, but believe it or not, John and I haven't talked since the Halloween party. Interesting correlative observations I think between John's 11:01:15 post and my 11:03:14 Post.

Part of my thinking here is not only technical, but if FOMC cuts rates next week, then not much more room for rate cuts and I think more upside to 30-year YIELD. Helps me offset some stock puts I'm holding too.

  Alan   11/1/02,  11:03:54 AM
NQ is now double top here near 1010 , going back to Monday's open,

  Jeff Bailey   11/1/02,  11:03:14 AM
Reestablishing 30-year YIELD Call exposure today. December 30-year futures (us02z) 109'20 -0.93% has PRICE breaking below 2-day low and down from 21-day SMA. Taking partial position in the March 30-year YIELD ($TYX.X) 5.069% calls. Link

  John Seckinger   11/1/02,  11:01:15 AM
The long bond yield just went over yesterday's high, resistance 50.8. Could this be the beginning of a Dow rally?

Response: There certainly seems to be some technical selling within the fixed income arena, coming after the TYX contract (30-year cash) failed to penetrate the 22 or 50 DMA's (49.81 and 49.67, respectively) during the last four sessions. Friday's low was 49.87 (read: 4.987%). Is this the start of a Dow rally? A weekly chart of the TYX might not agree, since the 22 weekly moving average is at 5.09% and the contract has not settled above this average since early June. The contract tried the last three weeks, but failed as buying entered late in the week (read: lower yields). With that said, I would wait until a close above 5.1% before looking for a serious allocation out of bonds and into stocks.

  Steven Price   11/1/02,  11:00:49 AM
Semiconductor Sector Index (SOX.X): 302.36 +7.31 The index continues to hang in there, establishing higher lows on each pullback. 305.03 is the recent high and I like new entries in OI call play FCS on a move above that level.

  Alan   11/1/02,  10:58:33 AM
Index Futures
Futures Trade Signal ENTRY
Go SHORT YM at 8420 (or better),

  Alan   11/1/02,  10:55:43 AM
One thought on this oddish buying - maybe some shorts are deciding to end the week flat and frustrated - wait till FOMC and Election is over and THEN come back in to open their Shorts.

  Jim Brown   11/1/02,  10:52:20 AM
Swing Trade Signals
I am amazed with the abrupt turnaround in the market. As I said last night a positive move today would be very bullish. It appears shorts are covering in advance of the Fed meeting and there are rumors that a big hedge fund was exiting large short positions this morning. We still have strong resistance at 8500-8550 and I am going to leave the stop loss at 8575. We have seen these big swings caused by program trading to reverse just as quickly. This is not a million retail traders all deciding that today is a good time to go long.

  Alan   11/1/02,  10:49:28 AM
NQ Nasdaq100 futures printing 1001 right now , Dow over 8400, FAST pops higher on no visible news

  Alan   11/1/02,  10:47:52 AM
I can find no News to explain the 10:30 AM buying - ES ran about 8 points in about 8 minutes. Now sideways at 885 pivot, next higher is 887, 892, 895, 900

  Jeff Bailey   11/1/02,  10:47:37 AM
Expedia (EXPE) $66.18 -2% ... Jeff: what's your thoughts on shorting expe here at 67?

After giving a spread-triple-top buy signal at $56, then breaking downward trend, longer-term p/f chart of EXPE is bullish. Today's trade at $66 has stock giving 3-box reversal lower. According to Prof. Davis study, the spread-triple is/was profitable 85.7% of the time, average gain of 22.9% in 7.7 months. From $56, a 22.9% gain would be $68.82. The bullish vertical count of EXPE is $76. Link

Hmmmm.... considering the NASDAQ-100 has been stronger than I expected and still some upside room to the bullish vertical count, and stock ABOVE trend, would be hesitant to try and pick a top. Could try with 1/4, but tight stop above yesterday's high of $69.35. Link

Right now, if looking short, prefering stocks that are giving sell signals and breaking below trend with weaker relative strength. EXPE isn't one of them.

  Alan   11/1/02,  10:45:13 AM
Index Futures
In order for the Dow to continue its 4th week in a row of Green closes, it must close over 8443, something to consider for later this afternoon.

  Alan   11/1/02,  10:39:35 AM
Index Futures
After going sideways for over an hour, it seems 10:30 AM has found some buyers - perhaps shorts frustrated on not being able to get ES under 875 and Dow 8300 - but ES, YM DOw, and NQ are all currently at day highs.
ES 883, YM 8350, NQ 995
As NQ seems to be 'leading', watch NQ to see how it handles the near-term 1000 resistance level. IF it fails (again), that could lead to 'new' selling

  Jonathan Levinson   11/1/02,  10:39:01 AM
That high put to call reading of 1.08 means that there are too many puts that need to get blown out. I expect the market to make it to just above resistance before reversing back down, just long enough to fake bulls into buying some calls and bears out of their puts. The TRINQ is at .44 and there's gap resistance at 1329 (exceeded) and chart resistance in the 1330-35 area. I do not think we will see new rally highs set on a day when the US Dollar is down, gold is up, and there's a 3.25B fed drain taking place.

  Jim Brown   11/1/02,  10:38:59 AM

  Linda Piazza   11/1/02,  10:33:26 AM
KO update: 45.76 -0.72. Perhaps my theory that Coca-Cola was one of the big-caps being acquired in end-of-year window dressing was correct, as, now that the window dressing has stopped, KO has dropped from this morning's opening of 46.48. It may be headed for its second retest of the six-year 43.50-45.00 support level in a week's time. The day is still young, but so far, the last two day's candles have muted the bullish implication of the morning-star formation that formed the first three days of the week.

  Alan   11/1/02,  10:29:32 AM
Index Futures
NQ (ndx) futures seem to be leading once again to the upside. Held their 972 support near 10 AM, and are now currently day Highs at 988 (988 is a also a pivot), and the next large upper resistance is 1000 which it has failed at several times in the last week.

  Jim Brown   11/1/02,  10:26:45 AM
Swing Trade Signals
After bouncing on the ISM numbers the weakness is finally settling in and the 8300 level is approaching. The possibility of better than a 25 point rate cut dwindled with the moderately bad ISM numbers. Bad but not horrible. The confusion is increasing but the urge to be in stocks is not.

  John Seckinger   11/1/02,  10:19:20 AM
The current low in the Dow is at 8309, corresponding to the high set on July 25th. A horizontal line from July 25th bisects through roughly 13 daily closes, openings, or lows since. Can you say "pivotal" area? And yes, I do expect the Dow to trade below 8309 today. Ideally, I would like a close under 8250.

  Steven Price   11/1/02,  10:18:37 AM
Ask the Analyst: Just a reminder to send this weekend's requests for an in depth analysis of your stocks to asktheanalyst@OptionInvestor.com

  Steven Price   11/1/02,  10:14:03 AM
Here is a list of stocks in the RTH for those considering the short play: ABS AMZN, BBY, COST, CVS, FD, GPS, HD, KR, KSS, LOW, LTD, MAY, RSH, S, SWY, TGT, TJX, WAG, WMT

  Jonathan Levinson   11/1/02,  10:11:26 AM
The fed has announced a weekend repo of 7.25B for a net drain of 3.25B.

  Jonathan Levinson   11/1/02,  10:10:13 AM
COMPX low of the day at 1313 just now, GE, C at lows of the day, TRINQ .99 with plenty of room to run upward, yields adding to their gains, and US Dollar Index down below 106.00. HUI +3.66 and XAU +2.31. If this doesn't terrify the bulls, I don't know what will.

  Alan   11/1/02,  10:06:52 AM
Index Futures
ES was about 878-79 BEFORE the 10 AM ISM numbers. Within a minute, it was at 881-882. Seems the market goes up even with sideways econ data under the concept of "well, they were mostly inline * BUT * at least they were not much worse than expected" ES now sideways at 880.

Dow remains rangebounce from 8300 to 8350.
ES at 10:05 AM is selling off, now at 877s and at day lows.
ES Week lows are 868.

  Steven Price   11/1/02,  10:06:11 AM
Retail Holders (RTH): $73.77 (-0.83) I like entry here in the RTH put play, with the break under $74 and Wal-Mart also looking heavy ($52.85 -0.70) under its 50-dma of $53.59

  Jonathan Levinson   11/1/02,  10:03:11 AM
The COMPX has just printed a high of the day at 1322 and looks to be starting a gap fill. Gap resistance is at 1329.

  Steven Price   11/1/02,  10:02:43 AM
I got an email before the open yesterday morning from a trader in the Amgen pit at the CBOE, telling me that the volatility skew in AMGN was getting very high and he was thinking about selling some puts. This means that the downside puts (lower strikes) had been bid up and the prices were very high, relative to the higher strikes. Amazing how "someone" was buying puts in a rising stock, just before yesterday's drop. One of the advantages traders have is "reading" the order flow. This was a perfect example. Usually in down markets volatility goes up and in rising markets it comes down. However, tracking the short term moves in a particular stock's implied volatility can give a trader clues and help them "read" the paper flow.

  John Seckinger   11/1/02,  10:01:59 AM
ISM comes in at 48.5%. Economists did revise their estimates down to the 47-48 percent range. Note: ISM was 49.5% in September. Orders rose to 50.9% from 50.2%.

  Jonathan Levinson   11/1/02,  9:55:50 AM
The fed has 10.50B in repos maturing today in overnight and 2 day repos. No announcement yet.

  John Seckinger   11/1/02,  9:49:40 AM
I am hearing that a hedge fund is taking profits on a short-term bond position, most likely done in order to square the account before the ISM release, election, and FOMC meeting. Note: The Dow closed last week at 8443. We are currently about 100 points lower.

  Steven Price   11/1/02,  9:49:00 AM
Trimeris (TRMS) : $53.00 (+0.10) Traders who are a little gun shy after yesterday's volatility in TRMS can sit this one out, but the stock is pushing up against $53.00 and a break through that level can be seen as an entry point for long plays.

  Alan   11/1/02,  9:47:36 AM
Index Futures
ES futures were near 892 resistance yesterday late afternoon. This morning they dipped down to the 876s level - yesterday's lows and also ABOVE the key ES 875 support. In the last 5 minutes, market is bouncing on 1) failure to get ES BELOW 875 and 2) shorts taking some profits heading into the ISM number.

  Steven Price   11/1/02,  9:44:47 AM
International Paper (IP): $34.95 (+0.02) I like IP's failure at the $35.00 level on a rebound attempt this morning for short entries. Conservative traders can give it a little time this morning to make sure it can't get over the hump, but this is the action I've been looking for.

  Jonathan Levinson   11/1/02,  9:41:54 AM
The thirty year yield is down .6 of a basis point, but shorter yields are green. The TRINQ has eased off, currently 1.3, though the COMPX has only recovered 1 point off its lows. Let's see if 10AM NAPalMs the market with the ISM number. (tired groan from peanut gallery)

  Jim Brown   11/1/02,  9:39:40 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The addition points for adding to the 1/4 short position were listed in the game plan last night as +1/4 with a trade under 8350 and moving to a full position with a trade under Dow 8300. The speed of the drop at the open blew right through 8350 and you may or may not have been able to add on schedule. I still think that a trade below 8300 should be the trigger to go to a full position.

Cautious traders should wait until after the ISM numbers at 10:AM as we could see a bounce on good numbers before we move down again. I would look to short any bounce failure as a higher entry point.

  Jonathan Levinson   11/1/02,  9:36:41 AM
106.00 seems to be support for the moment on the US Dollar Index. Here's a chart to display the carnage:


  Jonathan Levinson   11/1/02,  9:34:09 AM
A lot of red on my screen. The COMPX is now 6 points below its gap down open and is still printing new lows.

  John Seckinger   11/1/02,  9:33:17 AM
With the ISM release 30 minutes away, bonds remain in a tight range while the US Dollar trades under 106 for the first time since September 5th. Support should be found at 105, but the consolidation pattern that began in early August has been broken to the downside. Deflationary concerns? Possibly. Most likely it is currency traders overseas telling the US that the rate cut next week will not help our economy as much as we think.

  Alan   11/1/02,  9:32:21 AM
Index Futures
Futures Trade Signal ENTRY
Futures are currently flat, and will likely stay that way until AFTER the ISM number. If you have read my column last night, and saw the 2 ES charts from during yesterday's 830 am and 10 am Econ reports, you can see how insanely fast ES can move moments after a report - 5 ES points in 60 seconds is not uncommon if the report is much worse or much better than expected.

  Jonathan Levinson   11/1/02,  9:31:03 AM
9 point gap down open on the COMPX to 1320. TRINQ 2.58, TICK.NQ -65.

  Alan   11/1/02,  9:28:37 AM
Index Futures
Futures 925AM very quiet, ES 879s, YM 8322, NQ 982 and so far, Europe is red. ES is under 880, and with YM at 8322, that indicates a Dow cash open of about 8335-40, and under the 8350 pivot. My quess is very quiet until the 10 AM ISM number (I miss the 'NAPM' word instead of ISM [grins]

  Jim Brown   11/1/02,  9:25:47 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
This is a restatement of the current stop loss on the open short signal. Currently the stop loss is 8575 and will remain there until after the ISM data.

  Jim Brown   11/1/02,  9:23:08 AM
The markets dodged a bullet with the jobs report this morning. The report was inline with estimates and a loss of -5000 jobs but September was revised upward from -43,000 to -13,000. The Personal Income came in slightly less than expected but close to estimates but Personal Spending was down -0.4% compared to +0.4% last month. This was consistent with a consumer that is pulling back and beginning to save money for the coming rainy day.

MSFT is holding the futures down with a decision on the antitrust settlement due on Friday. With complaints that MSFT is withholding code this week the decision is far from a slam dunk.

This morning should be calm until the ISM numbers at 10:AM.

  Steven Price   11/1/02,  9:22:09 AM
My guess is that the Fed will do what it wants to do and can spin the data any way it wants. This morning's jobs data (unemployment rate better than expexted, but payrolls worse than expected) can be spun in either direction. With a quarter point cut already pretty much an assumption, these numbers did nothing to really sway sentiment.

  Jeff Bailey   11/1/02,  9:18:55 AM
09:00 Update has been posted. Link

  Jonathan Levinson   11/1/02,  8:28:26 AM
Futures are off this morning, but the real news is the US Dollar Index and Gold, both of which look like they're getting in gear for Mr. Greenspan to cut one. The US Dollar Index is in a slide and is approaching 106.00, while gold has broken $320 per ounce. If you're a foreigner holding US Bonds, this has been a bad month for your investment. But, there's always been the coupon with a guaranteed rate of return. If the currency in which that coupon is denominated is getting tanked, then you don't even have that. Which means... Sell! I anticipate higher yields today, but no corresponding rise in equities. Foreigners dumping US bonds because of the dollar will NOT be rolling the proceeds into MSFT, GE, or IBM. Neither will mutual funds. The wildcard should therefore be the fed, and I will be watching for this morning's OMO announcement.

  Jim Brown   10/31/02,  10:35:33 PM
The Swing Trade Game Plan has been posted: Link

  Jim Brown   10/31/02,  10:34:55 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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