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  Jim Brown   11/9/02,  3:21:14 AM
Market Monitor Survey - As you know we experienced some problems with different computer types and operating systems when we tested the Java version of the market monitor last week.

Because we have readers worldwide viewing the monitor from their office on every kind of computer imaginable and readers at home on everything from Windows95 computers to WindowsXP Pro and Apples we need to determine what percentage of each operating system we are dealing with. There is no reason for us to spend hundreds of hours designing code that will run on Windows95 if only .001% of the readers are still using that system.

We hope to have the new Java system up by next weekend but would like your help today. Please take the following 10 second survey and help us get an accurate profile of the reader base. Once you have entered your selection you will get a current snapshot of the results. If you don't take the survey you cannot complain if your computer type is misrepresented in the standings.

Reader Survey: Link

Thank you in advance for your help!

 
 
  Jim Brown   11/9/02,  3:03:48 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   11/8/02,  4:56:15 PM
Xcel Energy (XEL) $10.57 +0.28% Link ... utility operator in 12 states denies this morning's Wall Street Journal report that it has not filed for Chapter 11 bankruptcy and has no imminent plans to file for bankruptcy protection.

The Wall Street Journal reported that XEL, which owes about $10 billion to its bank lenders and bondholders, offered to surrender full ownership of the company to creditors through Chapter 11 bankruptcy filing. The Journal went on to say that a filing by the unregulated power-generation subsidiary of XEL would be the first in what is expected to be a string of energy-company bankruptcies in coming months.

 
 
  Jeff Bailey   11/8/02,  4:30:19 PM
Duke Energy (DUK) $19.96 -4.08% ... lower at $18.76 after just announcing it has received a subpoena from the San Francisco office of the U.S. Attorney as part of a grand jury investigation. DUK officials said it will cooperate with the U.S. Attorney, as it has with other government organizations inquiring into similar issues.

Disclosure.... I currently hold a bearish position in DUK

 
 
  Jim Brown   11/8/02,  4:12:15 PM
Swing Trade Signals
The managed to hold the Dow to a positive close for the week but look at the selling in the Nasdaq, OEX, SPX. All three finished the day weaker than the Dow and are an indication of a broader market problem. Glad we held that short over.

 
 
  John Seckinger   11/8/02,  3:56:52 PM
Some notable earnings next week includes Wal-Mart before the open on Wednesday, Target before the open on Thursday, and Dell after the close on Thursday. Note: Bond market closed on Monday, and there is an IBM analyst meeting next Wednesday. Also on Wednesday, SF Fed President Parry speaks in Arizona. He is a non-voter. Next Friday: Double Witching Options Expiration. Should be fun.

 
 
  Steven Price   11/8/02,  3:54:20 PM
Reader Question: What are your thoughts about holding or opening the RTH put ahead of next weeks heavy earnings calendar for the retail sector. Mike

Response: Retail Holders (RTH) $72.50 -1.24 This week brought some decent sales numbers but cautious comments about the upcoming quarter. I expect more of the same next week and I'm keeping the play open. I also like the breakdown below $73.00 for entries.

 
 
  Jim Brown   11/8/02,  3:51:55 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The battle is still raging over 8517 but the war appears to be going in favor of the bears. I am holding this short signal over the weekend but you are in charge of your own fate. Decide now.

 
 
  Jeff Bailey   11/8/02,  3:28:29 PM
The 3:15 Intraday Update has been posted. Link

 
 
  Jim Brown   11/8/02,  3:20:39 PM
Swing Trade Signals
If they are propping this market up they must be in a heated battle because it is not going anywhere. Dead stop at 8517, the exact spot almost where they need to finish the week with a gain. Don't ever bet against the big money.

 
 
  Jim Brown   11/8/02,  3:13:07 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We are still trending down after a brief attempt to bounce off 8500 at 3:PM. We are not far enough below the entry point to gain anything by lowering the stop loss by much. I see OEX 461 as current overhead resistance should that 458 level fail. I don't want to lower the stop TO resistance at 461 only to be taken out on a failed hit. Everything I see is pointing down and once 8500 breaks the current stop loss should not be important.

Bottom line: Keep the current OEX 463 stop loss unless your risk profile suggests getting out sooner.

 
 
  Jim Brown   11/8/02,  3:07:39 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
If you only took a partial position at the initial signal I would look to add to your position with a drop below OEX 455.

 
 
  Jim Brown   11/8/02,  3:03:08 PM
Swing Trade Signals
Looks like we are headed for a final test of the 8500 level as we move into the last hour of trading. It has held several times already today but the internals are getting weaker. However, we all know that the last hour on a Friday can be volatile and if "they" want to pump up the markets for a positive weekly close it should happen at any minute.

 
 
  John Seckinger   11/8/02,  3:01:22 PM
The final hour. The Dow is now down 5 points for the week, and I am sure there are some bulls that would like to the index finish higher. The bond market is about ready to close, so equity traders will not be able to hedge their positions as well during the last 60 minutes. The markets have been mainly range bound for the last few hours, but a break either way should stick. For the Dow, this would mean a break under 8500 or a move above 8560. The contract is currently at 8511.

 
 
  Linda Piazza   11/8/02,  2:44:09 PM
Reader Comment concerning my first post this morning: I enjoy your comments and observations. May I ask, exactly what "evidence" you are waiting to see in regard to "the bottom" occurring in October? I am also hesitant to "load up my portfolio with equities" right now and it would be interesting to know for which signals (evidence) you are waiting.

Response:I'm waiting for several things. The first is a throwback to the March/October descending trendline, to see if it still holds as support. We may never get a throwback (a move back down to that trendline), so if this current move back into that 446-458 consolidation range from the last couple of weeks is all we get before markets move up again, I'll take that as a confirmation of support.

Next, I want to see the OEX move above August highs in the 485 area. That would confirm a double bottom. Lots of people have been talking about a double bottom, but confirmation doesn't actually occur until prices move back up above the peak between the two bottoms.

Lastly, I want to see a move above the longer-term bear market descending trendline. That trendline, from July 2000 until now, sits above at about 515-520, if my fever hasn't dimmed my eyesight too much.

Although I won't consider it safe to start adding equities to my portfolio until then, that doesn't mean I won't play the call side from time to time. If current support holds and OEX starts moving up again next week, I'll try calls, being careful with my exits.

 
 
  Jonathan Levinson   11/8/02,  2:41:34 PM
Great post, Jim! The only way to be 100% wrong is to trade actively and take the other side of every good trade out there. Even a broken clock is 100% accurate twice per day.

The COMPX is currently negotiating the gains from November 4th and trying to decide where to go from here. Until that occurs, we'll have a trading range. If the bounces can't take out the day's highs, then I see a downward bias going forward, as support is much closer than resistance. Risk/reward would favor going long, but the fundamentals and the trading action this week mitigate to favor going short. In summary, it's a fine day in the market, with good arguments on either side. That's why traders need to set stops when they jump in.

The action in GE is a good example of what can go wrong with a bullish trade- the theme to the big rate cut and the action we've seen this year points to credit troubles. The amount of debt in the market is a problem that can surface unexpectedly. I would expect good individual long plays to be those that are least exposed to debt- good shorts would be the reverse. Sorry for the long ramble during a quiet trading range.

 
 
  Jim Brown   11/8/02,  2:22:21 PM
Hi Jim, Just sharing some thoughts... I dunno, but looking at the charts intraday, we have tested 8500 three times and looks like a triple bottom at 455 level. Also, on the daily OEX charts, looks to me if we close above Monday's low 455.75, then it looks like the OEX is building a nice base at the 455-460 level and feels (my gut tells me), we could go higher from here. No inflation, lowest interest rates in 50 years, no Iraq war -- the fundamentals look good as well. (name withheld)

Hi Jim, I think we are on the right track today with lower highs and lower lows. The indexes are all on the verge of breaking the weekly averages and the talking heads are saying why buy. Once we break the lows of the day at 8500 and 455 the market will see that as a serious negative and we will be testing the October lows all over again. Keep the faith! (name withheld)

I got these within 5 min of each other. Glad to see we are all on the same side. (grin) 44 million investors and 44 million opinions. Nobody 100% right and nobody 100% wrong. (well maybe one)

 
 
  John Seckinger   11/8/02,  2:21:45 PM
With only 45 minutes until the bond market closes, the Dec 30-year is still higher by '29 ticks at 112'27, and should have no problem closing above the 112 pivotal area. This, coupled with the weekly 'bearish shooting star' formation in the Dow, should have shorts ready if there is any hint of weakness during trading next week. Other signs include an extremely weak dollar, and falling Utility Index. A catalyst could involve Iraq, but you still have to trade what you see.

 
 
  Jonathan Levinson   11/8/02,  2:11:47 PM
The indices are taking a bounce from near their lows. The CBOE put to call ratio has gotten awfully high as the cat's out of the bag on this decline, which should of course slow or reverse the descent. The ratio has been close to or above 1 all day, and the latest reading is the highest at 1.13. Bears need to be careful when the whole options market starts to look bearish. The QQV is now down .99, still very low for a down day. The TRINQ is at 1.62, still showing steady selling. FVX is flat, TNX down 3 bps, TYX down 10.3 bps.

 
 
  Steven Price   11/8/02,  2:11:09 PM
Reader Question: Steven, Can I get your thoughts on option decay over the weekend prior to expiration for front month options. Do ITM/ATM/OTM puts all lose extrinsic value in the same way, or do OTM's drop faster.

Specific Example: The Nov 75 Puts on IBM are 1.05x1.20 (Stock 77.54 now). This is all time premium. Is there a way to estimate how much further the stock would need to fall on Monday to make up for the time decay over the weekend? Do you ever even consider this apporach or do you close out these positions (OTM) prior to the last week into expiration. Thanks, Chris

Response: Monday's open on expiration week usually sees out of the money options lose a bunch of premium if the stock isn't headed in the direction of the strike. If you were to divide the number of days left into the premium and then subtract 3 days decay, you could get an idea where they may wind up after the weekend. However, the decay curve steepens tremendously as you hit the final week. IBM has been very volatile and is headed toward $75 and I would expect the puts to hold some value if that is still the case into the close. If the stock opens anywhere near $80 on Monday, the bid may not be much more than $0.50. However, if it stays around current levels, you should see them stay around $1.00. There is a point of compression at which the options tend to hold their value, even in the final week, as market makers are not willing to sell anything for less than around 0.50 until the last day. If the Dow breaks 8500, I would hang onto those puts and take my chances. If the stock rebounds over $80, I would probably dump them.

Because the stock has experienced a run up and the VIX has come down, my guess is that the market makers have been buyers of premium and this is something you need to take into account. When the mm's are long a lot of premium, they are quicker to lower it into expiration, trying to get out of some of the decay. Therefore, if the stock does rebound, the bid will drop quickly in the out of the money options. The reason I think the mm's are long premium is that in a rising market, the most common trade is the covered write, where purchasers of stock are selling calls to lower the cost basis and the mm's are the buyers.

Both ATMs and OTMs see the decay curve steepen in the last week and the ATMs will lose more on a dollar basis, because there is more premium built in that can decay.

 
 
  Jim Brown   11/8/02,  2:10:28 PM
Market Monitor - I have received a couple emails today about a sporadic connection problem. We are working feverishly on the Java product that will be much better but the multi platform considerations are huge. We have readers on every system known from Windows95 to XP-pro, Linux, Unix, Apple and mainframes. We have readers on T3 45MB pipes and readers on 28.8 modems. (more on modems than you would believe) We are going to do a reader survey on Monday in the monitor to get a broader idea of how many monitor readers use each platform. If we only have 10 people on Windows95 and 2000+ on Win98 or better then maybe we don't spend hundreds of hours dealing with Win95 restraints. Same with the other non-Windows systems.

The key will be for everyone to answer the 30-second survey so that we get an accurate picture.

Meanwhile we are trying to tweak the current system to eliminate as many problems as possible without having to reinvent the wheel. We made some changes last night and the complaints have been far less today (knock on wood) However, if you are experiencing problems today I would appreciate an email to it@OptionInvestor.com with a complete description of the problem and what operating system, browser and Internet connection you have.

 
 
  Jim Brown   11/8/02,  1:50:34 PM
Swing Trade Signals
The OEX finally broke 458 just as the Nasdaq hit 1365 and both drew heavy selling. Just like holding a steel rod up in a thunderstorm to see if it is still raining. You become the lightning rod and not a rain gauge. A couple bulls must have felt brave enough to actually buy something and got struck by bearish selling. Could be an omen for the afternoon.

 
 
  Linda Piazza   11/8/02,  1:48:52 PM
SOX, currently 298.89, made a brief foray above 300, but hasn't been able to maintain that level so far.

 
 
  John Seckinger   11/8/02,  1:45:13 PM
There is some talk of central banks buying longer dated Treasuries, and this can be seen in the flattening of the yield curve. This normally means higher equity prices, but I would attribute it to traders who were long five year notes and short tens taking profits.

 
 
  Jeff Bailey   11/8/02,  1:43:20 PM
The 1:00 PM Intraday Update has been posted. Link

 
 
  Jim Brown   11/8/02,  1:43:02 PM
Jim, Why do you have pictures of everyone on the website but not one picture of Linda? There should be equal rights for all. Thanks - A.

She is there but we keep her hidden. Her beauty and youth puts all the other writers to shame. (Did I say that exactly the way you told me Linda?) Here is the lineup of everyone. Careful, make sure you are wearing sunglasses. It could be like staring into the sun. (grin) Link

 
 
  Kent Barton   11/8/02,  1:33:49 PM
Lowes (LOW), $39.41 -0.57: Retailers continue to look weak, as the RLX.X (retail index) begins to break support in the 280 area. That's good news for bearish traders with positions in LOW. This current OI put play has really started to pick up some downside momentum in the past two days, and today's move under $40.00 adds to the technical negativity.

On a related note, check out Home Depot (HD). Today's violation of support at $27.00 does not bode well for the bulls. The stock appears to be headed for a test of the $24-$25 region.

 
 
  Jim Brown   11/8/02,  1:27:48 PM
Swing Trade Signals
There is a definite intraday top on the OEX at 458 on the 1 min chart. The Nasdaq has the same top at 1363 and the Dow is stubbornly trying to break that critical 8550 level as well. Looks like they are going to try and hold them positive for the week as Jonathan pointed out. That 8550 level is about 33 points above that breakeven level. If they want to claim the week for the bulls they are going to have to hold it here.

There are many readers who have emailed that they expect "someone" to prop the market up at the close so investors will get a warm fuzzy feeling when reading the weekend newspapers. While I agree with the possible attempt there may be some hedge funds that will try and influence traders to the short side as well. Look at it as protecting their current positions. If we do finish below 8517 the odds are good it will be below 8500 as well. That could color the open on Monday with a red brush. Just thinking out loud.

 
 
  Jonathan Levinson   11/8/02,  1:12:16 PM
For those of you watching GE, I'm hearing trader talk that GE was slammed in a publication, Grant's Interest Rate Observer released today. Apparently it was a Grant's conference at which Ravi Suria was supposed to speak about GE when his speech was yanked a few days ago. The stock is off its lows, but still down by over 4.5%.

 
 
  Jonathan Levinson   11/8/02,  12:50:50 PM
Hi Jim, Interesting how everyone loves seeing faces to compare with the personalities we think we have down. Who said beauty is only skin deep? All you need now is e-mailers sending their photos...then you'll wish you kept your anonymity. I'm still waitng for Jonathan.

Here are two, only one of which I like. Hint- the one without the zit is my favorite, but for future articles, it'll be the one in the tie only. Consider the first one as a Halloween picture :)

Link
Link

 
 
  John Seckinger   11/8/02,  12:36:49 PM
The XAU Index (Gold and Silver) is higher by 0.28% at 69.91, and it is interesting how the 22, 50, and 200 DMA's (exp) are all converging near the 66.64 level. This should be a sign that volatility will increase. Upside objective remains at 74.80. If prices fall, I expect the XAU to test these averages in the near term.

 
 
  Linda Piazza   11/8/02,  12:27:48 PM
At 11:45, Briefing.com reported that Morgan Stanley was making positive comments about semi equipment, and postulates that these comments might have led to some firming of the SOX.

 
 
  Jonathan Levinson   11/8/02,  12:27:40 PM
Thanks for the catch, Steven. The COMPX low was indeed 1354, below gap resistance, which blew off in a spike to 1360 support. The bounce does not appear to have much in the way of legs, though I hesitate to mention it because the last time I did was about the bounce off the October low... A moment that I'll never forget. The TRINQ remains at 1.94, a moderate level showing steady selling, while the QQV is finally shaking its head groggily and asking "whappened?", currently -.08 on the day. I would have expected it to be way in the green after the strong selling we saw. Yields are back to red, and price seems to tuckering out on the COMPX.

 
 
  John Seckinger   11/8/02,  12:04:55 PM
The Utility Index (UTY), lower by 2.17% at 240, is underneath its 22 DMA at 242.65 and seems to want to take equities down with it for another wave lower. Another index experiencing a lot of technical damage is the Dollar, which has fallen 13 out of the last 15 trading sessions and should easily fall this session as well. That "d" word is most likely in currency traders' minds as they hit the sell button.

 
 
  Steven Price   11/8/02,  12:02:14 PM
COMPX: 1360.02 I mentioned in last night's Market Sentiment that the Nasdaq had yet to fill its gap from November 4, at 1360, and that 1360 could be a bounce point. The COMP filled that gap, trading down to 1354 and then bounced back over 1360. This is something for the shorts to watch out for, and I'd feel more comfortable from the short side in the techs with some intraday resistance under 1360. The fact that the Dow also bounced at 8500 at the same time is something to keep in mind.

 
 
  Linda Piazza   11/8/02,  11:52:47 AM
After my 11:30 post, I received this reply from John: Don't worry, Linda. The weather is nice today in central Colorado and so I'm heading out to play some golf. As Jim can attest, that usually means a dramatic movement in the market. My guess is to the negative and should help our DJX short nicely.

 
 
  Jeff Bailey   11/8/02,  11:52:32 AM
Abbott Labs (ABT) $45.90 +0.54% ... trying make way above 200-day SMA. Has been profiled bullish in past OI call section and stock has been giving p/f chart buy signals. Still overhead supply to work through, but looking bullish longer-term. Bullish vertical count is $64, and recent spread-triple-top at $42, has Professor Davis looking for 87.9% probability stock could gain 28.7% in 6.8 months. From $42, a 28.7% gain would be..... $54. If memory serves me correct, was profiled bullish at $42 for partial positions.Link

 
 
  Jonathan Levinson   11/8/02,  11:52:27 AM
The COMPX decline stopped at gap support of 1360 going back to November 4th. It's a choppy down trend from the high on November 4, but I see resistance on this bounce in the 1374 area. The TRINQ is already at a fairly tame reading of 1.93, while QQV is still down by .55 on the day. Very curious, that. The TICK.NQ remains -303 on this bounce. I don't know the reason for the sudden wave of selling, but war with Iraq isn't convincing me, as gold should have blasted higher, but it did not, with HUI +.79 on the day and XAU flat.

 
 
  Steven Price   11/8/02,  11:47:24 AM
Reader Question: With recent double top $45 and rollover would you kindly offer technical comment both in traditional nomenclature and PnF ... many thanks ... Don

QLogic (QLGC): $40.28 (-1.15) From the short side, I like the rejection at $45 and the three-box PnF reversal at $41. The stock tacked on $14 points after its triple top and has plenty to give back. However, it is also one of the few chip stocks to post decent earnings. It was downgraded by First Albany, with a price target of $36, and a break below $40 looks like a short entry point. If we can get some intraday resistance below $40 and the same below 300 in the SOX, I like the short side. The only concern here is risk/reward ratio. The logical stop loss on the play is $45, which gives you a risk/reward of about 1:1 on the initial target for the play. I usually look for a better ratio, so if a trader wants to enter the play short, it is something to keep in mind.

 
 
  Jeff Bailey   11/8/02,  11:45:20 AM
Drug Index (DRG.X) 318 +1.3% ... sector winner today and perhaps "double-boost" from Republican wins and some fall-out in other healthcare sectors that has institutional-based "healthcare" funds looking to drug stocks. Will note $DRG.X recently traded "spread-triple-top" and broke above longer-term downward trend at 315, which looks bullish Link .

Past profiled bullish trade in drug stock Johnson & Johnson (NYSE:JNJ) $60.63 +1.21% challenging recent highs of $61 and trades strong. Link

 
 
  Jim Brown   11/8/02,  11:44:27 AM
Jim, The talking heads trying to rationalize that the UN Resolution makes it less likely that the US will engage in military action may be a little premature. Yesterday, major 7th Transportation Group assets left for the Gulf from Norfolk aboard naval vessels. Due to the miracle of TV, anyone could see the Army LCUs perched atop Navy transports, along with the other transport ships that no doubt hold the assets of some 18th Airborne Corps unit. 7th Trans Gp supports the 18th Airborne Corps (10th Mtn/82d Ab/101st AA) and is a fairly accurate guage of how serious we are or aren't. You can't go to war without your toys; 7th Trans delivers the toys. While we have some assets prepositioned at Diego Garcia, I consider 7th Trans movement towards the Gulf as a reason to think that the US expects its troops in the Gulf area to need their toys ready for action within 2 months. Moving troops is easy, moving major military assets is very difficult. I've never seen a major 7th Gp deployment without a fairly major military action occur within a few months. Only my two cents and another reason not to go long without protection. Take Care. Coleen

Point well noted! I did see the pictures of 6-8 100-125 foot "boats" sitting crossways on top of a freighter on the way to sea. Very interesting way of transport. Sure looked top heavy but I bet there were plenty of tanks in the hold to act as ballast. Readers "in theater" continue to tell me that they don't need any more hardware and they could fight and win with gear already in place. I think it is a sign that resolution or not there will be a regime change sooner rather than later.

 
 
  John Seckinger   11/8/02,  11:43:53 AM
Another battle to see who wins the week. 8517 is the magic number in the Dow, and the "Bearish Shooting Star" formation (weekly basis) discussed earlier looks even better here. If the Dow closes at current levels, then it would make sense to look for weakness under this week's low of 8503 heading into trading next week.

 
 
  Jeff Bailey   11/8/02,  11:31:11 AM
30-year YIELD ($TYX.X) sharp beak lower to 4.808% today and breaking below the flat 50-day SMA. I'm still holding the March YIELD calls, but need to hedge with equity index puts is my thinking as equities now vulnerable to 50-day SMA's. Even better idea is stocks that trade BELOW trend on p/f charts and giving sell signals, which may also be trading below their 50-day's most likely lack bullish sponsorship and better short/put candidates.

 
 
  Linda Piazza   11/8/02,  11:30:07 AM
Where's Valter? VIX and .XAU are higher, dollar and yields are lower, support violated: so far, everything is working just right for a put play, but put plays haven't been as successful lately as they once were. I'd like a little extra confirmation that I'm on the right side of this play. In the meantime, I'll be careful with stops.

 
 
  Jim Brown   11/8/02,  11:28:58 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The next critical levels we will face on the current short signal will be interim support at 453-454 and stronger support at 446. There is a Fib retracement at 448 of 61%. There are no free lunches and the bears will have to work to push it lower. On the bright side the short term moving averages are turning negative after more than a week in positive territory. The intermediate term oscillators are also turning down. That last bout of selling was met by some dip buyers but with the S&P futures under 900 and even 895 and the NDX futures under critical support at 1028 there is not much for the bulls to cheer about.

 
 
  Jeff Bailey   11/8/02,  11:24:35 AM
QQQ $25.13 -1.6% ... taking some gains in Tuesday's profiled Nov. $26 puts from $0.90 here at $1.15. Per Index Trader Wrap, QQQ sitting at lower end of upward regression and 80.9% retracement. Want to take at least 1/2 off the table here, and reduce some risk into Friday's expiration.

 
 
  Jeff Bailey   11/8/02,  11:21:48 AM
The 11:00 AM Intraday Update has been posted. Link

 
 
  Jim Brown   11/8/02,  11:18:31 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The broad market SHORT signal was triggered at 11:12:30 when the OEX traded at 457. SPX 894.32, DIA 85.26, SPY 89.87, DJX 85.24, NDX 1011.52, Compx 1361.52, QQQ 25.16, ES02Z 893.50, NQ02z 1013.00, YM02z 8558.0

The initial stop loss on this short signal will be OEX 463.

 
 
  John Seckinger   11/8/02,  11:15:19 AM
Impressive sell orders, to say the least. Per last post, the Dow came only a few points from testing its 200 PMA, reversed, and has not looked back. The Dollar is under 105, bonds are higher by a full point at 113'00, and the Dow at 8517 is now exactly where the Dow closed last week. Bulls being tested once more.

 
 
  Jim Brown   11/8/02,  11:12:15 AM
Swing Trade Signals
The Dow trigger point was just hit at 8540 and the others are not going to be far behind unless the buyers step in on this last ditch support. It does not look promising.

 
 
  Jonathan Levinson   11/8/02,  11:10:10 AM
SPX 898 violated, red across my screen. The COMPX has broken below 1370, TRINQ rising slowly at 1.53, TICK.NQ -556, QQV still in the red but recovering, currently -.41 at 44.80.

 
 
  Jim Brown   11/8/02,  10:53:22 AM
Swing Trade Signals
S&P Futures are closing in on the critical 898-900 support level and it looks like the selling in increasing.

 
 
  Jeff Bailey   11/8/02,  10:45:35 AM
Quest Diagnostics (DGX) $60.93 -6.92% ... mentioned this one a couple days ago for potential short with resistance below $67. Today's trade at $62 defensive with bearish vertical count of $54. Link

 
 
  Jim Brown   11/8/02,  10:44:05 AM
Swing Trade Signals
Just another normal day in the market. Traders bought bad news at the open and sold the UN resolution announcement. This puts a possible war off for several months instead of the end of November and could prevent it altogether due to dragging it out long enough that everybody loses interest.

Internals are still dropping with the A/D line changing direction 100% at the announcement. The declining volume is increasing and Nasdaq futures are setting a new low for the day. The VIX has reversed its down trend. It would appear on the surface that we could be looking at a further drop but I would not jump to conclusions so quickly.

We have sees the indexes rise to trade just fractions away from the upper trigger points on the SPX 910 (910.11) OEX 465 (464.61) Nasdaq 1395 (1389.77) Dow 8650 (8668.91) This shows that overhead resistance still exists. However, the lower support levels have not been touched either. Someone is buying the dip and the possibility of a catastrophic drop is far from a certainty.

We have avoided the chop so far and I think we are well positioned to take advantage of any move, up or down.

 
 
  John Seckinger   11/8/02,  10:43:06 AM
Taking things to a micro level, the Dow (five-minute chart) rose above its 200 PMA and then failed to stay above. This most likely made longs feel like they were trapped, and some were. However, if the Dow does rise above this average once more (8628), I have a feeling that it will force some shorts to cover and longs will take one more chance. Dow is at 8613.

 
 
  Jonathan Levinson   11/8/02,  10:37:00 AM
GE is now down 3.22%, at a new LOD, on volume of over 25% of its average daily volume. Something's definitely up, but still cannot determine what.

 
 
  Jeff Bailey   11/8/02,  10:36:46 AM
Healthcare under pressure as THC Link continues its decline. Adding Syncor Int. (SCOR) $19.80 -12.69% Link to list of p/f charts in healthcare group under pressure and looking similar to THC of a couple weeks ago. Took some SCOR Jan. $20 puts this morning as bearish vertical count is $0.00. Link

 
 
  Linda Piazza   11/8/02,  10:30:55 AM
CNBC is reporting that the U.N. Security Council voted 15-0 in favor of the Iraq resolution.

 
 
  Jonathan Levinson   11/8/02,  10:29:11 AM
Good ole 1380 on the COMPX, 905 SPX. The TRINQ at .90 is a little less bullish, TICK.NQ -233. QQV -.51 and FVX off its lows and actually up 1.2 bps shows tentative bullishness from the smarter money.

 
 
  Steven Price   11/8/02,  10:25:27 AM
Reader Question: Steve, Your thoughts on THC and its impact on MME. Looks like MME is halted for trading. Regards,

Response: Mid Atlantic Medical (MME) $32.81 (-3.61): I think it is a bad day to be an HMO. I'm sure investors are starting to worry whether other healthcare organizations have been collecting excessive Medicare outlier payments, which have propped up earnings, like THC. Medicare may start looking into the issue elsewhere and while most companies may be on the up and up, the sector is getting whacked on the possibility the THC problems are industry wide.

 
 
  John Seckinger   11/8/02,  10:15:47 AM
What is going on in the 30-year bond? Ahead of Fisher's speech (Treasury official), the Dec contract has fell from 113'06 to 112'14 and is now only higher by '16 ticks. Definitely seems like a reason for cash to enter equities. If the contract falls under the day low of 111'28, there could be some traders buying bonds and taking profits in stocks.

 
 
  Steven Price   11/8/02,  10:13:13 AM
Zimmer Holdings (ZMH): $42.36 (-0.24) Got this possible long on my radar. It is not a terribly fast mover, but I like the series of higher highs and higher lows, and the business of joint replacements as the baby boomers are aging. We've got Stryker (SYK), a similar business, on our call play list. SYK may get a little more pop, and is already on a PnF buy signal, and I like ZMH, as well. ZMH gets a PnF reversal up at $43 and a new buy signal at $44.00. If SYK gets running, ZMH may follow.

 
 
  Linda Piazza   11/8/02,  10:11:53 AM
If you're considering a bearish trade on any of the low-end retailers, you might refer to Steven's 9:47 post about a possible bearish setup on Wal-Mart to help you set an entry on your play, too. Here's a PerfChart from Stockcharts.com, listing some of Wal-Mart's competitors and showing their relative performances. You can see that Wal-Mart has shown relative strength in this sector. If it goes down, it's likely to bring its competitors down with it. Link

 
 
  Jonathan Levinson   11/8/02,  10:02:27 AM
The Fed has just announced a 5 day repo of 6.25B, bringing the day to net neutral. Concurrent with the announcement, my screen went green... other than The General. Will watch in the future for a correlation- are the program trading robots watching the fed too?

 
 
  Jim Brown   11/8/02,  10:00:58 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Because we are seeing a good case of indecision this morning I am going to issue the long signal as well. Remember, we are going to trade what we see not try to pick a direction based on bias. Go LONG the broader market with an OEX trade at 465. This is well above the pivot point and prior resistance at 464 from yesterday afternoon. The stop loss on this signal will be OEX 460.

 
 
  Jonathan Levinson   11/8/02,  10:00:25 AM
Watching some pretty respectable selling in... Gee! no, GE, down 1.88% on the day at 25.65 with volume of 4.5M shares, 15% of its average daily volume after the first 30 minutes. I wonder what's happening there?

 
 
  Steven Price   11/8/02,  9:47:12 AM
Wal-Mart (WMT) $54.10 (+0.10) I'm looking at a bear flag formation in WMT. A trade under $53.50 could take it down to $50 pretty quickly. $53.50 would also be a 50-dma breakdown.

 
 
  John Seckinger   11/8/02,  9:45:50 AM
Looking at a weekly chart of the Dow, if the market closes here or slightly lower, candlestick followers will most likely take a bearish stance going forward. The pattern is called a "Bearish Shooting Star" formation; however, I would wait for confirmation (prices falling under this week's low either on Monday or Tuesday). Note: On a daily basis, the Dow formed this pattern on Monday but never confirmed it (stayed above 8521). Since this is a "shooting star" formation, if there isn't an immediate confirmation I generally dismiss the pattern.

 
 
  Jim Brown   11/8/02,  9:45:42 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
With the opening bounce fading let's activate the SHORT signal just in case. Go SHORT the broader market at OEX 457. This is below the strong support at 458-460 and a breakdown here could be significant.

 
 
  Jonathan Levinson   11/8/02,  9:44:13 AM
The fed has 6.5B in expiring repos today to refund in order for the markets to break even. The announcement is due out within the half hour.

 
 
  Steven Price   11/8/02,  9:40:01 AM
Oxford Health (OHP): $34.20 (-1.50) New entries in this OI put play can look to initiate with a trade under $33.70 or resistance under $34 on the intraday chart.

 
 
  John Seckinger   11/8/02,  9:31:49 AM
Yields are falling significantly once again, as the Dec. 30-year is already higher by one full point at 113. Solid resistance should be just above 114, while support (yesterday's resistance) comes in at 112. Note: The contract has not been at these levels since October 11th, one day after the large allocation out of bonds and into stocks began.

 
 
  Jonathan Levinson   11/8/02,  9:31:29 AM
Flat open on the COMPX at 1376, TRINQ .68, TICK.NQ -171.

 
 
  Steven Price   11/8/02,  9:30:26 AM
The battle in the SOX (302.61) to stay above 300 should be interesting this morning. QCOM should lift a few of the boats, but NVDA will be playing tug of war in the opposite direction. If the index breaks under 300, after falling out of its ascending channel yesterday, it may be time to look for some shorts. That being said, it gave a sell signal on the PnF on the October 29 pullback, as it did yesterday, which turned out to be a fake out.

 
 
  Linda Piazza   11/8/02,  9:27:36 AM
The U.N. Security Council has scheduled a vote on the Iraq resolution at 10 a.m. New York time. Yuri Fedotov, a Russian deputy foreign minister, told Interfax of some concerns and some needs for further consultations before the vote. The issue appears confused, as Russian President Putin apparently also described the resolution as satisfactory in discussions with French President Chirac, in a telephone conversation held today.

 
 
  Jeff Bailey   11/8/02,  9:26:40 AM
The 9:00 PM Intraday Update has been posted. Link

 
 
  Jim Brown   11/8/02,  9:25:31 AM
Swing Trade Signals
McDonalds warns, Safeway warns, NVDA cut to a "sell". Does this mean they are going to buy the bad news today or flee in horror? The futures are down but not strongly and they are still above those critical levels I mentioned last night. Whether this is a head fake or just one toe over the line we will not know until after the market opens.

Last night I suggested we would use these numbers to enter the market. LONG at Dow 8650, SPX 910, OEX 465, SHORT at Dow 8540, SPX 898, OEX 457. These levels would be better indicators if we got a small bounce at the open and did not simply gap down into the trigger. This may not happen today. I hesitate to initial a signal with the futures so close to the short side until a few minutes after the open. I would rather give up a couple points at the open rather than get triggered on the opening dip only to see it rebound five min later. The bottom line is I am not going to issue a signal until we see what happens around 9:40.

 
 
  Jonathan Levinson   11/8/02,  9:04:18 AM
On that same theme, Linda, did anyone ask how much more investors would be up if they had missed the last week of each DECLINE? My only other comment, less of a question, is that analyses such as these, which are recited relentlessly by the mutual fund industry, are deceptive insofar as the indices are not indices so much as managed funds. I've heard, though never checked, that only one stock in the Dow has been there since the 1920s. As we see each year with "rebalancing", the losers are flushed from the indices and replaced with new "picks". Well, unless investors are long ETFs or other index tracking funds, they're at risk of riding one of the losers to zero by staying invested through thick and thin.

Investing remains a tricky business, which is why you and we are continuously learning. Don't be swayed in your decisions by facile arguments, particularly those propagated by pundits. The crowd's job is to be wrong- don't get caught with the herd.

 
 
  Jonathan Levinson   11/8/02,  8:49:01 AM
The US Dollar Index continued its slide, currently at 104.80. Gold is trading just above $322/oz. Futures are flat to up, with yields flat to down. The light volume of yesterday's decline, followed by what I expect to be light volume for this Friday, makes me dubious as to whether bears can expect a decisive break through support on this decline. On the one hand, bears like to see a nice wave of selling, overpowering or engulfing the previous days' buy volume. On the other hand, selling tends to "recruit" volume on the way down, often with the most explosive volume at or near the bottom of the move. I'm anything but bullish on equities at this point, but the technicals leave me cautious as to the ability of price to penetrate support at this point. Note that we had over one week of rangebound trading during this rally- that range will now become the battlefield for bulls and bears. I like tight stops on put positions, mainly because I suspect that we might get a chance to reload those same contracts cheaper. The trades and the decisions remain your own- this perspective is mine.

 
 
  Linda Piazza   11/8/02,  7:45:35 AM
As of this writing, European and Asian markets were all down. The FTSE 100 was down 40.60, but about 10 points off its lows. The CAC 40 was down 29.35, but up about 27 points off its lows. The DAX was down 28.63, but about 36 points off its lows. Our futures turned positive about the same time these indices began climbing off their lows. The Nikkei was down 229.67 points.

 
 
  Linda Piazza   11/8/02,  7:06:17 AM
This morning, Nancy Kimelman, Chief Economist of SEI Investments, presented interesting figures on CNBC. Her firm collected data that showed that investors who missed the first week of a recovery missed the first 8% gains in their portfolios. Investors who were one quarter late missed the first 18% gains. Her argument was that investors should step into the markets now and stay fully invested, so that they wouldn't miss those first gains. Having majored in physics my first three years in college, I'm interested in numbers and also in logic. It seems to me there's a fallacy in her logic, and the fallacy is this: if investors step in too early, before a bottom has been reached, and "hold on," as she suggested, they're effectively missing that first week and perhaps that first quarter of gains anyway. They didn't buy at the bottom, and so the markets would have to climb again to reach the level at which they invested. Another guest argued with her, pointing out the number of times that bottoms had been called in the past. She agreed, but always countered with her 8% figure, either without realizing or admitting that stepping into the market too early was equivalent to stepping into it a bit too late. Either way, the bottom would be missed. I don't know whether the October bottoms were "the" bottoms, but if I'm going to miss those first profits either way, it seems safer and less painful to wait until I have evidence that they were before loading my portfolio with equities again.

 
 
  Jim Brown   11/7/02,  1:34:11 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   11/7/02,  1:33:39 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

 
 

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