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  Jim Brown   11/14/02,  9:38:59 PM
The Swing Trade Game Plan has been posted: Link

  Jeff Bailey   11/14/02,  6:01:20 PM
Telephone & Data Systems (AMEX:TDS) $52.61 +2.65% ... Thanks as always for the great info. I noted that TDS was up amazingly today. Did you continue to research it after your mention of it as a possible short on yesterday's MM? I'm wondering if we've been given a gift of a better entry to short it, or a GIFT in the German sense -- "gift" means "poison" in German.

To be truthful, short/putting a stock today never really crossed my mind with the amount of selling that took place in Treasuries today, but TDS Link would rank high on my list of short candidates, expecially on a break lower at $49. TDS closed right on its trending lower 50-day SMA, with 200-day SMA above at $68.71. With renewed selling in Treasuries today, the bearish side of me needs to be cognizant that cash is freeing up from Treasuries and can flow to stocks. Even a laggard like TDS.

TDS has really lagged the rally/move off the bottom in the Wireless Telecom Index (YLS.X) $52.34 +4.88% Link 432.20 +2.03%, which finds its 50-day SMA down at 375.

I'm not sure what the German word for "stop" is, but a trader can easily avoid "poison" if they've initiated a bearish trade in TDS, with a stop at $54.

Thoughts on TDS is that a rising tide can lift all boats and the lagging of TDS hints there may be some holes in the bow. However, as Treasuries see selling then we know cash frees up, which can build a tidal wave of enthusiasm for even the weakest of stocks.

  Steven Price   11/14/02,  4:21:00 PM
What do you think about IMCL. It was moving up nicely the last couple days and got a good pop at the close. A trader who bought it last week would have done well. Why doesn't OptionInvestor pick these kinds of stocks for calls? Michael

ImClone (IMCL): $13.44 +2.57 Jim Brown, is that you? Jim wanted to add IMCL as a long on Tuesday at around $9, and I went with CEPH instead. There goes my Christmas bonus! A bit of a chase at this point and I would look for it to give a sign of support before jumping in right now.

  Steven Price   11/14/02,  4:17:32 PM
Dell matches estimates, trading down 0.90 at $30.06. Similar action in AMAT last night, so we'll see the real reaction in the morning.

  Jonathan Levinson   11/14/02,  4:14:55 PM
Farmer in the... meets estimates. Trading down to 30.14 on Island ECN from its close of 30.94.

  Steven Price   11/14/02,  4:00:41 PM
Forest Labs (FRX): $105.30 (+4.05) OI call play FRX now above $105. New entries can look for support over $103.50 tomorrow to initiate.

  Jeff Bailey   11/14/02,  3:59:53 PM
Micron Tech (MU) $14.20 +8.64% ... stock building gains in late afternoon as Lehman's Dan Niles says that although most people assume that by mid-December DDR DRAM prices will collapse to the same low level as SDRAM, he believes that in fact SDRAM prices are moe likely to increase over time with some modest fallback in DDR prices to narrow the price gap. With a book value of $10.44, Lehman believes MU should be bought. Link

  Steven Price   11/14/02,  3:59:37 PM
IBM $80.75 +1.40 While IBM looks as though it will violate our stop on the close, a higher risk play would be to leave it open unless it breaks the 200-dma of $81.24. However, we will honor the stop.

  Jim Brown   11/14/02,  3:57:24 PM
ACS is halted after a huge drop - Rumor is now a DOJ news release pending.

  Jim Brown   11/14/02,  3:56:26 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The SHORT signal was closed at OEX 460.07, SPX 902.26, DIA 85.60, SPY 90.71, DJX 85.25, NDX 1055.44, Compx 1407.05, QQQ 26.24, SP02Z 902.30, ES02Z 902.50, NQ02Z 1057.0, YM02Z 8528.0.

It appears the markets are already pinning for expiration at OEX 460, SPX 900, DJX 85. The Nasdaq has surpassed the equivalent level at 1400 and is still rising.

  Kent Barton   11/14/02,  3:54:36 PM
Barr Labs (BRL) $57.55 -1.24: Trading lower on news that the company has recieved a subpoena from the Department of Health and Human Servies regarding a drug study. This one actually came up as a possible short in the OI pick meeting, but we decided that downside potential was limited by resistance at $55.00. Short-term traders looking to capture a move to that level could look for entries if BRL breaks under $57.36 on Friday. Oscillators are looking weak.

  Jim Brown   11/14/02,  3:51:52 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The good news is that the Dow has failed to hit 8550 this afternoon and the SPX is still below the 905 resistance from early November. The bad news is that there has not been an afternoon sell off to take us back below OEX 459. The trend is indicating a possible failure at resistance but with Dell earnings we really can't justify holding over night. Let's close the SHORT signal now at OEX 460 before we get a short covering spike at the close.

  Steven Price   11/14/02,  3:49:10 PM
Steve, LEH has been up over $2 so far despite the bad news from our latin american neighbours. Can you please comment on the short play entry on LEH ? Regards,

Lehman Bros (LEH): $56.68 (+2.24) We have seen LEH repeatedly fail at the descending 200-dma and short entries from that point should be profitable. However, we are not getting follow through breakdowns, with the last couple of drops finding support at the 50-dma. We are going to drop the play, since we haven't gotten the downside follow through we were looking for.

  Jeff Bailey   11/14/02,  3:38:44 PM
The 3:15 PM Intraday Update has been posted. Link

  Linda Piazza   11/14/02,  3:26:29 PM
VOD Update: At 18.87 as of this writing, Vodafone is up $1.16 on double daily volume. For the last three days, volume has definitely supported the move up. Traders who entered this aggressive and risky call play earlier in the week should be aware that MACD, RSI, (5)(3) and (21)(3) daily stochastics are all at or approaching oversold levels. There's risk back down to 17.00 or so on a pullback without breaking the bullish tenor of the price action, and there's also a gap up three days ago from the $16.00 level to the $17.00 level. I wouldn't be surprised to see a pullback as VOD approaches the psychologically important round number of $20.00. With the minimum targets projected by the double-bottom formation and P&F buy signals at 21.55 and 22, plan your trades accordingly. This stock tends to gap, both up and down.

  Jim Brown   11/14/02,  3:20:32 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
If we do not get a significant drop before the close and we do not get stopped out then I will be exiting the SHORT signal before the end of trading. While I think most of the expectations are already priced into Dell it is obvious from the AMAT earnings yesterday and the market reaction today that the markets want to go up despite the news. It is not worth the risk to hold a marginal short signal over the Dell earnings report. I would be looking for something in the 455 range to make me decide hold over. With the OEX currently at 461 it is technically above my LONG pivot number by one point. If we get a continued move after the Dell earnings then we will go long.

  Jonathan Levinson   11/14/02,  3:12:45 PM
The INDU is climbing on the 10 minute bars in a bearish ascending wedge formation that projects, naturally, to 8550. The COMPX is climbing in a range so tight that I hesitate to call it anything, though possibly a bear wedge, but I doubt it. The QQV has dropped off 2.19 to 44.30, the TICK.NQ is at -22, and the TRINQ remains at .31. Meanwhile, HUI and XAU are showing big gains on the day, which doesn't jibe well with the selloff in treasuries. I blame the bond action at least in part on the 2.75B in fed money being drained, given that it certainly hasn't come out of equities. The bottom line is that today's action is going to revolve around DELL after the bell. While I expect nothing positive enough to cause further gains, my expectations have nothing to do with it. COMPX traders in particular need to assess their exposure if DELL manages to gap the market up going into tomorrow.

  John Seckinger   11/14/02,  3:03:00 PM
The bond market is set to close, and the Dec. Bond looks to settle near the 111'08 level. The high on August 14th was 111'03, and this seems like a solid pivot level going forward. Support below 111'03 is at 110, while resistance above is felt at 112 and 112'11. With expiration Friday approaching, it will be interesting to see what the bond market's influence is during trading on Friday. It should remain strong. Note: Bond prices should trade inversely with stocks (at least in this current environment).

  Jeff Bailey   11/14/02,  2:43:34 PM
Honeywell Intl. (HON) $23.02 -8.8% ... noting some other comments made in today's market monitor. My point would be, stock trades below trend and has had sell signal associated with its p/f chart. Despite broadeer bullishness, it still seems to be these types of technicals that have pattern of blowing up, or at least negative to market. Then, when market turns negative, tends to lead to the downside. Link

  Jim Brown   11/14/02,  2:30:55 PM
Swing Trade Signals
The VIX has dropped to 33 and the lowest level since November 4th. That is also when the Dow hit 8730 and the OEX 470. The TRIN is at .48 and indicating overbought conditions. Both of these would indicate to me that it could be tough for the Dow to hit that 8550 mark today. Not impossible, just tough. We have seen traders climbing that wall of worry a lot lately so I would not count it out.

Now, 2:30, it is time for the end of day direction to appear. Dell has earnings after the bell and there is a rumor making the rounds that they have a $5 billion order backlog. They are currently trading near $31 and at a level not seen since April. If they don't have a huge backlog and disappoint in any way there could be some weakness in the stock tomorrow. Traders be aware! There are also a lot of economics tomorrow with Business inventories, PPI, Industrial Production and Michigan Sentiment.

  Jeff Bailey   11/14/02,  2:30:43 PM
S&P 100 Index (OEX.X) 459.79 +2.03% .... per today's 01:00 update and comments regarding potential head/shoulder top in the Dow. With technicals very similar between Dow, SPX and OEX, I will note here that OEX session high of 461.05, just baaaaarely broke above similar left shoulder high of 460.84 on an intraday basis. Hesitant bull in OEX may well wait until final minutes of trading and look for a close above 461 to paint the close bullish.

They say the "pros buy the close" and if the "pros" are bullish, should paint OEX near session high into the close. Will see with 90-minutes left in session.

Daily bar chart of OEX shows Stochastics turning higher from "oversold" and MACD trying to round out above zero. Link

  John Seckinger   11/14/02,  2:25:30 PM
One sector not wanting to give up its gains is the Semiconductor Index (Sox), higher by 4.91% at 310.11 and just off its intra-day high (311.46). It seems as though the index could come down to 306 and not hurt the sentiment gained from today's session. A close above September 11th's high of 310.76 should add to the recent bullish sentiment.

  Steven Price   11/14/02,  2:12:27 PM
Don't mean to rain on the parade, but if we get another rollover from this level, that H&S in the Dow looks textbook!

  Jim Brown   11/14/02,  2:09:57 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The broader market SHORT signal was triggered at 14:04:04 when the OEX traded below 449. SPX 899.41, DIA 85.26, SPY 90.40, DJX 85.00, NDX 1043.72, Compx 1395.76, QQQ 25.95, SP02Z 898.80, ES02Z 898.75, NQ02Z 1045.00, YM02Z 8523.0

The initial stop loss on this signal will be OEX 462.

They tried to hold them at Dow 8500, SPX 900 and they could try to rally them back to those round numbers for expiration but the A/D line is dropping like a rock. They will have to come up with some serious volume to turn this around.

  Kent Barton   11/14/02,  2:00:22 PM
Reader question: Love what you guys do! Was wondering if my eyes were seeing things or if the handle of a cup and handle formation was appearing on the daily INTC chart. Front edge on 8/21 at 19.55, rear edge on 11/8 at 19.20 and handle about to finish if INTC reaches 19.50? Thanks, John

Response: INTC ($19.06) is trading higher by more than 5% today on news that the company has added 480 million shares to its stock buyback program. That's most definitely a "cup" pattern during the time period you mentioned. I don't know if we've had enough flat consolidation to form a "handle" over the past week, but the pullback and subsequent rebound is pretty bullish. The way chip stocks are shrugging off the weak AMAT earnings is a good indication that the sector has been innoculated to any more bad news. The fundamental outlook is still hazy at best, but tell that to frustrated bears who have tried to short Intel over the past month! The next challenge for INTC will be stubborn resistance in the $19.50-$20.00 area. I wouldn't be considering any signficant large positions until shares clear that hurdle.

  Jim Brown   11/14/02,  1:56:52 PM
Its Alive ! The new Java Monitor is very close. I actually saw a live test a minute ago and they tell me I can start looking for a few beta testers later today. (wishful thinking?) Here is a screenshot for those that can't wait. We do appreciate your patience as we work through the current problems. Link

  Jeff Bailey   11/14/02,  1:56:41 PM
Syncor Intl. (SCOR) $25.38 +10.9% ... after trading $17.00 level, stock has seen impressive rebound to current levels. I still hold partial position in the January $20 puts, but I sure don't like this renewed optimism.Link.

  John Seckinger   11/14/02,  1:55:21 PM
Looking at a five-minute chart of the Dow, the "P" formation (indication of short covering) appears to have a high volume area at 8475. It is not uncommon for the market to come back and test the strength of this area. Currently the Dow is at 8523 and just above the high during the first five minutes (8520). If the market spends some time under 8520, longs could begin taking some profits.

  Steven Price   11/14/02,  1:44:24 PM
Forest Labs (FRX): 104.66 (+3.41) Finally got the breakout in OI call play FRX, entered at $98.75. I like new entries on a pullback above support at $103.50. That level provided resistance until today and support there would be evidence of a new higher consolidation point.

  Jeff Bailey   11/14/02,  1:40:01 PM
Geen across the screen ... Every Index, every Sector in the green, including bond YIELDS.

How bullish? Even the short-term 13-week YIELD ($IRX.X) shows YIELD at 1.192%, just below Fed fund of 1.25%. Can't wait until I get this months interest payment from my money market account!

  Jim Brown   11/14/02,  1:39:34 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry point on the outstanding SHORT signal to a trade at OEX 459. The A/D line is crashing and it appears we are going to pull an afternoon roll over just like the last two days. This is a highly speculative signal and the stop loss is going to be very tight at OEX 462 to take us out on any end of day short covering rally.

  Kent Barton   11/14/02,  1:33:38 PM
Northrop Grumman (NOC), 90.36 -2.91: On my list of roughly 30 major sector indices, the Defense Index (DFX.X) is the only one currently trading in the red. Obviously the HON sell-off is a major drag on the group, but the underlying weakness can be attributed to the perceived easing of tensions in Iraq. NOC is worth keeping an eye on if the sector continues to weaken. The stock has continued to move lower following yesterday's announcement that the SEC was weighing a lawsuit against Northrop related to its failed merger with Lockheed (LMT) back in '98. Technical bears will be watching for a break under last November's low ($88.50) to clear the way for a $80-$83 area. A failed rally near $95.00 might also provide a shorting opportunity.

  Jeff Bailey   11/14/02,  1:32:49 PM
The 1:00 PM Intraday Update has been posted. Link

  Jonathan Levinson   11/14/02,  1:31:05 PM
Of course, if the shorts begin to cover en masse at this level, that could be a different cup of tea.

  Jonathan Levinson   11/14/02,  1:28:58 PM
Jim, for what it's worth, I agree. Now there are two of us to field the inevitable emails. All of my stochastics are overbought, from weekly on down, and the TRINQ at .31 after almost this entire week of overbought readings is telling me to fade this rise. That, and of course, the news.

  Jim Brown   11/14/02,  1:23:00 PM
Swing Trade Signals
I see it but I can't bring myself to trade it. It is the deer in the headlights thing. I can't believe it is going up and I just can't convince myself to pull the trigger on a long. One thing that is holding me back is that the A/D line has actually dropped in the last 30 min and declining volume on the Nasdaq is increasing. What's up with that?

The suggested entry point for going long in the game plan last night was OEX 460. It was based on technical chart patterns, not news/earnings etc. If you believe in the rally then now it the time to jump in. I am going to wait for further confirmation. The nasdaq has STRONG resistance at 1425 and the Dow at 8550. Until those levels are broken I am still skeptical.

  Steven Price   11/14/02,  1:22:40 PM
Ambac Financial (ABK): $56.13 (-0.49) OI put play ABK is still falling, despite the rising tide in the market. It bounced at $55.73, which was just below support at $55.80. New entries on the short play can look for a move under $56 AND intraday resistance there. So far the bounce looks weak and the stock has set a series of lower highs and lower lows intraday, but I like entries better with resistance under $56.

  John Seckinger   11/14/02,  1:16:12 PM
It looks like this will be one more week that traders battle over whether the Dow will post a weekly gain. The magic number, 8537. Dow is currently at 8533. Unbelievable.

  Jonathan Levinson   11/14/02,  1:15:44 PM
We don't have a breakout yet, but the bulls are really delivering today. Whether they break through or not, a golf clap is certainly in order.

  Jonathan Levinson   11/14/02,  12:58:43 PM
Definitely some traders holding their breath here. SPX 900.36, COMPX 1397. All but the 1 minute stochastics are topped out. Either this pullback is gathering steam for another assault higher, or it's the beginning of a rollover. TRINQ at .31 indicates overbought, but not as low as we've seen this week.

  Jeff Bailey   11/14/02,  12:49:53 PM
Kohls (KSS) $63.30 +4.10% ... is name I like for bulls in stock specific retailing group. Similar technicals to last fall ahead of holiday shopping season. Stock rallied strong to 200-day SMA, then broke through to trade new highs into December. Strong break from congestion a couple of weeks ago and point/figure looking strong. Stock has been giving multiple buy signals and today's trade at $63 has stock above bearish resistance and demand builds. Link

  Jim Brown   11/14/02,  12:33:02 PM
Interesting pattern on the indexes. We are quickly approaching the pinch point somewhere in the 12:30-1:00 range. With strong overhead resistance any breakout could be limited and with option expiration tomorrow the downside should be limited as well. Should be interesting and it should happen any minute now.. Link

  Linda Piazza   11/14/02,  12:25:16 PM
Reader Question: I wonder if you could pass comment on Colgate-Palmolive.

Response: CL, currently 52.45. I don't know much about this consumer staple stock from a fundamental basis, but here's what I see on the charts: The 52.50 level is an important level to monitor, so it's significant that CL moved below that level today, but I'd probably want to see a close below that level or a retest and failure at that level this afternoon before considering a bearish play. Alternately, a fall through the support at 51 might be significant. The chart looks ugly, with stochastics, RSI, and MACD all confirming the downward trend. The shorter-term 22-dma has just crossed the 50-dma, also a bearish sign. Support lies below at 51 and 50, then 47.50 and the 44 area. It would be easy to enter this from the bearish side, setting a tight stop loss.

Two cautions, though: Until this stock trades below 52, it's still on a P&F buy signal. Also, the formation since early August looks suspiciously like the left shoulders (two) and head of a H&S formation. While it's always possible for CL to continue down from here, the (5)(3) stochastics are in oversold territory, and it's equally possible for the stock to bounce back up to the 55-56 level, forming the right shoulder. There's important psychology behind those H&S formations, so I'd be watchful for signs that CL may bounce back up and form that right shoulder before finally breaking support. If you're going to enter from a bearish side, decide first if you're interested in buying enough time and holding on for a formation of the right shoulder or if you'll set a tighter stop, exit, and then look for another entry if there's failure at the shoulder area.

If CL bounces strongly from that 52.50 area this afternoon, I'd wait for that right shoulder to form in the 55-56 area, seeing if stochs have moved rapidly into overbought territory while the shoulder formed. I've included a PerfChart comparing CL's strength with that of some of its competitors'. It's less strong than some, stronger than Gillette. I hope this information helps you make a decision that's right for you and your trading style. Link

  Jonathan Levinson   11/14/02,  12:20:27 PM
Home on the ... RANGE continues, with SPX at 896, COMPX at 1392 and in a new resistance zone that we recall from the pullback off the rally highs recently. FVX is now up 12.8 bps, and you have to hand it to the Fed- they really know how to stretch a few billion bucks. The 2.75B drain today is so far being absorbed nicely by selling in bonds. No need to whack equities to meet that bill so far.

  Jim Brown   11/14/02,  12:12:32 PM
AMD to cut 15% of its workforce Guess that good news from AMAT is spreading.

  Jim Brown   11/14/02,  12:08:32 PM
Argentina defaulting on debt - A reader just alerted me to this story but it appears the markets are not applying much importance to the event. Argentina is not as big as Brazil and does not have as much world impact. Still, just another domino to fall. Link

  Jeff Bailey   11/14/02,  12:04:14 PM
30-year YIELD ($TYX.X) 49.04, or 4.904% ... leggin into another partial in the 30-year March 50.00 YIELD calls (TYXCJ) $3.20

  Steven Price   11/14/02,  12:02:34 PM

MBIA (MBI) $40.69 +2.19 The stock sold off on potential problems with guarantees on truck driving school loans yesterday and has bounced today. The news has MBIA all over the board, as Salomon Smith Barney defended the company yesterday, saying the news was nothing new. They were right about the news being "old" news, as it hit the wires last Thursday, and the sell-off didn't come until Wednesday. However, that doesn't mean there aren't problems. The bounce found resistance at $41, and I would wait for a drop back under $40 and signs of resistance on the intraday chart at that level, before initiating new shorts.

  Jeff Bailey   11/14/02,  11:59:46 AM
The 11:00 AM Intraday Update has been posted. Link

  John Seckinger   11/14/02,  11:37:04 AM
One reason for the cap on stock prices seems to stem from the US Dollar, curretnly higher by 0.20 at 105.30 and hitting resistance at 105.32 (low on November 5th). Further resistance is seen at 105.41, low on September 4th. The Greenback will have to fall underneath today's low of 104.76 before bears get aggressive once again.

  Steven Price   11/14/02,  11:31:44 AM
Forest Labs (FRX): $103.40 +2.15 OI call play FRX is approaching new relative highs once again. Yesterday's high was $103.46 and a move above $103.50 could signal a new round of buying. More conservative entries can wait for $104.00. Keep in mind this stock has also been testing $100 on pullbacks, so ideal entries are on pullbacks above $100.

  Steven Price   11/14/02,  11:23:39 AM
VERY interesting comments re above in Market Monitor this morning. How does the market maker in index options hedge? Thanks for the great work.

Index Market Makers hedge using futures. In the OEX, they have to use a ratio for the SPX that is not exact, since there is no actual underlying product.

  Jim Brown   11/14/02,  11:09:12 AM
Swing Trade Signals
I am resisting the urge to go short at 457 instead of 455 but I would like to get below that first morning dip before pulling the trigger again. Several readers have speculated that Greenspan gave his slightly bearish "soft patch" speech yesterday knowing what was coming today. By putting a dose of pessimism into the markets they rally on any glimmer of hope. I don't think this was his objective. Unless he has turned into a contrarian he was simply warning the markets that he expected better times ahead but there could still be an economic dip in our immediate future.

The internals are beginning to fade and the dead stop at Dow 8500 looks very similar to the last two days of trading. Remember, this is an options expiration week and anything is possible. I check the max-pain on the OEX and it is 450. This is the point where the most options will expire worthless and the point most likely to see the price gravitate to on Friday.

  Jonathan Levinson   11/14/02,  11:03:30 AM
So far, the markets have been in a relatively narrow range since the initial gap and run at the open, 10 points for the COMPX, 5 for the SPX. The TRINQ is very low at .30, another sustained low reading... seems like 3 days in a row, unless I'm mistaken. FVX is up 11.4 bps today, which is quite bullish for equities, ditto the QQV down 1.28 on the day. I'm watching this range carefully and expect shorts to cover on a positive breakout from this range, possibly compounding the upside action if it occurs.

  Jeff Bailey   11/14/02,  11:02:37 AM
Q-charts ... Thanks for fixing my Q-charts:) You can move markets and fix charting services:) (really big GRIN)

I'm not a q-charts expert, but I've learned that AMEX stocks usually need the amex: in front of them, especially th HOLDRS.

I hope that "big GRIN" was about my q-charts expertise as I CAN move markets! (really, really, BIG GRIN).

Hey!... we got them bears in FRX from the $75 and that bullish triangle didn't we? Link

Better stop there or I'll have to eat a new brand of soup that CPB is coming out with. Calling it "crow soup" from this November's $22.50 call play from August. As stated before. Next year, will look for a better supply/demand chart and will at least want it in a column of X. Link

  John Seckinger   11/14/02,  10:59:40 AM
The Dow remains under 8500, while the S&P 500 is under 900; however, there still appears to be underpinning bids in the market. Back to the bond market, which is now lower by 1'15 at 111'19 and closing on support between 111'04 and 111. I would not be surprised to see bonds move back up to 112'11, which should temporarily pressure stocks. Note: The Dow has not broken above its high set during the first five minutes of trading (8520).

  Linda Piazza   11/14/02,  10:56:29 AM
Reader Question: Keep up the good work. I'm enjoying your posts. I have been seeing a lot about fed repos and I was wondering if you can explain exactly what that is and what effect it has on the market.

Response: I'm glad you asked the question. For those who might have missed the article, Jonathan Levinson wrote a great explanation of this topic. It's a must-read article. Here's the link: Link

  Jeff Bailey   11/14/02,  10:54:16 AM
Retail HOLDRS Jeff: Could you help me with a q-charts problem, as well? I can't get an options montage for RTH on Q-charts. Any suggestions would be greatly appreciated.

Hmmm... I'm having problem here too. That's when the OI tools part of the site comes in handy. Links to the CBOE option site. Link

Yes... 20-minute delayed, but pretty easy to figure out where bid/ask is at. If 20-minute delayed, then I can pull up a chart, switch to 20-minute bars, then look where the RTH was at 20-minutes ago. Has it moved? If so, by how much? Then approximated within 5 cents or so by adding/subtracting the 20-minute difference.

  Jeff Bailey   11/14/02,  10:45:25 AM
Intuit (INTU) $49.29 -6.6% ... Jeff: INTU reports lightly better than expected yet price falls 3%. is there something else hidden here?

I haven't looked at their earnings. P/F chart looks longer-term bullish, but today's trade at $51 does trigger double-bottom sell signal. Look for support to firm at bullish support trend of $49. May be some selling on the "good news" by those that bought in September/August base, but I agree, a bit suspicious. Link

May also be that NASDAQ-100 a bit "riskier" with the bullish % so close to 70% bullish level. Link

INTU is a component of the NASDAQ-100 and today's sell signal would take one stock away from the bullish % on a net basis.

Keep an eye on INTU for possible bullish play though. Today's action may also have something to do with option expiration on Friday. I'm not getting open interest numbers from my q-chart option chain, but $50 might be some type of "peg" level near-term?

  Jim Brown   11/14/02,  10:41:49 AM
Swing Trade Signals
The entry point for a long signal in last nights game plan was above Dow 8550/OEX 460. The OEX has moved ahead of the Dow slightly due to the HON loss. I am not going to issue a long signal at those levels without additional confirmation. I believe this is just short covering and it could send us back up to the top of the extended range at Dow 8700/OEX 470. The spike today on less than exciting economic events is unbelievable. If the market does move up on increasing internals then I will trade what I see but at the moment I fear I may need stronger glasses.

Everything appears to be moving sideways after that opening gap and I suspect other traders are scratching their heads as well. Retail Sales ex autos +0.7% but Autos dropped -14.3% This is bullish? AMAT warned of a continuing grim outlook and it is up this morning at the open? SOX surged over 300 again on the good news. What good news? Initial Jobless claims fell -8,000 last week but continuing claims rose by +89,000 during the same week? Oh, by the way, due to the holiday shortened week the numbers are expected to be revised upward next week due to incomplete data.

The bottom line is I cannot in good conscience go long on a short covering spike on less than exciting news with a major resistance top only 10 OEX points above. On Thursday before expiration I would rather give up those possible 10 points and watch from the sidelines instead of going long. We have sold off from the 8500 level two days in a row. What changed?

  Jeff Bailey   11/14/02,  10:33:38 AM
Retail HOLDRS Need a little help with the RTH on Q-charts. Can't seem to get the symbol to come up. RTH & RTH.X don't work.

Aha!... if you want to view AMEX listed securities, need to use the amex: in front of the symbol. So, would need to enter amex:rth

  Linda Piazza   11/14/02,  10:29:34 AM
KO Update: After a Greek bottler Coca Cola announced today that it more than doubled its group net profit in the first nine months, KO has been strong today. Currently at 45.74, it has, however, not yet broken through yesterday's highs of 45.85. While KO has been weakening since July, recent weakness was attributed to KO's warning of weak global sales, and this morning's report may be brightening its outlook in investor's eyes. Overhead, resistance lies at the 22-dma at 46.19, and there's historical resistance there, too. KO is still on a P&F sell signal and volume still tends to be lower on up days than on down days, but the JAN puts are particularly vulnerable to decay caused by the collapsing levels of the VIX. If KO doesn't break through that 43.50-45.00 support soon, it may be time for me to close out this play and collect any profits left since its move down from the 47 level.

  Steven Price   11/14/02,  10:27:39 AM
This is a sentence from your commentary yesterday evening and I would appreciate your feedback and insight about this phenomena:

"Right now, market makers with short stock positions are held back from filling large in-the-money call orders on the buy side, or large in the money put orders on the sell side, as getting off a short hedge requires an uptick in the stock."

Is it correct that a customer selling a lot of puts synthetically is the same thing as buying stock and selling calls so the market maker does the opposite and sells stock short and buys calls? And is it correct that a customer buying a lot of calls is synthetically the same as buying stock and buying puts so the market maker does the opposite and sells stock short and sells puts?

Buying stock and selling calls is the same thing synthetically as selling puts. Buying stock and buying puts is the same thing synthetically as buying calls.

A market maker generally hedges his trades by taking the opposite directional position in the stock. Therefore, if he buys calls, he will sell stock. If he sells calls, he will buy stock. The deeper in the money the call is, the more it will move along with the stock and the more stock the mm has to trade against the position to remain directionally neutral (delta neutral). The same rules apply to put trades. If mm buys put, he generally buys stock and sells stock when selling puts.

Because market makers trade stock so frequently, they often acquire large long or short stock positions in order to neutralize the options they are trading. If a mm is short stock and wants to fill an order to purchase calls or sell puts, he would need to sell stock on an uptick in the stock, in order to remain neutral. If the stock is not already on an uptick, or is falling, he will likely reduce his bid (either in price or size), since he is taking more risk and may not be able to hedge the trade at an ideal stock price. With single stock futures, there is no uptick rule, and therefore a mm can sell short regardless of which direction the stock is going.

Right now, SSFs are very thinly traded and do not provide enough liquidity for market makers to use as a hedge. However, they have just been listed, and as the liquidity grows, and more are bid and offered, this should help MMs hedge risk on long positions (by being able to short the future) and therefore provide larger and higher bids.

  Jeff Bailey   11/14/02,  10:25:43 AM
The money machine has the longer-dated 30-year YIELD ($TYX.X) 4.888% showing session YIELD high of 4.892%, or 48.92 on its p/f chart. Needs a trade at 49.00 or 4.9% to get a 3-box reversal higher. Link

  Jeff Bailey   11/14/02,  10:18:48 AM
Interesting.... I find it interesting that yesterday's comments regarding some potential bearishness between EXPE and TSG regarding airlines trying to do their own ticketing with Orbitz. See how EXPE +3% bids, yet TSG -3% doesn't? While very similar business, one (EXPE) Link has better p/f chart and supply/demand relationship, while the other (TSG) Link is quite a bit weaker supply/demand chart.

Disclosure, I currently hold bearish position in TSG and "hedged" bullish position in EXPE (long stock, covered call in Nov. $70's, protective put in Jan. $65's).

  John Seckinger   11/14/02,  10:17:10 AM
The catalyst for bears and bulls may still lie in the bond market, which is lower by 1'06 at 111'28 (ZB02F) and still shows investors are freeing up cash to put towards stocks. Other notes: Sox just above 300 at 301, and Dow just above 8500 at 8506. Moreover, S&P 500 Index just under 900 at 898.09. Most likely these markets will not stay at current levels for long.

  Jeff Bailey   11/14/02,  10:09:12 AM
Semiconductor Index (SOX.X) $303.97 +2.8% ... conventional box size for SOX is $20, which is used by Dorsey/Wright and Assoc. and viewed by most institutions. Similar to the QQQ, no "buy signal" so far on $20-box. Link

Can do same thing here as with OEX, and reduce the box size a bit, say $10-box to introduce more noise into the chart. Link

See some of the "false" buy signals the $10-box has shown in the past? 400, 350, 320? Not a very good box size of accurate buy signals huh? SOX a little too volatile to get good results from $10-box.

Interesting observation could be that on $10 box, SOX has NOT been able to give two consecutive buy signals without first generating a sell signal. Can make a note of that, but if SOX does give two consecutive buy signals, then that's DIVERGENCE and DIVERGENCE can hint of change taking place.

  Linda Piazza   11/14/02,  10:06:22 AM
VOD Update: Trading 18.25 at this writing, British telecommunications company Vodafone's stock has this morning moved above its 50-dma at 17.55, and is also above its 50-week MA. It's completed a double-bottom formation and generated a buy signal with minimal targets of 21.55 and 22, respectively. Because VOD gapped up yesterday morning and there's risk down to the bottom of that gap at 16, it may be too late for entries on this play now, but for those who entered this risky and aggressive call play yesterday morning, the psychologically important 20 may be the next resistance. True technical resistance lies at about 21.50.

  Jonathan Levinson   11/14/02,  10:05:35 AM
The O/N RP has been announced- just 6.25B added today, for a net drain on the day of 2.75B. I don't think we'll break the highs today, unless the fed's counting on selling in bonds to support equities. My guess is that 900 SPX should be the ceiling.

  Jeff Bailey   11/14/02,  10:03:54 AM
QQQ $25.59 +1.42% .... QQQ has yet to generate a "buy singal" even from the rally off the bottom. First sign of strength is trade at $27. Link.

  Steven Price   11/14/02,  10:02:35 AM
Semiconductor Sector Index (SOX)302.60 +6.95 Looks like the chip stocks are attempting a comeback after being left for dead. Guess I should have seen this coming after AMAT warned on declining revenue (GRIN). In the run from 214 to 329, the sector rallied repeatedly on bad news and the break above 300 again has me on the sidelines. I think it will fail, and after the big drop earlier this week, there is some bounce room, but I like it short much better under 300.

  Jeff Bailey   11/14/02,  10:01:23 AM
Fiber Optice (FOP.X) 42.90 +4.4% ... sector gainer in tech again today. What do you thing of this point and figure chart? After giving a sell signal at $41, that builds bearish vertical count of 28. Needs a trade at 46 to negate the bearish vertical count and get back on a buy signal. Link

  Jeff Bailey   11/14/02,  9:57:58 AM
Dow Industrials (INDU) 8,462.30 +0.76% ... just as the OEX on 2.5 box size came within a "frogs hair" of generating a double-top buy signal, Dow also just shy of needed 8,550 to get $50-box back on a "buy signal." Link

  Steven Price   11/14/02,  9:56:10 AM
Dueling Analysts: RTH $73.85 +1.05 I still like the $75.00 stop on the RTH from this level. The RTH has made several attempts at a rebound on news in the sector, and been rejected each time. A breakout over $75 would take out resistance and may get the group rolling toward Jeff's target. However, until that break, I still think the short side has some room.

  Jeff Bailey   11/14/02,  9:50:34 AM
S&P 100 (OEX.X) 457.13 +1.44% ... retail sales a bit stronger than expected so shorter-term bear in OEX monitoring things rather close here. A quick look at OEX.X on unconventional 2.5 box scale like we've looked at in index trader wrap shows early morning high of 457.39, falling just a frog's hair from the needed 457.50 to generate a "buy signal" Link

Again... the 2.5 box was used per excellent subscriber comment regarding that the OEX price of 450 is 1/2 that of the SPX 894, so why not use 2.5 box instead of conventional 5-point box size. The OEX 2.5 introduces a little more "noise," but gives a bit different perspective. Here's the conventional $5-box of the OEX. Still, traders can see how important the 440 level is on both the 2.5 and $5 box. Link

  Jonathan Levinson   11/14/02,  9:48:29 AM
The Fed has announced a 5B 28 day repo. 9B left to cover- awaiting the next announcement.

  Jeff Bailey   11/14/02,  9:45:44 AM
Retail HOLDRS (RTH) $74.25 +1.99% on the opening tick. I didn't realize that the RTH was an OI put play. As such, bearish traders can view earlier 09:36:26 as p/f risk/reward. RTH still under its rolling lower 21-day SMA of $75.21 and 50-day SMA of $76.63, so bulls have some work ahead of them if they really like the retail sales numbers and view good things ahead into the holiday shopping season. Link

  Jim Brown   11/14/02,  9:41:41 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go SHORT 1/4 position of the broader market with an OEX trade at 455. The initial bounce is running out of steam. The initial stop loss will be tight at 457.50 just over the high of the day. This is a protective entry to get us back in at the top of the range if it fails again.

  Linda Piazza   11/14/02,  9:38:54 AM
It will be interesting to see how bullish sentiment does battle against lack of liquidity if the Feds fail to reimburse that 14B in overnight, 2-day, and 28-day repos that Jonathan mentioned in his 8:03 comments.

  Jim Brown   11/14/02,  9:37:55 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORT signal at 9:33:22 when the OEX traded at 456.50, SPX 893.30, DIA 85.37, SPY 90.13, DJX 85.13, NDX 1034.58, Compx 1384.83, QQQ 25.72, SP02Z 896.20, ES02Z 896.20, NQ02Z 1035.50, YM02Z 8509.0.

I do not expect this bounce to last but we will reenter on whichever side of the pivot numbers the market decides to trade.

  Steven Price   11/14/02,  9:36:29 AM
Dow: 8514 (+115) With 8500 broken for the moment, look for secondary resistance at 8550 in th eDow. The H&S Jim referred to would allow upside room into the 8700s before a failure, but over 8550, I'd get out of the way and wait for a failure before shorting anything.

  Jeff Bailey   11/14/02,  9:36:26 AM
Retail HOLDRS (RTH) per last night's Index Trade Wrap. I haven't seen a tick from the RTH, but sector bulls can play long at the open from p/f chart, stop $70 with bullish vertical count of $108. Link

S&P Retail Index (RLX.X) 285.72 +1.34% and just above its 50-day SMA of 283.74 and just under its 21-day SMA of 286.18.

  Jonathan Levinson   11/14/02,  9:32:13 AM
17 point gap up open to 1378 COMPX, TRIINQ .24, TICK.NQ -103, QQV flat.

  Jim Brown   11/14/02,  9:31:00 AM
Swing Trade Signals
The bullish sentiment went into overdrive this morning on mediocre economic news. A slight decrease in initial jobless claims and a slightly better than expected Retail Sales report has spiked the futures +10 points. Even AMAT has come back from negative territory after giving grim guidance for the chip sector going forward.

This huge bounce on relatively mild data shows the strength of bullish sentiment and how bad the bulls want a year end rally. They are literally buying any glimmer of hope no matter how slight. The key this morning will still be the Dow 8500 level. The Dow futures are showing a +87 point expected bounce which would put us right back at 8480 again. After failing there two days running a third failure should be even more negative. A break over that level could help build the right shoulder on the H&S pattern we have been talking about.

The stop loss has not changed. It is still OEX 456.50. With HON expected to drop significantly at the open it could be the anchor for the Dow.

  Jeff Bailey   11/14/02,  9:30:15 AM
The 9:00 AM Intraday Update has been posted. Link

  John Seckinger   11/14/02,  9:27:51 AM
After a few days, we finally get a good move out of the bond market. The Dec 30-year is down that magical one full point (-1'04) at 111'30 and just a few ticks below the 112 support area. The yield curve is slightly flat, which is also bullish for stocks. The key: What will the Dow do at 8500 if it gets there?

  Jonathan Levinson   11/14/02,  9:23:00 AM
QQQ seems to have topped at 25.72, and despite the futures continuing their ballistic rise and yields higher with FVX +10.9 bps, QQQ is trading lower on Island ECN, currently 25.61.

  Jonathan Levinson   11/14/02,  9:14:01 AM
Futures continue their march higher. The COMPX is forming a bearish ascending wedge on the 10 minute chart, and the 1375 level should hold as resistance.

  Jonathan Levinson   11/14/02,  8:50:05 AM
Re: my rhetorical "does this feel like Q3 1998 question?"

I don't THINK so. I recall listening to a Morgan Stanley strategy call the first week of October. The quant people said, "our valuation model mathmetically can't get further than recommending 99% in equities.In other words now is the time to buy with both hands"

We are nowhere near anything similar. Earning then were ramping up. Now everytime I look at the S&P earnings forecast, it's down. -JB

  Jonathan Levinson   11/14/02,  8:36:57 AM
Yields are strongly up on the 8:30AM data, whith FVX +7.6 basis points, TNX +7.4 bps, and TYX up 4.1 bps. NDX futures are now flat, SPX futures +2.20.

  Jonathan Levinson   11/14/02,  8:35:33 AM
From the sublime to the ridiculous- more on the Citicorpse saga:

"Investigators looking at conflicts of interest by Salomon Smith Barney analysts are looking at whether the firm's former telecom analyst Jack Grubman upgraded his rating on AT&T Corp. shares in return for help getting his twins into an exclusive New York nursery school."

Full story at this Link

  Jonathan Levinson   11/14/02,  8:33:45 AM
CNNfn reports that retail sales were unchanged in October, a better showing than expected. Jobless claims fell to 388,000 in latest week.

  Jonathan Levinson   11/14/02,  8:03:57 AM
The fed has 12B in 2 day and overnight repos expiring today, in addition to 2B in 28 day repos for a grand tab of 14B owed by its 22 primary dealers. That's a lot of money. Anything less than 14B added by the fed today will be drained from the markets.

  Jonathan Levinson   11/14/02,  7:57:26 AM
The US Dollar Index ramped up to better than 105.30, but is back down to just above 105.00. NDX futures are down 1.50, SPX futures up 2.80 and gold heading back towards 320/oz after getting el tankoed on yesterday's news. Did anyone read the letter from Mr. Hussein posted by Jim yesterday? It's archived below if you missed it. How that text could have reassured anyone that anything good could possibly come from Mr. Hussein is beyond me. I won't editorialize further, but I could, ad nauseum. My conclusion is that the rally on this news seems awfully overdone after seeing the actual letter.

Also mentioned in yesterday's Market Monitor was the release about C. It seems that C issued 16M or so shares to bolster its pension fund, and those shares were exempt from registration under the Securities Act. If my understanding of that terse comment is correct, then we're looking at (a) an admission that there's a shortfall in C's pension fund (duh!), and (b) that C diluted its own stock by 16M + shares in order to top it up. No wonder the stock got smacked yesterday. Having Grubman and Weill playing "As the stomach turns" about who said what to whom certainly didn't help.

I find the strength in the markets very impressive against the backdrop presented by all of the news and events we've been seeing. Nevertheless, I find it difficult to characterize this news as a mere "wall of worry" as some bulls assert. Does it feel like Q3 1998 to anyone? In any event, the market will show us.

  Jim Brown   11/13/02,  11:48:26 PM
The Swing Trade Game Plan has been posted: Link

  Jeff Bailey   11/13/02,  11:21:59 PM
The Market Monitor has been archived. To view Wednesday's comments, simply click this Link.


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