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  Linda Piazza   11/18/02,  8:41:16 AM
A Bloomberg article this morning notes that Germany's gross domestic product grew by a mere 0.3% last quarter. Among the twelve countries using the euro, Germany's economy makes up about a third of the total economies, so its prospects are watched closely. Today, its central bank worried that hopes for improvement have dimmed, with business confidence numbers dropping further and unemployment numbers rising higher. Ralph Solveen, an economist Commerzbank AG in Frankfurt, lowered the growth forecast for next year from 1.25% to 1%. In the way the markets work these days, the DAX has responded so far today with a rise of 1.91%. In other European markets, the FTSE 100 is up 1.24%, and the CAC 40 is up more than 2%. In Asia, though, the Nikkei closed down 1.85%.

 
 
  Jonathan Levinson   11/18/02,  8:25:38 AM
The US Dollar Index fell this morning but has drifted up to 105.30. Futures are up, NDX +7, SPX +6.1. QQQ is trading 26.69, up 25 cents from Friday's close.

 
 
  Linda Piazza   11/15/02,  5:08:51 PM
Reader Question about CREE: Read your comment about BRCM. Like to get your analysis on CREE. The Pnf chart looks very bullish with an ascending triple top breakout. The first buy signal from 12 to 18 indicates this stock can go to 30? Makes no sense based on valuation but that is what the charts tells me.

Response: I can tell you've done your homework on CREE already. As I look at the weekly charts, I get a couple of confirmations of your target. I can make out a sloppy reverse H&S on those weekly charts, which would give a target of about 30, but more important than this sloppy formation is the rounding bottom formation. It's always difficult to tell the exact lip of a rounding bottom formation, but the increase in volume lately tells me that market participants may believe it's happening now. That rounding bottom formation would also give a target in the 30 area. (20 lip - 11 bottom = 9. Add 9 to 20 = 29.)

The bullish side: I see shorter-term MA's crossing longer-term MA's on all the charts. On the daily chart, the 22 has crossed the 50, the 50 has crossed the 200. On the weekly chart, the important 10 week/30 week crossover has occurred. Also, CREE has already consolidated a bit before this last push up. Volume is confirming the move up.

The bearish side: Those MA crossovers sometimes lag the movement, so that much of it is over before the crossovers occur. Also, CREE has either just barely or hasn't quite yet broken out over the longer-term descending line. (I couldn't access the feature of my charting system that would allow me to make that final determination and had to eyeball it.) This comes at a time when stochs and MACD are all oversold or nearing oversold on the daily charts, with RSI near oversold on both the daily and weekly charts, and with (5)(3) stochs oversold on the weekly charts, too. It looks as if CREE may be due for a pullback, then, but with strong support at 17.50 and with the 22-dma at 17.80, I would watch for those support levels to hold. The weekly MACD is just now making a bullish cross above the zero level. Watch volume on pullbacks, though. If it doesn't lessen on pullbacks, something is wrong. Also, I'd watch the behavior of the stochs, hoping to see them speed down toward oversold on a mild pullback or a sideways consolidation. If the move is deeper, and stochs move slower, something may be wrong. If you want to enter this from the bullish side, what you want to see is a mild pullback or consolidation on lessening volume as those oscillators cycle back down, and preparation is made for a breakout over that descending trendline.

 
 
  Steven Price   11/15/02,  4:45:56 PM
Apparently a couple of errors were present on the last stock pick link, so here's an updated version, including this weekend's add of EMC Link

The P&L is for stock only, and does not include the protective put.

For those readers who are looking for the stocks on the site, there is alink under strategies that says "Stocks"

 
 
  John Seckinger   11/15/02,  4:06:54 PM
Looking at the economic calendar, CPI and the Sept. Trade Balance are set to be released on the 19th (Tuesday), while Oct Housing starts is on Wednesday. Thursday has initial claims, and the Nov. Phila Fed and Oct Treasury Budget is on Friday. CPI will be watched after today's PPI shocker, and Housing starts always garners attention. It will be interesting to see what the dollar does after the Trade Balance numbers (could mean something), and economists will try to pull a correlation with the Phila release and the Chicago PMI the following Friday.

 
 
  John Seckinger   11/15/02,  4:02:44 PM
With the markets coming to a close, the S&P 500 is closing right on the aforementioned resistance at 910. Looking into next week, earnings include LOW and TOY before the market opens on Monday; HD before the open on Tuesday; and HOTT (to gauge retail spending) after the close on Wednesday.

 
 
  Jeff Bailey   11/15/02,  4:02:26 PM
The 3:15 PM Intraday Update has been posted. Link

 
 
  Jim Brown   11/15/02,  4:00:34 PM
Swing Trade Signals
Closing at the highs of the day and clear breakouts across the board. Now as long as we do not get any negative news over the weekend next week could be exciting. Techs pulled back and then rallied again which is a good sign. Still have strong resistance at 1425 but with the other three horsemen stretching to catch the Nasdaq it looks good like a setup for Monday.

 
 
  Linda Piazza   11/15/02,  3:36:58 PM
BRCM: I just noticed this on BRCM. There was unusual activity yesterday in BRCM calls. This resulted in an OI put/call ratio that's the lowest in 52 weeks, meaning that options traders are more bullish on this stock than they have been any time during the last year. The contrarian in me worries about this unabated bullishness, but I also notice that BRCM is presenting at the Lehman Brothers Semiconductor and Computer Systems Conference in San Francisco next Tuesday. Does someone (read: insider) know something positive about that presentation, the cynic in me wonders? At any rate, I'd treat that conference as I would an earnings report, holding over before that report only if it fits your trading parameters to do so.

 
 
  Jim Brown   11/15/02,  3:27:32 PM
Swing Trade Signals
I do not want anyone to get the wrong idea about my posts this afternoon. I see a strong rally ONLY if the Nasdaq can break that 1425 level. It is a technical observation and not based on fundamentals.

Technically we are also at the top of our recent resistance range and could easily take another dip back to support. If you feel like you have been trapped in the Bill Murray movie Ground Hog Day for the last several weeks then you are not alone. The only difference today (next week) would be that higher Nasdaq which could serve to break us out of the range bound conditions.

Regardless of our bias we need to trade what we see not what we think. If we see a breakout, jump on. If we see a failure at 1425 as I spelled out last night then we will trade that swing also.

 
 
  Jonathan Levinson   11/15/02,  3:25:02 PM
Cousin HUI and his weird friend XAU seem to be getting energetic here- HUI up 3.22 on the day, just tacked on an extra dollar in the past few minutes; XAU up 1.91 on the day. Dollar down, gold up. This rally has at least few zits and blemishes so far, but I'll be changing my tune above Jim's trigger.

 
 
  Jim Brown   11/15/02,  3:21:25 PM
Jim - I'm still waiting to win that cake. Tom

Yes Tom, I understand perfectly. Some of us feel like we have been walking in circles for weeks now.

 
 
  Linda Piazza   11/15/02,  3:13:39 PM
Cakewalk: I'm still mad at my brother for winning in the cakewalk and choosing a cake with sprinkles rather than the chocolate cake I'd been eyeing all day.

 
 
  Jonathan Levinson   11/15/02,  3:11:46 PM
The US Dollar Index is hovering just above 105.00.

 
 
  Jim Brown   11/15/02,  3:08:23 PM
Swing Trade Signals
Looks like those round number strikes are asserting themselves as we near the close. OEX 460, DOW 8500, SPX 905. Actually the 8537 close from last Friday is acting like a magnet as big money tries to insure another positive week. I would not be surprised to see some short covering at the close.

 
 
  Linda Piazza   11/15/02,  3:07:34 PM
Reader Question about BRCM: I know we all hate this stock, and would rather short than go long, but what's to think of a lift over 15? Could not give a rats you know what about what they don't do, but technically, some money looks to be made on this break. Or, I short...

Response: I saw your subject line listing BRCM and decided to take a look at the charts before I even saw what question you were asking. That way, I'd be sure I was looking at the charts with an unbiased eye, which is fairly difficult to do these days. What I saw was a bullish-looking chart, and the P&F bullish catapult breakout confirmed that for me in case I didn't believe what I was seeing. On the daily chart, the shorter 22-dma looks to be ready to cross the longer-term 50-dma. Prices are making higher highs and higher lows. There's bullish divergence on stochastics (lower bottom on stochastics with higher bottom on price). Both (5)(3) and (21)(3) stochastics are in overbought territory, showing a propensity for a pullback, but MACD and RSI are still bullish, perhaps predicting that any pullback will be shallow. Prices are trading near the top of an ascending channel just now, and they could fall all the way back to 12 or so and still stay within that channel, but I would expect those converging MA's in the 12.47 and 12.56 range to contain any fall.

A couple of things trouble me, and I'm sure you know what they are. One is that prices are still well underneath a long-term descending trendline, now at about 20, I believe. Another is that the 10-week MA is far from getting ready to cross the 30-week, and supposedly this 10-week/30-week crossover is the best predictor of a change in trend. With those two cautions, I wouldn't invest in Broadcom, but if your trading parameters fit this profile, you could consider trading it. Be aware of resistance overhead at 16.40 or so and again near 17.50. Watch what the oscillators are doing as BRCM approaches these numbers.

I can always see both sides of a trade. Sometimes that helps me and sometimes it keeps me out of trades that actually look good, but now the bearish side of me is going to come out and say that after a long decline, a bear flag formation also consists of higher highs and higher lows, moving counter to the prevailing trend. Usually volume abates during the formation of a bear flag, and today BRCM's volume is running just slightly above average daily volume, but also below volume on recent down days, so it's difficult to judge whether you could say volume is abating or not. If you decide to enter from the bullish side, be aware of this possibility.

 
 
  John Seckinger   11/15/02,  3:01:09 PM
Well, there is still just over an hour left and the Dow is holding on to roughly a net gain of five points for the week. It seems like I say something to that affect every Friday. It is interesting that the Nasdaq is underperforming the Dow today, after being strong all week. Looking at the S&P 500 Index, there definitely resistance from 907-910, and I would be surprised to see the market close above 910 as the weekend approaches.

 
 
  Jim Brown   11/15/02,  2:53:56 PM
Cakewalk - A 19th-century public entertainment among Americans in which walkers performing the most accomplished or amusing steps won cakes as prizes. (Dictionary.com)

Actually the cakewalks I remember were at school fairs and fund raisers where everyone contributed $2 bucks and stood in a circle of numbers. Music was played and everybody walked around the circle. When it stopped everyone stood on the closest number and a number was drawn by the host. If your number was drawn you won the cake. Everybody else got another turn or contributed more money for a new turn. The cakes were baked by the parents of the students. Since it was easy to do the less active attendees were able to participate as well as the very young children. Easy as pie! Oops, another archaic term.

 
 
  Jeff Bailey   11/15/02,  2:50:14 PM
Tellabs (TLAB) $7.65 +2.26% ... stock reversing course. Look for 3-box reversal higher at $8.00 combined with break back above still trending lower 200-day SMA as bullish. Options trader and ease into some January $7.50 calls here. Link

see: 10:59:53

 
 
  Jonathan Levinson   11/15/02,  2:47:38 PM
Jim, I'd never thought of it. What is a cakewalk?

 
 
  Jonathan Levinson   11/15/02,  2:46:11 PM
If this is a rangebound market, then the twitchy 5(3) stochastics are telling us that a top is near. However, if the market chooses to trend higher, then the stochastics will just bury themselves higher into overbought territory. The TRINQ is nowhere near overbought today, although on the week it still has a long way to go before reaching oversold. The QQV is down 2.65 to 41.86, telling me that the QQQ options market has completed discounted the possibility of a deep pullback from here. The bond market isn't as smug- yields only up 4.8 bps for the 5 year note. The lack of any kind of selloff in the COMPX is obviously rattling the bears, and the bulls can rest on their laurels for the week. But until that breakout occurs, this move is just a bounce within a range.

 
 
  Jim Brown   11/15/02,  2:44:37 PM
Swing Trade Signals
You might have noticed that slowing of momentum when the Dow hit near 8550 again. The SPX began struggling over 905 and OEX at 462. All critical resistance from Thursday. Sellers are still above us and any long scenario is not going to be a cake walk. (I actually remember cakewalks from my grade school days. Yes, I can remember that far back and we rode bicycles to school not horses.)

 
 
  Jim Brown   11/15/02,  2:37:01 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with a Nasdaq Comp trade at 1427. This would be slightly over the previous resistance and a breakout of the quadruple top. With all the bad news today any further rally should be viewed as very bullish. Aggressive investors might consider earlier entries but be aware of the Nasdaq 1420-1425 resistance and a possible failure at that point.

 
 
  Linda Piazza   11/15/02,  2:33:45 PM
Regarding my musings about the VIX in my 13:45 post, a reader points out expiration Friday was August 16 according to my Option Investor mouse pad. Thanks for that information. I was looking at my Palm calendar and guess I should have glanced down at my mouse pad instead! I hadn't found much correlation between low VIX numbers and expiration Fridays, and guess I actually hadn't found any since I had the wrong date. Still, the information about what happened when VIX last approached 30 still holds, whether it was expiration Friday or not. Like Jim, I'm wondering if we're about to return to that traditional 20-30 range, and certainly interested in seeing what happens today and what follow through we get next week. Currently at 31.79, VIX is quickly approaching its important 200-dma (at 31.23, according to stockcharts.com).

 
 
  Jim Brown   11/15/02,  2:32:59 PM
Swing Trade Signals
My OEX 462 alarm just triggered. The OEX/SPX are both trading at new highs and the Nasdaq is rocking toward 1420. If anyone wanted to get a jump on a long entry for next week now would be the time.

 
 
  Jim Brown   11/15/02,  2:11:27 PM
Jim, I don't know if you think much of the cup and handle formation, but the compx looks as though it is forming or has formed the cup and handle formation that Wm O'Neil from IBD likes to refer to. It looks like 1426 is the break out point. Then the compx is good for a substantial run. This market is really hard to figure. Bad news isn't being considered. I guess all the sellers cleared out in July and the only ones left are the traders, institutional investors and the Fed. One way or the other, the Fed is big player in this picture. Money coming out of Treasuries and into equities will force the return up on those Gov't obligations. Therefore rates will go up but the Fed won't have to come out and actually raise rates as the market will do so automatically. The market wants to go up and you can just see it from the action today.

I think the bears have had their day to ravage the market and now the bulls are going to run for a while. It is all part of the game plan. Suck you in and then spit you out. The market is a master at taking your and my money and the players know how to do it so well. Have a great weekend. Rick

I agree with the cup and handle concept. I do think a break over that level will drag many buyers off the sidelines and cause the final shift out of bonds to begin. With rates so low there is no future in any cash type account. The risk for fund managers at this point is not being in the market if their competition is making the same move. If we get an explosion then those left on the sidelines will be playing catch up for the next six months. Fund managers with cash in hand have got to be looking at the markets today with mixed emotions.

 
 
  Jeff Bailey   11/15/02,  2:09:12 PM
NYSE Composite (NYA.X) 478.73 +0.3% .... only major index just edged green. QQQ dipped lower after the 04:00 hour yesterday, so it shows more modest $-0.06 loss compared to NDX 1,047.77 -9.77 point decline. Hey... that's pocket change for a more volatile index. Stocks really doing little today.

Upside sectors have HMO.X +2% Link Healthcare (RXH.X) +1.6% Link , Gold/Silver (XAU.X) +2.6% Link

Session weakness in Fiber Optic (FOP.X) -2.2% Link and Airline (XAL.X) Link

 
 
  Steven Price   11/15/02,  2:08:32 PM
Steve: IBM stock now has dropped further to 79.07 - 1.64 option is still at same price 2.00...+.10 over yesterdays close, could you if possible elaborate on the market makers flexibility, realize it is his call and we can be at his mercy, thought it is somewhat of a regulated orderly method to keep prices in line. A drop in premiums of .60 cents in two days and market is in favor of shorts, seems a lot capitol loss to owner of options, your input on the option volatility is appreciated. Thank you again.

I'm not sure which option you are referring to, but here are my thoughts. The front month put will go to parity on expiration, and the last two days prior to that, the premium erosion goes extremely fast, as the decay curve goes to zero.

If you are talking about a December option, or further out, then it may be due to the volatility decline in the market. The VIX has dropped close to 30, and can be used to judge activity market wide. Usually, in uptrends, volatility drops and it has done so as we have climbed higher.

Also, as you get to expiration Friday, many firms buy in the short front month out of the money options and sell the next month, bringing volatility down in the month that will become the front month on Monday.

 
 
  Jim Brown   11/15/02,  2:03:35 PM
Swing Trade Signals
My internal indicators turned positive at 11:40 this morning on the OEX/SPX. The Dow is still slightly negative but a close above 8500 could trip the switch. It would still be borderline for the Dow but the ramping up on the Nasdaq is expanding its gap into positive territory. The bad news is the short term stochastics are beginning to turn over. This shows that the positive sentiment is not following through to the market and the closing numbers are far from certain.

 
 
  Jeff Bailey   11/15/02,  1:55:56 PM
The 1:00 PM Intraday Update has been posted. Link

 
 
  John Seckinger   11/15/02,  1:48:16 PM
It seems like the recent bounce will have to hold for bulls, since a failure here will most likely drain a lot energy from longs. For the Nasdaq, a failure seems likely once back below 1390. If this rally sticks and the enthusiasm picks up, I would not be surprised with attempt at the pivotal area right around 1420. With 1:15 left for the bond market, the recent equity buying should have brought sellers to the bond pits. It did not.

 
 
  Linda Piazza   11/15/02,  1:45:47 PM
VIX: I wondered if options expiration week could be skewing the VIX, so I took a look at recent options expiration Fridays. There's no clear correlation, but I did find that the lowest low of recent months--30.44--occurred on August 23, an expiration Friday if I looked at my calendar correctly. I'm sure all of you are familiar with August 23, as it started the long decline from the August highs. Here we are at another pivotal point, then. If the VIX bounces strongly from here or from its 200-dma just below and the 30 area proves to be the floor, markets may again prove the "when VIX is low, it's time to go" axiom, or else VIX may continue to fall into its once traditional range of 20-30, and markets may rally as fear abates. Interesting.

 
 
  Jim Brown   11/15/02,  1:45:23 PM
Swing Trade Signals
We must be ready to drop again because I am turning progressively more bullish as the day progresses. The markets are doing very well despite all the negative stock news this morning and the option expiration pressure. The Nasdaq at -14 has only given back a very small percentage of the nearly +100 points gained since Monday. Yes, it still has very solid resistance at 1420-1425 but a breakout of that resistance would be huge. The OEX/SPX are outperforming the Dow today and could easily close at new relative highs. The bears are completely ineffective and as we can see by the VIX nobody is afraid of a future dip. This is actually bearish but I think it is signaling a move back to more historical VIX levels between 20-30.

In looking a stocks yesterday for potential newsletter plays there were a lot of very strong techs that looked very good. I know this is heresy but it is true. The only challenge I see now is that Nasdaq 1420-1425 level. If that breaks there will be strong short covering and could produce a feeding frenzy rally.

Before I get completely crazy the bearish view still needs to be considered. Profits for other than Dell and MSFT are still very hard to produce. The chip sector is still looking at a six month desert ahead. There is a very good possibility the Dow is building the right shoulder and next week will be critical. The soft spot is still here and the bump in consumer sentiment could have been a result of the October rally and anticipation of the Fed rate cut. We are far from out of the woods but I think I can see daylight ahead.

 
 
  Jonathan Levinson   11/15/02,  1:44:34 PM
Very little has happened in the past hour. QQV is down 1.26 now, as QQQ volatility falls off near the upper end of the day's range, while the TRINQ remains at 1.23. The TICk.NQ shows 223, while yields have risen a touch, FVX up 5.5 bps. This rangebound action looks like distribution to me, particularly with the TRINQ staying in sell territory above 1. I'm in full agreement with Jim's Game Plan. Below 1425 COMPX, it's nothing we haven't seen already.

 
 
  Jim Brown   11/15/02,  1:44:03 PM
Hi Jim, The joke is on US!!!! AMAT says going to be 20% going forward. KLAC warns for next quarter. Dell going forward may increase Rev by 10%. Result = AMAT up, KLAC up, Dell Down.... The dummies are out in force and there is nothing I can do about it. Do you know what periods in history are like this. I have not found one that is even remotely close. All indications are that 6 months from now we may be right where we are today or maybe even worse. I thought I understood economics and supply and demand. Looks like I need a refresher. Angel

Obviously you are on to something. Have you considered going public with a new contrarian trading style? Buy bad news, sell good news? Oh, wait.. that is what everybody is already doing! (grin)

 
 
  Linda Piazza   11/15/02,  1:18:59 PM
VIX again at day's low of 32.12.

 
 
  Jim Brown   11/15/02,  1:02:30 PM
Fannie Mae - FNM said today that their asset balance had come back into the target range of less than a six month mismatch. This means they have protected their yields with enough bonds to offset their $751 billion investment portfolio. This is all greek to me but the bottom line is that they will not have to go into the open market to buy treasuries anytime soon. FNM and FRE have been under the gun since the election on the thought that a Republican majority might not be so friendly to these government sponsored entities. FNM was looked at as a put play several times recently but we felt support at $64 would hold. That support is looking weaker today and I would think a break under $64 could lead to much lower numbers as the event risk going forward increases.

 
 
  John Seckinger   11/15/02,  1:01:39 PM
The Dow remains in a relatively neutral range (8450 to 8550) as short traders get nervous below 8500 and long traders eager to take profits above 8500. If this wasn't option expiration, it is my opinion the selling would be more pronounced. A catalyst to override affects from option expiration? Possibly a weak dollar, which is near the 105 area and session low. A daily chart of the Greenback shows prices erasing all of Thursday's gains and getting back to the high set on November 10th at 104.95. If the dollar trades under 104.95, bullish equity traders might have to concede this week and let bears get more aggressive.

 
 
  Jeff Bailey   11/15/02,  12:47:21 PM
Phelps Dodge (PD) $29.66 -1.13% ... had some bullish success in my trading account from earlier this month. I'm thinking recent pullback and today's action may well be option related. Will put on watch list for next week on bullish move back above $30, with near-term upside to $34 as bounce.

World's largest copper produce sees December copper futures (hg02z) $0.7185 +0.91% getting a bounce from rising 21-day SMA, with 50-day SMA and lower Bollinger Band down at $0.69.

As comparison, PD is sitting right near lower Bollinger Band and similar rising 50-day. December copper recently found resistance at 200-day SMA of $0.73 and trend back to that level or break higher, becomes bullish for Phelpsy.

 
 
  Steven Price   11/15/02,  12:32:09 PM
Steve, Notice some selling (options related or downgrade from BoA) in CEPH has the stock under 56. Would you recommend opening new long position on this pullback or maybe Monday next week so that the overhead supply clears. Thanks,

Cephalon (CEPH) : $55.60 (-2.85) My original write-up looked for a pullback to support, possibly at $55 (or lower at that time), so I think I'm going to wait for new entries until I see a bounce. The stock has been on a tear and I think this morning's downgrade scared a few of those buyers who tried to jump on the bandwagon. However, the pullback is holding over $55 for the moment. I just don't want to try to catch a falling knife and I think we should wait to see what level the buyers step in at. I do like the risk/reward (current stop $54) from this point if we get support at $55.

 
 
  Jim Brown   11/15/02,  12:27:01 PM
No recovery in sight for airlines - The CFO of Delta said Friday there was no signs of a pickup in revenue for the airline sector this year or next. The possibility of a bankruptcy of UAL and even AMR has been discussed in recent days. With the new terrorist alerts the traveling public will likely reconsider future plans. Vacation travel should slide again and business travel has already dropped to "only when necessary." The airlines are already considering ways to cut capacity even more and that spells trouble got maintenance companies and service businesses.

 
 
  Linda Piazza   11/15/02,  12:21:11 PM
VIX: At 32.51, the VIX's low today is 32.12, approaching yesterday's low of 32.06. The 200-dma is just below at 31.23. Once again, VIX may soon test whether 30 will be a floor or whether the VIX will return to its traditional 20-30 range.

 
 
  Jim Brown   11/15/02,  12:14:01 PM
Swing Trade Signals
Looks like support is about to break. That support at Dow 8475, OEX 456, SPX 895 appears to be giving in to profit taking and fear of event risk over the weekend. The point where the most options expire worthless for the OEX was 450 yesterday but as of noon today it has moved up to OEX 455. But the SPX is 880 today. Obviously those two numbers are not close. The DIA/Dow level is 85.00/8500 and that appears to be on target.

It appears the Dow could fight the 8500 option expiration target and the 8537 "positive for the week" target at the close. The closeness of the two numbers along with the OEX at 455 would suggest to me that we are not going to see any big moves soon.

 
 
  John Seckinger   11/15/02,  12:06:33 PM
The nervousness in equities continues to be reflected in the bond market, as the 30-year is at its intra-day high of 111'04. Remember, higher bond prices means lower yields and should spell out a soft equity market. For an exact calculation, I think I will use The Earth Simulator in Yokohama, Japan, which performs 35.86 trillion calculations per second and is 4.5x faster than its nearest competitor.

 
 
  Steven Price   11/15/02,  12:03:47 PM
Semiconductor Index (SOX.X): 310.61 (-8.52) My thoughts here are 1) that a rebound from this level and trade over 329 gives us the higher high and higher low, with a bounce off a previous resistance level, at 310; and 2) a failure from this level and drop under 280 is the lower high and lower low and I short the daylights out of it! So for the moment I'm on the sidelines and looking at those levels. That doesn't mean I won't dip my toes in the water before I get them, but probably not with a large position.

 
 
  Jonathan Levinson   11/15/02,  11:53:12 AM
It appears that the Fed's weekend repo found its way into treasuries instead of equities, but I'm receiving numerous emails from readers who are baffled at the source of bids in equities. Well, so am I. The selling hasn't stopped- TRINQ at 1.35. But 1385 COMPX continues to hold as support, while yields return from their highs, with the FVX up just 4.1 bps. QQV is down .63 on the day, indicating a lack of fear but only moderate bullishness from the NDX options market. I guess even QQQ option traders are being lulled to sleep by this recent narrow range.

 
 
  Steven Price   11/15/02,  11:49:29 AM
Steve what do you think of FSTW? Thank You Rick

Firstwave Technologies (FSTW): $9.00 (-0.20) Right now the stock is almost dead center between resistance at $10, which is daily resistance and the PnF bearish resistance line, and support from the converging 50-dma and 200-dma at $7.60. I like the bounce off that support level, but the stock will need to see some real buying power to get through $10 and then $12. It is currently on a PnF reversal down in a column of "O". If I was long, I wouldn't necessarily close without the stock breaking under $7.50, but I do think the PnF chart looks bearish down to that level. If rebounds and trades $10.50, I might think about adding to a long position with a target of $12.

 
 
  Jeff Bailey   11/15/02,  11:44:45 AM
The 11:00 AM Intraday Update has been posted. Link

 
 
  John Seckinger   11/15/02,  11:37:31 AM
The 30-year (ZB02Z) is making a nice comeback, and this buying of bonds might make it hard for stocks to receive any new cash. The Dec bond is lower by 8 ticks at 110'31 and well off its intra-day low of 110'04. The 50 DMA at 110'16 remains underneath, while the 22 DMA is just above at 111'01. As far as stocks are concerned, it seems pretty technical in nature with 8500 as the psychological pivot.

 
 
  Linda Piazza   11/15/02,  11:27:34 AM
VOD Update: Vodafone, 18.26, down $0.55 as of this writing. As I expected (see my 3:26 post yesterday), VOD is moving down today on profit taking after being up strongly for three days on strong volume. That strong volume confirmed the price movement. VOD was one of Europe's leaders this week after announcing earnings. So far today, VOD is printing an inside day, but as the week ends, bullish players should remain aware that this stock tends to gap down as easily as it gaps up. There's slight support at 18, strong support at 17, and then below that, support at the 22-dma of 16.37, and at the bottom of this gap from several days ago at 16. Bullish target from P&F buy signal and from double-bottom formation remains at 21.55-22, but players should evaluate their risk/reward parameters, their strikes, and the amount of time bought when deciding whether to take profit, step back, and then re-enter after the pullback or whether to stay in through the long haul. Yesterday, at the time of my post, I decided to take profits and wait for a pullback.

 
 
  Jonathan Levinson   11/15/02,  11:00:40 AM
I've been watching GE underperform consistently. Two days ago, when the markets were strong, GE stayed red all day. It's been targeted by Ravi Surya, whose last catch preceded the fall of the telecoms. GE is a proxy for the entire economy, and is riddled with debt. I continue to like the stock as a bearish play, and continue to hold December puts on it. I will not think of going long until a significant low is reached. The October low, for instance, at 21.40 if it holds, would be a less risky level from which to enter. But because of its significant debt exposure and the trading patterns I've been seeing, I'm not thinking about going long at least until it's paid me handsomely on my current round of puts, and even then, I'd be very cautious playing a bounce.

 
 
  Jeff Bailey   11/15/02,  10:59:53 AM
Tellabs (TLAB) $7.37 -1.86% ... this is stock I saw last night with respect to Index Trader Wrap regarding the Wireless Telecom Index (YLS.X) $52.14 -0.36% hovering near its 200-day SMA. TLAB looks like it stretched its wings well above 200-day SMA Link last week and on bullish move higher in YLS.X, may be individual stock to trade on the upside.

When turning to the p/f chart of TLAB Link we see pullback to past "buy signal" of $7.00. As stated before, stocks trading BELOW trend are suspect. EVERY stock for the most part in Wireless is SUSPECT in my book. Some subscribers want to know why I'm so BEARISH or at least CAUTIOUS on these wireless and fiber optic. The reason Jeff Bailey is, is because the MARKET is, as depicted by the supply/demand charts.

Believe it or not, the OPTIONS trader that DOES NOT OVERLEVERAGE has an advantage over the stock trader if the options trader will trade small to begin with, and BUY TIME.

 
 
  Steven Price   11/15/02,  10:54:49 AM
Steve,

What's your position on MBI at this time?


Thanks,

Prica

MBIA (MBI): $40.23 +0.52 I still think the rebound looks a little weak, but I wouldn't recommend new entries until I see some resistance under $40. If we get above Wednesday's open at $41.25, I'll close the play.

 
 
  John Seckinger   11/15/02,  10:53:31 AM
It looks like the Dow came back and tested near 8472 (intra-day low of 8476) and a solid pivot area during yesterday's rally. Remember, there was a nice compression up until 12:15 PM yesterday (five-minute chart), and the breakout appeared to have started near 8472. With that said, if bulls are going to mount a rally, it might start near this area. If the Dow moves below 8448, this pattern recognition will be nullified.

 
 
  Linda Piazza   11/15/02,  10:52:37 AM
Reader Question: GE day chart has gap between $23.4-$22.6. With the downgrade, We could see GE downward to fill the gap. Is it a time for a bottom fish at $22.6 area with stop at $21.3? PnF chart still points to sell. But analyst usually downgrade near the bottom.

Response: Great research. I always watch for gaps on charts myself, to see how a stock behaves near those gaps. Candlesticks make those gaps easy to spot. As most readers probably already know, here's how gaps work: if GE were to move to the top of the gap and bounce from there, that action is considered bullish. If GE were to partially fill the gap and move up from there, that's bullish, too. If GE were to completely fill the gap and move down from there, that's very bearish.

The question is, how long would the bullish action persist, even if GE behaves in a bullish fashion as it fills or doesn't fill the gap? In addition to the gap you mentioned, I also notice that daily (5)(3) and (21)(3) stochastics looked poised to move up again. However, MACD on both the daily and weekly charts still looks bearish, and GE has been setting a series of lower highs and lower lows for a year now. I don't like catching falling knives, so my own trading parameters would dictate that I wait to buy GE until that pattern was broken. Factor in your own trading style as you make this decision for yourself. My caution means that I miss some great trades, but I also dodge some falling knives. If you remain interested in buying GE after seeing how it behaves around that gap, you've chosen a level that will allow you to set that close stop loss and limit your losses, so you're thinking ahead.

Maybe Jonathan would like to weigh in on GE, too!

 
 
  Jeff Bailey   11/15/02,  10:51:28 AM
Devon Energy (DVN) $43.54 +0.09% ... talked about this stock late Wednesday here in MM and again yesterday morning in 09:00 Update. Monitored stock yesterday and see another "inside day" today. Would really like to get a rally back near $46, but break lower of inside day may have stock breaking further to downside. Link

 
 
  Jim Brown   11/15/02,  10:43:48 AM
Swing Trade Signals
Interesting market today. It appears the profit taking drop stopped with a higher low on everything but the Nasdaq. The A/D line is stuck at -810 issues and declining volume is slowing. There are no indications of future direction yet but it is obvious (to me) that the bear have run out of conviction and the next major move could be up. If they can't knock them down on the news today then the bulls should take the consumer sentiment number and run with it. We may not see it today due to profit taking, option expiration and weekend event risk but next week could be a turning point. (either way)


We are quietly building the right shoulder of the H&S on the Dow but it is not a pattern until it is complete. We could just as easily break out instead of down and negate the entire thing. Looks like we are shaping up as a fight to finish the week positive again and that number is 8537.

 
 
  Jeff Bailey   11/15/02,  10:42:51 AM
Retail Index ($RLX.X) 292.38 +0.73% ... Jeff, can you comment on the possible reverse head and shoulders in the RLX? The way I draw the neckline it is poised to breakout.


Hmmmm... I see what you're looking at, but it is a "sloppy" one with somewhat unequal shoulders. The Retail HOLDRS (AMEX:RTH) $75.90 +0.86% has a more "conventional" type of reverse h/s pattern (ls-70, h=65, rs=71.25), with a trending lower neckline at about $81.50.


Let's do something, which I'm not doing until now. Calculation for bullish objective would be.. 81.50 - 65 = $16.50, add that $16.50 back to $81.50 and get objective of $98.


What's the bullish vertical count from the p/f chart of the RTH? Link
Yesterday, we calculated a bullish vertical count of $108.


Well, that's a difference of $10 between the two, but bull in group can be conservative with longer-term target of $98.


I can "see" about 500 reverse head and shoulder in the market if I want too. However, I prefer the very "conventional" ones with a solid flat neckline that helps get shorts trapped in and will boost demand once the break to upside of neckline takes place. I don't even mind a gradually sloping neckline of less that say.... 12 degrees. However, steeper sloaping necklines... well, those are simply just downward trends to me. The RTH has very "equal" shoulders, where the RLX.X is kind of "sloppy."


What really creates a "good" head/shoulder pattern is BIG VOLUME on the right shoulder (hs top or reverse hs). It can be that BIG VOLUME on the right shoulder that hints the MARKET has gotton smart and that last gasp of BIG VOLUME is major disagreement between bulls and bears and the SMART money wins out on the break of the neckline.

 
 
  Steven Price   11/15/02,  10:41:21 AM
IBM $79.59 (-1.13) For those readers holding IBM puts, I like the rollover from the 200-dma ($81.10). In hindsight, I wish I had placed my stop above that level, rather than $80. While I don't necessarily advocate raising a stop on a short play, $82.00 would be my stop if I were entering short here.

 
 
  Steven Price   11/15/02,  10:35:59 AM
That right shoulder in the Dow seems to be forming a nice top.

 
 
  Jonathan Levinson   11/15/02,  10:35:21 AM
I see a bullish descending wedge on the COMPX 5 minute chart. Bears should be careful here.

 
 
  Steven Price   11/15/02,  10:30:47 AM
Steven,

I need your help about cicso 12.50 straddle, I bought

cyqkv @.75
cyyqwv @ .80
Today call is @1.50.

Should I excerise call or let it expire by itself.

Thanks

Cisco (CSCO) $13.70 (-0.30) Any option that is in the money by 0.75 should be an automatic exercise, and you shouldn't have to do anything as long as it is more than 0.75 in the money at the close. However, please check with your broker to make sure they use this rule.

 
 
  John Seckinger   11/15/02,  10:20:36 AM
It appeared that the role of the Michigan numbers were to get most indicies to take out Thursday's high, hit stops, and then gravitate back to a well known strike price (read: SPX at 900, Dow at 8500). Remember, Dow needs to close above 8537 to have a net gain for the week. For bears, it would be nice if the Dow closed under last week's low of 8498.

 
 
  Jim Brown   11/15/02,  10:16:51 AM
Swing Trade Signals
After a volatile morning the markets appear to be headed for profit taking after giving bulls another chance for a higher exit on the Sentiment number. There is no real direction and it appears the markets could be stuck at round numbers for expiration. DOW 8500, SPX 900, OEX 460.


I am not anticipating an entry point today unless we can get the Nasdaq closer to 1425 and very strong resistance. The markets were overbought going into the close yesterday but are not showing any strong desire to sell off today despite the negative news. This would lead me to believe that we could be trading higher next week.

 
 
  Jonathan Levinson   11/15/02,  10:14:45 AM
I haven't seen all of it, but this is hilarious. Click on this Link

 
 
  Steven Price   11/15/02,  10:09:33 AM
Steve,

Love the work you all do. What's your take on HOV at this time?

Ken


Hovanian (HOV) : $34.01 (+0.15) I like the PnF reversal into the "X" column at $34 this morning. The stock continues to bounce from its 200-dma, which it did again this time ($30.51). I think the risk is down to that level, and conservative traders can look for a pullback above another PnF reversal down, which would be $31. However, I like entry on the $34 trade.

 
 
  Jonathan Levinson   11/15/02,  10:03:58 AM
The Fed has announced 5.25B in weekend repos. With nothing expiring today, that 5.25B is available to jam the markets. Given the action today, I'd guess that it will wind up in bonds, but that's a guess.

 
 
  Jonathan Levinson   11/15/02,  10:02:13 AM
Amazing action just now- another golf clap is in order.

The TRINQ has blown off steam to a more neutral 1.18, with the QQV down .33 on the day. Bullishness returned in a hurry. I sure wish the University of Michigan would give *me* a dingle and let me move the markets for a few minutes! I suspect that this one piece of laughably "soft" data (telephone poll of a few hundred random people) has such disproportionate influence on the market because it's the only data that many market participants are capable of understanding. Just a thought. COMPX is back off its highs at 1400 even.

 
 
  Steven Price   11/15/02,  9:55:50 AM
Note on the aforementioned IBM strategy. With the stock just above $80, a put holder can also buy stock above $80 risking a loss down to $80, where the put can be exercised and the stock sold. i.e. buy stock at $80.12, if it drops below $80, exercise put and sell the stock. If it rallies, sell the stock higher. Once again, no more than 100 shares per put and this limits profit to downside.

 
 
  Jim Brown   11/15/02,  9:55:20 AM
Michigan Sentiment much higher than expected at 85 for November. - The expectations were for 82 and it is well over the number for October. Holiday shopping may not be dead on arrival.

 
 
  John Seckinger   11/15/02,  9:50:25 AM
Note: The -1.9% annual deflation in Sep turned to a 0.6% rate of inflation in October following the PPI report. Looking at futures yield curve, fives are down 13 while tens off 15. This is an 18 tick flattener, and could give stocks a slight underpinning bid. The cash spread at 101 bps (ten year yield minus five year yield; 4.11% - 3.10%) and this isn't technically significant. With that said, we could see curve traders buying the curve if it gets to 100 bps wide. In conclusion, I would put more emphasis on the 30-year today.

 
 
  Steven Price   11/15/02,  9:50:06 AM
NVidia (NVDA) $13.45 (+0.90) OI stock pick NVDA, entered at $8.88 on 9/24, was upgraded by Merrill Lynch from neutral to buy, while other stocks in the sector were downgraded this morning.

 
 
  Jim Brown   11/15/02,  9:47:24 AM
Swing Trade Signals
I never cease to be amazed by the markets reaction to news events. The huge volume of negative economic news today plus literally dozens of downgrades to key stocks and sectors has barely even dented the averages with the Dow down only -25.


The FBI terror alert about a spectacular and massive attack possibility has failed to cause any reaction. 2-3 months ago that would have been good for -200 to -300 points easy. It appears the market has already discounted a weak quarter for PC sales (+1.1% growth), weak economic news and the eventuality of more attacks and decided that 6 months from now things will be better.


Add to this the bullish seasonal trend and it looks like we will be testing those recent highs soon.

 
 
  Steven Price   11/15/02,  9:43:37 AM
IBM $80.08 -0.64 one strategy for IBM Nov 80 put holders today, since it is expiration and the stock appears to be hugging $80, is to buy stock on dips below $80 and sell it on moves above the strike. If a traer buys 100 share for each put, this gives the most scalping power on a bounce, but limits any potential downside profit beond the purchase point. Alternative would be to buy 50 sahres per put and then 50 more on further drop.

 
 
  Jeff Bailey   11/15/02,  9:32:47 AM
30-year YIELD (TYX.X) 4.976% and nice move higher for those holding some YIELD calls. Pleasant surprise as I was not expecting a PPI rise of 1.1% and this puts the "flation" part of either inflation or stagflation into play and has some bond traders thinking of some type of Fed tightening on interest rates down the road.


While the "flation" should have Treasuries under some pressure, this is where equities can see some uncertainty. Inflation in my opinion is good, but stagflation would be viewed a negative.


I haven't gone through the numbers in great detail, but expect some of the PPI rise was due to dockworker lockouts and perhaps some energy pricing. Both should abate in not too distant future.


December Gold futures (gc02z) 319.20 +0.31% up $1.00 as one way to view market response on the "flation" part of things. Nothing major here.

 
 
  Steven Price   11/15/02,  9:32:34 AM
Let's see, AMAT says revenues will decline 20% from the fourth to the first quarter. Chips stocks rally. Dell predicts a 20% rise in revenue. Now we get the chip downgrade. Yeah, this is an easy market to trade (GRIN).

 
 
  Jonathan Levinson   11/15/02,  9:32:00 AM
15 point gap down open on the COMPX to 1396, TRINQ 1.82, QQV +.59.

 
 
  Jim Brown   11/15/02,  9:31:43 AM
Swing Trade Signals

The conflicting economic reports this morning have knocked the futures back into negative territory and it appears the markets will have to start in the hole today. Multiple downgrades to leaders like JPM, GE, INTC, AMD, PG, FDX and dozens more are putting pressure on the markets.


Will the bulls buy this bad news? That of course is unknown but due to option expiration the market reaction in either direction could be muted.


The game plan for today calls for no entry points unless the Nasdaq trades over 1420 and at the extreme edge of the recent range. The bullishness from yesterday did push the markets into overbought but not far enough from critical numbers to avoid strike pinning today.

 
 
  John Seckinger   11/15/02,  9:29:53 AM
The bond market has rebounded slightly from its lows following the IP numbers; however, supply from last week is finally overpowering demand in the fixed income arena. The 30-year is lower by '26 ticks at 110'13 (intra-day low of 110'08), and if the market starts to fall a full point (32/32) there is a chance cash will once again make its way into stocks. Resistance is seen in the 30-year at 110'29 and 111'04.

 
 
  Jeff Bailey   11/15/02,  9:26:33 AM
Industrial Production third straight monthly decline in industrial production was than expected: a -0.8% decline versus the -0.3% consensus. This took down the capacity utilization rate by six tenths to 75.2%. Weakness in the October numbers was broadbased. With business inventories near record lows relative to sales, it would seem unlikely that this downturn will continue much longer, but this will remain an important factor to watch in the months ahead.

 
 
  Jonathan Levinson   11/15/02,  9:23:52 AM
October Capacity Utilisation was down 0.6-Pt To 75.2%; Consensus 75.6%.

 
 
  Jeff Bailey   11/15/02,  9:23:17 AM
The 9:00 AM Intraday Update has been posted. Link

 
 
  Jonathan Levinson   11/15/02,  9:15:50 AM
US Dollar Index lower, gold higher, bonds lower/yields higher, equity futures lower- it looks like foreign selling of US assets, including the dollar.

 
 
  Jonathan Levinson   11/15/02,  8:48:00 AM
PPI Data: U.S. October Producer Prices Rise 1.1%; Core Rate Up 0.5%. This far exceeded expectations of .3% for the Producer Prices- Core Rate was expected at .1%. Bonds are selling off, with the FVX up 8.5 bps, yet equities futures are still flat, with QQQ now trading 26, down .1 from before 8:30AM.

 
 
  Jonathan Levinson   11/15/02,  8:04:10 AM
Futures are hovering around flat, with the US Dollar Index is up to 105.60 and gold is struggling below 320/oz. QQQ is trading 26.10, flat from yesterday's close, and GE is down 60 cents at 23.90 on Island ECN.

 
 
  Linda Piazza   11/15/02,  7:26:04 AM
Today begins with downgrades of two DOW components. JP Morgan downgraded General Electric to underweight and also lowered estimates for 2003 earnings from $1.70/share to $1.60. They expect the difficult environment to continue into 2004. They mentioned "concerns about fluidity of earnings estimates . . . and tough underlying fundamentals.

Merrill grouped Intel with Analog Devices, Applied Micro Circuits, Conexant, PMC-Sierra, and Vitesse Semiconductor, changing their ratings from neutrals to sells. They mentioned valuations as a reason behind the downgrades. After the downgrades, Intel shares fell as much as 2% in Germany.

 
 
  Jim Brown   11/15/02,  12:27:52 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   11/14/02,  12:06:53 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   11/14/02,  12:06:43 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

 
 

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