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  Jim Brown   11/20/02,  9:32:57 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   11/20/02,  7:37:36 PM
Avaya - According to a preliminary proxy statement filed with the Securities and Exchange Commission, the company wants to implement a reverse stock split of 1-for-30, 1-for-40, or 1-for-50, followed immediately by a forward stock split of the same ratio The Basking Ridge, N.J., company said the split, if approved, would reduce record-keeping and mailing expenses by cutting the number of shareholders. Investors with just a few Avaya shares would be forced to cash out their investments, under the proposed plan. The company had 363 million shares outstanding, as of Sept. 30.

Now I have heard everything.

 
 
  Steven Price   11/20/02,  4:00:10 PM
We are going to close the GE put play tonight, ahead of tomorrow's possible re-org news. While it will most certainly cost the company big $$$, it may get a bounce if the news is not as bad as predicted (per Jim's earlier comments).

 
 
  Jim Brown   11/20/02,  3:57:11 PM
GE - will Webcast its scheduled meeting with analysts on Thursday, November 21. The Webcast will be available at www.ge.com/investor. The presentations will start at 8:00 a.m.

GE is expected to announce an earnings shortfall of 15-20 cents less than current estimates due to problems in financing, capital equipment, airline, reinsurance and services division. They are expected to take a $2 billion charge for restructuring these divisions. Since the stock has been so beaten up recently and the expected bad news has been cussed and discussed in the media so much lately the rally today could be due to the bad news priced in.

 
 
  Jim Brown   11/20/02,  3:50:53 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Close the open SHORT signal now at 464.50. With no afternoon sell off and the GE analyst meeting at 8:AM being webcast to anyone interested there is a good chance that investors will think the bad news is not that bad. We are too close to the top to risk holding a marginal position overnight.

OEX 464.67, SPX 910.73, DIA 86.14, SPY 91.60, DJX 85.94, NDX 1067.09, Compx 1414.53, QQQ 26.53, SP02Z 910.80, ES02Z 908.75, NQ02Z 1065.00, YM02Z 8581.0

 
 
  Jeff Bailey   11/20/02,  3:39:16 PM
The 3:15 PM Intraday Update has been posted. Link

 
 
  John Seckinger   11/20/02,  3:22:20 PM
When the bond market closed at 1 p.m., prices certainly retreated more than at any other time during the session. The Dow fell back underneath the 8625 area, but bears should be looking for failure under 8570 by session's close. A move under 8570 in the Dow should also correlate with the S&P 500 under 910, and the Nasdaq close to 1400. It is interesting that the Utility Index (UTY) underperformed all session (only higher by 0.05%) and didn't come close to testing its relative high of 243.

 
 
  Jeff Bailey   11/20/02,  2:49:29 PM
Retail HOLDRS Jeff: I'm so confused. I can't figure out why the RTH is -1.7% today, while the RLX.X is +1.5%. I thought they'd track more closely? Is it Home Depot that is causing this problem?

No... just as we've seen some discrepancy between the NDX and QQQ, it's what takes place after 04:00 PM EST. In last night's market monitor, I noted that there was a late trade in the RTH at $74.40, which was well above any trades that took place yesterday during normal session. That 25K share trade at $74.40 now has the RTH of $73.25 down, while the RLX.X close of 277.82, which correlated with RTH pre-04:00 close, and current RLX.X trading of 282.45 +1.65% throws things off.

 
 
  Kent Barton   11/20/02,  2:48:15 PM
Kronos (KRON) $41.35 +2.10 : Breakout! With MSFT posting a solid 3.4% gain, the GSO.X software index is threatening to move above resistance at 110. Current PremierInvestor stock play KRON is looking particuarly strong after clearing its own level of resistance at $40.00. A retest of the May highs near $46.00 might be forthcoming if the software group continues to show strength. PI entered this play at $40.51. A pullback to this level might provide another buying opportunity. Bullish traders could also think about going long on a move above the intraday high of $41.80.

 
 
  Steven Price   11/20/02,  2:46:46 PM
Steve, What do you think of PG at this level? Yesterday, it was down, today is up? What is your outlook? Thanks,

Proctor and Gamble (PG): $88.03 (+0.93) PG remains one of the few Dow stocks currently giving a sell signal on the PnF chart. However, it is acting similarly to the Dow, testing the downside ($85), only to bounce within a range. Our stop loss on the short play is a close above the PnF reversal level of $89, but with today's action getting above the highs of the last seven sessions, I would hold off on short entry, unless we get a break back under $86, where the stock bounced yesterday.

 
 
  Jonathan Levinson   11/20/02,  2:41:45 PM
If this is a top forming, well, let's not even call for a golf clap... it merits a full standing O. The QQV is off its lows... a little, now down 2.96 to 37.58. The TICK.NQ is at +168 and the TRINQ is at .34. The stochastics? Let's just call them overbought. FVX has taken off like a rocket, up 11.1 bps until a minute ago, now up 10.2 bps. That's a lot of money leaving bonds. JPM is now up 7.11%. The COMPX is still 11 points from its rally high, but after what I've been watching, anything looks possible from here. The put to call ratio is still below .70 at .65. Lots of bullishness... too much, except that they've been making it stick today. Above 1425, I'll be looking to buy some of those stinker equity funds with the cash portion of my retirement account.

 
 
  Linda Piazza   11/20/02,  2:38:19 PM
Reader Question: On your last post-can you explain the difference between adv volume and dec vol and up vol vs down volume?-i thought they were the same thing.

Response: I'm glad you asked the question. I can remember wondering the same thing once, and this gives me an opportunity to mention the difference to others who might be wondering. Here's my understanding: Advancing/declining figures usually relate to how many issues are trading up or down on a given day. For example, if BRCM is trading up on the day, BRCM is one of the issues contributing to the advancing issues. However, up/down volume usually measures how many shares are trading up or down on the day, rather than how many issues. It's interesting to watch the interplay of the two figures. For example, if a particular big-cap stock--say MSFT, for example--were to be trading heavily to the downside while most other stocks were up, it might be possible for advance/decline figures to be positive while up/down volume was negative.

 
 
  Jeff Bailey   11/20/02,  2:31:58 PM
QQQ $26.57 +3.58% ... Hi Jeff, I followed your qqq put trade a few days ago and made some profit. Do you have any new trades on QQQ lately?

Only QQQ/NDX bearish trade idea I have had lately was from Monday evening's Index Trader Wrap, that could have been implemented at yesterday's open near $25.80. Taking some heat from the MARKET on that one right now and need upper Bollinger Band and horizontal resistance near $26.75 to hold things in check. Partial positions only as we're trying to pick a near-term top and only success has been little 1-2 day declines. Q's haven't closed below the trending higher 21-day SMA for two consecutive sessions since the move off the bottom and really shows impressive strength.

I would strongly suggest that QQQ bears on a near-term basis offset a bearish trade with some other "tech" like individual stocks. One that I liked recently was TLAB and that one helps offset some of the heat I'm taking today in the Q's.

Only real thing I "liked" about QQQ bearish trade is that bullish % is so near 70% and more "overbought," but still I realize how EARLY it would be, or is to be shorting. Thus the reiteration of small positions right now and prefer put options on the bearish side to help mitigate risk in account. Some other sectors like YLS.X are above their 200-day SMA, and 200-day SMA on Q is up near $28, and that would be about 5.5% from here.

 
 
  John Seckinger   11/20/02,  2:27:56 PM
With roughly 1.5 hours left in the trading session, the bond market is continuing its free-fall from 112'23 to current levels of 111. The intra-day low is 110'31. I did expect a test of 113, and now I expect bond prices to reach near the 110'12 area (playing the aforementioned wedge pattern). Turning to the equity markets, the Dow continues to power through once-thought strong resistance areas. First 8550, then 8585, and then even 8625. The day is not over, so it will very interesting where the Dow closes.

 
 
  Linda Piazza   11/20/02,  2:18:19 PM
Today has been an example of the importance of looking at volume when evaluating your trades. Although several technical indicators (chart formations and stochastics rollovers on daily charts) made a bearish entry look good yesterday, this morning volume patterns predicted that short-term bearish traders (me among them) were going to face a difficult day. Advancing volume led declining volume, and up volume moved ahead of down volume and stayed ahead all day. On the Nasdaq in particular, up volume began to swamp down volume.

 
 
  Steven Price   11/20/02,  2:11:29 PM
Good morning Steven: IBM 79.65 (+1.28), we still hold the Dec.75 puts, looks as consolidation in the stock is occurring, premium are now losing value, with next week being a soft period due to holiday and many traders absence, all said and done, do we still see a down turn back to 77 or 78 on P/F chart, or wiser to exit play totally. Your input on MM as always appreciated. Thank you

IBM: $80.89 (+2.52) You are corret that we are seeing some consolidation in IBM. While we also got a slight rise in the VIX yesterday, after bouncing off 30, it is now under that number, reflecting a market wide implied volatility drop. IBM Dec 75 puts are currently $1.05-$1.20 and I have a hard time imagining them getting much under $1 with a month until expiration. However, every trader must decide how much they are willing to lose. If IBM continues upward, certainly the puts will drop, but there is a compression point at which the drop will slow, both due to a low delta, as they become further out of the money, and the fact that MMs generally don't like to sell puts too far under a dollar unless they are already long a lot of them.

IBM remains on a PnF buy signal, where it has been since $63, but the recent consolidation has resistance at $83 and the next double top signal doesn't come until $84. The stock hasn't closed above the 200-dma ($80.70) since 11/04 and even then it was unable to hold the gain for more than a day. I'm not bullish on the stock until we see a decisive move through that level and a hold above it.

 
 
  Jim Brown   11/20/02,  2:10:02 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the OEX bounce to 466 on the SHORT signal at 14:05:33. SPX 912.44, DIA 86.37, SPY 91.87, DJX 86.13, NDX 1067.39, Compx 1414.44, QQQ 26.54, SP02Z 913.20, ES02Z 913.50, NQ02Z 1069.00, YM02Z 8602.0

The initial stop loss will be OEX 468 and a quick exit if we are wrong.

 
 
  Jim Brown   11/20/02,  1:52:45 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
High Risk Entry If we get another bounce I would suggest a 1/4 position SHORT entry at OEX 466 with a stop loss of OEX 468. This would be an attempt to sell resistance with a tight stop to take us out if we get another spurt of buying. Do not act on this signal if you do not agree with the concept. If we do not get another bounce then I would consider going SHORT with an OEX trade at 465. Same stop applies.

A more conservative entry would be a breakdown below OEX 463.

 
 
  Steven Price   11/20/02,  1:48:39 PM
Here is a link to our current stock pick list. The P/L % is based only on stock movement from the day we picked it and does not include the protective put purchase. Link

 
 
  Jim Brown   11/20/02,  1:46:31 PM
Swing Trade Signals
If we are going to fail today we are at the failure point. The Nasdaq is slowing and the Dow, SPX and OEX are all at their Monday highs. The declining volume on the Nasdaq is starting to increase. This is a critical point for the markets. They are on the verge of a breakout but also right at critical resistance. If the OEX breaks out here the next critical resistance is 472.50 which was the high on Nov-6th. The Dow high was 8799, SPX 925.

 
 
  Jeff Bailey   11/20/02,  1:41:21 PM
The 1:00 PM Intraday Update has been posted. Link

 
 
  Linda Piazza   11/20/02,  1:29:29 PM
Interesting. Just as I was typing that last entry about the VIX having minor support from July at 28.60, it hit the day's low (so far) of 28.67, and then turned back up. With the VIX currently at 29.22, I'm far from ready to call 28.67 the final low for the day, but I'll be watching what happens if the VIX climbs back up toward its 200-dma at 31.27 (simple moving average).

 
 
  Kent Barton   11/20/02,  1:29:09 PM
Boston Scientific (BSX) $40.46 +0.46 : Trading at multi-year highs today. On Monday the company announced positive results from a trial of its Taxus IV drug-coated heart stent. BSX isn't the fastest mover, but longer-term traders could think about going long at current levels. The stock looks like it could reach the $45.00 area within two months if the current uptrend remains intact.

 
 
  Jonathan Levinson   11/20/02,  1:17:39 PM
QQV is now down a touch under 10% on the day.

 
 
  Linda Piazza   11/20/02,  1:13:03 PM
VIX, currently at 28.96: There's some last-bastion minor support for the VIX at 28.60 from July. With the daily (5)(3) stochastics trying to turn up, it will be interesting to see if this support can stop the VIX's fall.

 
 
  John Seckinger   11/20/02,  12:58:36 PM
Since my last post, the Dow did not go back underneath 8545. Nevertheless, it will remain as a short term pivot going forward. What did happen was the Sox trading over 331 (currently at 335) while Treasury Bonds came under pressure (read: higher yields). The bond market is now down roughly a full point from its intra-day high of 112'23, while the Sox has broken its downward trend line from August 22nd.

 
 
  Jeff Bailey   11/20/02,  12:48:08 PM
Professor Davis' Study ... I printed out Profissor Davis' study in a past intra-day update regarding the various bullish/bearish MARKET patterns. Here's the Link to that update and can be kept in trader's logbook for reference.

Bull or bear market conditions are tied to the bullish % charts. Sector bullish % usage is also very helpful. Then a trader has MARKET, SECTOR and STOCK covered.

Traders will be interested to note GNSS $17.76 +8.69%, recently achieved one of Professor Davis' bullish pattern objectives, after GNSS traded a triple-top buy signal at $14.00. Still... bullish vertical count of $26.50 in play.

As an educational note... In early October (red A) on a p/f chart, the Semiconductor Bullish % (BPSEMI) from Dorsey/Wright and associates reversed to "bull alert" status at 14% (3-box reversal higher) and up from 8% . We see on the chart of GNSS, the (red A). Wouldn't it have been "smart" if short GNSS to maybe lock in some gains and cover positions with the sector reversing up to "bull alert" status?

Then, in early November (red B) on a p/f chart, the Semiconductor Bullish % achieved "bull confirmed" status by reaching 44% bullish. We can tie that in with the GNSS chart and find the (red B). Oh my! That's right before the triple-top buy signal of $14.00. Might have been worth 1/2 bullish position at $14.00 as GSNN was/is still below trend. See how those pullbacks of $13.50 most likely held as bears were really trying to cover on weakness, some bulls sitting some bids?

Only way for new bull to really control risk right now, with first sign of trouble at $13.00, is partial positions, not exposing account to FULL position risk. Still, risk to sell signal is $3.50, reward to bullish count is $10.50 and still holds favorable risk reward. Sector at 56% bullish not yet "overbought" level of 70%, so some potential upside still there.

Steve made comment of yesterday's "valuation" sell call by some firm. Maybe they're playing Professor Davis' study too. Kind of interesting at least. Maybe they took bigger positions at lower levels (institutions can take on more risk that you and I) and just legging out of some stock with a nice gain from the lows, but may also hold some for higher prices.

Anyway... had e-mail questions on Professor Davis' study to use with their business plans, along with understanding sector/market risk with the bullish %, and also about how time is referenced on a p/f chart. Just remember... 1-9 is the first chart entry at the beginning of months January-September, while A-C is October-December.

For those not subscribing to Dorsey's site (www.dorseywright.com) we use the FREE index bullish % from www.stockcharts.com so you can follow along. Hey... with GNSS, since it's a tech stock, what was the NASDAQ-100 bullish % doing in October (red A) and November (red B)? Link

Here too.... levels above 70% are considered more "overbought," while levels below 30% are deemed "oversold." As such, the bullish % is a great tool for risk management and helps a trader establish position size. At higher levels, bulls still play long, but decrease position size on new entries and make DARNED sure the bullish vertical counts give the stock some type of upside room to either the bullish count, or overhead resistance.

 
 
  Jonathan Levinson   11/20/02,  12:47:16 PM
QQV is now at 36.95, below its low set at the August rally peak. TRINQ .33. TICK.NQ 179. P/C ratio below .70. FVX now up 4.7 bps. If this move does not reverse shortly, we could be looking at a whole new rally. I don't think we are, but that's what I see.

 
 
  Jim Brown   11/20/02,  12:41:18 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out on the SHORT signal at 12:35:52 when the OEX traded at 465. SPX 910.21, DIA 86.09, SPY 91.55, DJX 86.86, NDX 1062.02, Compx 1409.56, QQQ 26.42, SP02Z 910.50, ES02Z 911.00, NQ02Z 1064, YM02Z 8584.0.

 
 
  Jim Brown   11/20/02,  12:31:28 PM
A reader sent me this link and I find it very interesting. It seems EBAY advertised that they were having a job fair for 200 jobs they were adding. Over 6,000 people rushed to apply and backed up traffic on highway 880. They had people with masters degrees applying for the low tech positions. Link

Thanks to Kevin S. for the link!

 
 
  Jonathan Levinson   11/20/02,  12:25:02 PM
Yields are up, FVX 2.7 bps, and so money is now leaving bonds. It would appear that this money is flowing straight into JPM, which is up 6.15% on the day to 23.30. Gold is below 318/oz, though HUI, the unhedged miners' index, is down only .23. The COMPX and SPX are both nearing resistance at 1410 and 910. Above that, I will expect to see the rally highs tested yet again.

 
 
  John Seckinger   11/20/02,  12:16:27 PM
Looking at a 10-minute chart of the Dow, there appears to be a bullish wedge with a breakout area of 8545. Even though the market is higher at 8564, the current trading environment points to a more range bound market than anything else. With that said, a move back under 8545 could certainly have longs exiting and shorts looking for a quick move lower. The objective on the bullish wedge is 8690. If I felt we were in a bull market, then I would look at this wedge differently.

 
 
  Jeff Bailey   11/20/02,  12:08:50 PM
The 11:00 AM Intraday Update has been posted. Link

 
 
  Jim Brown   11/20/02,  11:54:35 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the current stop loss on the open SHORT signal to OEX 465. This is just above the maximum resistance and could keep us in the current trade.

 
 
  Steven Price   11/20/02,  11:46:51 AM
Cephalon (CEPH): $56.33 +1.15 OI call play CEPH looks like it is forming a bullish flag, with support at $55. I still like entries here, after the stock rebounded from a downgrade, which followed its run up to $58.67. The downgrade was based on sector valuation and possible unsuccessful challenges from generic drugmakers to its Provigil product. The company has posted good growth numbers and raised its guidance. With the support at $55, the risk/reward seems pretty good from this level, with an initial target of $60, but an astronomic PnF bullish count of $97.

 
 
  Jeff Bailey   11/20/02,  11:45:54 AM
11:00 Update I've e-mailed the 11:00 Update, but we're having problems with our upload server to the site.

 
 
  Linda Piazza   11/20/02,  11:38:05 AM
Late yesterday, I commented that since I didn't pretend to be an expert on intermarket relationships, I'd been scouring news sources, looking for information that might relate to gold and the XAU. I've been getting a lot of emails about gold, offering various opinions ranging from a certainty that gold is going to soar to a certainty that it's going to fall. Thanks to Leila, who mentions seeing a COT report on gold today, indicating that the big commercial traders have big shorts in gold (a report I haven't substantiated, by the way.) Some comments include a caution that I should separate the XAU from gold, which I've also mentioned in previous commentary, including last week, when Newmont Mining released earnings. However, many of you might be using Stockcharts.com free charting service, and, for some reason, this service always updates XAU's daily chart intraday, but sometimes doesn't update gold's until the next day. For that reason, I've sometimes used the XAU's chart in my commentary. Although the two are not always analogous, their charts do offer some similarities. A look at the weekly charts of both show that they've each settled into a triangular consolidation pattern. One difference is that the XAU's weekly chart shows a bearish cross of the 10-week MA down across the 30-week MA, an indication of a possible trend change, while this bearish cross has not yet occurred on gold's chart. Although war worries and other global geopolitical and economic worries would lead me to believe that prices will break out to the upside, I'll watch to see what the charts show me.

 
 
  Jonathan Levinson   11/20/02,  11:35:48 AM
The QQV has keeled over, down 2 to 38.54, and awfully close to the low set at the peak of the August rally just above 37. While the QQV is a young indicator, its alltime low appears to be 30, from the April high.

 
 
  Jim Brown   11/20/02,  11:35:47 AM
The Dow/OEX came to a stop at the current down trend line drawn from the Nov-7th high through the Nov-18th high. We are currently trying to chip away at that resistance while holding at the current level. The lack of follow through has again taken some of the conviction out of the buyers. A break through the current resistance, Dow 8550, SPX 905, OEX 462 could trigger some short covering and a possible retest of the Monday highs.

 
 
  John Seckinger   11/20/02,  11:24:26 AM
The Nasdaq is once again nearing the 1400 level. The equity markets appear to be trading 'heavy' at current levels, but this could just be one more round of consolidation before another short wave higher into some strong resistance. Keeping stocks from going higher seems to be stemming from recent profit taking in the dollar, lower fractionally at 105.66 and underneath its intra-day high of 106.07.

 
 
  Jonathan Levinson   11/20/02,  11:06:56 AM
A flood of requests for the link to realtime CBOE put to call data. Readings are generated only every half hour, but here it is:

Link

 
 
  Steven Price   11/20/02,  11:00:29 AM
Hello Steven, I am long 2500 shares EMC @$4. Was thinking of taking profits here and would appreciate your opinion. Thank you

EMC: $6.24 (+0.14) I think EMC looks fine from the long side as long as it remains over $6. It bounced from that level yesterday and has seen upside resistance there in the past, lending credibility to the supply/demand struggle at that level.

 
 
  Steven Price   11/20/02,  10:57:52 AM
Genesis (GNSS): $17.54 (+1.20) It didn't take long for OI call play GNSS to recover from yesterday's downgrade, which was based on uncertainty in the ASP market and the stock reaching RBC's target (read: not really based on the company's fundamentals). The stock rallied right back through the 200-dma and entries here look good.

 
 
  Jeff Bailey   11/20/02,  10:57:36 AM
Deluxe Corp (DLX) $42.95 -1.69% ... Jeff: I have watched for any time this stock DLX , and I consider excelent tip as put play for low volatibily , beatiful chart , and the market in general From Argentina , Sandia

Stock breaking spread-triple bottom today with trade at $43. Bearish vertical count is $37. Link

According to Dorsey/Wright and Assoc., stock is part of "business products" group Link and sector is "bull confirmed" at 42%, so bearish caution is advised. However, stock going against the grain. Partial put/short positions can be taken with preliminary target of $37.

 
 
  Jonathan Levinson   11/20/02,  10:47:07 AM
Although the indices are looking tired, the latest put to call reading of 1.02 is awfully high- it could go higher, but above 1 makes most bears nervous.

 
 
  John Seckinger   11/20/02,  10:37:11 AM
Since the bond market is higher (read: lower yields) and stocks are higher as well, I will most likely put the bond market in the back of my mind during trading on Wednesday. Unless of course 113 is hit and the wedge trend line is tested. I will also be looking to see if the Sox trades 331 (currently at 325), as well as watching for a rollover in the UTY index (currently at 240 and has resistance at 243).

 
 
  Jonathan Levinson   11/20/02,  10:25:45 AM
The SPX is up against a descending trendline on the 15 minute chart that begins at November 18th, but the COMPX seems to be exceeding it today. Will it go higher? The TRINQ is at .45, which indicates an overbought COMPX, but it can go a lot lower as we've seen during the rally. The TICK.NQ at 130 is also bullish, and also not extreme. QQV is off .66 on the day, also moderately/sustainably bullish. Lastly, FVX is gaining ground, and if the buying in bonds turns to selling, there will be a fresh supply of money for equities. There is certainly upside potential today, and I'm watching near term resistance at COMPX 1395 for clues.

 
 
  Jeff Bailey   11/20/02,  10:20:45 AM
Qwest Comm. (Q) $4.45 +14% ... Link stock higher on news that company has commenced a private offer to exchanged $12.9 billion of outstanding debt securities of Qwest Capital Funding. The new securities include up to $4 billion of new senior subordinated secured notes of Qwest Services Corp.

 
 
  Jim Brown   11/20/02,  10:15:41 AM
The Nasdaq is rapidly approaching resistance at 1392 which could slow the current rebound. The futures are currently trading at the high of the day and the A/D line is positive at +1255. The Russell is also up strongly at +3.24 but nearing resistance at yesterday's afternoon highs. The dip buying is about to face a conviction test and we will see if the rebound has legs

 
 
  Linda Piazza   11/20/02,  10:13:39 AM
Although bond yields are down, I sure would like to see other indicators line up all one direction. As of this writing VIX is down, the dollar is up slightly, ad/dec lines are positive for both the NYSE and Nasdaq (1.4 and 1.46, respectively), up volume leads down volume on both by ratios of 155/68 and 187/54, but new lows beat new highs.

 
 
  Jim Brown   11/20/02,  10:05:30 AM
The Nasdaq is trying to stretch its leadership of the indexes today but it is getting no supporting help. The Dow is the weakest index and still negative while the others are slightly positive. After two days of selling we could see some bargain hunting attempts but without any positive stock news a significant breakout is not likely.

 
 
  Steven Price   11/20/02,  10:05:04 AM
I have been trying to follow the news for several competing ECNs that were going to be launched, or have been launched to grab additional business from the outcry pits.

I'm not sure when these are going to be rolled out, or if they have been already.

In your opinion, do you think that these automated systems may bring the spreads on index options down to earth a bit? I continue to migrate to daytrading options on things like IBM, MSFT, GE and a few others where spreads are generally no more than a dime, often only a nickel.

I generally swing trade SPX options because the large spreads make daytrades unreasonable....and keep hoping that something will "come along" some day to make them more viable for scalping.

Regards, Vlada

Right now, index options are singly listed, which removes the competitive pricing pressure you are seeing in equities. In fact, equities have only been listed on more than one exchange for about 3 years, which tightened the bid/ask and cut into market makers' profits severely when it originally happened, sending many would-be floor traders packing. I am not aware of any plans for the new exchanges to list index options, but the BOX is owned partially by proprietary market making firm Timber Hill , which also owns Interactive Brokers, and I'll put in a call and see if there are any plans to do so.

 
 
  John Seckinger   11/20/02,  10:02:44 AM
Yesterday, the Nasdaq drags the market lower; today, tech is in favor. The Sox index is currently higher by 2.27% at 319 and a bearish daily trend line comes in at 331. Looking downward, support appears to be at 303 and at the mid point of its Bollinger Bands. Looking elsewhere, the Dollar found resistance at its Bollinger Bands mid-point as well, as the Greenback has an intra-day high of 106.07 and the mid-point comes in at 106.02.

 
 
  Jonathan Levinson   11/20/02,  10:01:02 AM
The Fed has announced an overnight MSP in the amount of 2.5B, which drains the 1.25B expiring today, for a net drain of 1.25B.

 
 
  Steven Price   11/20/02,  9:50:59 AM
Hovanian (HOV): $31.91 (+0.21) Many of the homebuilders sold off this morning following the housing starts number. Some of this I believe can be attributed to seasonal swings, but in any case, OI call play HOV is up after again raising guidance for 2002. The company will be updating 2003 guidance Dec. 9.

 
 
  Jonathan Levinson   11/20/02,  9:48:20 AM
Matched Sale-Purchase Agreements: The Fed will be exectuing another MSP, which, as we saw yesterday, is a drain. No amount has yet been announced. Why is the fed draining? I believe it is in support of the dollar. However, the amounts are too small to make much of a difference. Strange behaviour we're witnessing from the fed.

Link

 
 
  Steven Price   11/20/02,  9:45:58 AM
Imclone (IMCL): $13.17 (+0.58) I like the move back over the 200-dma ($12.54) in OI call play IMCL for new entries here. The stock climbed over that level at yesterday's close and has kept going.

 
 
  Steven Price   11/20/02,  9:40:23 AM
Thanks for great work. I want to know who monitors options market makers or it is just the market i.e. supply and demand,which sets up prices. particularly in thinly traded options,I have noticed lot of bid/ask manipulation i.e. Once I buy the option, even if the stock moves 1 or 2 points, there is very little movement in option price, only bid/ask widens. Regards.

In general the option markets move according to supply/demand and stock movement. Exchanges have their own rules about how wide market makers can make each market, depending on the price level of the option (i.e. Any option under $2 can only be 0.25 wide at the CBOE). However, any in the money option can be as wide as the current bid/ask in the underlying stock. (MMs can widen beyond the exchange limits if a stock is highly volatile, but need permission from the exchange first).

The movement in any option, after you buy it and the stock moves, obeys a few laws. The deeper the option, the higher its correlation to the stock movement, which is called its Delta. There is also time decay and implied volatility, although implied volatility really comes down to supply/demand.

 
 
  Jeff Bailey   11/20/02,  9:37:58 AM
09:00 Update Link had been posted earlier. Here's the link.

 
 
  Jonathan Levinson   11/20/02,  9:32:51 AM
Flat open on the COMPX, TRINQ .49. FVX still in the red, down 2.2 bps.

 
 
  John Seckinger   11/20/02,  9:31:27 AM
With the Dow set to open fractionally lower, the 30-year (ZB02Z) is getting close to the top of its daily wedge. The Dec bond is higher by 0'13 ticks at 112'16 and the wedge appears to have a top at 113'00. A break out above this area should be bearish for stocks.

 
 
  Jeff Bailey   11/20/02,  9:31:27 AM
Semi equipment Soundview out with a call this morning and believes that more evidence is mounting that first quarter 2001 could be the turning point for more bullish order picture for the semi capital equipment industry; Soundview favorites include KLAC, AMAT Link , RTEC Link , and TER; raises NVLS Link price target to $38 from $31, LRCX Link to $18 from $15, KLAC Link to $45 from $35, and TER Link to $20 from $12.

In my (Jeff Bailey) opinion, sector bulls should stick with the "bigger guns" from the bullish side. AMAT, KLAC are both ABOVE downward trend and would technically be stronger looking stocks. NVLS is also one of the big three, but still fighting trend.

 
 
  Jim Brown   11/20/02,  9:30:17 AM
Tech stocks may show some life today after Soundview said that Q1 could be the turning point for the chip equipment stocks. KLAC, AMAT, TER, NVLS, LRCX, should benefit from the news. HPQ on the other hand was cut before earnings due out tonight. HPQ gave a cautious outlook presentation at Comdex and distributors are unhappy with the current price/product mix.

After trading up significantly over night the futures have traded down slightly after the housing starts data. It was still good but less than expected.

Today's market outlook is less than clear with chip equipment stocks key to any Nasdaq recovery. After two days of profit taking the Nasdaq could see some bargain hunting and possibly regain its leadership role but two comments from EMC and UIS yesterday that they see no recovery in IT spending should keep a lid on any rebound.

 
 
  Jonathan Levinson   11/20/02,  8:44:38 AM
The US Dollar Index broke 106 but is back to 105.80, and the futures have recovered some, with SPX now down 1.60 and NDX up 2.50. QQQ is trading 25.63 from its close of 25.65, and there's buying in bonds, with FVX down 2.6 bps. The fed has 1.25B in an MSP that matures today, which will be a net addition (the reverse of a repo) unless the fed takes further action today. We'll be watching for the announcement around 10:30AM.

 
 
  Linda Piazza   11/20/02,  8:39:44 AM
The Commerce Department announced that housing starts fell about 11% in October. The department estimates an annual pace of 1.60 million, down from a 16-year high of 1.81 million in September. Although television commentators labeled this number as in line with expectations, print sources note that economists expected a smaller decline, to 1.71 million starts in October. New single-family home starts fell only 7%, but starts of large apartment units were hit particularly hard, down 31%.

 
 
  Linda Piazza   11/20/02,  8:25:59 AM
Yesterday's concerns about slow growth in the German economy have expanded to include other European countries, driving a second down day on European markets. Bloomberg notes that Italy's consumer confidence numbers probably fell again for the ninth month and that in the third quarter, France's economy would post its lowest growth numbers for the year. As of this writing, the FTSE 100 was down .15%, the CAC 40 was down 1.03%, and the DAX was down 1.94%. In Asia, however, the Nikkei closed up 94.36 points, up 1.13%.

 
 
  Jim Brown   11/19/02,  1:14:00 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jim Brown   11/19/02,  1:13:47 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

 
 

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