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  John Seckinger   11/22/02,  4:20:25 PM
Note: On Monday morning at 10:00 a.m., October Existing Home Sales is scheduled for release. Economists expect a 5.35 million number, lower than September's 5.4 reading. 5.3 is below record pace of just over six million, but it would take a reading under 5 to worry investors. Note: October Homebuilders present sales index rose to a two year high. On Tuesday, Q3 GDP is on the economic docket, and economists are looking for a 3.2% growth rate versus 3.1%. Consumer Confidence is also expected, and should rise from 79.4 to 83. Furthermore, New Home Sales in October most likely fell from 1.02 million to 980k; however, above 900k is pretty solid, and I won't be concerned until this number falls into the 700's. On Tuesday, the GDP release is at 8:30 a.m., while all others are at 10 a.m.

  Linda Piazza   11/22/02,  4:01:08 PM
ZMH denies rumors that it's acquiring any company that would be dilutive, as doing so would damage the company's investment-grade rating.

  Jeff Bailey   11/22/02,  3:43:05 PM
The 3:15 PM Intraday Update has been posted. Link

  Jonathan Levinson   11/22/02,  3:42:24 PM
It's shaping up to be a decent day volume-wise, with 1.7B shares changing hands on the COMPX and 1.4B on the INDU so far. Impressive given the lack of movement. Is it distribution or is it base-building? We'll have the weekend to ponder that very question. The TRINQ is now on the bearish side of neutral at 1.18, same with the QQV +.38 on the day. TICK.NQ -232, possibly the most bearish reading I've seen since Wednesday. Up/down volume on the COMPX is even, with declining volume leading by a mere 66M shares. The p/c ratio is at its low of the day at .7.

  Jim Brown   11/22/02,  3:42:05 PM
Monday Outlook - I am getting a lot of emails about my Monday outlook. Based on the lack of significant profit taking today even after the bad Book-to-Bill semi numbers I would be expecting a continued rally next week. Thanksgiving week has been positive for nine consecutive years and with the bullish sentiment in the market there is no reason for it to quit. The qualification on this outlook is the strong resistance at 9050 and 9205 (200 DMA) on the Dow. The NDX 200 DMA is at 1131 and the NDX is currently 1114. This will limit any Nasdaq and QQQ gains. With the Dow limited to about +200 to +300 points and the Nasdaq to 20-30 there is not much upside. So, yes, my outlook is up but I do not see any breakouts over those numbers in two days of trading. Wed and Fri are not real days and Thursday is closed. That leaves only Monday/Tuesday as real trading days.

  John Seckinger   11/22/02,  3:11:28 PM
With one hour left, the Dow is right above its short-term pivot of 8840 as the bond market calls it a day. The 30-year closed down '08 ticks and underneath the 110'16 pivot at 109'28. Therefore, more weakness is expected in bonds heading into next week. If bonds rally above the 110'16 area, it is time to look at market conditions once again. Note: In theory, lower bond prices should mean higher stock prices. It was interesting to see a bearish divergence last week in bonds, and this divergence came to fruition via higher yields. The reverse H&S formation in 10-year yields also portends yields towards 4.50% and money flowing out of bonds.

  Linda Piazza   11/22/02,  2:53:40 PM
It's official. Despite what the charts say, Bruce Jacobs of Deutsche Bank feels that ZMH's weakness today may be "an attractive entry point." He also believes the weakness is attributable to Zimmer's possible acquisition of another company. Hmm. That still doesn't explain the deep downdraft in other medical supply companies such as PDCO, HSIC, SYK, and BSX. Two of these--PDCO and HSIC--reported earnings yesterday, and HSIC disappointed. I also thought I'd identified a commonality among all of these that are falling, since not all medical supply companies are down on the day. All of these that are underwater except one are involved with the sale or distribution of orthopedic or dental products rather than vascular or other medical products but that doesn't explain BSX's downdraft. The mystery continues.

  Jim Brown   11/22/02,  2:46:47 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The LONG signal was stopped out at 11:45 when the SPX traded 59 cents below our 929 stop at 928.41. It was a mercy killing. As my last Swing Trade signal the market wanted to get in one last fractional stop before reversing for a gain.

Steve will take over the Swing Trade model on Monday. Be sure and let him know what you would like to see here.

  Jonathan Levinson   11/22/02,  2:39:54 PM
Putting today in perspective, the COMPX is now +3.7, SPX +1.38, and the INDU +20. Despite a rash of intraday highs just now, little has changed, other than my pet indicators, which have gone bullish. The FVX is up 4 basis points, while the TRINQ is now .86 and QQV is down .26. The TICK.NQ is +43. Instead of bullish, I'd characterize these readings as bullishly neutral. To put it further in perspective, the indices are giving back exactly zero of yesterday's astounding gains- characterize that as you wish, but it doesn't look bearish to me. With the COMPX zooming in on the 1480-1520 zone I've identified, a level that has been a huge distribution zone for 6 years, I'm fascinated to see what will happen next. I cannot see the COMPX powering throw that much supply on this wave, and this seems so obvious to me that I could half see it happening.

  Kent Barton   11/22/02,  2:39:50 PM
ICOS Corp (ICOS) $31.01 +1.39 : This PremierInvestor long play was triggered early in today's session after the stock plowed through resistance at $30.00. ICOS is in the process of filling in its April 30th gap. The next obstacle for the bulls on the daily chart is all the way up at $37.00, near the April lows. The stock is showing good relative strength versus the BTK.X biotech index today and trading at fresh multi-month highs. Aggressive traders can think new entries on a move above $31.25 or on a pullback to intraday support at $30.50.

  Jim Brown   11/22/02,  2:37:42 PM
Back on line - That was fun. Somebody bumped a wire in the "fiber hut" according to the Qwest repairman but our T1 is back up and running. It went down at 9:32, I had a repairman on site by 10:35 and it was fixed by 12:25. Obviously Qwest is not very busy right now. I will update the stop on that last play in a moment.

  John Seckinger   11/22/02,  2:37:35 PM
The selling at 8880 seems to confirm the range trade mentality; however, the objective is for the Dow to fall back down to near 8840 and let volatility dry up once again. If the Dow stays higher than 8840 during the next 30 minutes, I would not be surprised with another test of 8880. The catalyst? The amazingly volatile Utility Index, now higher by 2.41% at 247. If 8840 is hit, then it will become very difficult to judge sentiment.

  Linda Piazza   11/22/02,  2:24:56 PM
Here's another stock included under the broad category of "Medical Supplies" that's a big percentage loser today: Schein (Henry) HSIC, down 2.40, 5.26%. HSIC is a distributor of medical supplies/devices rather than a manufacturer like ZMH, but it's interesting that so many of these are down on the day on big volume. There must be something more behind this than a rumor of an acquisition by one company of another.

  Steven Price   11/22/02,  2:12:51 PM
IBM: $84.98 (+0.08) Re: IBM Dec 75 puts - IBM's move above the 200-dma and support at $84 on the intraday chart is beginning to look bullish. After breaking through that level yesterday morning, the stock flatlined most of the day and crept higher onto the close. My previous bearish sentiment was shaken with the break over the 200-dma and lack of a pullback. So far the stock has been unable to break the $85.00 barrier, but a trip back under $80 is beginning to look unlikely.

  Jeff Bailey   11/22/02,  2:11:03 PM
The 1:00 PM Intraday Update has been posted. Link

  John Seckinger   11/22/02,  1:57:59 PM
A few things making headlines: There is a report from a Bear Stearns analyst that the company may have a $1 bln pension cost. In other news, the IMF called Brazilian Pres Lula's plans "excellent", and this should pave the way towards a $3 bln loan. Additionally, there is talk of a positive Dollar/U.S. growth article in Barron's and Newsweek this weekend.

  Jonathan Levinson   11/22/02,  1:57:22 PM
The put to call ratio continues to fall, currently .74. Gold has broken 320 in an amazing reversal. Any thoughts on how the USD and gold are rising together? While I ponder that one, here's a quick laugh: Link

  Linda Piazza   11/22/02,  1:42:12 PM
ZMH: I'm hearing from several readers and from Mark Phillips that ZMH is reportedly down because of a rumor it will be acquiring WMGI. I'm not sure that's the cause for all these medical supply companies to be down, but I'll keep investigating. Meanwhile, ZMH is now below its 50-dma at 39.80 and its 10-week MA at 39.85. It also fell below its ascending trendline from early August, re-testing that trendline yesterday and falling away from it. (5)(3) stochastics have turned down on the daily chart, and RSI has turned down, too. ZMH came close to giving a P&F sell signal, but hasn't yet done so. It bounced strongly from its 200-dma at 35.92, also an area of historical support. These stocks were all upgraded last week and it made sense to me on a fundamental basis (being a baby boomer myself) that these medical supply companies would prosper as we baby boomers age. Everything I see on the charts tell me that this would make a good put play, perhaps after waiting for a test and failure at those two MA's near 40 or alternately for a fall through the 200-dma at 35.92, but since I can't yet make sense of these sudden descent of these stocks, I'd consider the put play to be highly speculative.

  John Seckinger   11/22/02,  1:21:39 PM
Nice bullish trap in the Utilities Index. This interest-rate sensitive index hits 443.30 and then falls to 433 in about an hour. The UTY is currently lower by 1% at 438, and, like the Dow, is roughly in the middle of its daily range. Somewhat encouraging for bulls is the move higher in the dollar, up 0.29 at 106.10 and looking to test some resistance at 106.25. Bonds continue not to participate, and the yield curve (5/10) points to slight interest in stocks.

  Linda Piazza   11/22/02,  1:13:15 PM
Does anyone know what happened to medical supply companies Zimmer Holdings (ZMH), Stryker (SYK), and Boston Scientific (BSX)? I've been searching for news to explain the quick downdraft in these stocks. Zimmer is one of the leading decliners today. Here's a daily chart showing the damage: Link

  Steven Price   11/22/02,  1:07:26 PM
Hi Steve what do you think about KLIC? thanx rick

Kulicke & Soffa (KLIC): $5.61 (+0.74) The stock is up 40% in two days, and is outperforming the sector, most likely based on TSM's outlook. Resistance at $6 and $7. $4.50 was a triple top breakout on the PnF and $5.00 was previous resistance on the same chart. Current bullish count is $10.50, but we are getting that count from the cuurent column of "X" and will need a reversal in that column to get a final count. This tells me two things. First, the stock still looks bullish, in spite of the big gain. Second, it is likely to pull back at some point and $6 or $7 would be likely pullback levels. I might put on a 1/2 position here to catch the move up to a pullback , but wait for a full position until we get that reversal and another turn up into a column of "X".

  Jeff Bailey   11/22/02,  12:47:05 PM
Stock Trader's Almanac Jeff: do you know what tells us the Trader Almanac about the next week? Thanks for all your insight.Have a nice weekend. Torsten,Germany

Greetings to those "across the pond!" The other day I think we had e-mail from S. America?????

I see what looks to be a historically bullish week as my Stock Trader's Almanac has littl "blue bull heads" for Monday, Tuesday, Wednesday and Friday.

I tell you what. I have fond memories of my first days as a stock broker, they call them Investment Advisors today and there are some good ones. However, I was sitting in the fundamental/technical analysts office one day as I was one of the few Advisors that really loved fundamentals, but was learning about technical analysis. He said ..... ""Jeff: historically, one of the best short-term trading opportunities begins Wednesday's at about 11:00 AM EST. You see.... the pros will have the bulk of their institutional trades completed. Then they turn things over to the "rookies" as the head traders leave early for a nice 4.5 day Thanksgiving weekend. The only message is "don't screw anything up and I'll see you on Monday." What tends to happen is the "rookie" is there to simply fill the smaller "retail" investor orders and for the most part, the bulk of traders aren't doing much shorting and just making some markets. This "bullishness" starts to take place once the head trader leaves early.""

  Steven Price   11/22/02,  12:46:05 PM
Retail Index (RLX.X) 288.17 (+2.42) I continue to worry that this recent rally could still be derailed by poor retail sales heading into the holiday season. The comments earlier this week from Wal-Mart and Federated that sales were tracking below expectations for November, as well as a poor outlook from BJ Wholesale are still lurking in the background, and could indicate consumer spending still lagging.

I am looking at the descending trendline in the RLX, which has turned back the group on the last 4 attempts. Right now I have that trendline in the 292-293 area and the index failing at 290 this morning. Keep an eye on this sector to confirm bullishness in the market. Remember that the holiday shopping season is 6 days shorter this year, due to a late Thanksgiving, so year over year sales will likely suffer for November (which is likely priced into the sector). However, it could lead to a boom in December sales, so all is not necessarly lost if consumers still shop with the same adandon as past years. Unfortunately that is the key and every report I've seen from a mall indicates fewer customers. This could simply mean a switch to on-line shopping, but my guess is we'll see a big drop off, due to the cumulative effect of another tough year for the economy.

  Linda Piazza   11/22/02,  12:45:48 PM
The indices have been holding rather steady this morning while the hourly stochastics cycled down from overbought toward oversold. In the NDX, Nasdaq Comp, OEX, and SPX, the hourly stochastics have reached oversold and have the slightest hinge upward. The DOW hasn't yet reached oversold, but it's nearly there. Normally, it's bullish for prices to hold steady while the stochastics cycle down this way. Of course, I've seen those slight hinge upwards redraw themselves in an instant. Today, I'm wondering how investor psychology will affect this bullish action. Who will be more frightened to hold over the weekend: longs holding onto gains from the last few weeks or shorts who haven't yet covered?

  John Seckinger   11/22/02,  12:44:14 PM
Trading in the Dow appears to be pretty responsive so far. The established range of 8803 to 8880 should now become a pivot (+ or - a few points) going forward. Shorter-term traders could use 8843 (50% of days range) as a barometer as well. There does continue to be a bearish divergence in the RSI oscillator in Nasdaq and Dow; however, this has not been confirmed on a weekly chart. Looking elsewhere, Gold is higher by 2% and the Utility Index is above 243. One sector coming under pressure is Oil, lower by 1% at 438 but not showing any technical damage.

  Steven Price   11/22/02,  12:29:08 PM
Jet Blue (JBLU ): $34.61 (-0.39) OI put play JBLU continues to look very heavy, but bounced off $34.50. We are getting closer to a PnF downside breakthrough at $34.00, but I like entries on a move under $34.50, as well. Conservative traders should wait fot the trade of $34.00.

  Jeff Bailey   11/22/02,  12:24:46 PM
Microsoft (MSFT) $57.49 -0.6% .... lots of silence on MSFT - would love to have a big picture for it - long dec 65 calls @ .25

I consider this type of trade a "lottery play".... We've discussed big picture before, in fact, bullishly right before past court ruling that saw the stock jump from $52 level. Link

Not much has changed since then, other than the completion of the bullish vertical count column of $84.

My personal opinion? December expiration waaaaaaaay to short of time for such an out the money trade. Should have bought some bubble gum. Hey.... I can't be that harsh it's a lottery ticket, but I think hard pressed that it will pay as not enough time. That's just my opinion.

  Jeff Bailey   11/22/02,  12:17:15 PM

In yesterday's INDEX TRADER SUMMARY: "I tried a short/put a couple of days ago and stopped out this morning in the QQQ ".

You have advocated not using stop losses, at least in some situations. I like your thinking in that regard a lot. But as a matter of general strategy, in what situations would you use them? In what recent situations have you used them?

Yes... I was short the QQQ and when SHORT an equity, my business plan requires that I use a stop. Especially when considering the prior night's comment.... if jobless claims come in below 390K. While I have knots on my head from mom whacking me with a frying pan, HPQ news along with better jobs report had a QQQ short at risk, so I decided to cut loose.

However, with options, a QQQ put trader, using a business plan similar to what was described in last week's Ask the Analyst column, maybe not that concerned if holding January expiration. While the NASDAQ-100 Bullish % ($BPNDX) is not always indicative of price action, a QQQ put trader understands that RISK for bulls is at higher level. Now.... NDX bullish % can stay overbought indefinately, but a QQQ put trader that understood RISK before running the trade, LIMITED it per his/her business plan description, has TIME to see how things play out. IF NDX Bullish % falls below 30% then high odds QQQ put trader holding through yesterday's rally most likely sees gains when/if bullish % falls below 30%.

I probably should have worded it.... I tried a short a couple of days ago....

When would I use a stop on an option? When I make a longer-term bet 6-months out or longer and the trade immediately goes against me. 2) When I buy PUTS when market volatility is HIGH and Bullish % very oversold, but the stock I'm putting has big bearish vertical count associated with it, but rallies with the market and generates a p/f buy signal. 3) When I knowingly buy a call option on an overextended stock when the bullish % are overbought, but the stock has an "unbelievable" bullish vertical count associated with it. However, when the stock generates a sell signal, negates the "unbelievable" bullish vertical count as the bullish % turns lower from an "overbought" level. These are some times when a trader will use stops on options, but for the most part, avoids these types of trades to begin with, unless he/she is WELL AHEAD on the business plan goals.

Note! I do use stops on options to PROTECT GAINS! When I say I don't use stops on options, it relates to when a trade is first initiated and no time has passed as it relates to expiration of the option.

  Jeff Bailey   11/22/02,  12:09:16 PM
Plan the trade and damage control has early lead in "Ask the Analyst"

  Jeff Bailey   11/22/02,  11:54:36 AM
Ask the Analyst .... Not certain what this week's "ask the analyst" column will be about. Some have asked about how to assess risk/reward for trades to then better use with their business plans.

I've also seen some "damage" control questions where a topic on hedging is warranted.

I'm seeing some traders that have implemented some rather "terrible" trades in debit spreads where the security has moved against the strategy and quickly has turned into a loss. The lack of a "plan" where a trade must be hedged has traders looking a little panicked and that can lead to emotional trading. Maybe a topic on Plan the trade, trade the plan should be covered?

Trading like a market maker and trading levels while understanding risk. This is one that helps a trader get in the midset of a market maker and how they simply trade levels.

You make the call! What would you like to see in this weekends "Ask the analyst" column. If you could... e-mail me at jeff@otioninvestor.com and in the subject line type "Ask the analyst" I'll go through them before the close of trading and begin working on this weekend's column.

I don't want this to be a purely "educational" type of article either. Give me some stocks you're interested in or have technical questions about. Maybe I can combine a "strategy" with a real life stock situation. If you're a "fundamentals" trader, YOU have to give me the earnings, projected growth rates, and your fundamental target. Then we can perhaps use the chart to see if there is something technical in the stock's chart that has the MARKET believing in the fundamental analysis put forth (up or down). It's when the fundamentals don't match the technicals that can make for excellent trades. That's DIVERGENCE!

  John Seckinger   11/22/02,  11:54:31 AM
Equity traders are most likely preparing themselves for a test of the 8800 pivot in the Dow and 927 pivot in the S&P 500. Also coming under slight pressure is Treasuries, as rumors circulate that a few mortgage houses are prepared to dump fixed income securities. This, coupled with the corporate supply concerns, explains why the 30-year is down '06 ticks as stocks are also lower.

  Jeff Bailey   11/22/02,  11:47:58 AM
The 11:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   11/22/02,  11:46:17 AM
The US Dollar and the price of gold seem to be ramping together- a rare sight.

  Jonathan Levinson   11/22/02,  11:44:49 AM
Those 2000 shares of CEPH are peanuts. For a look at real insider selling, take a look QCOM at this Link

  Jonathan Levinson   11/22/02,  11:34:33 AM
More chop. CBOE put to call ration dipped to .79, then back up to .83. Little change since my last update, except that both the TRINQ and QQV are both edging fractionally higher- a little more selling and a little more fear.

  Steven Price   11/22/02,  11:29:39 AM

TRANSACTION: Sale (Option Related) 2,000 11/15/02 $55.46-$55.52


The Form 4 is filed with the Securities and Exchange Commission by any insider buying or selling their company's shares. This form must be filed within two business days of the transaction.

Cephalon (CEPH): $57.43 (-1.62) I don't attribute too much importance to an insider sale of only 2,000 shares after the stock runs up. If I were a director with stock options, I would likely be cashing them in as the stock price increased, as well. I'll stick with my new stop of $57.00, allowing for a pullback after the recent run.

  Jeff Bailey   11/22/02,  11:27:17 AM
Jim Brown has lost his Internet connection. When he gets it back, will begin posting.

  Linda Piazza   11/22/02,  11:07:35 AM
Now that the first trades of the day are squared away, volume patterns have improved, at least for those of you with a bullish perspective. Ad/Dec numbers still show slightly more declining issues than advancing issues, but instead of .55 on both the NYSE and Nasdaq, the numbers are now .92 and .79. Up volume vs. down volume is 196/191 on the NYSE and and 219/386 on the Nasdaq.

  John Seckinger   11/22/02,  11:04:38 AM
Private-sector economists have lowered their growth forecasts for the 4Q and for all of 2003 versus estimates given three months ago. Economists cut in half their estimates for fourth-quarter growth to 1.3 percent from earlier projections of 2.6 percent. They also lowered annualized real GDP to 2.6 percent for 2003, down from the previous estimate of 3.0 percent.

  Steven Price   11/22/02,  10:58:08 AM
Imclone (IMCL): $15.25 (+0.28) I like the base that is forming on the 5 min. chart over $15 and I think new entries on the call play look good if we hold here. Conservative traders can look for the Nasdaq to turn green, or a break above yesterday's high of $15.44 (entry at $15.50).

  Jim Brown   11/22/02,  10:56:35 AM
TSM - I am getting a lot of email about the TSM comment earlier. I had suggested TSM as a LONG TERM play several weeks ago when it was in the dumpster. Everyone wants to know if I still like it. Yes, I liked it at $6 and I like it at $9 (would love to see a pull back to $8.50). This is the largest semiconductor foundry in the world. With the trend away from manufacturing your own chips due to the continually higher cost of equipment TSM will benefit.

They said they were raising estimates of capacity utilization from low to mid 50% range to 60% fo the 4Q due to a pickup in demand for PC products. It said it had to add capacity to meet the brisk sales of chips for holiday demand. It said the decline in wafer production of -7% previously expected for the 4Q would now be flat instead due to the increase in orders. They also said average selling prices had not dropped the -3% to -5% as expected but had remained flat.

This may not sound like much improvement but due to its unique position in the chip manufacturing sector this is a leading indicator that the drop in demand has stopped. I still like TSM and after the unexpected good news I would not hesitate to look at a long-term position.

  Linda Piazza   11/22/02,  10:55:27 AM
Reader Don S. points out this morning that Buzz Lynn wrote a series of articles titled "Do You Have Trader Status?" in late 2001 and into 2002. For those of you who are newbies, these articles are must-reads as you consider IRS matters. Thanks, Don, for reminding me of these excellent articles. I've included a link to the last of the articles here, and it includes links to all the others: Link

  Jeff Bailey   11/22/02,  10:52:43 AM
Interesting isn't it? Yesterday I talked a little about how TLAB seemed to play "catch up" with the Wireless Sector (YLS.X) and how their day-to-day actions seems to have one or the other "outperforming" either up or down, with the trend being to the upside. Wireless up 1%, but maybe TLAB up 8%, then the next day Wireless up 8%, TLAB +1% type of action.

Interesting that Retail HOLDRS (RTH) +1.76% today and biggest sector gainer, when it languished while markets jolted higher. Almost as if RTH now tries to play a game of "catch up." Thing I "like" about RTH is that it did break longer-term downward trend, has a "buysignal" associated with its chart, and bullish vertical count gives some type of sign of further upside potential.

This "catch up" is a type of trade that a more active trader will look for. Key for the bullish trader is to do it with stocks that have some type of bullish demand picture developing or in play.

For instance.... earlier comment regarding Micron (MU). This is perhaps one of the more negative p/f charts in the group, especially among the more "notable" names that are in the semiconductor sector Link . Let's say its the "tail of the snake" and not necessarily one of those in the group at this point that a bull exposes a lot of capital on. However, it too seems to be trying to play a little "catch up."

As a side note... yesterday's action saw Dorsey/Wright's semiconductor bullish % (bpsemi) rising to 66% bullish. Wow! Remember back in late September we made note that the bullish % was down at 8%, which was a matching relative low found in early August? I thing the reason we made note was a subscriber was short MXIM at $25. Comments here was to move stop down, protect the trade as sector bullish % had bear carrying the bulk of risk. MXIM trading $41 now.

  Jonathan Levinson   11/22/02,  10:38:55 AM
Lots of rangebound chop. The put to call ratio opened at 1.04, and last printed at .83. That sudden drop isn't the best of news for bulls, who would prefer to see a feeding frenzy continue in puts. QQV is flat at +.11 on the day, and the TRINQ at 1.44 shows steady, moderate selling pressure. Yields have have cranked up, good news for equity bulls and bad news for the mortgage refi market, FVX +4.5 bps, TNX +2.9, TYX +2.4.

  Jim Brown   11/22/02,  10:34:07 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The opening rebound appears to be fading and even though I think the SPX 925 level should be support for the current LONG play I do not want to wait for it to see if it fails. Raise the stop loss to SPX 929, (OEX 475). In my opinion the possibility of an afternoon sell off on profit taking exceeds the possibility of another big gain.

  John Seckinger   11/22/02,  10:32:11 AM
Corporate supply, as well as allocation out of bonds and into stocks, continue to pressure the 10-year note. This week alone, $20 billion in corporate paper entered the market. That is a significant amount of paper that needs to be hedged via selling bonds. Then, when it is time to "unwind" the hedge, traders most likely sell the rally and continue to enter stocks. There are a few deals to be priced today, and the 10-year note is currently lower by '08 ticks while the 30-year is off by '09. Because of the supply, I will pay more attention to the 30-year for a correlation to stocks, and worry about the 10-year on a closing level only.

  Steven Price   11/22/02,  10:30:27 AM
I'm adjusting a couple of stop losses:

HOV ($33.52 -0.18) up to $32.50: If we get another pullback underneath that level, then I think the sideways movement may continue. I still think longs have a downside only to the 200-dma of $30.81, but I don't want to watch time decay drop further over the weekend if we are going to be headed sideways.

CEPH ($58.59 -0.76) up to $57.00: I'd like to see the tops of the recent intraday moves, before yesterday's breakout, act as support. We got in at $55.50 and I'd like to lock in some profits, as well.

  Jeff Bailey   11/22/02,  10:25:39 AM
Aggressive Bulls .... in recent sessions, I've noticed privately some smaller "technology" names that used to be "high flyers" really see upside action. Remember Akamai Tech (AKAM) $2.65 +20.45% at $300. Almost took a flyer on this one earlier in the week at $1.20, but stayed clear. Was thinking of it as an option, risk $500 and see what happens. Wish I had. I think some shorts from well above current levels locking in some gains and has stock bidding along with "late bulls" nipping away at a flyer.

With the CBOE Internet Index (INX.X) 100 +2% on fire in recent weeks, I'm thinking back to this weekend's ask the analyst column and weekly chart of CMGI (CMGI) $0.78 (unch) trading just below its 200-day SMA. I really know nothing of their business anymore, not sure what type of "internet" holdings they have. Would rate any trade in the stock as HIGHLY SPECULATIVE, but for RISK CAPITAL ONLY, some of these old names finding some pops to the upside. At $0.78, no different than an option. Risk a stop below $0.50 and target $1.50, which is this past April's relative high as target?

  Jeff Bailey   11/22/02,  10:16:44 AM
10-year YIELD ($TNX.X) 4.172% .... edging back above 4.15% and gives stocks a bid. Dow +25 points, SPX + fractional, QQQ unch.

  Jim Brown   11/22/02,  10:16:19 AM
I think the markets are going to key on the news that TSM, the worlds largest chip foundry, was upping guidance for the 4Q due to increased demand for PC products. This is significant and could be a real turning point. The SOX is almost positive again for the day after the very negative book-to-bill last night. The Nasdaq is already back to near zero and the broader indexes have already traded in positive territory. The reaction to this news could be muted today but it should not be lost on traders in the near future. This could be the light at the end of the tunnel.

  Jeff Bailey   11/22/02,  10:12:28 AM
Retail HOLDRS (AMEX:RTH) $75.00 +1.22% ... I still like the retailers from the bullish side of things and continue to hold bullish trade in the Jan. $75 calls. Sector still on a "buy signal" and today's trade at $75, has security back in column of X, and back above still trending lower 50-day SMA. With bullish vertical count of $108, risk/reward most favorable for bull with stop at $71, or $70 to give some room. With stock market improvement, may bollster investor and consumer confidence as holiday shopping season gets full swing. Link

Reiterating "buy" for partial positions here. According to Dorsey/Wright & Associates, sector is "bull alert" at 40.7%. Would take reading of 46% to achieve "bull confirmed" status, while a reversal lower to 34% needed for "bear confirmed".

  John Seckinger   11/22/02,  10:10:11 AM
With no economic data today, the focus definitely falls on movement in equities. The dollar is holding up against the Euro due to a weak France GDP report, and gaining against the Yen as traders wait for Japan to spend another 3 trillion yen to help its economy. In other news, Fed Governor Santomero spoke this morning; however, did not discuss the U.S. economy or monetary policy. He did, however, stress the importance of banking regulation (most likely implying that Japan should continue to clean up its banking loan problems).

  Steven Price   11/22/02,  10:07:39 AM
Hi Steve. What do u think about the BKX? Nobody seems to be talking about it (all tech these past few days). Does it look like a buy if it breaks 800? I am thinking of 1/2 position of C and other 1/2 in FBF calls on a breakout.

KBW Bank Index (BKX.X) 794.54 (-0.22) I'm looking at the 200 dma of 803.45 and additional resistance at 807. The PnF gave a buy signal at 770 and has extended itself to 800, where it is at least taking a breath, after running right into resistance at 800 on that chart, as well.

Citigroup (C): $39.00 (+0.06) C is right up against its 200-dma of $39.05 and doesn't give the next PnF buy signal for another dollar, at $40. The stock already broke through bearish resistance at $34.

Fleetboston (FBF): $26.72 (-0.20) FBF has a little more room before the 200-dma, which sits at $28.80, $2 above. It gave a new buy signal at $26, and has bearish resistance at $29.

With the BKX right at resistance, I'd probably wait for an upside breakthrough to go long the sector, in order to make sure you don't get in just before a pullback. My entries would be $40 in C, with a trade of 810 in the BKX, and in FBF, I like the rising highs and lows on the PnF here, but would also want confirmation from the BKX first. My only concern in FBF is that bearish resistance line up at $29 and the current extension from $18. C has more room to the upside if it breaks $40.

  Linda Piazza   11/22/02,  10:05:22 AM
I don't draw too many conclusions from volume information this early in the trading day, but so far, there's a slightly negative slant to the volume patterns. Ad/dec numbers are negative for both NYSE and Nasdaq, at .55 for both, and up/down volume numbers are 19/45 and 33/147, respectively. $TRIN is .86 for NYSE and $TRINQ is 1.81, backing up the selling seen in the volume patterns.

  Jonathan Levinson   11/22/02,  10:02:52 AM
The fed has added 5.5B via 5 day repo, which is a small 750M drain.

  Jeff Bailey   11/22/02,  9:59:48 AM
Micron Tech (MU) $16.19 +3.25% ... stock bucking some marginal semiconductor weakness. Thinking here is this..... a couple of weeks ago, Dan Niles was bullish Hewlett-Packard (HPQ) ahead of its quarter and telling investors to get long before earnings (excellent call). Earlier this week, Niles making bullish comment on MU that they most likely see firming price in more commoditize DRAM area and he might be right on MU too. Link

  Jonathan Levinson   11/22/02,  9:56:16 AM
Thanks for the fed repo info daily.

Keep it up.

I'm beginning to get a "feel" for how to use that info.

It's in there, but they're tricky buggers with it when they want to be. I expect to see repo money spent buying treasuries- rising yields will jeopardize the credit bubble more than falling equities, and the most efficient way to keep money cheap is to keep buying treasuries. Just my $.02.

  Steven Price   11/22/02,  9:47:44 AM
Jet Blue (JBLU): $34.70 (-0.30) Conservative traders can wait for the PnF bullish support breakdown in JBLU at $34.00, but the stock set yet another relative low this morning and has shown no signs of a bounce since the stock began its recent sell-off November 15.

  Jonathan Levinson   11/22/02,  9:46:29 AM
The fed has 6.25B in overnight repos expiring today. No announcement yet as to how it will be funded.

  Steven Price   11/22/02,  9:36:35 AM
Semiconductor Sector Index (SOX) 358.66 -6.64 Yesterday's book to bill, combined with the fact that the SOX rallied right to its August high makes the pullback from this level seem logical. While I've been bearish on the sector, but staying out of the way of shorting it, I'm not ready to pick the top yet. The trend is still up and a pullback could give us a long entry point.

  John Seckinger   11/22/02,  9:34:42 AM
With stocks set to open, the Dec 30-year (ZB02Z) is fractionally higher at 110'05. The bond contract will need to rise above the 110'16 level before getting back into the wedge profiled the last few days. If the contract does get back into the wedge, we may see a small short covering rally. In other news, equity mutual funds reported net cash outflows for the week ending Wednesday November 20. Taxable bond funds attracted $1.3bln in cash, while money market funds saw a net increase of $39.1bln over the same period.

  Jonathan Levinson   11/22/02,  9:32:42 AM
14 point gap down open to 1453 COMPX, TRINQ a 3.36, TICK.NQ +157.

  Jim Brown   11/22/02,  9:31:50 AM
Swing Trade Signals
I am with Jonathan. We are very overbought and should pull back to support at 8750/925 before charging off again. The book-to-bill appears to be a non-event with more attention being paid Cisco and the options expense discussion. Still techs are under pressure simply from the big gains and today could be mixed.

The current stop loss on the open LONG signal is SPX 921. There is strong support at 925 but that does not mean we are safe. Look for a dip at the open and probably a bounce before the real direction appears.

  Jeff Bailey   11/22/02,  9:31:09 AM
The 9:00 AM Intraday Update has been posted. Link

  Linda Piazza   11/22/02,  9:29:41 AM
As December approaches, I wanted to take a moment to mention wash sales to the newbies out there. Perhaps you haven't heard of this IRS rule, but it's important if you've experienced losses in your account this year. I'm going to include a link to an IRS site, so if some of these terms are unfamiliar, you'll find them there. If you've sold a security or derivative (say, an option on a particular stock or index) at a loss, you can't deduct that loss if buy the security or the derivative again within 30 days, or if you also owned it thirty days previously. Instead of deducting the loss, you have to add it to the cost of buying the security or derivative again. So, if I lost $1000 on an IMCL put play, for example, but I bought IMCL puts again within 30 days (even if they were for a different strike or different expiration month), I couldn't deduct the loss. Instead, I'd have to add $1000 to the cost of buying the next batch of options. Therefore, if you trade OEX options exclusively and trade them through the end of this year and into next year, you wouldn't be able to deduct your losses, if any (unless you've chosen a "mark-to-market" method of accounting, explained on the IRS site). The IRS assumes that if you've bought the security or derivative again, your ultimate goal is to own the security, so the loss just adds to your cost basis. Some traders and counselors have advised that one way to get around the wash rule is to close out all trades before December 1, and either cease trading all of that month (not likely with most Type A traders) or to close out all trades and switch your preferred trading vehicle for the month of December. I am not offering this as advice, but only mentioning advice I've heard. Tax rules change from year to year, and I am not a tax accountant. What I am advising is that you read the IRS information in the linked site and then talk to your own tax accountant for advice. Call the IRS, too, although I've often gotten conflicting information about this. Do not write to me about this, as I'm just another trader struggling with this rule. I know this rule caught me by surprise my first year of trading, and I thought some of you might not know about it, either. Link

  Jonathan Levinson   11/22/02,  9:21:54 AM
An interesting commentary on yesterday's jobless claims: While jobless claims were reported to have slipped to 375,000 last week, due to the Veterans’ Day holiday employment offices were open only four days.

  Jonathan Levinson   11/22/02,  8:58:16 AM
Numbers first: The US Dollar Index has been zigging and zagging on the 15 minute chart around 105.70, where it's currently hovering. NDX futures down 7.5, SPX futures down 3.40, gold in the 318/oz area. Yields down a bit, FVX -2.5 bps, TNX -2.2, TYX -.5.

I have been receiving a lot of email from a lot of bears. The general sentiments, distilled from thousands of words, are wonder, disgust, and fear. A few thoughs: Last fall, when the INDU had just finished getting Al Quaedaed and was reapproaching 10,000, Jim posted a chart showing a long, hard trading range from 9,800 to 10,200 and noted that after months in that range, it would not fall easily. Well, 1480 to 1520 COMPX is a similar zone. A trader with whom I correspond noted that over the past 6 years, this area was tested in 10 separate months - 10/97, 11/97, 12/97, 01/98, 08/98, 09/98, 10/98, 09/01, 10/01 and 06/02. It will not be a cakewalk through that level, and the COMPX is VERY extended. By extended, I refer to oscillators, breadth indicators, sentiment indicators, you name it. No need to discuss valuation or fundamentals. This has been a record setting rally, on mostly bad news. Now, we must note that yesterday broke a swing high on VOLUME, as Tom O'Brien and Tim Ord were noting. We need to expect a light volume pullback to The Numbers (925, 1425), and a subsequent bounce- at least, according to the volume watchers.

I have a huge reserve of margin available to be deployed long using mutual funds under a tax-saving arrangement I entered back when I still followed mutual funds. I've kept it just in case. I have no plan to go long on a long term basis while the indices are trading below these key levels, which coincide with their 200 dma's.

Another thing: some readers have noted that on some settings, their particular oscillators are just beginning to show breakouts. Yes. The thing about oscillators, and any indicator, is that the time frame selected will affect the results. We can measure waves of any wavelength and amplitude we wish. But the ones I follow, the ones that have made me money, are very very toppy. On a longer timeframe, the record setting upside action we've had is dragging the moving averages higher. Stick to your timeframe, and be consistent. That's the best way to "feel" the market and its moves.

  Jim Brown   11/22/02,  2:42:05 AM
The Swing Trade Game Plan has been posted: Link

  Jim Brown   11/22/02,  2:41:51 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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