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  Jeff Bailey   11/27/02,  11:37:47 PM
Overheard at this year's Thanksgiving tables....

Bulls: Thank you for the wonderful food we are about to eat and the recent rally from the lows when the NASDAQ-100 Bullish % reversed up to "bull alert" status in early October. We were really starting to wonder if you, the great bull, had forgotten us. As it turns out, you didn't and for that we are thankful.

Bears: Thank you for the wonderful food we are about to eat and the rather nice gains that have been found since last December when our family first came out of early hibernation. While the last couple of months have been rather rough, we are perhaps about to give thanks that those darned bullish % charts are once again at or nearing more "overbought" levels of bullishness and the recent couple of month's pain may soon subside.

Happy Thanksgiving and good night! See you Friday morning and a 1/2 day trading session.

  Jeff Bailey   11/27/02,  11:36:04 PM
Tonight's Trivia Question and a topic for Thanksgiving dinner table conversation. CNBC reports that Wall Street is rolling out hedge funds for the masses, which an investor used to have to pay $1 million for in order to get "hedge fund" type management out of. Jim Jubek cautioned investors that these new hedge funds or many hedge funds tend to underperform in a bull market.

Can you guess why that would be?

Answer.... because hedge fund managers are so concerned about managing risk and HEDGING that risk.

Ask any index mutual fund investor that owned some of XYZ S&P 500 Index funds how well that S&P 500 Index fund did at managing risk. I remember some guy at a very "popular" mutual fund company saying a couple of years ago that it made no sense to own a "manged" mutual fund as the managed mutual funds very rarely were able to beat the S&P 500.

While many mutual fund managers took it on the chin during the great rally of the 90's bull market as their funds only gained 15%, while the S&P 500 was churning out 20%, many of those "managed" funds didn't suffer the beating of the S&P 500 the past two years.

Risk... investing isn't always about reward, but also about risk.

  John Seckinger   11/27/02,  5:14:54 PM
I wonder if traders are remembering what happened the last time the market rebounded and hit the 50% retracement from the highs in March? Please see chart: Link

  Jeff Bailey   11/27/02,  5:06:13 PM
Wierd fills ... Jeff: I put in an order for 5 oxbxn puts at 8.4 when b/a was 8.90/9.00...got filled! at 16:00:22... got rid of them for 9 at 16:00:45...can u please explain why..though i dont mind these often..if u can answer on mm

Could be a number of reasons, but most likely explanation (without having seen what was going on) was that a more aggressive bidder may have come "in between" the more natural bid/ask spread and bid $8.90. 10-cent spreads in OEX options can be hard to find most often, so assume that $9.00 was the natural offer and $8.40 was "natural" bid. Aggressive buyer of the put maybe taking down 20 and wants to save $0.10 so he/she bids $8.90 and creates the tighter spread (10-cents on 2000 is $200 and pays for Thanksgiving dinner with wine). Anyway, market maker takes him/her out (sells naked $8.90) then sits the bid with you at $8.40 to try and scalp 50 cents on 20 contracts (50 cents on 2000 is $1,000).

Then... you and market maker get filled at the bid, at 04:00 "the pros buy the close" and whack.... you get hit at $9.00 as VIX on the rise and premiums increasing a bit.

  Steven Price   11/27/02,  4:58:49 PM
I would like to know what is the rate at which an in-the-money QQQ option moves with every 10cent move in the QQQ stock?

That certainly depends on how far in the money the option is, as well as which month. The delta of an option tells you how much that option moves for every dollar in the stock. At the moneys start at 50% and go higher the deeper the option is. The further you go out in time, the closer a delta moves to 50, as well, as more time equals more uncertainty. Deltas also move closer to 50 as volatility increases, as well, for the same reason. You can use the option calculator at the CBOE to play with different prices with this link Link

  Jeff Bailey   11/27/02,  4:25:22 PM
Great observation .... Jeff, Did you guys catch the spike in the OEX just before or right after 4:00 pm? I am tracking OXBXP and at 10:00 am or so they were at 12:20 ask (underlying price 779.50) and for a minute there the ask went to 14.00 around 4:02 pm with the OEX close almost a point higher. If you get a change please explain what might of been the cause for this type of action.

Hmmmmm..... market volatility (VIX.X) 30.84 +7.3% actually rose today, so it would make some sense that premiums actually rise under this type of VIX action. I don't have time to go through today's trades, but trader may want to review today's time and sales with bid/ask turned on and see if there were some unusual trades at the bid or ask to get a feel for things. Maybe BIG size at the bid is a bull selling some premium, while some BIG size at the offer is either a hedge or BEAR.

Interesting observation though and perhaps worth adding as an observation to today's 03:15 Intra day update.

  Jonathan Levinson   11/27/02,  4:09:03 PM
Happy thanksgiving, all.

  Jim Brown   11/27/02,  4:08:32 PM
The A/D line went out at +3850 positive issues and the RUT at 410.26. Futures sold off about -3 points right after the close on profit taking but the stage is set for Friday. There are no economic reports on Friday and we will be left to trade on the current bullish sentiment. It should be interesting. Happy Thanksgiving!

  Jim Brown   11/27/02,  4:00:02 PM
The Russell has exploded in the last 20 min from 406 to almost 410. This is a very positive sign going into the close.

  Linda Piazza   11/27/02,  3:55:32 PM
Reader Question: Is Nasdaq forming the head of a H& S formation on daily chart? Probably 1498 or 200 DMA is the tip of the head. Thanks a lot.

Response: Steve mentioned in his wrap last night a similar theory by other readers in regards to the DOW. I've included a link to his article. I see why you might point to that area as the tip of the head. However, until that head rounds over, support forms again in the area that would become the neckline (either sloping or horizontal) and the right shoulder begins to form, it's too early to think about potential H&S formations. The COMPX might continue to move up so far that the head would be way out of proportion to any possible H&S formation. The retest of support might stop far above what would be considered possible for a neckline, instead forming higher highs and higher lows. It's not too early to watch for a possible H&S to form and to keep this possibility in the back of your mind, but it's too early to act on that information or to think it probable that it will form. So far, volume patterns don't seem to be confirming that possibility. Volume should be highest as the push up to form the left shoulder occurs, be somewhat lower as the push up to form the head occurs, and be lower still as the right shoulder forms. From what I see on the charts, volume has been about equal on the formation of the potential left shoulder and potential head. I hope this helps. Here's Steve's article: Link

  Jim Brown   11/27/02,  3:53:46 PM
The NasTrin at .27 is VERY low and showing extreme overbought. The NYSE TRIN at .51 is nearing those levels. The VIX is still rising at 30.02. I think this is very positive. It is showing fear that the rally may not hold. The conflict in the indicators to me is positive for Friday. We have had big gains and are running full speed into a normally bullish Friday. The A/D line is now showing nearly +3700 positive issues. I would love to see the markets go out at the high on short covering and traders buying the breakout.

  Jeff Bailey   11/27/02,  3:52:30 PM
Times are differnet? ...Jeff: Resistance levels in August is not quite the same as resistance levels in Nov/Dec.

I'm thinking subscriber's point is things are a little different today than they were in August. This is good point but....

As discussed more thouroughly in the 03:15 Update, I would agree that overhead supply is much "further away" than it was in August. However... is it at all concerning to a bull that in August 22, the Bullish % for the OEX was 58%, then grew to 59% on Monday August 26th, before eventually reversing the 3-boxes (6%) to 49% by September 3rd?

The points I'm trying to make is that the Bullish % tells us that risk is high for bulls. While the bullish % doesn't necessarily tell us about price action, it is a guide for trade management and has good traders on the ALERT for potential danger or "traps." This is the point I'm trying to get across.

Excellent observation by subscriber though. It would be interesting to interview an S&P Depository Receipt's (AMEX:SPY) $94.56 +3.10% bull (and bear for that matter) that loaded the boat on August 22nd at $97.00, held down to the October 10th low of $77.07 that now finds the SPY back near his/her initial entry point and see if they feel resistance levels are any different.

  Steven Price   11/27/02,  3:51:20 PM
Swing Trade Signals
Since the OEX broke through resistance at 479, it has found support there on three pullbacks this afternoon. This shift from resistance to support leaves me bullish for Friday and I'm planning on turning the long signal over to Jim, while I'm gone. I'll be back Tuesday morning on the Monitor, but until then he's back in business.

  Jim Brown   11/27/02,  3:45:53 PM
Just like Nasdaq Compx 1425 was the key level for the last couple months the Compx 200 DMA at 1496 is now the key level. Without tech support on Friday any rally will lose steam quickly. The NDX 200 DMA of 1123 was broken today and that should have freed the QQQ for Friday.

  John Seckinger   11/27/02,  3:44:36 PM
With 20-minutes to go, the Nasdaq is still exactly on its 200 DMA (exp). With the bond market closing on its lows (early session today and friday), the 30-year (ZB02Z) has an objective of near 104 and this should be bullish for stocks.

  Jeff Bailey   11/27/02,  3:40:43 PM
The 3:15 PM Intraday Update has been posted. Link

  Jim Brown   11/27/02,  3:39:36 PM
We are getting some positive growth in the A/D numbers and TICKS are +800. Considering the big gains for the day it is looking positive into the close.

  Steven Price   11/27/02,  3:38:35 PM
Dear Steve,

Been reading your insightful postings all day. Thank you.

I wonder what your thoughts are on initiating a substantial position in a couple of indexes, before the close today. Considering QQQ, DIA or SPY. Also considering SMH. Would you do it? And if so which would you choose?

My concern is with buying at such a high, given today's results. (Did so on Monday at close & got creamed yesterday). But don't ewant to miss out on the "year end rally".

Appreciate your thoughts. Thanks.

I Like the higher highs in the broad indices and I'm planning on leaving the LONG swing trade signal open heading into to the close. However, my targets are Dow 9050/OEX 487/SPX 950. The QQQ has not yet held above its 200-dma (now 28.00, so I'd hold off there until we get some support after the rejection the last three days at that level. While a year end rally is a possibility, my current targets are more conservative and I'd wait until we break the above levels before playing for a longer span.

  Linda Piazza   11/27/02,  3:22:05 PM
It seems that many participants might be worried about the next direction of the markets, as the VIX climbs to 29.75 as of this writing. The problem lies in knowing whether the VIX will again be turned back in the 30-31 range, reasserting the old 20-30 trading range, or will break back into the recent 30-50 range. As the VIX moves up, (5)(3) daily stochastics have been moving up rather quickly, too, perhaps showing that they'll soon move into overbought territory. The 200-dma lies overhead (31.36 simple, on Stockcharts.com). It's natural for broken support levels to be retested, so I'll be interested to see whether that broken support is now resistance. If so, that provides further evidence that the rally might continue. A move back into that recent 30-50 range would be bearish, in my opinion.

  John Seckinger   11/27/02,  3:19:30 PM
The 30-year cash bond (TYX.X) has broken out significantly via higher yields, and an objective appears to come in at 5.5%. With the index currently showing yields of 5.11%, this is a signficant move from here. Please see illustration: Link

  Jim Brown   11/27/02,  3:17:22 PM
Jeff - I assume a comprehensive reader poll was taken by the IT department and the ranking is based on the amount of requests they got. With you and I on the top of the list that should tell us both something. (I did have IT make my checkmark permanent - it can't be turned off. Nobody will ever know he-he)

  Jonathan Levinson   11/27/02,  3:14:25 PM
Per Jim's 15:07:49 post: Shouldn't it be spelled "whose" in the tab? Don't worry, Jeff, I'm right behind you.

  Jeff Bailey   11/27/02,  3:10:32 PM
Per Jim's 15:07:49 post .... You get the message Jim, then why is my name first on the list?

  Jeff Bailey   11/27/02,  3:08:52 PM
Boeing (BA) $35.00 +3.92% ... trade at $35 has this Dow component back on a p/f buy signal. Will have the bullish % seeing a net gain of 3.33% if no other components have given a reversing "sell signal" today. Link

Suffice it to say, the tide is rising as many boats if not aircraft manufacturers continue to rise.

  Jim Brown   11/27/02,  3:07:49 PM
Java Monitor - Several of the testers have expressed excitement about the author screening feature on the new monitor. Unfortunately they did not say which author they wanted to screen. OK, I get it guys, if you want me to shut up just say so. (grin) Sample image - Link

  Jim Brown   11/27/02,  3:06:30 PM
The Russell-2000 did a perfect gap to resistance and dead stop at 406 this morning. It has literally gone to a nearly flat line all day where the big cap indexes have been trending up slightly. The RUT is only up +1.98% for the day while the Dow +2.83%, Compx +3.04%, SPX +2.80, OEX +2.96. This would lead me to believe there is not as breadth in the markets as it appears.

  Linda Piazza   11/27/02,  3:05:48 PM
It's soon going to be the time to make decisions about holding over the holiday. Your main goal is not to capitalize on any potential big move (up or down--I'm hearing from traders who believe strongly in each direction) but is instead to preserve capital. Steve has cautioned about decay in option premium, especially for December OTM options. Jonathan has warned of overtired markets. Jeff has mentioned risk to bulls due to current bullish percent levels. John and Jim have mentioned important support and resistance levels. If you believe strongly in a certain direction and today's price action or other indicators validate your belief, by all means prepare to participate in that move by choosing optimum option strikes and months. Perhaps consider some hedging strategies in case you're wrong. Limit your risk to a manageable amount. Although we're all afraid of missing out on a big move, you can always leverage into that move, risking a little now, and risking more at the next confirmation.

  Jonathan Levinson   11/27/02,  2:50:53 PM
If Mr. Market were a child, I'd be reading Dr. Spock and saying what my parents used to about my brothers- "Oh, they're just overtired." In any event, it's still got lotsa friends. The TRINQ is still at .24, the QQV is still lightly down, though now off 1.17 to 40.07. The put to call ratio is at its low of the day, .65. And, it looks like the SPX is finally blowing off the slighest bit of steam. Anyone remember "Airplane!"- I feel like Lloyd Bridges... "Looks like I picked the wrong day to quit sniffing glue". It looks like the upper trendline of our bullhorn formation has held for the time being.

  John Seckinger   11/27/02,  2:50:39 PM
I do understand that I got a little carried away with all the 200 DMA's being tested, and should note that the 50% retracement from the highs in mid-March to the low on October 10th is 8935. Thanks Jeff for reminding me.

  Jeff Bailey   11/27/02,  2:48:33 PM
How bullish are you? Today is a good time to review your trader's logbook. Indexes breakign to relative highs on some big point gains.

Remember 08/22/02? OEX breaking above 3-day consolidation of 482? That was a top wasn't it?

Oh gooodness. Not a prety thing I wrote that day.... Link in the 01:00 Update.

Hmmmm.... Gold/Silver Index (XAU.X) 62.01 -1.91% was down -2% that day at 61.76. What the heck?

I don't write this to say that history will repeat, but my goodness it would keep me from getting carried away on the bullish side and deviating from my business/account discipline. Wouldn't it you?

Now... some may say... "Jeff you're were an idiot to be bullish back on August 22nd"

I will say.... "fool me once, shame on the market, but fool me twice and catch me OVERLEVERAGED on the buy side, then shame on me. I'm no fool!"

  Jim Brown   11/27/02,  2:43:04 PM
Yes, the kiss of death handoff! Thanks Steve! Now where is that support level again because I am sure we are going to test it!! (grin)

  Jim Brown   11/27/02,  2:35:14 PM
Volume is drying up but the indexes are holding their ground. Still looking positive for Friday but still the danger of a pull back at the close. According to CNBC this is the biggest move for the Dow ever for a Thanksgiving Wednesday. Hopefully Friday will follow suit.

  Steven Price   11/27/02,  2:32:11 PM
Swing Trade Signals
I like the consolidation over Dow 9000/OEX 480/SPX 938. Looks bullish and conforms to history. If I still like the long play by the end of the day, I'll turn it over to Jim for Friday, rather than closing it. I was planning on staying flat heading into the holiday, but the upside break into new territory was too hard to ignore.

  Jeff Bailey   11/27/02,  2:32:00 PM
Akamai (AKAM) $2.08 +6.2% .... never know for sure, but want to make short-term traders aware of something here, that may have been a "trick" on bulls. Again... not sure, but I learned a "trick" as a market maker that may be useful to short-term traders in the future.

When looking at a 10-minute interval chart of AKAM, a short-term trader might draw a downward trend on AKAM's chart where that very downward trend from $2.51 (this is the 11/22/02 09:40:00 interval close) and attach that trend to the high of 11/27/02 10:00:00 interval) and extension of that trend comes in at $2.11 (which had been horizontal resistance for 40 minutes).

Time and sales shows 100 shares trading at $2.12, juuuuust above that trend. Sometimes a seller looking to build some liquidity (buying) will sacrifice 100 shares to get that little tick and try and suck in some momentum players, like us that are playing a HIGH RISK type of trade.

A good trader will make this observation and begin looking at the stock (especially if long) with a sceptical type of view on a SHORT-TERM BASIS.

Again.... never sure, but a trick I learned and see from time to time. If you're a "momentum" trader, this is a "trick" to be cognizant of and sometimes keeps a trader out of trouble and looking for more than 100 shares on a potential break of trend.

Trade time was 14:02:20 .... 100 shares at $2.12.

Disclosure ... I hold bullish position in AKAM and have NOT sold a share today.

  Kent Barton   11/27/02,  2:31:35 PM
Teva Pharmaceutical (TEVA), $78.70 +1.76: Mentioned this one on Monday after the company announced a 2-for-1 stock split. Shares have broken to all-time highs today on moderate volume. Psychological resistance looms at $80.00, but the bullish vertical count of $92 now seems a little more attainable. As we've seen with Forest Labs (FRX), some of these drug stocks can really get moving once they break into bluesky territory!

  John Seckinger   11/27/02,  2:25:36 PM
I was expecting the Dow to test its 200 DMA (exp) at 8947 during that last little spike higher. The Nasdaq broke above its at 1487 and is currently at 1490. Note: The S&P 500 Index at 939 is far underneath its 200 DMA (exp) of 965, but is above a bearish trend line that began back in March. This index has never settled above this line, which currently comes in at 931.50.

  Linda Piazza   11/27/02,  2:14:53 PM
To add to the anecdotal evidence about hirings, I know several people with masters degrees from Carnegie Mellon's prestigious program in computer software development. (At least, they all tell me it's a prestigious program.) Most of them were courted heavily during the dot.com boom and this particular group of friends mostly ended up in Austin's tech corridor. All--every single one of this group of six to ten people--were laid off last year. A few have managed to cobble together jobs during the last year, mostly from firms that have then gone under themselves. One guy never even had a real interview during this time. Suddenly, they're getting interviews, although some have stated that the firms seem to want to hire them, mention expecting new business, but are dragging out the interview process until they collect those new contracts.

  Jeff Bailey   11/27/02,  2:11:23 PM
Just noticing this ... the Retail HOLDRS (AMEX:RTH) $76.25 +3.17% Link p/f chart shows POTENTIAL "bullish triangle". I say POTENTIAL as it would take a trade at $77 to trigger the pattern.

Oh my!.... Kohls (KSS) $69.56 doing a little dance above its 200-day SMA of $67.84 today. Gooooooo.... baby.

  Steven Price   11/27/02,  2:10:45 PM
Sallie Mae (SLM): $96.98 (-0.87) OI put play Sallie Mae has bucked the trend today, sinking further after coverage was initiated on the stock with a "hold" rating by Prudential, with cautious comments that recent "above normal" growth may be hard to sustain from 2003-2005. I'm lowering the stop to $101.50. The trade of $97 broke the ascending trendline on the PnF,and can be seen as an entry point. However, more convservative traders may want to wait for a break under the bullish support line at $95 for new shorts.

  Jim Brown   11/27/02,  2:09:22 PM
Why is the vix going up with the market up so much? Are they looking at resistance and a big roll over? With low vol. on Friday could they push it down again, like Wednesday? Carl

Some people are afraid it will fall again and they are protecting their profits with puts. Others are expecting it to fall and are buying puts to profit from it. Either way the increased put activity is increasing the VIX

  Jim Brown   11/27/02,  2:07:33 PM
Jim, What are the hours of the market on Friday?

9:30 to 1:PM

  Jonathan Levinson   11/27/02,  2:06:34 PM
On the contrary- Jonathan's been paying interest to keep a leveraged mutual fund account active in money market assets, just waiting for a reason to get long without having to rely on the "greater fool" theory. A return to the sale days (daze?) would suit me just fine!

  Jeff Bailey   11/27/02,  2:05:19 PM
The 1:00 PM Intraday Update has been posted. Link

  Jim Brown   11/27/02,  2:03:02 PM
Hi Jim, My friend (a physician) was laid off by a large Pharmaceutical co. ten months ago. She has great credentials, Harvard, Yale etc. Until three weeks ago she had had only four interviews. Lately, she has been inundated with calls from headhunters and has five firm offers. The headhunters have said they see a clear pickup and not just in that sector.Interesting? Happy Thanksgiving. NYC

Come on, don't tease the bears like that. Are you trying to ruin their weekend? We all hope your right. Well, most of us. Jonathan may not be pleased.

  Linda Piazza   11/27/02,  1:54:51 PM
The OEX has been speeding toward the important 485-490 area, the confluence of August highs (487.42 intraday and 485.95 close), the 200-dma (exp) at 487.67 according to Stockcharts.com, and the upper boundary of the ascending channel it's been following. Logic tells me that it would be hard for the OEX to push past all those various levels of resistance without at least some consolidation if not a pullback, since the stochastics have been showing overbought levels for days now, but just in case, a close above August highs will confirm the double bottom in the OEX.

  Jim Brown   11/27/02,  1:52:28 PM
I think we are seeing a pretty good example of hope here. We are hugging the highs and have resisted one serious attempt to drop. There is nothing to write about as we are simply stuck at a resistance high and neither side can budge it. It looks like we are setting up for a break on Friday if we are able to close over Dow 8900. The A/D line is out of site with +3224 positive issues. Unfortunately the TRIN at .56 and the P/C ratio at .68 are indicating no fear and approaching overbought conditions. This means a strong move on Friday could push us over the edge and setup that next drop. Remember 9050 and 9200 are strong resistance and only a break over 9200 will convince the herd to join the party. Enjoy the green but keep your finger on the sell trigger if support levels are broken. I still see support at Compx 1480, Dow 8850, OEX 477, SPX 932.

  John Seckinger   11/27/02,  1:46:52 PM
Is the second time a charm? The Nasdaq-100 (NDX) is once again exactly on its 200 DMA (exp) at 1128.67. This DMA was tested two sessions ago at 1129, and the index went on to fall to 1083. I think I am starting to see a pattern with indices testing their 200 DMA (exponential). I don't think the 30-year will reach its 200 DMA, since the ZB02Z contract is at 108'17 and its 200 DMA is lower at 101'16.

  Jonathan Levinson   11/27/02,  1:45:27 PM
With the five year yield up 20 basis points so far, any question of liquidity is moot for the moment. The TRINQ is still extreme at .22, and the QQV is still lightly down by .88. Precious metals continue to sell off, with HUI now down 2.04 to 113.75. The SPX is still struggling with the upper trendline on that bullhorn identified earlier.

  Kent Barton   11/27/02,  1:36:54 PM
Microsoft (MSFT), $58.58 +1.68: Mr. Softee, a current OI call play, is within cents of slicing through the relative high at $58.64. With the NASDAQ approaching resistance at 1500, a breakout would be fortuitously timed for tech bulls. MSFT looks like it could reach the $60.00 level if the broader market maintains its upside bias. This would help the software index to break above its own relative high of 118.63. The GSO.X has been struggling with its descending 200-dma at 116.80.

  John Seckinger   11/27/02,  1:24:45 PM
I am impressed the Dow has gone the entire session without testing its short-term 200 PMA (currently at 8872). Looking at the 200 DMA (exp), it currently rests just above at 9046. One sector testing its 200 DMA (exp) is the Sox, currently exactly on its average at 380.79. Other interesting charts include the XAU, lower by 1.8% at 62.02 and not far above a daily bullish trend line of 61.35. This day has definitely gotten interesting.

  Jeff Bailey   11/27/02,  1:11:52 PM
Akamai Tech (AKAM) $2.08 +6.2% .... Jeff, Yesterday you suggested going long akam this afternoon. Do you still think this is a good play?

Yes... I stuck in a bid at $2.00 this morning and somehow managed to get filled. Small position in $ terms and AGRESSIVE bulls only. Target $2.50 on some potential short-covering type action for now. I suggest a trader trading these very small and very volatile type stocks use a % stop loss that complies with your business/trading plan. There is NO WAY I would suggest a 10% of account position in this type of trade. Nor would I have suggested it in CMGI recently.

Disclosure... I currently hold bullish position in AKAM

  John Seckinger   11/27/02,  1:05:11 PM
Had slight computer problems, but that has been resolved. Impressively, the 30-year is down two full points (64/64) and is certainly helping the underpinning bid in equities. One of my rules of thumb is, "if bond prices are down one full point, look for significant bids in stocks for the entire session." I don't have a quote for a two point move. Looking at the yield curve, their isn't the reaction (read: flattening) that I would have expected; however, the yield difference between the five and ten year note remains under 100 at 93 and still could hit that 80 number (example of 80 bps wide would be ten year yield at say 4.30% and five year yield at 3.50 percent). At this point, then asset allocation managers might look to unwind positions and stop the current move from bonds to equities.

  Jim Brown   11/27/02,  1:04:15 PM
johns@aug..... My email to you was blocked as spam by your ISP. Sorry

  Linda Piazza   11/27/02,  1:03:14 PM
Guidant: 29.87, down 1.98, but up from the day's low of 28.81. Mystery solved? Bloomberg.com reports that the 7th U.S. Circuit Court of Appeals denied Guidant and research partner Cook Group's request to allow them to sell their drug-coated stents while the medical device makers appeal a lawsuit filed against Boston Scientific. In an earlier case, a judge had blocked the stent sales, and they sought to have that ruling overturned. Perhaps this pending ruling along with unfavorable earnings by PDCO and OIN put play HSIC were separately responsible for some of the sudden downturns seen in stocks of companies that produce medical devices or distribute them. Technical damage has been done on some of these stocks, while others, such as ZMH, have managed to hold support. So far, ZMH has stayed above its 200-dma.

  Jeff Bailey   11/27/02,  12:59:47 PM
Procter & Gamble (NYSE:PG) $84.76 +0.4% Link ... Jeff Per your graph of today of PG, i only see a double bottom sell where is the third ?, and do you still hold your Puts in this rally thanks

OK... today's trade at $84 WAS a double-bottom sell signal. I think what the trader in this e-mail is talking about is stockcharts.com note at the top "descending triple bottom breakdown."

Do you see the three consecutive sell signals? The first was at $87 then stockcharts.com calls the second sell signal at $86 (comparing further to the left) and now today's traded at $84, which is below the direct column of O to the left.

Now.... I'm kind of an "old school" p/f chartist and I don't really consider "double bottom" sell signal that span months back as all that significant UNLESS they are generated at some HISTORICAL LOWS and there's a lot of "air" under the lows to $0.00, which is a stock's ultimate risk.

Also! When stockcharts.com does say "descending triple bottom breadown" DO NOT go to Professor Davis' probability table for a "triple bottom."

The "true" tiple-bottom sell signal does exist in PG at $87 and that's right where I originally profiled PG as a short/put trade for PARTIAL POSITIONS as stock was still above trend.

Now... a trader holding partial can round out to full or leg in further in a BEARISH position. A trader holding partial could also just sit back and see if the broader market bullishness doesn't see PG reverse up 3- boxes to $87 as a better entry point, with a partial bearish position already established. If PG tanks from here, then still have the partial, but patient until the Bullish % charts reverse lower.

Yes... I still hold bearish position in the PG Jan. $90 puts. I don't mind holding some bearish positions is WEAK stocks, that are givng some sell signals in what would still be considered a very EARLY point to be looking short. I want some nice BEARISH vertical counts that will help give "doubt" to a bull that they are waisting their time in the stock and have some meaninful downside to be concerned about.

A bearish trade in PG in my opinion should be "offset" with some type of equal dollar weighted BULLISH play. In the past, the stock I though bulls should offset with is JNJ Link as a Dow component.

If Saddam does something "stupid" and geopolitical risk comes into play, I would think PG outpaces a JNJ decline.

  Jonathan Levinson   11/27/02,  12:53:48 PM
It's not over yet, but I call that a whipsaw, and hereby suggest that a golf clap is in order. These guys are good.

  Linda Piazza   11/27/02,  12:49:30 PM
Reader Rick P. points out that the VIX has again moved above 28.60 in the last hour.

  Jim Brown   11/27/02,  12:48:09 PM
Looks like the excitement faded once over the 8900/480 level. The key now is to hold as close to these levels as possible so that 77.2369% chance of the rally continuing on Friday starts from a higher plateau. I see support at Compx 1480, Dow 8850, OEX 477, SPX 932. Keep your fingers crossed!

  Jeff Bailey   11/27/02,  12:44:23 PM
Trivia Question? .... Jeff, If you had to guess,what's the probability that today's gains will carry over into Friday? Thanks! Vince

Well.... we discussed this just recently Link . According to the Stock Trader's Almanac today had a 75% chance and Friday has a 77.5% chance. I'm going to say the probability that today's gains will carry over into Friday are 77.2369%.

  Linda Piazza   11/27/02,  12:20:39 PM
This is one of those days when traders can see how useless some oscillators become in a strongly trending market. If you've got access to five-minute stochastics on your charts, take a look at what's happened with prices on the OEX or S&P 500 as five-minute stochastics turn down. The rollover on five-minute stochastics on the S&P 500 that lasted from about 11:25 until 11:45 (which was indicating bearish divergence, by the way) was good for about a one-point drop in price, more of a consolidation than a drop. In a strong uptrend, the buy signals are more reliable than the sell signals, but none are as reliable as they are in a mature trend. At some point in the future, the trend will slow and prices will move down along with the oscillators, but relying on one indicator only for buy or sell signals can be a treacherous practice.

  Steven Price   11/27/02,  12:14:23 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the long entry at 12:11:28 with the OEX trade of 480.25. Place stop at 477.00

  Jonathan Levinson   11/27/02,  12:08:15 PM
The SPX is trying to break the upper resistance on that triangle right now a print above 938-9 should do it.

  Steven Price   11/27/02,  12:02:42 PM
NQ futures is what needs to be looked at. NQ02z siting at 1124/25 right at the begining drop into gap down yesterday (clear as a bell on the 10mn chart) I think that is critical more then anything else. If that fails, we could see 1120, then 1109/1110. But I suspect we will break out from this congestion and hit 1130, maybe even 1135. Good work on holding back on that short.

Definitley something else to keep an eye on.

  Jonathan Levinson   11/27/02,  12:02:01 PM
Squinting at the charts, there's an expanding triangle on the 15 minute bars. Trouble is, these can break north or south- no clear direction until the breakout occurs. The good news is that we're close to the flat upper line on the chart, and a breakout from there will spell further upside. The bad news is that for longer than a short term trade, we have to recall that the bullish percent data, which have been so good at catching major turns, are toppy, which throws off a bulls ideal risk/reward scenario. No indicator is "all that", but we have to keep an eye on it- the practical solution if going long is too be strict about your stop losses.

  Jim Brown   11/27/02,  12:01:46 PM
OK, we are going to try this one more time. The Java monitor is ready for a larger test by Windows users. (No Macs, Unix, Linux yet) I need about 25 readers who are willing to be beta testers today to email me and I will send you the setup file. It has been working well for us internally but you know what happens in real life.

This message will disappear when I get enough testers.

  Steven Price   11/27/02,  11:55:41 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
With the Dow breaking out over 8900 and the SPX on its highs, let's go long with an OEX trade of 480.25 on a breakout over resistance.

  Steven Price   11/27/02,  11:51:02 AM
Swing Trade Signals

I love your technical analysis, keep up the great work. However, I am not sure why you are looking for a short. Once the resistances you mentioned are broken, why not initiate a long. We certainly have alot of good economic data, and we are still in an uptrend

I was looking to play the odds with a low risk/high reward play on failure from a repeated resistance level. However, as you have mentioned, the market looks strong and I'm not going to short anything without signs of weakness, especially after that resistance failed. Jim's earlier post mentioned possible resistance levels above, as well, so with the long weekend, I'm not sure I'll enter a long play today. In last night's Swing Trade Wrap, I highlighted a couple of scenarios that might make me reconsider the plan to leave things alone for the weekend. One was a rollover from OEX 479. We got the move to 479, but no rollover.

  Jim Brown   11/27/02,  11:49:21 AM
As each historical trend develops, this one is nine years strong, the possibility of a counter play by big money appears. The Nasdaq dead stop at 1485, current resistance and the dead stop by the OEX at 479, also strong resistance may be pointing to a "sell the rally" event instead of a breakout. The retail traders joined the rally this morning but it will take the institutional traders to break the resistance. It does not appear they are on the bus today. Resistance is holding and internals are beginning to weaken. I think there is a good possibility they took their shot at the break and just came up short.

Obviously a +200 point bounce after a -192 point drop is a strong move but no new resistance levels were broken. Are we setting up for a negative Friday? If so the nine year streak of bullish Thanksgiving weeks will come to an end. I am not willing to bet against it. With family shoppers hitting the malls on Friday the family investors, typically men and typically late cycle shoppers, have tended to stay home and enter a few trades. The bottom line? We are dead on resistance and showing failure but the game is far from over. This game is not over until the final bell sounds on Friday.

  Jeff Bailey   11/27/02,  11:46:26 AM
The 11:00 AM Intraday Update has been posted. Link

  Steven Price   11/27/02,  11:45:11 AM
ICOS: $31.96 +1.75 OI call play ICOS rebounding strongly. Recent high of $32.25 and I'd look for $32.50 for new entries. Conservative traders can wait to re-test $32 on a pullback, for new support.

  Jonathan Levinson   11/27/02,  11:38:29 AM
So far, you have to squint pretty hard to find anything not bullish in today's action. The five year yield is up over 15 basis points, and the COMPX +38 while the fed put 2B back in its pocket. The QQV has dropped relatively little, just .84 to 40.40, and precious metals are finally in the red with HUI down 1.03. There's only one small red candle printed all day so far on the 10 minute chart. This has been a non-stop buying frenzy so far, yet the put to call ratio has made it only as low as .70, and so there is still too much put activity to confidently predict a top just yet.

  Jim Brown   11/27/02,  11:33:19 AM
It definitely appears the fix was in yesterday and the selling was artificial as I suggested in the monitor before the close. They stacked the deck just in case the news was good and now traders are benefiting from the historical trends. The problem as I see it is still resistance at 9000 (psychological) 9050 real and 9188 the 200 DMA. This rally has been losing steam as that resistance nears and it is going to take a lot more volume to push it higher.

The Thanksgiving rally from last year peaked on Dec-5th after two huge days and then sold off from Dec-5th to Dec-14th as earnings warnings, profit taking and year end tax selling took hold. This is also a possibility for this year. I have been cautioning that the 9050 resistance was strong and many analysts expect 9200 to be the December high. If you are considering a long play now you need to keep these targets in sight and be prepared to bail if that 9200 level fails.

  Steven Price   11/27/02,  11:30:23 AM
Swing Trade Signals
So much for resistance at 479. Our high of the day is 479.12 and we are starting to see some support forming over 478.00. SPX resistance is at 938 (currently 935.26). So far no rollover and Friday after Thanksgiving is traditionally bullish, but very slow.

  Linda Piazza   11/27/02,  11:19:35 AM
Correction: One source lists GDT as "Advanced Medical" rather than "Medical Supply." Since the group "develops, manufactures, and markets products and services that enable less-invasive care for some of life's most threatening medical conditions," I'd lumped it with medical supply companies.

  Steven Price   11/27/02,  11:17:47 AM
Swing Trade Signals
I'm getting an itchy trigger finger to short the rally at resistance (OEX 479), but I'm going to need to see signs of weakness first. I'll also need enough time left in the day to make it pay off. Right now we are above relative highs, so I don't see weakness.

  Linda Piazza   11/27/02,  11:15:55 AM
Briefing.com just noted that Guidant was down on heavy volume today. It seems to be the medical supply company du jour to take a tumble this week. All week, medical supply companies seem to be taking turns falling on heavy volume. BSX, ZMH, HSIC were companies that fell on heavy volume earlier in the week. Today, all three of those are up, although on light volume for all but HSIC, whose volume seems moderate.

  John Seckinger   11/27/02,  11:11:02 AM
Side Notes: There is a bidding deadline at 11 ET for 2-year notes about to be auctioned. The 2-year is lower by 1/4 point with the when issued trading at 2.12%. That could result in a 2 1/8% coupon. If that happens, there is a slight (read: slight) chance that bond holder will then start buying bonds in the short term. This could pressure stocks in the near term.

  John Seckinger   11/27/02,  10:55:27 AM
The Dow is definitely in a small consolidation phase, but has used its short term moving averages as support. Also bullish is the fact that bonds are lower by more than one full point (32/32); currently down 1'18 at 109'11. If curious how I derived at 8862 resistance level, please see link and scroll to bottom of article (last chart), Link

  Jeff Bailey   11/27/02,  10:50:21 AM
10-year YIELD ($TNX.X) ... trading with a 4.2% YIELD and X gets the square after recent triple-top "buy" signal on YIELD. Equity bulls next YIELD alert would be placed at 4.3% as an alert that more meaningful selling in this bond takes place. Recent economic data may be putting some pressure on Treasuries on thought Fed rate cuts have run their course. Time will tell, but supply looks to be getting an upper hand on demand in the Treasuries.

Longer-dated 30-year YIELD ($TYX.X) 5.05% seing a nice little pop today and X gets the square here too. Same type of YIELD alert can be set at 5.25% here. March 5.0% YIELD calls look good and maintain "hold" rating from previous two YIELD call profiles. Link

  Steven Price   11/27/02,  10:46:25 AM
Swing Trade Signals
We are right up into resistance now with the OEX 477.83/Dow 8863/SPX 932. While I said earlier I am hesitant to initiate, let's look for failure at Dow 8550/SPX 930/OEX 477 for possible shorts. Right now, I'm not going to short into strength, but these are the levels I'm watching for rollover.

  Jeff Bailey   11/27/02,  10:42:25 AM
Treasury YIELDS ... all higher and looking to break above recent relative highs. 5-year YIELD showing greatest technical break higher here at 3.272%, which violates to the upside 10/18/02 resistance of 3.245% Link

  Steven Price   11/27/02,  10:28:39 AM
Henry Kissinger heading up the 9/11 committee? Cheney as the V.P.? Rumsfeld heading defense? Caspar Weinberger's resume' just came up on the White House fax.

  Linda Piazza   11/27/02,  10:27:40 AM
The up/down volume on the Nasdaq remains skewed drastically, with up volume 17.35 times down volume. I would never step in front of a train speeding this fast, as my personal trading parameters don't have me trading against the trend, but the contrarian in me says that's too skewed to last.

  Steven Price   11/27/02,  10:21:14 AM
Steven, Per you comments regarding premium decay: Since it makes little sense (or assumption of more risk than potential reward) to buy premium today, then why not sell it? Just a thought. Keith

I often did sell premium just ahead of long weekends. However, a few of things to note. 1) unlimited risk with short options 2) The VIX has already come down by almost 50% in the last six weeks 3) Not sure the premium decay from the short side is worth the unlimited risk on a short option 4)One way to eliminate short risk is by selling those options that are just out of the money and buying the really cheap stuff another strike out. However, unless you have the ability to actively trade stock against the short position, I don't recommend this strategy for retail investors. Pros do it all the time, but are more involved and have access to more order flow to hedge things that have gone awry on an adverse move.

  Jeff Bailey   11/27/02,  10:18:34 AM
Dow Industrials (INDU) 8,822 +1.68% ... Breadth positive with 29 gainers and just 1 decliner... Procter Gamble (NYSE:PG) $84.15 -0.31%. Link

  Jonathan Levinson   11/27/02,  10:18:20 AM
Does anyone remember when markets fell faster than they rose, on the theory that fear is stronger and more urgent than greed? Perhaps for the past few months the fear has been of missing the next bull market. In any event, 10AM spike is blowing off a bit, and the TRINQ has "rallied" up to .18 (sarcasm). The QQV is down only .21, and so option traders are remaining very cautious so far. The bond market is not, however, will a selloff reflected in the FVX which is up 11 basis points so far. HUI and XAU are slightly positive- no selloff in precious metals either.

  Steven Price   11/27/02,  10:14:15 AM
Swing Trade Signals
OEX 475.84/Dow 8833.98/COMP 1479.45

We are starting to get close to overhead resistance from recent highs. I'll be watching for a rollover from those levels, with tight stops just over resistance on any initiation.

  John Seckinger   11/27/02,  10:09:50 AM
Based on short-term analysis, I have resistance at 8862. It seems as though it would take a move under 8750 before sentiment takes a more neutral reading.

  Steven Price   11/27/02,  10:05:49 AM
Swing Trade Signals
Traders who decided to short the OEX on yesterday's breakdown need to start worrying with the move over 474.00 (474.75).

  John Seckinger   11/27/02,  10:03:39 AM
Durable Goods rose 2.8% vs 1.8% consensus, and Chicago PMI rises to 54.3 vs consensus of 48.5

For the PMI, levels above 50 are considered expansion, while levels below contraction.

  Steven Price   11/27/02,  10:02:41 AM
Steve, Isn't this a good time to roll December options into Jan options on stocks that show promise? At least that's what I do most months with some success. John

Interesting thought on the roll. January options will certainly lose less premium the next few days. One thing you need to watch out for, however, is that in a slow move up in the market, we will see a volatility contraction, which will take more juice out of January premiums. Normally I don't roll until later in the cycle, but with the long weekend ahead (and more holiday days next month), it's a decent strategy.

  John Seckinger   11/27/02,  10:00:14 AM
If the market begins to fall, support is seen at 8750 (top of first five minutes of trading) and 8724 (50% of day's range). One sector not participating in the rally is Utilities, lower by 0.47% at 242. Under 243 is not a good sign, and may spill into stocks. Hard to be bearish from now to Monday, so something to put on the radar screen.

  Steven Price   11/27/02,  9:55:06 AM
Swing Trade Signals
Failure under 473.00 (high of 472.59) has me concerned about the bounce. I don't think shorts need to panic here, but now that we are solidly in the middle of the range between Monday's high and Tuesday's Low, I'm not going to choose direction from this level. As I said earlier, the premium decay is going to be a big factor the next few days and unless there is a clear opportunity to garner 6 points in either direction by the end of the day, I'm going to sit on the sidelines. If we get a slow grind up to the 478.50 area, I would consider a low/risk, high/reward short entry on a failure at that level. However, with the current failure at 473 and more resistance at 474.00, I'm not ready to bet on a slow grind.

  Linda Piazza   11/27/02,  9:53:48 AM
The low $TRINQ Jonathan mentioned (currently .24) is being mirrored in the volume patterns, of course. Everyone seems to want to buy four-lettered stocks so far this morning. Adv/dec on Nasdaq issues is 2.4 and up/down volume is a skewed 160/17. On the NYSE, adv/dec is 2.12, and up/down volume is 81/12.

  Jonathan Levinson   11/27/02,  9:50:09 AM
The fed has added another 7B in 5 day repos, for a net drain today of 2B.

  John Seckinger   11/27/02,  9:49:24 AM
Univ of Michigan sentiment 84.2 vs 85.0 consensus

  Steven Price   11/27/02,  9:44:07 AM
I've been talking about premium decay the last couple of days ad nauseum, however, I'm going to throw out one more reminder. We are essentially looking at 5 days of premium decay from this afternoon through Monday, in exchange for 1 day of trading opportunity. Friday should see little action and if I were long out of the money December options that had shown a profit in a stock that didn't show much movement, I would be thinking about closing out ahead of the holiday. That doesn't mean I would close out in a stock with a nice trend developing, but anything that seems stagnant will seem more so 5 days from now, when we open on Monday and the options are far cheaper. Be very careful with long entries today in OTMs.

  John Seckinger   11/27/02,  9:40:26 AM
Note: Michigan Sentiment is due out at 9:45, while Durable Goods and Chicago PMI is scheduled for 10 a.m. Economists expect the revision to Michigan's sentiment reading to come in at 85 (unchanged), while estimates for October durable goods is for a +1.8% reading. In September, durable goods fell 4.9%. The November Chicago PMI is expected to rise to 48.5 from 45.9, month prior.

  John Seckinger   11/27/02,  9:35:16 AM
Equity bulls should be excited to see the 30-year fail at the 111 level, now currently lower by '22 ticks at 110'07. The intra-day low is 110'03. It will now take a close above 111'04 (higher due to upward trend line) before I start to think of a solid allocation out of stocks and into bonds.

  Jonathan Levinson   11/27/02,  9:33:25 AM
19 point gap up open on the COMPX to 1463, TRINQ .19, QQV down .60. That TRINQ reading is extreme and, if it doesn't reverse shortly, we could have a strong up day on our hands.

  Jonathan Levinson   11/27/02,  9:32:21 AM
There were no 28 day expiries today, so the 5B just added covers part of the 14B in shorter term repos expiring today. We await the next announcement concerning the remaining 9B expiring.

  Steven Price   11/27/02,  9:29:59 AM
With spending up a little more than expected and incomes up a little less, it appears consumers are willing to dip into the saving account, or stretch the plastic a little further, as we get closer to the holidays. Certainly if both numbers had matched or beat expectations, retailers would be pretty pumped, but the spending component should give those stocks a boost, nonetheless. The drop in initial jobless claims should also help the group. The fly in the ointment? That would be the growth in continuing jobless claims, indicating those people out of work are having a tougher time finding a job. This could signal a shift higher in the time lag between jobs and the increase in those claims of 91,000 dwarfs the reduction in first time claims of 11,250.

  Jeff Bailey   11/27/02,  9:29:45 AM
The 9:00 AM Intraday Update has been posted. Link

  Steven Price   11/27/02,  9:19:30 AM
Swing Trade Signals
The Swing Trade model is flat this morning. I do not plan on opening new positions ahead of the holiday and what I expect to be a very slow afternoon. Of course I could still change my mind if I see something that has real momentum behind it. Looks like that profit taking sell-off yesterday was quite a fake out, sucking in the bears before two traditionally up days. After this morning's gap up, we'll see just how much conviction the bulls have as well.

  Jonathan Levinson   11/27/02,  9:19:25 AM
The fed has just announced a 29 day repo in the amount of $5B. I expect further announcements as the morning progresses.

  Jonathan Levinson   11/27/02,  9:15:29 AM
Investors Business daily on its front page has a headline Stock Fund Outflow Unceasing. What was reported was 7.7 billion pulled money out of stock funds. This sounds to me like the retail investor is getting out on any price spikes. My question is then who is really buying this market?

Well, first off, the fed has 14B worth of repos expiring today. As mentioned yesterday, the fed has been cranking out repos to an extent not seen in several months, and perhaps coincidently, the market has been marching higher. I do not have data on mutual fund flows, but have heard the same story that you're reporting here. Frankly, if the fed is jamming the equity markets and taxpayers are selling into it, then I consider it sweet justice that Mr. Greenspan is buying people's stock from them. But, that is my personal opinion.

Other sources of liquidity include bond sales. There's a bounteous debate as to whether bond sales result in equity buys- the counterargument being that sales of treasuries result in buying of corporates. I'm not sure what I think of this, but the argument is there.

There's also foreign buying, such as we saw this week when noise was made about Germany's low business confidence, and speculation of ECB rate cuts in the future.

Lastly, there are funds. Mutual funds can borrow to meet redemptions (does that make them into hedge funds?). As well, as their portfolios shrink in a declining market, the same gross amount of cash reserves represents a larger percentage of the total assets under management, allowing them to buy more equities without violating their net asset allocation. On this topic, I could see as well where hedge funds blowing up or folding could result in covering of short positions to close out their portfolios.

All this is speculation on my part, just throwing out potential sources of liquidity as John and Jane Q. Public retreat from the market. Besides, we all know it's Jeff's and Steven's bullish plays that have been propping up equities and jamming the BPNDX and BPSPX ever higher into nosebleed territory! Well, that and Shelley's put purchases :)

  Jonathan Levinson   11/27/02,  8:59:58 AM
The futures like it, with NDX +15.50, SPX +7.50, and the five year yield up 5.5 bps. The USD Index is trading just north of 106.50.

  Jonathan Levinson   11/27/02,  8:58:43 AM
From Bloomberg.com: "The number of first-time claims decreased by 17,000 to 364,000 in the week that ended Saturday from a revised 381,000 the prior week, the Labor Department said. Last week's decline was the second in a row, and the total was the lowest since 355,000 in the week ended Feb. 17, 2001."


  Steven Price   11/27/02,  3:23:23 AM
The Swing Trade Game Plan has been posted: Link

  Jim Brown   11/27/02,  3:23:01 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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