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  Jeff Bailey   12/2/02,  5:51:56 PM
Forest Labs (FRX) $109.26 +1.79% ... I hope i got the right person, if not pass it along. I currently have 200 shares of FRX.. Was thinking about selling covered calls on it. My target price has been reached and passed on the stock. Do you have any other trading scenarios to apply? You're all opinion is valued.

I had profiled FRX as bullish back in August at $74 on the "bullish triangle pattern" and OI has also profiled calls in this stock. FRX has done rather well Link since. Not sure of trader's cost basis, but if concerned about capital gains into the end of the year and stock position now represents more than 20% of account, one thing a trader/investor can do is sell some in-the-money calls with Jan. 03 expiration or later and perhaps look to push the capital gain into next year. If stock gets called away, then so be it, but assess that possibility just the same. Other alternative is to purchase a protective put, hope it turns into a loss as many FRX putters have found out and eventually use that put loss to offset gains in stock.

One thing I would suggest is that you look to pay yourself for the risk taken upon entry and at least move up a stop on the stock to your original bullish target (if no option positions are taken). When profiled here, longer-term target was $96 from the bullish vertical count.

  Jim Brown   12/2/02,  4:10:56 PM
We did not get back to positive on the Dow but the trend remains intact. Tomorrow will start with the profit taking already out of the way but with resistance just above at 8900, 940, 480. If we can break those levels we could see buyers come back into the market. Support is now 8800, 1475, 928, 474. Not much room to maneuver on the downside before getting into trouble but plenty of room overhead. Should be interesting.

  John Seckinger   12/2/02,  4:00:52 PM
Note: There are no economic reports on the docket for tomorrow, but Q3 productivity is due out on Wednesday with the ISM Services report and October Factory Orders scheduled as well. Economists are looking for a 4.5% rise in productivity (revised figure) from 4.0%, month prior (8:30 a.m.). ISM Services is expected to increase to 54 from 53.1, while factory orders are expected to have risen 1.7% from a 2.3% contraction in September (10 a.m.).

  Jeff Bailey   12/2/02,  3:51:59 PM
The 3:15 PM Intraday Update has been posted. Link

  Jim Brown   12/2/02,  3:49:12 PM
Swing Trade Signals
The A/D line is positive again and the Dow is on track for a slim chance of a positive close despite the news that West Virginia will join Massachusetts as the only two states to contest the justice dept settlement.

  John Seckinger   12/2/02,  3:38:10 PM
There are a few things I am looking at. Both can be addressed with a simple illustration of the Dow. Once is a bullish trend line that remains intact, and the other is the possibility of a bull trap above the 200 DMA (exp) at 8945. Note: The 50% retracment of the March to October move is at 8935. Note: The simple 200 DMA remains above, as well as a bearish trend line that begins in March and bisects through the highs in May. The bullish trend line (blue) currently comes in at 8790 and was not tested today. The red descending trend line is seen at 9450. Link

  Jim Brown   12/2/02,  3:21:55 PM
Swing Trade Signals
All the sub-atomic charts (very small intervals) are starting to show green and the Dow, SPX and OEX have now all exceeded the suggested stops I gave earlier. With the bounce off Dow 8800 and the reversal in the internals I think we got confirmation on my suggestion to go long. I would add to any long positions with a break over 8910, SPX 941, OEX 481. I specifically hedged those numbers a little to the upside to make sure we don't get touched at resistance of 8900, 940, 480 only to fail again.

  Jim Brown   12/2/02,  3:14:11 PM
Swing Trade Signals
The Dow penetrated the suggest stop at 8830 by four points but the SPX/OEX did not reach the 933/476 levels. If you are still short the internals are turning back into your favor. Look for Dow 8800 as the decision point once again.

  Linda Piazza   12/2/02,  3:10:19 PM
Reader Question: We always enjoy your MM comments and detailed analysis regard stock and market, could you give us your opinion on IBM 87.45 + .53 (.61%)we are short on the stock, seems there are gaps to fill in the 84 range, where do see targets on PnF? Appreciate your comments on MM.

Response: IBM, currently 86.35. Before answering your question about P&F targets, I first want to say that while I always check P&F charts before initiating a trade, I'm no guru on this subject. For more sage advice, you might want to check with Jeff. However, a quick check of the P&F charts show that IBM is actually on a buy signal. If my quick calculations are correct, the original target for that buy signal was 95, and IBM has since signaled an ascending triple top breakout. However, some stocks or indices typically achieve their bullish or bearish targets and some don't. I haven't followed IBM on P&F charts and so don't know if it's one of the stocks that typically does meet its targets.

As far as P&F targets go, then, you're swimming against the tide with a short position. However, despite that buy signal, I can see one reason you might have instituted a short trade. (5)(3) and (21)(3) daily and (5)(3) weekly stochastics show bearish divergence, with price reaching new highs but these oscillators not doing so. The (5)(3) daily stochastic is already rolling. If IBM's price action follows these indicators down, I see support at the 10-week MA at 84.10 and from an ascending trendline that lies in that area, at the gap in the 82 area and the 22-dma at 81.78, near 80 from various MA's and also the psychological support from that round number, and then again at 78.

When looking at the various MA's, be aware that on the daily chart, there's been a bullish cross of the 22-dma over the 50-dma, and on weekly charts, there's been a bullish cross of the 10-dma over the 30-dma, a supposed sign of a change in trend. However, those MA's have been flattening of late. Also, a look at on-balance volume and accumulation patterns show that IBM has been accumulated of late, although those lines also appear to be flattening.

Jeff has also been reporting on bullish percent charts that show some risks to bulls in the markets these days. IBM appears ready for a pullback, based on what the stochastics are showing and what instinct says, but those stochastics or instincts haven't been the best predictor of price action lately, so establish sound stops or hedging procedures according to your own account management procedures as you follow this trade.

One further note. CNBC reported this afternoon that a suspicious package had been received in IBM's mailroom and that two employees had been taken to a nearby hospital after being overcome.

  Kent Barton   12/2/02,  2:59:42 PM
Per Jeff's 14:29 comments about the SOX.X...It's probably not a coincidence that the index is starting to run out of steam at these lofty levels. After a 77% gain from the October lows, some profit-taking could be expected. That "overbought" bullish percent provides technical evidence that the risk/reward potential for the sector is becoming increasingly skewed in the bears' favor. Solid resistance in the 400 area (just below the descending 200-dma at 407) will be a formidable challenge unless we see some consolidation of the recent gains.

By the way, check out that failed rally at the 200-dma in INTC today. Looks like a short-term top, doesn't it? The bulls better watch out if the company's Thursday afternoon mid-quarter update doesn't go smoothly.

  Jim Brown   12/2/02,  2:58:56 PM
Swing Trade Signals
Just after I made that last post the internals changed with the A/D line improving and advancing volume increasing. It appears the Dow 8800 level attracted some buyers. Obviously not enough to overcome the sellers yet but enough to make me wonder if the post 3:PM trend is going to be up. If it is I would get ready to go long if stopped out.

  Jeff Bailey   12/2/02,  2:52:57 PM
Impax Laboratories (IPXL) $5.18 +6.36% ... announced that it received FDA acceptance of IPXL's ANDA (Abbreviated New Drug Application) for a generic version of Tricor 160-milligram tablets. The company said the FDA's acceptance of the ANDA means the agency has made a determination that the application is sufficiently complete and ready for final review. IPXL had 2001 sales of $6.9 million and said that it believes it is on track to reach the high end of its goal of 6 to 8 new product filings in 2002. IPXL currently has 19 ANDAs pending at the FDA, four of which have received tentative approval from the FDA.

IPXL's p/f chart recently gave a double-top buy signal at $5.50 after also giving a "low pole warning" reversal. I like a longer-term play in the May $5 calls (UPREA) $1.20/$1.45. No stop on the calls as risk is to $4.00 while favorable reward profile longer-term with bullish count of $12.75. Link

  Jim Brown   12/2/02,  2:38:45 PM
Swing Trade Signals
The A/D line is accelerating to the downside and the declining volume is picking up speed as well. The TRIN is climbing and now over 1.15. With 80 minutes left in the trading day we are setting up for a big move after the 3:PM turn. There are no indications yet which direction it may take but the internals are showing further weakness. This can all reverse in an instant if we hit some level the program traders think is significant.

  Jonathan Levinson   12/2/02,  2:34:15 PM
I'm wiping my glasses in disbelief as the TRINQ reaches neutral bullish territory at .91. It seems like forever that this indicator made it out of extreme bullish territory below .50. The TICK.NQ is bearish at -271, and the QQV is creeping up, currently +.91 to 44.69. I think that the greatest danger for bulls at this point is that most bears have been bludgeoned by the relentless nature of the rally, and will be slow to emerge from their caves. This creates a downside risk because the main buyers on a major slide are bears covering their shorts. But, this will remain to be seen. As Jim pointed out, we're still in "pullback" territory within an uptrend.

  Jeff Bailey   12/2/02,  2:29:06 PM
Tech sectors in the red ... just runing red are Biotech (BTK.X) 368 -0.14%, Software (GSO.X) 116 -0.34% and Semiconductor (SOX.X) 327 -0.17%.

Of these three, Semiconductor is perhaps most "overbought" as sector bullish % from Dorsey/Wright & Assoc. (BPSEMI) is "bull confirmed" at 74%.

Biotech (BPBIOM) is also "bull confirmed" but at 44%, while Software is "bull confirmed" at 48%.

Equity bulls looking for tech exposure most likely wants to be looking in biotech or software at this point, looking for stocks coming out of larger bases of consolidation with some good bullish vertical counts and offering tighter stops. Looking perhaps for some rotation out of semiconductor in more overbought state.

  Jim Brown   12/2/02,  2:26:25 PM
Swing Trade Signals
Now that the Compx has broken into negative territory I would set my stops on any short positions at Dow 8830, SPX 933, OEX 476. We could be heading lower but let's not give back anything we gained this morning. I would look to go long if those stops are hit with any follow through.

  John Seckinger   12/2/02,  2:15:40 PM
The Nasdaq is now only a few points from unchanged, while the Dow is off 86 points at 8809. With the Dow dragging the Nasdaq lower, there is a chance the Compx will control the selling. Least resistance is still lower for today's session, but something to watch for; especially with the bond market closing in less than an hour. Speaking of the bond market, the 30-year is basically unchanged after a strong sell-off and significant rebound already today. Currently at 109'05, a move above 109'16 should be bearish for stocks, while a close under 108'16 would have bullish implications.

  Jim Brown   12/2/02,  2:12:55 PM
Swing Trade Signals
The Dow, SPX and OEX are struggling at the pivot numbers I listed earlier of 8825, 930, 475. The Compx is stubbornly refusing to give up its hold on positive territory. If you are still short from that big spike this morning I would consider lowering your stop losses to get out for a nice profit on a rebound from here. This is critical support and a likely bounce point as I indicated earlier. Of course if it fails it would also be very negative and we could see another -100 point Dow drop before we reach strong support at 8700. We have had a good move and it may be time to start thinking about being long again.

  Kent Barton   12/2/02,  2:04:28 PM
Anheuser Busch (BUD), $48.00 -1.12: BUD looks like a decent short if the market continues to drift lower. Shares have sold off from the converging 50, 100, and 200-day moving averages near $51 and are teetering just above the relative low of $47.95. If this level gives way the bears will be looking for BUD to retest its 52-week lows near $44. Interestingly, the p-n-f chart shows that the stock is also sitting right on bullish support: Link

  Jonathan Levinson   12/2/02,  2:00:20 PM
The COMPX is drawing a bearish ascending wedge, more pronounced on the 60 minute chart but squintable on the daily candles as well. If so, then December 5th "turn date" that many wavers have been excited about should mark the outer reaches of this move, assuming that it will break down. By memory, Bulkowski has the ascending wedge breakdown scenario as 75% reliable. Not perfect, but certainly decent odds of playing out.

The best I've been able to do on my XAU / HUI question is that the big boys, the institutions, tend to be more familiar with ABX, PDG and AU than with the smaller, unhedged miners. And if they're hedging with gold, that's where they'd be running first. We'll see, but XAU remains in the lead, well above HUI which is not only red, but down 1.62 on the day.

  Jeff Bailey   12/2/02,  1:53:20 PM
The 1:00 PM Intraday Update has been posted. Link

  Linda Piazza   12/2/02,  1:49:10 PM
As the COMPX moves below that simple 200-dma average in the 1493 area, the hourly stochastics are now in the process of redrawing themselves, and now reflect the heaviness that has been present in the markets since mid-morning. Funny how that happens! Watch the exponential 200-dma at 1485.75, too.

  John Seckinger   12/2/02,  1:38:41 PM
Well, it looks like the bulls finally capitulated. It was interesting how there was an 8901 print before this last wave lower began. One sector leading the way lower is the Utilities, falling by 1.5% to 242 and is now barely underneath its 50 DMA. Weakness under 240 for the UTY index should get more shorts involved in equities in general.

  Linda Piazza   12/2/02,  1:34:30 PM
I'm still looking for clues as to the direction for the afternoon, and not finding much that's definitive. On hourly stochastics, the fast lines and slow lines point different directions, with the hourly stochastics on the $COMPX looking about as inconclusive as it's possible for them to look. Adv/dec figures are still positive (1.33 on NYSE issues and 1.13 on Nasdaq issues) and up/down volume is also still positive, although the 927/270 (3.4:1) ratio on the Nasdaq is far below this morning's more than 10:1 ratio.

  Kent Barton   12/2/02,  1:23:14 PM
Procter & Gamble (PG), $82.90 -1.63 This PremierInvestor short play is one of the uglier-looking Dow components. Shares have fallen to multi-month lows and are retracing the steep gains from late July. The daily chart doesn't show any clear levels of support until the $74-$75 area. A glance at the p-n-f chart doesn't give shareholders much to be happy about either; PG recently broke through bullish support! Traders can target new entries on another rollover from the $84.00 area.

  Jonathan Levinson   12/2/02,  1:13:07 PM
The COMPX has been drifting slowly higher off its intraday lows, with little conviction in either direction other than sideways. The TRINQ remains awfully low for such a slow rise, currently at .32, and the QQV is up to 44, +1.42 on the day. The five year yield is well off its lows, up 8.6 bps, and precious metals are lower, with HUI down 1.60 and XAU down a mere .06. I won't continue to rattle about the XAU/HUI divergence, but if any of you have an opinion, I'd love to hear it. The HUI has been outperforming the XAU all year, as the HUI is comprised of "unhedged" gold miners, while the XAU is overweighted with ABX, AU and PDG, all major hedgers of the metal. Is it because gold is entering a bear market? Is it because the unhedged miners are being shorted aggressively by investment banks, as was done all summer? Your guess is as good as mine, though I remain bullish on gold.

  John Seckinger   12/2/02,  12:47:09 PM
Well, Mr. Bailey just gave me an advanced lesson on P&F charting. I certainly do not mind expanding my tool belt. Speaking of expanding, the Dow has done everything but. It looks like we may have a break above 8900, but will that be a time when longs get trapped? This is definitely the time to start paying attention.

  OI Staff   12/2/02,  12:18:33 PM
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  Linda Piazza   12/2/02,  12:13:50 PM
I've been monitoring both exponential and simple 200-dma's this morning, and both seem to be coming into play at times. According to Stockcharts.com, the exponential 200-dma for the COMPX ($COMPQ on these charts) is 1485.75, and 1485.83 was the low of the day, so far. Yet, a lot of the price action today has oscillated around 1493.25, the simple 200-dma. Much of the Q's price action has oscillated around the exponential 200-dma at 28.09 (rather than around the simple 200-dma, as with the $COMPX), while today's low of 27.85 was near the simple 200-dma of 27.87 (rather than the exponential 200-dma, as with the $COMPX). Perhaps on pivotal days such as this one, it's important to watch both the exponential and simple dma's.

  Jonathan Levinson   12/2/02,  11:57:13 AM
From Bloomberg.com: UAL Corp.'s United Airlines reached a new agreement with leaders of the union representing the carrier's mechanics and won't seek bankruptcy protection today


  Jonathan Levinson   12/2/02,  11:52:49 AM
The US Dollar Index chart took a swan dive after the ISM data, reversing all of the morning's spectacular gains and is now trading just above 106.60. This chart formation is know colloquially as "The Finger" for obvious reasons, but I doubt if you'll find it in Bulkowski's text.


  John Seckinger   12/2/02,  11:47:34 AM
Per 11:09:08 Post, there certainly is a nice battle at 8900. The 200 PMA (five minute chart) is below at 8881, and has been holding the last few downdrafts. It should not be long before one camp decides to temporarily capitulate.

  Jeff Bailey   12/2/02,  11:45:53 AM
The 11:00 AM Intraday Update has been posted. Link

  Jim Brown   12/2/02,  11:14:19 AM
Swing Trade Signals
Those currently short and those wanting to be long should be watching Compx 1470, Dow 8825, SPX 930, OEX 475 as potential bounce points for the current drop. This represents the pivot levels for the major indexes. Below those numbers represents a trend change, not just profit taking. A bounce from those levels, actually the odds are good for a bounce just above them, would maintain the current bullish trend and could attract new buyers. With the four major tech meetings this week those buyers may not appear in any strength.

  Jonathan Levinson   12/2/02,  11:10:01 AM
As the XAU goes positive (again leading the HUI, a rare occurrence), yields continue to slide, and the COMPX prints a blowoff doji on a shocking whipsaw, I can only propose an extended golf clap on this morning's action, which I find to be nothing short of amazing.

  John Seckinger   12/2/02,  11:09:08 AM
It actually seems like a rational sell-off. A pause under 9000, and then a nice test at the opening level of 8900 (in order to decide if this will be a range day). Shorts should now defend near 8900 going forward. It is hard to state a bullish case; therefore, look for long liquidation to pick up if the market can stay below 8900. It is somewhat surprising that the bond market is near unchanged, only because the Nasdaq is still positive. Speaking of the Nasdaq, this index is at 1487 and exactly on its 200 DMA (exp). The Simple 200 DMA is at 1493.

  Jim Brown   12/2/02,  11:08:41 AM
Swing Trade Signals
The levels are ticking off just like falling dominos and the last support level left is the Compx closing low from Friday at 1478. If that level fails then we could see the tech selling increase and the already falling A/D line at +309 issues turn negative. Not a bad day for shorts so far!

  Jim Brown   12/2/02,  11:00:58 AM
Swing Trade Signals
I would hope everyone wanting to be short would be at full strength now that the Compx is under 1500 and the Dow is flirting with negative territory. If we get that last break below Dow 8885 the rest of the broader market indexes should follow the Dow into negative territory. The S&P futures are trending steadily downward but the NDX futures are clinging to 1130. There is definitely selling pressure but the buyers are fighting a strong battle around the Dow 8900 level. Look for 8885 as the possible last straw.

  Jonathan Levinson   12/2/02,  10:56:09 AM
Latest put to call reading came in at .56. Mr. Bull's tenacity is impressive- great news for bears.

  Jim Brown   12/2/02,  10:50:58 AM
We broke the closing low from Friday by one point and some buyers appeared. Not many but enough to stop the vertical drop from 10:15. The A/D line has dropped from +2716 to only +849 positive issues and the advancing volume has turned down. The still negative ISM numbers may have put a serious dent in the new bulls forehead as it ran headlong into the reality that a recovery has not yet begun in the manufacturing sector.

  John Seckinger   12/2/02,  10:42:05 AM
Apparently, Merrill Lynch is telling its customers to take some profits in the corporate bond market and put the cash into Treasuries. The ISM number certainly seemed to be the catalyst for lower stocks and higher bond prices (as well as Dow near 9077, etc.), but this report could give the recent move another leg.

  Jim Brown   12/2/02,  10:39:19 AM
Swing Trade Signals
The sell off is continuing and we are approaching the Nasdaq Compx 1500 level and a break below that level would be a good time to add to short positions again. The Dow is in danger of going negative and the internals are getting weaker. Once the Compx breaks 1500 we could accelerate to the downside.

  Jim Brown   12/2/02,  10:35:05 AM
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  Jonathan Levinson   12/2/02,  10:32:37 AM
The opening put to call ratio, delayed today, just came out at .51. This is a bearish reading showing way too many bulls piled into one side of the rowboat. Looks like we're getting our pullback right now. TRINQ rising, now .24.

  Jonathan Levinson   12/2/02,  10:28:33 AM
The charts are bit of a mess with all the gaps from last week's various partial session and closed sessions. QQQ volatilty (QQV) has dropped considerably from its opening high, and is now up .46 on the day. The TRINQ didn't hit zero, but .12 is plenty low, current reading of .18. The TICK.NQ is bearish at -283. Precious metals are off their lows, and yields are way off their highs, with FVX +4.4 bps.

  Jim Brown   12/2/02,  10:26:48 AM
Swing Trade Signals
If you are thinking about adding to short positions it appears the second bounce off the ISM number is failing and everything is trending down. A break below the Nasdaq Compx low for the day at 1508 would have me adding to current short positions. The A/D line is weakening and the TICK is trending lower.

  Linda Piazza   12/2/02,  10:22:48 AM
Now that we've seen the ISM numbers, it's time for a check of volume patterns. Adv/dec numbers are strongly positive, at 2.30 for NYSE issues and 2.03 for Nasdaq issues. New highs powered over new lows on both NYSE and Nasdaq. Up/down volume patterns show strength, too, with the ratio being 254/50 for NYSE and 411/38 (more than a 10:1 ratio) for the Nasdaq. I'd say that the imbalance on the Nasdaq numbers calls for some caution when entering long positions, except that the markets don't seem to be paying attention to these contrarian observations lately.

  John Seckinger   12/2/02,  10:18:20 AM
Looking at the Dow, 8972 is 50% of today's range, while the 200 DMA (exp.) is lower at 8947. The pullback took us to 8961 in the Dow. Currently at 8986 and above the 50% and 200 DMA, it appears that we now have a range (8961 to 9043) that can be used to really gauge sentiment going forward.

  Jim Brown   12/2/02,  10:15:23 AM
The TRIN hit 0.00 on Qcharts this morning at 10:00. While this would be EXTREMELY bearish I did not believe it. I checked on Interquote and they are showing the TRIN at .52 with the low of the day at .28. I have no way of verifying either number but I would strongly doubt the 0.00 low on Qcharts, currently 0.19. A low at zero would trigger a flood of sell programs and while we saw a dip on the ISM numbers we did not see a massive sell off. I suspect a data feed problem instead.

  Jeff Bailey   12/2/02,  10:12:14 AM
VerticalNet (VERT) $1.83 +24.48% Link the number two gainer in this morning's market (no news so thinking some short-covering). Using rolled up retracement from $0.13-$3.11, good "fit" with 38.2% at $1.27, 50% at $1.62, 61.8% at $1.97 (traded $2.20 morning high) and gives AGGRESSIVE bulls targets at 80.9% of $2.54 and 100% at $3.11 as potential market maker levels.

  Linda Piazza   12/2/02,  10:11:39 AM
KO Update: Several weeks ago, I entered a put play on KO just after the company's earnings announcement, when KO dipped below 47.50. While KO has remained in a down-trending channel and has several times dipped below important support at 45.00, it stubbornly refuses to break further support at 43.50. I've been following this trade from time to time for instructional reasons only, for those readers who might be new to technical analysis. On Friday, KO completed an inside day. For those looking at candlesticks, this means that Friday's candle was entirely inside the boundaries of Wednesday's candle. Technical traders sometimes trade inside days by shorting or buying puts when a stock moves below the low printed on the inside day (45.52 on Friday) or by buying stock or calls if it moves above the high of that day (46.15 on Friday). Although KO moved briefly above 46.15, printing a high of 46.18, no intraday candles closed above that level and it held only momentarily. These two levels are made more important by the fact that the 22-dma lies at 45.61, so a move below 45.52 keeps KO below the 22-dma, the 50-dma, and the 200-dma. A move above 46.25 also puts KO at the upper limit of the descending channel, so an upside break is important technically, too. I'm not recommending a trade on either of these numbers, however, since a downward break of the inside day would soon face strong support at 45, 44.21, and 43.50. An upside break of the inside day would soon face resistance at 46.75, 47, and 47.50. I wouldn't consider a new put position in KO unless it breaks the 43.50 support or a new call position unless it breaks 47.50 resistance.

  Jonathan Levinson   12/2/02,  10:07:58 AM
The fed has added 6.75B in overnight repos, for a net drain of 250M. The markets are on their own.

  Jeff Bailey   12/2/02,  10:07:05 AM
Sector Action rather bullish with all but Gold/Silver (XAU.X) 62.46 -1.45% and Forest/Paper (FPP.X) 299 -1.1% in the green. Oil (OIX.X) -0.02% and Utility (UTY.X) -0.10% near unchanged.

Sector gainers have Internet (INX.X) +6.9%, Networking (NWX.X) +6.25%, Wireless (YLS.X) +7.13%.

  John Seckinger   12/2/02,  10:05:31 AM
The ISM index for November was reported at 49.2 vs the consensus of 51.0.

  Jeff Bailey   12/2/02,  10:03:09 AM
Retail HOLDRS (AMEX:RTH) $79.35 +4.14% Link ... strong gains out of the gate on this morning's Wal-Mart (WMT) $56.55 +4.89% Link news. Have upside alert set on WMT at $57 and stock looks bullish with a trade at $57 (session high has been $56.74).

With WMT the mid-section of my retail "snake/inchworm", the "head" in Kohls (KSS) $71.40 +4.23% on the move higher still Link and showing the leadership a sector bull likes.

The "tail" in Home Depot (HD) $27.45 +4.09% trying to get a foothold from $25 and 3-box reversal up this morning is good sign for sector bulls. Link

  Jim Brown   12/2/02,  10:02:28 AM
Swing Trade Signals
While Steve is not going to be recommending Swing Trades today I would suggest those looking for an entry point to consider a short position if the Dow drops back below 9000. So far there has not been any real follow through on the gap open. If we do get that follow through then the SPX resistance at 963 and the Dow resistance at 9077 would be the next critical levels and possible failure points. I would consider a partial position with a failure of those higher levels.

  OI Staff   12/2/02,  10:00:10 AM
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  John Seckinger   12/2/02,  9:58:52 AM
Because of the strong Chicago PMI report, ISM estimates have been revised upward. In November, economists expect a 51 number versus 48.5, prior month. I believe the market is pricing in a 52 reading. Also in a few minutes, October Construction Spending is due out and the consensus estimates is for an unchanged reading versus a 0.6% increase in September. This should take a back seat to the ISM report.

  Jonathan Levinson   12/2/02,  9:55:27 AM
Gold, HUI and XAU are all getting slammed as the US Dollar appreciates on news of weakness in the Yen. HUI is down 2.09 to 113.84, XAU down 1.18 to 62.20 and Gold is now test the 315 support level.

  Jim Brown   12/2/02,  9:54:03 AM
A reader just emailed me that Arch Crawford has recommend a full short position at this level with a stop at Dow 9300.

  Jonathan Levinson   12/2/02,  9:53:33 AM
7B in fed repos are expiring today. No announcement as yet on today's open market ops, but I'm all over it and will keep you posted.

  Jonathan Levinson   12/2/02,  9:52:07 AM
For those of you interested in intermarket relationships, money supply, gold and the fed, I urge you to read the following speech by new fed governor Ben S. Bernanke.


  Jeff Bailey   12/2/02,  9:50:33 AM
Johnson & Johnson (JNJ) $55.01 -3.54% ... Stock down on New York Times article that said European regulators considering banning JNJ's Eprex drug due to 160 cases of PRCA. Some analysts saying that the New York Times article goes way beyond "speculation" and would need much more information to believe drug would be band.

Today's trade at $55 does have JNJ's p/f chart generating a double-bottom sell signal. Stock still in upward trend, but sell signal does have bearish vertical count of $48 associated with the stock Link . If long calls from original profile near current level, I'd tend to honor today's sell signal and move to the sidelines, especially if holding December exiration $55's. If long the underlying stock, would suggest a covered call to work down cost basis to profitable level.

I don't know enough about the Eprex drug or what's going on here. Next level of technical support for JNJ is the bullish support trend at $53.

  Jim Brown   12/2/02,  9:48:32 AM
I would be very inclined to shorting this open if the Dow falls back below 9000 and adding to positions if the Nasdaq Compx falls back below 1500. The possibility of caution ahead of the four analysts meetings I previously mentioned is pretty strong. We got a nice opening bounce and it will be interesting to see if it will stick. The TRIN fell to a very bearish 0.16 at the open indicating nearly all the volume was advancing. When everyone stands on the same side of the boat you know what happens.

  Linda Piazza   12/2/02,  9:46:15 AM
To J.K. who wrote asking for the IRS site on wash sales, your server rejected my reply as undeliverable. Here's the site: Link

  John Seckinger   12/2/02,  9:36:17 AM
Jonathan touched on bonds, Jim mentioned 9077 in the Dow, Jeff talked about Intel and Wal-Mart, and Linda reminded us of the ISM report due out at 10 a.m. Staying with the bond market, the 30-year is lower by more than one full point (32/32) at 108'03. Moreover, the intra-day low of 107'22 is close to the bottom seen on October 24th at 107'02. Note: The 200 DMA is below at 106'06. Mentioned last week, the objective is underneath 104. If bonds stay under 108'16 (ZB02Z), look for bids to stay focused on stocks. There is a lot of talk of cash yields rising back to the 5.5% level (30-year currently at 5.12%), and this should add to the volatility.

  Jim Brown   12/2/02,  9:35:16 AM
Swing Trade Signals
Steve is traveling back to Denver from Chicago today and will not be making any Swing Trade recommendations today. According to his Game Plan for today he suggested waiting until the Compx and NDX 200 DMA were both broken strongly. Of course that would put the OEX/SPX/Dow just below those levels. With the possibility for conflicting resistance levels keeping a top on the tech bounce I would be careful about long plays after the gap open.

  Jonathan Levinson   12/2/02,  9:33:20 AM
29 point gap up open on the COMPX to 1507, above the 200 dma, QQV +2.38 to 44.96, TRINQ .16, TICK.NQ 185.

  Linda Piazza   12/2/02,  9:26:36 AM
As you're planning early trades this morning, remember that ISM and Construction Spending numbers are due later this morning.

  Jeff Bailey   12/2/02,  9:25:41 AM
The 9:00 AM Intraday Update has been posted. Link

  Jim Brown   12/2/02,  9:23:22 AM
The financial news has powered the futures to a strong opening indication that will power the NDX well over resistance at the 200 DMA of 1121. The Nasdaq Compx is likely to test 1500 again. The Dow futures are showing a bounce to 9000 which may be psychological resistance but it is just below real technical resistance at 9077.

The transportation sector is getting a boost from the UAL news and the tech sector is rebounding on several favorable news items.

The markets are poised to open strongly with the Dow and Compx hitting strong resistance. However, there are 4 big tech analyst meetings this week from CSCO, HPQ, AOL and INTC. These meetings could fuel the rally over resistance or stop it cold if reality is different from the current mildly bullish outlook. Be careful buying this gap open.

  Jonathan Levinson   12/2/02,  8:58:47 AM
Bonds are being sold hugely 18 minutes after the open, with FVX +11.7 bps, TNX +10.7, and TYX +8.9. While we await the open, an interesting question to ponder is the future of gold. As Mr. Greenspan has said, deflation will be aggressively fought and rate cuts are not the only tool. As talk of an ECB rate cut circulates, a devaluation of the Yen, we begin to see a race to devalue currencies relative to the US Dollar. Is that Mr. Greenspan's strategy? Certainly the pace of fed repos has quickened dramatically of late. Will the US print more dollars as well? It seems that if paper money will be devalued, it must be devalued relative to something. If you knew that a huge supply of Yen would be offered next week, what would you do today? Offer yours first, ahead of the impending supply. Well, how does one do that? Today, they're buying US Dollars. But what if US Dollars will be offered too, this time by the US central bank? Eventually, I'd think that if "paper" is multiplying on a global scale, commodities will cost more of that paper. I would expect this charge to be led by gold. Technically, however, gold is coiling into a wedge, and it's in the middle of this year's endless $295-$330 range. It hasn't rallied yet, despite all of the inflation-speak from the fed over the past weeks. So, for now, it's an intellectual puzzle. But gold remains on the watchlist.

  Jonathan Levinson   12/2/02,  8:38:17 AM
A story out of the Japanese media quotes Japanese Finance Minister Masajuro Shiokawa as saying the Yen should weaken as much as 23 percent. Guess what happens to the US Dollar Index? The 15 minute chart shows a bottle-rocket formation, bringing the USD to its current 107.20. The futures launched at the same time, with NDX +23 and SPX +11.50. Gold in US Dollars got hit and is currently below 317/oz. QQQ is trading 28.38 on Island ECN, from Friday's clos at 27.72.

  John Seckinger   12/1/02,  9:54:35 PM
The Futures Trader Wrap has been posted: Link

  Jim Brown   12/1/02,  9:54:09 PM
The Swing Trade Game Plan has been posted: Link

  Jim Brown   12/1/02,  9:53:40 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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