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  Jeff Bailey   12/6/02,  6:40:30 PM
A great group of subscriber I've said before, that OptionInvestor.com, as well as premierinvestor.net, has a fantastic base of subscribers and many have a wonderful sense of "humor."

The "market" as we know it contains a very diverse group of individuals with all having one goal in mind. To make money! With that said, for every buyer there has to be a seller. Otherwise, there is NO market. Value perceived by one (buyer), is value not observed by another (seller). Have you ever wondered, if even for a second, who was on the other side of the trade in the stock or option you just bought/sold and what that trader could possibly have in mind when taking the other side of the trade? Is it something fundamental, or something technical that has them thinking differently.

Here's a note from a subscriber and fellow LEAPS and swing-trade (holds more than a week or two) options trader that can't watch the market every hour or every day. He has a secret weapon for those option trades that are "just too close to call." Jeff: Thanks for introducing me to point and figure charting. I've been trading for years using standard bars and candlesticks and trend lines, etc. Although I've known of P&F, I've never known the value or how to use the charts. This is very enlightening and I intend to put it to good use.

Thank you so much for taking time to e-mail be back. Hope I run across you someday 'out on the road'.

Picture was edited to protect the identity of this well known entertainer/option trader on the eastern seaboard. Note the rather alert posture of the trader, always on the lookout for opportunity.Link

Well... have a great weekend. I will be "on the road" Monday. Look forward to some well rounded and insightful observations/thought from Linda, Mark Phillips, Steve Price and Kent in the intra-day commentary, while Jonathan updates index traders later in the evening.

  Jim Brown   12/6/02,  6:20:10 PM
Dow Jones is reporting that a U.S. Navy ship collided with an Iranian ship in the gulf. The U.S. said the collision was minor with no injuries. That is a big sea and warships just don't "collide" so there is probably more to the story than we are being told.

  Linda Piazza   12/6/02,  4:09:38 PM
Reader Comment: Has the uptrend from the October lows been broken? It would seem from a daily/weekly perspective the INDU and COMPX have already rolled over. However, the "end of the year" phenomenon has me quite skeptical that the rally is over.

Response: My overall view is that we'll get at least a normal and to-be-expected 38.2% to 50% retracement of the rally, and that it has either already begun or will after a retest of the broken trendline. (Since (5)(3)daily stochastics are in oversold territory, I wouldn't be surprised to see markets move up and retest that broken trendline early next week before falling back again.) With weekly and daily charts showing bearish divergence and with weekly candles showing engulfing candles, I don't believe at this moment that those August highs will be exceeded in the SPX before a retracement of the rally.

  Jeff Bailey   12/6/02,  4:02:32 PM
Short-term trader thoughts Tough to hold December expiration over the weekend. 60-minute chart of the Dow for example as Dow 8,640, showing support at 200-pd SMA of 8,600, while 21-pd SMA served resistance on Wednesday rally, serving resistance today at 8,680 and currently at 8,660. With 50-pd SMA on the 60-minute time at 8,642, a move above the 21-pd SMA has 8,760 in play short-term.

  Jeff Bailey   12/6/02,  3:59:46 PM
The 3:15 PM Intraday Update has been posted. Link

  John Seckinger   12/6/02,  3:39:10 PM
Interesting session. Bonds and the XAU failed at resistance, the Nasdaq couldn't get above 1430, and the Dow will end up losing roughly 300 points for the week. Moreover, the Sox is looking to have its worst week since the third week in July. Keeping things in perspective, the Dow has rallied from 7200 to 9000 in less than two months. It all comes down to least resistance. The Dow has set five consecutive lower lows and four consecutive lower highs and the blue chips seem to like to trade in waves on a weekly chart (Since July, the Dow spent 5 weeks with net gains, then six with net losses, then eight with net gains, and now one with a loss. Will it really end at one?).

  Jim Brown   12/6/02,  3:29:40 PM
IBM continuing the drop from yesterday. The news of the RATL buyout this morning knocked about $1 this morning and the stock tried to rally but is selling off as the afternoon progresses. This stock should be showing the implied bullishness with the large services and consulting base but the bleeding is continuing. Probably the normal "will they warn" thoughts going through traders heads. I have been negative on IBM in past quarters but I am neutral today. If we are seeing any signs of an approaching recovery then IBM should benefit. If so, why are they weak?

  Jonathan Levinson   12/6/02,  3:16:15 PM
Consumer credit just posted its smallest expansion in 16 months, far below analyst expectations. For the full story, click this Link

  Linda Piazza   12/6/02,  3:13:27 PM
It should be interesting this last hour. The COMPX has fallen below this afternoon's breakout point in the 1421 area and the hourly stochastic is in full roll after signalling a bearish divergence, but so far, the COMPX stopped short of falling back into this morning's gap down from yesterday's close. This action is being mirrored in the other indices, too.

  Jonathan Levinson   12/6/02,  3:12:23 PM
I have to agree with Jim, as I sink ever deeper into the semi-coma that seems to be overtaking many traders. The put to call ratio is back up to .89, and the TRINQ is at .70, with the TICK.NQ -135 and FVX down 12.9 basis points. Quite simply, I see no clear play in either direction from here, and I'm not enough of a shooter to want to take a position for the sheer joy of it.

  OI Staff   12/6/02,  3:10:58 PM
Java Monitor Beta Testers The Java Monitor server has been restarted please restart your desktop clients.

  Jim Brown   12/6/02,  3:04:24 PM
Lots of red candles on individual stocks. Steve and I are reviewing possibles for the weekend newsletter and there are very few that look decent either long or short. The afternoon short covering rally has evaporated as we approach the 3:pm turning point. I have received several emails in total confusion as to market direction. Join the club! We have strong support at 8350-8500 but overhead resistance is also heavy. I would have thought buying the bounce off 8500 this morning would have been good to 8750 but we did not even get close. When in doubt - stay out! The conflicting economic news and beginnings of a recovery in semiconductors has confused investors and when confused the best move is to the sidelines. I think that is what we are seeing this afternoon.

  John Seckinger   12/6/02,  2:55:14 PM
Looking at a weekly chart of the Diamonds (DIA) via candlestick analysis, there is a bearish engulfing pattern that actually would have "engulfed" the last three weeks IF the contract stayed at today's low of 85.10. Currently at 86.66 and easily engulfing last week (88.18), a close below 86.50 would engulf the week prior as well.

  Steven Price   12/6/02,  2:37:21 PM
Swing Trade Signals
The Nasdaq Composite is hovering around that August high of 1426 (just ticked up to 1429), but it will be pivotal to see if it fails that level. If it dies, I'd be careful with long plays at this level.

  Jeff Bailey   12/6/02,  2:31:25 PM
Per 01:00 Update .... here's what I am looking at as it relates to mentioning of Gold. Here's the $1 box of the XAU.X Link where I've also set the bollinger setting at 50-day bads to reflect 2 Std. Deviations from 50-day. We can see the XAU.X has had trouble trading $72 or higher in recent months and at upper end of range, tough for bulls to go long and pullback to $65 likely.

Then we turn to sector "bellwether" and Newmont (NEM) Link . NOTE!!!! There were bad ticks today and NEM's high has only been to $25.95 and not enough to trade $27. At $26.55, a gold bug is much more inclined to WAIT for the stock to prove a $27 trade and try to also get some confirmation from the sector.

With the sector bullish % still "bear confirmed" at Dorsey/Wright, most likely find some bears doing some low risk shorts here, stop just above $27 in NEM and looking to scalp some type of pullback to $24.50 is my thinking.

  Kent Barton   12/6/02,  2:13:17 PM
Gateway Inc (GTW) $3.74 +0.32: Shares of the PC company were beaten down yesterday after CEO Ted Waitt warned that their fourth-quarter earnings and revenue results might miss previous estimates. The stock is bouncing back nicely today, amid rumors that Gateway may be a takeover target. Some are saying that the company could actually be taken private. Jeff and I were just doing a little speculating of our own on who might want GTW, and we came to the conclusion that Wal-Mart might be another potential suitor.

Traders may recall that WMT recently announced plans to offer its own line of personal computers. Simply taking an estabished company like Gateway and selling them at Wal-Mart stores seems a lot easier than starting a PC division from scratch. Plus, the Gateway brand name would bring more credibility to the product. Consumers don't usually associate Wally Mart with high-end electronics such as PC's...That's more the realm of your Circuit City's and Best Buys.

Of course this is total speculation...but if WMT buys out GTW, you heard it here first!

  John Seckinger   12/6/02,  2:12:02 PM
The Dow is roughly 170 points above its lows of the session, and a few charts of the 30-year tells the story. Here is the chart from this morning's post when Dow was at 8525: Link Here is a more recent chart of the bond contract: Link

  Jeff Bailey   12/6/02,  2:11:19 PM
The 1:00 PM Intraday Update has been posted. Link

  Steven Price   12/6/02,  2:07:20 PM
One more note on my last post: When I say ATM have higher deltas in the front month, I mean the delta accelerates faster as they go ITM. ATM is generally a 50 delta in the first couple of months and increases slightly as you go further out in time, based on the forward price of the underlying instrument.

  Steven Price   12/6/02,  2:03:01 PM
Hi Guys, I am starting to trade ATM QQQ options for 1-5 day timeframes, and would like to know your recomendation as to expiration month. Steven implying front month, and Jeff implying non-front month.

Should I avoid front-month, despite despite typically better bid-ask spreads or perhaps only use them if I am in the trade for a day or less? thanks -john

If you are trading short-term, 1-5 days, I usually like the fronth month because the deltas are higher in the ATM options, meaning the moves represent the underlying movement more closely. That being said, time decay takes more out of them over the weekend, since 3 days is a higher percentage of the time until expiration.

I believe Jeff is looking longer term, while the swing trades I have been looking at are shorter-term trends.

  Jim Brown   12/6/02,  1:49:01 PM
Bank of Mexico just tightened its monetary policy raising its "short" into the market to 475 million pesos a day, up from 400 million. This move was taken to fight inflation that is threatening to push prices above the government goals.

  Jonathan Levinson   12/6/02,  1:48:00 PM
Next resistance is just below COMPX 1430.

  Jonathan Levinson   12/6/02,  1:46:30 PM
The COMPX is printing new highs, finally above 1422. The TRINQ is at .50, so there's room to the upside, and the put to call ratio is at .86, same conclusion. We'll watch how quickly these fall. I have a feeling that the upside won't be too substantial, but it's just a guess at this point.

  Jim Brown   12/6/02,  1:37:25 PM
The Dow has been in a 20 point range for an hour but the A/D line is "slowly" improving. A/D volume is "slowly" improving as well. We could be setting up for a bout of short covering as we move into the close. The bears have not been able to push it back down and the path of least resistance today appears to be up.

  John Seckinger   12/6/02,  1:33:09 PM
The Dow continues to trade between the 8600 and 8650 area; however, the XAU index (profiled at 12:29:30 with chart) has powered higher and is currently at 70.77 and near the 70.86 intra-day high. Stocks within the sector leading the way include GFI, AEM, HMY, NEM, and AU. Looking elsewhere, the dollar has traded a lot like equities during the last few hours.

  Jim Brown   12/6/02,  1:30:20 PM
INFY - is getting killed today after the company said it was considering letting investors convert their Indian shares into ADR or GDR shares. The report said it could be as much as a $100 million conversion. This would dilute the ADR shares significantly. INFY is the number 2 software services exporter in India. The stock is down -7.30 to 72.90 on the news or nearly -10%. I assume they were trying to do something nice for their stockholders in general but those already holding ADR shares are probably not impressed. There are no options on INFY.

  Linda Piazza   12/6/02,  1:25:14 PM
Poor Treasury Secretary O'Neill, seeing televised reports that his resignation resulted in this morning's bounce. None of the television commentators have mentioned that hourly stochastics were showing that markets were oversold and due for an upturn or that the Dow hit the psychologically important number of 8500 before bouncing. As Jonathan mentioned earlier, it's hard to decipher which development led to the bounce from the lows this morning, but we options traders know to look at all factors. As options traders, we should also be aware that the formerly oversold levels on the stochastics are now approaching levels that indicate overbought markets, although the stochastics haven't yet turned down and may not for the rest of the day. It's just one more factor to watch.

Another is volume patterns. As of a few minutes ago, adv/dec numbers were 1.13 for NYSE issues and .90 for Nasdaq issues. Up/down volume was 320/327 for NYSE shares and 528/344 for Nasdaq shares. These are fairly neutral numbers, but much improved from early this morning. We'll see what happens the rest of the day.

  Jim Brown   12/6/02,  1:14:01 PM
Hey Jim, I played your Editor's Play from a couple of weeks ago by buying that RATL 10 April calls (RAQDB). RATL is UP 25% today on the IBM buyout, yet these calls are DOWN 50%!!!! How is that possible???

The IBM buyout at $10.50 puts a cap on the potential upside and removes any time premium. (expectation) All the news is in and the stock is not going any higher. It is unfortunate but it is one of the cause/result factors that is out of our control. Since it is a cash deal you can't hold the RATL calls for conversion into IBM calls. You would likely just be cashed out for 50 cents. If it were a stock swap you would receive some prorated IBM calls. Sometimes you just can't win.

  Jonathan Levinson   12/6/02,  1:10:17 PM
Questions: What is the put to call ratio?

Developed by Martin Zweig, the Put to Call Ratio is a market sentiment indicator that shows the relationship between the number of puts and calls traded on the Chicago Board Options Exchange (CBOE). It's a contrarian indicator based on volume of options traded. It is equal to the number of puts divided by the number of calls traded for each time period. If you have 1 put traded with 20 calls traded, it indicates excessive speculation in calls, and it's usually indicative of wildly excessive bullishness. The p/c ratio above 1 tends to show heightened bearishness. Watch the range. It can be charted on Qcharts as PUTCALL and on Stockcharts.com as $CPC. It's yet another tool for the toolbox. But if looking to get long, best to do it when the p/c ratio is above 1- the higher the better. If going short, we like it nice and low, at the bottom of its range. I use it as a short term indicator, like the TRINQ and QQV, some of my other faves.

  Steven Price   12/6/02,  1:04:05 PM
Swing Trade Signals
Without any real momentum building today, I'm not planning on entering again before the weekend.

Hi steve, In the MM today you said you were leary of openning a new position because of 3 days of time decay. Are the markets closed Monday? Or were you talking about today plus the weekend? Just curious. Mike

My experience on the trading floor was that we usually took prices down for the new day in the morning, unless there was some overnight development. So I'm counting Saturday, Sunday, and Monday. However, Friday afternoons are generally pretty slow and traders tend to take premium down then a bit, as well, to avoid buying before the weekend.

  Jeff Bailey   12/6/02,  12:49:21 PM
12:33:38 comment ... boy this has me wondering. My comments regarding 3-month expiration are more of a Option Investor or Institutional basis where there isn't a lot of trading in the options being done and a move more than $0.50 in the QQQ or $12 point move in the NDX is being looked for.

I (Jeff Bailey) prefer, and this is a personal view, to make a decision, based on the p/f charts, select a time and price where I feel the option purchased will generate a profit when the stock achieves my target. Then, initiate the trade and "forget" about it. Sure, I'll monitor it, but it won't bother me if the stock moves 5% gainst me the next day, because my ORIGINAL PLAN wasn't based on tomorrow, but January or February or March expiration.

Heck... I had a discussion with a LEAPS trader today. I've mentioned previously that I bought a partial position in the Ford Jan05 LEAPS several weeks ago. I don't even begin thinking about this one for another year. In perspective, a trader that buy a February expiration put, doesn't begin thinking about it until mid-January, or the stock reaches 50% of its target goal in the next week.

To build on this... a short-term 5-day type of trader. May buy puts on the QQQ at $26.50, and not think about it until it trades $0.50 either side of entry (my opinion). But you don't need to buy 3-month expiration if your only going to be in the trade for 5-days.

However... I will challenge a short-term options trader to do this. What do YOU think the the stock/index your getting ready to trade will be at in the next two months? If you're buying puts for a 5-day move lower, then you would be thinking lower is my opinion. To humor yourself, buy 1 put contract on the stock/index you're going to trade, don't risk thousands, but a couple-hundred bucks or an amount a losing short-term trade might have you risking. Then, go about your short-term trading of 5-1 day holding period. Then at the end of February expiration. Take calculate the % gain on capital risked in the 2-month put. Then.... take the TOTAL capital turned. Say you traded $1,000.00 in each short term trade, did that 8 times in a 2-month period. That's $8,000.00 +commission in and out and calculate your gains/losses from that activity. What does that return give you as a % of capital risked?

  Jonathan Levinson   12/6/02,  12:37:10 PM
To follow through on Linda's post, the COMPX feels a bit like Russian Roulette at the moment. It looks awfully toppy on the weekly chart, but the subatomic charts are saying "Do you feel lucky... Punk?" The TRINQ has been low all day, currently at .47, so I'd be taking some of Dirty Harry's action, but the put to call ratio shows an army of others already getting in there, and history teaches that they are usually wrong. The ratio has been coming down, but a low of .89 on the day is still way too high. The emails I'm receiving are bullish, bearish, and neutral, so toss my opinion onto the pile, but I like patience here.

  Jeff Bailey   12/6/02,  12:33:38 PM
Option Expiration ... I am starting to trade ATM QQQ options for 1-5 day timeframes, and would like to know your recomendation as to expiration month. In trying to reverse engineer your Market Monitor comments to answer my question, I am confused by this apparent conflict: Steven implying front month, I believe, here:

OK... I can't speak for Steve, but my comments about buying 3-month expiration is for those that are looking at options trade that would be put on and held for much more than 5-days or a $0.50-$1.00 move in the QQQ.

If you're going to short-term trade options (I don't trade options short-term unless my scenario is for some type of economic news or earnings to get a quick pop up or down), then I would trade current month expiration.

However, I do suggest that current month expiration NOT be traded within 5-7 days option expirations as there can be too much "manipulation" which is very difficult to assess into a trading plan.

  Steven Price   12/6/02,  12:30:58 PM
Semiconductor Sector Index (SOX) 330.72 -0.92 The SOX ticked back below the 329 support level, and is hovering right at 330. We saw another lower low, with the trade down to 322 and I'd like to see some resistance here, as well, before shorting after the 70 point drop from Monday's high.

  John Seckinger   12/6/02,  12:29:30 PM
On December 3rd, I showed a chart of the XAU and how prices (currently near 67) could head to 71.30 and test the top part of the wedge. Moreover, it would take a move to 72 before confirming a breakout to the upside. Upon further review, a trend line from the relative high at 71.30 and 71 seems to bisect the top of today's range (70.86). Like bonds, resistance held today. Please see chart: Link

  Linda Piazza   12/6/02,  12:19:00 PM
On a five-minute chart, the COMPX has been forming a (possibly) bullish right triangle with a flat top at today's high, about 1421. A swing trader myself, I don't put a lot of trust in developments hinted at by five-minute charts, but this formation is something to watch as a sign of further bullishness or bearishness. The triangle has nearly reached its apex and should break one direction or the other soon. These formations sometimes morph into rectangular formations, so I wouldn't act on a breakdown of the formation right away. If it were going to morph into a rectangular formation, 1410 is an area to watch for further breakdowns. 1400 also provides strong psychological support. Then just below that are today's lows. An upside break is going to encounter strong resistance around 1450. All in all, I agree with Steven's assessment of the risks versus rewards of trading on a Friday afternoon, especially this late in the December options expiration cycle. If you're a scalper, you could perhaps scalp a few points, but swing traders are going to suffer greatly if they hold over the weekend and the market gaps against them Monday morning. If you're inclined to enter a trade today, give credence to Jeff's admonition to look out several months.

  Steven Price   12/6/02,  12:00:28 PM
Looking at the SPX 60 Min chart, the 913-914 area seems like a reasonable resistance area for a short position. What do you think?

I see the resistance you are talking about, and it is definitely present. I'm a bigger fan of the 920 level, however, beacause it has acted as both resistance and support. As the day wears on and we get closer to the weekend, I'm less inclined to open any position, since it gives us less time for a move before 3 days of time decay set in.

  Jeff Bailey   12/6/02,  11:56:32 AM
The 11:00 AM Intraday Update has been posted. Link

  John Seckinger   12/6/02,  11:39:35 AM
Note: The 30-year price (which usually moves inversely with stocks) fell from a high of 110'26 to 108'26 over the last few hours. That is a significant move in the bond pits. The ZB03H contract is currently lower by '03 ticks at 109'03 on the session. This correlation should continue as the day progresses.

  Linda Piazza   12/6/02,  11:21:56 AM
Since my 10:30 post, markets again broke above the tops of their gaps and have been in the process of (so far successfully) retesting those areas in the last few moments. Five and ten-minute stochastics have turned up, fifteen-minute stochs have turned down, thirty-minute stochs have a slight hint of a hinge down, and sixty-minute are inconclusive. Should be an interesting test. I'd watch the 1410 level on the COMPX as this approximate level stopped the drop at 10:20 or so this morning.

  Steven Price   12/6/02,  11:12:15 AM
Swing Trade Signals
As per Jeff's last post, the next opportunity may come on a break under Dow 8500/SPX 900/OEX 455, with resistance under those numbers. However, we'll have to be aware of the 50 dmas below at 8329/880/447. I'd prefer to short resistance on a bounce, however, so I'll be patient.

  John Seckinger   12/6/02,  11:02:52 AM
I am a big fan of the range within the first five minutes. In the Dow, this was from 8620 to 8510. I use these levels as pivotal areas. With the Dow inside this range, sentiment can be at times hard to capture. For a more micro-analysis, I take 50% of the day's range to get 8563 and that level can be used as an even shorter-term pivot. Note: Dow is at 8580.

  Jeff Bailey   12/6/02,  10:58:44 AM
Dow Industrials (INDU) 8,574 -0.56% ... will make notes here that morning low was 8,501.86. This is just 1.86 ABOVE psychological 8,500. This most certainly hints that there were probably some type of buy programs set for that level to square things up. Look for some formidable resistance at 8,717 area.

  Steven Price   12/6/02,  10:53:55 AM
Steve, is there any news on ICOS? Why open down so sharply? Thanks

ICOS $31.20 (+0.70) There was news that Bayer/Glaxo saw promising results for their proposed anti-impotence drug, which would compete with both Viagra and ICOS/Lilly drug Cialis, which is targeted for release in 2003. part of the pullback, however, was also market related and the stock has recovered well on the market bounce.

  Jonathan Levinson   12/6/02,  10:49:10 AM
This from a reader whose opinion I respect:

QCOM just guided positive, XLNX got an upgrade. With the O'neil resignation (good news, Bush is becoming pro-active on economy), plus gap fill and NQ staying above it (bullish), I think it would be a diservice to not mention these factors in the monitor for those initiating shorts today. Just my opinion.

I agree on a short term basis.

  Jonathan Levinson   12/6/02,  10:45:00 AM
The CBOE put to call ratio opened at .94 and has just come in at 1.06. That's awfully high for a bear's liking, and it could be signalling further short term upside ahead.

  Jonathan Levinson   12/6/02,  10:42:34 AM
Whether it was an oversold bounce, a hockey-stick save from the plunge protection team, the O'Neill Resignation Rally, or dip buyers, the COMPX has filled the gap and returned to the neckline of that small head and shoulders identified yesterday, now resistance at 1420-22 or so. The TRINQ is down at .44 and QQV is down 1.11. The TRINQ is confusing today- it should have opened high instead of low, and we never saw big readings on. FVX has recovered and is now down just 9.9 bps, while the metals indices have given back part of their gains, with XAU +1 at 69.92 and HUI +1.75 at 125.14.

  Steven Price   12/6/02,  10:33:03 AM
Swing Trade Signals
I like the failed rebound just over 8600 from the short side. This would be yet another lower level of round number resistance in the Dow, after 9000, 8800 and 8700 yesterday (which got only a small test, but still failed).

  Linda Piazza   12/6/02,  10:30:40 AM
The markets have been doing some gap-filling this morning, trying to fill the gaps down from yesterday's close. It looks bearish that they moved to the tops of those gaps or just above them and then began to fall back, but the verdict is far from final yet and the outlook could change by the time I finish typing this entry.

  Steven Price   12/6/02,  10:29:34 AM
Qualcomm (QCOM): $41.60 (+2.00) For those readers still holding calls on OI play QCOM, I wasn't crazy about the pullback under $40, but the stock seems to have righted itself after the correction. Note resistance at $42.00, and the recent high just under $43.

  Steven Price   12/6/02,  10:23:35 AM
Swing Trade Signals
I am tempted to short the failure below 8600 in the Dow,however, with the support at 8500 and the streak of losing days due for a winner, I'm going to sit this one out for the moment.

  John Seckinger   12/6/02,  10:23:31 AM
The wildcard certainly seems to be U.S. Treasury Secretary Paul O'Neill resigning and its affect on the dollar. The Greenback came under intense pressure after the non-farm report (106.10 to 104.92), but has since recovered and is now at 105.38. Ticker: DX00Y.

  Steven Price   12/6/02,  10:15:18 AM
Swing Trade Signals
Quite a bounce so far, with the SPX in positive territory and the Dow off just 5 points. So far no resistance at 8600 (Dow currently 8617), so let's see if it can hold that level. 8625 was pivotal yesterday and so far the high today was 8626.

  Jonathan Levinson   12/6/02,  10:13:23 AM
Fed has basically been "out" for the wk no?

The fed has basically been draining, and suprise suprise, look at what's happened to equities.

  Jonathan Levinson   12/6/02,  10:05:55 AM
Top White House economic advisor Larry Lindsey resigns.

  Jonathan Levinson   12/6/02,  10:04:59 AM
Is there a precious metals sector fund or ETF that you would suggest more than an individual stock?

I like CEF, which owns gold and silver in a warehouse, or ASA. I own CEF as part of my conservative gold holdings. XAU, the hedged miners' index, is tradable and has options, though the liquidity's a little thin and the spreads wide. Also, precious metals funds- I own two canadian funds, but don't follow the funds in the US- the funds tend to be more volatile, and I use those as the "aggressive" part of my metals position.

  Steven Price   12/6/02,  10:04:56 AM
Swing Trade Signals
I am hesitant to enter a trade on Friday afternoon to hold over the weekend for a couple of reasons. We are looking at 5 straight days down in the Dow and even a downtrend will get its bounces. However, I a not going to predict a bounce on Monday morning with SPX 900 failing today. Right now I'm going to do some homework and look for intraday resistance levels as possible shorting opportunities. Of course, the market does some funny things and if I get something too hard to resist I may dip my toes back in the water.

  Linda Piazza   12/6/02,  10:02:38 AM
ADV/DEC numbers were negative in early trading, of course. They were negative enough that contrarians would urge caution for those who didn't take Steven's exit signal and who may be in shorter-term trades and not prepared to ride out a bounce. For NYSE issues, the adv/dec was .29 in early trading and for Nasdaq it was .32. Up/down volume patterns showed a 16:199 ratio for NYSE shares and 30/83 for Nasdaq.

  Jonathan Levinson   12/6/02,  9:55:19 AM
The fed has announced that it is taking no action today, for a mere 2B add. The markets are on their own today.

  John Seckinger   12/6/02,  9:53:11 AM
A daily chart of the 30-year bond had the contract right at a descending trend line about 30-minutes ago. This easily could have been the catalyst for some funds rolling into stocks after the first initial drop. With this pattern in bonds, it makes sense to wait until the dust settle (read: take profits). It will now be interesting to see if the Dow comes back and tests its low during the first five minutes (8510). This area could become pivotal. Here is a chart of the 30-year: Link

  Jonathan Levinson   12/6/02,  9:52:24 AM
We have precious metals up, with HUI +3.08 to 126.47 and XAU +1.66 to 70.58.

  Linda Piazza   12/6/02,  9:50:11 AM
Congratulations, Steven, on a great trade!

  Steven Price   12/6/02,  9:45:47 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The short signal was stopped out with the trade of Dow 8525 at 9:42:12

  Jeff Bailey   12/6/02,  9:44:01 AM
Option Expiration Looks like "ask the analyst" column will be option expiration. Without going into great detail here, if looking to buy puts, I would STRONGLY suggest February MINIMUM expiration. You will perhaps see why in this weekends column, but I'm sure some traders are initiating some puts today.

  Steven Price   12/6/02,  9:39:50 AM
Swing Trade Signals
Looks like we are getting that bounce off 8500, although the SPX remains under 900. If we get the bounce through 8525, we'll be stopped out for a gain and we can consider getting back in at the top of a bounce, or possibly a break under Dow 8500.

  Steven Price   12/6/02,  9:36:34 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's keep a tight stop on the short to lock in a gain after the drop. Set stops on the Short Position at Dow 8525

  John Seckinger   12/6/02,  9:33:40 AM
Profiled Monday night in the Futures Wrap was the possibility of a WEEKLY bearish divergence in the RSI (Dow and S&P 500). It looks like this will come to fruition, as well as the oscillator closing under the 50 level. Note: There was a bearish divergence in both March and May. Note: Bonds will now be quoted in March, with the ticker ZB03H. The 30-year contract is higher by 1'07 and at 110'13. Support below is at 110, while resistance above is at 110'30.

  Jonathan Levinson   12/6/02,  9:33:08 AM
15 point COMPX gap down, TRINQ .13, QQV +.99 to 47.32.

  Linda Piazza   12/6/02,  9:27:34 AM
European markets were down before this morning's U.S. employment figures were released, and they dove further afterwards. Currently, the FTSE 100 is down 2.12%, the CAC 40 is down 1.31%, and the DAX is down 2.95%.

  Jonathan Levinson   12/6/02,  9:25:35 AM
U.S. Treasury Secretary Paul O'Neill has just just announced his resignation.

  Jeff Bailey   12/6/02,  9:25:34 AM
The 9:00 AM Intraday Update has been posted. Link

  Steven Price   12/6/02,  9:23:19 AM
Swing Trade Signals
Right now the Dow futures are setting up around 8510 and with that big of a drop I'm concerned about a strong bounce off 8500. If we struggle to break 8500, I may simply close for a gain.

  Steven Price   12/6/02,  9:20:33 AM
Swing Trade Signals
The swing trade signal is currently short a 1/4 position and the plan was to add to that short position on on a move under Dow 8600/SPX 900 with eveidence of resistance underneath those levels. The other levels I have on the radar as presenting risk to the short position, as possible bouonce points are 1400 in the COMPX and 893 in the SPX. Lets look for a bounce off the opening dip to set up new resistance and then I'll consider adding to the short.

  Jonathan Levinson   12/6/02,  9:19:09 AM
I have a print below 105.70 on the US Dollar Index, while gold has now eased down to just below 327/oz.

  Jonathan Levinson   12/6/02,  9:17:07 AM
The fed has a 2B matched sale-purchase agreement maturing today, which is a net addition 2B in liquidity. This small add will not make a difference with the FVX up more than 20 bps as it currently is. The morning announcement for additional repos will be very important to determine what the fed intends to do about this morning's equity selloff and treasuries rally. My guess, based on recent fed speeches, is that the fed is all for a treasuries rally. But, will it try to stem the equities selloff? The morning announcement, due within the next hour or so, will be crucial.

  Jonathan Levinson   12/6/02,  8:47:22 AM
Gold has crossed 327/oz, the futures are pointed straight down, QQQ is trading 25.67 on Island ECN, while INTC, bulled my Dan Niles on Monday, is now trading 18.60, down approximately 10% since he recommended it. The five year yield is now down 18.3 bps.

  Jonathan Levinson   12/6/02,  8:37:15 AM
Bloomberg.com: U.S. Unemployment Rate Increases to 6 Percent as Economy Loses 40,000 Jobs - The U.S. economy unexpectedly lost jobs in November and the unemployment rate rose more than expected to 6 percent, government figures showed


  Jonathan Levinson   12/6/02,  8:35:01 AM
Looks like the market didn't like employment data- QQQ just dropped 30 cents in 30 seconds. FVX is down 15.4 bps in the first minute of trading- that's NOT a typo. QQQ now 25.66 as I type, down from its close of 26.20. Gold was above 325 before this data- should be interesting to watch the next half hour.

  Steven Price   12/6/02,  3:43:33 AM
The Swing Trade Game Plan has been posted: Link

  John Seckinger   12/6/02,  3:43:08 AM
The Futures Trader Wrap has been posted: Link

  Jim Brown   12/6/02,  3:42:37 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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