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  Jeff Bailey   12/17/02,  10:04:31 PM
S&P 500 Weightings ...Enjoy your commmentary. However, I would like to know the weighting of components in the S&P 500, so I can track the major ones, as I do with the QQQ. Is it possible to know the weighting of the top 10? Thks Mike

Yes! On the OI web page, we have a section called "market posture" (left column under Commentary) If you click that "Market Posture" it will take you into that section Link . Then, click one of the links, like (Monday, December 16, 2002) Link Then.... click the underscored SPX Link and BOOM!, you're at the CBOE SPX Index Components page.

Man... there's a lot of resources at OIs home page isn't there? There's stuff here that I have yet to discover too.

  Jim Brown   12/17/02,  7:26:04 PM
Semiconductor Sector - The book-to-bill ratio for November will be released on Wednesday night and could be critical to any support for a potential holiday rally. This report has been showing sharp declines in bookings for the last several months. Last months 0.73 was the lowest reading since Sept-2001 and the fifth consecutive monthly drop. As we saw from Micron today just increasing the sales is not enough. They need to be profitable sales.

  Jim Brown   12/17/02,  7:22:03 PM
Consumer Confidence - ABC News/Money Magazine reported late Tuesday that their weekly consumer confidence index dipped to -23 and a nine year low for the week ended Dec-15th.

  Jim Brown   12/17/02,  7:19:24 PM
FAOO - FAO Inc, which owns FAO Schwartz, Zany Brainy and The Right Start, said it will likely file for bankruptcy if its bank does not ease current restrictions on liquidity. The retailer operates 253 retail stores nationwide. Sounds like high dollar toy sales are not hot this season. Last week there were several articles on manufacturers refusing to ship to FAO Schwartz due to non-payment of invoices. Wells Fargo is the bank that stands to lose if FAO files bankruptcy.

  Jim Brown   12/17/02,  6:00:07 PM
Micron - MU announced a loss of -.52 cents after the bell. Analysts were expecting a loss of only -.23 cents. MU said average selling prices fell -12% during the period. This news was contrary to what analysts had been predicting, increased sales and rising prices. Gartner Dataquest said DRAM sales were up worldwide by +37%. Great news for chipmakers I am sure. They can sell even more chips at a bigger loss than the quarter before. Eventually you have to start refusing to accept new business because you cannot afford to sell it for 25% less than it cost you to make it?

IFX fell today after it was announced they won a $2.6 billion contract to make DRAM chips for Kingston Memory. Wouldn't it be easier to write Kingston a check for $500 million and just not make the chips? (grin) Obviously I say this in jest because the chipmakers are fighting for their lives and eventually the weaker players will not be able to fund the losses and the survivors will end up with all the chips and significant pricing power. Better buy that memory now before that comes to pass.

  Kent Barton   12/17/02,  4:17:58 PM
MedImmune (MEDI) has won FDA approval for its FluMist medication. However, panel says it does not have enough data to provide recommendation for 50 to 64 year olds.

  Jim Brown   12/17/02,  3:58:41 PM
DISH - It is getting more complicated to tell who the players are in the Satellite TV business with mergers, failed mergers, bankruptcies and service halts. It appears traders are convinced DISH will be the ultimate survivor and a break over $22 would be very positive.

  Jim Brown   12/17/02,  3:57:32 PM
Jim: Quick note here with respect to equities and US dollar. With gold up strongly and the Swiss Franc up strongly, it appears that smart money is looking for a safe haven and could not care about growth or economics.
(SF always becomes strong in times of turmoil due to the neutral nature of the country)
Therefore, I would not expect either equities or the US dollar to rally significantly in the near term.
check out the swiss franc sf03h huge gap. Also you will see the SF spiked at the close which bodes ill for the us$. ams.

John Seckinger is probably fully invested in Francs already!! He is the dollar hawk in the office.

  Linda Piazza   12/17/02,  3:57:27 PM
At the end of the day, I like to look at the daily candlestick chart to see the shape of the day's chart. The candle actually won't be completed until the end of the day, but I can at least create an "if, then" scenario for how that candle might look at the end of the day. That helps me make end-of-day trading decisions. Here's a daily chart of the COMPX: Link Earlier today, it looked as if the COMP might be forming a doji, but prices have fallen and now there's a small real body below a longer shadow. Steve Nison labels this as a "spinning top" formation and comments that it signals that the prior move may be losing momentum. The difficult lies in determining what the prior move has been since the COMPX has been consolidating! The upward movement was of one day's duration. I call this one a draw, since hourly stochastics are indicating oversold conditions, although since this spinning-top formation came after at least a one-day rally, I'd cast it as more bearish than bullish. Because it's coming during the midst of consolidation, it could be signalling more consolidation ahead. If prices should move up, closing at or near today's open, the doji that would then be formed can also be a sign of investor confusion or slowing momentum.

  John Seckinger   12/17/02,  3:57:26 PM
Per 13:54:38 Post, the Sox index started to fall at 3:20 p.m. and, in my opinion, accelerated the selling pressure in the Dow as this index broke its daily trend line at 321. The index is currently at 319. Any intermediate term consequences? Not with today's close; however, I will be closely monitoring the Sox for a move either above 335 or below 305 as an indication that another wave will take place in both the Sox and Dow. Ideally, the Sox moves ahead of time.

  Steven Price   12/17/02,  3:51:14 PM
Swing Trade Signals
Seeing red across most markets at this point. I'm still going to allow for a bounce at Dow 8500 and SPX 900 and hang onto the 1/2 long position. The current stop is Dow 8470, but after a 200 point gain yesterday, I'm not going to panic, or add to the position on today's retracement.

Current levels: Dow 8532/SPX 902/OEX 458/COMP 1386

The VIX is up fractionally, by 0.24, but definitely does not yet indicate fear of a renewed sell-off.

  Kent Barton   12/17/02,  3:51:14 PM
Looks like those CRXA and MEDI approval announcements won't be made until after the closing bell.

Mike, Grasso always reminded me of a boxing trainer...One of those scrappy little guys shouting words of encouragement from the ringside.

  Mike Parnos   12/17/02,  3:47:53 PM
Important Question - Does anybody else think that Dick Grasso, the head of the NYSE, look like an alien? Next time he's on, check out the shape of his head. If that isn't a second cousin to E.T. . . . .

  Jonathan Levinson   12/17/02,  3:44:08 PM
Just back. Looks like I arrived just in time to catch the excitement.

  Mark Phillips   12/17/02,  3:42:26 PM
Retail Update Jim has been talking over the past couple weeks about and soliciting input about anecdotal evidence of either strength or weakness in the Retail world. My wife and I spent last weekend in the den of iniquity. That's right, Vegas, Baby! It's only about a 3-hour drive and we tend to go over once or twice per year for a long weekend. Neither of us are much for gambling, but we always take in a couple shows, enjoy the great meals and of course spend some time perusing several of the shopping malls in the theme resorts like Paris, Ceasars, Bellagio and the Venetian. Needless to say, we didn't spend our time in the low-rent district.

After last weekend, most of the shows go dark in Vegas and the crowds tend to dry up to a trickle until New Years. This is NOT the high season for tourism in Las Vegas. Having that as background, I didn't expect to see a lot of people or shoppers out in force. We've been in Vegas this time the past two years, and I was actually surprised to see the crowds as heavy as they were. It was definitely busier than last year (due to the aftermath of the 9/11 attacks). But both the shopping malls and the casinos were busier than I remembered from 2-years ago, before the consumer was scared or feeling the pinch of mass layoffs and recession.

I personally think the Retail sector is due for another big fall after the holidays, but the evidence to support that conslusion was certainly not apparent from my outing last weekend. Consumers are still spending money and not just on the essentials.

  Jeff Bailey   12/17/02,  3:42:16 PM
The 3:15 PM Intraday Update has been posted. Link

  Mike Parnos   12/17/02,  3:37:40 PM
Hello, again. Are we rich yet? - I've been getting a lot of questions today about the viability of doing more of the QQQ ITM strangles that have been so successful over the last 3-4 months.

The one that I'm watching is the February 25/27 strangle. The only problem is that it would cost $4.80 to put on the strategy and that is about 30-40 cents more than it usually costs.

We have to weigh the value of the additional week (Feb. is a 5-week option month) against the fact that it would require a larger initial move to cover the cost of our strangle. It's not totally unreasonable, but I think I'd like to wait until closer to the end of the week before making that decision.

Remember, all good things come to those who wait -- especially if you're waiting for your pizza or your furniture to show up.

  Linda Piazza   12/17/02,  3:28:14 PM
At 45.00, down $0.73 on the day, Coca-Cola (KO) is again flirting with support at 45. A few days ago, Chief Executive Douglas Daft announced a decision by KO not to release earnings guidance, choosing instead to focus on strategic initiatives. The stock gapped down on the open that day, but has been trying to move up since. On the 16th, Prudential lowered its profit estimates for the company, which I thought surely would be the end of the put play I've had in KO for a while, but now it's once again testing that support. Some support exists in the 44.20 area, the site of a November low, but a KO bear wants to see the stock break final support at 43.50. Although the stock has remained below my entry, this hasn't been a profitable play because of the collapsing value of the VIX, and I've been tempted to pull my money and put it elsewhere many times. However, I had a plan when I entered, I entered conservatively, the prices haven't violated the stops I set, and I'm still in. We'll see whether that's a wise decision at January expiration.

  John Seckinger   12/17/02,  3:19:47 PM
The bond market is closed, and the 30-year failed to generate any interest as stocks drifted lower. So, is it bullish for stocks? Well, there is talk that the Fed might hike rates in the middle of 2003, and this should lead to underperformance of Treasury bonds. Certainly the ever present risk of war looms; however, it certainly would be nice to see a rally in stocks at the expense of bonds as this economy recovers. It is rumored that a few hedge funds are significantly short Treasury Bonds, and are most likely offering these thoughts to help their trade. They could be right.

  Jim Brown   12/17/02,  3:17:29 PM
ACAM - Remember the post I made last week on ACAM at $39? If you did not act on it don't bother looking at the chart. It will ruin your whole day, it did mine.

  Mark Phillips   12/17/02,  3:17:24 PM
CTXS $13.21 (+0.39) Sneaking higher. While all the major indices gyrate near their lows of the day, OI Call Play CTXS is back over the $13 level and trading very near its high of the day. Traders that took advantage of last week's drop to the $12 level to initiate new positions are doing alright and rooting for the stock to break out over its recent high of $13.48. A successful move above $13.50 (read:volume) will present us with the next solid entry point. Until then, we're just waiting for confirmation. In rangebound action like this, the operative phrase is, "Buy support and sell resistance."

  Jim Brown   12/17/02,  3:13:48 PM
Hi Jim, You mentioned that you would like some info on what some companies are going to do in the coming year. I work for a very large insurance company. In 1999 we purchased 25,000 IBM Pentium II laptops. We are scheduled to replace them in the coming year '03, with 28,000 IBM Pentium IV's. Y2K really made us upgrade our very old equipment all at once. We have about 80,000 employees and they have announced a restructuring that will take place over the next three years to reduce our workforce by 15 percent. You may add this to your collection of information. Keep up the good work and I will keep my head up and eyes open. Have a great Holliday. Thanks. Joe

Thanks for the update! This is exactly what I think will power the 2003-2H recovery. Those old Pentium II computers exist by the millions and they are dinosaurs in the current 2.5 GHZ environment. Please continue to send me your economic comments.

We heard from dozens of readers two weeks ago about how bad retail sales were in their local malls. The official numbers are starting to come in and they are not pretty and they confirm what we knew two weeks ago. Would it be nice to know 3-6 months in advance when the next upgrade wave was going to begin?

  Linda Piazza   12/17/02,  3:05:14 PM
Jeff mentioned McDonald's (MCD) outlook today in his 10:17 post. Currently trading at a $15.74, off a low of $15.58, it's just been upgraded by a Lehman analyst to equal weight from underweight. Mitchell Speiser, the Lehman analyst, acknowledges that "there's no turnaround in sight," but mentions MCD's operating cash flow of $3 billion. He thinks its valuation should limit the stock's fall.

  Jeff Bailey   12/17/02,  2:54:03 PM
Rod Stewart singing on CNBC.... As I look furiously for some type of stock action in this tightly traded range today.

  John Seckinger   12/17/02,  2:53:33 PM
Per 11:43:13 Post, the 8573 level was called the apex, or pivot, within the Dow. Interestingly enough, the Dow did find some resistance during its last spike higher at that level. Maybe there actually is something to these five-minute patterns and "b and P" formations? Unfortuately, they do not give objectives. A tool, nonetheless. These educational patterns do not always work, but it is nice when they do. Some are short-term in nature, and not for everyone; however, the "b and P" patterns can be seen on weekly charts. If any questions on these patterns, please do not hesitate to send me an email.

  Kent Barton   12/17/02,  2:53:00 PM
Rod Stewart is singing on CNBC right now. I think this is the definition of a "slow news day."

  Linda Piazza   12/17/02,  2:46:30 PM
Looking at intermarket relationships, a scan shows all measures somewhere in in the middle of their day's ranges as of this writing. Ten-year and thirty-year yields are up from their lows, but not back to their highs. The VIX is again above 30, but not at its highs. The XAU is down, but not at its lows. These relationships aren't providing clear signals as to the afternoon's likely direction--at least, not yet.

  Steven Price   12/17/02,  2:45:56 PM
Let's try that stock play link again. Once again P/L is based on the stocks only and does not include the protective put. Link

  Jim Brown   12/17/02,  2:44:50 PM
AMZN - Amazon may be leading the league in the online sales arena but based on their chart traders are not expecting a big upside surprise. The stock has topped at $22.50 and is beginning to show weakness. If you remember last year Amazon had record sales in the 4Q and was all over the airwaves blowing their own horn. They ended up posting a profit for the quarter that was about the cost of a Superbowl ad on huge sales numbers. With free shipment on almost everything and lots of out of stock categories as early as last week there is a good possibility traders will be disappointed when they report results for this quarter. This could be their make or break quarter as they have pulled out all the stops. A lackluster showing could push them back down to the $10 range once again.

  Jeff Bailey   12/17/02,  2:39:59 PM
Corixa Corp. (CRXA) $7.23 +3.58% ... still halted with news pending. Have been to the company's web site Link and have seen nothing on today's FDA review. Nothing on newswires either.

In recent months, NASDAQ and NYSE have been more apt to halt biotech stocks ahead of FDA reviews. Perhaps to try and reduce speculative trading.

  Jim Brown   12/17/02,  2:36:15 PM
ADBE - Looking very strong today after putting in a nice saucer bottom after dropping in late November. Currently $27.21 and overhead resistance at $30.71. That does not present a huge range but ADBE has been supported by the 50 DMA, currently 25.60, and the risk profile appears minimal. If we get a holiday rally in tech stocks this one could be a sleeper.

  John Seckinger   12/17/02,  2:27:08 PM
Looking at things from a Bullish Percent point of view, there are quite a number of sectors at 'mid-field' and seemingly making it a stock pickers market. Example: The bullish percent for the NYSE closed yesterday at 49.65, and right in-between the 70 and 30 barmoter readings that represent overbought and oversold, respectively.

  Jeff Bailey   12/17/02,  2:26:57 PM
SBC Communications (SBC) $27.77 +2.35% ... from bullish profile here in market monitor (Friday 12:54:17 $26.26).... I'm feeling like I hit the "gold mine" based on market action. Will look to protect gain and raise a stop to $27.50, with target of $28.50.

  Jim Brown   12/17/02,  2:26:39 PM
AMGN - After affirming guidance last week AMGN has rocketed to test strong resistance at $52. This level has been a solid top today but there is a stronger trend of higher lows. I would be looking to buy AMGN on a breakout over $52.25 with a target of $60-$62.

  Linda Piazza   12/17/02,  2:26:36 PM
Adv/dec figures have actually improved a little from my last posting of these numbers. For the NYSE issues, the adv/dec figure is .73, with an up/down volume ratio of 288/499. For the Nasdaq issues, the adv/dec figure is .76, with up/down volume coming in at 394/475.

  Kent Barton   12/17/02,  2:24:31 PM
Still no word from the FDA on the CRXA and MEDI drug approvals. Everyone at those two companies must be on pins and needles right now! Years of research and development are on the line.

It'll be interesting to see how the biotech index (354.24, +2.71) reacts to the announcements. The BTK.X has been downtrending since late-November but now seems to be finding support at its 50-dma and 100-dma. Sector leader AMGN is actually looking pretty strong, as shares approach the May highs near $53.00.

  John Seckinger   12/17/02,  2:21:14 PM
Note: Sectors coming under pressure on Tuesday include Discount, video game, specialty, and Electronic retailers, as well as Auto dealership groups.

  Steven Price   12/17/02,  2:01:46 PM
Swing Trade Signals
The Dow is approaching the 8550 support level I talked about earlier. So far it has bounced there, but without much conviction With the NDX and COMP hanging in with small percentage losses, I can see a bounce from this level. However, those tech indices had been green until the last few minutes and a break under Dow 8550 could lead to a re-test of 8500. I'm also watching 900 in the SPX as a possible bounce level on the pullback.

Current levels Dow 8558.09/SPX 905.27/OEX 459.72/COMP 1395

  Mark Phillips   12/17/02,  1:58:58 PM
MMM $121.83 (-1.83) Here we go again? Just to check whether the bears were secure in their positions, the bulls had a little party yesterday, driving MMM back up to $123.50 at the close. But after an unsuccessful attempt to once again scale that level this morning, the stock has been knocked lower by one wave of selling after another. After being turned back at $123 just before lunch, MMM quickly lost a dollar down to the $122 level and that support level appears to be giving way as I type.

Aggressive bears would have done well to short the early failures at $123.50 or $123, as the stock appears to be back in a mode of establishing lower highs. Traders still looking to initiate a position may be best served by waiting for a breakdown below last Friday's low at $121.50. Look for volume to confirm the breakdown.

  Jim Brown   12/17/02,  1:55:07 PM
If the Dow is going to bounce this afternoon I see the current 8550-8560 range as critical. This would be the bottom intraday support from the gain on Monday and it is also the confluence of the 2/5 DMA on the 15 min chart. This is normally an area where buyers decide to appear. We have given back about 1/3 of yesterdays gains and nothing says we can't give back more. The Monday rally was too strong for this far in front of the holiday week. Keep your fingers crossed.

  John Seckinger   12/17/02,  1:54:38 PM
The Dow has drifted lower, but one sector I would like to see confirm (or reject) the move is the Semiconductor Sector (Sox), currently lower by 0.32% at 324.59 but not under a trend line that comes in today at 321. Note: The 22 DMA (exp) in the Sox is currently at 328 and this index had an intra-day high of 331. Therefore, this sector isn't exactly stong, but not breaking down either.

  Linda Piazza   12/17/02,  1:54:26 PM
Reader Question:Any thoughts on RSTO? I see no news today, other than it's a retail stock, and getting hammered, on what looks like higher than normal volume.

Response: Here's my best guess on RSTO. Today, Pier 1 (PIR) reported earnings and met raised expectations. However, Pier 1, Williams-Sonoma (WSM), Restoration Hardware (RSTO), and other specialty retailers in this space are all falling hard. One analyst speculated that Pier 1 may be falling because of concerns over its inventory levels. Also, although housing numbers released today met expectations, perhaps there's some concern about continued growth in this space.

A look at charts shows that RSTO is still on a P&F buy signal, but that it gave a high-pole warning, reversed quickly into a column of "O's," and is close to giving a sell signal. Link Currently at 5.23, it's moved below its 50-dma (exp) at 5.97, and is sitting near light support between 5.25-5.50. Next support will probably be offered by the psychologically important 5.00 level, but technical support lies below at 4.65 and 4.00. A glance at the weekly chart shows an ugly possibility: a potential H&S formation with the right shoulder perhaps being formed now. Link

  Jim Brown   12/17/02,  1:49:11 PM
JCOM - is bucking the trend today. After selling off in early December it is showing surprising strength in a down market. It was upgraded to "buy" at First Albany yesterday but it looks like the short waited to cover until today. Just an idle observation but if it clears the gap at $21 it could run to $25 pretty quickly.

  Jeff Bailey   12/17/02,  1:40:13 PM
The 1:00 PM Intraday Update has been posted. Link

  Kent Barton   12/17/02,  1:31:04 PM
H&R Block (HRB) 39.85 +0.52: This un-triggered PremierInvestor short play never reached our entry trigger under $37.00. With shares moving above the 50-dma ($39.62), we'll most likely be giving it the axe tonight. The intraday breakout out of the $37-$40 range (which has dicated trading for nearly a month) is a pretty good sign for the bulls. While the bar chart doesn't show any significant obstacles until the 200-dma ($44.32), p-n-f chartists will point out that bearish resistance is at $43.00.

  John Seckinger   12/17/02,  1:27:45 PM
I have gotten numerous emails on the 8573 pivot and lack of downward follow-through. I am surprised, but I use this with the five-minute pattern(s) as well. With that said, since the Dow is still below the low during the first five mintues (8587), the apex and potential downward pressure still exists.

  Linda Piazza   12/17/02,  1:20:17 PM
When you hear “the markets” discussed on CNBC or even on our site, most of us think of the Dow and the Nasdaq. However, in the past, Jim and other writers have pointed out the importance of another market that’s less rarely mentioned: the Wilshire 5000 Equity Index. This value-weighed index represents all the U.S. common stocks that are actively traded. To view the Wilshire 5000 on Stockcharts.com, use $WLSH.

What would an examination of the $WLSH charts show? Link This linked P&F chart shows the Wilshire to be on a sell signal, although it has reversed into a column of X’s, as have some of the other markets. Link A look at this three-year weekly chart shows a pattern of lower highs and lower lows that hasn’t yet been broken. However, the RSI predicted a sunnier outlook, at least for a while. Beginning in late 2001, the RSI began printing a series of lower highs. A descending trendline could be drawn across those lower RSI highs. That trendline was broken in October, predicting the rally that carried the Wilshire and other markets off the lows. Weekly stochastics may now be clouding that sunny outlook, however. The last two stochastic highs have shown a pattern of higher highs, while prices haven’t confirmed with higher highs. That may be indicating bearish divergence unless prices can manage to move above August highs before the stochastics complete the cycle down to oversold.

  Linda Piazza   12/17/02,  1:16:43 PM
The VIX has moved back above 30, while the VXN remains down on the day.

  Jeff Bailey   12/17/02,  1:04:21 PM
Corixa (CRXA) $7.25 +4% ... Halted, news pending.

Yesterday, Morgan Stanley made comments that it believed odds of CRXA getting FDA approval by FDA for its Bexxar drug had slipped below 50%. If not approved, IDEC Pharmaceuticals (IDPH) $34.87 +2.7% would be likely beneficiary of such news.

  John Seckinger   12/17/02,  12:51:19 PM
A solid range in Gold (GC03G) today, rising to 343 before pulling back to current 338.2 levels. Support should be found at 333.7 and near the 330 area. These daily moves, at first glance, look bearish; however, more often than not I see the high (343) tested again in the near term as traders test the strength of underlying sentiment. Note: Gold should trade inversely with the U.S. dollar, which should have a positive impact on stocks.

  John Seckinger   12/17/02,  12:45:34 PM
The U.S. dollar did find a quick bid from 103.27 to 103.84 around 11:20 a.m. after the White House voiced support for the Greenback. It was interesting how the dollar moved higher about 10 minutes before the Dow moved from 8575 and spiked higher.

  Linda Piazza   12/17/02,  12:25:45 PM
I've said before that I don't give much credence to formations seen on the five-minute charts, especially since I don't classify myself as a daytrader, but the $COMP's five-minute charts are looking suspiciously like a H&S formation with a left shoulder at 1400, a head at today's highs, a neckline at about 1392, and a right shoulder perhaps in the process of forming now. A move toward today's highs again would negate the (very short-term) bearish potential in that possible H&S formation.

  Linda Piazza   12/17/02,  12:15:10 PM
Yesterday afternoon, I mentioned VLO (Valero Energy)in the Market Monitor, pointing out that it was challenging the 200-dma, the 37.50 neckline of a rough reverse H&S formation, and was on a P&F buy signal with a new double top breakout signal. It was also challenging the resistance shown on that P&F chart. I'd mentioned that readers might consider a call play on a move above the 200-dma, the 37.50 neckline, and that P&F resistance. Valero did all three this morning, and it did it on higher-than-normal volume, another consideration I'd mentioned. Since the 200-dma is coming into play, I've included both the exponential 200-dma and the simple 200-dma on the following chart: Link As soon as VLO hit that resistance line on the P&F chart, sellers came in, driving it back down just below that 37.50 neckline. Was the move above resistance a trap? Perhaps, although the relatively strong volume the last two days presents a more bullish case. Conservative traders might want to wait for a close above that resistance rather than an intraday move above it. Link

Anyone considering an entry into this call play should check my cautions from yesterday, including overhead resistance levels. Most important is the disclosure that this suggestion is based on technical analysis of the chart only, although VLO drew my attention when it raised guidance yesterday. I do not know of fundamentals that might change this company's outlook. Also, since it required months to build that reverse H&S formation, traders shouldn't enter with December options, planning on targets to be hit in the next few days. Disclosure: I have a bullish position.

  Steven Price   12/17/02,  12:07:23 PM
Citrix Systems (CTXS): $13.14 (+0.34) I like the move in OI call play CTXS back above $13 for new entries. Conservative traders can wait for a move above the recent high of $13.48, targeting the next PnF "X" at $13.50 for entry. $13.50 is the new buy signal on the PnF chart.

  Jeff Bailey   12/17/02,  11:53:52 AM
The 11:00 AM Intraday Update has been posted. Link

  Linda Piazza   12/17/02,  11:48:35 AM
Reader Matt kindly contributes the following information for those who follow Jonathan's numbers on Fed repos. Today the Feds announced an overnight repo in the amount of 3.5 billion. With 7.25 expiring today, that leaves a net drain of 3.75 billion, perhaps explaining some of the sluggishness in today's markets. Thanks, Matt.

  John Seckinger   12/17/02,  11:43:13 AM
Traders familiar with the "b to P" patterns just saw a long liquidation pattern ("b") in the Dow on a five-minute chart and then a move from its apex at 8573. If the Dow falls back under 8573, more selling would then be expected. For more information on these patterns, please see link: Link

  Linda Piazza   12/17/02,  11:42:03 AM
The good news for COMPX bulls is that prices remain relatively steady while the (5)(3) 60-minute stochastic cycles down, and the $TRINQ has moved to a sustainable .83 from an unsustainable .25 or so. The not-as-comforting news is that the adv/dec numbers continue to decline. On the Nasdaq, that number now stands at .61, while it's .66 on the NYSE issues. Down volume is now ahead of up volume with both NYSE and Nasdaq shares traded.

  Steven Price   12/17/02,  11:36:54 AM
Coors (RKY) $60.68 (-0.82) OI put play RKY failed to participate in yesterday's rally and has continued the previous drop this morning. While I think a move under $60 looks bearish, new entries need to be aware of the bullish support line on the PnF at $59 and may want to wait for a break of that level to intiate.

  Steven Price   12/17/02,  11:21:17 AM
Swing Trade Signals
The pullback we are seeing is certainly not unexpected after yesterday's big gains, and I'm looking at support in the Dow at 8550 as a bullish signal. If that support level fails, I'm not ready to punt, but probably would not open a full long position. I like today's higher highs for longs and the key for a sustained rally will be some higher lows.

Curretn levels Dow 8572/OEX 460/SPX 905/COMP 1395

  John Seckinger   12/17/02,  11:14:10 AM
With the dollar at fresh multi-year lows against the euro, pundits seem to be concerned about a war with Iraq as the catalyst. Also worrisome is a lack of strong dollar policy and uncertainty over John Snow. Note: The Greenback should have its first loss in four years (down 9% versus the yen so far this year), but a weak dollar should help the beaten-down manufacturing sector. However, do we need a greater current account deficit? Currently this deficit is 4.5% of our GDP. Currently at 103.36, a chart of the dollar reminds me of when the Dow fell under 7500. The chart looks horrible, but ANY rally (in this case, above 104.50) would really change the scope and could signal a nice bottom.

  Mark Phillips   12/17/02,  11:08:25 AM
BBY $23.40 (-2.00) More disappointment in the Retail sector. BBY reported earnings this morning and beat by a penney. The company offered Q4 quidance that was essentially in line with consensus estimates. Other than report a blowout upside surprise, it probably didn't matter. Investors were ready to sell the news and sell they have! At this point, BBY is off nearly 8% and trading at the low of the day, after violating the $25 support level that has been supporting it for the past 2 weeks.

The weakness in BBY is certainly producing a drag on the Retail index (RLX.X) today, as are negative comments from TGT. Even WMT is substantially weaker this morning, having already given back half of yesterday's gains. so far, the RLX index is off by -2.20% and is threatening to break below its recent low of $272. If forced to choose, I'd have to go with Steve's bearish thesis on the Retail sector -- there just aren't any signs of life anywhere in the industry, from the discount up to the luxury level.

  Linda Piazza   12/17/02,  10:59:37 AM
That gap down from Thursday's close to Friday's opening keeps acting as a magnet for the COMPX today. The COMPX is once again trading inside that gap, and, once again, bulls want to see it stay above the 1388 level.

  Linda Piazza   12/17/02,  10:56:30 AM
Welcome, Mike! I'm looking forward to seeing your new portfolio this weekend, after options expiration. For those who haven't been following the CPTI results, they've been impressive. If you're finding that your directional trades are depleting your trading capital, you might try some of Mike's strategies, or some of the other conservative strategies offered by other OIN writers.

  Mike Parnos   12/17/02,  10:51:31 AM
Good Morning Everyone It's been awhile since I've been on the Market Monitor. I know there are a lot of questions out there about the conservative spread strategies that I teach at the CPTI (Couch Potato Trading Institute). Well, fire away!! I'll do the best I can to keep putting $$$ in your pocket with minimal risk.

For those who have been following the CPTI portfolio, you may have noticed that TTWO (our Short Strangle) had been drifting lower -- dangerously close to the lower strike of 22 1/2. Well, this morning TTWO announce some dynamite earnings and, at last look, has bounced up nicely back over $25 with three days to go. When we're good, we're good!!

I'll be on and off throughout the trading day, so send along your questions and concerns about life, liberty and the pursuit of the almighty dollar.

  Linda Piazza   12/17/02,  10:38:26 AM
I'd feel better about the sustainability of the upward move if the adv/dec numbers were a little better. Currently, that number reads at .87 for the NYSE issues and .86 for the Nasdaq issues, showing more issues declining than advancing. Nasdaq volume still shows more up volume than down volume, however, with a current ratio of 216:77, showing that there's some concentrated buying in some issues. New highs are still above new lows on both NYSE and Nasdaq.

  Mark Phillips   12/17/02,  10:34:33 AM
Related to some of my postings on LEAPS plays last Friday, I had some readers write asking what option strikes I recommend and what the desired entry strategy would be. You can't beat that for an opportunity for a cheap plug, now can you? GRIN

Everything you could possibly want to know on the subject is contained in the weekly LEAPS column, where we regularly update recommended strikes and entry strategies. For newcomers to the LEAPS portion of the OI website, I strongly recommend you read through the information contained under the strategy link at the top of each week's LEAPs article. It will help you to more easily maximize the benefit of this section of the newsletter.

  Steven Price   12/17/02,  10:33:13 AM
Target (TGT): In a continuing trend, Target came out and said last week's sales, as well as month to date, were tracking below expectations. This follows bearish comments from Wal-Mart yesterday and Federated's refusal to even make a prediction. While the retailers have been riding a rising tide, the Retail Index (RLX.X) has given back almost 2% today. I said in last night's wrap that I expected poor results from the retailers come earnings time and would look to short an end of year rally for department store stocks. However, if we keep getting negative news releases, we may not get a convincing rally in those stocks. Keep an eye on the sector and let's wait for Jeff's long play to make him some money before stepping in and getting short. I'm targeting a short play just after Christmas, or possibly the New Year, if we can get a rally in the RLX to around 300 (currently 274).

  John Seckinger   12/17/02,  10:29:54 AM
It would be nice if the breakout above 8627 had a little more volume, and rising only to 8638 isn't much of a follow-through. Nevertheless, I still have expectations for higher prices as long as 8600 holds. At current levels, the power of the range trade seems to be dominating. Will we take out the lows by a few points and then rebound higher? Checking the Intermarket relationships, bond prices are off their highs and the Utilities Index (UTY) continues to power upwards. This UTY index has marched higher, albeit slow, for seven consecutive sessions. Currently at 255, its 200 DMA (exp) is still much higher at 275.

  Jeff Bailey   12/17/02,  10:17:30 AM
McDonald's (MCD) $16.01 -7.8% ... Dow component continues to have trouble and once again warns and issues Q4 guidance below consensus. Company said that based on December results, expects Q4 to be lower than the first two months of the quarter and expects margins to be pressured lower than the comparable period last year. Now expects Q4 EPS of $0.25-$0.26, which is well below consensus of $0.32. Forecast includes a foreign currency benefit of $0.01-$0.02. Link

  Mark Phillips   12/17/02,  10:13:52 AM
Murphy is alive and well. No sooner did I post my last comment on the ROOM play than it reversed course and fell under its opening lows. That broke the pattern of higher lows and has the play looking more atractive here. Now I'd like to see resistance begin to develop either at $62 or up at $62.50 to confirm yesterday's rebound was just a respite in a developing downtrend.

  Linda Piazza   12/17/02,  10:13:39 AM
In earliest trading this morning, declining volume was slightly ahead of advancing volume among both NYSE and Nasdaq issues: .95 and .86, respectively. Up volume was less than down volume on the NYSE, by a ratio of 47:55, but up volume was far ahead of down volume on the Nasdaq, by a ratio of 123:44. New highs were above new lows for both. Earliest trading volume figures can sometimes be misleading, so we'll check a little later in the morning, too.

  Linda Piazza   12/17/02,  10:06:06 AM
As the COMPX was printing day's highs, both (5)(3) and (10)(5) 60-minute stochastics have been showing overbought conditions. The (5)(3) showed those same conditions all day yesterday, so overbought levels shown by this "twitchy" (to use Jonathan's description) stochastic setting doesn't guarantee a fall. I've seen that 60-minute stay pinned in overbought or oversold levels for a couple of days while prices continue to climb (or drop, in the case of oversold levels). It can cycle down while prices hold steady. It does, however, signal caution to bulls and a need to follow trading plans.

  Mark Phillips   12/17/02,  10:05:10 AM
ROOM $62.67 (+0.19) Following through on its sharp recovery on Monday, shares of ROOM managed to briefly crest the $63 resistance level (also the site of our stop) this morning. While the initial pullback may look attractive for aggressive players, I wouldn't be interested in taking an entry unless the stock drops under the morning lows of $62.25. As it stands right now, ROOM is putting together a series of higher intraday highs and lows -- not the best setup for a successful put play. If in the play, honor your stops.

  Jeff Bailey   12/17/02,  10:02:22 AM
Comcast (CMCSA) $24.50 +0.40% ... hi jeff thanks for your hard work....would like to get your idea on CMCSA wat you think I have a short postion...support? and restance?

I need to find out more about the difference between CMCSA Link and CMCSK Link , as their p/f charts slightly different. However, CMCSA recently gave sell signal at $23, but comes after a low pole warning (reversal of long column of O by X), which may hint stock has found a longer-term bottom. Resistance below $28.00, but short has stop at $28 as trade there is triple-top buy signal above trend. Support on p/f chart is bullish support trend at $19.50.

For more "detailed" levels of support/resistance, I've taken retracement from $28.30 (06/18/02 high) to lows of $17.50. This has 80.9% resistance at $26.23, 38.2% $24.17, 50% at $22.90 and 61.8% at $21.62.

Not crazy about a short here as oscillators turning up. Might look at selling a $22.50 or $25 put near-term.

  John Seckinger   12/17/02,  10:00:20 AM
The Dow did find resistance at 8627, and is now back at its 50% retracement. All signs point to a range trade, but there is still a chance the Dow will use either 8627 or 8587 as support or resistance, respectively, in the near term. This pattern is still fairly common, but definitely harder to trade than yesterday. Market makers are firmly in control. Let us hope this changes.

  Jeff Bailey   12/17/02,  9:49:58 AM
Sectors mixed this morning and quick look is about 50/50.

Early strength in Fiber Optice (FOP.X) 49.66 +1.03%, DJ US Home Construction (DJUSHB) 312.84 +1.07%.

Weakness in Oil Service (OSX.X) 91.93 -1.04%, Wireless Telecom (YLS.X) 55.64 -0.71% and Drugs (DRG.X) 304 -0.65%.

  Steven Price   12/17/02,  9:49:47 AM
Swing Trade Signals
The COMP and NDX are back in the green, but just barely. The Dow/SPX/OEX are still red, but have recovered some of the morning's losses and have given back less than 10% of yesterday's gains.

Current readings Dow 8614/SPX 909.58/OEX 462.31/COMP1402.70

  Linda Piazza   12/17/02,  9:47:56 AM
A caution: Jeff and others have written about the importance of a trading plan. I’ve often mentioned knowing your trading style when choosing a trade. In this triple-witching week, it’s even more important to pay attention to your trading style or plan. Although many love trading slightly OTM front-month options during expiration week, I stay away from them. A study of my trades pointed out that my losses most often came from front-month trades entered on seemingly perfect setups during the Thursday or Friday of expiration week. Is it me or the markets causing those losses? Maybe it’s a bit of both. Late in the week during options expiration week, stocks and markets tend to gravitate toward certain numbers, ignoring how they should behave according to technical analysis. Also, perhaps in an attempt to capitalize on those cheap options, I was ignoring some nuance that should have alerted me to stay out of the trade. Whatever the reason, those cheap front-month options no longer lure me. I give those perfect setups time to work.

  John Seckinger   12/17/02,  9:47:23 AM
Side Note: President Bush has decided to deploy a limited system designed to protect the United States against a ballistic missile attack. The first phase should be deployed within two years.

  Jeff Bailey   12/17/02,  9:46:12 AM
Sonic Automotive (SAH) $14.80 -5.6% ... stock lower after cutting its Q4 guidance to $0.48-$0.52 from previous forecast of $0.62-$0.66, and lowering its 2003 guidance to $2.70-$2.80 from $2.95-$3.05. Company said the reasons for lowered guidance is the impact of a slower new vehicle sales environment. Link

  John Seckinger   12/17/02,  9:43:44 AM
Looking at a five-minute chart of the Dow, 50% of the day's range is 8606 (high pullback is 8609 and currently at 8603). Resistance above is seen at 8627, while support is felt at 8587. Hard to decipher direction, since right next to 50% retracement.

  Steven Price   12/17/02,  9:40:36 AM
Swing Trade Signals
That pullback has not been very severe, with the Dow catching a bid and trading back above 8600. Current levels are Dow 8602/OEX 461.78/COMP 1397/SPX 908. I'd like to see some support over yesterday's closing numbers, but if we can get back in the green, with the OEX trading 464, I'd expect the rally to put on another leg.

  Jeff Bailey   12/17/02,  9:40:01 AM
MedImmune (MEDI) $24.94 .... stock halted this morning ahead of today's FDA FluMist evaluation.Link

  Linda Piazza   12/17/02,  9:38:55 AM
At 1396.94, the COMPX is currently printing the day's highs.

  Linda Piazza   12/17/02,  9:36:35 AM
The COMPX gapped down this morning, opening at 1396.33, and currently trading inside the gap from Thursday's close to Friday's open. Bullish traders want the COMPX's fall to be arrested before closing that gap, at about 1388.

  John Seckinger   12/17/02,  9:33:27 AM
Industrial Production rose 0.1% in November, but was slightly less than 0.2% consensus. However, the October production figure was revised higher to -0.6% from -0.8%. Capacity utilization figure came in higher than expected during November at 75.6% vs the 75.4% consensus. The 30-year (ZB03H), after digesting all the reports this morning, is currently higher by '14 ticks at 109'18 and above its 50 DMA at 109'11. The 22 DMA is at 109'18. If the contract stays above 109'18, look for a move to 110. Note: Higher bond prices should mean weaker stocks. For bids to enter equities, a move back under 109'11 would be a good start.

  Jeff Bailey   12/17/02,  9:32:55 AM
The 9:00 AM Intraday Update has been posted. Link

  Steven Price   12/17/02,  9:18:29 AM
Swing Trade Signals
Right now we are LONG a 1/2 position and will look for support on this morning's pullback as a possible addition point. Yesterday saw point and figure reversals into columns of "X" in the Dow and SPX. The OEX would need a trade of 464 for its own reversal. Yesterday's close also took the Dow and SPX over recent resistance at Dow 8625 and SPX 910 from last week's failed rebound on Dec 11. After yesterday's big jump, some pullback can be expected, the key will be where we get new support.

  Linda Piazza   12/17/02,  8:46:49 AM
Economic numbers released this morning include Nov. CPI, up 0.1%, with the Core CPI up 0.2%. These numbers met forecasts. Housing starts were up 2% to 1.697 million, while building permits were down 3% to 1.725 million. These numbers also met forecasts. Currently down 1.10, S&P futures were down before the release of these numbers, spiked higher immediately afterwards, and are now retracing some of those gains as the markets digest the economic numbers and await more later this morning. Gold remains priced at 340.00.

  Jonathan Levinson   12/17/02,  8:12:45 AM
There are 7.25 in 4 day repos expiring today. Any amount that the fed adds below that will constitute a drain. The announcement should be released between 10AM and 10:15 EST. You can watch for the update at this Link

  Jonathan Levinson   12/17/02,  8:07:59 AM
Gold broke 340/oz overnight and is currently trading just below it, while the US Dollar Index got hammered down to below 103.40. Futures are down, and QQQ is currently trading 25.76 from its close of 25.85. I have to be offline until this afternoon- please keep the markets under control for me.

  Linda Piazza   12/17/02,  7:32:14 AM
Overnight, the Nikkei broke its longest streak of down days since 1991, rising .71% to 8510.73. European stock markets didn't follow the Nikkei's lead, however. With U.K. inflation measures rising and concerns about European retail sales swelling, the FTSE 100 fell .92% as of this writing, accompanied by the CAC 40's fall of 1.00% and the DAX's fall of 1.51%. Retailers led the fall on concerns of weak holiday spending. Video-game retailer Game Group Plc lowered expectations for full-year earnings, pulling other video-game related stocks lower. GlaxoSmithKline also tumbled after the U.S. Food and Drug Administration again delayed permissions for the use of Advair Diskus asthma treatment for a new use.

In the U.K., inflation measures revealed that retail prices rose 2.8%, minus mortgage interest payments, with housing and gasoline prices leading the gains. This number limits the Bank of England's ability to lower rates. A Bloomberg article notes that the Bank of England expects higher-than-targeted inflation to endure throughout 2003, commenting that a raise in rates might be the next move.

In other news, Cadbury Schweppes Plc announced a decision to buy Pfizer Inc.'s Adams candy unit.

  Jim Brown   12/17/02,  2:27:04 AM
End of year renewal special - The end of year special has been posted and those readers who want to lock in the cheapest rate possible with a ton of freebies should check it out! Click here: Link

  John Seckinger   12/17/02,  2:23:40 AM
The Futures Trader Wrap has been posted: Link

  Steven Price   12/17/02,  2:23:17 AM
The Swing Trade Game Plan has been posted: Link

  Jim Brown   12/17/02,  2:22:53 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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