Option Investor
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  Jim Brown   12/18/02,  5:23:18 PM
Many UPS holiday helpers were told not to show up for work today. Package volume was insufficient to require drivers helpers. This should be a key indicator of the health of holiday sales since UPS typically is buried in the week before Christmas. Volume was reportedly light yesterday as well but temp workers put in half a day.

  Jim Brown   12/18/02,  4:29:07 PM
ORCL - Oracle beat the street and their prior estimates with earnings of $.10 cents a share. Oracle's prior estimates were in the 8-9 cent range. The press release bragged about building momentum across industries and regions. A bullish earnings report in the tech sector? Can it be? It will be interesting to see how the news is spun as the day progresses. ORCL up to $11.25 in after hours from a $10.65 close.

  Jim Brown   12/18/02,  3:55:04 PM
Nice bounce off that double test of the 100 DMA at 8411. Art said there was a decent "buy on close" program on the NYSE. Could trigger some short covering here.

  Linda Piazza   12/18/02,  3:54:22 PM
Yesterday's doji on the COMPX daily chart proved predictive when it promised that the upward momentum had been lost. Although the last few moments of trading can change the shape of today's candle and change the outlook, too, here's the $COMPX candlestick chart as it exists so far: Link As can be seen, if nothing changes before the close, this candlestick formation hints at an evening-star formation, a three-candle formation that includes a white candle, a doji ideally sitting above the white candle, and then a red candle, ideally below the doji. Not only was today's candle below the doji, but it gapped below it, adding to the bearishness. Complicating the interpretation of this in a bearish light, though, is the fact that an evening star formation should come after an upward move, and I don't know that you can properly call the most recent move upward. The COMPX appears to have been consolidating, more than anything. That blunts the predictive power of this potentially bearish pattern. Still, Nison features an example of an evening star in BEYOND CANDLESTICKS (page 114) that mimics this setup almost exactly. The stock in question didn't fall immediately, but instead consolidated a bit more, but Nison felt the presence of that evening star was predicting weakness in the stock.

Note: The stock in Nison's book did fall after a few days.

  Jeff Bailey   12/18/02,  3:53:21 PM
Before the close I do think that there's been some option expiration support in play today as depicted by today's low trade of $25.05 in the QQQ as mentioned in last night's index Trader's wrap (final paragraph)Link

Also "suspicious" is today's SPX low of 887.82, which is pretty darned close to the 888 lower range of expiration support.

Has me thinking potential bid higher tomorrow for an SPX peg of 900. Not a reason to "buy" the SPX, but more of a reason for short-term bears to protect some gains.

  Jeff Bailey   12/18/02,  3:47:27 PM
The 3:15 PM Intraday Update has been posted. Link

  Steven Price   12/18/02,  3:46:59 PM
Steven: ROOM 61.10 - 06 - 5.26 put play URDML 60/Jan stock has not moved below 60.50, has this pretty much become support, where do you see support/resistance. Thanks for input on MM.

Hotels.com (ROOM) $60.94 (-0.22)This stock has been stuck in neutral the last couple of days, since the failed rebound following its PnF sell signal at $60. I would not recommend a new entry here, unless it falls below the recent low of $59.45. For those holding the play, I would start to be concerned about time decay, as the stock is moving sideways. I am not quite ready to close the short, but I'm not so sure about the speed of the move anymore. We have lowered the stop to $63.00, which is just above the 50-dma. A move over that level would have me sufficiently convinced that the stock is at support and I would close the play. I still think the downside has plenty of room if we can get the breakdown, giving a decent risk/reward from the current level. Some bounce can be expected after a big fall and the fact that the bounce has failed is encouraging.

  John Seckinger   12/18/02,  3:37:34 PM
The dollar is slightly higher today at 103.64 and trying not to close near a multi-year lows, while February Gold (GC03G) index continues to power higher by two dollars at 344.8 and posting a higher daily close for seven consecutive sessions. The Feb contract also appears to be at a contract high. I calculate the upside objective, based on a wedge breakout, to be just above 350. With this said, we appear to be entering a critical stage for both markets, and I would not be surprised to see these trends reverse course over the next few weeks. By reversing course, it should help stocks in general.

  Jim Brown   12/18/02,  3:36:00 PM
Dead stop at the 100 DMA of 8411 again. This is strong support but we are not out of the woods yet. The A/D line is nearing -3000 issues and declining volume is still increasing.

  Linda Piazza   12/18/02,  3:34:23 PM
Here’s an interesting—if-disturbing chart from Stockcharts.com. It shows the S&P 500 breaking through a green upward-trending line in the middle of this year. The last time the S&P 500 moved below that trendline was in 1985, and that violation was a minor one that hasn’t since been repeated until the recent break. The longer a trendline is in effect, the more serious it is to see a violation. This violation suggests that this trendline should provide strong resistance to future rallies to the 1000 area. Link

  Kent Barton   12/18/02,  3:32:34 PM
Oil Service HOLDRS (OIH) $58.55 -1.50: The ongoing strike in Venezuela and President Bush's rejection of the Iraqi arms declaration has pushed crude futures (cl03f) to new multi-month highs. Why, then, are the oil service HOLDRS moving lower? I can see two possible reasons for the decline. First of all, Haliburton (HAL) has sold off sharply on the heels of the company's asbestos settlement (see the 13:50 post). Investors may have heard something they didn't like during the company's conference call. In any case, HAL is pressuring the sector. Secondly, technicians will note that OIH has pulled back to its recent trend of higher lows. The stock may have been due for a pullback after breifly popping its head above the 200-dma at $59.71. Although the daily stochastics are looking bearish, more upward movement in the price of oil might help the OIH rebound from its ascending trendline.

  Steven Price   12/18/02,  3:32:15 PM
Swing Trade Signals
The Dow is re-testing that 100-dma again at 8411. We just got a bounce from that level, but it is looking less likely that we'll get that 8490 long confirmation by the end of the day. The LONG signal from this level is still sitting above strong support and I'll leave that signal open unless I see something significant to change the bounce strategy. We are still heading into a traditionally bullish time of the year, and if we are going to get a bounce, it should be from this area. I could still see a pullback as far as 8300, but that won't change the strategy.

Current levels Dow 8421/SPX 888/OEX 451/COMP 1356

  Jeff Bailey   12/18/02,  3:29:08 PM
Sell Program SPX 888

  Mark Phillips   12/18/02,  3:22:43 PM
Making the case for a bounce In trying to determine whether the broad market is going to continue in its present range (Read: bounce back up from today's lows), I thought I'd take a rather unconventional view of the landscape.

Let's use the OI play list as our "Map of the Market" and see what it has to say. Currently there are 4 Calls and 6 puts, for a total of 10 plays that is slightly biased to the bearish camp. Good, that makes sense with respect to the broad market action. Let's review each of them in terms of where they are with respect to support.

Calls: CTXS - Holding near $13, with major support near $12

ISSX - Holding near $20 with strong support at $19

MERQ - Sitting near $30, with strong support at $29

OVER - Giving back a bit today, but solid support near $28.50

Puts: AIG - Weak again today and finally pushing below $59, but watch out for solid support near $58

COST - Some mild weakness this morning but holding near unchanged for the day.

DLX - Breaking to new multi-month lows again today, but no conviction, as has been the case throughout this downward move.

MMM - Tested the $120 level and rebounded...now up nearly $1 from the intraday lows.

RKY - Caught a bounce from just above the $60 support level.

ROOM - Once again found support just over the $60 level.

See the common thread here? Few of the plays are breaking down and even those that are hitting new recent lows are failing to elicit any follow through selling. Typical pre-holiday action, don't you think? If pressed, I'd have to side with Jim in being very skeptical of any breakdown over the next couple weeks. Until 2003 rolls around, dips below recent lows in the broad market should make for attractive bullish entries to hold into the end of the year.

  Jonathan Levinson   12/18/02,  3:21:22 PM
Precious metals continue higher still, with HUI just breaking above 143, +5.80 on the day, XAU +1.89 to 76.56 despite the anti-trust suit announced against ABX. The COMPX is treading water, yet the QQV is actually negative on the day, currently -.09 to 41.71. What, me worry?!

  Jim Brown   12/18/02,  3:19:07 PM
Jim, Noticed a note on DJ Newswire this afternoon that brokerage account margin debt is up 1.9% for November. It's information like this that has me get out my bear coat. The little guy putting his toes in the water to have the pirahnas chew off... I too hope for a Christmas rally, but only to short. Nearby military base is gearing up to outfit, vaccinate, etc. the reservists/guardsmen about to be called up -- planning date is about 6 Jan 03. This will be ugly news even though the political talking heads have already mentioned the possibility. Also, it will be that many less people to shop and spend money. Take care and thanks for the updates on shopping around the U.S. Coleen

I have had several readers "in country" send email that the most likely attack date was the new moon in January which was also the attack date back in 1991. This is the ideal weather/climate timing with the anticipation of a 60-90 day conflict. (so they say) With the heightened rhetoric about Iraq today it appears the drumbeat is increasing. On the margin front I would see that as a sign that retail traders are in fact coming back into the market and as you speculated just in time to be a bedtime snack for the bears if they have no staying power.

  Jeff Bailey   12/18/02,  3:18:59 PM
Barrick Gold (ABX)$15.68 -1.38% ... lagging XAU.X +2.53% upside move, but recovering from the lows after Blanchard and Company files a $2 billion suit accusing Barrick Gold and JP Morgan (JPM) $24.07 -3.8% of unlawfully manipulating the price of gold and making $2 billion in short-selling profits by suppressing the price of gold at the expense of individual investors. Blanchard is one of the largest retail dealers in gold commodity.

  Steven Price   12/18/02,  3:06:13 PM
Deluxe (DLX) $40.27 (-0.58) OI put play DLX continues its series of lower lows, with another new relative low today. $40 is bound to provide some support and new entries should look for a move beneath that level to initiate. Traders who chose our possible entry point of the failed rebound to the 200-dma at $44 may want to consider taking some profits as we approach that possible bounce point.

  Steven Price   12/18/02,  3:01:52 PM
American International (AIG) $58.76 -1.81 OI put play AIG rolled over once again from its recent rebound and has traded a new relative low, breking recent support at $59.00. The breakdown below that $59.00 support level looks weak, but we are approaching support in the Dow between 8300 and 8400. New entries should be weary of a bounce from this area and may want to use a failed rebound below $60 to initiate.

  John Seckinger   12/18/02,  2:55:02 PM
And just so everyone doesn't think I am crazy with my "open to close" theories, Jim's 8490 area matches up very nicely to the low during the first five minutes of trading at 8487.83. I do recommend starting with pattern recognition on a weekly, daily, 120, and 60-minute chart; then getting micro is that fits your style of trading. It is amazing how many tools are available. I am starting to become a fan of the bullish percent, since it gives me a good idea of risk management. My next endeavor? Bollinger Bands, which I used before Chicago but strayed away from because it didn't fit my style. I think it does now.

  Jonathan Levinson   12/18/02,  2:53:52 PM
This most recent blast of selling created a consensus on the fickle 5(3) stochastics, and they are now looking bearish across all daily and shorter timeframes. HUI and XAU have hit new intraday highs.

  Jim Brown   12/18/02,  2:47:32 PM
Looks like the 100 DMA is going to be revisited at 8411. A drop below 8435 would be a lower intraday low and could accelerate that retest. The declining volume is accelerating again as well as the A/D line to the downside with -2741 issues.

  Linda Piazza   12/18/02,  2:42:57 PM
Jim mentioned watching the 8490 area for confirmation of a rebound in the DJI. An equivalent level to watch in the COMPX is the 1367-1370 level Jonathan and I noted earlier today. The 1367 level serves as the base of a double top pattern formed across several days (see my 11:17 post), and should now serve as resistance if that pattern is to reach its target. If the COMPX moves above 1370, traders would have proof that the resistance wasn't holding.

  Linda Piazza   12/18/02,  2:32:01 PM
Taking a look back at the two IPO's for today, I see that hospice program operator Vistacare (VSTA)has extended its gains to 15.40, from an initial public offering price of $12. Commercial Capital Bancorp (CCBI) moved down a bit to 8.10, but is still above its IPO price of $8. While these gains don't meet those of the IPO's introduced during the bubblemania period, and shouldn't, their performance is better than that experienced by many IPO's during the last couple of years. These stocks aren't optionable, of course, but I mention their performance because some consider the introduction and relatively strong performance of IPO's to be a sign of an improving economy.

  John Seckinger   12/18/02,  2:31:34 PM
With the Sox lower by 6.29% at 300.49, is there hope for this index? Support should be found at the round number of 300, but more importantly the Bullish Percent (currently Bear Alert at 62% and won't be calculated until tonight) could fall as low as 50% and possible give shorts a reason to re-evaluate and maybe even cover in the near term. The responsive buying should help the Dow if things go according to plan.

  Jonathan Levinson   12/18/02,  2:31:03 PM
Other than a couple of buy and sell programs, volume has been drying up through the afternoon on the QQQs. The stochastics have become chopped up, point down on the daily candles, up on the longer intraday timeframes, and down on the shorter intradays. The put to call ratio has risen to the mid- to high mid .80s. Very little guidance in the indicators, with price holding right at the pivot area.

  Jim Brown   12/18/02,  2:25:53 PM
Looks like the 100 DMA on the Dow at 8411 held the line against the sellers and is providing support for the current bounce. If the buyers decide the bears can't push it any farther down then there is a good possibility it will cause the bargain hunting to begin. The A/D volume has been flat for the last 30 min and the 60 min MACD (8,18,6) and STOCH (10,3,5) are beginning to turn up. If we clear the previous intraday high around 8490 I would see that as confirmation of a rebound and a secondary entry point. If we fail again below 8490 then we have a lower high and risk of retesting 8350-8400 once again. In the time it took me to type this another bout of selling appeared which indicates we are not out of the woods yet. Watch for a break over 8490 as confirmation of any new long positions.

  Linda Piazza   12/18/02,  2:15:50 PM
In his latest intraday email update, Jeff mentioned how several of the indices were trading in relationship to their 50-dma's. I took a look at the broadest of the markets, the Wilshire 5000 ($WLSH on stockcharts.com and $TMW on livecharts.com). Currently trading at 8452.94, this market currently trades below its exponential 50-dma at 8503.83.

  Jonathan Levinson   12/18/02,  2:13:23 PM
An anti-trust lawsuit filed today accuses Barrick Gold Corp., Toronto, and J.P. Morgan Chase & Co., New York City, of "unlawfully combining to actively manipulate the price of gold" and making (US)$2 billion in short-selling profits by suppressing the price of gold at the expense of individual investors.

Here's the full link from Bloomberg: Link

  Ray Cummins   12/18/02,  2:08:51 PM
LXK Slumps on UK News
The European Parliament dealt a blow to major printer companies such as LexMark (NYSE:LXK) today, voting unanimously to ban them from forcing consumers to buy manufacturers' own-brand ink refills. The printer-ink provision was included in a last-minute amendment to a bill requiring manufacturers of electronic goods to pay for recycling them and environmentalists as well as consumers who need to replace the ink cartridges in their computer printers were pleased with the requirement.

As of 2:05 PM EST, LXK was down $2.39 at $60.95 and bearish positions in the Spreads/Combos and Premium Selling portfolios benefited from the news, not to mention the overall negative trend in technology issues.

  Steven Price   12/18/02,  2:02:34 PM
Swing Trade Signals
The intraday rally has faded back below intraday resistance levels. This is similar to last Friday's failed bounce before the big rally on Monday. While we may not get the same power on the bounce, this morning's support around 8400 still leaves us with a high percentage entry. Those traders looking to enter long should also keep an eye on the SOX, which has broken slightly below support at 300 and is now trading 299.31. The chips led the market lower this morning and any bounce would be much stronger if we can get a rebound in that area, as well.

Current levels Dow 8449/SPX 891/OEX 452.98/ COMP 1361

  Jonathan Levinson   12/18/02,  2:01:35 PM
Still no tradable action as the indices continue to struggle at this s/r line. The TRINQ at 2.85 offers no guidance- if it were reading 4 or 5, we could adopt a bullish bias, but it's staying in neutral sell territory. Bond yields also remain rangebound, FVX -7.6 bps at 2.991%, while precious metals continue to do well with gold above 341/oz, up over 4.50 on the day. The QQV has dropped a bit, currently only +.26, although in a dead range volatility tends to drop. This smells of op ex week to me, although Wednesday seems a little early for price to start sticking to its round number options expiry numbers.

  Jim Brown   12/18/02,  1:59:03 PM
Sears - "S" dropped back to $24 this morning on the news from FAOO and the weak sales reports from TGT. It has rebounded +.50 cents off the lows. I recommended Sears last week on any pullback with risk to $23.00. I still see Sears as a long-term opportunity and at $24.39 currently there is very little risk for long-term investors. I like the stock with a stop at 22.50 and initial potential to $30. The Lands End package count is still running a close second to Amazon in UPS trucks and the last comment from Sears I can find said they were pleased with the late November shopping trends that were inline with Sear's expectations.

  John Seckinger   12/18/02,  1:58:37 PM
Shares of Monsanto (MON) are lower by 9.2% at 18.35, following the company's chief executive, Hendrik Verfaillie, resignation effective immediately. Shares had a high of 20.60 during trading on Tuesday, and almost hit its 200 DMA at 20.85. Today, shares had a low of 18.17 while its 22 DMA (exp) rests slightly underneath at 18.11.

  Jeff Bailey   12/18/02,  1:52:33 PM
the 1:00 PM Intraday Update has been posted. Link

  Kent Barton   12/18/02,  1:50:20 PM
Haliburton (HAL) $20.64 +0.26: Moving slightly higher after the company settled an asbestos exposure settlement. The settlement includes $2.77 billion in cash and 59.5 in shares of the company's stock. Although HAL has quietly gained more than 70% from its late-September lows, the bulls will now have to contend with overhead resistance in the $21-$22 region.

  Linda Piazza   12/18/02,  1:45:48 PM
John just mentioned in his 13:31 post that the utilities were outperforming the markets. Last night in my ever-ongoing quest to learn more about the markets, I was doing research on group rotation. Many economists believe that utilities are a leading group, while steels are a lagging group. Utilities might be expected to perform best on a relative basis near the beginning of a market cycle, while steel companies might be expected to perform best on a relative basis near the end of a bull market or the beginning of a bear market. With this group rotation in mind, I took a look at a PerfChart from Stockcharts.com, comparing the relative performances of the S&P 500, the Dow Jones US Steel Index ($DJUSST), and the Dow Jones Utility Index ($UTIL). Link A slider at the bottom of this chart allows you to follow the progression of these three measures from the present back to early 2000.

First, I looked for periods when the steel companies significantly outperformed the S&P 500’s. A period like that began early this year and carried through until about September, although 2001 also saw several months when the steel companies outperformed the S&P 500. Group-rotation theory might point to this period as the end of the bull market or the beginning of a bear market, when most of us hope we’ve been seeing the end of the bear market!

A glance at this chart did show that in mid-July, the utility index began a period when it outperformed the S&P 500, ahead of the August rally in the S&P’s, but the utilities sank in relative performance in early September, ahead of the October move lower in the broader markets. Currently, as John mentioned, the utilities may be moving up again in relative performance. What bulls need to see is a sustained period of outperformance that would signify that this leading group is piloting the broader markets into a new bull market. This theory of group rotation isn’t a perfect predictor of market behavior, especially as interpreted by someone as untrained in economic theory as I am, but it is one tool for traders to examine when thinking about the markets.

  Jeff Bailey   12/18/02,  1:44:50 PM
Sell Program SPX = 890

  Kent Barton   12/18/02,  1:40:59 PM
Generic drug-maker Hi-Tech Pharmacal (HITK, $23.12 -0.85) announced a 3-for-2 stock split this morning, to be distributed on January 17th to shareholders of record on December 30th. The stock has more than doubled from its September lows, thanks to a few FDA approvals. Last week's dip to the 50-dma ($17.01) offered a heckuva entry point - shares have since added more than 40%. HITK is currently pulling back from Tuesday's all-time highs. Traders looking to play a split run in this ligher-volume stock will probably want to wait for a pullback to previous resistance at $20.00.

  Linda Piazza   12/18/02,  1:32:44 PM
Reader Question: Where are you getting your adv/dec numbers? They don't match the numbers given on quote.com.

Response: I don't use quote.com, but one difference might be in the way the numbers are calculated. To calculate adv/dec figures, some sources subtract declining issues from advancing issues, coming up with a positive number when there are more advancing issues than declining issues and a negative number when there are more declining issues than positive issues. Hence, you'll hear people talk about a "negative adv/dec number." Others use the method I prefer--the ratio method, dividing advancing issues by declining issues. A number greater than one indicates that more issues are advancing than declining, and a number lower than one indicates that more issues are declining than advancing. Some sources lump all issues together, while some separate NYSE and Nasdaq.

Here's the site I use for raw information, doing the divisions myself: Link This briefing.com site also provides a sidebar to the left of the page titled "Market Internals Data," and provides both the raw data and the already calculated ratio for adv/dec figures. Link However, it doesn't provide up/down volume information, and I like to see both. One note: if you check one site and then the other, there may be minor differences in adv/dec ratios. Both numbers are delayed, and the minor differences result from minor differences in the time data is reported.

  John Seckinger   12/18/02,  1:31:24 PM
The Dow did see some resistance at the 8485 area profiled earlier, but one more test there might just be the ticket for bulls. The Sox is down 6% at 301, and bulls should get more confidence with a move back above 305. Once again, the Utilities Index (UTY) is outperforming and down fractionally to 256. Looking at the 30-year, the ZB03H contract is '13 ticks off its intra-day high, and a move under 109'16 (currently at 109'23) should be encouraging for bulls as well.

  Ray Cummins   12/18/02,  1:10:19 PM
More FDA Decisions
Shares of Corixa (NASDAQ:CRXA) advanced today after an FDA advisory panel endorsed the company's experimental anti-cancer drug, Bexxar. However, one biotech firm that isn't profiting from the panel's support for Corixa's drug is Idec Pharmaceuticals (NASDAQ:IDPH) because their anti-cancer drug, Zevalin, will face competition from Corixa's Bexxar.

While we were not playing Corixa in anticipation of a favorable decision, our bearish credit-spread in IDPH will benefit from the news. The current position (DEC45C/DEC40C) is at maximum profit with the stock now trading near $34.

  John Seckinger   12/18/02,  1:01:50 PM
Fannie Mae reportedly expects a record $2.5 trillion of mortgage originations in 2002. The company does expect this figure to fall to $2 trillion in 2003. Cash due to the massive refinancing is expected put $170 bln of added cash in the pockets of homeowners this year, up from a $100 bln rise in 2001.

  Jonathan Levinson   12/18/02,  12:58:03 PM
I am waiting yet to go long but a bit confused on some numbers. The Dow 8431 and the S & P 889. Then the Nasdaq 1362, the Nasdaq 100 Index 1005. Are these numbers important for closing or inter-day or do they even mean anything. I hope you can understand what I am trying to say.

Loud and clear, W.J. These are critical support/resistance lines. You can think of them as pivot points. Most simply, you can be long above them and short below them. I'm watching as the price chugs along, currently just above these levels. If you're itching to go long, doing so here with a stop just below these levels isn't the worst trade you could try. I would insist on the stop, though, if you want to get in early. As is currently being seen, the bounce from the dip below those levels is not particularly strong or fast, and a reversal is very possible.

  Ray Cummins   12/18/02,  12:55:08 PM
MEDI Credit-Strangle Update
One of the more aggressive positions in the Spreads/Combos section; a credit (short) strangle in MedImmune (NASDAQ:MEDI) appears likely to finish at maximum profit now that the company's flu vaccine FLUMIST has been approved by the US Food and Drug Administration.

Late Tuesday, an FDA advisory panel recommended that the company's experimental nasal-spray flu vaccine be approved for people aged 5 through 49, but since the biotech firm had sought approval to market the vaccine for people up to age 64, the decision was seen as only a minor victory and shares of the company's stock did not experience the large gains that these decisions often produce. As of 12:45 EST, the stock was up only $2.63 at $27.62, well within the maximum profit range for our neutral-outlook position (DEC30C/20P). Conservative traders closed the play prior to the meeting for a small gain but for those who held through the announcement, the profits were upwards of 20% in less than two weeks.

  Steven Price   12/18/02,  12:51:50 PM
Swing Trade Signals
So far the rebound has been pretty reliable. The move in the Dow back over 8450 was a move through intraday resistance and 8490 is the next significant intraday resistance level from this morning. The 50-dma sits at 8472 and we just broke back above that average after struggling briefly.

Current levels are Dow 8477/OEX 453/SPX 893/COMP 1364

  Jonathan Levinson   12/18/02,  12:41:32 PM
Well, it's turning out to be a long critical moment for the COMPX. The TRINQ has risen on this move off the lows, currently 3.24, an interesting divergence as selling pressure increases alongside price. QQV is lower, up a mere .46 on the day. The volume on QQQ has been lower on this intraday upmove, which isn't what a bull would prefer to see. Precious metals continue to hold their gains as bond yields continue to hold their losses. QQQ is currently trading 25.20. The put to call ratio near its lows at .84 isn't providing much guidance, as to .80 level is too high to point to a short term top, but certainly too low to indicate much of a bottom. I'd guess that we'll see a continuation of this narrow range in the COMPX.

  John Seckinger   12/18/02,  12:34:25 PM
Is there a 'war trade' going on? Possibly. "Unnamed officials" said President Bush would probably declare Baghdad in breach of a United Nations arms resolution later this week. International benchmark Brent crude oil rose 65 cents to $28.57 a barrel and hit a two month high of $29. Looking at February Light, Sweet Crude, the CL03G contract is currently at 30.60 and has a high of 31.15.

  Mark Phillips   12/18/02,  12:32:07 PM
More on Housing Remember the work we did back in early November on Relative strength in the Housing sector? Here are the links in case you missed them the first time around. Link Link

At the end of our investigation, I concluded that RYL was the weakest of the housing stocks, with LEN coming in a close second. Perusing the RS charts today, I'd have to conclude that nothing has changed. RYL is still the weakest, with LEN close behind. The only thing that keeps LEN in also-ran status is that it has failed to take out a prior low on the RS chart since December of last year. That actually looks strong relative to the RYL RS chart, where the stock has been marching to new lows for most of the past year.

My gut feel is that we are nearing the point where we could see a big breakdown in the sector (and especially those weaker stocks in the sector). Unless there is a dramatic improvement of the $DJUSHB strength relative to the broad market, rallies in these weaker housing stocks continue to look like bearish entry points.

  Jeff Bailey   12/18/02,  12:30:49 PM
Sell program Premiums ... Jeff, Don't know if it was pure coincidence or luck but I set alerts today for 1st time on the Camp #'s on the spx. Just as the ES started to break its little triangle on the 5m chart, 7th bar, i heard the alarm go off for sell programs, around 894-i wasn't trading today but had i been thiat sure would have given me confidence to hit the short button! Can I use it like this or was that just coincidence? Thanks

I don't think a coincidence. I got alerts to at around 10:00 (SPX 892) and 11:00 (SPX) 888. Has me looking for some intra-day resistance right here at SPX 892.06.

  Linda Piazza   12/18/02,  12:26:02 PM
Two IPO's debuted today. As of this writing, hospice program operator VistaCare (VSTA) traded at 15.05, more than $3 above its initial public offering price of $12. Commercial Capital Bancorp (CCBI) traded at 8.20 as of this writing, with a day's high of 8.62, both levels above its IPO price of $8.

  Mark Phillips   12/18/02,  12:23:21 PM
LEAPS UPDATE LEN $52.57 Housing strength really seems to be on the wane -- at least in terms of the home construction stocks. We've been playing the downside in LEN in the LEAPS Portfolio for several weeks now and I'm noticing the behavior gradually changing in favor of the bears. When we first initiated the play back in October, it was really resistant to drop and very susceptible to strong bounces on the slightest favorable piece of news.

But look at today's action. LEN guided higher for Q4 and for 2003, but it is barely trading in the green today and holding below strong resistance near $53.50. Adding to the strength of overhead resistance is the 50-dma ($53.32) and the turning down 200-dma ($$54.18). The Housing sector ($DJUSHB) is barely positive as well, and it looks like another failed rally is in the making here, as the sector appears to be rolling over right at its descending trendline that began back in late August. This is the fourth attempt to break that trendline since the October lows and with each failure, that trendline becomes stronger.

  Linda Piazza   12/18/02,  12:06:47 PM
VLO: 37.07, down $0.50 on light volume. Yesterday, I wondered whether Valero Energy's pop above P&F resistance at 38 was a trap, as the sellers immediately stepped in and drove the price back below the 37.50 neckline of the reverse H&S formation. Link Although VLO moved back above that 37.50 neckline yesterday, it's pulling back today. It's still above the 50-dma (simple) at 36.73, one of the three conditions I'd thought necessary for a bullish play in this stock, with a move above that 37.50 neckline and the 38-level P&F resistance being the other two. My suggestion yesterday that conservative players might want to wait for a close over 38 rather than an intraday move above it before entering a new play seems a good one. (5)(3) stochastics have moved up to show overbought levels. Disclosure: I have a bullish play in VLO.

  John Seckinger   12/18/02,  12:02:55 PM
The Securities and Exchange Commission proposed on Wednesday rules requiring corporate insiders' stock transactions to be posted on the internet. Chief executive officers, board directors and anyone holding 10 percent or more will be affected by the proposal, according to the SEC. Companies currently have two business days to report with the SEC whenever an insider buys or sells stock in his company. Currently, the information can be reported either in paper form or electronically.

  Jonathan Levinson   12/18/02,  11:54:08 AM
The COMPX has made it to 1362 from its intraday low of 1355. The TRINQ remains near its highs of the day at 2.95, ditto the QQV at 1.12. Bond yields are off their worst levels of the day, with the FVX down 7.1 bps, TNX -5.7 bps and TYX -3.7 bps. HUI remains above 140 and XAU above 75. If the COMPX can get back above the 1367-70 area, we can consider the break below 1360 to have been a non-issue. This looks to me like a critical moment for the COMPX.

  Linda Piazza   12/18/02,  11:47:14 AM
Time to check volume patterns again: NYSE adv/dec measures .43, down from (more negative than) the .50 earlier this morning, and Nasdaq comes in at .37, down from .44. Down volume trumps up volume by more than 4.5:1 on the NYSE and by more than 7:1 on Nasdaq. New lows continue to outnumber new highs.

  Steven Price   12/18/02,  11:43:29 AM
Swing Trade Signals
The 8400 level in the Dow is holding so far, and I'd look to add to the 1/2 LONG position for a bounce play if we get another leg down to support around the 38.2% Fib retracement at Dow 8355. Linda pointed out these retracement levels at 09:58:18 for readers who missed them.

  Jeff Bailey   12/18/02,  11:37:14 AM
The 11:00 AM Intraday Update has been posted. Link

  John Seckinger   12/18/02,  11:29:02 AM
Note: The lows on November 14th and 19th in the Dow were 8403 and 8405, respectively. Today's low is 8407. That does reinforce the fact that it makes sense to buy above 8400 and not wait for an exact test. It might happen, but probabilities say there are some solid underpinning bids were waiting for that move to happen (read: never gets there). Bonds are off the highs of 110'03, and a move in the Dow above 8450 should give longs some breathing room.

  Steven Price   12/18/02,  11:20:45 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggerd on the 1/2 LONG signal when the Dow traded 8425 at 11:19:06. Stops are initially set at 8240

  Linda Piazza   12/18/02,  11:17:59 AM
In his 10:59 post, Jonathan mentioned the failure of the triple bottom in the COMPX at about 1360. When the COMPX fell through that level, it then created a rough double-top formation on the hourly charts with the two tops at 1411.69 and 1408.16, formed across last week's trading and this week's. The bottom is roughly in the 1367 area. Using conservative measures (the lowest of the two tops) the target would project to 1326 (1408-1367 = 41. Subtract 41 from 1367 = 1326.) As I've mentioned in other posts, formations on intraday charts are not as significant as those formed on daily or weekly charts, but a double top formed on hourly charts across a week's trading does have more significance that a formation showing up on a five-minute chart. If the COMPX breaks strongly back above the bottom of this formation, its significance would be cancelled.

  Steven Price   12/18/02,  11:12:40 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
With the SOX holding at 300 and the Dow finding support at 8400, let's initiate a 1/2 LONG position on a trade back over Friday's low.

Go LONG a 1/2 position in the the broader market on a Dow trade of 8425

Place stops at 8240

  Mark Phillips   12/18/02,  11:09:01 AM
RKY $60.72 (+0.37) A bounce arrives right on schedule. It might seem strange to see OI Put play RKY trading up in the face of a broadly negative market, but it actually makes perfect sense. In last night's update, we talked about the likelihood of a bounce due to the significance of the $59-60 support zone. Sure enough, RKY ticked down to $60.30 this morning before catching a bit of a bid. Interestingly, this is the stock's first foray above its descending trendline (currently $60.70) since last Monday. Look for resistance at $61, $61.50 and $62 as possible rollover points where new positions can be considered.

  Steven Price   12/18/02,  11:07:53 AM
Swing Trade Signals
Friday's lows are toast. Let's keep an eye on possible bounce points in the Dow at 8400, or 8350. If we get a bounce, then we can enter long with at least a 1/2 position. However, since the 50-dmas fell on the second test, we are left to focus on daily support in the Dow 8300-8400 and SPX 870-880 range. My preferred entries would be from those areas. However, the key here is IF we get a bounce. One of the sector indices I'm watching closely is the Semiconductor Sector Index (SOX) 301.17, which is trading just over support at the 300 level. Since Micron is one of the reasons we fell this morning, that index can give us some good signals for a possible bounce.

  Jonathan Levinson   12/18/02,  11:03:38 AM
Precious metals are having a nice day, with XAU +2.17 to 76.84 and HUI +4.78 to 142.04. Congratulations to all of us beaten up, ridiculed gold bugs, as the break of 335/oz continues to hold.

  Jonathan Levinson   12/18/02,  10:59:51 AM
That triple bottom in the making at 1360 COMPX just failed. QQQ is down 3.12% on the day, but the QQV is up less than 1 point on the day. The QQQ market appears unconcerned by the drop so far.

  Linda Piazza   12/18/02,  10:54:18 AM
Last Friday, the 25.25 level served as resistance for the QQQ's before a brief break upward and a fall to support at 25.00. Bullish player might have hoped that 25.25 would serve as support today, but it looks as if that 25.00 level may be tested now unless the QQQ's quickly move back above that level.

  Jonathan Levinson   12/18/02,  10:52:34 AM
Despite a fresh round of new lows on the COMPX, the TRINQ is still below 3 at 2.74, and the QQV is still quite low, telling me that there's not much fear of a selloff here. Contrarians take note.

  John Seckinger   12/18/02,  10:51:15 AM
Notes on this morning's $35.1 bln Oct trade deficit figure. It was at its smallest level since March as imports fell stronger than exports. Imports fell 2.4% after the revised 1.1% dip in Sep. Auto and consumer goods fell significantly. Exports fell 1% after an 0.4% Sep decline. Capital goods appeared to be affected the most. China's deficit fell while Japan's rose. Looking elsewhere, the German Ifo index (business confidence) came in at 87.1 versus expectations of 87.3.

  Jeff Bailey   12/18/02,  10:41:38 AM
Telephone Data Sys. (TDS) $49.00 -2.19% ... mentioned this one as bearish candidate a while back. Downside alert here at $49, which is double-bottom sell signal and turn vertical count initially bearish to $40. Stock was a laggard in the recent telecom rally. 1/2 position here, then would round to full on break to 52-week low of $44. Link

  Mark Phillips   12/18/02,  10:38:57 AM
MMM $121.86 (-0.64) still drifting lower. MMM is still heading lower, using the descending trendline as resistance. If the recent pattern continues to play out, then it is likely the stock will find support for a bounce later on today to take it back up to that descending resistance line, currently at $122.50. Another rollover there may be our next high-odds entry opportunity. Note that the 50% retracement of the bounce off the September low is $120, and that makes it a likely level to look for the next rebound.

  Jonathan Levinson   12/18/02,  10:38:17 AM
Gold is printing intraday highs above 340/oz.

  Steven Price   12/18/02,  10:36:01 AM
Swing Trade Signals
Friday's low was Dow 8422/SPX 888.48/OEX 451.46. If those levels fall, then look for support at the 38.2% Fib levels Linda highlighted at 09:58:18.

  Jonathan Levinson   12/18/02,  10:27:03 AM
We have bond yields down, with the FVX -7.9 bps for the day, while precious metals are up, HUI +2.02 and XAU +.44, while QQQ volatility as measured by the QQV is +.65 on the day. The TRINQ at 2.35 shows strong but not extreme selling presure in the COMPX, and the TICK.NQ is reading -190. The COMPX is finding support in the 1365 area for the third time since Dec. 9th. If "they" are going to bounce it, it will come here. The put to call ratio came in at .81, not extreme in either direction.

  John Seckinger   12/18/02,  10:25:46 AM
I agree with Linda and Steve. I like support in the Dow near 8400, as well the Fib. numbers listed regarding the NDX. It looks as though shorts will try to defend the 8485 area in the Dow (where breakdown took place), and bulls can really get some confidence if they take out this area. Notice how the bond market rallied almost a half a point to 110'03 as the Dow fell. This area actually is resistance for the ZB03H contract, and a pullback from those levels should help stocks. It doesn't look good for bulls (since "open drive" pattern intact), but we have a lot of trading left. Very interesting: 50% of today's range is 8485.

  Linda Piazza   12/18/02,  10:18:54 AM
Early volume patterns are negative, as expected, with the adv/dec figure at .50 for NYSE issues and .44 for Nasdaq-traded issues. Volume shows greater down volume than up volume by a nearly 4:1 ratio for NYSE shares and by a more than 5:1 ratio on Nasdaq shares traded. New lows outnumber new highs on both. As I've mentioned other mornings, early volume patterns can be distorted, but so far, these patterns aren't encouraging for bulls.

  Linda Piazza   12/18/02,  10:09:01 AM
Those snapped Fib retracement levels for the NDX are 1020.90 (38.2%) and 977.50 (50%), and for the QQQ's are 25.42 (38.2%) and 24.34 (50%). As has been typical lately, the NDX led the other indices, being the first to dip below one of the Fib retracement levels.

  Jonathan Levinson   12/18/02,  10:01:49 AM
The fed has just announced an overnight repo of 6B, for a net addition of 2.5B.

  Linda Piazza   12/18/02,  9:58:18 AM
Steven mentioned the 50-dma's of the various indices in his 9:38 post. You might also watch the Fib retracement levels for support, should the declines resume. Approximate levels (snapping a retracement tool rather than calculating, a more precise measurement) for the various indices are as follows: SPX: 885 (38.2%) and 862 (50%); OEX 450.50 (38.2%) and 438.50 (50%); COMPX 1367 (38.2%) and 1317 (50%); and Dow Jones Industrials 8355 (38.2%) and 8130 (50%).

  Steven Price   12/18/02,  9:51:31 AM
Swing Trade Signals
My next entry is going to depend on how the market behaves in the Dow 8400 area if we get there. If we get another show of support, I will step in LONG for a higher percentage entry.

  John Seckinger   12/18/02,  9:47:49 AM
Looking at the pros and cons: The Dow is under the low during the first five minutes (8487), and the 30-year is higher by '18 ticks at 109'24 (support below at 109'16). Also, the Sox is lower by 3.37% at 309. Pros include the ES contract finding support at 893.50 (low is 893.25), and the NQ03H contract coming only one tick from profiled support at 1025. I do put a lot of weight in the Dow, so I will be looking to see if 8487 can be taken out with some authority.

  Steven Price   12/18/02,  9:40:13 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out on the 1/2 LONG signal when the Dow traded 8470 at 9:38:58

  Linda Piazza   12/18/02,  9:39:35 AM
Studying a ten-day chart of the S&P 500, support levels to watch appear to be 898, 892-893 (correlating well with John's notations in his 9:34 comments), and below that at 888-890.

  Steven Price   12/18/02,  9:38:56 AM
Swing Trade Signals
We're getting red pretty much across the board, with the Dow, SPX and OEX approaching the 50-dmas. Those 50 dmas sit at Dow 8472/SPX 455.84/SPX 895.42. Current levels are Dow 8473/SPX 455.34/SPX 896.68

  John Seckinger   12/18/02,  9:34:39 AM
With the equity markets coming under pressure, there was a H&S formation within the SPX and ES contract (profiled last night in futures wrap) that has an objective of 893.50 for the ES March contract. This 893.50 number matched up perfectly with support found via pivot analysis. This area could be rather important during trading today, especially if this market is going to bounce.

  Jonathan Levinson   12/18/02,  9:30:56 AM
12 point gap down open on the COMPX, TRINQ .58, TICK.NQ -77.

  Jeff Bailey   12/18/02,  9:30:42 AM
The 9:00 AM Intraday Update has been posted. Link

  Steven Price   12/18/02,  9:20:32 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Things aren't looking pretty for the 1/2 LONG position with a stop at Dow 8470. If we are stopped out, I'll wait for a re-test of Friday's lows before jumping bhack in. There is strong support in the 8300-8400 range, and I'll look to possibly step back in on a bounce from that level. I put on only a 1/2 position on Monday, but if we successfully test support down around 8400, a lower risk entry with a stop around 8250 might justify a full position.

Exit the current LONG signal at Dow 8470

  Jonathan Levinson   12/18/02,  9:19:29 AM
The fed drained 3.75B yesterday by adding 3.5B in overnight repos to refund an expiring 7.25B 4 day repo (whew!). So, for today, 3.5B in overnight repos (ON/RP) are expiring. I'll keep you posted on the fed's action when it's announced.

  Jonathan Levinson   12/18/02,  9:10:50 AM
We're seeing buying in bonds, with the five year yield (FVX) down 4.5 basis points, the ten year yield (TNX) down 3.7 bps, and the thirty year (TYX) down 3.1 bps.

  Jonathan Levinson   12/18/02,  8:56:55 AM
On the other hand:

The us$ becomes weaker during times of conflict with the us because of uncertainty. Money is shift from us$ typically to something more stable such as gold or the swiss franc. The swiss franc is normally bullish under these conditions because of its neutral position with regard to military forces. Hence countries around the world sell their us$ to buy the swiss franc.

Look at the chart sf03h you will notice a huge gap up. hope this helps.

Thanks, Anthony. It does.

  Linda Piazza   12/18/02,  8:45:06 AM
Earnings news this morning includes the following: FedEx reports Q2 earnings of $0.81/share versus First Call expectations of $0.79, and revenues of 5.67 billion versus expectations of 5.58 billion. Citing weaker-than-expected manufacturing and wholesale sectors, FedEx guided Q3 expectations to $0.45-.55 versus a previous First Call estimate of $0.54. FedEx also announced a plan to cut capital expenditures by $200 million.

Lennar (LEN) raised targets for fiscal 2003 to $8.50 from $8.10 and announced expectations that Q4 will exceed expectations by more than 10%.

General Mills (GIS) reported Q2 earnings of $0.77/share versus First Call estimates of $0.74 and raised full year outlooks to $2.60-2.62 versus the previous outlook of $2.58.

  Jonathan Levinson   12/18/02,  8:36:45 AM
Conseco's bankruptcy is the third largest Chapter 11 filing, after WCOM and ENE. Linda once mentioned the Kondratieff Cycle, which is a multidecade cycle, the "Winter" of which is characterized by a cleansing of debt and deflation. With this year showing us a wave of record bankruptcies, Kondratieff, who was banished to Syberia for his views on the interplay and sequence of economic cycles in the early 20th century, would no doubt be pounding the table.

  Jonathan Levinson   12/18/02,  8:29:53 AM
The US Dollar Index has been drifting higher from its low of 103.10 to just above 103.80 currently while gold has been drilled down to just above 336/oz. Futures remain very weak and QQQ is currently trading 25.52 on Island ECN from its close of 25.93. The move up in the USD makes sense to me, and I've been confused for at the moves down in the USD on the "story" of imminent war with Iraq. I would expect any externality, be it war or major domestic terrorist attack, or any such event that requires major expenditures of dollars by the US to result in the cost of Dollars to rise. This fundamentalist argument is just that, and is of course subject to what the charts say and do- the fact is that the USD is also oversold after the action of the past week. Either way, it's currently off its lows.

  Linda Piazza   12/18/02,  7:09:25 AM
Last night, Jim mentioned the Micron miss and the Conseco filing for bankruptcy. Both weighed on trading in the Nikkei last night, with semi companies and insurers particularly hard hit. The Nikkei Average closed at 8,344.01, just points above the 19-year low of 8,303.39 hit Nov. 14.

European markets also headed down in early trading. As of this writing, the FTSE 100 is down .78%, the CAC 40 is down 1.05%, and the DAX is down 1.16%. A business confidence number released today in Germany showed that while German businesses have little hope for domestic improvement in the near future, they do look to the U.S. economy for signs of improvement.

Perhaps also weighing on markets today is the expected preliminary report by weapons inspectors to the U.N. on the Iraqi Arms Declaration. Some expect Bush to announce Iraq in violation of the U.N. resolution as early as tomorrow.

General Electric today announced plans to buy Finland's Instrumentarium Oyj, an anesthesia equipment maker, in a bid to expand its footing in the medical-equipment space and to eliminate a major competitor.

  Jim Brown   12/18/02,  4:38:52 AM
Wednesday trading - With the futures down significantly due to the Micron news and the collapse of the German DAX there is a good chance we will see a big gap down at the open. From my wrap on Tuesday night I suggested buying any dip under 8450 with a stop at 8250. That is still my plan. I would love to see a V bottom to stronger support at 8350 but remember we have the 50 DMA at 8454 and the 100 DMA at 8414. That will be some tough resistance. Bottom line, buy the dip with a stop at 8250.

  Jim Brown   12/18/02,  4:20:41 AM
Conseco Files for Bankruptcy - CNC became the third largest company to file for bankruptcy behind WCOM and Enron in terms of assets. The US financial services group said it filed bankruptcy after reaching an agreement with its banks and bondholders. The filing did not involve any of the insurance businesses and several other parts of its business. The company listed $52 billion in assets on its last quarterly report and warned it was in trouble. The $6 billion acquisition of Green Tree Financial in 1998 proved to be one acquisition too many and the debt load finally killed CNC as the economy sank over the last two years.

  Jim Brown   12/18/02,  4:12:08 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   12/18/02,  4:11:51 AM
The Futures Trader Wrap has been posted: Link

  Steven Price   12/18/02,  4:11:30 AM
The Swing Trade Game Plan has been posted: Link

  Jim Brown   12/18/02,  4:10:59 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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