Option Investor
Printer friendly version
  Linda Piazza   12/23/02,  4:10:27 PM
It looks as if the Dow Jones Transportation Index eked out a close above the 2300 level and above its 50-dma (exponential) today, but below the 22-dma (exp). MACD and RSI still look bearish on the daily chart, but the (5)(3) daily stochastic is trying to hinge upward. Will the transportation index dip below support or move above resistance? Today's candle is a doji, anchored in a consolidation zone, indicating indecision. It should be interesting to see what happens this week. While I won't draw too many conclusions from what happens during a light-volume holiday week, this important index bears watching.

  Jim Brown   12/23/02,  3:47:48 PM
I am turning a little more bullish here at the close. The lack of the sellers to manage a real failure on the Dow and the continued ability of the Dow to rebound back over the 8487 pivot point is encouraging. The support seems to be rising and the sellers appear to be running out of steam. With the markets closing at 1:PM tomorrow there will be even less volume and less conviction. However, I expect anybody that wanted to be flat before the holidays has already bailed and tomorrow will be left to the bargain hunters.

  Jeff Bailey   12/23/02,  3:43:34 PM
The 3:15 PM Intraday Update has been posted. Link

  Jim Brown   12/23/02,  3:36:50 PM
On the long side of the ledger IGEN appears to be breaking out over long-term resistance to a new high. It had a nice move intraday and appears to have launched from several weeks of consolidation. Could be the year end bargain hunting and I would want to see at lease a little pullback before jumping on this one.

  Jonathan Levinson   12/23/02,  3:34:33 PM
As the dust clears for the day, we see the COMPX up a whopping 14 points on the day. Despite this, the TRINQ remains overbought at .40, 3.75B in overnight fed money was added, and we saw respectable selling in bonds before yields pulled back to finish modestly in the green. While the bears' projected scenario hasn't occurred, I would be hardpressed to think of today as a "rally". I forget whose quote it was, but a famous investor once said that "the market may go nowhere, but it will certainly get there in the most exciting way possible."

  Jim Brown   12/23/02,  3:33:50 PM
ZBRA - Interesting chart on Zebra Technologies. After a huge drop a week ago the dead cat bounce is failing again. A break below $53.25 might make a good entry point for a Feb $50 put, currently $2.80. The stock is trading below all the major averages and $48 and $46 as the next rough support levels. Highly speculative play, which could appear to be chasing the stock after the recent drop from $63, but still has possibilities.

  John Seckinger   12/23/02,  3:33:38 PM
Shares of Banc of America (BAC) are currently lower by 0.32 cents to 69.98, basically unaffected by the news that the company will allocate about $1.2 billion to pay for bad loans to a major bankrupt airline (most likely UAL). BAC also attributed the fourth-quarter loan loss provision (compared to $804 million in the third quarter) to weakness in the utilities sector.

  Linda Piazza   12/23/02,  3:31:17 PM
Several news sources note that a Ukrainian passenger plane flying from Turkey to Iran crashed in Iran. One source noted 46 deaths. The plane carried Turkish and Ukrainian nationals.

  Linda Piazza   12/23/02,  3:22:52 PM
Week before last, the current SPX 896-898 level provided support from Tuesday afternoon through Thursday, and then was resistance that Friday. Last week, the SPX opened slightly above this level on Thursday, before falling through it, and then this level served as resistance again on Friday. It's been an important level to monitor for the last ten days.

  Linda Piazza   12/23/02,  3:11:00 PM
Do you watch time and sales on the equities that interest you? A reader asked the meaning of a rule note on a NYSE block trade this morning. If you want to bookmark the rules site on both NYSE and Nasdaq-traded equities, here they are: For the NYSE, click on the "Rules and Changes" box on this page Link For the Nasdaq-listed stocks, click on the Nasdaq manual, with a link found here: Link

  Mark Phillips   12/23/02,  3:03:45 PM
XMSR $3.24 (+0.24)

Hi Mark: XMSR 3.27 + .27 (9.00%) after this mornings news, on PnF do you see a sell or buy, where do see upside potential if any. Thank you for comments on today's MM.

Looking at the intraday chart, I'm glad I wasn't one of those that got sucked in at the open, as the first trade was the high of the day. The stock hasn't fallen back much, but clearly the opening gap was overdone. Looking at the candle chart, I don't see a lot that gets me real excited, as the stock is still locked in a pattern of lower highs over the past 6 weeks, which is really just an sub-set of the pattern of lower highs that has been in place since March. The only redeeming quality is the pattern of higher lows over the past month as XMSR has moved up from $1.75 to $3.25.

Turning to the PnF chart, let's see if there is anything bullish to be gleaned. The stock is currently working on a double-top Buy signal generated earlier in December. The vertical count projects up to the $7 level 3x(0.25 box size)x(6 boxes) + 2.50. Note that the stock has been having a rough time with the $4 resistance level and once clear of that level, it will have to contend with the descending bearish resistance line at $5.50.

If forced to make a call, I'd have to cautiously side with the bulls, but would prefer an entry closer to the $2.75-3.00 range, with further support being supplied by the 50-dma (currently $2.89). With the 200-dma coming down and curretnly at the $6 level, I'd want to be out of any bullish position by the time price reached the $5.50-5.75 area.

  Jonathan Levinson   12/23/02,  3:01:57 PM
The COMPX has just rallied off its lows and is now up against trendline resistance on the downtrend from this afternoon, coinciding with the 50 dma. HUI is slightly off its highs, and with the bond market now closed, equities are on their own. The TRINQ remains low at .38, QQV is down .46, and bullishness contains to rule sentiment as the put to call ratio prints another reading below .60.

  John Seckinger   12/23/02,  3:01:11 PM
The UK reported its third quarter GDP rose 0.9% and to a three year high. Growth in the UK appears to be supported by the housing sector. Therefore, there is a chance the Bank of England will not have to lower rates in the near term. The UK is one of the few bright spots of growth in Europe, as the other large economies are struggling. Note: The UK is not part of the European Monetary Union at this time.

  John Seckinger   12/23/02,  2:54:52 PM
Notes on Tomorrow's volatile Durable Goods Report: The number is expected to show the first back to back gain since the April to May period. Consumer and defense spending rose while business investment ("core" durables or non-defense/aircraft capital goods orders) is less than 1% stronger from a year ago. Transportation orders are expected to be big reason for the 0.8% November rise.

  John Seckinger   12/23/02,  2:31:23 PM
Once again, doing some pattern recognition with Jeff on the phone. Talking about the Dow right on the mid-point of its Bollinger Bands (five-minute at 8490), and how the Retail Holders Index is lower by 2.13% at 69.15 and most likely pressuring the blue chips. Ticker: AMEX:RTH Retail Companies continuing to show weakness include TJX, PSUN, and ROST.

  Linda Piazza   12/23/02,  2:25:01 PM
Adv/dec (ratio method) figures for the NYSE and Nasdaq now show more decliners, with a .94 number on the NYSE and .87 on the Nasdaq. The up/down volume ratio for the NYSE is 303/397, while on the Nasdaq up volume is more than twice down volume. On the NYSE, new highs outnumber new lows by 51:38, and, on the Nasdaq, they're exactly equal at 50 new highs and 50 news lows.

  Jeff Bailey   12/23/02,  2:22:44 PM
Costco (COST) $27.14 -2.65% ... 52-week low here. Could signal weakness building, not only for retail, but for broader market as well.

  Jonathan Levinson   12/23/02,  1:55:28 PM
The put to call ratio is still miles too low at .56. I can only attribute it to opex reshuffling, or possibly a whole segment of the trading population fell asleep listening to Kudlow and Cramer shrieking about the bottom being in and woke up on autopilot. For Fabes and others who wish to follow the daily CBOE data, here's the Link

  John Seckinger   12/23/02,  1:49:43 PM
Looking at the XAU Index, Monday's 3% rise to 77.19 allows me to keep a bullish stance on the XAU; moreover, it is still interesting how prices continue to stay above the important 72 area. The oscillators look a little overbought, but there is not a divergence with price action; therefore, least resistance remains higher. The intermediate objective of 86 remains. If long and the XAU trades 81 or higher, get concerned if prices fall back to 79 (could mean trap). On the downside, a move under 72 should then signal that any bounce will be met by sellers.

  Mark Phillips   12/23/02,  1:48:33 PM
Getting Interesting Again? I spent the first few hours this morning away from the markets, and in going through the early morning news found an item where SG Cowen has upgraded ABC from Outerform to Strong Buy. Apparently the call is based on the stock's recent fall from grace since late October. I personally would be hard pressed to get excited about the upgrade, and that seems to be the case with a lot of investors, as ABC appears destined to post an inside day after Friday's big drop.

We've talked about ABC a fair amount in recent weeks, and I'm now looking for a rally failure in the $55-56 area to present an attracitve entry point for the bears. Recall that Friday's trading set a new all-time low for the stock and the PnF chart Link has given us a big sell signal, with the price target currently at $38. Of further interest is that today's intraday high of $53.92 was only 7-cents above the previous all-time low ($53.85), set last November. Looks like prior support is becoming resistance.

  Kent Barton   12/23/02,  1:42:44 PM
Reader question: The newsletter said to look for a failed reversal at $60 for the AIG put play. How much cushion do you give? Ie, it now looks like it might be going to rollover at 60.300 instead of 60.00; is that acceptable?

Response: AIG ($59.90, +0.83) caught a bid this morning but wasn't able to break above $60.50. If you look at a 10-minute chart, this level coincides with the top of last Wednesday morning's gap. The way shares sold off after filling in this gap is encouraging. On the other hand, AIG is currently showing relative strength versus both the Dow and the IUX.X insurance index. Thus, the most prudent strategy in this case might entail waiting for a move below Friday's intraday resistance at $59.50 before adding short positions.

  Linda Piazza   12/23/02,  1:42:40 PM
Reader Question: LF $24.40, and losing support at $25.00. Looks like a great short with target of $20 short term and $15 longer term. Stop $27.00.

Response: This knowledgeable reader must have noticed the several bearish signs on LeapFrog Enterprise's daily chart. Link Among those bearish signs are a broken trendline, broken support at 25 (which the trader mentioned above), increasing volume as LP falls over the last week, and a move below the 22 and 50-ema's. Those exponential daily moving averages will provide resistance if/as LF moves up again, perhaps leading to that $27.00 stop the reader mentioned.

Since this stock trades less than 500,000 in average daily volume, these comments are for discussion purposes only, but here are some cautions. First, when I see a formation such as the one on the LeapFrog daily chart, I immediately think left-shoulder-and-head. That leaves a right shoulder to be formed. Forming that right shoulder could possibly bring LeapFrog back as high as 30, although I think the reader's judgment is sound when expecting a failure around the level of its 50-dma near 27. Because I've seen these patterns play out over and over, I'd like the rollover at resistance rather than buying on the current break, although it's possible that LP will continue falling without ever forming that right shoulder. My problem is that there's not much trading history on this stock, so it's not trustworthy to look back at the P&F chart and backtest to see if LF tends to hit is P&F targets. Without a long trading history, it's also difficult to determine whether LF tends to trade above or below a certain support or resistance level, trapping bulls or bears, and then move back the next day. Because of these cautions, it's even more important to assess risk/reward. A trade at just under 25, with a risk to 27 and a target of 20, is a risk/reward ratio of a little more than 1:2, but since LF could move all the way up above $35 before giving another buy signal, I wouldn't be surprised to see LF move all the way to that $30 shoulder level before rolling over. That would stop out a trader with a $27 stop.

  Jeff Bailey   12/23/02,  1:40:22 PM
The 1:00 PM Intraday Update has been posted. Link

  Jim Brown   12/23/02,  1:36:44 PM
Hidden among the candles this morning is the pivot point for me on the Dow of 8487. This is the 5 DMA on the 15 min chart. If this fails again it could be lights out for the holiday rally. Odds are not looking good. We are struggling to find meaning in the minute gyrations today but it you pull back and look at the bigger picture 8350 and 8750 are still the key points and there is a lot of whipsaw in the middle.

  Jonathan Levinson   12/23/02,  1:33:02 PM
The one minute COMPX chart tells the whole story. The downside takes a great deal longer to develop than the upside. In fact, each meaningful wave of selling has been consistently met with a fast and urgent wave of buying, with the bids actually gapping up. Markets tend to fall faster than they rise, except for recently- the only major fear in the equity markets seems to be of missing the upside.

  Mark Phillips   12/23/02,  1:29:23 PM
Not much conviction ahead of the holiday, with the markets trading very flat on very light volume after the opening volatility. But the action in the XAU and a solid bid in the Gold Futures (GC03G) gives a hint that investors are still very much worried, despite the relaxation of the VIX.

With anemic volume, any moves this week are likely to be muted and untrustworthy. But perusing my Watch List, I must say I like the action in LEAPS play NEM, which is once again over the $29 level, in conjunction with the GC03G contract moving to new highs for the day at $345. NEM's $30 resistance is going to be a tough nut for the bulls to crack, but with continuing weakness in the dollar and the war drums beating, it could be crested sooner than many of us think.

  Jonathan Levinson   12/23/02,  1:25:39 PM
John, with that kind of scratch, I'd be taking on "retired rich guy" status :)

  John Seckinger   12/23/02,  1:22:43 PM
With Wednesday's Powerball Drawing now at $280 million ($151.4 million - cash option), I think I found some stocking stuffers. If I won, I would have to put about 50% of the proceeds into my trading account (grin) and take on Market Maker status.

  Jonathan Levinson   12/23/02,  1:15:48 PM
If this is all that the bears have, then Sandy Claus might have decided to visit after all. Nonetheless, FVX is still relatively low today at a mere +3.3 bps. The TRINQ must be broken, still reading .35. QQV is flat at 40.18. HUI, however, is up 3.26 to 142.76, no doubt because of my recently bullish comments on gold and unhedged miners. Perhaps Al Green got paged on the Batphone in the oak-panelled bowels of the concrete and lead federal reserve building, dropped his Cohiba torpedo into his snifter of musky port and spilled caviar on his tie, shouting urgently over the PA system "Jonathan's bulling gold, Jonathan's bulling gold!" Or not.

  Linda Piazza   12/23/02,  1:03:36 PM
At 2316.40, the Dow Jones Transportation Index has been challenging its 50-dma (exponential) at 2313.94. So how is the important Dow Jones Transportation Index's chart looking as the holiday shopping season winds down? Link Some factors to note on this daily chart are that the prices are beginning to take on a rounding-over appearance, that prices today are sitting right on a trendline formed beginning in the end of November after having briefly moved below that trendline, that volume has been picking up in the last week as price levels fall, and that the RSI has been forming a pattern of lower highs since early November. These are potentially bearish developments, but as yet only potentially so. However, the (5)(3) daily stochastic is trying to turn up. The 10-week exponential moving average lies just overhead, too, at 2322.55. Will this transportation index be able to push up through that level and back above its ascending trendline as the stochastic cycles back up?

The weekly chart shows that (5)(3) weekly stochastics are in full roll, so that hints at more weakness ahead. Weekly RSI has flat-lined, not giving much help at predicting and the MACD appears to be flattening, too. All in all, I don't see many signs of strength here, with one possible caveat. On this weekly chart, on-balance volume might hint at more strength than is showing up on other indicators. Link

Why am I looking at the Dow Jones Transportation Index? Many economists consider it a leading indicator of strength or recovery in the broader markets, as goods must be shipped.

  John Seckinger   12/23/02,  12:58:33 PM
Not helping the Utility Index (UTY, -0.67%) is the downgrade of Duke Energy's debt by Moody's. It appears to be in response to lower actual and anticipated earnings and cash flow as a result of continued weakness in wholesale energy markets both in the U.S. and abroad (as reported from Moody's). Shares of Duke Energy (DUK) are lower by 3.08% to 19.47.

  John Seckinger   12/23/02,  12:41:42 PM
It was very interesting how the Dow pulled back to the high set during the first five minutes (8510) before recovering. Yes, it lined up with the 50 DMA; therefore, sould further strengthen this level. For bulls, a move above 8535 should be encouraging. If the 8510 area fails to hold, shorts might try to get aggressive during this light volume session.

  Mark Phillips   12/23/02,  12:30:22 PM
ROOM $59.41 (-0.04) It looked rather interesting to me that this stock couldn't crest the $60 level last Friday, and that level is continuing to be a formidable obstacle today. While all the major indices have managed to push into and hold in positive territory (although just barely in some cases) as we enter the lunch hour, ROOM is once again in the red after another unsuccessful attempt to push through the $60 resistance level. While I don't expect any big moves between today and tomorrow's early close, the stock's inability to push through the $60 level has me thinking that failed rallies in this area look attractive for new positions to benefit when the stock eventually follows through on its PnF Sell signal generated last week. Link

  Jonathan Levinson   12/23/02,  12:27:51 PM
Thanks to JB who has invited to savor the sun n fun in Pittsburgh not far from the Monongahela River Beach.

No need to buy "cruise wear"...just wear the same as you would for a outing to Trois Riviere.

Hmmm. Gotta think about it. I know that JB probably doesn't look too hot in a bikini, and Trois Rivieres is as close Siberia as a Montrealer can get in December. Thanks anyway, JB- it's much appreciated. And if you're ever in Montreal, the Guiness is on me. Any others?

  Jonathan Levinson   12/23/02,  12:23:54 PM
Good Mornin'. Jonathan, is there a particular reason to buy psychical gold/ silver as to owning just the stocks? Does gold/ silver move faster than the stocks? Also, silver looks anemic at this point. It doesn't look like it is moving on gold's coat tails yet. At present I'm considering making my own gold mutual fund with John Ing's "terrific 10": crystallex, eldorado, claude res., high river gold, iamgold, miramar mining, repadre capital, northgate explor., philex gold, st. andrews goldfields, plus I have a few others such as tyhee. Could I get your comments please? TIA Grant

Hmm. This could well be a master's dissertation, so I probably won't do it justice in this limited medium. Nevertheless: Physical metal is nobody's paper. If you were to jump into a time machine destined for 1000 years into the past or the future, would you bring GE stock, dollar bills, bonds.... or gold and silver? These are the truest form of money. The word for money in french is "argent", which translates literally into "silver". That's why we buy physical metal and take delivery. Better in my backyard than in someone else's bank.

Gold and silver stocks move much faster than the metals. HUI is up far more than $gold. But, these are paper assets, stocks- and so not as secure as the metal itself. This is why I own coins, diversified mining funds, and CEF shares. I've covered most ends of the precious metals spectrum by holding different assets within the precious metals asset class.

Silver has lagged gold thus far, but I don't believe we've seen the bullish finale in precious metals just yet. Silver remains a very heavily shorted commodity, and this is why Warren Buffet, Bill Gates and Soros all have what are reputed to be huge positions in the metal. Still though, better to own silver through shares or metal than options or futures- the timing is worse than just tricky.

I don't know John Ing and won't comment on his picks, except to say that the XAU or hedged index of miners has vastly underperformed the unhedged index (HUI)- for this reason I seek to avoid XAU components, notably ABX, AU and PDG. Happy hunting!

  Linda Piazza   12/23/02,  12:09:20 PM
Stochastics H&S? Traders can watch for recognized patterns to form on stochastics and other indicators as well as on price levels. A break of the chart formations on the indicators can sometimes signal impending weakness or strength on prices, but it's important to use them as warnings only and not to act until price confirms the indicator's pattern. On this chart of Valero Energy (VLO), the (5)(3) stochastics are threatening to form a H&S top. Link Also, you might note the bearish divergence on the RSI (equal high while price was making a higher high).

VLO is currently on a P&F buy signal. Last week, when VLO pushed through the 37.50 neckline of its own reverse H&S formation, broke above its 200-dma (both exponential and simple), and also pushed above the bearish resistance line on the P&F chart, I grew concerned when sellers immediately pushed it down again. This potentially bearish development on the stochastics and RSI also has me watching. VLO has been consolidating on low volume, and it's been gratifying that price has so far held above important support levels while the (5)(3) stochastic cycles down. If this stochastic turns back up before crossing that neckline, it will also preserve the higher-lows pattern seen on the stochastics. That higher-lows pattern is also seen on the RSI, and that has so far been preserved, which is a bullish sign. This mixture of bullish signs with potentially bearish signs is perhaps to be expected at VLO consolidates after its recent gains, but be alert to other possibilities.

  Jonathan Levinson   12/23/02,  12:01:23 PM
I've just found a brilliant explanation of how best to read the put to call ratio. As we know, very low readings show excess bullishness, which is bearish, and very high readings show excess bearishness, which is bullish. Here's the summary: Link

  John Seckinger   12/23/02,  12:01:16 PM
Taking a look at the Sox index, the 2.74% rise to 30.622 places the index just under the 307-308 lows seen on December 9th, 10th, 13th, and 16th. With that said, sentiment is neutral to slightly bearish. A move above 320 should be viewed as a win for longs and possible catalyst for a move towards 340. On the other hand, a move back under 295 should give shorts even more confidence.

  Jonathan Levinson   12/23/02,  11:55:52 AM
The FVX has dumped 3 bps from its intraday gains in the past 20 minutes. Perhaps someone at the fed caught my previous comment about their repo money. Or, perhaps Seckinger just decided to add to his position in five year treasuries. Either way, as the TRINQ edges up, the FVX edges down, and the COMPX goes below 1380, we might have just seen an intraday top, although the aimlessness of the past hour's trading has me wondering if we're not in the same blast-up-languish-at-top pattern we've been seeing increasingly of late.

  Jim Brown   12/23/02,  11:53:17 AM
Don't look now but the bullishness is rapidly fading on all fronts. If that was the most the holiday bulls could muster we could be in trouble. Every chart I have is showing the roll over and it is not pretty. It would suggest a broad based sell program but the lack of a sharp move would mean the share volumes were small. We just broke the one billion share level across all markets so volume is extremely light. The NYSE is just barely over 500 million with 547 million on the Nasdaq. Definitely no conviction on either side and a tie normally goes to the bears.

  Jonathan Levinson   12/23/02,  11:48:23 AM
As the COMPX remains stuck in this 1380-85 confluence zone and the December-in-Montreal sky turns a little greyer, my only observation is that I would be available to lie on a beach in any warm, sunny clime and provide market and trading information ad nauseum in exchange for room and board. Please try not to trip over yourselves emailing your phone numbers and travel directions :)

  Jeff Bailey   12/23/02,  11:33:52 AM
The 11:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   12/23/02,  11:33:44 AM
The put to call ratio has just edged up to .51. I have not yet seen the total exchange volumes, but they have to be very low. The indicators are basically unchanged, except for bond yields, which have broken to new highs, FVX +6.6 bps. I expect today's fed money to go into bonds to slow the ascent of yields, but it's just a guess.

  John Seckinger   12/23/02,  11:31:32 AM
February Crude Oil is higher by 0.79 cents at 31.10 and very close to a new two-year high (31.15) set both last Wednesday and Thursday. Traders appear worried over a January 27th briefing by U.N. arms inspectors to the UN Security Council as an event that could trigger an attack on Iraq. Iraq exports roughly two million barrels a day of crude oil, and is the sixth largest supplier to the United States.

  Linda Piazza   12/23/02,  11:13:56 AM
A reminder to those confused by different quotes concerning advancing/declining volume. Some sites subtract declining issues from advancing issues to arrive at a positive number (for more advancing than declining issues) or a negative number (for more declining issues than advancing issues). Others calculate a ratio, dividing advancing issues by declining issues. A number above 1.00 would indicate more advancing issues than declining issues, while a number below 1.00 would indicate more declining issues than advancing. Neither type of calculation is right or wrong, but just two different ways of calculating this important measure. I prefer the ratio method; others prefer the subtraction method. I also prefer to see the NYSE and Nasdaq separately; some prefer a calculation of all issues traded across all indices. Decide on a method you prefer and then familiarize yourself with the way these numbers behave under certain market conditions.

By the ratio method, NYSE adv/dec is now at 1.2, and Nasdaq is now 1.09. Nasdaq up volume is running almost 3 times down volume, and is ahead on the NYSE volume, too, but by a lower ratio. New highs outnumber new lows.

  Jim Brown   12/23/02,  11:11:32 AM
A friend works at the Gap, she indicated several stores are reporting higher sales, but significant discounts. So margins will be way off. IM

I think the next retail earnings cycle could be bad news for the 2003 market

  Jonathan Levinson   12/23/02,  11:11:16 AM
The third p/c ratio for the day has just come in at .48. TRINQ still low, QQV +.23 on the day, FVX +5.5 bps, precious metals off their highs but still well up on the day. 1380-85 COMPX is providing resistance so far, but near term direction is still iffy. Other than the indicators being well overbought, this has been one very bullish day so far.

  John Seckinger   12/23/02,  11:05:00 AM
I just did a retracement analysis from the high on December 2nd at 9043 to the low of 8327. Retracement junkies like using 38.2 and 50% levels; however, try 19.1% as well (1/2 of 38.2). The 19.1% level came in at 8464. Today's low: 8462. Hindsight now, yes; however, it should give bulls more confidence for the current move and hopefully adds another tool to your trading belt going forward. It will be added to mine.

  Jim Brown   12/23/02,  10:54:08 AM
All the internals are now showing some decent strength with advancing volume starting to move up strongly. The A/D line is positive at +500 issues and the QQQ is showing a solid uptrend. Futures are at the highs of the day across the board. Santa must be on his way!

  Linda Piazza   12/23/02,  10:53:48 AM
The SPX moved above 900. Will it hold? As the others have done, I'm scanning intermarket relationships for guidance, and see VIX and VXN down,indicating some optimism in the market. XAU is up, and the dollar slightly down, perhaps indicating some concern. Ten-year and thirty-year bond yields are up, perhaps due to the Lehman development John mentioned in his 9:45 comment. So far, this move up hasn't changed volume patterns. Both the NYSE and Nasdaq show more decliners than advancers, but the Nasdaq shows more up volume than down volume.

  Ray Cummins   12/23/02,  10:53:32 AM
Spreads/Combos -- Portfolio News

Not much to report this morning but one issue is moving in the right direction. Neurocrine Biosciences (NASDAQ:NBIX) shares are up $3 at $47.25 after reporting that results from the second trial with IL-4 Fusion Toxin for the treatment of malignant brain tumors indicate a safe and well-tolerated dose has been determined and that the compound is now ready to enter advanced efficacy trials using survival as the valid endpoint.

The news certainly helps our bullish positions in the issue and the move back into a previous consolidation area near $47 suggests a possible continuation of the recent upward trend.

  Jim Brown   12/23/02,  10:49:00 AM
Swing Trade Signals
I would be looking to go long here at 8520 if you are an aggressive trader. The week is off to a good start with the early weakness now history.

  Jeff Bailey   12/23/02,  10:48:47 AM
Panamerican Beverage (PB) $20.57 +103% ... soft drink bottler in Latin America bought by Coca-Cola (NYSE:KO) $44.08 (unch) for $3.6 billion. Under terms of the deal, weighted average value of each Panamco share is $22.87. As of December 2001, KO owned a 25% interest in Panamco.

  John Seckinger   12/23/02,  10:46:34 AM
Come on Dow, no range trade on my watch. With the blue chips above 8510 (high during first five minutes), I would like this level to become support. Note: We spent the first hour within the range of the first five minutes, so now it is time to do some "hunting for efficiency". It could also be called, "The Search for Value." I would like to see a move to 8625 and test the strength of range traders on a more intermediate basis.

  Jim Brown   12/23/02,  10:44:33 AM
The 50 DMA at 8512 has been broken but just barely. That last little spike managed to generate some interest. I am seeing a bunch of new symbols on the short term up list. Looks like there is some selective bargain hunting in progress. NBIX, COGN, JCOM, QLGC, QCOM, MHP are all seeing strong buying.

  Jonathan Levinson   12/23/02,  10:43:28 AM
The COMPX is powering toward the 1380-85 resistance area. So far, these low p/c ratios aren't playing out as usual, nor the TRINQ which has been extremely overbought in the low .30's to mid-.20's. Bond yields have remained steady, with FVX +4.5 bps. Precious metals are showing strength today. If this morning rally is going to fail, it should do so very soon. If not, with all of the short term indicators this overbought, we could see a substantial rally- in other words, it's either a top in the short term wavelets, or the start of something much larger and more bullish. Wait and see as we approach a critical level.

  John Seckinger   12/23/02,  10:42:01 AM
Three Powerful Letters: IBM. If you like following IBM and curious about "double top buy signal" and "double-top buy signal from a reverse in bearish signals," take a look at Jeff's article over the weekend. Jeff, I liked it. See link: Link

  Ray Cummins   12/23/02,  10:40:14 AM
Spreads/Combos -- A great question (from Friday) on trading strategies

Regarding the suggestion to target a higher credit such as $0.05 to $0.10 above the current composite Bid/Ask spread:Are you suggesting to place spreads .1 to .2 better then best bid best ask? or are you suggesting the combined quote that some programs want to quote? or the best bid one one exchange and the best ask on another? Thank for your insite.

Sorry I didn't get back to you during the session...Regarding "target" prices: It is assumed you are getting accurate quotes, if not from each exchange individually, at least as a composite "best" price for the spread. As far as filling the trade across multiple exchanges, it's hard to expect people to buy one option at the CBOE and sell another at the PHLX or the PFEX unless they are using a direct access platform (such as Preferred Trade) and that would require individual option orders. Thus, my suggestion is to get the best available credit (or debit - depending on the strategy) from the exchanges that trade the options and then add (or subtract - depending on the strategy) $0.05 or $0.10 for the initial order. When determining the amount of the opening order, you should also consider the relative price of the options, whether they are ITM or OTM, the time value remaining, the volatility of the underlying etc. Of course, you will have to make adjustments if the order is not filled in a timely manner, or if you feel the changing conditions warrant a different price for the spread.

  Jim Brown   12/23/02,  10:39:29 AM
Iraq - shot down an American reconnaissance plane (unmanned) it was just announced. Talking about tugging on superman's cape! You have 50,000 troops doing live fire exercises on your border and UN inspectors looking for an excuse to bomb you back to the stone age and somebody escalates the conflict by shooting down a plane. Amazing.

Also reported was Iraq is expecting its first load or volunteers from several countries including Americans to camp out around military installations to prevent American bombings. Hope they have their wills in order.

  Jonathan Levinson   12/23/02,  10:36:39 AM
The latest put to call ratio has just come in at .48. That is the lowest reading I have seen in months. This is very bearish, on the basis that that many bulls cannot possibly be right. Of course, price is the only action and sentiment indicators are just that- sentiment. But, look at a chart of the p/c ratio on stockcharts.com ($CPC). Like the VIX, low readings tend to coincide with market tops. Very interesting action, but it could well be the result of squaring positions from op ex Friday just passed.

  Jim Brown   12/23/02,  10:33:14 AM
GPS broke $15

  Jim Brown   12/23/02,  10:26:30 AM
Jim, We were just at the malls in Orlando , the GAP stores were empty. Is this a short for the coming season ? George

Good point. GPS has rallied from $8.50 in October to $16.50 last week. There was a huge drop this morning back to support at $15. If it breaks that support I think it is definitely a short. I have heard several analysts say Gap has turned the corner but then their lips were moving. Yes, George, under $15 looks like a solid play to me.

  John Seckinger   12/23/02,  10:26:05 AM
Speaking of retailers, both Dollar General (DG) and Ann Taylor (ANN) are trading at new 52-week lows. The retail behemoth Wal-Mart is lower by 1.53% at 50.04 and has traded under 50 at 49.95. Best Buy (BBY), a place I like to shop, is lower this morning as well (23.43, -5.33%). Other sectors weak include Airlines, Restaurant, and Railroad issues.

  Jonathan Levinson   12/23/02,  10:25:51 AM
The put to call ratio came in at .54 for the first half hour- quite bearish.

  Linda Piazza   12/23/02,  10:22:30 AM
In early trading on the NYSE, down volume was 1.8 times up volume, while on the Nasdaq, up volume was 2.4 times down volume. Decliners continue to lead advancers on both the NYSE and the Nasdaq.

  Jim Brown   12/23/02,  10:19:35 AM
All the major indexes except the Dow are now trading in positive territory after opening down on negative news, rallying and then losing ground on the Consumer Sentiment. The Nasdaq has the best pattern and could be pointing the way. Semiconductors are up despite a warning from Cypress Semi. It appears the morning weakness is fading but the key still remains Dow 8512.

  Linda Piazza   12/23/02,  10:19:21 AM
Apparently discounter K-Mart wasn't collecting many holiday sales, either. The company reported sales lower than same-period sales last year, saying that Thanksgiving holiday sales were good, but that sales had softened more than expected the last two weeks. I'm not suggested a trade in what is now a penny stock, but only reporting another outlook on holiday sales.

  Linda Piazza   12/23/02,  10:13:14 AM
Briefing.com lists adv/dec numbers this morning at .80 for NYSE issues and .90 for Nasdaq issues. Up/down volume figures have not been available this morning.

  Jonathan Levinson   12/23/02,  10:12:44 AM
The fed has add 3.75B as an overnight repo. This is a net addition with no expiries today.

  Jim Brown   12/23/02,  10:11:28 AM
Same story in Portland, OR; Best Buy jammed while Circuit City was empty. Sears was also empty. But Costco was packed. Jim, Vancouver, WA.

Our Costco down the street from us was packed as well on Saturday night. One of my sons called from Costco in a panic on Saturday. He had spent several hours completing ALL of his holiday shopping in one afternoon and had accumulated two baskets with about $1,100 of merchandise. As he approached the checkout line he realized they don't take MC/Visa cards, which is what he planned on using to pay the bill. Rather than waste the several hours of shopping by giving up and going home for a checkbook he called my wife to come bail him out with a check. We were also out shopping about five miles away. Where would we be without cell phones? We rushed to his rescue but after waiting to get into the parking lot and pulling up to the front door my wife turned to me for the checkbook. Me? I did not have one. If I can't use plastic I don't buy it. She was out of checks. (She will use any medium of exchange when on a mission) He is already in line and putting stuff on the counter yet between the three of us we don't have a check. My wife is not to be beaten. She quickly rounds up all the debit cards available and runs to the ATM to raise $1200 in cash at an ATM holiday max of $300 each. They have to shut down the line with his $1100 bill until the cash arrives. Meanwhile I am circling the parking lot for the 20th time because there is no parking. Ah, the joys of Christmas and kids. (This kid is 31)

  John Seckinger   12/23/02,  10:10:42 AM
Reminder: There are NO companies set to report earnings this week. The event schedule is very light as well. Japanese markets did not trade overnight, while the Frankfurt market will be closed tomorrow. This is certainly keeping the volume light in the FX and fixed-income markets, adding volatility for those involved.

  Linda Piazza   12/23/02,  10:08:05 AM
A breakdown of some of the internals of the University of Michigan numbers includes the following items, according to Marketwatch.com: Current Conditions Index rose to 96, versus 93.1 in November, the Expectations Index rose to 80.8 vs. 78.5 in November.

  Jonathan Levinson   12/23/02,  9:56:56 AM
The FVX is dropping some of its gains, as the COMPX prints The Finger on the one minute chart. The TRINQ has risen a bit to .32, still showing extreme buying pressure so far. No word from the fed, as Easy Al's Flying Upside Down Alligator Jubilee ruminates on whether to add more liquidity or not this morning. There are no repos expiring today, and so any repos today will be net additions. The announcement is due any minute now.

  John Seckinger   12/23/02,  9:56:11 AM
With the dollar trading to its lowest level in four years against the Swiss francs (CHF), as well as hitting levels against the the British pound not seen since April 2000, Gold appears to be a benefactor. February Gold (GCG3) is higher by $2.5 at 343.50, but under Friday's high of 348.9.

  Jeff Bailey   12/23/02,  9:53:08 AM
Michigan Sentiment Revised marginally lower to 86.7 from previous 87.0. Not much change here and should have little impact on trading.

  Jim Brown   12/23/02,  9:52:06 AM
Consumer Sentiment just released at 86.7 for December compared to 84.2 in November.

  Jim Brown   12/23/02,  9:50:41 AM
NTES - Anybody watching NetEase.com? This Chinese Internet company has been on fire lately. Sorry, no options but the stock trades in the $13 range. I don't know the story behind it but it was trading at $2 in October. Sheesh!

  Linda Piazza   12/23/02,  9:50:13 AM
COMPX now testing the top of that 1360-1370 range that contained it on Friday. There's a slight broadening look to the trading range, perhaps indicating slightly more instability in this range. As I've typed, COMPX has moved above the 1370 area.

  John Seckinger   12/23/02,  9:46:29 AM
It appears that one of the reasons for bonds coming under pressure is a shorting in duration in the Lehman Government Index. This should imply selling in bonds towards the end of the month. There is a chance this selling could get funds flowing into stocks, but could also be accomplished by selling 30-year bonds and buying shorter-term maturities without helping equities.

  Jonathan Levinson   12/23/02,  9:46:18 AM
It's just taken a lot of buying to fill the opening gap, as the TRINQ is now reading .28 and the QQV has dropped to 41.21. Selling has increased in bonds, though, and so the upside could be building steam, as FVX is now up 4.8 bps. An interesting open so far, no clear direction yet. Bonds are a bigger market than equities, though, and I'd be inclined to follow the selling in treasuries as a clue to near term direction. From here, it looks to be up.

  Jeff Bailey   12/23/02,  9:43:43 AM
Shortened Trading day tomorrow (01:00 PM EST), closed on Wednesday. Has me not overly eager to open an options trade today, and lose 1.5 day's premium. Premiums higher about a week or so after expiration so need something that really winds my clock to make an option trade.

  John Seckinger   12/23/02,  9:38:16 AM
Pattern Recognition. With the first five minutes behind us, look for the 8464 low during the first five minutes (or first period) to act pivotal going forward. Also, the 50% retracement of the first five minutes comes in at 8487. A move above this area should be encouraging for longs. Looking elsewhere, bonds are trading rather technically this morning, as the 30-year is lower by 9 ticks at 110'22 and unable to remain above the 111 resistance area.

  Jim Brown   12/23/02,  9:37:43 AM
A Circuit City sales clerk (they are paid on commission) with six years employment at the same store said this was the worst Christmas in 5 years. On the same day, the Best Buy store around the corner had an overflowing parking lot. Both stores are located in the affluent Southwest sector of Austin, Texas. John

Same story in Denver. The Circuit City store three blocks from Best Buy looked like it was vacant on Saturday but you could not get into the Best Buy parking lot. Too bad CC is only $7. Not worth shorting.

  Jonathan Levinson   12/23/02,  9:31:15 AM
4 point gap down open on the COMPX to 1359, TRINQ .99, QQV +2.25 to 42.43.

  Jeff Bailey   12/23/02,  9:27:42 AM
Per Johathan's 09:19:46 ... was out finishing up some holiday shopping yesterday and had a nice conversation with sales rep. at Foley's. She said she'd be glad when the shopping "surge" was open. I asked her if they'd been busy, but she said way less # of shoppers than last year. She started explaining that there had been a lot of layoffs and the economy had slowed. I paid my $9.99 "on sale" for a little teddy bear, grabbed the thing by the paw, and headed out the door.

  Jim Brown   12/23/02,  9:25:04 AM
Swing Trade Signals
Steve is out of town for the holidays so he will not be giving any Swing Trade signals today.

The 50 DMA on the Dow at 8512 is strong resistance and was a solid ceiling on Friday. This is typically a bullish week but fears of war in Iraq, a confrontation building on the nuclear plant in North Korea, Argentina, Citigroup, etc, is going to start us off in the cellar.

Short term support at 8450 should be the first level tested this morning. Aggressive traders anticipating a potential holiday rally could be looking at the morning dip as an opportunity to go long at support. Conservative traders should wait for a move back over resistance at 8512 as confirmation.

Either long possibility will run into trouble at 8625 resistance and again at 8750. There is always the chance we will see one of those monster triple digit holiday explosions but with the negative news items I think that is a remote chance.

I am not convinced there is enough negative sentiment to go short either. With all the bad news this morning the Dow futures are only down -50 and could easily been down much farther. There is strong support at 8300-8350, which limits our downside as well.

The bottom line for me is three choices:

Remain flat and tidy up holiday preparations.
Go Long at 8350 support if we touch that level again.
Go Long with a breakout over 8512

A fourth choice would be to go long 1/2 position at 8450, which is a level most likely hit at the open. Adding 1/2 position at 8515 or 8350, whichever occurs first.

  Jeff Bailey   12/23/02,  9:25:01 AM
Inktomi (INKT) $1.18 ... stock jumps to $1.70 on news that Yahoo! Inc. (YHOO) will acquire the maker of scalable network infrastructure software for $1.65 in cash. May be a "bargain" considering the $200+ value the MARKET was willing to pay for the shares 3 years ago.

  Jeff Bailey   12/23/02,  9:22:05 AM
The 9:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   12/23/02,  9:19:46 AM
Here in cold, grey, seasnal-affective-disordered Montreal, the crowds downtown looked at least 30% thinner than last year at this time, and Canuckistan's economy is supposed to be doing well. At least, that's what they tried to tell me at the Waterhouse President's Account dinner 2 months ago.

  Linda Piazza   12/23/02,  9:19:34 AM
Add Bank of America to the banks writing off bad loans. Bank of America said this morning that it will set aside $1.2 billion in Q4 to write off bad loans to an airline.

  Jim Brown   12/23/02,  9:08:23 AM
Retail Sales The weak sales story continues to lead the headlines with more warnings that sales are coming in on the low end of estimates. After seeing the crowds at the malls I visited this weekend, (yes, I was still shopping), I was sure the stores had made their quarter on Saturday alone. Last year the last five days before Christmas brought in 1/3 of all holiday sales. It sure looked like this year was on track to repeat that performance.

  Jim Brown   12/23/02,  9:01:05 AM
Citigroup said this morning that it is taking a -$1.3 billion fourth quarter charge for the stock research settlement with regulators and to cover costs associated with Enron. It also said it was increasing credit reserves by $200 million.

McDonalds dropped again after Moodys said it may cut their debt rating due to its first quarterly loss in 47 years.

These negatives are weighing on the Dow and futures are down significantly.

  Jonathan Levinson   12/23/02,  8:56:26 AM
Citigroup Expects $1.5 Billion Charge to Cover Bad Loans, Research Claims

Citigroup Inc. said fourth- quarter earnings will be reduced by $1.5 billion to cover loan losses and costs to settle claims that the biggest financial-services company misled customers with biased stock research.

Full story at this Link

  Jonathan Levinson   12/23/02,  8:49:55 AM
NDX futures have hit a session low at 1016, with SPX futures trading just south of 892. The US Dollar Index has recovered off its session lows to just shy of 103.40, and gold has just broken 342.50 on the way up. FVX is up 2.1 bps, a touch of selling in bonds.

  Linda Piazza   12/23/02,  7:22:58 AM
In an unexpected move, BNP Paribas, France's biggest bank, says it is studying Credit Argricole's bid to take over Credit Lyonnais. Although widely expected to drop its own bid to acquire rival Credit Lyonnais after Credit Agricole's offer last week, Paribas now says it may continue to buy more of rival Credit Lyonnais and that it intends to keep all options open. Credit Agricole's proposed takeover would be the world's third-largest transaction this year.

Bloomberg.com reports that Crude oil jumped to a 2 1/2- month high after OPEC's decision this weekend not to boost output until its benchmark index exceeds $22 to $28 a barrel for 20 trading days. The Venezuelan strike and worries over Iraq sent OPEC's price benchmark on Thursday to $29.56, its fourth day above the target range.

The FTSE 100 climbed above 3900 this morning, trading up .37% as of this writing to 3904.30. Other major European markets were down, with the CAC 40 trading down .25%, and the DAX down 1.59% to 2976.21, again below the psychologically important 3000. The Nikkei was closed due to a holiday.

  Jim Brown   12/23/02,  3:12:36 AM
Futures are down significantly in Sunday night trading on several concerns. The UBS Index of Investor Optimism dropped to its lowest level since inception for individual investors in Europe on Monday. It sank -10 points to -38. This covers investors in France, Britain, Germany, Italy and Spain. Fears of war and lack of economic progress was dampening investor sentiment.

TYCO delayed a long awaited report on results of its accounting probe and failed to explain the delay.

Several nations had harsh words toward North Korea as it announced it was removing UN monitoring equipment from the mothballed nuclear plant and the seals from a storage depot containing 8000 spent plutonium rods which could be refined and used as an additional source of plutonium for fuel or bombs.

  Steven Price   12/22/02,  1:26:52 AM
End of year renewal special - The end of year special this year has been a hit 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   12/22/02,  1:25:49 AM
The Futures Trader Wrap has been posted: Link

  Steven Price   12/22/02,  1:25:03 AM
The Swing Trade Game Plan has been posted: Link

  Steven Price   12/22/02,  1:24:36 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


Market Monitor Archives