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  Jim Brown   1/3/03,  5:15:09 PM
Are you going to lose the Market Monitor?

If you have not signed up for the 2003 renewal special you are in danger of losing access to the market monitor beginning on Jan-6th. Lock in the cheapest rate possible with a ton of freebies now! Click here: Link

  Kent Barton   1/3/03,  4:45:27 PM
Pre-Paid Legal (PPD) 26.48 -0.44: Getting slammed in after-hours after the company's CEO and founder steeped down. The company also announced a large increase in memberships. Shares currently trading near $20.00 in the extended session.

  Jim Brown   1/3/03,  4:07:32 PM
Win $2003 in 2003 ! Don't forget to place your guess before the entries close on Sunday. We are going to close the year with a Guess the Dow for 2003 contest. We are going to give away $2003 in cash to the top 3 guessers. Place your guess now. You can change it as much as you want until the entries close on Sunday night. Click here: Link

  Jeff Bailey   1/3/03,  4:03:44 PM
The 3:15 PM Intraday Update has been posted. Link

  Linda Piazza   1/3/03,  3:57:58 PM
Reader comment from Ashok, after my post about OEX's month-long pattern of printing a white candle and then either reversing the next day or printing a candle signaling a reversal, with the reversal delayed until the following day: There are same type of formation in DJI, ndx, comp and spx. Here's a month-long daily chart of the DJI: Link Divergence from this pattern would have me stepping aside and watching those weekly charts, but so far, there has been no break in the pattern on the OEX.

  Steven Price   1/3/03,  3:50:41 PM
Swing Trade Signals
After dropping to new intraday lows we got a bounce just above Dow 8550, which has me concerned about the higher support level I was talking about earlier. I do like the fact (from the short side) that the SPX fell through 905 and has a daily top at 911.25, which is previous resistance. Big bounces in the recent past have had a tendency to get big follow throughs the next day and so far that is not the case here. I doubt we'll see a new intraday low before the day is out, but so far I haven't seen anything that makes me worried about the short entry from this level.

  Linda Piazza   1/3/03,  3:39:53 PM
Patterns: I'd mentioned earlier that I was watching the OEX daily chart as the day progressed, noting the possibility for the formation of the second candle of a potential evening-star formation. (Did I hedge that enough so that I can be right either direction?) Unless something changes drastically in the next thirty minutes, today's candle still shows that potential. Since it's only a potential for an evening-star formation, and since the "rally" would have been a one-day rally during the midst of a decline, how do I evaluate the likelihood that Monday will see the formation of the third candle in the pattern and that the OEX will fall next week? In addition to watching how the OEX acts around its 50-dma (both types), I'm also looking at its pattern of behavior. Over the last month, each white candle has been followed either by red candle that begins a further decline or by a candle that signals indecision--a doji or a spinning top, for example. Then there's a decline. Can that pattern be broken? Of course, and I'll be watching for any divergence from that pattern. Link I'll be particularly alert since weekly RSI is turning up. Also, as Jonathan has mentioned earlier this week, the weekly (5)(3) stochastic is showing oversold conditions. Now the fast line has hinged up with a bullish kiss of the slow line. The slow line has not yet turned up, however, and the slow line gives fewer false signals than does the fast line. This week's candle is a bullish white candle.

For now, I'll trust that pattern that's been followed this last month, but I'll do it nervously, with that weekly chart in mind.

  Ray Cummins   1/3/03,  3:35:13 PM
Spreads/Combos/Premium Selling - Portfolio Activity

Today's volatile session produced some big moves in a number of stocks. Among the bearish plays, spreads in Wal-Mart (NYSE:WMT) and Lowe's Companies (NYSE:LOW) benefited from selling pressure in the retail sector, however online merchant Amazon.com (NASDAQ:AMZN) continued to recover from its recent downward trend. Our bearish synthetic position (offered last Sunday) in AMZN may be a bit tardy as the stock has rebounded above the right shoulder in a short-term H-N-S pattern. Today's closing price will likely determine the next move in the position. One issue that traded substantially lower was PolyMedica (NASDAQ:PLMD). The popular distributor of Liberty diabetes products plunged over $4 to $27 after its chief executive warned staff that the Federal Bureau of Investigation was widening its health-care fraud probe of the medical products maker. Our (short put) position at $25 is "out-of-the-money" for now, but conservative (prudent?) traders should consider closing the position to limit losses.

On the upside, UBS AG gapped higher at the open, trading up $1.15 on heavier-than-average volume and the move has put the issue back at the top of a recent price range. Our sold strike at $50 is in jeopardy and conservative traders should consider closing the spread to limit losses. Another unexpected rally occurred in Eastman Kodak (NYSE:EK), which was up over $1.50 (near $37.34) at midday. The stock was propelled by news of an upgrade from Deutsch Bank and our bullish position will benefit from the upward momentum that has returned to blue-chip component.

  Jeff Bailey   1/3/03,  3:27:37 PM
Forest Labs (FRX) 106.02 +6% ... breaking to new intra-day high here

  Jim Brown   1/3/03,  3:18:11 PM
I see Abbey is going to be on Rukeyser tonight. I wonder if her performance will be as heavily scripted as the prior CNBC appearances? Will she toe the party line or will she drop a bombshell to go along with the Goldman Sachs/SG Cowen cut in 2003 spending surveys over the last two weeks? Surely with the economists at GS saying corporate spending could fall instead of rise in 2003 she will not be predicting a new high for the S&P.

Considering the Rukeyser forum is on of the most bullish on stock TV I doubt they would have asked her if she was going to turn bearish. It should be interesting to see how she will walk the thin line of being bullish but not being overtly so.

  Jeff Bailey   1/3/03,  3:17:26 PM
Since 10:00 AM and the construction data, haven't gotten a "buy/sell program" premium alert. With SPX at 904.52, might not get one either unless it looks like 900 in a near-term downside objective.

  Jonathan Levinson   1/3/03,  3:16:19 PM
More of this narrow range, above COMPX 1377 and below 1381. The put to call ratio has been in the low .80s for most of the afternoon. Other than the action in gold and the USD, I'd be calling this a directionless consolidation day, bullish insofar as it releases the overbought condition a bit with sacrificing price. Monday will be interesting when the big volume returns.

  Linda Piazza   1/3/03,  3:04:26 PM
I keep tapping my screen, but I'm still seeing more advancing than declining issues on the NYSE after the latest update. The ratio-method adv/dec reads at a modest 1.02 for the NYSE, but that's up from readings in the .80's earlier today. Nasdaq adv/dec (ratio method) reads at .82, also up a bit from this morning's readings. New highs continue to outnumber new lows, currently by 58:8 on the NYSE and 52:8 on the Nasdaq. Despite there being more advancing issues on the NYSE, down volume is now 1.38 times up volume, while up/down volume is nearly equal on the Nasdaq. Pring notes that while almost all oscillators are derived from some kind of manipulation of the prices, volume is not, and therefore can be considered an independent indicator. That's why I like to watch these volume patterns. They just aren't giving me many clues, today, though.

  Jeff Bailey   1/3/03,  3:01:17 PM
NASDAQ-100 Index (NDX.X 1,023 -0.45% .... taking some notes here as it relates to Dow action. NASDAQ not yet violated day's low like Dow, and index traders trading NDX or QQQ would like to see some follow through from NASDAQ.

Even a Dow bear looks over his/her shoulder if short/put the Dow and wants to see NDX give a break lower for observation of broader weakness taking place.

  John Seckinger   1/3/03,  2:51:15 PM
Per 14:09:23 Post, notice how 8580 was breached and the following rally never made it back to the next retracement level above at 8594; signaling a failure. Remember, today's pivot is lower at 8519. Let us see if the Dow can make it there. Bonds close in 10 minutes, and equity bears will like to see more bids come into the 30-year, now higher by 3 ticks at 110'08.

  Jeff Bailey   1/3/03,  2:51:02 PM
Dow Industrials (INDU) 8,556 .... making some way now at session lows and taken out the 8,565 level. Next test of near-term will be "formidable" on short-term basis near 8,500. Should find some resistance now near 8,600.

  Mark Wnetrzak   1/3/03,  2:45:40 PM
Covered-Call Early Exit
Biomarin Pharmaceuticals (NASDAQ:BMRN) is back in the red today after rallying off support around $6.50. The post-Christmas rally offered an excellent chance to exit the position unscathed or make a viable roll-down to an APR- or JUL-$5.00 call. The portfolio position (long the stock, short the JAN-$7.50 calls, Cost Basis - $6.69), will be shown closed.

  Linda Piazza   1/3/03,  2:44:33 PM
Interesting comment from a reader--thanks, Matt: Watching the big block trades, the big boys are accumulating dia (dow) as fast today as yesterday, but only accumulating qqq, spy, and iwm (ru2000) half as fast as yesterday. Note: I have not verified this information, but thought I'd pass on the comment.

  Jonathan Levinson   1/3/03,  2:42:47 PM
The more I think about it, the more it seems that the bulk of the fed's 8B from yesterday must have gone into the USD Index, and came right back out again today. The weakness we're seeing in equities doesn't begin to explain the amount that must be drained today.

The COMPX remains above 1380, though the TRINQ is climbing within bullish territory at .84. QQV -.25 on the day. The HUI is +5.4 at 152.34, a spectacular run today, ditto XAU +2.37 at 80.19.

  Mark Phillips   1/3/03,  2:40:35 PM
ACS $54.88 (+0.90) despite the vacillations in the broad market today, ACS managed to pull off that breakout we've been waiting for. Intraday, we've seen the stock sneak just above $55, but it looks like its out of steam for today. The next thing to watch for is to see where the stock finds support on the next pullback. Ideally, we'll get a rebound from the $54 level (old resistance becomes new support), which would provide an attractive entry point. For those traders that entered the play down near support earlier in the week, we'll be tightening the stop this weekend to $52, just below both the 10-dma and Tuesday's intraday support.

  Jim Brown   1/3/03,  2:38:26 PM
My short entry point at 8600 from yesterday is looking better every minute. The Dow's high of 8635 today appeared to be a climax event. The 60 min MACD 8,18,6 and STO 10,3,5 are both in full reversal and the A/D line just turned negative again. The Advancing volume, which has been flat all day finally appears to be weakening. If our New Years rally was only one day long then the outlook for the month is less than positive.

  Jonathan Levinson   1/3/03,  2:33:36 PM
I have to admit that I'm puzzled as to the markets' action in light of the 14B drain of fed money by the 22 primary dealers. Bonds have held, equities have held. The only significant selling I saw today was in the US Dollar Index. Did the fed's elves actually unload 14B worth of greenbacks? I'm not aware of any way to check. But the forex markets see over $1T worth of transactions daily, 14B could be potentially sold without upsetting the applecart, I'd guess.

  Mark Wnetrzak   1/3/03,  2:32:38 PM
Covered-Call Portfolio
One of the portfolio positions, Advent Software (NASDAQ:ADVS) - long the stock, short JAN-$12.50 calls, Cost Basis $12.01 - is making a fairly big move up ($14.87 +1.23) after "warning" about slightly lower revenue yesterday after the close.

  Jeff Bailey   1/3/03,  2:30:48 PM
Dow 5-minute chart Per last night's Index Trader wrap and looking at 5-minute chart. In past 20-minutes, Dow has made a relatively lower high than earlier this morning. Lower high came when Stochs were "oversold" on 5-minute time. In last night's wrap, we discussed the series of higher lows in the Dow on this time-table and we see equal or higher lows again today when Stochs go "oversold." Lower high just recently is perhaps "hint" that Dow is weakening, but technician and trader looking short really wants to see a LOWER LOW to think Dow may start to break down. Will then check the lower low against Stochs. All we're doing here is making a past observation of what did NOT happen for a short, and looking for the exact opposite. Link

  Jim Brown   1/3/03,  2:27:44 PM
Where did all the bullishness go? (grin) I received several emails last night saying I was not bullish enough and a couple saying I was too bullish. Obviously there are some seriously addicted market addicts in the group. The overwhelming consensus of my recent mailbag is still negative. I see the constant parade of "experts" saying the worst is over and the economy is rebounding, all is well. I agree mostly. The worst may be over for the economy but all the bad news for stocks may not be in our past. The patient may have been given the full dose of antibiotics but it could still take a couple of quarters for the infection to be flushed from the system.

I still think there will be some earnings warnings next week that will upset the markets. I think the 4Q earnings results will not provide a reason to cheer and I think there is another serious dip in our future. The end of year retirement contributions historically power the market for the first several days and a week day today is evidence of weak money flow combined with profit taking from yesterday. Either way, today is a throw away day. It means nothing. Many traders are still on vacation and the real market will not return until Monday. Kick back and relax! This is just the preshow!

  Ray Cummins   1/3/03,  2:21:49 PM
Spreads/Combos - Reader's Write

Attn: Combos Editor...I was looking through the candidates in last Sunday's OIN (specifically Lockheed Martin - LMT) and I noticed you have some new data included in the credit spreads write-ups. The term you used was PROBABILITY OF PROFIT. What exactly does this mean and how is it determined? Thanks, BL

The "Probability of profit" (expressed as a percentage) is based on the break-even price of the position and the 100-day historical volatility of the underlying issue. It is purely a statistical calculation determined by the past movement of the issue with no inputs other than current price, 100-day HV, time to expiration and break-even/profit point. To generate the number, I use a simple probability calculator and free volatility data provided on the Internet. Keep in mind, this calculation is not affected by, or reflective of, the current technical trend or fundamental condition of the underlying issue. At the same time, it is useful information for vertical spreads and other combination strategies -- especially those with trends in volatility as a major catalyst -- as long as one is aware of its basis and limitations. An informative article on probability and statistical analysis (that will help explain the background for this process) is available at this Link

  Kent Barton   1/3/03,  2:18:39 PM
Volatility Index (VIX.X) 28.10 -0.42: Moving to another relative low today and quickly approaching its November low of 26.41. A break below this level would put the index at levels not seen since June.

Traders have various ways of reading the VIX.X. My personal feeling is that a break to the downside would be a bullish development for the market. Most of us are familiar with that tried-and-true axiom, "when the VIX is low, it's time to go...when the VIX is high, it's time to buy." But while a breakdown would take the index to new *relative* lows, there would be ample downside remaining until the bottom of its historical trading range, in the 20-22 area.

The lower premium that results from decreased volatility is also a boon for option buyers.

  John Seckinger   1/3/03,  2:09:23 PM
When I said that I would like the Dow to fall back to 8580 and give a short-term bull trap reading, that was from getting an apex on a five-minute chart. However, if you take a retracement of today's range, 19.1% from the low comes in at 8581. Maybe I was off by one point. You gotta love retracement analysis. Note: 8609 is 61.8% and capped the last rally. Yes, I admit that the range is small and some of the retracement levels are close; however, it does seem to say a move back under 8580 would be short-term bearish. Retracement above 8580 is at 8594.

  Jonathan Levinson   1/3/03,  2:04:04 PM
That would be a lower high on the COMPX, just below the highs of the day. This run might not be finished, but so far there's a double top just below 1390 COMPX.

  Jeff Bailey   1/3/03,  2:02:02 PM
The 1:00 PM Intraday Update has been posted. Link

  Linda Piazza   1/3/03,  1:58:31 PM
Car sales figures are beginning to come out today. Toyota Motor says its sales were up 2% from a year ago, but the headline provided did not mention whether those were full-year comparisons or comparisons of December numbers. Ford saw December sales rising 8.2% over those from December 2001, but noted that full-year sales fell 8.8%. Ford plans to raise production in the first quarter in response to the higher December numbers. Jaguar and Land Rover December sales fell from December 2001, but full-year sales were at record levels. Volvo mentions strong demand for its SUV, but notes 12% fewer sales in 2002. As John mentioned earlier, General Motors plans to extend zero-percent financing and rebate programs.

  Steven Price   1/3/03,  1:55:50 PM
Swing Trade Signals
The Dow ticked back into the green, as has the SPX and COMP. We may get another test of the day's highs and as I have said earlier conservative traders can place a stop on the short signal at Dow 8650. We have been trading closer to the lows for most of the afternoon, but with little conviction in either direction. It's hard to take much from the sideways movement, but after getting no real pullback following yesterday's rally, another leg up is not out of the question. I'm going to maintain the 1/2 short position unless I see something that changes my mind. Right now we are still just below several levels of resistance and if this rally was just another fake-out, then there could be some real potential to the downside. However, with support seemingly forming at a higher level, above Dow 8550, I won't argue with those traders waiting for a more significant breakdown to enter short.

Current levels : Dow 8605/SPX 908.32/COMP 1386/OEX 459.00

  John Seckinger   1/3/03,  1:53:56 PM
Boston Federal Reserve President Cathy Minehan said on Friday that she expects the economy to keep growing at a moderate pace into the new year. Minehan said that businesses are likely to resume a normal pattern of hiring and investment once that uncertainty (Iraq, etc.) dissipates. "It looks to me as if the recovery is well positioned to continue, moderately but steadily. We just need to have some patience," Minehan was quoted as saying. This non-voting member expects the economy to grow at a 3 to 3.5 percent rate by the end of 2003.

  Jonathan Levinson   1/3/03,  1:50:24 PM
The COMPX has begun to advance, currently at 1387, as the TRINQ falls to .43 and QQV drops to .75. Yields have recovered off their lows with FVX +2.6, TNX +2.1 and TYX +1.2 bps. With the day high looming 2 points away, we are approaching a critical test of the day's trading range.

  Linda Piazza   1/3/03,  1:46:31 PM
Today, a report issued by mutual fund analyst Lipper noted that the average stock mutual fund fell 20.1 percent in full-year 2002. Without the Q4 rise, the declines would have been deeper. Growth funds showed the steepest declines.

  John Seckinger   1/3/03,  1:44:36 PM
As a trader, I will be watching the relationship between the XAU index and the Dow. XAU is now at 79.57 as the Dow makes a move higher. It seems unlikely that the XAU will hit 75 today, but something to remember heading into next week. Also finding a bid is the Sox, higher by 1.8% to 314 but still under some good resistance (315 to 320). If an equity bear, I would like to see a move back under 8580 and try to reject this recent move higher (short-term bull trap).

  Jonathan Levinson   1/3/03,  1:25:51 PM
I have been referring to the fed's 22 primary dealers, occassionally referring to them as Al Green's 22 elves. Here's the official list: Link

  Linda Piazza   1/3/03,  1:24:11 PM
In his 12:45 post, Steven wondered if we'd seen all the market action we were going to see. If that were true, what would the charts show at the end of the day? Here's today's chart of the OEX on which I've included both the simple and exponential 50-dma's: Link The last two days' candles show a big white candle and a small-bodied red candle that sits just above the exponential 50-dma but is bisected by the simple 50-dma. If you'd looked at only the exponential, it would appear that the OEX was holding just over that important MA, while a look at the simple gives a slightly different outlook. Although today's candle is so far a small-bodied candle and not a doji, and it sits near the top of yesterday's candle and not above it, the two candles still suggest the possibility of an evening-star formation, if they still appear the same at day's end. Yesterday, I'd mentioned that the OEX has seen a series of big white candles that turned out to be one-day wonders, making me hesitant to trust the bullishness implied by yesterday's candle. With this potential for an evening-star formation, I'm going to keep that simple 50-dma on my chart, to see if the OEX can push above it by the day's end. While today is far from over and today's candle can change dramatically this afternoon, I thought it might be interesting to explain why I look at both simple and exponential dma's, to see which might be impacting a trade.

Also note that the MACD is curling up on this chart, while the RSI appears to be turning down. If you were to draw an ascending line under the lows on the RSI from July through October and November, you might notice that the RSI broke through that ascending line in early December, came back up to test it in the last few days, and appears to be turning down again after the RSI resistance held. Since RSI can be a leading indicator and since trendline breaks on the RSI should be given serious consideration, I'm momentarily giving more credence to that development than to the MACD, but that interpretation could change by day's end.

  John Seckinger   1/3/03,  1:20:53 PM
Hard to decipher movement from here in the Dow. Bond prices have rallied (bearish for stocks), the Dollar is lower, and the XAU did hit 80. However, the Dow really should be lower than current levels and I start to wonder about a bull trap in the XAU. Then I tell myself to be patient and watch price action, since neither my pivot or R1 in Dow was hit today. On a 60-minute chart and daily, stochastics in the Dow do seem a little overbought.

  Jeff Bailey   1/3/03,  1:03:35 PM
Talk about range bound...... FRX $104.97 .... after gap higher, look at 5-minute chart of FRX. High has been 106, low $104 and traders have narrowed the stock down to a tight little "pennant" at $105, with 5-minute bars for past hour being $104.91-$105.07. That's pretty tight for a $100+ stock.

  Jonathan Levinson   1/3/03,  1:00:58 PM
The COMPX seems rangebound between 1380 resistance and 1377 support. Talk about threading a needle. The US Dollar Index cracked around the same time that gold went vertical, and is now trading just south of 102.40.

  Mark Phillips   1/3/03,  12:57:33 PM
NEM $30.32 (+0.62) Jonathan, John and Jeff have been commenting today on the continued strong move in gold, so I figure I'll chime in. The February futures contract (GC03G) is breaking out over $352, and if it can hold this level into the close, it will represent a new closing high for the contract. Shares of LEAP Call play NEM are once again blasting through the $30 level, setting a new 6-month high and closing in on the multi-year high ($32.75) posted in June. To put the recent move into some context, GC03G is now up 11% over the past month, while NEM is up more than 33% in the same period of time.

Gold bulls are having their day in the sun, as those currency and geopolitical concerns are making the yellow metal look more and more appealing as a store of value.

I've written recently that I thought NEM would have a hard time pushing through the $30 resistance level, but if today's action is any indication, I was too pessimistic. The moral of the story? NEVER underestimate the power of a primary bull market, which is where gold is right now.

For traders that have been in the LEAP play since we added it, I will be tightening the stop this weekend to $27, just below the still-rising 200-dma. For those eager to take a short-term profit, I certainly wouldn't argue with harvesting some gains here. The '04 LEAP (LIE-AF) originally listed at $3.90, is currently Bid $5.70/Ask $5.90 for a nice 50% gain.

But don't think this spells the end of this play. We're in the midst of a powerful bull run, in my opinion, and there will be plenty of pullbacks along the way to allow for new entries. As refernce, the vertical count from the PnF chart is currently pointing to a price target of $45. If all goes according to plan (it rarely does, but I can hope!), we ought to get a pullback near the 200-dma just about the time the 50-dma crosses over it sometime in the 3rd week of January. That crossover will simply reinforce the already bullish condition in the stock.

  Steven Price   1/3/03,  12:49:35 PM
Swing Trade Signals
We got yet another successful test of the lows of the day. So far that low is holding in the Dow(8569)/SPX(904)/OEX(457) with no real movement in either direction. Bonds are pretty much moving sideways and I'm beginning to wonder if we've seen all the action we are going to get today.

Current levels Dow 8582/OEX 457.49/SPX 905.38/COMP 1378.67

  Jonathan Levinson   1/3/03,  12:49:26 PM
Bond yields have gone flat across the curve, and precious metals keep getting more precious. The COMPX is miraculously holding current levels, despite the put to call ratio falling to .79 and bonds and gold being bought. The QQV is still negative and the TRINQ is still neutral-bullish at .72. I continue to watch 1377 as the support/pivot, and shorting on a break below 1375 with a stop at 1380 seems like a very good trade from here.

  John Seckinger   1/3/03,  12:47:25 PM
According to Dorsey Wright & Associates, Bullish Percent for Precious Metals is in an overbought condition. Be aware of a BULL trap. By definition of a BULL trap, a triple-top buy signal is given, and then prices quickly reverse lower and gives a sell signal. This will happen if the XAU hits 80 and then does a quick move back under 75. With the XAU having an intra-day high of 80.30, now is the time to look for a relationship between the XAU and the Dow. Above 80, the Dow should crack; however, it isn't yet. If it doesn't, let us look for a BULL trap in the XAU (read: immediate move lower).

  Linda Piazza   1/3/03,  12:46:23 PM
The SOX moved back above that 50-dma (exponential) before I could finish typing the entry, of course.

  Linda Piazza   1/3/03,  12:43:38 PM
According to Stockcharts.com, the 50-dma (exponential) for the SOX is at 311.07. Currently at 310.54, the SOX has moved below that level again after being above it earlier today. The day is far from over, so it's possible that the SOX could still close above that MA, as bulls might want to see happen.

A note: Readers might have noticed several of us quoting different MA's. A moving average is a moving average, right, and we all ought to be quoting the same numbers? Not necessarily. Some of us look at simple moving averages, calculated the way you would have calculated an average when you were in the primary grades--add up the entries and divide by the number of entries to get an average. Some of us use exponential moving averages. Calculations for these give more weight to the most recent entries. Then, there's the fact that these are "moving" averages, and some charting services recalculate them during the day. The 50-dma might have changed value as the day progresses. As I have in the past, though, I encourage you to look at both simple and exponential MA's, as some stocks seem to track one better than the other. Because I sometimes use simple MA's and sometimes exponential, I'll always mention which I'm using in my comments. I also encourage you to try different MA's. For example, I track the 22-dma, while others watch the 20- or 21-dma. Four weeks is twenty days, perhaps leading to the popularity of the 20-day, but on average, each month has 22 business days, so that's why I use the 22-dma.

  John Seckinger   1/3/03,  12:19:07 PM
XAU Index starting to go vertical; higher by 2.23% to 79.56 and close to the 80 area. There is a chance bids will come in at 80 and provide a catalyst for another wave higher. According to P&F charts, bullish price objective is 112. I think 90 is a good intermediate objective. Relative Strength is in short-term buy signal, but longer term bearish trend for RS reading as seen via Point & Figure charting.

  Jeff Bailey   1/3/03,  12:18:05 PM
Gold/Silver Index (XAU.X) $79.54 +2.21% ... per last night's Index Trader Wrap.... sector really making a move in last 30-minutes above recent three-session highs of $77.88 and looks to have some buyers (shorts covering, bull longs). Move above 80 on the index could raise some eyebrows and perhaps trigger some downside action in the major indexes.

Yesterday's rebound in XAU.X from negative territory despite dollar strength was suspicious. Today, gold stocks bid, but U.S. Dollar Index (dx00y) 102.49 -0.47% giving back some of yesterday's gains.

  John Seckinger   1/3/03,  12:12:45 PM
The United States could be risking a surge in gasoline prices by declining to open its emergency oil reserve to Venezuela. Pump prices are only 26 cents from the highest national average price on record. U.S. refiners, including Citgo and Amerada Hess, have requested oil from the U.S. Strategic Petroleum Reserve (SPR), citing the loss of 2.7 million barrels per day of crude from strike-bound Venezuela. So far the requests have been turned down.

  Steven Price   1/3/03,  12:12:21 PM
Swing Trade Signals
I'd prefer to see bonds closer to their highs of the day, but so far no real buying action to confirm a pull back in equities. SPX still holding 905 and we are sitting above the lows.

Current levels Dow 8582/SPX 905.34/OEX 457.53/COMP1378.80

The Dow had been hugging the rising 50-pma on the 5 min chart for most of the morning. It gave up that level, but the last test of today's low (8568) was successful and until we breakdown below that level, I expect we'll be moving sideways, or possibly higher.

  Linda Piazza   1/3/03,  12:12:21 PM
I admit I'm perplexed by today's action. Jonathan mentioned the net drain today, yet markets have mostly held their own while the (5)(3) hourly stochastics cycle down fairly quickly. Volume patterns show there's been moderate selling, yet new highs outnumber new lows, one sign of strength. I've been trying to build a scenario that encompasses it all. Do those higher bond yields we're seeing today mean that money is rotating from bonds to equities, propping up the markets? With bond yields now moving down toward the day's lows, will markets finally collapse, too? Stay tuned, as Leigh says.

  Jonathan Levinson   1/3/03,  11:58:23 AM
The COMPX is still hanging above the pivot (can I still use that term colloquially?) of 1377, while HUI and XAU strap on boosters, with HUI now +2.53 at 149.47 and XAU +1.1 at 78.92.

  Jeff Bailey   1/3/03,  11:55:41 AM
The 11:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   1/3/03,  11:52:16 AM
Spot gold has broken 350/oz, with HUI +1.89 and XAU +.70.

  Linda Piazza   1/3/03,  11:31:47 AM
Adv/dec (ratio method) figures have stayed relatively steady throughout the morning, with those numbers now at .86 for NYSE issues and .74 for Nasdaq issues. Numbers under 1.00 indicate more declining than advancing issues. New highs remain strong when measured against new lows, with a 43:5 ratio for the NYSE and a 44:8 ratio for the Nasdaq. One volume indicator that has changed a bit is the relationship of up volume to down volume. Earlier in the day, the Nasdaq up volume had been 1.91 times down volume. Now up volume barely pulls ahead of down volume, at a 217:210 ratio. Down volume has exceeded up volume all day on the NYSE.

  Jeff Bailey   1/3/03,  11:23:31 AM
E-mail updates IT staff is currently trying to resolve whatever problems there are with the e-mail versions of both the OI and PI intra-day updates.

  John Seckinger   1/3/03,  11:21:11 AM
Shares of General Motors (GM) are lower by 1.12% to 38.51, despite announcing new cash rebates and interest-free loans on Friday. GM's new program does offer less extensive offers of zero-percent financing versus last year, and excludes the Cadillac, Hummer, Saab and Corvette. The incentive program runs through February 28th.

  Jonathan Levinson   1/3/03,  11:20:38 AM
The COMPX is finding support at the precise breakout point of yesterday's upper descending trendline. The 5 minute candles appear to be printing a descending wedge, which formations tend to break to the upside. If this occurs, we could revisit the highs of the day. A break below 1375 won't necessarily invalidate the formation- at that point it will become a matter of watching to see if the price can get back above 1377 from below.

  Linda Piazza   1/3/03,  11:19:40 AM
Advocates of candlestick charting often scan charts looking for big white or red candles--those much larger than the usual candles on a chart. The mid-points of these candles can provide support or resistance. Yesterday printed one of those candles on the OEX. The midpoint is at 452.13. Scan across this chart and you can find other big white or red candles whose midpoints might provide support or resistance. Link

  John Seckinger   1/3/03,  11:16:29 AM
With the Dow not too close to either R1 (8696) or pivot (8519), one way to look at the market is via retracement analysis between R2 and S2 (8785 and 8253). This process then gives market maker levels of 8671, 8629 (near today's high), and 8581.

  Jonathan Levinson   1/3/03,  11:08:32 AM
Precious metals have come back from negative territory, with gold now trading above 346/oz, HUI +.11 and XAU down .13.

  Steven Price   1/3/03,  11:05:15 AM
We just tested the lows of the day and got a bounce off Dow 8569 and SPX 904. The QQQ is into the red by a few pennies, but once again no follow through and we are moving back toward the middle of the intraday range once again.

  Jonathan Levinson   1/3/03,  11:02:39 AM
Looks like CNBC is suffering from the bear market: Link

  Steven Price   1/3/03,  11:02:12 AM
Semiconductor Index (SOX) The SOX broke through resistance this morning at 310 and is so far holding its gains. That should make bears a little nervous, as the last pullback bounced from 310. I'd love to see a trip back under 300 for shorts, or back over 330 for long plays.

  Mark Phillips   1/3/03,  10:59:42 AM
IBM $81.20 (+0.63) Interesting action in new OI Put play IBM this morning. The stock is once again trading in the green (3rd in the list of DOW gainers, behind only EK and JNJ). While we want to see weakness for a better entry, this morning's strength appears to be running into trouble near the $81.50 level. This is an area of prior resistance and if the broad market falters, we ought to see Big Blue challenging the $80 level in short order. Entries near the current level hold another benefit, which is that risk is pretty easy to manage with a stop set at $83. Just under $2 of upside risk and potentially $12 of reward down to the PnF bearish price target of $69.

  Steven Price   1/3/03,  10:57:33 AM
We really are not getting any follow through to the downside, but the intraday bounces so far haven't been able to garner any steam either. The SPX did hold above 905 after this morning's drop, which could be seen as bullish. We are just slightly in the red across the board, with the exception of the QQQ, which is up slightly. I'd be more aggressive from the short side if the Qs weren't positive and IBM wasn't still holding onto its gains.

Current levels Dow 8592/OEX 457.90/SPX 906.18/COMP 1378.93/QQQ 25.43

  Jonathan Levinson   1/3/03,  10:56:05 AM
The US Dollar Index is struggling to hold the 102.75 support mentioned earlier today. The chart isn't looking particularly strong from here: Link

  Jonathan Levinson   1/3/03,  10:50:21 AM
Remember the downsloping trendline on the COMPX that was violated yesterday on the print above 1377? The descending channel can be seen most easily on the daily candles. A print below 1375 should return the COMPX under the upper trendline and back into the descending channel.

  Jonathan Levinson   1/3/03,  10:42:03 AM
I love the info you give re: fed funds .... WHERE do you find that information daily?

Flattery will get you everywhere. There are a few links I follow, but this one's my favorite: Link

  John Seckinger   1/3/03,  10:38:51 AM
On a seasonal basis, the yield curve is now supposed to steepen (better buying in shorter end maturities). The 5/10 year yield curve is already relatively steep and near multi-year levels. Currently, the 10-year cash is yielding 4.05% and the five-year cash is yielding 3.00%. This is a 105 bp wide curve, and is representative of a weaker dollar and geopolitical events. For information on the yield curve, see article: Link

  Jonathan Levinson   1/3/03,  10:37:41 AM
I wondered if this would happen today, and then pour on the funds for next Tuesdays announcement of the economic stimulus plan (Bush announcement). What do you think? Thanks for great work!

The fed works in mysterious ways. There's no way of knowing. I'd figured that they needed the 14B to cover Al Green's tab for the holiday festivities that no doubt took place at the Federal Reserve Building. Within its shell of stone and lead no doubt took place an orgy of beluga caviar, the finest tobacco, cognacs and musky port, string ensembles and perhaps even nymphs fanning the governors with banana leaves...

The daily decisions regarding the open market ops are made via conference call having regard to the current market action. Perhaps the fed was afraid of creating a blowoff in equities and a repeat of October- there's no way to tell.

  Jeff Bailey   1/3/03,  10:27:26 AM
Dow Indu ... per last night's Index Trader Wrap. Stochastic is at "oversold" on 5-minute chart, Dow has NOT hit a relative low on intra-day basis.

  Jonathan Levinson   1/3/03,  10:25:13 AM
While following the fed's open market operations may seem esoteric, I note that this latest round of selling commenced concurrently with the fed's announcement on its website. It's either coincidence, or I'm not alone after all :)

  Jonathan Levinson   1/3/03,  10:22:37 AM
I had a bit of a shock at the fed's announcement this morning, which is that it is taking no action with respect the expiring repos this morning. That is to say, 14 billion dollars in fed money must be paid back to the fed by its 22 primary dealers who have invested those funds in an array of securities. Expect to see selling in equities and bonds today. I believe that this is the largest drain I've seen from the fed since I started following the open market operations last year.

  Steven Price   1/3/03,  10:22:02 AM
Swing Trade Signals
Feels like we are running to stand still here, but we did see a new high after the morning dip. We are now ticking back into the red, but just barely. The rally so far failed below the 50% retracement of the recent drop, which is a level you can view in last night's Swing Wrap.

Current levels Dow 8599/SPX 907.52/OEX 458.52/COMP1381.72

  Linda Piazza   1/3/03,  10:17:51 AM
The earliest volume patterns aren't clarifying matters much. Adv/dec numbers (by ratio method) on both NYSE-traded and Nasdaq-traded issues show more declining issues than advancing issues, at .81 and .69, respectively. Yet new highs far outnumber new lows, at 32:2 on the NYSE and 25:3 on the Nasdaq. Down volume is 1.91 times up volume on the NYSE, yet up volume is 1.2 times down volume on the Nasdaq.

  Jeff Bailey   1/3/03,  10:12:53 AM
L3 Communications (LLL) $47 +1.62% ... stock is on my bullish watch list as a name for exposure to "defense" group. Trade here gets stock back on a buy signal and comes from recent support at $41. Link

If stock were above trend, which it is not, would look full positions. Pattern here is "bearish signal reversed" and bullish p/f chart pattern. Can look 1/4, but would look extended expiration of more than a couple of months.

Look for confirmation of LLL bullishness from sector and the $DFX.X Link with a trade at $166, which would be a triple-top buy signal.

Two potentially powerful and bullish p/f patterns here.

  Jonathan Levinson   1/3/03,  10:12:00 AM
The opening put to call ratio has come in at .79, which is neutral but verging on bearish. Bulls would have preferred to see a reading that exceeded 1.0.

  John Seckinger   1/3/03,  10:03:46 AM
The Utility Index (UTY) is above 260 and might be responsible for bids in equities. The dollar is weaker, and so is bonds (30-year down '12 ticks to 109'25). The Sox index is higher by 1.15% to 312. Ok, what does this all mean? I would look for resistance at R1 in the Dow at 8696, unless the dollar really starts to recover and help stocks. If the pivot is taken out to the downside I will look for more weakness in the dollar and stocks.

  Jeff Bailey   1/3/03,  10:02:27 AM
Forest Labs (FRX) $104.98 +4.99% ... stock filled its 12/05-12/06 gap lower back to the upside in early trade at $106. Bull would really like to get stock back near $102 if he/she could. Then look for news in late January-February regarding the company's Alzheimer's drug, which many believe will be a larger sales driver that the company's already blockbuster anti-depressants. I'm hearing that new Alzheimer drug has $5 billion sales potential and if so, would be largest drug for FRX. Link

Bullish vertical count on FRX now grows to.... $133

  Jonathan Levinson   1/3/03,  10:01:31 AM
The COMPX is printing new highs at 1385 as the TRINQ falls to .62- the buying has come in quickly, with the TICK.NQ at 346.

  Steven Price   1/3/03,  9:59:52 AM
Swing Trade Signals
The bulls bought that last dip, preventing any free fall following the Home Depot opening. There is still heavy resistance just overhead and it will take some heavy buying to break, but if the Dow gets back over 8650 on a rally, conservative shorts can use that level as an alternative stop.

  Mark Phillips   1/3/03,  9:50:29 AM
SNPS $43.08 (-3.84) As we feared from the late-breaking news last night, shares of SNPS are getting sold, and sold hard this morning. The CFO replacement seems to be the catalyst for the move, but the bottom line is that the technical strength we had been focusing on over the past week is no more. With a mildly weak open for the broad market, SNPS is off more than 8% and has already traded more than 80% of its ADV, 15 minutes into the trading day. Whether using the $43 stop or some other technical level, we would recommend being out of this play and will be dropping it this weekend.

  Steven Price   1/3/03,  9:44:47 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
After a short boost to new highs, we rolled over and were triggered on a 1/2 short position when the Dow traded 8590 at 9:41:40 Current levels are Dow 8585/OEX 457.80/SPX 906.18/COMP 1377

  Jonathan Levinson   1/3/03,  9:43:47 AM
The fed has an impressive 14B in expiring repos to replace today in order to avoid a net drain in liquidity. There have been no announcents yet.

  Linda Piazza   1/3/03,  9:43:03 AM
I'm taking note of that sell recommendation on HD as a sign of what might come in other retail stocks. I'm noting gold down and bond yields up--normally bullish signs for the equities. It's too early to check volume patterns just yet and get any sense of how they're performing, as they'll be distorted in early trading. I'll be interested to hear from Jonathan about today's repos and to see the levels for VIX and VXN, to see if they clarify today's outlook.

  John Seckinger   1/3/03,  9:40:01 AM
After the first five minutes of trading, the range in the Dow comes in at 8611 to 8599. Yes, there is about a 95% chance we will still have a higher daily high and low. Unfortunately, the range is really too tight to draw any good trading conclusion; nevertheless, look to see if 8611 becomes support (despite the fact that Home Depot (HD, -10.73%) was given a "sell" rating).

  Jeff Bailey   1/3/03,  9:38:45 AM
Johnson & Johnson (NYSE:JNJ) $56.26 +1.64% ... leading Dow gainer in the early going. My thoughts on this is the Guidant (GDT) new from this morning's 09:00 pre-market update regarding its cancelled merger with Cook Group in the coated stents business. This pretty much leaves JNJ and Boston Scientific (NYSE:BSX) $43.05 +0.02% as the dominant players now.

  Steven Price   1/3/03,  9:37:42 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
It looks like that opening range is failing. Let's go SHORT a 1/2 position in the broader markets if the Dow trades 8590. Set Stops at 8760 to begin with.

  Jeff Bailey   1/3/03,  9:33:03 AM
The 9:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   1/3/03,  9:32:09 AM
Live and learn! We have a 3 point gap down open on the COMPX to 1381, TRINQ 1.73, QQV +.83.

  Steven Price   1/3/03,  9:24:32 AM
Swing Trade Signals
It looks as though we are in for a minor pullback, but nothing earth shattering on the open. I'd really like to see a small leg higher into resistance in the Dow at 8650 and SPX at 910-911, as I highlighted in my Swing Wrap last night. I'd be looking to short that rally into resistance and then play a lower low than we saw last week. I said in yesterday's Monitor that I'd be looking for an entry point after seeing if/when we bounce on a pullback after yesterday's rally. Jim pointed out the heavy resistance just above the current levels and aggressive shorts can jump on below Dow 8600 and look to add below 8525. I'm going to watch John's pivot levels, as well as the opening range before jumping in.

  Jonathan Levinson   1/3/03,  9:20:39 AM
The Qubes have dropped off their best levels, currently 25.48 on Island ECN. Bonds are still being sold, with FVX +3.3 bps, TNX +3.2 and TYX +2.3. I expect a small gap up open.

  Linda Piazza   1/3/03,  8:44:37 AM
The FTSE 100 and CAC 40 have moved marginally into the red, with the FTSE down 6.20 (0.15%) and the CAC down 3.87 (0.12%). The DAX remains marginally positive, up 3.63 points (0.12%).

  Jonathan Levinson   1/3/03,  8:23:50 AM
The US Dollar Index is having trouble holding the 103 level, but found support this morning at 102.75 on a dip. The futures have recovered from the HD selloff, QQQ currently trading 25.53. Gold, which I see as a type of put on financial assets, has been very resilient given the buying panic in equities and selling panic in bonds yesterday, and is currently trading above 344/oz.

  Linda Piazza   1/3/03,  7:43:34 AM
CNBC just announced that RadioShack was lowering Q4 EPS due to weak sales and gross margins.

  Linda Piazza   1/3/03,  7:41:53 AM
While many commentators mentioned the unexpectedly high ISM numbers as a reason for yesterday's U.S. rally, OptionInvestor writers commented last night that markets had already looked ready to rally as long as the ISM numbers were not too weak. A look at yesterday's action in European markets perhaps reinforces that idea. Those markets rallied yesterday despite weak manufacturing numbers for both the countries using the euro and the U.K. which does not. As of this writing, major European markets hold their gains despite gloomy forecasts for European economies. Bloomberg headline news mentions that German banks don't expect to see a recovery in 2003 in the world's third largest economy. Growth in the U.K., Europe's second-largest economy, may be slowing. The FTSE 100 is up .12%, the CAC 40 is up .34%, and the DAX is up .54%, again above 3000 this week, and currently reading 3121.76.

  John Seckinger   1/2/03,  1:56:45 AM
Pivots/Levels Friday's S2, S1, P, R1, R2 are as follows

Dow Indu. (INDU): S2=8,253, S1=8,430, P=8519, R1=8,696, R2=8,785

SPX: S2= 870, S1=890, P=899, R1=918, R2=928

OEX: S2= 440, S1=450, P=454.5, R1=464, R2=469

NDX: S2= 970, S1=999, P=1013, R1=1042, R2=1056

QQQ: S2= 24.04, S1=24.73, P=25.14, R1=25.83, R2=26.24

  Jim Brown   1/2/03,  1:56:30 AM
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  John Seckinger   1/2/03,  1:53:24 AM
Futures on the Market Monitor We have just about completed the changes to the new Market Monitor and we will be starting to test the Futures page next week. Our plans are to go live with futures trades on the E-Mini on the following Monday Jan-13th. We are going to be offering two types of trades. Position trades and scalps. It is entirely up to the reader which style they participate in. Each will be clearly defined. We suggest you paper trade them for a week or two until you convince yourself, which is most profitable.

  Jim Brown   1/2/03,  1:53:15 AM
Win $2003 in 2003 ! We are going to close the year with a Guess the Dow for 2003 contest. We are going to give away $2003 in cash to the top 3 guessers. Place your guess now. You can change it as much as you want until the entries close on Sunday. Click here: Link

  Steven Price   1/2/03,  1:52:58 AM
The Swing Trade Game Plan has been posted: Link

  John Seckinger   1/2/03,  1:52:36 AM
The Futures Trader Wrap has been posted: Link

  Jeff Bailey   1/2/03,  1:52:15 AM
The Index Trader Wrap has been posted: Link

  Jeff Bailey   1/2/03,  1:51:15 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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