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  Jeff Bailey   1/13/03,  4:44:02 PM
Intra-day Pivot/Levels for Tuesday (01/14/02)...

INDU : S2= 8678, S1= 8732, P= 8800 , R1= 8854 , R2= 8923

SPX : S2= 914, S1= 920, P= 927, R1= 933, R2= 941

OEX : S2= 465, S1= 468, P= 471.5 , R1= 474, R2=478

NDX : S2= 1059, S1=1071 , P= 1088, R1=1100 , R2=1116

QQQ : S2= 26.30, S1= 26.61, P= 27.04 , R1= 27.35, R2= 27.78

These could be compared to ...

Intra-day Pivot/Levels for Monday (01/13/03)..

INDU : S2=8635 , S1=8710 , P=8764 , R1=8839 , R2=8893

SPX : S2=911 , S1=919 , P=926 , R1=934 , R2=941

OEX : S2=462 , S1=466 , P=469.5 , R1=474 , R2=477

NDX : S2=1040 , S1=1063 , P= 1080 , R1=1103 , R2=1120

QQQ : S2=25.81 , S1=26.44 , P=26.85 , R1=27.48 , R2=27.89

  Jim Brown   1/13/03,  4:20:36 PM
Futures Trading Today was the first live day for the Futures Monitor and it was a great success. To access the Futures Monitor just click the link below the regular monitor on the Desktop Monitor Option Window.

Here is a screenshot of the monitor and where to click: Link
Be sure and check it out.

  Jim Brown   1/13/03,  4:14:37 PM
End of year renewal special - Today is the last day to take advantage of the special. Those readers who want to lock in the cheapest rate possible with a ton of freebies should check it out! Click here: Link

Upgrade your regular subscription to a Premium level to continue receiving the Market Monitor. Click here: Link

  Linda Piazza   1/13/03,  4:04:42 PM
I'm stepping back and trying to get a feel for what happened today. On the surface, markets held relatively steady. So steady, in fact, that many indices or stocks are forming dojis at resistance. (For those new to candlestick charting, a doji is a candle that looks like a cross, and indicates indecision.) OEX never fully tested the overhead resistance I mentioned in my 9:56 post before falling back through the important 472.50 level. The COMPX did test its exponential 200-dma, and fell from that level, but has remained above its simple 200-dma. The DJI is producing a doji that's right on resistance, too, following up along the underside of the regression channel that had contained its movement until early December. It failed its effort to stay above 8800, but did not plunge, either. Other indices, such as the Dow Jones Transportation Index, show the same inability to push above the next strong resistance, but the same reluctance to fall beneath the next support, too. The VIX seems to be building a base, refusing to fall beneath 26. 5(3)(3) stochastics have been in overbought levels for a while on most indices, but have not fallen. Those stochastics have to cycle down some time or another, though, and perhaps that's when we'll discern intermediate market direction. The depth of the retracement when the stochastics cycle down should finally help us make predictions. This feels bearish to me, but I'll let the markets clarify things for me.

  Jonathan Levinson   1/13/03,  3:51:17 PM
Still very little action on the COMPX, but I note that the loft has been diminishing on the bounces off the lower ascending trendline of our 60 minute bearish ascending wedge. A close at current levels, nearly flat on the day across the indices, would be more bearish than might otherwise appear, particularly given the intraday range and the blowoff that occurred on the opening gap up.

  Jeff Bailey   1/13/03,  3:49:41 PM
Dow Industials (INDU) 8,784.68 .... using this as the close and today's high/low, early pivot analysis for tomorrow has the Dow's PIVOT at 8,800.

Short-term traders looking for any type of direction into tomorrow's open not getting it here and looks rather "neutral" at this point. Only "decider" as to short-term trader holding some positions overnight might be where Dow closes in relation to 8,800 is my thinking.

It would take a Dow close at 8,810 to have Dow close above tomorrow's pivot, which with a close at 8,810, would have the daily pivot being 8,808.75.

  Jeff Bailey   1/13/03,  3:46:34 PM
The 3:15 PM intraday update has been posted. Link

  Steven Price   1/13/03,  3:35:48 PM
Swing Trade Signals
It's a good thing Jim has been having some luck on the futures side of things with his scalps. We are really not getting any momentum in the broader markets for more tha a few points in either direction and the longer term trend is not becoming any clearer at this point. We are back in the red and a close above Dow 8800, which I believe would be significant for bulls, is looking less likely.

Current levels Dow 8774/SPX 924.87/COMP 1443/OEX 470.11

  Ray Cummins   1/13/03,  3:31:20 PM
Spreads/Combos/Premium Selling -- Portfolio Activity

Today's volatile session has caused some traders to start adjusting positions ahead of the January options expiration and we have a number of plays on the "watch-list" as well. Hershey (NYSE:HSY) is up $0.83 at $67.93 and our bullish diagonal spread (FEB-$65C/JAN-$70C) in the issue is now profitable. Another position in that category, Raytheon (NYSE:RTN) has previously offered a gain but with the stock down $1.62 at $29.80, it may be time to consider closing the play in the interest of capital preservation. Lockheed Martin (NYSE:LMT), down $1.82 at $55.17, is also feeling the weight of selling pressure in the defense sector -- no war for 6 weeks? -- and our bullish credit spread (JAN-$50P/JAN-$55P) will be in jeopardy if the stock moves much lower. The likelihood of a delayed conflict in Iraq and the move by OPEC to bolster supplies is hurting oil issues, most significantly Nabors Industries (NYSE:NBR), which is down $0.78 to $32.90. Our cost basis is near $32.25, so we will be diligently monitoring the stock for further downside activity.

Among the bearish spreads, Cephalon (NASDAQ:CEPH) is up $1.31 at $52.87 but with the sold (call) strike at $55, we have a bit of breathing room before a move will have to be made. Gilead Sciences (NASDAQ:GILD) is slightly more pressing as the stock is just under the sold (call) strike at $37.50. A close above that price would certainly indicate a potential exit or adjustment in the bearish credit spread (JAN-$40/JAN-$37C).

  Linda Piazza   1/13/03,  3:29:54 PM
Jonathan just mentioned that this was opex week, and I'd like to caution those of you holding January options that market direction shouldn't be your only consideration when deciding to hold those front-month options overnight or not. If the market looks to be headed your direction, but not quickly enough, you might find yourself with worthless options or options not worth nearly as much as they were the day before, even after a move your direction. Give this consideration as you're making decisions. A gap your direction would be good for your options, of course, but a gap against your position can be particularly devastating during opex week and a steady state can be just as devastating if the options you're holding are even slightly OTM.

  Kent Barton   1/13/03,  3:27:27 PM
Talk about solid resistance! In her 12:21 post Linda discussed how the BIX.X was sitting under its simple 200-day moving average. On a similar note, the BKW.X banking index (which factors in money-center institutions such as Citicorp and JP Morgan) is hovering just below solid resistance at 800. This level has repeatedly given the bulls headaches over the past five months. A breakout through this region would be an indication that the market as a whole is headed higher. I'd be looking for the index to provide confirmation by moving above the August high at 107.

  Mark Phillips   1/13/03,  3:19:30 PM
WOW! I completely forgot that Jim was over there battling it out with the Futures signals. If you haven't taken a look, it's worth the time. For the first day out of the gate, Jim looks like he had a pretty good run. A total of four scalp signals generated, for a net gain of 11.5 ES points. I dare say it will be worth keeping an eye on that Futures Monitor for those hyperactive day-trader types!

  Jonathan Levinson   1/13/03,  3:18:54 PM
The moneyflow index seems to have telegraphed this small move lower on the COMPX, and has yet to reverse, currently at a day low. The TRINQ is also nearing a day high at 1.41. The put to call ratio is also at a day high, but still a relative low of .67. There's been an impressive lack of action since the opening volatility, despite the lack of strength this afternoon. I don't expect much more than what we've seen, but am mindful of the fact that during opex week, strange things can happen.

  Linda Piazza   1/13/03,  3:06:05 PM
Speaking of checking things out, readers might click on the Future Monitor to check out the action there. It sounds as if it's been fun today. Makes me wish I were a scalper.

  Linda Piazza   1/13/03,  3:02:12 PM
Jonathan's 2:52 post mentioned the moneyflow indicator with Livecharts. A while ago, Buzz Lynn wrote a great series of articles about Q-charts, which also offers the moneyflow indicators. A reader, RK, wrote him with a suggestion about a method of using moneyflow along with three other indicators to give buy or sell signals. I'm just testing out the theory myself, but readers might check it out if interested. Link

  Linda Piazza   1/13/03,  2:54:29 PM
As with the other indices, the Dow Jones Transportation Index has been stuck beneath resistance at the exponential 200-dma at 2413.45, but above the 2365-2375 support area. No guidance here in market health or strength, although that could change by the day's end.

  Jonathan Levinson   1/13/03,  2:52:05 PM
One of Livecharts' newly-added indicators, the Money Flow Index, dropped off a cliff during the past hour, but I'm still working on getting a feel for the indicator. There has been virtually no change in any of the indicators I follow- so little that it's not worth reporting. Evidently the COMPX will remain parked pending the reports from INTC, MSFT, SUNW and IBM. In the meantime, I continue to watch that wedge on the COMPX, waiting for the break.

  John Seckinger   1/13/03,  2:48:13 PM
Shares of Georgia Pacific (GP) are lower by almost 7% on Monday, following higher than anticipated asbestos liability costs last year. These costs might offset any profit the company would have booked in the 4Q. The company will report its earnings on January 21st. Analysts were expecting a profit of 22 cents for the quarter. GP said it will record a fourth quarter pre-tax charge of approximately $315 million for asbestos liabilities and defense costs it expects to pay over 10 years through 2012.

  Jeff Bailey   1/13/03,  2:47:43 PM
Forest Labs (FRX) $54.61 -1.6% ... Jeff: frx is pulling back today.where do you see a good point getting in. regards.

Stock hit another 52-weeker this morning at $56. I'd look for at least a 3-box reversal ($53) and ideal pullback entry would be $50-$51 (mid-range of Bollinger with 21-day/2 Std. Dev), but not sure the latter will take place. Link

I like and own full position in the May $55 calls. Trader may look partial position at $53, then wait a couple days, see what takes place, with eventual plan to round out to full in coming weeks.

As I see it, the RISK for a bull right now is the upcoming FDA decision on the company's Alzheimer's drug. If approved, stock should gap higher is my opinion, thus the reason I like the May $55 calls that allows some "run time" on approval. A trader that established just partial has some exposure to stock under FAVORABLE ruling. While I don't expect the Alzheimer drug to get negative decision, a risk averse bull that just has partial at this point, also limits some risk compared to full position in the stock.

In my opinion, reason to own stock here is for the Alzheimer drug, not the 2:1 split, which has already happened, and not the guiding higher of earnings, which was announced on 01/03/03. We kind of already "knew" about the guiding higher of earnings per past comments. The catalyst from here is the Alzheimer's drug in my opinion.

  Ray Cummins   1/13/03,  2:29:48 PM
Spreads/Combos - Readers Write E-mail Reply

Dear Ray...Thank you for your help in the past. I do not understand your return calculation for the EBAY (01/12/03 Combos) debit spread. If the cost for a $5 spread is $4.45. the maximum gain would be $0.15 which would work out to 3%. Please explain. Thank You...MC.

Hello Marc...Here is the original position:

PLAY (conservative - bullish/debit spread):
BUY CALL FEB-60.00 QXB-BL OI=117 A=$14.30
SELL CALL FEB-65.00 QXB-BM OI=303 B=$9.80
POTENTIAL PROFIT(max)=12% B/E=$64.45

If the cost for the EBAY debit spread is $4.45 (currently trading near $4.50), the maximum potential gain is $0.55; $65.00 - $60.00 - $4.45 = $0.55. If the cost (debit required) is $4.45 and the potential profit is $0.55, the return on investment is equal to $0.55 / $4.45 or 12%. Let me know if I can help with any more questions...Ray

  Mark Phillips   1/13/03,  2:25:10 PM
ACS $55.63 (+0.62) After being turned back near the $56 resistance level this morning, shares of ACS are recovering with the rest of the market. The stock looks like it wants to challenge that resistance level yet again this afternoon, but remember that momentum entries need to wait for a rally through the $57 level before stepping into the play. In the meantime, we can see that rebounds from the $54-54.50 area continue to provide acceptable entries into the play ahead of the next breakout attempt. The latest dip was fairly mild and appears to have just been healthy consolidation in this continuing uptrend, as we now have the 5,3,3 daily Stochastics turning another short-cycle bullish reversal.

  Linda Piazza   1/13/03,  2:24:44 PM
Just as Jonathan mentioned happening with respect to advancing and declining volume, up volume shows slight gains over down volume, with up volume being a modest 1.25 times down volume on the NYSE and 1.37 times down volume on the Nasdaq. New highs continue to outnumber new lows, but by smaller proportions than was happening at the end of last week when new highs vastly outnumbered new lows. Jeff mentioned the possibility that stocks up early in the week were then being run up ahead of the weekend so that weekend newspapers would report them at 52-week-highs. Despite not being quite as out of proportion as toward the end of the week, the proportion of new highs to new lows today is a robust 73:27 for the NYSE and 85:14 for the Nasdaq.

  John Seckinger   1/13/03,  2:18:58 PM
Intel (INTC) has announced plans to cut prices on many of its processors used in laptops between 10 and 38 percent. These cuts come a few months before Intel unveils its new higher performance mobile processor, The Centrino. The Centrino is scheduled to be released sometime before July. With its Pentium 4 Processor M, Intel dropped the price of its 2.20 gigahertz version by 38 percent to $348; its 2.0 GHz by 31 percent to $241; 1.90 GHz by 18 percent to $198; and 1.80 GHz by 14 percent to $171. Shares of Intel are higher by 0.14 cents to 17.55, but underneath its session high at 17.98. Volume appears average.

  Jonathan Levinson   1/13/03,  2:15:32 PM
The formation I'm most closely following is the bearish ascending wedge on the COMPX 60 minute chart. A break of the day low would take us out of it, but for now the lower ascending trendline continues to hold. The rest of the indicators are doing their best to say nothing as the rangebound action on the COMPX continues to play out. Volume breadth continues to remain steady, with advancing volume extending its lead over declining volume slightly, 583M to 517M.

  Jeff Bailey   1/13/03,  2:07:31 PM
The 1:00 PM Intraday Update has been posted. Link

  Linda Piazza   1/13/03,  2:02:05 PM
Steven Price mentioned the potential for a reverse H&S pattern on the 60-minute charts. There's also potential for a reverse H&S on the daily and weekly charts, as indicated on this daily chart, with a neckline in green at the 9080 level. Link I've pointed out a rough reverse H&S in Valero Energy over the last week, and reader Russell S. wrote this morning to say that he was seeing these potential reverse H&S set up in many stocks on the weekly charts.

It may seem confusing that we've been talking about regular H&S formations and now I'm mentioning the potential for reverse H&S formations. I've been hesitant to mention the possibility because I seem to be spotting H&S formations everywhere and I didn't want information to be too confusing. However, we should be alert to all possibilities. We're not going to see both formations fulfilled, I don't believe. A move through the neckline of the current H&S will set up targets that will test October lows, undoing the potential for the reverse H&S formation. Obviously, a move first through the 9080 level negates the possibility for the markets to move through that neckline for the regular H&S formations.

  Steven Price   1/13/03,  2:01:41 PM
Swing Trade Signals
We are back in the green across the board, with the Dow hanging just barely to the upside of 8800. I think a close above that level would be significant, but as I've said earlier, longs need to be cautious of the sinking 200-dmas, December highs and the fact that the second legs of the last two PnF rallies have peetered out quickly. We are in rough waters as far as jumping in, but it does appear that resistance at Dow 8800 is not as significant as it was last week.

Current levels: Dow 8815/SPX 929.13/OEX 472.56/COMP1450

  Steven Price   1/13/03,  1:56:46 PM
Cigna (CI): $44.71 (+0.41)OI call play Cigna is trying to make its way past the $45 barrier once again. The stock has worked its way higher into the late October gap and a trade of $45 would be a new buy signal after retreating from $44 to $41 and bouncing back to the high end of the range. Conservative traders can set an alert at $45 for long entries.

  John Seckinger   1/13/03,  1:41:42 PM
The consolidation in the Dow continues, and the blue chips remain under 50% of the day's range (8809) and right at the low during the first five minutes of trading (8787). The dollar continues to show weakness, and the 30-year is getting back to the highs of the session. If equities do roll, it should be from here (back above 8809 cancelling out slight bearishness).

  Kent Barton   1/13/03,  1:41:32 PM
Close, but no cigar. Shares of Cigna (CI, $44.63 +0.32) are outperforming the Dow today but haven't cleared psychological resistance at $45.00. We won't be activating our OI/PI long play until this occurs. If a breakout does take place, we'll be looking for CI to rally towards the October lows near $57.00.

  Jonathan Levinson   1/13/03,  1:38:34 PM
The put to call ratio has just set a day high at a still-low .66.

  Linda Piazza   1/13/03,  1:36:09 PM
Reader Question: I noticed your post a few moments ago on Valero. PEG is up over 50% in a short time in pressing up against both the exp. and reg. 200 day mvg. average; actually it's surpassed the EMA. When a stock has gone up this much this fast I'm also reticent to buy it. Any thoughts? thx,

Response: I see PEG on a P&F buy signal, but nearly up against a bearish resistance line at 38. That bearish resistance line and the simple 200-dma may be combining to give PEG its current hesitation. I not only checked PEG's P&F chart, but also the RS of PEG against the $UTY sector, showing that relative strength is on a "sell" signal, but in a column of X's. If I understand Dorsey correctly, he says that this may be an indication that the stock is outperforming in the nearterm. I checked $UTY's relative strength against the SPX, and noted that this is in a sell signal, but also in a column of X's. Here Dorsey clearly says, "When a sector index reverses up into a column of X's on its RS chart, we consider that to be a buy signal," noting that this is a difference in the way buy signals are interpreted for other reasons. This buy signal shows that the $UTY might be outperforming the SPX.

I note that volume is strong today. On the daily bar chart, I notice that the candles may be consolidating in a bull flag pattern. That's bullish, of course. Prices are staying above the ascending trendline that's been forming since October, but that's a steep trendline, isn't it? I'd be worried, too, about entering before a pullback and a new, less steep trendline forms. However, I wouldn't want to enter unless that pullback stayed above both 200-dma's.

I see RSI making a series of higher highs and higher lows--all great to see if you're interested in a bullish play. I do see a troubling potential for bearish divergence on the 5(3)3 stochastics, but stochastics don't always work so well in a strongly trending market or stock. MACD is still strong. Because of that potential for bearish divergence on the stochastics, you could wait for a pullback for an entry, checking the chart patterns again. I'm not sure how much of a pullback you're going to get in this stock, however, as it has a habit of consolidating for a few days and then moving up again. An alternative, but a riskier one, is to enter now, although I'd want to wait until I got a close above that simple 200-dma, at least, setting a stop just below that exponential 200-dma, which also would show a break of the ascending trendline. Like you, I think I'd prefer to wait for the pullback and for stochastics to cycle down and head back up, especially with that resistance overhead. In addition to the 38 level, you might expect resistance at the 40 and 42 levels. You might risk losing a great opportunity, but there will be another one if you're feeling cautious about that steep trendline. Link

  Jonathan Levinson   1/13/03,  1:35:41 PM
The US Dollar Index is down to 101.34 now, and the bounce that felt like it wanted to happen there, um, didn't. The COMPX is currently trading 1346, while the QQQ remains at 26.94. XAU stopped just short of going positive, and we continue to see very little movement from bonds or equities.

  Jonathan Levinson   1/13/03,  1:09:02 PM
Linda nailed it again, if the latest put to call reading is any indication- a third reading at .63. QQV is up 2.54 on the day, and the TRINQ is back at .75. The five year treasury yield is down 4 bps now, and the HUI and XAU are down a little less, XAU -.07 on the day and HUI -1.24. February gold continues to hold above the 353 level, while the US Dollar Index is above its lows but looking a little toppy at 101.53.

  Linda Piazza   1/13/03,  1:01:35 PM
The VIX hasn't been much help forecasting direction today. With a low 26.31 on the day, so far, it held above last week's low of 26.19, but I wouldn't call the movement off 26.31 a bounce, either. So far, the VIX is printing a doji for the day, a visible sign of the indecision we're all feeling.

  John Seckinger   1/13/03,  12:54:38 PM
Still waiting to see if the Dow will rollover from here or not (using 8809 as a guide, since half of day's range). The bond market most likely expects it, and the upper tail in the Sox index isn't a very encouraging sign for bulls. The dollar looks to set its fourth consecutive daily lower low and lower high, and bulls are most likely going to wait until the Greenback can prove foreigners are indeed interested. The close should be very important, since the 'tail' can be filled back in.

  Steven Price   1/13/03,  12:49:49 PM
Swing Trade Signals
We are once again struggling with 8800 in the Dow. On the daily chart it may end up looking like an insignificant day, with a just a blip. However, the PnF gave significant signals, regardless of whether we finish above or below 8800. One note, however, is that back in November (where we are looking at a possible left shoulder), the SPX gave the final buy signal at 925, which looked like a breakout, before rolling over and heading south. The Dow gave two boxes (buy at 8750, then 8800), which would equate this time to a to a top of 9000, before rolling over. The OEX never gave a buy signal (2.5 box).

However, we are spending more time testing resistance on the daily chart than we did at any other failed head or shoulder over the last several months. Most of the occurences with this much staying power eventually legged higher.

Current levels: Dow 8797/SPX 927.06/OEX 471.12/COMP 1449

  Jonathan Levinson   1/13/03,  12:42:57 PM
The put to call ratio has flatlined at .63 for the past hour, down off its high reading for the day at .65. These are at the low end of the range for the past few weeks. Given that the indicators and price aren't showing much movement, I'll reflect for a moment on sentiment as measured by the p/c ratio. The .63 reading coincides quite well with the current price level of the index I follow most closely, the COMPX, and my own "internal" sentiment. My feeling is that a good hard push upward could put the COMPX into potential breakout territory, and so I'm nervous about adding to my shorts. If the big push occurred, I'd be expecting an even lower put to call ratio, because my own bearish thoughts about price would be further refuted. However, the fact is that it's taken a great deal of aggressive buying to get the COMPX to this level, and that "hard push" could be the "exhaustion" move that many Elliott wavers are predicting here- many are calling for a last push higher followed by a massive wave down. If the put to call ratio dipped to more extreme lows, conventional wisdom would call it a sell signal. The Elliott forecast seems to line up well with that. On the other hand, overbought indicators could become more overbought, and so caution and proper account management continue to be job one.

  Kent Barton   1/13/03,  12:37:11 PM
SLM Corp (SLM) $106.47 -1.33: Shares of Sallie Mae are seeing some profit taking after moving to new all-time highs early this morning. A 15-minute chart shows that the stock has more-or-less been trading sideways (with a slight bullish bias) over the past week. Pulling back to a daily chart, we can see that the stock has been ascending in a reliable trend of higher lows. A pullback to this trendline, which roughly coincides with near=term support at $105.50, might offer a bullish entry point. FYI...the p-n-f bullish vertical count is $120.

  Jeff Bailey   1/13/03,  12:33:32 PM
American Elec. Power (AEP) $27.30 -3.9% ... Also a S&P 100 Index component. Stock trades heavy today and just below trend. This is one of the stocks in S&P 100 that is currently on "buy signal," but trade at $25.00 (session low has been $26.55) would have stock taking 1% away from bullish %.

Interesting thing here is technicals combined with Business Week article last week saying that a few professional bears are short this power company with belief that AEP is facing a liquidity squeeze and is having diviculty supporting its dividend (hmmmm.... Duke Energy too?) of almost 9%. Some analysts warn that company will have to cut its dividend. "One pro is short AEP at $25, and who reaped big profits in shorting Enron and WorldCom in 2001, sees AEP hitting a new low of 14 in a year."

Subscribers that have been with OI awhile remember some good shorts/puts profiled here in ILA, WMB and other "energy/utility" related names. AEP looks good technical short, using trend as leverage with stop just above at $31. Link

A quick look at Relative Strength Chart of AES vs. OEX shows stock's RS is "on a buy signal, but column of O." Link

In my "mind's eye" I can envision how a trade at $25, or $24, could generate "sell signal" in AES p/f chart, and at the same time have RS chart also generating a "sell signal." As such, bears can be looking short/put here, but only 1/4 or 1/2 positions. Then look to add with technical breakdowns in AES chart and RS chart.

  Linda Piazza   1/13/03,  12:21:44 PM
Here's an example of the reason I like to monitor both the exponential and simple 200-dma's: Link On this chart of the BIX, it's apparent that this banking index did battle with the exponential 200-dma (maroon line) from mid-October until January 6, when the BIX finally broke through this important MA. Since then, however, it's been pushing right up against the simple 200-dma at 295.74. It's clear from this chart that both 200-dma's have come into play.

Also of interest on this chart is the thick red line I've drawn through the RSI indicator on the bottom of this chart. The RSI has been making a series of higher lows, all the way through the lower price lows of October and into the current time period. If the RSI indicator were to fall through that rising line, I would be alert to weakness in the BIX. If the RSI were to come down and test that line and then move back up, I'd be alerted to continued strength in the BIX. It's often more useful to use the RSI indicator in this manner than it is to look at the numbers being displayed.

  John Seckinger   1/13/03,  12:20:54 PM
I am showing (via Q-charts) volume significant within both the 10-year note and 30-year bonds. The 10-year (ZN03H) contract is showing volume of 945k, much higher than the 439k reading on Friday. The 30-year is showing volume of 367k and above Friday's reading of 146k. Is this because of a potential bear trap in bonds and bull trap in stocks? Possibly. I would like to get these volume numbers confirmed first.

  Jeff Bailey   1/13/03,  12:18:05 PM
United Technologies (UTX) $63.79 -0.83% ... one of the S&P 100 Index components that came very close to generating a reversing p/f chart "buy signal" at $66, to get S&P 100 Bullish % back into "bull confirmed," but unable to do so. Earnings release date is January 16th (this Thursday) before the market. Analysts are looking for $1.05 vs. year ago $0.69. Recent quarter EPS was $1.21, so thinking becomes to get a "buy signal," need some upside surprise or bullish comments going forward. I'm looking at past quarterly EPS and Q4 seems to be the slow quarter with Q2 being the stronger quarter. Link

Note: UTX is also a Dow Industrials component as well as S&P 500.

  Kent Barton   1/13/03,  12:10:10 PM
Front-month crude oil futures (cl03g) are ticking slightly higher after a relatively quiet weekend on the geo-political front. The major sector news today has Apache (APA) buying some of BP's producing properties for $1.3 billion. Traders within the group might want to note that the OSX.X oil service index (81.85 -1.42) has fallen to new multi-week lows after rolling over from its 100-dma. The index is being pressured by an earnings warning from Smith International (SII), who warned that its Q4 EPS would come in 6 cents less than analyst expectations.

  Jonathan Levinson   1/13/03,  12:07:29 PM
Market internals are looking very balanced on the COMPX, with advancing volume actually slightly ahead of declining volume, 1406 advancers to 1556 decliners, and 73 new highs to 6 new lows. The TRINQ and QQV have barely budged in the past half hour, and nor has price, which is parked just below QQQ 27 and just above COMPX 1445. The XAU and HUI are off their lows but still in the red.

  Jeff Bailey   1/13/03,  11:59:42 AM
The 11:00 AM intraday update has been posted. Link

  Linda Piazza   1/13/03,  11:53:20 AM
That's good information to know about bonds, John. (See John's 11:45 post.) I, for one, feel lucky to have John's updates about the bond market because it's sometimes difficult to sort out whether the bond market action is due to something happening with the equities, the geo-political situation, or bonds themselves. Last week, for example, I heard a bond analyst on CBNC commenting that Bush's economic plan would cause debt, and that the government would issue new bonds to pay that debt, and that bond traders therefore anticipated more supply and lower prices and were selling bonds ahead of those lower prices.

  John Seckinger   1/13/03,  11:45:34 AM
Bonds are finding a bid due to both the decline in equities and lowered expectations for corporate supply issued this week. Traders are expecting $16 bln this week, lower than earlier estimates of $20 billion and under last week's issuance of $23 billion. Note: Dow close to low during first five minutes of trading (8787).

  Linda Piazza   1/13/03,  11:39:46 AM
VLO: 38.15 + 0.59. Last week, I cautioned bullish traders that Valero Energy was testing its exponential 200-dma, and that traders watch for a failure at that level to set stops. Valero did not fall through that support, and instead bounced, and now appears ready to test mid-December highs of 38.55. I would also be watchful for a failure at that level, and those in January options might consider taking profits if Valero does appear to roll over at that level. Daily 5(3)3 stochastics are in full upward mode, however, and weekly appear to be trying to turn up again while in levels indicating overbought conditions. Above 38.55, the next resistance lies in the 39.90-40.00 area, both on a historical basis and from the psychological resistance offered at the nice round number of 40. Valero remains on a P&F buy signal

  Jonathan Levinson   1/13/03,  11:36:42 AM
Sure enough, the COMPX found support at 1336, just before Friday's support zone. The TRINQ never made it much above 1, and is currently at .75 on this bounce. QQV is +2.77 on the day, and QQQ is back at 26.95, firmly back in Friday's range. While there's been a lot of noise today since the open, we have been watching an ongoing predominance of call trading as reflected in the low put to call ratios. My guess is that these calls will have to be expired worthless by opex Friday, which leads to me guess at net downside this week for the QQQ and COMPX. The market makers tend to be the biggest option writers, and they should have an interest in protecting their investment by leaning toward lower prices.

  Mark Phillips   1/13/03,  11:36:36 AM
DELL $25.92 (-1.23) Stock getting whacked to the tune of -4.5% this morning in a continuation of the slide that began last Thursday afternoon. I still don't know what the root cause of the weakness from last week was, but today's catalyst appears to be the downgrade from JP Morgan this morning. The firm lowered their rating to Neutral from Overweight on views that there is no near-term PC upgrade cycle in the works.

Traders following the stock in line with our current LEAPS Watch List play will want to watch how the stock performs near the long-term ascending trendline. It currently rests at $25.50, and that just happens to be where the stock rebounded from this morning. For real confirmation of a rebound, DELL needs to get back over the 200-dma ($26.61), which acted as strong support through most of the month of December. Clearly, the stock is going to need to shake off today's weakness and get back over the 200-dma if it is going to remain in the bullish triangle formation, with a top near $30.

  Linda Piazza   1/13/03,  11:31:16 AM
The SPX is back at "left-shoulder" levels. On November 6, the SPX high was 925.66.

  Jonathan Levinson   1/13/03,  11:27:40 AM
Thanks, Mark. And thanks to Wes, for "HHG". I'll go with the Feb contract price until I can get a better handle on HHG. The prices I've been quoting come from Kitco's spot prices.

  Mark Phillips   1/13/03,  11:26:14 AM
Regarding Jonathan's 11:22 post, the symbol for February Gold futures in QCharts is GC03G.

  Steven Price   1/13/03,  11:24:56 AM
Swing Trade Signals
One thing traders need to be aware of from the long side are the descending 200-dmas in the Dow (8927), SPX (949.49) and OEX (476.72). The last time we broke the resistance levels we took out this morning, those 200-dmas were quite a bit higher and long positions will have that level to deal with much sooner on a rally from these levels this time. When we reached the December 2 high, those 200-dmas sat at OEX 493/SPX 982/Dow 9177.

  Linda Piazza   1/13/03,  11:24:47 AM
After testing its exponential 200-dma for four days last week, the Dow Jones Transportation Index fell away this morning and now looks to test support in the 2365-2375 area. As I mentioned last week, I watch this index because it can be an important measure of economic strength or weakness.

  Jonathan Levinson   1/13/03,  11:22:06 AM
Do you have any suggestions where to find a chart for gold in Qcharts? I mean spot or futures not XAU or HUI or GOX. HHG is not helping me. Is there a gold chart in QCharts????

There is, although it appears to be offline for the moment. Here's the link. The symbol should be $GOLD.


  Linda Piazza   1/13/03,  11:16:09 AM
Stepping back for a moment, I see the dollar up, which is normally bullish for equities, but I also notice ten-year and thirty-year yields down, VIX and VXN up, and the XAU up, which is normally a bearish combination for stocks. Volume patterns indicate more skittishness on the part of the bulls than earlier today, too, with adv/dec figures now showing more decliners, with a .81 ratio on the NYSE and a .74 ratio on the Nasdaq. Up/down volume is nearly equal on the NYSE, by a ratio of 192/198, and a slightly more negative ratio of 218/354 on the Nasdaq. New highs continue to outnumber new lows, with a 52/20 ratio for the NYSE and a 69/6 for the Nasdaq.

  John Seckinger   1/13/03,  11:11:13 AM
The U.S. Supreme Court rejected an appeal by the nation's automakers seeking to consolidate tens of thousands of asbestos liability claims in a federal bankruptcy court presiding over the case of an automotive parts supplier. The justices let stand without any comment a ruling by a U.S. appeals court in Philadelphia that it lacked jurisdiction over the personal injury lawsuits, which were filed by claimants exposed to asbestos in brake parts.

  Jonathan Levinson   1/13/03,  11:04:58 AM
Hi all. Looks like I was having some problems there, and am back online. Many of your emails are just coming in now, so please accept my apologies if you haven't received a response.

Good mornin' Jonathan. I've e- mailed you in the past concerning Au and Ag. I'm looking to buy a fairly large position in physical silver (fairly large for me anyhow) and I know you use Kitco, but I would like to have your comments on whether to let Kitco store it or take delivery of it. Also, I have heard that with physical gold or silver, Mr. Cretain (sp?- so what!) can't tax it. Wahoo!!! TIA Grant

This is not tax advice, but when I made my last buy from Kitco, I was told that Canadian maples were not taxable in Canada because they were "4 nines" pure, and that, for example, Kruges or Eagles were subject to Cdn sales tax. Guess which ones I bought? With my coinage, I take physical delivery. Leaving it in a bank or dealer's vault defeats the purpose for me, which is to have real money (Au and Ag) in my paws just in case... well, just in case. The bulk of my investments in this sector are through mutual funds, which are far better leveraged than my physical holdings. I hold gold and silver coins, CEF.A shares, Royal Precious Metals fund (Canada's #1 performing mutual fund over 1 and 3 year time spans) and AGF Precious Metals.

  Linda Piazza   1/13/03,  11:03:43 AM
Although the battle may not be over, the COMPX came away from its test of the exponential 200-dma with a few bruises. Here's a chart, with the maroon line being the exponential 200-dma. Link The OEX never even touched the exponential 200-dma and other resistance points outlined in my 9:56 post before falling away.

  Mark Wnetrzak   1/13/03,  11:01:14 AM
Covered-Call Portfolio
The gap and crap open suggests the bulls are a bit hesitant to back their bets and more inclined to protecting their profits. Several of our covered-call candidates for this week are suffering sustained selling after gapping higher at the open. Asyst Technologies (NASDAQ:ASYT) is looking especially weak, quickly giving back the open and now moving steadily lower. Caution at entering new bullish or even neutral positions may be wise. The Bulls were eager to run through the "chute" this morning; hopefully they won't find themselves inside a meat factory this afternoon.

  John Seckinger   1/13/03,  11:00:10 AM
In the fixed income arena. a primary dealer is looking for an increase of $1 bln to $28 bln in 2-year notes, and an increase by $2 bln in each of 5-year and 10-year issuances to $24 bln and $20 bln, respectively. There is a rumor that the there will be a monthly issuance of 5-year notes as early as May. If not May, fixed income traders say August is a strong possibility.

  John Seckinger   1/13/03,  10:53:31 AM
I just told Jeff on the phone that I thought this move was more technical in nature than anything else. Just another bull trap - indicated once 8820 was taken out in the Dow. I will now look to see if the five minute low of 8787 becomes resistance going forward.

  Jonathan Levinson   1/13/03,  10:51:21 AM
The COMPX is rapidly approaching the 1430-35 level where it found support on Friday.

  Steven Price   1/13/03,  10:50:52 AM
Swing Trade Signals
I would be very careful entering positions right now. I'm not sure what the reason for this fade has been, and I'm not so sure about a long entry anymore until I see the reason. I may wind up kicking myself for being stopped out on the short signal before a sell-off. Current levels: Dow 8767/SPX 923.57/OEX 469.05/COMP 1438

  Jonathan Levinson   1/13/03,  10:42:03 AM
The put to call ratio has dropped to .53. This is precisely the action that bears have been waiting for. The markets are headed south, yet the put to call ratio is dropping, as traders have been conditioned to buy every dip. The longer that bullish speculation remains dominant, the greater the potential to the downside, just as we saw last spring.

  Steven Price   1/13/03,  10:39:07 AM
Swing Trade Signals
For those traders looking to capture a possible move to Dow 9000, following the PnF buy signals in the Dow/SPX/OEX, I'm looking at a possible reverse head and shoulders formation on the 60 min. Dow chart with a head at 8580, shoulders at 8713 and 8718 and neckline at 8800. The formation is a little sloppy, but the measuring objective is around 9020.

One of the concerns I have right now and one Jeff and I discussed last week was the plethora of possibilities from this level. If this rebound fails and we get another close below 8800, will the pattern of closes below 8800 mirror that of closes above 8300 a couple of weeks ago, before a big turnaround? We got sell signals on the PnF back then as well.

Right now the morning rally has faded and we are back in the red. this was a huge fade. Current levels: Dow 8776/OEX 469.95/COMP 1441/SPX 924.81

One thing a trader may want to consider in the current environment is looking at straddles, which is the purchase of a call and a put at the same strike. This allows traders to buy the dips on the underlying security and sell the rallies, holding the options as protection. While direction has not been easy to pick recently, we have moved and this strategy could be applied with the Dow Diamonds as the underlying hedge.

  Jonathan Levinson   1/13/03,  10:32:36 AM
The TICK.NQ at -500 is lowest I've seen in weeks. TRINQ at .73 is climbing as selling pressure increses. HUI and XAU are coming off their lows, and yields have gone negative. The COMPX has now filled the opening gap, and if it doesn't find support here, could have a ways to fall.

  Jeff Bailey   1/13/03,  10:26:25 AM
Market Volatility Index (VIX.X) 26.31 -3.02% ... slipping below Friday's low here. Have alert set at 26.18, which is just below Thursday's low. Current action has VIX falling ever so slightly and might be hint of some market bullishness over next couple of weeks. Bulls want to see vix continue to fall, then would become more "defensive" in weeks ahead if VIX were to fall to 22.00-21.00 and see bullish % get back above 70%.

  Jonathan Levinson   1/13/03,  10:25:52 AM
The fed has announced a 3B overnight repo, which adds a net $1B in liquidity to the markets.

  Mark Phillips   1/13/03,  10:18:44 AM
PG $85.96 (-0.17) In what is largely a positive start to expiration week, PG is one notable spot of weakness this morning, failing to gain any altitude with the pop in the broad markets. The stock currently holds the #2 losing position in the DOW and the rebound off of last week's lows appears to be losing steam. That said, PG is currently trading in an area of congestion, and the best entries will likely come either on a failed rally up near $87, or a breakdown under $84.50

  Linda Piazza   1/13/03,  10:17:35 AM
Volume patterns in earliest trading confirmed the bullish sentiment in the markets. New highs continued to outnumber new lows, at a 38:6 ratio on the NYSE and a 55:2 ratio on the Nasdaq. Ratio method adv/dec numbers showed that advancers came in at 1.72 times decliners among NYSE-traded issues and 1.6 times decliners on Nasdaq-traded issues. Up/down volume also showed a positive pattern, with up volume 2.7 times down volume on the NYSE and 4.75 times down volume on the Nasdaq. These early trading patterns are not always predictive of later volume patterns, but that's what was happening in early trading.

  Jeff Bailey   1/13/03,  10:17:14 AM
Duke Energy (DUK) $18.25 -13% ... has been utility stock mentioned as bearish for months. Had decided here in market monitor to move to sidelines on puts several weeks ago when stock had pulled back to $19.00 level. Today's reduced guidance, which has been a recent pattern for Duke once again has that secondary offering in play from $18.36. Any trader still holding a January expiration put contract, I'd close out here. Then, lets monitor stock next couple of days, look for closes below the $18.36 level on some heavier than average volume. Try and get a feel for those secondary offering bulls to see if they begin to hedge. Duke said today that current guidance will support the dividend. If the bulls holding the secondary don't agree, or begin to get "nervous" about the dividend, then they should begin some hedging activity.

  John Seckinger   1/13/03,  10:17:14 AM
It looks like most equity markets made it through Resistance 1, but unable to hit the second resistance level. Failure? I personally will wait until the Dow falls under 8821 and 50% of the morning's rise before calling it an intra-day failure.

  Jonathan Levinson   1/13/03,  10:12:27 AM
The put to call ratio has just printed .55. Getting down there now to relative lows over past weeks, a bearish reading.

  Jonathan Levinson   1/13/03,  10:11:50 AM
The QQV is holding its gains, currently up 2.47. While I'm expecting downside in the QQQ's for this week, it's difficult to be a buyer of put options on a big spike in NDX volatility (as measured by the QQV). I generally prefer to sell options when volatility spikes up and buy when it spikes down. It's not an ironclad rule, more of a reflex- and, it would have failed me had I followed it on Friday, when the QQV was down, into today in which it's spiked up on a gap *up* open. This is anomalous market action, but it still would have cost me money.

  Jonathan Levinson   1/13/03,  10:04:49 AM
The QQV is holding its gains, currently up 2.47. While I'm expecting downside in the QQQ's for this week, it's difficult to be a buyer of put options on a big spike in NDX volatility (as measured by the QQV). I generally prefer to sell options when volatility spikes up and buy when it spikes down. It's not an ironclad rule, more of a reflex- and, it would have failed me had I followed it on Friday, when the QQV was down, into today in which it's spiked up on a gap *up* open. This is anomalous market action, but it still would have cost me money.

  John Seckinger   1/13/03,  9:56:37 AM
As Jim gets the kinks out of the futures monitor (in terms of posting and commentary), note how the Dow rose above R1 at 8839 but failed to hit the 8893 area and R2. Now currently just under R1, look to see if institutional investors will use this level as a starting point.

  Linda Piazza   1/13/03,  9:56:11 AM
Here are the resistance levels I'm watching in the OEX chart this morning. The maroon line is the exponential 200-dma at 480.53. The blue MA is the simple 200-dma at 476.74. A rise in the OEX toward those numbers will also test the former support from an ascending channel, which might now provide resistance. As anyone who was reading the Monitor Friday knows, I'm perfectly willing to trade bullish, but I still have that "show-me" attitude, and that requires a move over these levels in the OEX. I don't want to jump into bullish plays, only to have the OEX turned back at these levels. Link

  Steven Price   1/13/03,  9:49:04 AM
Swing Trade Signals
We got the SPX over 935, Dow over 8850 and OEX over 472.50, before the rally began to fade. Buying a pullback now that we got those signals could be the next strategy, depending on where that pullback takes us and how much room we have until the August/December highs just over Dow 9000. I'd like to see the bullish percent data after the close to see whether we got the upturn in the OEX into a column of "X" as well, but I would suspect that we have.

I'm not sure an ultimate target of 9000-9100 in the Dow is worth entry at this point, considering the bid/ask option forfeit, but it might be worth a shot to futures traders targeting the August/December high of 965/954 in the SPX.

Ideally I'm looking for a pullback and confirmation from the bullish percent to enter from the long side, so as to give us a little more profit potential on the upside.

  Linda Piazza   1/13/03,  9:47:21 AM
It's make-it-or-break-it time for the COMPX. Having passed up its simple 200-dma last week, it's now sitting right underneath its exponential 200-dma of 1463.29.

  John Seckinger   1/13/03,  9:38:52 AM
After the first five minutes, we have a range in the Dow from 8787 to 8856. 50% of the morning's move comes in at 8821. This area should not be penetrated if bulls are going to control the session.

  Jonathan Levinson   1/13/03,  9:38:22 AM
The TRINQ has dropped to .29 on this leg up. Gold is trading weak, with HUI -1.91 on the day and XAU -1.22 so far.

  Steven Price   1/13/03,  9:38:05 AM
Swing Trade Signals
The Dow gave that buy signal at 8850, while the SPX is getting close to the 935 signal, trading 934.88. I'm thinking back to the last failed head and shoulders formation, where Jeff offered the advice that the right shoulder shouldn't wind up above the ear. It was good advice back in the middle of November and something to keep in mind now.

  Steven Price   1/13/03,  9:33:58 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the exit signal when the Dow traded 8825 at 9:31:46

  Jonathan Levinson   1/13/03,  9:32:52 AM
14 point gap up open to COMPX 1461, TRINQ .64, QQV +2.4 to 37.56, FVX +.4 bps, nearly flat.

  Jeff Bailey   1/13/03,  9:30:27 AM
The 9:00 AM Intraday Update has been posted. Link

  John Seckinger   1/13/03,  9:28:58 AM
It looks like the formation of the Right Shoulder in the Dow will be tested today. The pivot is calculated at 8764, while R1 is at 8839 and R2 is above at 8893. Note: Since the Dow closed on Friday above Monday's pivot, this did have slight bullish implications. Something to look for today at the close.

  Steven Price   1/13/03,  9:24:35 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
If the current jump in futures holds, there is a good chance we will be out of the 1/2 short position on the open. Stops should be set at Dow 8825. Last week I suggested alternative stops on the short of 8650, 8700 and 8750 for more conservative traders leaving more aggressive traders willing to risk the 1/2 position from resistance at 8800. While I'll be out at 8825, traders who want to give this position a little more room to fail can use a stop of 8850.

Dow 8850 will give a PnF buy signal, as will an SPX trade of 935. The OEX gave a buy signal (on the 2.5 box chart) at 472.50 and if we get a continued rally today, we may see its bullish percent turn into a column of "X" as well.

If we do get a trade of Dow 8850, then traders willing to take on the possibility of strong resistance at 9000-9100 can think about going long at that level, if we get confirming buy signals in the SPX at 935.

  Jonathan Levinson   1/13/03,  9:11:28 AM
The fed has 1.999B in weekend repos expiring today. We'll await the morning announcement to determine the fed's course of action for the day.

  Jonathan Levinson   1/13/03,  9:05:23 AM
The five year yield is now up 1.8 bps, down from its opening gain of 4.6 bps. Is this lack of confirmation in the treasury market signalling a gap and crap in equities on the open?

  Jonathan Levinson   1/13/03,  8:35:43 AM
Bonds have just started trading, and seem to be confirming the jump in equity futures, with FVX +4.6 bps, TNX +3.3 bps and TYX +2.3. QQQ is trading 27.47 on Island ECN, with the US Dollar down off the morning highs but above last night's lows, currently 104.45. Gold is just above 351/oz.

  Linda Piazza   1/13/03,  7:14:57 AM
The German DAX leads European markets higher today after the release of a German manufacturing number that showed production increasing 2.5% in November, rather than the expected 0.6%. This number surveys production at factories, construction site, utilities and mines. As of this writing, the DAX had moved up 2.77%, just off its highs of the day. The FTSE 100 was up .64% and the CAC 40 was up 1.47%. In the U.K., J Sainsbury PLC announced a bid for Safeway Plc. The offer comes in 21% higher than the all-stock bid made by William Morrison Supermarkets PLC last week, but some question whether British competition authorities will block the acquisition of one of the top four food retailers by a rival, reducing the top four to three.

Japanese markets were closed for a holiday today, but other Asian markets rebounded after James Kelly, Assistant Secretary of State for East Asian and Pacific Affairs, met with South Korean President-elect Roh Moo Hyun. Kelly revealed the U.S.'s willingness to talk to North Korea and confirmed that the U.S. would renew fuel deliveries if North Korea abandoned its nuclear weapons program. Tensions had escalated over the weekend as North Korea commented that it might resume missile testing, and as the official North Korean newspaper Rodong Sinmun stated, "If the United States evades its responsibility and challenges us, we'll turn the citadel of imperialists into a sea of fire." Kelley's meeting with Roh Moo Hyun seemed to ease fears in Asian markets with the Hang Seng moving up 1.16%.

  Jim Brown   1/12/03,  11:02:28 PM

THIS IS THE LAST DAY to take advantage of the special. Those readers who want to lock in the cheapest rate possible with a ton of freebies should check it out! Click here: Link

Upgrade your regular subscription to a Premium level to continue receiving the Market Monitor. Click here: Link

  Jim Brown   1/12/03,  11:01:35 PM
Futures Trading

On the new Desktop Market Monitor there is a link to the Futures Monitor. We will begin the futures commentary and trades on this page on Monday. Click this link to see how to access this information: Link

  Leigh Stevens   1/12/03,  11:00:58 PM
The Index Trader Wrap has been posted: Link

  Steven Price   1/12/03,  11:00:30 PM
The Swing Trade Game Plan has been posted: Link

  John Seckinger   1/12/03,  11:00:12 PM
The Futures Trader Wrap has been posted: Link

  Jim Brown   1/12/03,  10:59:41 PM
The Index Trader Wrap has been posted: Link


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