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  Jeff Bailey   1/14/03,  6:37:06 PM
Intra-day Pivots-Levels for tomorrow 01-15-03 are...

Index         S2      S1       P      R1     R2
Dow Jones 8714 8778 8810 8875 8907
SPX 918 925 928 935 938
OEX 466 470 472 476 478
NDX 1074 1084 1091 1101 1108
QQQ 26.62 26.86 27.09 27.33 27.56

And can be compared to today's 01-14-03 levels of ...

Index         S2      S1       P      R1     R2
Dow Jones 8678 8732 8800 8854 8923
SPX 914 920 927 933 941
OEX 465 468 471.5 474 478
NDX 1059 1071 1088 1100 1116
QQQ 26.30 26.61 27.04 27.35 27.78

Note: All S's move higher, as do Ps, but Rs actually move lower. This is slightly different than what we've seen past couple of sessions and is "because" today's highs did not take out yesterday's highs. For short-term traders, they will note today's "inside day." Those looking to play this type of trader's pattern may also use the intra-day levels tomorrow in their trading.

This "inside day" trading discipline is very easy to understand, and was discussed in a "Bailey's Basics" article at this link. Link

It can also be used by swing-traders for entry and exit points.

  Jeff Bailey   1/14/03,  6:11:41 PM
Semi-equipment names AMAT $15.36 -0.25% trading at $14.75, NVLS $33.45 -0.59% trading at $32.25 and KLAC $39.65 -1.97% at $38.30 in after-hours. Most likely negative action here after Intel's comments regarding further reduction in Capex outlook for 2003.

  Jeff Bailey   1/14/03,  6:04:07 PM
Intel tidbits and looking ahead comments.

Sees little "underlying growth" in U.S. economy in first half of 2003, with potential for growth in second half of 2003.

Sees 2003 gross margins for Q1 at 50% and expects all of 2003 to be about 51%, plus or minus a few percentage points (this was compared to 50% in 2002).

Capex is expected to be between $3.5-$3.9 billion, which would be below consensus of $4 billion and lower than 2002's $4.7 billion.

Revenues for Q1 are expected to be between $6.5 billion and $7.0 billion. This range looks to have consensus of $6.67 at lower half of Intel's forward guidance.

Intel (INTC) $17.90 here, with QQQ $27.18.

  Jeff Bailey   1/14/03,  5:54:36 PM
American Power Conversion (APCC) $15.82 ... this newly added componet to the NASDAQ-100 index trades higher at $16.25 after the company said it now sees Q4 (Dec) EPS of $0.21-$0.25, excluding special pre-tax charges (consensus is EPS of $0.20). APCC expects to post mid-single digit year-over-year revenue growth in Q4 versus $338.6 million in Q42001 (consensus revenue was $335.2 million) and anticipates taking special pre-tax charge of $15-$25 million in Q42002, related to voluntary recall of two models in its Back-UPS CS uninterruptible power supply line due to potential safety issues that may exist with the products. Link

APCC currently carries a minimal 0.36% weighting in the NASDAQ-100

  Jeff Bailey   1/14/03,  5:47:20 PM
Intel (INTC) $18.02 .... QQQ $27.22

  Linda Piazza   1/14/03,  4:43:25 PM
Bloomberg television reports that INTC's planned cap-ex expenditures of $3.5-3.9 billion comes in under the Bear Stearns benchmark of $4 billion. Bear Stearns thought anything below the $4 billion mark would look bearish. We'll see how the markets weight this number versus the revenue and earnings-per-share numbers, as well as increased margins.

  Jonathan Levinson   1/14/03,  4:41:55 PM
Capital spending for 2003 is expected to be between $3.5 billion and $3.9 billion, as compared to $4.7 billion in 2002. Intel's semiconductor equipment spending is being primarily targeted at 300-mm wafer production, which is providing the company with greater capital efficiency and lower manufacturing costs.

  Jim Brown   1/14/03,  4:34:38 PM
Intel beat the street on the surface by two cents with $.16 cents vs estimates of $.14 cents.

  Linda Piazza   1/14/03,  4:15:34 PM
At 1461.01, the COMPX closed just below its exponential 200-dma at 1464.35. Daily ADX registers 18.37, indicating range-bound trading, at least until the ADX moves up a bit more. You'd think that ADX level had already moved up, however, as the 5(3)3 stochastics remain pinned in overbought territory day after day. Today, I do note, however, that 21(5)(3) stochastics are now signaling overbought levels on all the major indices, too, and appear to be trying to roll on the S&P's and the COMPX, although the end-of-day action kicked these longer stochastics back up on the Dow Jones Industrials.

  Linda Piazza   1/14/03,  4:01:51 PM
A commentator on Bloomberg television voiced the opinion that these small-range days didn't bode well for the markets, echoing my gut feeling. He said that they indicated indecision between bulls and bears, and that's what those small-bodied candles are showing, too. He stated that traders don't want to see indecision after a rally, but want to see carry through. Of course, he ended his time on Bloomberg by commenting that traders should stay invested if they have a long-term view, ruining his trustworthiness. If he anticipates a fall, why would traders want to be fully invested in equities? (Note: don't make trading decisions on my gut feeling. I'm not.)

  Jeff Bailey   1/14/03,  4:01:10 PM
Intel (INTC) $17.79 +2.35% was closing 04:00 tick. Will benchmark from here in late-hours trading.

  Jeff Bailey   1/14/03,  3:59:22 PM
Dow Industrials 8837 +0.58% ... early pivot analysis for tomorrow withough knowing for certain today's high and close has Pivot at 8,807, R1 at 8,869, so early look is Dow will close above tomorrow's pivot. May press bears into the close.

  Linda Piazza   1/14/03,  3:57:20 PM
Reader Question: R.S. comments in reference to my post about CSCO's potential to form a reverse H&S, "Sebl is also right on the neckline today. If it breaks the neckline , will you load the boat with calls even though the nasdaq 100 is approaching overbought per the bullish percent data, all indexes are right on resistance, and the elliott wave prediction of the imminent crash into a wave 3 freefall any second?

Response: R.S. has voiced my dilemma, and that of many traders. I won't be loading the boat with bullish plays with those factors hanging over any bullish plays I attempt. First, I would have to see major indices close above their 200-ema's, the ADX indicators showing that the markets were trending strongly so that I could ignore the overbought levels on the stochastics, and my overhead resistance levels passed. I'd want to see the Banking Index and Transportation Index confirm strength in the major indices. I'd prefer to see the stochastics cycle back down while indices or stocks held above appropriate support levels. Somehow, I can't yet believe that's going to happen, but if it does, I'll ease into bullish plays. Very cautiously.

  Jeff Bailey   1/14/03,  3:55:30 PM
The 3:15 PM intraday update has been posted. Link

  Jonathan Levinson   1/14/03,  3:46:47 PM
That said, precious metals stocks are getting hammered, despite the price of gold staying relatively stable today. HUI is currently down 5.78 to 139.03, XAU down 2.61 to 74.13.

  Steven Price   1/14/03,  3:39:14 PM
Swing Trade Signals
If we get a close above 8800 in the Dow, accompanied by a close over 930 in the SPX, I am leaning toward the long side. While I think the overhead resistance (200-dma and December high) will keep me on the sidelines, traders looking for a short move can lean in that direction.

  Jonathan Levinson   1/14/03,  3:34:32 PM
Is your bullishness long term based on the political tensions or based on GG and gold as a metal. A tough question to answer but if there is no war will gold just drop?

My bullishness on gold derives more from the combination of fundamentals and technicals as described in my 12:39:47 post. While it's impossible to tell what's behind the buying, I believe that war speculation is a minor factor compared with the toppiness in the bond markets and, arguably, equities. If interest rates are low, so is the time value of cash. With equities and bonds both risky, and real estate at a relative peak, gold and commodities in general become a more attractive asset class. For this reason, I believe that the trend will continue beyond the short term.

  Ray Cummins   1/14/03,  3:25:33 PM
Spreads/Combos/Premium Selling -- Notable Events

Shares of Overture Services (NASDAQ:OVER) are trading $3 lower near $28 after being downgraded at Soundview to "underperform." The brokerage said yesterday's pre-announcement of revenue upside is more than offset by rising traffic acquisitions costs. Overture reported Monday night that fourth-quarter revenues would be nearly $200 million, versus consensus estimates of $192.5 million, due to increased traffic and click-through volume from the company's largest partners. Despite bullish ratings by several Wall Street firms, investors focused on the issue of higher costs and unloaded the stock throughout the morning session. Our target (short put) position at $22.50 appears safe for now, however traders should monitor the stock closely until Friday's expiration of January options.

  Jeff Bailey   1/14/03,  3:15:39 PM
Office Depot (ODP) $12.85 -8.9% .... defensive today ahead of earnings slated for February 5th (unconfirmed). Analyst's looking for EPS of $0.21 per share, compared to year-ago $0.19.

  Jonathan Levinson   1/14/03,  2:58:12 PM
I remember Dennis Miller making fun of KMart: "I guess when I say KMart you know I'm talking fashion central- bought a couple of short sleeved suits, and a broqueed dickie, and a Century-21 blazer for the holidays..." Not so funny now as the announcement comes of a possible 35,000 layoffs and 326 store closings. Here's the Link

  Linda Piazza   1/14/03,  2:58:09 PM
The indices sit at crucial junctures, and so do many stocks. Yesterday, a reader suggested he was seeing many potential reverse H&S's form in specific stocks. Here's one I'm watching on Cisco's chart. Link Charts like these are the reasons I'm remaining patient today. While I'm viewing the repeated failures to push over the next resistance levels in a bearish light, I can also see that a positive reaction to INTC's earnings could initiate a sea change in the way the markets are behaving.

  Jonathan Levinson   1/14/03,  2:38:15 PM
The COMPX is now testing the trendline on the ascending wedge on the 60 minute chart, support at 1450.

  Jeff Bailey   1/14/03,  2:37:50 PM
Semiconductor Index (SOX.X) 332.22 -0.25% ... first "tech sector" to turn red in the afternoon session. Most likely some bulls looking to move sidelines into the close ahead of Intel's earnings, but action here may put a lid on any further market bullishness into the close.

ALL the major indexes pegged at their pivots right here.

According to Dorsey/Wright and Associates, their semiconductor sector bullish % (BPSEMI) is still "bear alert" status at 52.46, and needs a reading of 54% to reverse back up into "bull confirmed" status. Reached 74% in late November, before turning "bear alert" at 68% in early December.

  Kent Barton   1/14/03,  2:35:12 PM
Deluxe Corp. (DLX) $40.39 -0.56: This PI short play broke out of its sideways trading range last week. Shares have shown promising relative weakness over the past two sessions, and are quickly approaching $40.00. We'll be looking for a move below this critical support level to send DLX down to the $38.00 area.

  Linda Piazza   1/14/03,  2:34:07 PM
Excruciating is the right word for the market action today, as markets continue to test overhead resistance and fall back from those levels, but then fail to break through support. As I scroll through daily charts, I see dojis or small-bodied candles forming below resistance, just as has happened for the last several days. This inability to push through resistance for day after day begins to feel bearish even without those stochastics pinned at overbought levels, but I concede that a bullish case can be made for holding above support, too.

  Jonathan Levinson   1/14/03,  2:29:43 PM
Looking at the chart of the US Dollar Index (DX00Y on Qcharts), the index is at resistance after completing a dramatic decline from its double top of 120 at the beginning of 2002 to its current 101.19 with an intraday low of 100.96. After this long decline, most of the oscillators are oversold, from the 5(3) monthly stochastics to the daily candles. This support level coincides with the resistance we've seen in gold at the 355/oz level. I would expect a rebound in the dollar to be bearish for gold, just as the failure of the dollar coincided with the rise in gold last year. I'm expecting strong resistance on a potential bounce in DX00Y to come just below 105.00.

  Linda Piazza   1/14/03,  2:16:15 PM
VLO: There's certainly a reason that Valero Energy's P&F chart shows a resistance line at 38. There's a lot of supply at this level. I've watched above 200,000 shares traded in 5,000-25,000 blocks over the last hour, all at bid or best bid, suggesting sellers unloading stock. So far, Valero's price has held even above 38 as this distribution happens, but January options holders should be alert to the possibility that supply might overwhelm demand and prices might fall again. Of course, there's also the possibility that the supply might be absorbed and Valero will move up.

  Mark Wnetrzak   1/14/03,  2:15:53 PM
Covered-Call Portfolio: ALA
Alcatel (NYSE:ALA), a covered call candidate profiled Sunday (long the stock, short the FEB-$5 calls), rocketed higher today after the company said they now expect higher 4th-quarter revenue. The stock has made a nice bullish break-out above the 150-dma and near-term resistance around $6 (the December high) on very heavy volume.

  Linda Piazza   1/14/03,  2:10:40 PM
Kmart employees will be watching for pink slips today, as the company began notifying employees of perhaps as many as 300 stores that they would no longer have jobs. Analysts predict that the store closures will affect more than 20,000 employees.

  Jeff Bailey   1/14/03,  2:06:51 PM
QQQ $27.07 +0.48% ... in last night's Index Trader Wrap, thought a QQQ straddle at the $27 level ahead of tonight earnings and more importantly company's conference call might be "best" index trade today. Not seeking any type of direction, just looking for some type of volatility away from the $27 volume pivot we've discussed.

I took a look at the January expiration and bulk of today's option interest is at $28 call, $24 call, $26 put, $27 put, $27 call.

$24 call most likely considered "bearish" and perhaps covered call action, while others are evenly placed bullish and bearish bets around Intel's numbers.

QQQ volume of 30 million shares is very light today, and has QQQ as 6th most actively traded security in the market today. Usually in top 3 or 4.

  Jonathan Levinson   1/14/03,  2:05:19 PM
"Excruciating" is a good word to describe the past 10 or so market hours. The COMPX continues to do nothing and go nowhere. It's as if the market makers have decided to kill all the options they've written by simply parking the price for a few days, thus dropping implied volatility and causing puts and calls alike to deflate.

  Steven Price   1/14/03,  1:54:15 PM
Steve, I have been following vxgn for awhile. I actually have a profitable, open trade on currently using a bull put spread that was placed when the underlying was at15. Anyway, vxgn has been pushing against very strong resistance at 20 and is in a very tight trading range,especially over the last 3 days. My OPINION is we are going to break through. If my OPINION is right where do you see the next resistance level? Thanks, Bill-Cincinnati

Vaxgen (VXGN): $19.70 (-0.14) Vaxgen has also been on my radar for a while. I considered it for the OI stock list back when it began receiving NIH money for the anthrax vaccine, but unfortunately passed due to a recent high percentage gain. The stock has been struggling with $20, but did trade that level the last two days, giving it a triple top buy signal on the point and figure chart. The bullish vertical count is $24.50 and is dervived from the current column of "X," meaning it has a chance to go higher and will not be finalized until we get a reversal down. There is resistance on the daily chart at $22 and again between $23 and $24. The sector index is on the way down, so new entries need to be aware of a bull trap, but if you are "assuming it will breakout," then $22 should be the next roadblock.

  Mark Phillips   1/14/03,  1:51:51 PM
LTR $47.78 (+0.41) Following the opening dip to $46.75, shares of OI Call play LTR have seen a consistent bid and the stock is nearing yesterday's high of $47.90. Given the lackluster trade in the broad market and the fact that volume on LTR has been consistently declining throughout the day, a breakout move seems unlikely today. But if volume comes back into the stock with a break over $48, momentum types could certainly use that for new entries. Just be careful not to get caught in a bull trap -- in that regard, I think volume is the key indicator to watch.

  Jeff Bailey   1/14/03,  1:43:56 PM
The 1:00 PM Intraday Update has been posted. Link

  Jonathan Levinson   1/14/03,  1:39:12 PM
The US Dollar Index has risen off its lows, currently at 101.22. The put to call ratio at .80 for the past hour is too high for bears' comfort and too low for bulls' comfort- in the other words, the market is in fine form.

  Kent Barton   1/14/03,  1:36:33 PM
McDonalds (MCD) $16.96 -0.37: MCD is currently the worst-performing Dow component, with a 2.0% loss. Shares are being pressured by a note from Solomon Smith Barney that says the company's conference call next Thursday will not feature any major changes in the business plan. Considering that McDonalds expects to announce a quarterly loss for the first time in its 47-year history, investors are likely to be disappointed by the lack of action. Maybe it's just me, but their highly-touted "dollar menu" program comes off as simply rearranging the deck chairs on the Titanic. It's beyond me how smaller profit-margins are going to return the company to profitability. The cheap menu might lure customers away from competitors, but these gains will probably be short-lived unless the quality of the product improves. I did notice the other night that they've started marketing those pita sandwiches again. That seems like a pretty good move, since Americans seem to be getting more health conscious.

Technically, bears can be pleased that MCD has started to rollover from its 50-dma at $17.33. Speculative short-term traders could target bearish entries at current levels, with a stop slightly above the relative high of $17.38. I'd be looking for shares to move back towards the $15.00 level ahead of the meeting.

  Jonathan Levinson   1/14/03,  1:30:12 PM
Would you short (buy 60 put) on MSFT with 55 target since there is a huge open interest on Jan 55 call (> 105000)

I wouldn't base the trade solely on put/call ratio dynamics, because market makers and specialists have a vast array of strategies at their disposal, and op-ex setups don't always pan out. However, in combination with other technicals, op-ex put/call configurations add a pleasant cherry on top. MSFT is tracing the same ascending wedge as the COMPX, and is toppy on the 5(3) stochastics. On the weekly, the oscillator hasn't yet started to roll over, and so it's early to load up a short term put position. Arguably, we're witnessing the formation of a top at currently levels, and I'd suggest buying extra time to allow for the possibility of further upside.

  Linda Piazza   1/14/03,  1:29:17 PM
On the SPX, the 200-ema, the simple 200-dma, and the resistance from the regression channel all come together between 948.42 (200-sma) and 949.74 (200-ema).

  Linda Piazza   1/14/03,  1:24:52 PM
Here comes the push. Will it succeed? On the OEX, remember to watch the simple 200-dma at 476.20 and the exponential 200-dma at 480.42. A regression channel that formerly provided support will now likely provide some resistance, with that channel now crossing at just about the level of the 200-ema.

  Steven Price   1/14/03,  1:23:42 PM
Swing Trade Signals
My opinion of this action is changing on an almost hourly basis, which is a good indication that I should be extremely cautious about picking a direction. If we do get a close above Dow 8800 and SPX 930, after shaking off poor jobs data, poor retail sales and geo-political concerns, I will most likely leave for the day feeling awfully bullish.

Mark's comments about the banking sector are also applicable and although the BKX is above the 200-dma, the BIX has yet to close above its own 200-dma. It has failed that level for the last several days and currently sits just 0.10 above the 295.63 average. I'd like to see both of these indices close above that level to confirm a bullish move in the broader markets.

  Jim Brown   1/14/03,  1:17:49 PM
If you are still attempting to use the old Java version of the monitor it will not work. It will however hang up the current program and cause it to quit refreshing. The Java server has been shutdown and trying to connect to the monitor with the Java program just confuses the program that reads the database. Please download the current desktop monitor or use one of the browser versions. Thanks

  Linda Piazza   1/14/03,  1:11:21 PM
Volume appears robust today, with 719 million shares traded on the NYSE and 833 million traded on the Nasdaq. Bulls might point to the green currently showing up on the indices and call the strong volume bullish, while bears could point to the inability of the indices to move strongly up on that strong volume. We just have to wait and see.

  Linda Piazza   1/14/03,  1:06:13 PM
I'm watching the Dow Jones Transportation Index for the same reason Mark watches the BKX. I'm looking for signs of market strength or weakness, as Dow theory holds that the $TRAN should confirm strength in the industrials. So far, it's not doing so, with the $TRAN last week testing its exponential 200-dma and then falling away. At 2375.84 currently, it's lingering nearer its 2366-2375 support than it is its 2413.61 exponential 200-dma, but the day is not yet done. As I mentioned earlier, I'm watching all of this, but trying not to form too many conclusions too early. I keep thinking that gravity has to assert itself again, and that when the stochastics cycle down, we'll have a better idea of the intermediate trend, but so far, the daily stochastics have defied the laws of physics and stayed aloft.

  Mark Phillips   1/14/03,  12:53:00 PM
BKX.X $796.87 (+6.14) I mentioned this index last week due to the well-known adage that for a broad market advance, the financial stocks must participate. The KBW Banking index (BKX.X) has been battling with the $800 level for months now, but hasn't been able to scale it. Yesterday's intraday push up to $800.71 notwithstanding, broad market bulls need to see this index improve from here and the fact that it is finally above the 200-dma ($788.48) is encouraging. In fact, yesterday's print above $800 has the PnF chart on a new Buy signal.

I'll be watching the $800 level and the 200-dma to see which way the BKX decides to break. I'd be willing to bet that the broad market follows the direction of that break in short order.

  Jeff Bailey   1/14/03,  12:47:47 PM
Cigna (CI) $46.02 +3.16% ... I see Steve's 11:47:23 comment about CI being call play for OI. According to Dorsey/Wright and Associates, Insurance sector Bullish % (BPINSU) is "bull confirmed" at 51.11%. Sector had reversed "bull correction" at "red B" on p/f chart, and recent reversal back higher to "bull confirmed" came in late November, just before "red C" on p/f chart. For those that don't use Dorsey's sector bullish %, you can envision this down, then up again action in the sector bullish % with that of CI's chart. Link

Note how CI pulled back at its "red C" in the bull correction phase, and now gives a point and figure buy singal as sector returns to "bull confirmed" phase. Good sector field position for bulls here. CI's bullish count is $61, so some good upside can be had. Would be a little more "conservative" with a target of $55-$57 though, which is just below the past spread-triple-bottom sell signal of $57.

  Linda Piazza   1/14/03,  12:41:15 PM
You can't get advancers and decliners much more even than they are now, with 1566 NYSE advancing issues and 1567 NYSE declining issues. Up/down volume ratios are beginning to show a little more buying interest, though, especially on the Nasdaq, with up volume being a little more than twice down volume. New highs/new lows show a 54:15 ratio on the NYSE and a 43:12 ratio on the Nasdaq.

  Jonathan Levinson   1/14/03,  12:39:47 PM
Regarding Mark's comment, yes, I concur. Both Al Green and Governor Bernanke have all but promised the relentless printing of currency and in doing so have placed the Greenspan Put under gold. I wouldn't mind a pull back to add to my longs, but bull markets have a habit of going higher. I'm not agile enough to go short in a bull market with consistent success, so I'll continue to ride my gold positions forward and watch the charts. The fundamentals support the technicals here, which makes it a difficult trend to ignore.

  John Seckinger   1/14/03,  12:39:46 PM
Note: London Brent crude futures traded $31.25 earlier today, its highest level since December 2000. The Oil Index (XOI.X) is slightly lower to 445 and does have solid support below at 440. Currently, the index is slightly below both its 50 and 22 DMA (exp) of 446.70 and 447.58, respectively. Turning to the commodity, a chart of the CL03H contract shows a series of higher lows and higher highs since temporarily falling under its 50 DMA (exp) back on January 8th. Bulls would like to see a move to 33 and then support found above current levels. This would then confirm that the recent consolidation is merely a pause before another wave higher.

  Jonathan Levinson   1/14/03,  12:36:04 PM
Regarding Denise's post, I would urge traders to be careful with the observation that "bad news is good". Lately, that's been the case, and most cycle analysts correlate this with uptrends in the mid-range cycles. Looking at the weekly 5(3) stochastics, for example, we see them topping but not yet rolling over. When that cycle reverses, good news will be traded as bad, or at least, so goes the theory and my experience. This is why Granville's quote is so resonant. Of course, that's just my opinion. I see a large bearish formation, while there's been plenty of strength on display from the bulls. As always, plan your trade and trade your plan.

  Mark Phillips   1/14/03,  12:35:27 PM
XAU $75.55 (-1.19) Gold stocks are looking a bit weak again today, and the daily chart of the XAU shows what could be a topping formation. but I wouldn't play the downside on a bet. Why? Today, we have the 50-dma finally crossing up through the 200-dma and they are both on a positive slope. The last time the long-term view looked like this was in Feb-2002 when the XAU was trading near $62. Traders looking to play the long side may just get a gift of an entry point on another dip and test of the $71 level, where those moving averages are currently converged. Note the rebound from the 50-dma in March-2002 preceded a sharp rally from $62 all the way up to $89 by late May. Can history repeat? I think so, and I'll bet Jonathan would concur...

  Steven Price   1/14/03,  12:29:01 PM
and what do they say never short a dull market?...certainly can get dull. Today is pivot day for trend reversal. I think downside limited if traders able to ignore this horrible news this am, so far just my humble opinion. Denise, Long in Phoenix

Good advice, Denise.

  Jonathan Levinson   1/14/03,  12:27:28 PM
Here, here, Linda. Agreed.

  Linda Piazza   1/14/03,  12:25:16 PM
Several writers have urged patience today, and I concur. As painful as it is, we're yet again at an important juncture in the markets. I'm trying to be patient and not draw too many conclusions from micro-movements today. If you're overleveraged in front-month OTM options, however, it might be difficult to exercise that patience. I believe a move is imminent, but then I've believed that for about four trading days. If you're holding those OTM front-month options, this period of market inertia is an opportunity to think about your pain thresholds when you consider account management. Remember Jonathan's frequent injunction that your first priority is to maintain a trading account.

  Jonathan Levinson   1/14/03,  12:22:54 PM
I'm squinting at my screen, but my lower trendline looks to be at approx. COMPX 1450 even.

  John Seckinger   1/14/03,  12:11:05 PM
Stuck on the phone with Bailey again about retracements. This time in the SPX. Trading around its pivot today does make for some false signals, but patience is the key. The SPX is above all short-term moving averages and stuck in range between two retracements (930.8 and 924.7). Conservative traders can use a five-minute close outside this range, using a tight stop in case the range-trade mentality takes over. I am slanted towards a bid here, but the Dow is only 8-points above its pivot. I will be following Jonathan's ascending wedge, so marrying a position isn't likely to happen.

  Linda Piazza   1/14/03,  12:04:57 PM
Don't look for volume patterns to give many clues this morning, as advancers/decliners and up/down figures remain nearly even. New highs/new lows ratios rank at 49:13 for the NYSE and 49:11 for the Nasdaq. While still strong, these new highs/new lows figures haven't seemed as out of proportion as last week's numbers.

  Steven Price   1/14/03,  11:56:34 AM
American Standard (ASD): $68.40 (unch) OI put play ASD tested yesterday's low at $68.00 once again this morning. That trade was a test of the PnF bullish support line at the same level and a trade of $67.00 would be a complete breakthrough. New short entries can be initiated on a break below $68, while conservative traders may want to wait for the breakdown at $67.

  Linda Piazza   1/14/03,  11:56:04 AM
Jonathan's point that news must be considered in the context of current market cycles can't be overstated, as we've all shaken our heads in puzzlement when news affects market action in ways that couldn't have been anticipated: a relatively mild reaction to devastating news on one day and a devastating reaction to mildly disturbing news on another. Sometimes television commentators link a rise or fall in the markets solely to a news item, when we readers and writers at OIN know that the markets were already ripe for a fall or a climb and that the news was only the precipitating force.

  Steven Price   1/14/03,  11:47:23 AM
Cigna (CI) $45.97 (+1.36) Traders who got in on the break over $45 are seeing some mild gains already this morning. A look at the 60 min chart shows the pressure building between $44 and $45 the last few days and this breakout into the gap should hopefully be good for a few points. The 21-dma has provided support the last few days and traders may want to use this level for their stop loss. It currently sits at $42.71

  Jonathan Levinson   1/14/03,  11:47:20 AM
The COMPX continues to fulfill its ascending wedge as precious metals drop, HUI currently -3.08 to 141.73 and XAU -1.34 to 75.40. The US Dollar Index is slightly off its lows at 101.07, while speculation about Iraq continues. If there are no weapons, why would Saddam be considering exile? And if other Arab nations believe in the innocence of Iraq as they have asserted, why would they support such a course of action? In the end, as Joe Ganville put it, "News is for suckers." As I argued in my article in Traders Corner, news must be considered in light of the prevailing market cycles, as it is the mood of the market that will determine the market's reaction to the news. Currently, I'll go with the ascending wedge. The market rises, but it's a bearish formation. I believe good news will propel us higher within the pattern, but the bottom is likely to fall out at some point, at least, according to the pattern as described in Bulkowski's Encyclopedia of Chart Patterns. I'm looking at a range of 1454 to 1475 within the trendlines at the moment.

  Mark Phillips   1/14/03,  11:42:04 AM
OUCH! Linda, just the mention of Differential Equations gave me a headache! Glad I don't need to use them in this profession! BIG GRIN OF RELIEF

  Jim Brown   1/14/03,  11:41:33 AM
Send questions on monitor problems to IT@OptionInvestor.com

Trust me, the writers (including myself) cannot help.

  Linda Piazza   1/14/03,  11:39:31 AM
Steven's 11:08 post mentioned the ease in downloading the Monitor. He also mentioned that he was able to download it from home without help. I also was able to download the new Monitor from home with ease. As I told the IT department, however, I had no problem in college with nuclear physics, but downloads somehow stump me. When I received the following message, I didn't know what to do, but the IT department soon cleared up my confusion. I include the information in case some of you are receiving the same error message. My error message read as follows: [Microsoft][ODBC SQL Server Driver][Named Pipes]Specified SQL Server Not Found.

Here's the response I received from the IT department: Your ODBC Drivers are not set to use TCP/IP. In either the Windows System Dir on 98 or the Winnt/System32 Dir you will find a file called cliconfg.exe and if you double click that file you will see a SQL Server Client Network Utility. You need to enable TCP/IP and that will get rid of that error message for you. This is an issue with the Microsoft operating system these protocols are not enabled by default.

Note: Don't write me with questions about downloading, but if you need help with differential equations . . . seriously, don't send those either. I've been out of school so long that I barely remember doing them.

  Mark Phillips   1/14/03,  11:36:56 AM
AZO $65.80 (-0.65) I mentioned this stock last Wednesday afternoon (3:09pm) as looking weak as it broke below its long-term ascending trendline again. The stock has continued to deteriorate this week and is now reaching the upper edge of that $62-65 support range. I certainly wouldn't consider new bearish positions here, with daily Stochastics now buried deep in oversold, but the dramatic deterioration of On Balance Volume Link certainly would have me avoiding any sort of bullish trade on expectations of a bounce from that support. The bulls are on the run and subsequent failed rallies likely make for solid bearish trades.

  Jeff Bailey   1/14/03,  11:33:07 AM
The 11:00 AM Intraday Update has been posted. Link

  John Seckinger   1/14/03,  11:31:46 AM
Trying to decipher direction. Note: 50% of today's range is 8782. The Dow is under 8800 and bonds are higher in price. The XAU index is weaker, while the Dollar continues to trade soft. Bids came into the blue chips on a failed attempt to test the low (10:15 a.m.), but there was a lack of momentum above 8800 earlier this morning. Moreover, we are in the tight range that took place during the first five minutes of trading. Time for more patience.

  Steven Price   1/14/03,  11:11:38 AM
Swing Trade Signals
I am starting to get the feeling that the recent rally has simply run its course. However, with no downside momentum, the recovery from bad news this morning and those PnF buy signals I am not ready to go short without a sign of weakness.

  Steven Price   1/14/03,  11:08:58 AM
Steve, i don't understand what you ment by --Jim's trading on the futures monitor. What is the futures monitor? vic

Market Monitor users can download the new Monitor on the Monitor entry page. It is a desktop application and very easy to use once downloaded. Once downloaded, simply open it from your desktop and click on "Futures Monitor Posts" on the left side to follow Jim's futures trade signals.

I will admit that although I work for a website/newsletter, I was somewhat intimidated about setting up the new monitor. I have never been very computer savvy, but the new monitor set-up is terrific and I suggest all readers give it a try. I was actually able to set it up at home with no help from OI's tech staff and that's a first!

  Linda Piazza   1/14/03,  11:06:05 AM
The COMPX exponential 200-dma reads at 1463.03 today, with a COMPX high so far of 1459.49 before the COMPX moved back down a bit. Is that close enough to call that a test of the 200-ema? I think it is, but it may not be the final or only test today. I keep looking at charts and seeing the same figures day after day, with the 5(3)3 stochastics defying gravity day after day.

  Jonathan Levinson   1/14/03,  10:56:56 AM
The COMPX appears to be rising in a bear flag formation on the 5 minute charts since today's open. So that would make this upmove a bear flag within a bearish rising wedge. A print below 1452 should signal a downside break of the 5 minute flag projecting a move to about 1440- nothing dramatic.

  Jonathan Levinson   1/14/03,  10:52:20 AM
From the World Tribune:

CAIRO — Iraqi President Saddam Hussein has for the first time signaled openness to an Arab plan for his exile in an effort to prevent a U.S.-led war against Iraq.

Arab diplomatic sources said Saddam has agreed to send a senior aide to discuss "personal issues." The sources said the aide could arrive in Cairo over the weekend for talks on a plan to organize asylum in a Middle East country.


  John Seckinger   1/14/03,  10:51:13 AM
The Sox index is back above the 340 level, and a close here or above (a little premature) would be its highest close since December 3rd. Longs could get aggressive here, since a move back under the 335 area would temporarily cancel out the recent bullishness (reward would be for a trade to 365). This is analogous to playing the Dow aggressively long above the 8800 pivot.

  Mark Phillips   1/14/03,  10:47:19 AM
So is anyone else out there driven to wonder about the symbols for the McClellan Oscillator? This was the subject of last night's Trader's Corner article, and those of you that read it know what I'm talking about.

This is why I love the Internet! Mike, one of our astute readers emailed me with StockCharts symbols for the NASDAQ Mclellan Oscillator and Summation Index. Here they are:

NASDAQ McClellan Oscillator - $NAMO

NASDAQ McClellan Summation Index - $NASI

Well, I applied a bit of deductive reasoning and managed to come up with the NYSE symbols as well. If you're interested, here they are:

NYSE McClellan Oscillator - $NYMO

NYSE Summation Index - $NYSI

So far, I don't have any clue on QCharts symbols, but we can use these symbols to create Sharp Charts on the StockCharts.com site like the one I've shown here. Link

I don't know about you, but that series of declining peaks since the August highs isn't what I'd call a sign of strength for the broad market.

  Jonathan Levinson   1/14/03,  10:40:55 AM
The put to call ratio has held up, with a dip from .77 to .74 for this half hour. If we assume that the markets will be unlikely to drop significantly when most participants expect it (ie when the put to call ratio is high), and that the markets are more likely to drop when most participants *don't* expect it, then this moderate reading in the .70's tells us not to expect much in either direction for the moment.

  Steven Price   1/14/03,  10:39:37 AM
Swing Trade Signals
For those readers who have not checked out Jim's trading on the Futures Monitor, I highly suggest it. The current market has been tough to establish a longer term direction and those traders looking to get in and out on shorter moves can benefit from futures scalping.

  Jeff Bailey   1/14/03,  10:39:37 AM
Intra-day Pivot/Levels has had Dow, SPX, OEX coming close to daily S1s, sand now nearing R1s. NDX and QQQ didn't come as close to S1s. QQQ high has been $27.32 in past 10-minutes with R1 of $27.35. NDX session high has been 1,097, which compares to R1 of 1,099. Should see some NDX support near 1,090.

  Linda Piazza   1/14/03,  10:39:36 AM
At 2381.86, down 5.28, the Dow Jones Transportation Index this morning moved down to test support in the 2366-2375 area, reaching a day's low of 2369.84. The overhead 200-dma (both exponential and simple) appear to be pressuring this important index, with the index spending last week testing the exponential 200-dma before falling away to test support today. A low ADX value indicates rangebound trading, so that a study of oscillators should prove valuable. With 5(3)3 stochastics and RSI turning down, it doesn't currently appear that the $TRAN will be able to break that overhead resistance. I'll watch during the day for changes in the ADX value, however.

  Steven Price   1/14/03,  10:34:02 AM
Dow back over 8800, with all major averages in the green. If we get a move over yesterday's high of 8869, the 200-dma of 8927 should be the next big test. Maybe yesterday's pop was not a big blow-off top after all. However, with all of the resistance levels I highlighted in last night's Swing Wrap, going long here will have an awful lot of speed bumps ahead.

Current levels: Dow 8807/SPX 928.34/OEX 472.56/COMP 1458/QQQ 27.22

  Jeff Bailey   1/14/03,  10:33:56 AM
Networking Index (NWX.X) 171.47 +4.9% ... making way above December's highs and taking out summer's highs with spread-triple-top at 170 Link . Sector lead by Alcatel (NYSE:ALA) $7.07 +21.2% Link , which also trades spread-triple-top at $6.50 today after the French telecom equipment maker said it expects Q4 revenue growth in the "high 20%" with operating earnings around breakeven. ALA had previously forecasted a 20% sequential rise in Q4 revenue and said it would only break even before taking into account exceptional items.

Sector bellwether has Cisco Systems (CSCO) $15.55 +1.7% extending recent spread-triple-top at $15.50. Link

Some major technical resistance being broken here.

  Linda Piazza   1/14/03,  10:28:49 AM
VLO: 38.32 -.03. Valero Energy came within three cents of its December 38.55 high this morning before moving back down. The last time it reached that level, it was immediately knocked back below the 37.50 neckline of an out-of-proportion reverse H&S formation. Today, buyers came back in around 38.00. Those holding January options should be especially watchful as Valero again attempts that 38.55 level.

  Jonathan Levinson   1/14/03,  10:26:18 AM
The current action shows the COMPX bouncing off the lower trendline of its rising wedge on teh 60 minute chart. Depending on how the upper trendline is drawn, it can look like a bear flag as well, but either way, the conclusion is the same- ie, not up. What makes this difficult is that unless you're scalping trades within the range, a bullish trade is at risk for a fulfillment of the pattern (with a downside break), and a bearish trade is at risk for either being too early or worse, an unlikely but very possible failure of the pattern with an upside break. For now, it's sufficient to see the upper trendlines, position yourself according to your own strategy and trading style, and use stop losses to mitigate the risk.

  Steven Price   1/14/03,  10:25:20 AM
Cigna (CI) $45.25 (+0.64) OI call play CI finally broke through resistance at $45, establishing a new buy signal on the point and figure chart and moving above resistance that goes all the way back to its big October drop. I like long entries at this level.

  Steven Price   1/14/03,  10:22:48 AM
Swing Trade Signals
I'm looking a the chart of the ten-year note, on which you can see some short-term head and shoulders formations. The last one that filled its downside objective on a neckline break was October 29 to November 20, and the break came awfully close to the measuring objective below 110. The low of 110'025 came on December 2, which was the high in the Dow/SPX/OEX before the December sell-off.

I'm looking at another possible formation with shoulders around 113 and 114 on 12/13 and 1/8. The head would be just over 115 on 12/31. A neckline break would come below 112 and could be a signal for the next leg up in equities. This formation is not nearly as neat as the previous one, but nevertheless could have big implications for long swing entries. The measuring objective would be just over 108 and would imply a much higher high for equities than the December rally.

  John Seckinger   1/14/03,  10:21:45 AM
The Dow remains under the pivot at 8800 and in an aggressive bearish channel (five-minute chart) that began yesterday at 2:15 p.m. Bulls look to test this area as I type. Looking elsewhere, the Utility Index is back under 260 for the first time since January 2nd when the markets in general rallied strongly. Testing this breakout area for the UTY Index should be important going forward. Support is seen below at 255, while strong resistance is above at its 200 DMA (273). It was only seven trading days ago when the UTY index was at 276.73 and above its 200 DMA (exp).

  Jeff Bailey   1/14/03,  10:18:04 AM
Genzyme (GENZ) $33.04 +4.29% ... stock resumed for trading today Link . UBS Warburg says that yesterday's FDA Advisory Committee panel was in consensus that GENZ's Fabrazyme drug merited approval based on the clinical data presented by the company, and considering the negative FDA briefing document on TKTX's Link compteing Replagal, UBS Warburg believes there is a high likelihood that GENZ's Fabrazyme will have the U.S. market for itself.

  Mark Phillips   1/14/03,  10:16:25 AM
WLP $67.15 (-1.45) So much for support! Yesterday's Play of the Day is leading right out of the gate again today, plunging through $68 at the open and actually trading briefly below the $67 level. Possible support at the bottom of that late-November gap was nothing more than a figment of my imagination as the steady bleed continues. Next up on the support list is the $66 area, which provided mild resistance before the December rally got moving. As mentioned before, the best entries into this play will come on the heels of a failed rally, and a rebound off the $66 area may be just what we need to set that up. Looking back a couple days, we can certainly see how that failed rally at $70 provided a great entry into the play. We're targeting an eventual test of the November lows near $62.50, and if reached in the near term, that level would make for an ideal point to harvest gains.

  Linda Piazza   1/14/03,  10:06:55 AM
At 26.88 currently, the VIX dropped quickly during the last ten minutes. Watch what happens near 26.19, last week's low. I caution that the VIX can sometimes behave strangely during opex week.

  Jonathan Levinson   1/14/03,  10:06:28 AM
The fed has just announced a 9 day repo in the amount of 4.25B. This refunds the expiring 3B from yesterday and leaves an additional 1.25B on the table to find its way into securities.

  Jonathan Levinson   1/14/03,  10:02:26 AM
The opening put to call ratio came in at .77, which could explain the sudden pop we're getting here.

  Steven Price   1/14/03,  10:02:00 AM
Swing Trade Signals
Today's low in the Dow of 8746 is exactly the point at which we found support yesterday. A move below that level with resistance on a bounce would be the first sign of a downswing, but without a move inder 8580, it is hard to proclaim a lower low on a daily basis. Right now the dip has bounced and we are close to unchanged. Current levels: Dow 8782/COMP 1453/OEX 470.91/SPX 925.58

  Linda Piazza   1/14/03,  10:00:14 AM
Advancers and decliners, and up/down volume are fairly even this morning, with decliners slightly ahead of advancers on both the NYSE and Nasdaq, and with up volume slightly below down volume on the NYSE and slightly ahead of down volume on the Nasdaq. New highs/new lows ratios are 19/5 for the NYSE and 21/6 for the Nasdaq.

  Jonathan Levinson   1/14/03,  9:58:20 AM
It could be a very long day if the COMPX just gets parked at this level awaiting the INTC report. It strikes me as odd that the market is more concerned about INTC's view of the coming quarters than this morning's geopolitical developments. Nevertheless, we trade what we see. As I began typing, the QQQ has pushed to the top of its range, currently at 27.13, with the TRINQ dipping back below .50.

  John Seckinger   1/14/03,  9:52:21 AM
The 30-year is finding a nice bid this morning, higher by '12 ticks to 109'27 and testing its 50 DMA (110'00) as the intra-day high is 110'02. The 22 DMA is higher at 110'09. Note: On January 9th, the ZB03H contract had a range from 110'27 to 108'18. We are obviously still in that range. With that said, equity bears might se some flight into bonds above 110'09, but 110'27 should hold more importance as it relates to asset allocation.

  Linda Piazza   1/14/03,  9:50:59 AM
Bloomberg is reporting that the Fed's Broaddus is saying that Iraq worries are restraining spending.

  Linda Piazza   1/14/03,  9:43:03 AM
All readers who are interested in volume patterns and who use Q-charts might find Mark Phillips' article last night on market breadth a must-read. He's listed lots of symbols for volume patterns. Link Alas, Q-charts doesn't seem to have live quotes for my own favorites, the ratio method of determining adv/dec or up/down volume. A live, chartable figure offers many advantages, though, so check out Mark's article.

  Jonathan Levinson   1/14/03,  9:42:54 AM
The fed's 22 primary dealers need to reimburse yesterday's 3B overnight repo today. The announcement is due just after 10AM.

  John Seckinger   1/14/03,  9:41:49 AM
In case you missed it: Hans Blix, chief UN weapons inspector, has reported that smuggled materials have been found in Iraq. A clear connection to weapons of mass destruction has not been established.

  John Seckinger   1/14/03,  9:36:24 AM
Not a big range to go on during the first five minutes, as the Dow traversed from 8795 to 8775. What is interesting is that the blue chips failed to get back to the pivot at 8800. I would use this level to the upside more than 8795.

  John Seckinger   1/14/03,  9:32:56 AM
Intra-day Pivot/Levels for Tuesday

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

  Jonathan Levinson   1/14/03,  9:30:46 AM
Flat open on the COMPX, TRINQ .71, QQV -.12.

  Jonathan Levinson   1/14/03,  9:30:12 AM
The US Dollar Index has just dipped below 101.

  Steven Price   1/14/03,  9:28:39 AM
That retail sales data may portend some disappointing earnings reports coming up next month. I've been all over this group and highlighted not only the effect of the poor economy, but the effect that a later Thanksgiving had on moving a higher percentage of sales into the deep discount period just before Christmas. That isn't to say the bad news wasn't built in and that investors already fled these stocks ahead of time. However, the trend has been one of disappointment, with monthly sales warnings ever since the summer and a ratcheting down of growth expectations.

Looking at the Retail Holders (RTH) $71.90, the PnF rollover doesn't come until $69 and the sell signal at $67. However, with support at $65, I think a move back below $70 would provide a good short sntry.

  Linda Piazza   1/14/03,  9:28:20 AM
Although European markets were up strongly today after the release of key economic numbers in the U.K., France, and Germany, the release of U.S. retail sales figures and the worries Jonathan mentioned about Iraq dropped the FTSE 100 and CAC 40 into negative territory, down .29% and .21% respective. The DAX, up 2.19% when I first reported numbers early this morning, remains up, but has trimmed its gains to .92%.

  Jonathan Levinson   1/14/03,  9:25:35 AM
Lost my posts too- the US Dollar's been getting whacked, which is bearish for bonds and equities. The index is currently trading 101.08.

  Jim Brown   1/14/03,  9:24:49 AM
End of year renewal special

It is over, done, kaput, finished. It is always amazing to me that we run this special for four weeks each year. For four weeks we send out emails proclaiming the virtues of the special and explaining in a dozen different ways why readers should take us up on the offer. But even after being deluged with dozens of comments and multiple emails for four weeks the rush to register does not occur until this weekend. Nearly 50% of all the subscriptions for the entire four weeks took place in the last 48 hours. Simply amazing! It restores my faith in the value of procrastination and reminds me that if it was not for the last minute many things would ever get done.

From the bottom of my heart and that of my team we thank you for the commitment you have shown to us and the value you place on our efforts. We commit to you that we will redouble our efforts to make 2003 a very profitable year both in terms of education and profit. We salute you and thank you for pointing out our errors when we are wrong and patting us on the back when we do good. We feel the OIN readers are some of the most committed traders in the business and part of our extended family. Now let's go kick some bear butt.

Jim Brown

  Jeff Bailey   1/14/03,  9:24:26 AM
The 9:00 AM Intraday Update has been posted. Link

  Linda Piazza   1/14/03,  9:23:30 AM
I had also reported earlier this morning that Alcatel, Europe's biggest telecom-equipment company, had reported earnings that surprised to the upside. Cisco had been an early beneficiary of Alcatel's report.

  Linda Piazza   1/14/03,  9:20:23 AM
My earlier posts this morning disappeared, so I wanted to mention again that 20,000 GE employees began a two-day strike at 12:01 am this morning.

  Steven Price   1/14/03,  9:13:36 AM
Swing Trade Signals
We are currently flat and after yesterday's PnF buy signals across the board. I'll be watching intraday support levels to try and determine if we got our blow-off top before a major reversal, or if this morning's drop is simply another pullback, before a leg higher. If we do get a major rollover, I'll be watching last Wednesday's low in the Dow at 8580 and the SPX support at 910 for signals of a true breakdown.

  Jonathan Levinson   1/14/03,  8:59:35 AM
For a change, treasuries are overstating the bad news this morning, and equities are ignoring it. FVX is down 4.9 bps, TNX -3.4 and TYX -2.2, while QQQ is down a mere 2 cents from yesterday's close. Bloomberg is blaming this on the discovery of illegally smuggled materials in Iraq that could be linked to chemical, nuclear or biological weapons.


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