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  Jeff Bailey   1/15/03,  6:48:14 PM
Intra-day Pivots-Levels for tomorrow 01-16-03 are...

 Index         S2      S1       P      R1     R2
Dow Jones 8607 8665 8760 8817 8912
SPX 906 912 922.5 928 938
OEX 461 463 469 473 478
NDX 1051 1062 1081 1092 1111
QQQ 26.12 26.42 22.69 27.19 27.66
And can be compared to today's 01-15-03 levels of ...
  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

Testing the "matrix" from today's 01:00 Update, I will note correlative support as it relates to tomorrows DAILY S2 levels for the OEX and NDX and the WEEKLY S1 OEX and NDX levels. I will not change the WEEKLY levels until Friday's close. Just as I will not change the MONTHLY levels until the January 31 close.

 
 
  Steven Price   1/15/03,  6:17:41 PM
I'd like to thank everyone for their responses to my question about home sales in their areas. I've gotten some great responses that I'll continue to post tomorrow. So far I am seeing a trend of a slowdown in most areas, with a few exceptions.

 
 
  Jeff Bailey   1/15/03,  5:39:09 PM
Give them he@@ ... OK, lots of lightbulbs went on today with regards to the intra-day pivot and S2, S1, R1 and R2 levels. Now shorter-term traders are giving market makers and specialists a run for their money and getting an idea of how these levels are being traded.

Now... what's going on asks one subscriber regarding our technique with retracement, whereby we anchor the upper end and lower end of retracement at the S2 and R2 to "define" some type of daily range, and look for some other intra-day levels, which it sure looked like the QQQ were traded.

An article that many have liked that I've written regarding how a trader looks to trade retracement can be found here Link and was written on February 20, 2001. I like this article because I left YOU the trader with a decision to make at the end of the article. You know what has happened, but is an example of trading retracement.

Then, just recently, I wrote another article an a "junk stock" only to try and show how even a "junk stock" tends to be traded with retracement. This article was written on December 1, 2002. Link

 
 
  Linda Piazza   1/15/03,  5:17:51 PM
Headlines trumpet the news that AAPL missed on its earnings report while YHOO topped estimates, but YHOO currently trades down $.85 from its close. AAPL also trades down in afterhours.

 
 
  Steven Price   1/15/03,  4:58:11 PM
More home sales input:

Hi Steven, My friend sells real estate here in Chapel Hill NC. She was telling me just yesterday that the buyers are here, but it is just taking longer. So far she hasn't had to lower asking prices. I know from my own experience that my home has appreciated by 30% since I purchased in September of 2001 and two neighbors just sold at their asking price. Their homes were on the market for 4 and 6 weeks. I think though that this area may be unique. My mother lives 25 miles away in Cary and her lakeside condo(on market for 90 days),while she shows it a couple of times a week, still hasn't sold. She had one offer for 15% lower that she refused. J

 
 
  Linda Piazza   1/15/03,  4:40:16 PM
Steve, we moved into our Dallas-area suburban neighborhood about a year ago when we were transferred. Just after we moved, houses were selling within weeks or sometimes days of being listed. Now they're sitting for months.

 
 
  Steven Price   1/15/03,  4:39:27 PM
Here are a couple of responses I've gotten on my home sales query:

I don't know about the prices but I am a CPA in the New York area. I hear from my olders clients who keep homes in NY and Florida that many of their neighbors in Florida are selling their homes in NY because they cannot afford to keep both homes anymore due to the low interest rate and the drop in the market.

I live on the central coast of California and houses are still selling like hotcakes. Building is also out of control. The housing prices are ridiculous. You can get a small 3 bd, 2bth, for $395,000. A house that would be about $145,000 anywhere else. New houses are selling faster that Old houses. MAC

 
 
  Linda Piazza   1/15/03,  4:26:47 PM
Bearish Engulfing Pattern: Nison describes a bearish engulfing pattern as one in which a red candle envelopes the real body of the previous white candle. This two-candle pattern should provide resistance. Today saw bearish engulfing patterns form across all the indices. The size of the red candle is important. The longer the red candle, the more bearish the implications. Today’s candles weren’t particularly long in comparison to the previous white candles, but they did engulf those candles. OEX chart: Link While the above chart references the OEX, of particular interest is the COMPX, where the bearish engulfing candle moved below the level of the previous day’s harami—a candle that sits inside the real body of the previous day’s candle. A move below the bottom of the harami is considered bearish in itself.

This is options expiration week, also complicated by earnings and economic releases, as well as the geo-political situation. Although I view today’s action as bearish, I’ve many times seen bearish scenarios appear to set up during opex week, only to have the markets ignore those setups. The markets don’t care what I see on these charts! I provide this for information only.

 
 
  Steven Price   1/15/03,  4:17:45 PM
I continue to read reports of home sales being strong, but cooling off (as mentioned in today's Beige Book). My experience has been that in my neighborhood, they are more than just cooling, as a couple of my neighbors have recently lowered their asking prices by significant amounts. I am interested to hear what our readers are seeing in their own neighborhoods across the country and around the world.

 
 
  Jeff Bailey   1/15/03,  4:00:00 PM
QQQ $26.70 -1.40% .... I'd consider late day trading with S1 holding as afternoon resistance and a pullback into the close, somewhat defensive into tomorrow's open. As such, "day trader" most likely not holding over night.

 
 
  Mark Wnetrzak   1/15/03,  3:58:50 PM
Email Question: BMRN

Hi Mark, Do you know if BMRN has been halted? Thanks

Yes, BioMarin Pharmaceutical (NASDAQ:BMRN) $9.18 (+2.16) had been halted earlier as one of their experimental drugs was under revue this week and has now opened (rocketed) higher on favorable news. Unfortunately, and I blame Murphy's Law (grin), the covered-call position (long the stock, short the JAN-$7.50) was listed as closed this weekend. The stock has broken it uptrend from AUG and had offered a painless exit on the first rebound off $6.50.

 
 
  Linda Piazza   1/15/03,  3:58:36 PM
It's the end of the day, and I'm still seeing the same things I've been seeing for days on the DJI chart--failure at resistance, stochastics threatening to roll. Nevertheless, this is opex week and a week of possible surprises from economic numbers and earnings. Make decisions wisely as you ponder whether to hold over, whether long or short. Link

 
 
  Steven Price   1/15/03,  3:52:37 PM
Swing Trade Signals
The breakdown of the opening range once again proved to be reliable, as it appears we will close toward our lows of the day. The failed rebound at Dow 8750 looks particularly bearish heading into tomorrow and I would think twice about heading home with a long position. I can see us in a holding pattern tomorrow ahead of earnings from IBM and MSFT after the bell. However, following the Intel results, I can also envision traders not wanting to get caught long for those earnings and dumping equities. The hold over 8700 could also be viewed as support and right now I am simply not confident in taking a direction before Friday morning. That may change if we begin to see support levels fall, or we get a big bounce tomorrow, but I'm comfortable heading home flat.

 
 
  Jeff Bailey   1/15/03,  3:45:31 PM
The 3:15 intraday update has been posted. Link

 
 
  Mark Wnetrzak   1/15/03,  3:40:50 PM
Covered-Call Candidates
A quick scan offers a couple candidates to consider: FHRX $8.00 (+0.32), the FEB-$7.50 call (FUF BU) $1.00 x $1.10, monthly based yield – 5.5%; IDCC $16.05 (-0.47), the FEB-$12.50 call (DAQ BV) $4.10 x $4.40, monthly based yield – 3.6%; and LMNX $5.45 (+1.41), the FEB-$5 call (UEN BA) $0.80 x $1.05, monthly based yield – 5.1%.

 
 
  Steven Price   1/15/03,  3:40:12 PM
Mark pointed out to me after my 2:13:10 post that ATM LEAPS calls often have higher deltas than the near term. I alluded to the LEAP being based on the forward price of the stock, which is the reason for this. Stock XYZ is worth more in a year or two than it is now, based on interest rates and therefore when calculating the delta for a call with an expiration two years from now, the stock price is assumed to be higher.

For instance if XYZ is currently $20, it should be worth $22 two years from now (random example) and the $20 strike 2005 LEAP call delta is based on a price of $22.

 
 
  Steven Price   1/15/03,  3:33:15 PM
American Standard (ASD) $67.55 (-0.89) OI put play ASD finally broke down below that $68.00 support it found the last two days. The break is also below the bullish support line on the PnF chart, although a trade of $67 will be needed for a complete breakthrough. Aggressive traders can enter on the $68 break, while more conservative traders may want to wait for a move to $67.00.

 
 
  Linda Piazza   1/15/03,  3:30:00 PM
I agree with Mark's 3:16 post about volume trends. I prefer ratios and Mark prefers using advdecv, but it’s more important that you get to know the indicator you prefer than that you choose one over the other. Know how volume patterns behave during certain types of markets or certain periods of the day. One reason I actually prefer to make these calculations for myself is that it literally gives me a feel for how the patterns play out, with touch augmenting visual memory. However, I do like seeing real-time, chartable numbers, which Q-charts doesn’t provide for the ratio method, as far as I can determine. So, dare I admit it, I look at advdecv, too.

 
 
  Kent Barton   1/15/03,  3:20:27 PM
CNBC is reporting that all those missing viles of Bubonic plague have been located.

 
 
  Jonathan Levinson   1/15/03,  3:19:12 PM
I looks like 1445 COMPX resistance has held for now. The last put to call reading of .85 is pretty scary for bears, though, and it's shaping up to be an interesting close. The TRINQ is rising a touch on this move lower, currently 2.18.

 
 
  Mark Phillips   1/15/03,  3:16:24 PM
Interesting clarification for those of you interested in all this market breadth chatter. In my Monday article, I stated that the ADVDECV indicators show the difference between volume to the buy side and volume to the sell side since the opening bell. In actuality, that isn't quite correct, as pointed out by an observant reader.

I use advdecv.ny all the time. I don't mean to be picky but you say that advancing volume, for example, is the summation (since the open for that day) of all the volume on the buy side. Is that really true? I think the indicators may show the volume since the close of the previous day The effect of after hours trading can make a substantial difference.

Also, have you ever compared the advdecv numbers on QCharts with Yahoo Finance? There can be big differences.

I pay more attention to the trend of advdecv.ny rather than the absolute number because I am not sure the number was at zero at the opening of the trading day and because there are big differences between services.

Well Put! Well I wanted to make sure, so I drilled down to the micro view on my ADVDECV.NY chart for today, and sure enough, the open was +298400, indicating we didn't start at zero. My reader brings up another very important point, and that has to do with the actual numbers QCharts provides for broad market volume-related indicators. In my experience, the numbers are ALWAYS inaccurate, and I never rely on the actual numbers. For instance, right now, QCharts is showing a total of 1.497 billion shares have already traded on the NYSE -- we don't even need to look at another source to know that number is too high. sure enough, a quick look at the total NYSE volume on Yahoo! shows just under 1.1 billion total shares traded so far today. That seems a lot more reasonable.

It's all about the trend and the strength of that trend -- that's where the power of all these intraday breadth indicators really comes into play. I hope that helps clarify things.

 
 
  Steven Price   1/15/03,  3:15:35 PM
Swing Trade Signals
Current levels: Dow 8748/OEX 468.60/SPX 921.35/COMP 1444

 
 
  Jeff Bailey   1/15/03,  3:13:54 PM
QQQ Talked a little about volume on the 5-minute chart. Did you see that volume spike of 1.35 million shares in the 5-minute move higher from 26.75-$26.88? Compare that to the 2.4 million spike on the downward move from $26.89-$26.76. Think like a market maker here as a day-trader, and volume becomes "order flow." If you were market maker bidder on the decline, probably got some stock to sit an offer with here right? Feed into bullishness, check order flow from the "buy side." This can create some near-term resistance again.

 
 
  Steven Price   1/15/03,  3:11:54 PM
Swing Trade Signals
we are getting an afternoon bounce and the Dow is now flirting with the support level of the past couple of days around 8746. A failure at that intraday support would certainly seem bearish, but let's remember the increases for the first two weeks of the year as of yesterday's close are Dow +6%, SPX + 6%, OEX + 6.7%, COMP + 9%, NDX + 11%. Multiply that by 26 and the current pace is quite unsustainable. We are bound to get a pullback at some point and with the big earnings week, we should have a better picture by Friday. So far, we got more dip buying and I suspect more schizophrenia in the next couple of days.

 
 
  Linda Piazza   1/15/03,  3:09:51 PM
It looks as if this dull day may turn in some excitement despite those volume patterns, but perhaps not as much excitement as Jonathan is imagining. I knew I should have watched more cartoons when I was young. I just took a look at last Wednesday's new highs vs. new lows figures from about this time in the afternoon and noted that we were seeing 93 new highs vs. 17 new lows on the NYSE, as compared to today's 76:13 number, and 42 new highs vs. 24 new lows on the Nasdaq, as compared to today's 70:19 number. When comparing today's number to last Wednesday's number, I remembered Jeff's observation that when stocks are reaching new highs toward the middle of the week, they're often run up toward the end of the week. I didn't want to compare today's numbers to Friday's numbers, then, but to instead find day-to-day correspondence. Although I can't draw too many conclusions from one comparison, it certainly doesn't seem from this one that the number of new highs vs. new lows is easing much, at least on the Nasdaq.

 
 
  Jeff Bailey   1/15/03,  3:09:33 PM
QQQ 26.85 .... 10-minute high has been 26.88, 2-cents above S1.... hmmmm... we saw 2-cents above today's R1 didn't we? Tricky little buggers they are.

 
 
  Mark Wnetrzak   1/15/03,  3:09:30 PM
Covered-Call Portfolio
A quick scan of the model covered-call portfolio has MGI Pharma (NASDAQ:MOGN) moving lower on higher volume and testing a key support area around $7. The strong move to $4 on heavy volume in XM Satellite Radio (NASDAQ:XMSR) is impressive and may be causing some "call-selling" regret.

 
 
  Jeff Bailey   1/15/03,  3:03:48 PM
QQQ 26.86 -0.81% ... Boom! on the move above 19.1% retracement of $26.79, now at today's S1.... feel the power of the intra-day levels?

 
 
  Jonathan Levinson   1/15/03,  3:03:45 PM
The COMPX has bounced back into our congestion zone at 1445, just below the failed trendline at 1450 which should give us some resistance on this push.

 
 
  Jonathan Levinson   1/15/03,  2:59:34 PM
Hey, speak for yourself Linda :) I've still got Yosemite Sam riding the fire-breathing dragon around Saddam Hussein's Bhagdad palace yelling "Whoah mule! Whoah!"

 
 
  Linda Piazza   1/15/03,  2:57:23 PM
Current volume patterns show a slightly higher ratio, but I wouldn’t call the numbers bullish yet. Adv/dec ratios still show more decliners, with a .62 ratio for the NYSE and a .56 for the Nasdaq. Down volume still outnumbers up volume by almost 2 times on the NYSE and about 3 times on the Nasdaq. New highs vs. new lows show a 76:13 ratio on the NYSE and a 70:19 ratio on the Nasdaq.

 
 
  Linda Piazza   1/15/03,  2:53:52 PM
It sounds as if Jim is having more fun than we are.

 
 
  Jim Brown   1/15/03,  2:50:59 PM
Thanks for the plug Jeff but you missed the +5 gain at the open this morning and the three trades I was stopped out for trying to pick the bottom earlier. I am +4 for the day but I had to work hard for it. Still +13.50 for the week.

 
 
  Jeff Bailey   1/15/03,  2:46:59 PM
popped over to the futures monitor and see where Jim got a nice little bullish scalp trade in the E-minis.

 
 
  Kent Barton   1/15/03,  2:46:37 PM
Walt Disney (DIS) $18.01 -0.46: The Mouse House and other large media companies were given a victory today when the Supreme Court upheld a law extending copyright protection by 20 years. However, this news isn't doing much for Disney stock. DIS is currently the third-weakest Dow component with a loss of 2.7%. A glance at the daily chart shows that shares are beginning to roll over from the 200-dma at $18.66. The other major moving average came into play today when the stock bounced from its 50-dma at $17.72. A violation of this level might lead to a retracement of the rapid late-December/early-January gains. Technical bears will note that the daily stochastics (5,3,3) are falling from overbought levels while the MACD is beginning to level out above the baseline.

 
 
  Jeff Bailey   1/15/03,  2:45:34 PM
QQQ $26.71 -1.36% ... OK... QQQ high since 02:29:19 post has been $26.79, but 5-minute didn't close above that level. Expect a test back near $26.62 here. Then.... look for stochastics on this time to dip "oversold," should QQQ firm at $26.62 and begin move higher, then good entry and first test is to get a 5-minute close above $26.79, and then bullishness should build on thought of test of intra-day S1 minimum.

 
 
  Jonathan Levinson   1/15/03,  2:41:54 PM
The latest put to call reading from the CBOE is tardy. We're seeing the COMPX and QQQ trying to bounce here, but as expected the loft is pretty weak so far. The TRINQ is lower still at 2.05, but the fact that it's held 2 so far tells me that there's plenty of selling into the rises thus far. QQV as well is back at +1 on the day at 38.85. Precious metals began to slip but are regaining some, HUI currently +1.75 and XAU +.77. More bullish, however, is the recovery in yields, with FVX now down just 1.4 bps on the day. This could be portenting a push higher in equities.

 
 
  Linda Piazza   1/15/03,  2:40:50 PM
The exponential and simple 200-dma’s certainly seem to have been a factor in today’s trading in the COMPX. Today’s high at 1463.99 was just a whisper away from the 200-ema at 1464.12, while today’s COMPX low of 1435.29 stopped short of the 200-sma at 1428.19.

 
 
  Jeff Bailey   1/15/03,  2:34:55 PM
Market Volatility Index (VIX.X) 27.98 +5.38% .... checking against 12:06:52 post. Yep, volatility down from that post. Gives trader a feeling that near-term, was wise to have close out QQQ Jan. $27 put at S2 when VIX spiked a bit and set off alert. May indeed have been intra-day volatility spike extreme.

 
 
  Steven Price   1/15/03,  2:32:35 PM
I received this response to my 11:58:43 post from the reader in Phoenix that discussed the new plants being built by Intel and Motorola:

Having worked in the semiconductor industry for many years (my previous life), I know that Intel and Motorola, and others, build these plants as "shells" since they're cheap as compared to the equipment they must purchase to put into these plants. Once the shell is built, they then wait until a more positive sign of expansion before spending the billion or so for the capital equipment. From Intel's announcement, it would appear they're not yet ready to populate these new buildings. Instead they're probably slowly replacing their older equipment with 300mm equipment. Kind of like Jim's opinion that PCs may be replaced slowly and hence no quick flare-up in new orders.

 
 
  Jeff Bailey   1/15/03,  2:29:19 PM
QQQ $26.77 -1.14% ... nice little bid comes into Q's from today's R2, now a day-trader bull look for pullback entry back near $26.62, with early target back near $27.00. Will monitor here and for pullback bull entry, would like to see the QQQ see a 5-minute close above 19.1% retracement of $26.79. (see 11:00 Updated retracement, chart on left.) Link

 
 
  Jonathan Levinson   1/15/03,  2:26:02 PM
AJS11 has corrected me. Bubonic plague is transmitted by a vector, usually fleas, and is generally non-contagious unless direct contact is had with the vector of infection (fleas) or their host (infected rodents).

 
 
  Jonathan Levinson   1/15/03,  2:16:24 PM
Most Districts characterized growth as 'sluggish,' or economic activity as 'soft' or 'subdued," the Fed said in its periodic "beige book" report, an anecdotal roundup of U.S. economic conditions compiled from reports submitted by its 12 regional banks.

For more synonyms for "not good" and other details on the Beige Book, see this Link

 
 
  Steven Price   1/15/03,  2:13:10 PM
Recently I was talking to a fella who trades the SPX using DEEP in the money Leaps to get a nearly 1-1 ratio movement in the option with the SPX....... I'd like to do the the same thing for IBM..... for those intraday or 1-2 day scalps.

But when I started looking at some of the IBMs I could not manage to find anything moving even close to a 1-1 ratio no matter how "deep" I went.

It will be difficult to find any LEAP that gives you a 1:1 movement ratio to an underlying instrument. The reason for this is based on greeks. Delta is the measurement of how much an option should move in relation to stocks. It is based on the probability of that option being in the money at expiration. For instance, with stock XYZ trading $20, the $20 call or put will have a 50 delta, reflecting a 50% chance of it being in the money when it expires. That indicates that it will move $0.50 for the next dollar of movement in the stock. (The delta obviously changes over that next dollar of movement, but that is another discussion).

As we move out in time, or volatility increases, all deltas move closer to 50. This is because more time or higher volatility suggests a higher probability that the stock can wind up on either side of the strike.

Because LEAPS are longer term options, thus carrying a higher probability that the stock can wind up on either side of the strike, the delta of a LEAP will be closer to 50 than the corresponding shorter-term option at the same strike. Therefore, it is very difficult, or near impossible to find a LEAP that will move at a 100% correlation (or 100 delta) to the stock movement.(Another consideration is that LEAPS deltas are based on the forward price of the stock, taking the current interest rate into account, but once again that is a different discussion).

If you are trying to play 1-2 day scalps, you are better off trading the front month deep option, whose delta can approach 100 and thus close to a 100% correlation to the stock's movement.

 
 
  Jonathan Levinson   1/15/03,  2:08:26 PM
CNNfn is reporting that the Beige Book points to a continued "soft spot" in the economy. No details yet.

 
 
  Jeff Bailey   1/15/03,  2:07:12 PM
The 1:00 PM Intraday Update has been posted. Link

 
 
  Jonathan Levinson   1/15/03,  2:07:02 PM
The put to call ratio continues to climb, now at .82, as option traders continue to bet on lower lows near the low of the day. With the TRINQ at 2.22 and QQV losing some more of its gains, this could be signalling an impending bounce, but again, I expect it to be shallow.

 
 
  Ray Cummins   1/15/03,  2:06:47 PM
Spreads/Combos/Premium Selling -- Portfolio Activity

Today's brisk retreat was just what we needed to get some of our "premium selling" issues back in a favorable range. Positions benefiting from the downward trend include: Linear Technology (NASDAQ:LLTC), Cabot Micro (NASDAQ:CCMP), Maxim Integrated Products (NASDAQ:MXIM), Novellus (NASDAQ:NVLS), Expedia (NASDAQ:EXPE), Gilead Sciences (NASDAQ:GILD), Cephalon (NASDAQ:CEPH), General Dynamics (NYSE:GD) and 3M (NYSE:MMM). However, we also have a few bullish issues that have slumped under the selling pressure and should be monitored for further downside movement. ASA Ltd. (NYSE:ASA), Symantec (NASDAQ:SYMC), and Intuit (NASDAQ:INTU) are some of the most obvious members of that group. On the upside, Biosite (NASDAQ:BSTE) and Nabors Industries (NYSE:NBR) are among the few rallying stocks and the market hedge in the PHLX Gold Index (XAU) has rebounded as well. With more volatility expected ahead of the January options expiration (on Friday), traders should be diligent in their position management and exit or adjust any questionable plays before they can significantly erode portfolio capital.

 
 
  John Seckinger   1/15/03,  2:06:43 PM
What is your thoughts on using pivots for individual stocks?

Response: I definitely use them for particular stocks as well. Let's take MSFT as an example. Yesterday's low was 56.19, the high 57, and the close at 56.97. This gives us R2 of 57.53, R1 at 57.25, pivot of 56.72, S1 at 56.44, and S2 of 55.91. Today's high was 57.32, and once under 56.72 shares of MSFT only got back to 56.74 before falling to 56.19. The high since the low was 56.45, or S1. Not great today, but I do feel using pivot analysis works very well.

 
 
  Jonathan Levinson   1/15/03,  2:04:29 PM
Isn't bubonic plague contagious?

 
 
  Linda Piazza   1/15/03,  2:03:57 PM
Although GE is perhaps not the market bellwether it once was, I also (in addition to the transportation index and other measures) watch GE as a gauge of overall market health. This chart shows that today’s action drops GE out of a formation I’ve been watching for a while. This is not a trading suggestion for GE, but rather a look beneath the indices at the underbelly of the market to see signs of health or weakness. Link

 
 
  Jim Brown   1/15/03,  2:03:29 PM
The missing vials were only enough to harm one person according to news reports.

 
 
  Steven Price   1/15/03,  1:59:22 PM
Just heard the report about missing viles of Bubonic Plague at Texas Tech, which Jonathan referred to in his post. CNBC commented about market reaction to the story, which I really haven't noticed. I do have it on reliable authority that it is not a terribly difficult disease to treat with modern medicine, so it is unlikely this is a terrorist plot.

 
 
  Linda Piazza   1/15/03,  1:53:42 PM
On the Dow Jones Transportation Index, daily RSI had been forming a series of higher lows since July, but RSI has now broken through that ascending trendline, portending more weakness. The index failed its attempt to move back over the 2366-2375 resistance earlier this morning. Today’s low has been 2353.90. The 50-ema, historical support, and support from a short-term rising trendline converge at 2331-2322, so I would look for next support from that area if the index again breaks below today’s low.

 
 
  Kent Barton   1/15/03,  1:47:41 PM
Semiconductor index (SOX.X) $324.57 -12.16: Seeing a slight rebound off the lows of the day after briefly moving under the 50-dma (see Steve's 11:47 post). This bounce has pushed the stochastics (5,3,3) towards the upper band on the 5, 10, and 15 minute intervals. The index has additional support at 320. A 15-minute chart shows that this level put a floor under the SOX.X on January 8th.

 
 
  Linda Piazza   1/15/03,  1:42:58 PM
KO: 44.94 - .79 as of this writing. Coca-Cola is once again moving below the important 45 level in its never-ending test of six-year support in the 43-45 area. Perhaps more significant than the 45 level today is the 44.60 level, the level of a short-term ascending trendline, a slightly longer-term ascending trendline, and some light historical support. I wouldn’t enter short positions on KO at these levels, as it has bounced repeatedly in the last couple of months when it hits 43-43.50. I would watch for a breakdown below the 43 level, however. Although the weekly stochastics are cycling back up, KO has been in a long-term right triangle with a horizontal base in that support area and prices are being pressured as prices move toward the apex. KO has a tendency to pop up out of that triangle for a day or two, then move back down and test support again. Check chart patterns and overall market health before entering a short position in this stock, as it tends to trade in concert with the markets.

 
 
  Jonathan Levinson   1/15/03,  1:38:36 PM
Here's something new to worry about:

FBI investigating 35 vials missing from Texas Tech laboratory. City official says some vials contained bubonic plague. Details to come.

This was taken from CNN.com. I'm awaiting further details.

 
 
  Jonathan Levinson   1/15/03,  1:36:11 PM
Vert little to report for the COMPX as price once again flatlines in the early afternoon. The TRINQ has eased down a bit to 2.3, ditto the QQV which is now up 1.1 on the day. The five year yield is off its lows, down 3.9 bps to 3.004%, while HUI and XAU are holding their gains. This is either going to be the site of a bounce or a mere pause to relieve oversold conditions on the COMPX from the morning selloff. The put to call ratio has risen to .79 as increasing numbers of option traders bet on the latter scenario.

 
 
  John Seckinger   1/15/03,  1:36:04 PM
It is nice to see the YM (mini-Dow) contract have an intra-day high of 8855 (exactly R1) and an intra-day low of 8682 (S2 was 8683). Note: If there are any subscribers that look at these R1 and S2 levels and say to themselves, "What is John talking about?" - please send me an email. It all began with this article: Link

 
 
  Jim Brown   1/15/03,  1:35:00 PM
Don't forget the Fed Beige book will be out in about 20 min at 2:PM ET. This could be a market mover after the reports from yesterday and the warnings this morning.

 
 
  Kent Barton   1/15/03,  1:31:35 PM
Biotech HOLDRS (BBH) 90.38 -0.62: Yesterday the BTK.X biotech index broke out above its 200-dma. BBH, however, wasn't able to break above resistance at $92.00. We're getting similar action today with the stock rolling over from $91.75 for the third consecutive session. Premier Investor will maintain a bullish entry point at $92.12. It looks like there's plenty of upside potential...We just need to get that breakout first!

We'll also be keeping an eye on Genentech (DNA) after the bell. The company's stock is moving lower ahead of their earnings announcement.

 
 
  Linda Piazza   1/15/03,  1:26:50 PM
Adv/dec ratios are staying fairly steady, although down volume is increasing in proportion to up volume. Down volume now comes in at 3.3 times up volume on the NYSE and 4.6 times up volume on the Nasdaq.

 
 
  Jeff Bailey   1/15/03,  1:10:23 PM
Jeff: Wow, this intra-day pivot stuff is pretty amazing. I also think it is interesting that your retracement stuff from the 11:00 update shows some comonality around $27.09 and $27.04, and your "volume pivot" that you've been talking about in the past. Do you see that as an important level of resistance again?

Hmmmm.... Great observation and "memory." Yes, it could well be, but one reason to still be at least "thinking" further strength is the ability of the QQQ to even get back above that level in recent sessions. "Why was the QQQ able to get back above that $27 level?" Some might believe it was simply a case of irrational exuberance. All I know for sure is that demand had to have been outstripping supply. I have a feeling we haven't seen the last of QQQ $27 and does indeed serve as a "key level" still.

 
 
  Ray Cummins   1/15/03,  1:08:38 PM
Spreads/Combos -- E-mail Replies

Dear Ray...One of the most basic ways of covering a spread trade that is going against you is to buy the stock, if you are short a call, and sell short the stock if you are short a put. It sounds simple but what do you do when you incorporate these strategies and the price fluctuates above and below the strike price? Even with stop-loss orders, you can continue to be caught in this fluctuation and lose significant amounts of money. Please comment...Thank You, MK

Hello MK...The problem you are referring to is known as "slippage" and the condition exists in all major financial markets. However, the effects of slippage are more noticeable when a number of trades are grouped together in a short time, such as often occurs in the strategy you mentioned -- covering/uncovering a short option in a range-bound issue. Losses due to slippage are amplified by a number of factors including: large bid/ask spreads (illiquid markets), incorrect or inaccurate pricing (inefficient data provider) and delayed execution of trades (ineffective/untimely brokerage service or trading platform). Since there is no way to alter the price activity of the underlying instrument, the key to success (or achieving the maximum amount of success under the circumstances) in the adjustment technique you described is to limit the consequences of slippage as much as possible when executing stop-orders and opening/closing new positions. Obviously, this involves the use of a broker or trading platform that provides accurate quotes and consistently responds to orders with timely executions in liquid markets. Hope that helps...

 
 
  Linda Piazza   1/15/03,  1:08:20 PM
Steve mentioned that Microsoft always seems to be increasing spending rather than decreasing spending. I found this tidbit buried in a Marketwatch.com article this morning:

Even so, Yahoo's stock managed to stay well above the $20-mark in Tuesday trading after its paid-search partner, Overture, said sales were nearly $10 million higher than expected in the fourth quarter, due to traffic from its "largest partners."

Yahoo and Microsoft are Overture's largest distribution partners.

 
 
  John Seckinger   1/15/03,  1:06:13 PM
More weakness. The Dow, on a five-minute chart, continues to trade soft. Even the mid-point of a five-minute Bollinger Bands is offering strong resistance. The recent move lower started at 8725, and I will look for a five-minute close above this area before starting to think about a possible rally.

 
 
  Jeff Bailey   1/15/03,  1:00:38 PM
Market Monitor Note Did you know that by clicking the name of a market monitor commentator, you can view that persons posts for the day? Sometimes this is useful if you are following a train of thought by that commentator and want to view his/her posts in consecutive order, instead of trying to scroll down through all of the posts.

Then, when you're done, simply click the Market Monitor Posts back near the top and it "turns on" all of the commentators posts again.

 
 
  Steven Price   1/15/03,  12:59:54 PM
Swing Trade Signals
With the S2 failure and the bullish action in the bond market John just commented on, combined with the rollover from the 200 ema in the Dow and OEX, I'm leaning more toward the possibility of that we did see a sucker rally last night at the close. So far 8700 has held and as I said earlier a move down to 8685 could be a significant trend reversal. However, once again I keep thinking that if we get good news from MSFT, who always seems to be increasing spending, rather than decreasing, and IBM, we could get a big rally to end the week. This thinking is keeping me on the sidelines.

 
 
  Jeff Bailey   1/15/03,  12:52:51 PM
QQQ $26.63 -1.66% here... session low has been $26.58, just below today's R2. You don't think.... no can't be.

 
 
  Jonathan Levinson   1/15/03,  12:52:10 PM
The COMPX has found support at 1435, a tollbooth we've seen repeatedly going back many months. The TRINQ is at 2.27 and QQV is +1.14, while the put to call ratio is in the mid .70s. This tells me that there might be a bounce, but I don't expect it to be particularly high if it happens at current levels on the indicators just cited. if the TRINQ were above 4, there would be more pent-up energy to power the move. HUI and XAU are holding their gains, and buying in bonds has picked up, with FVX down 4.6.

In other (humorous) news, the FBI has a new way of tracking internet activity, ostensibly to track terrorists. For a preview, take a look at this Link

 
 
  John Seckinger   1/15/03,  12:43:53 PM
Is it significant that the 30-year (ZB03H) is above its 50 Exponential Moving Average?

Response: With the 30-year currently higher by '20 ticks at 110'16, today's rally in the bond pits took out the 50 EMA (110 level) as equities softened. Significant? Normally it could be, however, both the 22 DMA (simple) and mid-point of a daily Bollinger Band comes in just above current prices. Moreover, a 38.2% retracement of the decline from December 31st to January 13th also is near current levels. Therefore, I think that we would get a better asset allocation move into bonds and out of stocks if the 30-year closes above 110'24. In fact, this should have some intermediate bullish implications (bearish for stocks). If broken, resistance above is at 111 and 111'27.

 
 
  Jeff Bailey   1/15/03,  12:40:34 PM
The Matrix ... Last night, I put together a "matrix" using John Seckinger's pivot analysis formula's that he has introduced us to.

I did not post this information, perhaps should have for today, but I'm like most of you, I wanted to make the observation FIRST, see how things panned out, make some notes, then perhaps use in the future.

What I "noted" from this daily, weekly and monthly pivot analysis was some commonality at the R1 levels. Note that there is really NO commonality among pivots or supports at this point. Who knows... maybe after today's range is completed and we have tomorrow's pivot analysis, we will find SUPPORT commonality between the DAILY and weekly or monthly levels.

What do YOU think. Link

Using Dow Indu as an example... See the commonality at Daily R1, Weekly R1?

Using NDX, see the commonality at Daily R2 and Monthly R1?

For OEX, see the commonality at Weekly R1 and Monthly R1?

Kind of interesting and I take some notes in my Trader's logbook. May come in handy in the future. If nothing else, would have been a terrible day to "buy the open."

Now, have we seen the top? Hmmm.... I can't say so. What if next week, all the commonality is found at Support levels, we take out all of the commonality of resistance in the above matrix. Don't the weekly R2's and Montly R2's become in play?

How can we even think of this? Remember the bullish % have been reversing up and my "fit" in with this morning's 09:00 comments. Do you or I have to be "Full position" short/put right now, even if this is the top? Heavens no. Think what might be ahead if we get reversals back lower in the bullish %. Not bad to be somewhat "neutral" right now, maybe even a calendar spread where long calls shorter-term, while put several months out? This strategy would play into a near-term reversal up in the bullish %, but observation that the reversals up in the bullish % would most likely have continued bullishness finding the bullish % "overbought" above 70% in the next couple of weeks or so, then the distribution back lower.

 
 
  Jeff Bailey   1/15/03,  12:19:30 PM
Do I buy S2 for bull long? I'm anticipating a question here.

No, not at this point. I've seen 5-minute closes below S2 in the major indexes, so I'm looking for some "firming" up, and would at least want to see some sideway's action.

From 11:00 update and even last night's Index Trader Wrap regarding QQQ, AGGRESSIVE bull doesn't mind trying to pick an intra-day bottom usings last night's or YESTERDAY's intra-day retracement of $26.58 (19.1%) as potential support, but I think its worth waiting at least 15-minutes at a minimum to see what takes place. QQQ trading $26.61 here.

 
 
  Linda Piazza   1/15/03,  12:13:39 PM
Bob Pisani on CNBC is making the point that there’s a lack of positive outlook in the guidance companies are offering. Although I don't make market decisions based on what's said on CNBC, that was the tenor of Intel’s guidance, too. Perhaps that lack of a positive outlook by Intel, as much as the lower cap-ex expenditures, affected the markets. Of course, lower cap-ex expenditures by Intel necessarily impacts the semi equipment makers.

 
 
  Jeff Bailey   1/15/03,  12:06:52 PM
Market Volatility Inex (VIX.X) 28.40 +7.1% ... had upside alert set here per 09:00 Intra-day update on Friday. Link

Hmmm.... QQQ hits intra-day S2, and increasing VIX. I'm thinking VXN doing same type of thing.

This may be "max volatility" for put trader to sell his/her QQQ $27 put from yesterday's straddle.

 
 
  John Seckinger   1/15/03,  12:06:49 PM
The "open drive" to the downside continues. With the Dow closing on a five-minute bar under S2 (8714), I have done fitted retracements to get the next level of support below at 8665. Resistance above is seen at 8740 and 8760. Will we close near the lows? In theory, we should.

 
 
  Jeff Bailey   1/15/03,  12:03:53 PM
QQQ $26.65 -1.55% .... QQQ straddle trader most likely closes out his/her put side here. Gets out of the trade relatively "break-even" on a net/net basis. Not all that bad considering a scenario for some type of "surprise" from Intel did not pan out.

If every scenario that "goes wrong" ends up in a break-even trade, then a trader's life would be considered very good.

 
 
  Steven Price   1/15/03,  11:58:43 AM
Interesting comment from a reader:

Wonder if the analysts are making too much about Intel's reduced capex? I live in the Phoenix area which has several Intel and Motorola plants. Both companies completed new fab plants in 2002. Construction on these was started in 2001. At the time, Intel CEO said they wanted to be ready when chip business cycled up and not have to play catch up. My point, they don't have to spend in 2003...they already have!

 
 
  Linda Piazza   1/15/03,  11:56:41 AM
Currently the new highs/new lows ratios show 48 new highs to 5 new lows on the NYSE and 44 new highs to 8 new lows on the Nasdaq. Adv/dec ratios read at .51 and .47, respectively, while down volume is almost 3 times up volume on the NYSE and almost four times up volume on the Nasdaq. Certainly these numbers are sustainable, but with all the surprises possibly in store this week, that doesn’t guarantee that they will be sustained. Taken together with the lower dollar, higher (from its morning lows) gold, lower bond yields, and higher VIX, the adv/dec and up/down figures hint at continued weakness. Opex week craziness can certainly undo the predictive powers of these measures, however. That's one reason I have an iron-clad rule against buying front-month options during opex week. I’m also watching for that thirty-year bond 110’09 level that John pointed out to us yesterday as possibly signaling flight into bonds. (Thanks, John, for pointing that out.) We haven't seen it yet.

 
 
  Steven Price   1/15/03,  11:52:42 AM
Swing Trade Signals
Not sure if this is a pullback or a reversal yet, but aggressive traders can play the bounce off S2 at Dow 8714/SPX 918 on the LONG side, with a stop of 8685, below Thursday's bounce level. The upside target would be 8850 and a re-test of the 200-ema.

 
 
  Steven Price   1/15/03,  11:47:20 AM
Semiconductor Index (SOX): 326.17 -10.56 The chips have led the sell-off following Intel's capex comments. Last Wednesday's pullback in the SOX bounced from the rising 50-dma, which now sits at 323.72. We also bounced from the same dma level this morning, with a low of 324.68. Look for a breakdown of that level to speed downside momentum.

 
 
  Jonathan Levinson   1/15/03,  11:46:51 AM
The TRINQ is remaining in its current zone, 1.86, while the put to callr ratio has crept up to .75. HUI and XAU are holding their gains, and treasury yields are lightly in the red, FVX -2.6 bps. So far there's been no strength to the COMPX bounces, but to expect a solid "whoosh" downward would be overly optimistic (for bears). If you round out the channel on the 60 minute COMPX, (a la Hurst), you'll see that the COMPX is near the bottom of the rounding channel. A bounce even above the violated lower trendline wouldn't invalidate this "curvy" price channel, but for the moment it's a question of how much steam the bulls have left after the spectacular runup off the 2003 lows. With opex upon us, my guess is that some more ITM calls need to get flushed out of the money.

 
 
  John Seckinger   1/15/03,  11:36:26 AM
I am looking at some corporate bonds for possible purchase, and I really only found one by AT&T that I liked (AA rated with a coupon of 7.75% and at a slight premium - 102.141). I wonder if this means that company's in general are enjoying a better balance sheet? I definitely would have expected most corporate spreads to be wider than those of Treasuries.

 
 
  Jeff Bailey   1/15/03,  11:31:35 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Linda Piazza   1/15/03,  11:30:21 AM
After falling to a low of 2359.48, the Dow Jones Transportation Index is currently 2362.49, and is rising to rest the bottom of that 2366-2375 area that was formerly support. Daily 5(3)3 stochastics are in full roll, while the 60-minutes are trying to turn down again after rising. The fast line has already turned down, making a bearish kiss of the slow line, but the slow line has yet to turn down. I’m always cautious until that happens, especially on these jittery 5(3)3 stochastics. As things stand now, it doesn’t appear that this index will be able to hold above that support, but that could change as the day and the week go on.

 
 
  Jonathan Levinson   1/15/03,  11:22:39 AM
Current headline on CNN.com: Inspectors check Saddam's Baghdad palace U.N. arms inspectors today showed up at Saddam Hussein's main presidential palace in Baghdad as a hunt for Iraq's alleged weapons of mass destruction entered its eighth week.

I've never seen Saddam's palace, and my own image of it derives from the Bugs Bunny episode with the singing sword and the fire-breathing dragon, co-starring Yosemite Sam ("Whoah mule!"). Nevertheless, it's difficult to imagine that Saddam would have a couple of ICBM's stashed at the back of the royal walk-in closet, or behind the stores of Cocoa-Puffs in the royal pantry. I wonder what they're expecting to find? Perhaps some anthrax powder in the Desenex shaker in the royal medecine cabinet? Just killing time here, but it makes me wonder.

 
 
  Mark Phillips   1/15/03,  11:11:12 AM
PG $85.39 (-0.97) OI Put Play PG is getting pushed down today with the weakness in the broad market and if this keeps up much longer, we just might get another test of the bottom of the stock's recent range, near $84.50. In the DOW, PG is today's 4th largest point loser, behind MMM, DD (warned this morning) and AA. There's still some work to do before PG is in position for a breakdown, and my gut feel is that it won't happen today. But today's weakness is a nice confirmation of the relative weakness we've been observing over the past couple weeks.

 
 
  John Seckinger   1/15/03,  11:08:37 AM
Well, we finally got the test of S2 on the Dow (8714), and I will start using fitted retracements once a five-minute period closes below this area. The low at 8710 seems perfect for the bottom of the profiled "b" pattern. I hope this becomes a significant low in the near term, as well as 8760 being watched strongly as well.

 
 
  Jonathan Levinson   1/15/03,  11:07:03 AM
Did you notice all the good news on GG.

Warburg upgraded it to a buy and it has increased it's dividend.

You picked the support perfectly!!Outstanding.

Thanks, Robert. I just saw that too- GG has announced a 25% increase in dividend from 12 cents to 15 cents, and is increasing the frequency of distribution to 6x per year.

 
 
  Jonathan Levinson   1/15/03,  11:05:50 AM
That's one great big ugly red candle on the US Dollar Index today, with a selloff all the way to 101.17. Meanwhile XAU and HUI are both positive, HUI +1.87 and XAU +.88, with gold back above 350/oz. The COMPX found resistance at the 1445-50 former support level, while the put to call ratio has risen to .73. The TRINQ is showing solid but not extreme selling pressure at 1.89.

 
 
  Mark Phillips   1/15/03,  11:03:20 AM
AZO $63.68 (-1.82) Speaking of bleeding, AZO has been bleeding like a stuck pig this week and is getting hit with a fresh round of selling this morning, now trading in the heart of that $63-65 support area I've been talking about. I think it will be interesting to watch what happens next. On the one hand, this support area has been in place for well over a year, so should be relatively strong. On the other hand, the stock is now well below its 2-year ascending trendline, and as I mentioned yesterday OBV (On Balance Volume) has absolutely collapsed over the past 8 weeks.

 
 
  Steven Price   1/15/03,  11:03:11 AM
Swing Trade Signals
We continue to head lower, seeking out new intraday lows. If were looking at the charts in a vaccuum I may be thinking the reversal has finally come. However, with a big earnings day tomorrow, sentiment can change just as quickly. I'm not willing to bet right now against that possibility. Right now the 50-dma in the Dow sits at 8605 and we bounced above that level on the last pullback a week ago. I'd like a breakdown of that level before entering short. You can bet today's rollover will re-stoke the fire of head and shoulders pattern talk if we don't get a bounce.

Current levels Dow 8718/SPX 918/OEX 467.56/COMP 1439

Note: we bounced right at the S2 level in the Dow/SPX that Jeff listed in last night's monitor.

 
 
  Mark Phillips   1/15/03,  10:58:16 AM
Not looking good... Yesterday I mentioned the importance of the BKX Banking index to hopes for a continuation of the rally up to DOW 8800. Recall that the $800 level has been a stubborn level of resistance for this index, and it was turned away yesterday. But bulls could take some consolation in the fact that the BKX held above its 200-dma, ready to take another shot at the $800 level in the future. Well, it doesn't look like it's going to happen today, with the index back down at the $785 level and back below its 200-dma.

While I follow the BKX index, Liinda has been making her own inferences about the broad market based on the action of the Transports. Just like the rest of the market, the Transports opened near their high of the day and have continued to bleed lower throughout the day. It's hard to be bullish in the light of that sort of action.

 
 
  Steven Price   1/15/03,  10:56:14 AM
One way traders can predict just how well their options will hold up during expiration week is to look at the previous month's expiring options chart. By substituting the old month's symbol for the current option chain symbol, traders can pull up a daily chart and see how the ATM/OTM/ITM option premium decayed as we approached expiration. Monthly symbols are as follows:

Expiration Month Codes

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Calls A B C D E F G H I J K L

Puts M N O P Q R S T U V W X

For example, substitute the Jan 27 QQQ call (QAVAA) with the December symbol (QAVLA) to get a chart of the Dec 27 QQQ call and see how it decayed heading into expiration. This strategy cna be applied to all options and when comparing months, traders can focus on where the ATM was at that time.

 
 
  John Seckinger   1/15/03,  10:44:27 AM
Pattern Recognition: The Dow could be in the process of forming a "b" long liquidation pattern, with the 8760 area being the top of the hump. I would then imagine an apex at either 8745 or possibly 8734 before the next move. Just thinking outloud. Can be seen on five-minute chart.

 
 
  Linda Piazza   1/15/03,  10:44:25 AM
CNBC is reporting that North Korea rejects any offers of U.S. dialogue or aid that come with conditions.

 
 
  Linda Piazza   1/15/03,  10:41:37 AM
Volume patterns this morning reflect the negative numbers seen on your trading screens. Ratio-method adv/dec numbers are .41 for the NYSE and .42 for the Nasdaq, showing more decliners. Down volume ranks more than 3 times up volume on the NYSE and about 4.5 times up volume on the Nasdaq. New highs continue to outnumber new lows, however, with a 36:4 ratio on the NYSE and a 31:6 ratio on the Nasdaq. As Jeff and I have both commented, the proportion is nevertheless weighted less heavily in favor of the new highs than it was last week.

 
 
  Jonathan Levinson   1/15/03,  10:41:09 AM
The put to call ratio jumped to .70 for the 2nd half hour, though the day's action has caused a bearish cross on the less nerve-wracking 10(5) daily stochastic for the COMPX. This setting gives fewer and later signals, but they tend to be more reliable.

 
 
  Linda Piazza   1/15/03,  10:32:52 AM
When planning positions today, think about the cautions offered by other writers on the board, including possible reactions from expected earnings reports and economic numbers. I concur with Jonathan’s warning yesterday that strange things can happen on opex week, too, and with the comments Jeff just offered. Personally, I’ve found that “perfect” technical setups don’t behave perfectly during opex week, but sometimes follow through with the expected action the next week. If you’re thinking about entering positions today, bearish or bullish, consider giving yourself some time for the trade to work and buying February options rather than January options.

 
 
  Jeff Bailey   1/15/03,  10:31:32 AM
All things being equal is a mindset I like to get into when trading current month options very near to expiration (I hardly ever do this, but have when I feel a particular "event" may drive market action just ahead of expiration, like I thought Intel's earnings might do).

Think about this right now. Let's remove any thought of "premium" in a QQQ $27 put right now, but understand that the QQQ Jan $27 Put is currently trading $0.45 bid (QQQ is $26.89 here), and yesterday, was most likely purchased for $0.50.

Now... if I remove thought of premium, at $26.89, I KNOW for fact that my QQQ $27 put is trading with 11 intrinsic. Selling it here at $0.45 (book a 5-cent loss per contract share) is no different that if I try and hold to expiration and get a close at $26.55.

If I understand this, then I can begin making some risk/reward judgements toward this option, asking myself.... "is it worth the risk of $45.00 per contract to continue to hold. If answer is "yes," then I must firmly believe the QQQ will trade below $26.55 at expiration."

A quick check of today's S2 is $26.62 and that would have my QQQ Jan $27 put holding $0.38 of intrinsic value. What will the QQQ Jan $27 put premium hold if QQQ trades $26.62? I have no clue. It very much depends on where the VXN is when the QQQ trades $26.62.

Now you see, we've introduced yet ANOTHER variable into things. And this makes it evey MORE difficult doesn't it? If anything, a reason NOT to trade current month expiration unless you have some very well defined trading plans and levels to trade within.

 
 
  Linda Piazza   1/15/03,  10:27:01 AM
The Dow Jones Transportation Index was one of the first to begin falling away after repeated tests of its exponential 200-dma. Currently at 2364.42, it’s testing levels below support at 2366-2375. Next historical support lies at 2322 for this important index.

 
 
  Steven Price   1/15/03,  10:25:57 AM
Swing Trade Signals
We are trading near lows of the day and that 8746 dow support was taken out. The 60 min Dow chart shows an awful lot of rising small candles since Jan 9, with some big wicks and tails along the way. If this drop holds for much of the day, the comparatively large red candle could be viewed as a reversal indication. Bonds still green and the VIX (27.96 +1.41) has onced again bounced from support just over 26.

Current levels Dow 8743/COMP 1444/SPX 920.99/ OEX 469.05

 
 
  John Seckinger   1/15/03,  10:24:02 AM
On the economic front, a report on NY Fed Manufacturing showed an increase of 8.4 pts to 20.7. Therefore, analysts will most likely revise estimates higher for the Philadelphia Fed report scheduled for tomorrow at noon. December's Phila Fed came in at 11.3, and the current consensus is for a 9.0 reading. However, with the increase in the NY report, estimates will most likely rise to the 15-20 range.

 
 
  Linda Piazza   1/15/03,  10:22:46 AM
Currently at 28.01, the VIX has edged above resistance at 28.00.

 
 
  John Seckinger   1/15/03,  10:18:12 AM
The Dow, on a five-minute chart, has closed lower nine out of the last ten bars. The only gain coming from 9:50 to 9:55; a 0.41-point advance. Time to look for a test of S2 at 8714.

 
 
  Jonathan Levinson   1/15/03,  10:18:05 AM
The opening put to call ratio was .59. The downside break of the bearish ascending wedge looks real. Any new bearish positions should have their stops at or slightly above the trendline to protect capital and aid digestion :)

 
 
  Mark Phillips   1/15/03,  10:13:12 AM
GM $39.90 (-0.60) That's just not nice! After proceeding to close above our $40 stop yesterday, LEAPS put play GM is under pressure with the broad markets again this morning, falling back under that $40 level. My bearish outlook for the stock remains unchanged, but discipline is paramount, especially in such an uncertain market. Our stop was breached, so we're out of the play. For those eager to play the downside again, I like entry on a rally failure in the $42-43 area for new long-term bearish entries, but remain concerned with the PnF chart, which is currently on a Buy signal, which will be reinforced by another Buy signal with a trade at $42. I think the prudent course of action is to wait for a Sell signal on the PnF chart before attempting to game the downside in the Automotive sector again. Don't worry, I'll be watching and we'll get our chance.

 
 
  Steven Price   1/15/03,  10:11:50 AM
Swing Trade Signals
Have we seen a sucker move with yesterday's closing push above Dow 8800/SPX 930 bringing in the last wave of bulls before the 200-ema rollover? A move below the 8746 Dow support level of the last couple of days could be significant. I'd still be cautious about shorting ahead of IBM and MSFT's earnings tomorrw, but if the reaction to Intel is an indication, maybe we did just see a bull trap.

Current levels Dow 8759/SPX 922.41/OEX 469.87/COMP1445

 
 
  Jeff Bailey   1/15/03,  10:02:25 AM
QQQ $26.88 -0.84% .... one thing I've noted in the past as discussed with John Seckinger is that on the 5-minute bars, it is often observed that for shorter-term trading, it has actually taken a 5-minute bar CLOSE below a S1 to really signal any type of sign of further intra-day weakness. Watch the QQQ here, see if "they" don't dip it below today's S1 of $26.86, but NOT see a close below $26.86 on the 5-minute bar, and then get a little rally back near today's pivot.

Why would this be? Just as I used $27.36, which was 3-cents above today's R1 as a "prove it to me" level to hold a QQQ Jan $27 call, market makers, specialists and "pro traders" will set alerts at a level, or just under a level. Then, when the level is traded, the security will "naturally" trade just under the level, but when the buyers come in (bulls or short-covering) at the stated level, the 5-minute bar just doesn't "close" below the level you and they were trading. This is perhaps more important observation today for those that are looking to short at S1.

 
 
  Jonathan Levinson   1/15/03,  10:00:11 AM
The fed has added 5.75B in overnight repos. With no expiries today, that's a net addition.

 
 
  Linda Piazza   1/15/03,  9:58:49 AM
Thanks, Jonathan, for weighing in on the speculation about Japan buying dollars.

 
 
  Jonathan Levinson   1/15/03,  9:58:14 AM
Besides coins in the vault, what's your favorite gold play?

Frankly, I'm loving my Royal Precious Metals Fund, but it's in Canuckistan and possibly not available in the US. It was Canada's top performer last year, and the link to its description and top holdings is below. I'm a fan of Goldcorp (GG) as a more aggressive play, and CEF as a more conservative one. My own positions, all long term, are gold and silver coins, CEF, Royal Precious Metals, and AGF Precious Metals. My parents and others who attended our recent family dinners have positions in GG and Kinross. I'm not making specific recommendations, but just disclosing my own positions. Hey, you asked!

Link

 
 
  John Seckinger   1/15/03,  9:55:55 AM
Few notes: R1 in the YM contract was 8855. Today's high was 8855. R1 in the NQ contract was 1101.25. The high was 1103. For the ES contract, R1 was 933.75, while the high was 932.75. With that said, we might continue to see relatively weakness in S&P 500 stocks over the 30 blue chips as the session progresses. Just something to think about.

 
 
  Jonathan Levinson   1/15/03,  9:54:13 AM
HUI and XAU are both in the green, HUI dramatically reversing its opening loss. Looks like that support held. The US Dollar Index (dx00y) is down, currently at 101.50.

 
 
  Jeff Bailey   1/15/03,  9:52:58 AM
QQQ $26.86 -0.78% ... trading today's S1 here. QQQ straddle trader from yesterday that is more "risk averse" can close out here, or.... lower morning stop from just above $27.35 to just above today's pivot ($27.09) and now target today's S2 of $26.62.

 
 
  Jonathan Levinson   1/15/03,  9:49:41 AM
Presumably, Japan cannot buy as many dollars as the fed can print. Intervention in the currency markets is generally a losing proposition, because of the sheer size of those markets- a billion here, a billion there, but over 1000 billion dollars are traded in the forex markets every day. There appears to be a rush on to devalue everyone's currency to avoid deflation, while permitting foreign exports to be consumed by the relentless US consumption machine. What this tells me is that fundamentally, gold is the place to be, and, while the US Dollar is looking very weak, it's still the reserve currency of the world, and the world makes its money exporting to the US. So, I'm not as bearish on the USD as others might be. It may go down much lower, but not without a fight. And so far, 101.00 has held.

 
 
  Linda Piazza   1/15/03,  9:49:28 AM
If a picture is worth a thousand words (and I usually write about that many in my entries), here’s a picture of what I’m watching in the OEX. The blue MA is the descending simple 200-dma, nearly touched this morning before this latest dip. The maroon MA is the exponential 200-dma. Link

 
 
  Linda Piazza   1/15/03,  9:47:19 AM
Currently at 27.56, the VIX is up $1.01 this morning.

 
 
  Steven Price   1/15/03,  9:45:34 AM
Swing Trade Signals
Third positive day in a row for bonds, which has me concerned about the rally strength. We are now below the opening range support at Dow 8795/SPX 926.44, indicating we could be bleeding further throughout the day.

Current levels Dow 8784/SPX 924.91/OEX 470.83/COMP 1447

 
 
  John Seckinger   1/15/03,  9:45:29 AM
The PPI report released this morning showed a 0.4% annual decline in the core rate - the lowest calendar year decline sine 1974. Wholesale price deflation? The declines were mostly driven by the automakers discounting prices, so I wouldn't call it necessarily deflation. In fact, Intermediate goods prices are 3.2% higher than a year ago, while raw material prices have increased year-over-year by 26%.

 
 
  Jonathan Levinson   1/15/03,  9:44:40 AM
Bears looking to get short on this break should watch the chart support at this level. While a break below 1450 brings the downside action on the bearish wedge into play, we still have a congestion area at 1445, which could bring in further support. You can be endless cautious all the way down and miss your entry, but this looks key to me. Alternatively, a close stop just above the trendline could balance the risk of another bounce from this level.

 
 
  Jeff Bailey   1/15/03,  9:44:11 AM
QQQ per last night's Index Trader Wrap... "suspicious" to say the least how the QQQ got "hit" at our R1 and then dives lower isn't it? To me, this hints of "bearish" session into today's close. Somewhat like a "sell the news" type of trade day.

 
 
  Linda Piazza   1/15/03,  9:41:07 AM
I understand some aspects of relationships between markets, but I’d be the first to admit I’m still learning others. I’m thinking this morning about my report on the speculation that Japan would be buying dollars to help its export-driven economy. If the feds are printing dollars as quickly as they can, but Japan is also buying dollars, how will that balance out? What effect will it have on our economy? Perhaps John, Jonathan, or one of the other writers has an opinion.

 
 
  Jonathan Levinson   1/15/03,  9:40:40 AM
1450 remains a key level for our bearish ascending wedge on the COMPX. A solid break below could mean that the party's starting for bears.

 
 
  Steven Price   1/15/03,  9:40:05 AM
Swing Trade Signals
The positive open in the Dow failed right at the 200-ema of 8854.86, coming within 0.25 before rolling over. The Dow is sitting on 8800 and SPX sank quickly below 930. Let's see if 8800 provides any type of support, as we traded down to 8795 and held.

Current levels Dow 8806/COMP 1451/SPX 927/OEX 472.19/QQQ 27.06

 
 
  Jonathan Levinson   1/15/03,  9:38:32 AM
We have HUI dropping 1.22 out of the gate, while XAU appears not to be open yet. Note that the US Dollar Index found support just below 101.00 yesterday, at support, and gold reversed at 355/oz. I note further that UBS Warburg is bulling gold, and Thom Calandra on marketwatch also has a bullish article on precious metals today. As we saw with Dan Niles promoting Intel at the exact, precise top in December, I'm very suspicious of upgrades, particular when it looks to me like we're in rollover territory. Today's upgrades and bullish articles only confirm my suspicion. Please be careful with your gold longs, respect your stops, and watch for support. HUI should find support right here, with next support around 126, while XAU should be supported at 71.50ish.

 
 
  Jeff Bailey   1/15/03,  9:36:04 AM
QQQ $27.16 +0.22% ... first 5-minute bar shows high of $27.35. Per last night's Index Trader Wrap, QQQ straddle traders sells the Jan QQQ $27 calls as QQQ DID NOT trade $27.36 in first 5-minutes.

Now holds the QQQ Jan $27 put and looks to salvage remaining premium and QQQ $26.86 or $26.70, but has trailing stop at $27.36.

Again... this was the PLAN outlined for traders that may have put on a QQQ $27 straddle ahead of Intel's numbers yesterday. Link

Just trading the PLAN and the levels.

 
 
  John Seckinger   1/15/03,  9:35:52 AM
Intra-day Pivot/Levels for Wednesday (01/15/02)...

INDU : S2= 8714, S1= 8778, P= 8810 , R1= 8875 , R2= 8907

SPX : S2= 918, S1= 925, P= 928, R1= 935, R2= 938

OEX : S2= 466, S1= 470, P= 472 , R1= 476, R2=478

NDX : S2= 1074, S1=1084 , P= 1091, R1=1101 , R2=1108

QQQ : S2= 26.62, S1= 26.68, P= 27.09 , R1= 27.33, R2= 27.56

 
 
  Jeff Bailey   1/15/03,  9:31:47 AM
The 9:00 AM Intraday Update has been posted. Link

 
 
  Jonathan Levinson   1/15/03,  9:30:11 AM
Flat open on the COMPX, TRINQ .55, QQV +.5 to 38.95.

 
 
  Steven Price   1/15/03,  9:25:00 AM
Swing Trade Signals
Not much has changed from yesterday's strategy. On the long side, I'd like to see a move through all of the resistance highlighted in last night's Swing Plan. On the short side, I would need to see a decisive rollover and with the close over Dow 8800/SPX 930, I am beginning to doubt we will get that. Microsoft and IBM are out with earnings tomorrow, so we may not get a big move until after those numbers are released.

 
 
  Linda Piazza   1/15/03,  9:04:43 AM
Bank of America (BAC) reported Q4 earnings of $1.69/share, up from $1.29/share a year ago. Analysts expected $1.66/share according to one survey. Revenues were flat at $8.97 billion, in line with expectations of $8.94 billion. Saying the business environment continue to be challenging, the company mentioned weak market-related revenue but growth in mortgage, debit and credit card, and savings units.

 
 
  Jonathan Levinson   1/15/03,  8:39:54 AM
The PPI has just come in below expectations, with producers' prices flat and the core rate down .3 percent, showing a reduced risk of inflation, most likely explaining the drop in gold we've just seen. Here's the full story: Link

 
 
  Jonathan Levinson   1/15/03,  8:34:57 AM
Treasuries have just opened slightly up, with yields in the red, FVX -1.2 bps, TNX -.4 bps and TYX +.1 bps. QQQ is holding up at 27.20, up .12 from yesterday's close. The US Dollar Index is well above yesterday's lows at 101.65 currently, and gold is struggling to hold 350/oz.

 
 
  Linda Piazza   1/15/03,  8:12:49 AM
Dupont (DD), the Dow's eleventh-largest company according to CNBC, lowers Q4 guidance this morning to $.31-.33, from an expected $.33.

 
 
  Jonathan Levinson   1/15/03,  8:04:27 AM
WASHINGTON (Reuters) - Fannie Mae (NYSE:FNM - News), the largest home financing company, on Wednesday said its quarterly earnings fell more than 50 percent as options it uses to protect itself from interest-rate swings lost value.

Link

 
 
  Linda Piazza   1/15/03,  7:23:50 AM
Good Morning! Today’s theme in overseas trading appears to be that all is not as it seems on the surface. Despite announcing better-than-expected revenues and earnings-per-share, Intel’s intention to reduce cap-ex expenditures appears to be carrying more weight in overseas markets as chip-equipment makers came under pressure overnight. ASML, Advantest, and Tokyo Electron fell in European and Asian trading. As of this writing, Intel trades up slightly in European markets, but pared its gains from earlier today, and other chipmakers trade slightly down.

Also, despite the release of a UK unemployment number that showed claims falling 5,300, a number that kept the jobless rate the lowest since July 1975, the FTSE 100 fell along with other European markets. Retailers and the U.K. government hired new workers, while manufacturers, banks, and insurers cut jobs. Morgan Stanley lowered lenders Barclays and Lloyds to “underweight,” citing worries about margins. Deutsche Lufthansa AG fell on worries that the airline's employees may strike this week. European media stocks were also under pressure, as Goldman Sachs lowered the outlook on these stocks to a neutral view and as the EU studied the arrangements between Hollywood studios and European pay-television companies. As of this writing the FTSE 100 traded down .91%, the CAC 40 was down .44%, and the DAX had moved down .37%.

In Japan, the Nikkei closed up .69%. Gains in banks helped offset losses in technology exporters. Intel’s outlook weighed on technology exporters, but so did the dollar’s early weakness against the yen. Bloomberg reports rumors that Japan will buy dollars to drive Japan’s recovery when the dollar reaches the 117-yen level.

 
 
  Steven Price   1/14/03,  1:00:34 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   1/14/03,  1:00:13 AM
The Index Trader Wrap has been posted: Link

 
 
  John Seckinger   1/14/03,  12:59:11 AM
The Futures Trader Wrap has been posted: Link

 
 
  Jim Brown   1/14/03,  12:58:50 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

 
 

Market Monitor Archives