Option Investor
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  Jeff Bailey   1/21/03,  5:49:10 PM
Pivot Matrix with tomorrow's daily S2, S1, Pivot, R2 and R2 recalculated. Weekly and monthly stay the same. Link

From the matrix, I see commonality in SPX and OEX. Looking for SPX support at S2 of 875, which isn't too far off from weekly S2 of 876. Then we note for another session that SPX 912 appears as "common" resistance at daily R2 912 (was today's SPX R2) and weekly pivot of 912.

Tomorrow morning, alert to potential "drop, then pop."

  Jeff Bailey   1/21/03,  3:58:34 PM
The 3:15 PM intraday update has been posted. Link

  Steven Price   1/21/03,  3:57:26 PM
What do you think of vz here as a short? Sitting on 200 day ma and has crossed thru 20 day ma. I percieve significant reward if 38 broken. Thanks, Bill cinci

Verizon (VZ) $37.33 (-1.17) VZ's break below $38, as well as the 200-dma certainly looks bearish. There is some support at $35, as well as previous resistance around $33 (which is likely to act as support). PnF support at $33, as well, and $37 is the sell signal. I like VZ short, but would tighten stops as I approached $35 and again at $33.

  Linda Piazza   1/21/03,  3:56:44 PM
At 30.59 as of this writing, the VIX is challenging its simple 50-dma at 30.68.

  John Seckinger   1/21/03,  3:50:56 PM
Jim traded four times today in the Futures Monitor; all winners. Jim saw gains of 5 points, 3.50 points, 3.00 points, and 2.75 points during the session. Total for the day = 14.25 points. If trading one contract, that equates to 712.50 dollars (excluding commissions). Please make sure you have the NEW monitor, and look to the upper left hand corner of this applet for "Futures Monitor Posts". It is found under the folder, "Option Investor Market Monitor." If having problems finding it, send me an email.

  Linda Piazza   1/21/03,  3:44:16 PM
Another flip-flop in Nasdaq volume patterns occurs as down volume now trumps up volume on both the Nasdaq and NYSE. On the NYSE, down volume now outranks up volume by 4.6 times.

  John Seckinger   1/21/03,  3:40:33 PM
We definitely are experiencing the last hour of weakness. Nice to see a plan come together; referring to the OEX and the "b" formation noted earlier. How about the 30-year bond? The close at 111'13 is right at the top of the range from 111'16 to 110'19. I cannot ignore the weakness in equities today, and I am going to be looking for a move to 112 in the 30-year tomorrow. For traders flat, please check the ZB03H ticker before equities start tomorrow in order to get a good gauge of sentiment. Note: Higher bond prices should mean lower stock prices.

  Steven Price   1/21/03,  3:38:44 PM
Swing Trade Signals
Traders short from 8590-8600 should decide just how much of a bounce they are willing to risk after a nice move in their favor. I won't be here tomorrow to suggest stops, but I still think there is downside in the cards in the near future. I can envision some sort of bounce after a 400-point sell-off in the last few days and I'll be looking to get short on that bounce. However, there is also nothing wrong with taking profits and getting back in. I'm still kicking myself for the stop out at 8825 on the 8700 short, but hindsight is 20/20. We have had pretty much a straight shot down from the close over 8800, with even number support resistance at 8700/8600. These levels could still be used for entries on a bounce failure and would be the most likely rebound levels.

Current levels: Dow 8451/OEX 451.16/SPX 889.45/COMP 1368

  Jonathan Levinson   1/21/03,  3:35:56 PM
The put to call ratio for this half hour is back out at .56 with QQQ a few cents off its low of the day. QQV is up .97 now with the TICK.NQ at -259. It looks like recognition is creeping into the COMPX, with the TRINQ climbing slightly higher to .77. Tomorrow's open should be very interesting. It's still a mystery where the fed's 16B went, but being an overnight repo, it needs to be refunded tomorrow.

  Mark Wnetrzak   1/21/03,  3:35:30 PM
Covered-Call Portfolio
The model covered-call portfolio is holding up fairly well in the current bearish environment as the threat of war with Iraq grows. Globespan-Virata (NASDAQ:GSPN) is testing the top of the December support area and a move to $4.50 on increasing volume would be worrisome. Med-Design (NASDAQ:MEDC) dropped a bit around 3:00 PM on no news (hmmm). J.D. Edwards (NASDAQ:JDEC) bounced mid-day and has now given back its gains today as it continues to test a strong support area near the sold strike (FEB-$12.50). On a side note, last month's CC candidate XM Satellite Radio (NASDAQ:XMSR) continues to power higher on heavy volume breaking above near-term resistance. The next test of resistance would be the September high as the issue continues to cause a bit of "call-selling" regret (grin).

  Linda Piazza   1/21/03,  3:29:03 PM
The OEX followed through on the bearish implications seen when a bearish engulfing pattern formed on the weekly chart. As the day closes, the OEX moves down toward further candlestick support seen in the 449.50 area. Pivot analysis also notes a weekly S1 level at 450, correlating well with candlestick support and with expected psychological support at 450.

  Jeff Bailey   1/21/03,  3:10:07 PM
SPX 891.28 -1.16% .... SPX just traded 890.69, which is right at out "5-minute fitted" retracement of 890.95. Would look for some near-term support here at this retracment and correlative S2 from daily pivot analysis and S1 of 889 weekly pivot analysis. Link

SPX or SPY bears can look to lock in some gains, or if "swing-trader" type, can lower stop to just above 896.37 on 5-minute bar close above that level.

  Jonathan Levinson   1/21/03,  3:06:37 PM
The put to call ratio actually fell back to .56 as option traders bought the dip this past half hour. The bond market however is seeing buying, with the five year yield now down 3.4 bps. The QQV is finally positive, +.29, while the TRINQ has risen to .61. TICK.NQ -188. It looks as if the decline has started with the COMPX at 1370.

  Linda Piazza   1/21/03,  2:56:59 PM
Perhaps the buying in CSCO is one of the reasons up volume comes in at 1.54 times down volume on the Nasdaq despite there being fewer advancing issues than declining issues. CSCO gets only one vote in the adv/dec numbers, as those numbers measure the number of advancing or declining issues, and CSCO is only one issue. Since up/down volume figures count the number of shares traded on up volume or down volume, CSCO’s nearly 50 million shares traded has given it nearly 50 million opportunities to impact the up/down figures.

  John Seckinger   1/21/03,  2:51:53 PM
Per 1:56:22 Post, the OEX contract definitely seemed to attract both shorts AND longs liquidation (hence the "b" formation) once under the 454.24 to 454 area. The 451.11 objective has not been reached yet (intra-day low of 452.72), but we still have a solid hour left. One more reason for thinking about the last hour sell-off has to do with the Dow perfoming an "open TEST drive" today, which is when the market bids just above the high during the first five-minutes (went above the pivot) before reversing and selling off for the entire session. The pattern can be seen here: Link

  Steven Price   1/21/03,  2:50:32 PM
Swing Trade Signals
We got the failed rebound I was looking for earlier at Dow 8500 that current shorts can use to add to positions. My suggested stop of 8700 for shorts from 8590-8600 still makes sense, but conservative traders may want to lower the stop to just above today's high of 8623 to protect against a bounce. I never got the entry I was looking for a little higher (Dow 8650-8700), but hopefully more aggressive traders got in short this morning when I identified possible alternative entry. I'm still looking for a bounce entry point,preferrably just below 8600 now, but since I will be gone tomorrow, I will probably hold off on entries this afternoon. My target on the earlier short entries is in the Dow 8300-8400 range.

Current levels: Dow 8489/OEX 452.98/SPX 892.90/COMP 1372 (now finally in the red)

  Jonathan Levinson   1/21/03,  2:43:42 PM
The put to call ratio is now at .58, the TRINQ up to .51, and the FVX down 2.7 bps. The COMPX is now below the lower end of the 1377-82 s/r zone, and if it breaks down here, well.. the market is still overbought and sentiment still very bullish.

  Linda Piazza   1/21/03,  2:36:30 PM
KO: At 44.76 as of this writing, KO may be about to break down out of a bear flag pattern on the daily chart. Over the weekend, a reader with a bearish position in KO noted that another advisory service was suggesting a bullish play in KO because it sat near support near 42.50. That support offered an easy-to-define stop loss. I agree with that estimate, but I don’t see much to convince me to enter a bullish play just because I know when I should exit that play. The bullish case? If I squint just right, I can draw a descending line from KO's mid-1998 highs to current levels, and see that KO popped above that descending line in the late spring of 2002 and has perhaps been falling along that line rather than dropping below it. It's been on a P&F sell signal, but it's recently turned up into a column of X's.

What about the bearish side? I see a 10-week MA that's still below the 30-week MA, so I don't see a change in fundamental direction yet, although these MA crossovers tend to be a little late. On a weekly chart, and even more clearly on a longer-term chart, I see a potentially bearish triangle, with support at about 42.50-43, and with the top sloping down from those 1998 highs I mentioned. I'm not convinced that the brief pop above that descending trendline isn't being broached to the downside again just now. As that top slopes down and as those MA's move down, too, KO has been spending more and more time being compressed toward that 42.50-43.00 support.

Also on the bearish side is the fact that KO's relative strength chart (relative to the INDU) shows that KO is currently in a column of O's, indicating short-term weakness relative to the Dow. Its sector, the Dow Jones Non-Cyclical Consumer Goods ($DJUSNC on Stockcharts.com) is also on a sell signal, and the sector is in a column of O's relative to the $SPX, indicating that the whole sector is in a period of short-term weakness. KO currently shows a sell signal and is in a column of O's relative to its sector. The Bullish Percent Chart on Consumer Staples is reversing into a column of O's. So, not only does the bar chart look potentially bearish, but also the P&F charts show the potential for continued short-term weakness.

Does that mean it’s time for new bearish entries into KO. Not yet. KO still hasn’t broken beneath that long-term support and may not, but I’m watching. Disclosure: I’m out of my January put position, entered when KO broke 47.

  Kent Barton   1/21/03,  2:23:47 PM
More news for BSX. The company just recieved EU approval of its Taxus drug-coated heart stent. Shares are seeing a "sell on the news" reaction to this development...Currently trading at $45.00, lower by 1.6%.

  Jeff Bailey   1/21/03,  2:18:15 PM
The 1:00 PM Intraday Update has been posted. Link

  Steven Price   1/21/03,  2:13:57 PM
Swing Trade Signals
We got a breakdown of Dow 8500 and as I stated earlier I like that break to add to current short positions. Those traders who entered short at 8600 or 8590 can look for resistance under 8500 to add to the position. We got a bounce off the low of 8499 and I'd suggest waiting for that 8500 level to act as resistance on a failed rally attempt.

Current levels: Dow 8508/SPX 894.77/OEX 453.83/COMP 1376

  Jonathan Levinson   1/21/03,  2:11:06 PM
The US Dollar Index has just hit a new low of 100.16.

  Jonathan Levinson   1/21/03,  2:09:35 PM
Any ideas on where today's $16 B has gone?

Nope, I truly have no idea. Given the blowout in the USD, perhaps they're out buying other currencies with it. Or, it could have to do with Wednesday's bond sale at the link below. Truly, I can only guess.

  John Seckinger   1/21/03,  2:09:30 PM
Jim is up +11.50 today while trading the ES futures contract. Remember, each point is $50. Very nice.

  Linda Piazza   1/21/03,  2:07:10 PM
Up volume continues to increase on the Nasdaq, with up volume now at 1.8 times down volume. It's still the opposite on the NYSE, with down volume now at 2.54 times up volume. New highs continue to outnumber new lows on both the NYSE and Nasdaq, but I note a few more new Nasdaq lows today as compared to early last week. That might be micro-managing things a bit too much to note 32 new lows today as compared to less than 20 this time last week, so I won't draw conclusions based on that number, but will continue to watch what happens.

  Jonathan Levinson   1/21/03,  2:06:48 PM
The CBOE put to call ratio has just printed .57, showing an insignificant drop in bullish enthusiasm despite the failure of the COMPX to hold 1380. The TRINQ at .41 is still at the low end of its scale, and bond yields have dropped a touch, FVX now down 1.4 bps. The COMPX continues to feel toppy to me here.

  Mark Phillips   1/21/03,  2:05:07 PM
Could you please comment on EDS as a long term CALL play. If a good leap candidate, what price action would you recommend making a position in EDS CALLS ? I am thinking LEAPs for 2005 but wondering if the stock with SEC investigation and upcoming earnings might go and test $10 level if not more.

From a fundamental standpoint, there's nothing about EDS that gets me interested from the long side, aside from the company's now-low P/E ratio of 8. Despite the fact that there have been some analyst upgrades lately, I don't like the way the company is apparently losing business to rivals such as IBM. One such example is the $5 billion JPMorgan IT contract that went to IBM, rather than EDS.

The technicals don't look very encouraging either, with the selloff over the past few days shattering the ascending trendline from the late-September lows. Trouble is showing on the PnF chart too Link with a new Sell signal today generated by the trade below $17. That newest column of O's generates a tentative bearish price target (which could continue to move lower) of $12. Clearly from the daily chart, major support comes in at the $10-11 area, which coincides with the Sep/Oct lows. Throw in bearish Stochastics divergence on the weekly chart, and I wouldn't consider any bullish positions ahead of the company's earnings release on February 6th. The SEC investigation is likely factored into the share price already, but I would wait for some price stabilization before considering bullish positions. Possible support levels are $13.50-14.00 and then the $10-11 area.

  John Seckinger   1/21/03,  1:56:22 PM
John, Do you see there is a "b" formation on a five-minute chart of the OEX?

Response: Yes, I definitely see one. Good observation. I 'think' the apex is at 454.25; therefore, a move under here should be a good start to get longs to liquidate AND shorts involved. Objective for now is at 453, but a five-minute close under here should pressure the index down to 451.11 and then 449. Note: S1 is at 454, so I will now "revise" the apex down to 454. The original 454.25 area was based on fitted retracements. It is nice to be able to use retracements and a "b" formation pattern.

  Linda Piazza   1/21/03,  1:55:35 PM
It’s interesting the way pivot analysis sometimes correlates with historical support levels seen on the bar charts. For example, today’s NDX pivot of 1026, set out in Jeff’s wonderful Pivot Analysis Matrix this weekend, was also the site of an ascending (green) trendline, seen on the linked chart. Don’t abandon chart study, however, as the 978 NDX level did not show up on daily, weekly or monthly pivot analysis, and yet some could argue that level’s importance, too. (It’s the site of the horizontal green line in the linked chart.) That 978 NDX level is the high of the August right shoulder, the late December lows, and also a potential H&S neckline in the NDX. Perhaps that level will show up in daily or weekly pivot analysis if the NDX continues to fall, but those reading charts would already know it’s an important level to watch before it shows up on pivot analysis. Link

  Jonathan Levinson   1/21/03,  1:49:20 PM
can you explain why the dollar down effects equities negatively? Any links for further reading?

A weak US Dollar occurs because investors are selling it. When they sell, they don't necessarily just sell dollars- they sell the assets which are denominated in US Dollars- ie stocks and bonds. If you're a Japanese holding GE and ten year treasury notes and the dollar tanks... 20% from last January 2002 or so... it takes a 20% appreciation in your investment just to break even. So, chances are, you're thinking of selling your GE and getting out of US Dollars if you haven't already. Why hold a depreciating dollar if you can invest in Yen denominated assets? This is the thinking, and the reason why a falling dollar is bad news for equities and fixed income securities alike.

  Jonathan Levinson   1/21/03,  1:39:16 PM
The put to call ratio has now fallen to .56, and with the TRINQ at .38, it's looking like we're approaching another relative top in the COMPX here in the 1380 confluence zone. The US Dollar Index is staying near the floor at 101.24, and precious metals are holding their gains. Bond yields are flat to negative, and this is clearly a tense moment for the markets.

  John Seckinger   1/21/03,  1:35:21 PM
With the US Dollar falling to 100.17, there is a good chance we will see the 100 level. This will be the first time since the month of January 2000. The last close under 100 was September of 1999. On a monthly closing basis, I would expect 100 to be pretty pivotal. I can see a nice bounce back up through the 106.50 level, but of course I am going to be overly optimistic on my own currency (read: If i had a position in the dollar, I would sell it down to the 96.94 area).

  Steven Price   1/21/03,  1:25:26 PM
Swing Trade Signals
Short broad market positions should continue to have a hard time breaking through today's lows without a rollover in the COMP/NDX, which are both still in the green. The bounces in those indices look a lot like the charts of Microsoft and IBM, which are seeing oversold bounces, but those bounces are weak in comparison to Friday's sell-off. So far the 200-dma at $51.99 is keeping a lid on MSFT and I would expect an eventual rollover if traders don't get some positive news to reverse the current slide. That seems unlikely and given the current negative reactions we are seeing to positive earnings releases, I'm leaning short overall. That doesn't mean we won't get some type of bounce after the recent sell-off, but as long as it tops out below Dow 8700/COMP 1400, I'd be looking to short that bounce.

For those readers looking at Microsoft ($51.85 +0.39), I'm not sure I'd short above support in the $50-$51 range, but I would not be looking to go long here.

  John Seckinger   1/21/03,  1:21:45 PM
Oh, Bailey. Jeff is helping me with "Stacked Retracements" and how these areas can help a trader at 9:30 a.m. the next morning. I will do a piece on it for tonight's Investor Education Section. It basically uses the first five-minutes when futures re-open for a night session, and then gauges sentiment heading into the following day of trading.

  Linda Piazza   1/21/03,  1:21:07 PM
CNBC reports that Venezuelan tanker pilots may be meeting to end their strike. In the U.S., however, teamsters have called for strike authorization, due at least in part to higher co-pays on their insurance. It will be interesting to see how the transportation index sorts out the opposing forces: the hope of lower oil prices if the Venezuelan situation were to be resolved and the threat of a strike by the teamsters. Currently trading at 2308.07, the $TRAN remains pinned beneath key resistance levels.

  Jonathan Levinson   1/21/03,  1:09:23 PM
The US Dollar Index set a low around 100.17, while the COMPX is struggling with the 1380 resistance level and the put to call reading has just come out at .59. The TRINQ is very low at .34, and the QQV is flat at +.02 on the day. Ditto yields, which are nearly unchanged on the day. It looks like something's going to have to give here, as the dollar gets sold but the markets hold up with overbought breadth and bullish sentiment.

  Kent Barton   1/21/03,  1:05:58 PM
Boston Scientific (BSX) $46.00 +0.23: Shares have ticked higher over the past half-hour following the company's release of preliminary fourth-quarter results. BSX is reporting income of 31 cents/share, in-line with analyst expectations. Final Q4 results will be announced on February 4th. The stock gapped higher this morning and hit a fresh multi-year high after the company's Gastroesophageal Reflux treatment (I think that's medical-speak for heartburn) receieved approval from the FDA.

BSX is currently a bullish play on PremierInvestor. Short-term traders should be looking to lock in some profits as shares approach the 1999 highs near $47.00.

  Jonathan Levinson   1/21/03,  12:57:25 PM
The US Dollar is printing new lows at 100.32 as HUI and XAU break to new intraday highs.

  Linda Piazza   1/21/03,  12:46:09 PM
No sooner did I type my last entry, than COMPX quotes began showing up on Q-charts, with the COMPX currently quoted at 1376.21.

  Linda Piazza   1/21/03,  12:43:06 PM
While we can’t get quotes on the COMPX, we can watch volume patterns, and those patterns show that the Nasdaq up/down volume has flip-flopped again, with up volume now 1.46 times down volume. The adv/dec ratio on the Nasdaq still shows more decliners with a .64 ratio. The comparable number on the NYSE is .57, and down volume still leads up volume on that exchange.

  Kent Barton   1/21/03,  12:33:05 PM
Deluxe Corp. (DLX) $40.01 +0.19: On Friday we finally got that coveted breakdown below key support at $40.00. Shares are finding some buyers today and have managed to squeak back above that level. Utilizing the pivot formula that John and Jeff have been using, I'm showing the following "key" levels for today's trading in DLX: S2 = 39.23 S1 = 39.52 Pivot = 40.12 R1 = 40.41 R2 = 41.01

There's still a lot of action left before the closing bell, but thus far it's worth noting that the intrday high is $40.10; two cents below the pivot. Pure coincidence? Perhaps. But it's also interesting to see that RI coincides with intraday support/resistance from Friday. The bar chart shows additional overhead resistance at $40.71, which was the high for the past two sessions.

Technical bears will be looking for another close below $40.00. DLX traced a new multi-month low this morning and the big picture is not looking strong. As we outlined in the PI update on Friday, traders with a very short-term timeframe may want to aim to close out short positions if shares break down to the $38.00 area. We're targeting a move to the $33-$35 region ahead of the company's earnings report on January 30th.

  Linda Piazza   1/21/03,  12:23:45 PM
What do I do when I see charts like that in my 12:03 post on the Russell? Usually I grow more cautious about entering trades. Why? I’m not prescient, and I notice key support/resistance levels currently being tested across many indices and stocks. Bush hasn’t alerted me as to his plans for war with Iraq, although I think I can read his mind when I hear about the recent troop movements. Greenspan hasn’t let me know why he felt the need for the huge levels of cash infusion and how the money will be put to work. Those charts indicate the possibility for further breakdowns or a resistance to further breakdowns. A breakdown from those support areas in the various stocks and indices will be bearish, but a bounce from those areas might be considered short-term bullish by some (and just an opportunity for new bearish entries by some). This morning, I entered a straddle play on the SMH (a Mike Parnos suggested play) as it seemed appropriate for this time of “will it or won’t it” break down. Those considering straddles should be alert to the tick up in the VIX today. If markets should move up, that VIX might tick right back down, deflating option values.

  John Seckinger   1/21/03,  12:18:49 PM
Here is a quick chart of the Dow on a five-minute chart. The levels are a retracement from R2 to S2, with S2 being 0% and the pivot at 50%. Notice how I use 50% to split up a retracement area. Link

  Jonathan Levinson   1/21/03,  12:12:24 PM
QQQ has broken above the 25.31 resistance line, though not with very much velocity. The TRINQ at .42 and the low put to call ratio leads me to expect little upward force on this move, but that $16 Billion, as in 16 thousand million dollars added today by Al Green, the Repo Man, creates a significant wildcard.

  Ray Cummins   1/21/03,  12:12:17 PM
Spreads/Combos -- Readers Write

Hello Ray...What is your status on the Fair, Isaac and Company (NYSE:FIC) spread trade recommended on 1/15? Thanks, CHM

FIC - Fair, Isaac and Company -- picked at $44.63
PLAY (very conservative - bullish/credit spread):
BUY PUT FEB-35.00 FIC-NG OI=10 A=$0.35
SELL PUT FEB-40.00 FIC-NH OI=0 B=$0.75
POTENTIAL PROFIT(max)=9% B/E=$39.55

Obviously, the near-term outlook for the broader equity markets is bearish but we are still trying to offer a few bullish plays to balance the portfolio. With regard to FIC, the upward trend is consolidating after achieving a 52-week high and the first level of technical support is near $42 (30-dma). A move below that range would set up a test of the DEC-2002 lows near $40. Below that area, only the long-term (150-day) moving average can prevent a "bearish" character change. A conservative exit/adjustment signal would occur on any close below $42 while more aggressive traders might wait until the issue moves below the sold strike at $40 before terminating the position.

  Steven Price   1/21/03,  12:11:19 PM
Swing Trade Signals
We are seeing some strong resistance on the intraday chart at Dow 8530-8535. Traders already short partial positions can think about adding to those shorts after this last rollover from that level. With an intraday low at 8503, a more conservative approach would be adding on a break below 8500. Similar breaks can be found at SPX 893 and OEX 453. I am concerned about a lack of sell-off in the techs to confirm the blue-chip drop, which is something for conservative traders to watch.

Current levels: Dow 8520/OEX 454.58/COMP 1375/SPX 896.15

  Linda Piazza   1/21/03,  12:03:57 PM
Whoa! Friday, I put up this chart of the Russell 2000, showing the potential H&S formation (green neckline) as well as a potential reverse H&S formation (red neckline). Although there’s certainly room to argue about the position of the neckline for the H&S formation, look where the Russell sits now. Link

  Jonathan Levinson   1/21/03,  12:03:33 PM
Most recent put to call ratio .60.

  Jeff Bailey   1/21/03,  11:58:09 AM
SPX 895.58 -0.65% .... From 10:27:15 comments regarding short near 900.75, here is how 5-minute bar action with "5-minute fitted retracement" has unfolded. With S2 of 890 nearing, would lower stop just above 899. First sign of renewed strength on intra-day basis would be 5-minute close ABOVE 898.44 . Link

  Jonathan Levinson   1/21/03,  11:57:04 AM
Thanks to Wes for pointing out that the NDX is printing what is possibly a bullish descending wedge on the 15 minute bars. With QQQ currently testing this morning's former support level from the downside, this is something I'm keeping my eye on. Still feeling disorientated without my live COMPX chart.

  Kent Barton   1/21/03,  11:56:20 AM
Electronic Arts (ERTS) $49.63 +1.68: ERTS is moving higher this morning after receiving a pair of positive brokerage comments. Piper Jaffray upgraded the stock to in-line from underperform, citing a 7% rise in videogame sales for December. Lehman believes ERTS is undervalued at current levels.

Although the stock is showing good relative strength, the bulls still have their work cut out if they're going to buck the multi-week downtrend. Shares face overhead resistance at the 21-dma ($51.00) and psychological resistance at $50.00. As we outlined in the OI/PI play write-up, a failed rally at the latter level might provide an opportunity to open short positions.

  John Seckinger   1/21/03,  11:53:14 AM
Support becoming resistance. Case-in-point: Utility Sector Index (UTY) at the much-discussed 260 area. Closing under 260 on Friday, today's high is 260.63 before weakness settled in. The UTY is currently down 1.3% at 257, but should find some support at 255 and its 50 EMA. A close back above 260 would take things now to more neutral levels. The longer the UTY stays under 260, the more I will get bearish on stocks in general.

  Linda Piazza   1/21/03,  11:48:53 AM
Careful out there. I note a number of key stocks that are trading either just under or just above important support levels. For example, CSCO currently trades at 14.26 after reaching a day low of 14.15. It’s currently trading right at its 200-ema at 14.25, and just above its 22-dma at 14.03, its 50-dma at 14.00, and its 200-dma (simple) at 13.63.

  Jeff Bailey   1/21/03,  11:46:42 AM
The 11:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   1/21/03,  11:45:41 AM
The put to call ratio has just returned to its day low of .59, while the US Dollar Index (dx00y) continues to trade just above 100.55. Precious metals are continuing to climb, with HUI +.72, while yields are now red across the curve, FVX -1.1 bps. I can't wait for the COMPX feed to come back online.

  Linda Piazza   1/21/03,  11:37:38 AM
Checking on volume patterns, I note that the Nasdaq up/down volume pattern has reversed from earlier this morning, with 1.4 times more shares now trading on down volume than on up volume. The NYSE shows increasing selling, too, with the down volume being 3.34 times up volume.

  Mark Phillips   1/21/03,  11:34:40 AM
KSS $54.85 (-1.75) While the retailers are showing a bit of weakness this morning, breaking below the $264 level with a 1.25% loss, KSS is seeing heavier selling, currently down more than 3% on the day. Clearly, SELL is the operative word for this stock over the near-term, with the first solid support coming in at the $52.50 area, the site of the lows earlier this month. Traders that missed the entry on the breakdown below the $56 support level this morning, will now want to either wait for a failed rally below that level or a break of that $52.50 support level. Shorts from current levels may work down to the $52.50 level, but keep in mind that the stock is now trading midway between near-term support and resistance, making the near-term risk/reward ratio close to 1:1. That's not particularly favorable, and prudent traders still on the sidelines will wait for a better entry point.

  John Seckinger   1/21/03,  11:28:35 AM
Looking at P&F charts, the S&P 500 Index continues to breakout in a negative fashion (read: Column of O's continuing). With the 895 level added so far today (5-point bars), the current bearsih price objective stands at 855. The SPX contract is currently down 7-points at 894.75.

  Jonathan Levinson   1/21/03,  11:24:52 AM
The US Dollar Index got trashed just now, selling off from 100.75 to below 100.55, and is now at 100.59. The selloff coincided with the reversal in precious metals and the new lows on the indices.

  Mark Phillips   1/21/03,  11:24:38 AM
CTSH $58.96 (-1.18) New OI Put play was triggered on the early drop through the $59.75 level, breaking support at $60. With possible support at the 200-dma ($57.90) and then the ascending trendline at $56, traders that missed the entry on the breakdown this morning will want to look for a failed rebound at or near that breakdown level from this morning to provide the next-best entry opportunity. Given the solid breakdown this morning, our $62.50 stop should not be threatened on any rebound unless a trend reversal occurs.

  John Seckinger   1/21/03,  11:24:10 AM
Shares of Dover Corp. (DOV) are lower by 6.84% to 27.47, following a rumor of an SEC investigation. Slight support at 27, with more seen near 25. The 200 EMA is now higher at 29.25, and should be solid resistance going forward.

  Linda Piazza   1/21/03,  11:23:55 AM
I’m also having difficulties with Q-charts this morning. My daily chart for the Dow Jones Transportation Index is not updating, but here’s what I see on the intraday charts. This morning, the index dipped below three levels of support, including the 22-dma (simple) at about 2344, the 50-dma (simple) at about 2337, and a trendline that had been supporting prices since October, currently hitting at about 2322. Currently at 2312.62, the index might encounter resistance if it tries to push above those levels now.

Steve posed an interesting question in his weekend wrap. In our technological society, is it still valid to watch the transportation index for signs of strength or weakness in the economy? I would go further, to ask if it was still valid to watch this index, being that our economy is now so heavily weighted toward the services sector. I’ve been thinking about the question all weekend. I know several people who work in service-oriented careers, but those careers sometimes require travel. I also remember talk in early 2000 about the “new paradigm” for growth in our technological society, and I saw the results of believing in that new paradigm. I now pay more attention to Art Cashin and other seasoned commentators than I once did and more attention to the older paradigms than I once did. I’m not sure whether the transportation index is as important as it once was, but perhaps it still gives some measure. So, while I won’t make trading decisions based on this measure alone, I finally concluded that I would continue to watch this index.

  Steven Price   1/21/03,  11:23:22 AM
Swing Trade Signals
If we make another failed run at Dow 8625/SPX 900, I will probably use that as an official entry point, as it does not look like we will make it back into the 8650-8700 range. After four straight days in the red, I am expecting some bounce for a good entry point, but that expectation is coming at lower levels.

  Steven Price   1/21/03,  11:20:56 AM
Swing Trade Signals
Current levels: Dow 8530/SPX 896.24/OEX 454.60/COMP1376

  John Seckinger   1/21/03,  11:19:22 AM
Talking to Bailey about hedging commodities, while also watching the Dow continue to trade soft. 8552 is history (for now), and it is interesting how the blue chips continue to settle (five-minute chart) under 8530 (a level found via retracement analysis between S2 and R2). Support below 8530 is S2 at 8478.

  Steven Price   1/21/03,  11:19:16 AM
Swing Trade Signals
While I never got the short entry I was looking for at 8650-8700, we did get the PnF sell signal in the Dow at 8550, to confirm those signals on the SPX and OEX. Those aggressive traders who took the suggested entry on the break back below 8600 or last Friday's possible entry at 8590 can either lower stops above today's high at 8625, or allow for a bigger bounce after the sell-off of the last several days with the current suggested stop over 8700.

  Jonathan Levinson   1/21/03,  11:10:01 AM
We have XAU and HUI back in the green as QQQ sets new daily lows. The COMPX is still offline. The TRINQ is up to .92 while the CBOE put to call ratio is is at .61, still bad news for equity bulls.

  Linda Piazza   1/21/03,  10:59:45 AM
Volume patterns: Adv/dec ratios stand at .59 for the NYSE-traded issues and .67 for the Nasdaq-traded issues. Up/down volume shows more up volume than down volume on the Nasdaq, however, with up volume coming in at 1.44 times down volume. Over on the NYSE, down volume ranks 2.6 times up volume. New highs/new lows show 55 new highs to 16 new lows on the NYSE and 53 new highs to 23 new lows on the Nasdaq.

  Linda Piazza   1/21/03,  10:56:49 AM
The VIX is now above 30 for the first time this month.

  Jonathan Levinson   1/21/03,  10:40:09 AM
The most recent put to call reading has just come in at .59. This falling put to call ratio without a corresponding rise in price is a bearish divergence to my eye. Combine it with the TRINQ at .45, near overbought territory, and we have a setup for lower lows today.

  John Seckinger   1/21/03,  10:38:43 AM
I am sticking with the 8552 level, and we did get a 8546 print; however, no five-minute close under 8552. I like to use that as a confirmation. The Dow is still trading weak, and the 30-year is in the green (read: higher prices, lower yield) by a few ticks at 111'05. The intra-day high is 111'15. The range from 110'19 to 111'16 looks to be important for asset allocation players.

  Jonathan Levinson   1/21/03,  10:37:53 AM
Traders are shaking their heads about the size of the overnight repo. 16B is the largest anyone's seen since the period immediately following 9/11. It could be signalling a prelude to war, or perhaps it's somehow related to Mizuho's record 16B full year loss announced this morning. There's no way to know, so keep a close eye on your open positions, particularly shorts.

  Jonathan Levinson   1/21/03,  10:32:32 AM
QQQ has just printed a lower intraday high at 25.45. The TRINQ is "up" to .57, which is at the low end of bullish territory.

  Linda Piazza   1/21/03,  10:30:28 AM
It’s certainly difficult to trade in a vacuum, and I for one will be slow to enter trades when I can’t gauge the COMPX’s activity. Without that information, it’s impossible to note whether the COMPX’s movements echo the Dow’s and SPX’s or diverge from them.

  Jonathan Levinson   1/21/03,  10:27:39 AM
The CBOE website was also offline, but I've finally obtained the opening put to call reading, which was .64- too low for bulls' comfort.

  Jeff Bailey   1/21/03,  10:27:15 AM
SPX 900.75 -0.11% .... Like SPX short here and targeting today's S1 and S2's with stop just above today's high of 906.00 on 5-minute close above that level. Link

Retracement shown on above chart is "5-min fitted," but traders also anchoring retracement from S2 and R2 will see correlative resistance level at 902 level here and correlative support at 896.

  Ray Cummins   1/21/03,  10:26:41 AM
Spreads/Combos/Premium Selling -- Notable Events

Shares of American Pharmaceutical Partners (NASDAQ:APPX) traded sharply higher this morning after the company raised its fourth quarter and 2002 guidance due to strong demand for recently launched, higher margin products. In a press release, the maker of injectable pharmaceutical products said it expects fourth-quarter earnings of at least $0.33 per share, well above its previous guidance and the consensus estimate of $0.21 per share. Our new (bullish) diagonal spread in the issue was "right on target" but the gap-up at the open of today's session prevented an acceptable entry in the position.

  Jonathan Levinson   1/21/03,  10:21:10 AM
I take it back. Apparently the problem is not with Quote.com, but with their data feed. The COMPX remains offline.

  Jonathan Levinson   1/21/03,  10:17:12 AM
Livecharts remains offline, so no COMPX quotes for me. QQQ seems to have found support at the 25.30 level again, and is now at 25.38. The TRINQ is falling, now .43. Yields are near flat, with FVX +.5 bps, while HUI and XAU are both down, 1.19 and .45 respectively.

  Linda Piazza   1/21/03,  10:14:51 AM
John’s 9:43 post mentioned the Barron’s article on “The Debt Bomb.” Jonathan and others have mentioned growing debt as an escalating concern. This linked article from Bloomberg discusses some of the problems Japanese banks are experiencing from the bad loans accrued during the lengthening economic slump. Link

  John Seckinger   1/21/03,  10:09:04 AM
I am surprised we didn't get a bounce higher before selling took over. I was expecting a move towards 8700. Note: Friday's low was 8559, and the 200 EMA comes in at 8570. The Dow is currently down 21.53 points to 8564. MACD, on a daily chart, 'appears' to ready to cross lower as well. Stochastics do, however, continue to fall. I still like the relative low on January 3rd at 8552 as a key indicator to the downside. This level is a little above S1.

  Jonathan Levinson   1/21/03,  10:07:30 AM
Al Green has just unleashed a huge overnight repo, 16B, which is a net addition. Be very careful out there- this is a very large amount of liquidity that could wind up in stocks or bonds.

  Mark Phillips   1/21/03,  9:58:14 AM
I'm with you Jonathan. Charts are painting but its excrutiatingly slow this morning. Changing servers doesn't seem to have an effect -- the servers must be overloaded with all that day-trader activity. GRIN

By the way, does everyone else have a gap in their intraday charts from yesterday's non-existent session, or is it just me? If anyone knows how to get QCharts to 'close up' that gap, I'd sure like to hear about it.

  John Seckinger   1/21/03,  9:56:43 AM
Are things looking up for GE? Well, I notice that GE, not GE Capital, is issuing a corporate bond going out to 2013 and priced about +115 basis points over Treasuries. Issuing these bonds from the company level is a little surprising, and could mean more confidence from the company to take on additional debt instead of adding it to GE Capital's books. It could be a moot point, but something to watch. I assume these are AAA, but not sure. Shares of GE are up fractionally (+0.08) to 24.90.

  Steven Price   1/21/03,  9:53:03 AM
Swing Trade Signals
I'm fighting the inclination to get short here, hoping for a better rally failure entry point. However, I'm not sure that we will get it. The bounce this morning has been very weak and aggressive traders entering here short may want to use a stop just over 8700, or possibly above the R2 level of 8750.

  Steven Price   1/21/03,  9:47:56 AM
Swing Trade Signals
Note: I will be gone tomorrow, so traders relying on signals in the swing model can either leave stops in place from any trades entered today, or refrain from today's action. I will be back on Thrusday.

  Mark Phillips   1/21/03,  9:47:22 AM
As inexplicable as Friday's lift in the HMO stocks was, we were still compelled to drop our bearish play on WLP due to the strong monotonic rise in an overall weak market. Over the weekend, I got a note from Linda, which perhaps sheds some light on the reason behind the bullish price action:

I found an article about a change in a 1977 law that previously required that Medicaid managed care enrollees be allowed to get emergency services immediately at the nearest provider. That policy was changed, it was announced today in a New York Times article, and Ari Fleischer apparently discussed the change. Before, HMO's couldn't place any limitations on visits to the emergency room, but now perhaps can.

Thanks Linda! While I don't know if that was the cause for the rise, it is certainly the best explanation I've come across! Note that the HMO index is up almost 1% this morning at $529.37, and WLP is now trading at $70.61, solidly above the $70.25 stop we had listed on the play. Any traders that elected to hold on for lower levels after we dropped the play over the weekend should have been stopped out on the opening move. Don't forget, our first job as traders is preservation of capital when we're wrong.

  Steven Price   1/21/03,  9:46:09 AM
Swing Trade Signals
As I made my last entry, we got a pullback.

Current levels: Dow 8599/COMP 1376/SPX 903.07/OEX 458.03

  Jonathan Levinson   1/21/03,  9:44:38 AM
I'm shooting blind so far, with Livecharts not displaying the COMPX this morning. QQQ seems to have topped out so far at 25.55, currently midway between between its opening low and early high at 25.43. The TRINQ remains low at .34.

  Steven Price   1/21/03,  9:44:10 AM
Swing Trade Signals
We did get a move through the openng range to the upside, although the move looks weak. Given that move, further intraday strength would be indicated. I'd like to target a failed rally around the R1 level John posted at Dow 8668 for short entry. I'll wait for the failure, rather than just pick a top, though. More aggressive traders can look to enter short on a drop back below Dow 8600.

Linda also noted the SOX trade through 300, which could signal a hold or a move higher through that level.

  John Seckinger   1/21/03,  9:43:59 AM
There is an article in Barron's last weekend titled "The Debt Bomb." It reminds me of "The Kondratieff Winter." Quoting the author Johnathan Laing, "there is no question that we have a debt bomb, but I'm not sure how long the fuse will turn out to be... it wont detonate if the economy remains strong enough to continue to generate enough real consumer-income growth and corporate cash flow to support the debt"

  Linda Piazza   1/21/03,  9:43:30 AM
On the OEX daily chart, I see the 50-dma (simple) today at 461.59, with 463.68 historical resistance just above that.

  Linda Piazza   1/21/03,  9:37:34 AM
At 300.79 as of this writing, the SOX has ticked above the 300 level as 5(3)3 60-minute stochastics turn up. The fast line appears to be moving up quickly.

  John Seckinger   1/21/03,  9:37:12 AM
After the first five minutes of trading, the Dow has a range of 8619 and 8586. It is also interesting how the Dow closed one point above its pivot of 8614 (should be slightly bullish). Traders that drew a retracement from S2 to R2 will see support below at 8582, while resistance above is at 8646. These areas are slightly inside S1 and R1, respectively.

  Jeff Bailey   1/21/03,  9:33:24 AM
The 9:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   1/21/03,  9:32:56 AM
The fed has no repos expiring today, and so any amounts added will be net additions to the markets' liquidity.

  Jonathan Levinson   1/21/03,  9:31:36 AM
Deadcharts has dropped the ball, but the TRINQ is at .34, QQV +.95 to 37.62, and QQQ is trading 25.44.

  John Seckinger   1/21/03,  9:27:07 AM
Intra-day Pivot/Levels for Tuesday (01/21/02)...

INDU : S2= 8477 S1= 8532, P= 8614 , R1= 8668 , R2= 8750

SPX : S2= 890, S1= 896, P= 905, R1= 911, R2= 921

OEX : S2= 450, S1= 454, P= 459 , R1= 463, R2=468

NDX : S2= 1002, S1=1010 , P= 1026, R1=1033 , R2=1049

QQQ : S2= 24.84, S1= 25.09, P= 25.51 , R1= 25.76, R2= 26.18

  Jonathan Levinson   1/21/03,  9:25:29 AM
Yields have ticked positive showing selling in bonds, FVX +1.7 bps.

  Linda Piazza   1/21/03,  9:22:22 AM
European markets ticked up in the last hour, with the CAC 40 and DAX moving into positive territory, up .04% and .24%, respectively. The FTSE 100 remains down by .42%.

  Jonathan Levinson   1/21/03,  8:52:53 AM
Bonds have yet to confirm the uptick in the futures, with FVX -1.1 bps, TNX -.4 bps and TYX -.8 bps.

  Steven Price   1/21/03,  8:49:27 AM
Swing Trade Signals
We are currently flat and looking for a bounce entry point after getting PnF sell signals in the SPX and OEX on Friday. I'm going to let the first few minutes set the opening range before jumping in. I would prefer an entry around Dow 8650-8700.

  Linda Piazza   1/21/03,  8:49:08 AM
Housing starts proved unexpectedly strong in December, with 1.835 million units started, up 5% from the previous month. Analysts had expected 1.68 million units started, with an expected fall of 1%. Link

  Linda Piazza   1/21/03,  8:44:42 AM
Companies reporting today included MMM, a company watched by many for signs of strength in the economy. Reporting earnings of $1.29/share, versus a First Call average estimate of $1.28/share, the company noted strong sales of transportation and safety equipment and the growing Asian market for their products. Link

  Linda Piazza   1/21/03,  8:35:39 AM
European stocks continue to fall as their trading day progresses and as the opening of the U.S. markets approaches. Last week, the DAX fell below the psychologically important 3000 level, and today it trades well below that level at 2874.81, currently down .65% on the day. Now the CAC 40 also threatens to fall below its 3000 level, currently trading down .62% on the day at 3001.34. The FTSE 100 currently trades down .96%.

  Jonathan Levinson   1/21/03,  8:25:53 AM
Citigroup Profit Falls on Higher Loan Losses, Research-Settlement Costs

Citigroup Inc. said fourth- quarter profit fell 37 percent because of higher loan losses and the cost of settling claims that the world's biggest financial- services company misled customers with biased stock research.


  Jonathan Levinson   1/21/03,  8:23:25 AM
The mercury outside my window read -21 degrees celcius this morning, and I can confirm that it is very cold in Montreal today. The US Dollar Index suddenly got very hot last night after selling off all yesterday, though it never made it past 100.95 on the runup. QQQ is trading down 3 cents from Friday's close, giving back a bit after the futures ramped up last night as well. NDX futures are currently trading 1019 and SPX is trading 900.90.

  Linda Piazza   1/21/03,  8:00:43 AM
Good Morning! Our markets were closed yesterday, but European and Asian markets were open, of course. On Monday, the Nikkei closed up .14%, with gains led by NTT, Nippon Telegraph & Telephone Corporation, after an announcement that the phone company would be allowed to raise access fees. While the news was good for Japan’s biggest phone company, chip-related stocks didn’t fare so well, with declines in Tokyo Electron and Infineon balancing the gains in the telephone companies. Infineon reported earnings that disappointed. Today, the Nikkei extended its gains by another 1.75% after Mizuho Holdings, the world’s largest bank by one measure, reported losses almost nine times its earlier estimate and said it would seek funding, as had rivals Sumitomo Mitsui Financial Group and UFJ Holdings. The government has been pressuring Mizuho and others to write off bad loans faster, and Mizuho did so, accounting for the disastrous earnings report. Some think Mizuho’s actions in seeking new funding will help it avert an immediate disaster, perhaps accounting for the rise in the Nikkei.

On Monday, the FTSE 100 fell 1.10%, the CAC 40 fell 1.21% to 3020.07, and the DAX fell .87% to 2893.55. As of this writing, they have extended those losses by .37%, .31%, and .08%, respectively. Today, Italy saw the release of the first consumer confidence number for the euro countries, with consumer confidence falling to 106.2 from 106.7. Some attributed the fall in confidence to Fiat’s decision to cut jobs. Italian inflation stands at 2.8%, with inflation in the combined euro countries standing at 2.2%, higher than the ECB’s 2% ceiling. Still, the ECB has hinted that rates may come down further, as economists expect inflation to come down. Despite this gloomy news across the region, Germany reported that institutional investor confidence rose in January, with December’s levels having been the lowest for more than a year.

Bloomberg reported that telephone companies such as Vodafone, Telefonica, and Deutsche Telekom rose in European trading after Credit Suisse announced that it expected a turnaround in this sector after last year’s losses. CSFB also raised telecommunications-equipment shares to “overweight” from “neutral,” citing that reorganizations in these companies will cut costs, thereby offsetting expected declining revenues. Hmm. Doesn’t sound like much of a reason to overweight a portfolio in these stocks, but nevertheless, shares of telecommunications-equipment stocks rose. In the U.K. Cable & Wireless CEO Graham Wallace announced that he would resign, leading to a 4.1% rise in this stock.

  Steven Price   1/20/03,  7:50:21 PM
The Swing Trade Game Plan has been posted: Link

  Leigh Stevens   1/20/03,  7:50:13 PM
The Index Trader Wrap has been posted: Link

  John Seckinger   1/20/03,  7:49:57 PM
The Futures Trader Wrap has been posted: Link

  Jim Brown   1/20/03,  7:49:47 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link


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