Option Investor
Printer friendly version
  Linda Piazza   1/27/03,  4:00:05 PM
A regression channel contained the SPX prices all through December. In early January, the SPX pushed out of that channel, only to fall back into it today. That's a bearish action. The SPX looks to close today in the middle of that regression channel. If the markets should bounce on favorable economic numbers tomorrow, I would expect the SPX to face resistance at the top of the regression channel, which would lie at the 856 area tomorrow (and move lower each day). If prices continue to fall, the bottom of that regression channel would lie at about 827 tomorrow (and would move lower each day). I, for one, would like to have the opportunity to buy puts again on a rollover near the upper end of the channel, but I don't know if that will happen.

  Jonathan Levinson   1/27/03,  3:50:42 PM
On the other hand, a return to the lows would print a gravestone hammer on the 30 minute candles, which would be very not-bullish.

  Jonathan Levinson   1/27/03,  3:48:43 PM
By the same token, the COMPX is displaying a remarkable lack of staying power. A push higher from here would be a higher low on the shorter timeframes nevertheless.

  Linda Piazza   1/27/03,  3:42:24 PM
While volume patterns supported today's downward thrust, the adv/dec ratio on the NYSE currently resides at .27, a low number that might predict at least a short-term bounce. The Nasdaq ratio is .38. Up volume outranks down volume by 8.3 times on the NYSE and by 5.3 times on the Nasdaq. New lows number 113 on the NYSE as compared to 54 new highs, while lows number 97 on the NYSE as compared to 44 new lows.

  Linda Piazza   1/27/03,  3:40:24 PM
After reaching a number within just shy of the 427.30 target from the double tops, the OEX has now rebounded above those double tops.

  Jonathan Levinson   1/27/03,  3:38:17 PM
The latest put to call reading is 1.02. The TRINQ remains neutral, the TICK.NQ low. The ADVDECV turned up slightly on this latest bounce, and the 13 period moving average is turning up on the shorter timeframes. Other than the put to call ratio, I see nothing that could give this bounce significant power, but the price will do what it wants. Today was the test of the neckline on the daily COMPX h&s formation, and some kind of re-test is expected. This is a difficult level, and traders should be letting their stops do the work for them.

  Linda Piazza   1/27/03,  3:30:06 PM
While saying that passive cooperation on Iraq's part is not acceptable and while indicating the U.S.'s willingness to act as a sovereign power, Powell did lay out a timetable that seems to preclude any action against Iraq within the next week. He said that Bush would be conferring with world leaders this week and that decisions as to next steps would be made after that.

  Steven Price   1/27/03,  3:29:50 PM
Swing Trade Signals
We didn't get the downside follow through after Colin Powell's remarks. In fact, he sounded as though he might be willing to give more time to the inspectors with a show of cooperation from Iraq. While that will most likely not happen, it did open the door for a continuing saga, at least until we get our troops in place. The Dow once again popped over 8000, but just barely and the SPX remains just under 850. The Democratic response has been skeptical and those traders not willing to risk the possibility of a bounce from this sell-off can certainly close out here. My other suggested stop for more conservative traders would be Dow 8030, just above this afternoon's rebound highs.

Current levels: Dow 8013/SPX 849.16/OEX 430.60/COMP 1326

  John Seckinger   1/27/03,  3:29:33 PM
With 30-minutes to go, the Dow rejected levels underneath 7980 and seem neutral to maybe even slightly bullish going forward. A very hard range to make a lot of sense out of. The 7950 area was never tested today, but blue chips still traded rather heavy until just recently. I will look for a move back towards 8045.

  Jonathan Levinson   1/27/03,  3:18:39 PM
Volatility is picking up on the COMPX, and the gloves seem to be coming off now. HUI and XAU have been knocked down again, with HUI currently -2 at 149.91 and XAU -1.85 at 80.35.

  Linda Piazza   1/27/03,  3:12:50 PM
Powell mentions information or technology stored in private homes and evidence that equipment or materials has been moved just before inspectors arrive. He emphasizes that this information comes from U.N. inspectors and not from the U.S. He posed the question, "How much more time should Iraq be allowed? Not much."

  Jonathan Levinson   1/27/03,  3:10:12 PM
The put to call ratio shows no sign of bottom picking amongst option traders. At the same time, the TRINQ remains suspiciously low, while the TRINQ has been quite low all day, currently -312. This tells me that there's a great deal of put volume going through, and broadbased selling in the COMPX, with the bulk of the buying concentrated within a small number of issues. No surprise there. A small bounce seems to be occurring right now, with QQQ up a few cents to 24.50. The 13 period moving average has been violated on the 1 and 5 minute charts, but we'll need to see how long it lasts.

  Kent Barton   1/27/03,  3:09:36 PM
The 3:15 PM Intraday Update has been posted. Link

  Linda Piazza   1/27/03,  3:04:30 PM
Colin Powell is speaking now about U.S. reaction to the U.N. meeting today.

  John Seckinger   1/27/03,  3:03:25 PM
Shares of American Express (AXP) are basically unchanged at 33.72, but well off its lows of 32.55. The rise seems attributed to earnings that were 0.01 cent bettter than consensus views, as AXP reported Q4 earnings of 0.52. Additionally, revenues rose 5.5% year/year to $6.20 bln. Expectations were for revenues of $5.81 billion. The company says that it starts this year "with the same cautious views that we held in 2002 and expect continued uncertainty in both the economy and financial markets."

  Mark Phillips   1/27/03,  2:54:59 PM
MOCO Again? With the VIX popping over 40 today, and the markets sharply down, is it time to get ready for MOCO again?

I'd be lying if I said the same thought hadn't occurred to me with the relentless selling over the past week, but I think gaming a potential MOCO play is a bit premature at this point. Keep in minde that the marketplace is highly charged due to the current geopolitical situation and extreme currency weakness. This situation has the potential to resolve itself explosively (in either direction) over the near-term. I think we've got some more work to do on the downside before we can even consider trying to buy a bounce, but that's just my opinion. Readers looking to implement the MOCO strategy I outlined last year should (in my opinion) wait for a VIX of at least 45 before starting to implement such a strategy. Part of my rationale for starting the process at a higher VIX reading this time around is due to my thoughts on the higher range we're seeing on the VIX in recent months. I went into some detail on that issue in the weekend LEAPS column. Link

For those of you that have no idea what I'm talking about when I mention MOCO, here are the links to the original articles I penned last year. Link Link Link

  Linda Piazza   1/27/03,  2:54:18 PM
The OEX did fall through the 429.30 area without surpassing its 431.30 double tops, and now does seem headed for a fulfillment of that 427.30 target, near the day's lows. (See my 1:41 update.)

  Linda Piazza   1/27/03,  2:51:22 PM
Mark and I have each mentioned our favorite bellwether stocks. I note also that CSCO has maintained levels above its simple 200-dma today after falling through other MA's on Friday, including the exponential 200-dma.

  Steven Price   1/27/03,  2:51:12 PM
I see I can sell UAL Jan 05 put 25 for $24. The most one can loose on this trade is $1. I pay 6% on a load and if I pay $24 of the loan, in one year I save $1.44 in interest. In a bad case (I know it is not the worst case), the option is assigned in one year (a year before expiration) and UAL is goes to 0, I still gain $.44. What is the catch? Isn't the possibility of assignment before 1 year low? Thanks, AA

Actually the probability of assignment is very high. The general rule for exercising deep puts early is to look at the interest you would receive for selling the stock at the strike price for period of time until expiration. If the interest on the strike (in this case $25) between now and expiration is higher than the price of the call, then the put is exercised.

This goes to conversions/reversals, where a trader can unwind a position by buying in the call for less than the amount of interest he receives by selling the long stock that he holds as a hedge against against the put at the strike price .

  John Seckinger   1/27/03,  2:49:35 PM
The Dow has remained in a very tight range over the last hour, but seems poised to fall under the 7980 level. This would be a good move for bears. The upside range comes in at 8015. Bonds continue to weaken (down '25 ticks), so I would be surprised to see a good bid in equities as foreigners are most likely exiting all dollar-denominated assets.

  Mark Phillips   1/27/03,  2:41:43 PM
Speaking of bellwether stocks, I'm watching IBM, which is a good one to watch for the Technology arena. After giving up the $80 support level again last week, Big Blue continues to trade poorly, but inline with the rest of the overall market. Now trading at $77.80 (near the low of the day), the stock is approaching the 200-dma and the December lows, both just above $76. If the bulls are going to attempt a rally (either today or later this week), the $76 level on IBM is where they are likely to begin their attempt.

Another stock that I think is important to monitor is MSFT. After failing to hold the $50 support level on Friday, Mr. Softee has filled the October 15 gap (and then some, with the next likely stop the October 11 gap ($46.38-48.87). Failure to bounce from that level (or slightly above) would indicate the stock is destined to retest the October lows near $43.

If MSFT and IBM can't find support and stage a meaningful rebound from the levels listed above, I think it is going to be very difficult for the broad markets to avoid a retest of their October lows.

  Jonathan Levinson   1/27/03,  2:41:25 PM
The 13 period moving average is an interesting indicator to watch. So far, moves above it have failed rather quickly, and I'm watching it on the shorter timeframes for signs of a meaningful bounce. If not for that nasty put to call ratio, I wouldn't bother, but I'm in no hurry to get blindsided by a bounce.

  Jonathan Levinson   1/27/03,  2:39:24 PM
The most recent put to call ratio has come out again at 1.04.

  Linda Piazza   1/27/03,  2:37:30 PM
I was just looking at those OEX 460 puts I sold (for a profit) for $12.80 two Fridays ago. I've been in and out of those puts again since then, but they're now quoted at 34.10 x 36.70. What about a trader who'd held those puts all this time and was sitting on a big profit ahead of the Durable Orders, Consumer Confidence, and New Home Sales numbers tomorrow morning? With an almost 200% profit, would that trader be tempted to lighten up this afternoon? I would, but of course, I've already done so, way too soon, so perhaps I'm not the best judge! Anyway, with the temporarily oversold conditions, be alert to the possibility.

  Linda Piazza   1/27/03,  2:30:07 PM
GE: 22.92. Monitoring bellwether (or at least former bellwether) stocks, I noticed that GE currently trades just below its 23.02 July 24 low and its 23.60 November 19 low. Those levels might now be resistance on a move up, while mild support can be found at 22.50 and below that at the 21.40 October 10 low.

  Jonathan Levinson   1/27/03,  2:26:06 PM
Good eye, Linda. This would explain the selling in US bonds and US equities we've been seeing all day. Very little has changed in the past half hour, with MSFT and QQQ continuing to show weakness and sinking ever closer to their lows of the day. XAU and HUI remain lightly in the red, but still above their round number support numbers of 150 and 80. The lows of the day for the COMPX continue to provide support, but the weakness of the bounces thus far makes them suspect.

  Linda Piazza   1/27/03,  2:19:24 PM
Higher bond yields are good for equities, right? Not necessarily. In his 1:31 post, John speculated that we might be seeing a flight out of dollar-denominated assets in general. That reminded me that early this morning when I was watching CNBC World, a European bond trader said something that echoed John's thoughts. He said that there had been a flight to euro-denominated bonds and out of U.S. bonds. I'm not an expert on these inter-market relationships and I haven't confirmed that information, but John's comment spurred that memory. Also, as an aside, European commentators were noting high put/call ratios across Europe.

  John Seckinger   1/27/03,  2:11:05 PM
There is an article out by a notable Fed watcher, stating the following: "it seems more likely [than a change in bias] the FOMC will come down on the side of leaving both the rate and the risk statement unchanged." My opinion is that the Fed will leave rates unchanged as well; however, one has to be worried about possible softness in the Housing market (not happening now, but maybe in the future). If another cut would spur another round of re-financing, or allow a significant amount of people to get a loan for a house, then I think that would be appropriate. The housing market, coupled with purchases of consumer durables, cannot come under pressure if we are to avoid another recession. The US economy may have never left the last recession. Just thinking outloud.

  Linda Piazza   1/27/03,  2:05:55 PM
Today, the $DJUSNC (Dow Jones Consumer Non-Cyclical Index) broke below the horizontal support of a bearish right triangle, with that support being just under the 200 level. Weakness in this index, filled with companies such as Playtex, Kimberly Clark, Tyson Foods, and Sysco, confirms bearishness in the broader markets.

Many consumer non-cyclicals report today, some having reported before the bell and some reporting after the market close. KMB reported before the bell, meeting previously lowered guidance although seeing flat sales. After having been punished in recent weeks, the company bucks the trend in the consumer non-cyclical index today, and is up .60 as of this writing.

  Linda Piazza   1/27/03,  1:53:03 PM
Those planning on entering plays this afternoon should first be aware that tomorrow morning sees the release of Durable Orders before the bell and Consumer Confidence and New Homes Sales at 10:00 ET. The consumer confidence number is a January number and might include information gathered during the early January upswing.

  Jonathan Levinson   1/27/03,  1:50:33 PM
That high put to call ratio is a continuing cause of concern for traders in bearish positions. Yet the relatively low TRINQ tells a different story. The options market appears far more bearish than the overall market- witness the spiking volatily indices as well. The COMPX continues to show weakness, still very close to its lows of the day after a weak bounce. This looks like a good place for trailing stops, just in case the put to call ratio really is giving us the heads up on a possible bounce.

  Steven Price   1/27/03,  1:43:16 PM
Swing Trade Signals
I don't particularly like the higher intraday lows we are seeing here, or the lack of downside follow through on the last trip below Dow 8000. At the same time, we are not getting much upside follow through, either. As John mentioned, we are seeing some real indecision. All Dow stocks in the red, with the exception of WMT and SBC.

Current levels: Dow 8003/SPX 849.40/OEX 429.92/COMP 1327

  Linda Piazza   1/27/03,  1:41:09 PM
The OEX five-minute chart appears to be setting up for a possible double-top formation at 431.30. To avoid forming that double-top formation, the OEX must push above that 431.30 level before falling through the 429.30 level. Five-minute charts are not good predictors of eventual market direction, but I mention this pattern because a confirmation of the pattern (on a move back through 429.30) should mean a target of 427.30, which would be a retest of today's lows. Caution: with today's inflated VIX and the spreads on the OEX options, a two-point OEX movement would not be profitable, but watching this development could help predict further OEX direction.

  Kent Barton   1/27/03,  1:35:07 PM
Boston Scientific (BSX) $42.30 -1.47: This Premier Investor long play was stopped out this morning after BSX suffered a downward gap. With no apparent news in Boston Scientific, JNJ, or GDT, it looks like shares succumbed to the overall bearish market environment. Traders still holding long positions should be watching for the stock to remain above mid-December support at $41.50. P-n-f chartists will note that BSX has reversed into a column of "O."

  John Seckinger   1/27/03,  1:31:25 PM
The equity markets appear to be in an "indecision" area here. Least resistance appears lower, but could we get a move back towards the 8050 area before rolling over again? Not clear at the moment. To confirm weakness, I will be looking for a move back underneath the 7980 area. Bonds continue to trade lower, and this weakness in the dollar, bonds, and stocks certainly has bulls very concerned (read: a flight out of dollar denominated assets in general).

  Steven Price   1/27/03,  1:29:45 PM
The 1:00 PM Intraday Update has been posted. Link

  Jonathan Levinson   1/27/03,  1:19:06 PM
The COMPX continues to trade just above its low of the day, though the TRINQ has deflated to neutral at 1.11 while the QQV is holding its gains. FVX has increased a bit, now +6.1 bps on the day. These divergences could be signalling a return of buyers, or simply indicating a release of the short term oversold condition. Only time will tell which it is. HUI and XAU have returned to negative territory, with HUI -.61 and XAU -.86.

  Linda Piazza   1/27/03,  1:06:15 PM
While the SOX appears to have broken its H&S neckline, has the SMH? Perhaps not. It's not as easy to determine a neckline for the SMH as it for the SOX. The red neckline shown in the linked chart may be valid, however, as an extension of the line back through past months shows that it hits important support/resistance levels. While it's probably more important to watch the SOX for market guidance, those readers who have positions in the SMH might take a look at the chart. Link

  John Seckinger   1/27/03,  12:59:32 PM
I always like to think of the Sox Index as the potential "wildcard" during any given trading session, and Monday's activity has this sector lower by 2.20-points to 281.37. This index remains below both the December 31st low of 285.66, as well as the neckline to a H&S formation (currently comes in around 288 - sloping upwards). Another relative low traders could be looking at is the 281.97 low set on November 11th. A rise above the 286-288 area could be a catalyst for short covering, while a move back under 280 should have bears looking at the bottom of a daily Bollinger Band at 271 as a short-term bearish objective.

  Steven Price   1/27/03,  12:46:31 PM
Swing Trade Signals
We are getting an across the board bounce here, but the COMP still remains below its Dec 31 close. Bonds still failing to confirm the sell-off in equities, and rolling back over toward daily lows. Alternative stops on the current 1/2 short could be 8045, just above S1, or 8090, just above intraday resistance.

Current levels: Dow 8012/SPX 849.65/OEX 430.07/COMP 1329

  Linda Piazza   1/27/03,  12:45:15 PM
With a low of 427.03, the OEX did appear to stop short of that 426.50 last-ditch historical support. (See my 11:49 post.) I note, too, John's calculation of a 425 S2 support level.

  Linda Piazza   1/27/03,  12:41:32 PM
For anyone wondering why we cover geo-political developments as well as economic news, Art Cashin mentioned a temporary pop in the dollar this morning near 9 ET as being caused by a rumor that Saddam Hussein had the "taken early retirement" route. This also points to the treacherous nature of these markets. While I'm reminded of a European analyst's comment this morning that markets remain overvalued and that the Iraq situation is just the precipitating factor, we still could see explosive but temporary short-covering rallies on any news views as positive.

  Jonathan Levinson   1/27/03,  12:34:43 PM
I've just caught Ari Fleischer on CNN, and while I'm not his biggest fan, it's difficult not to feel sympathy for the man in what must be a truly miserable job. Getting back to mine, the TRINQ is at 2.09, QQV +3.05 to 41.14, a very big jump. The TICK.NQ -505 shows broad selling. FVX is back up to the middle of its intraday range, +5.5 bps. The COMPX has bounced all the way to 1325. The p/c ratio is at 1.05, still very high.

  Mark Phillips   1/27/03,  12:30:48 PM
AZO $58.52 (-2.31) With the markets getting pounded again with the increasing fears of the imminent war in Iraq, AZO has crashed through long-term support at $60, and except for some mild support at $54, the stock looks to have an open path to major support in the $47-48 area. Today's trade below $60 triggered our Watch List play, which we added last week. Check out the original writeup here. Link

  John Seckinger   1/27/03,  12:29:29 PM
The US Dollar lost 1.3% last week, and continues to trade underneath the 100 level (99.38). The Greenback has now set 9 consecutive weeks of lower lows, and will see 9 weeks of lower highs unless 100.96 is taken out. Strong support is seen lower at 97, while a close back above 100 could have some short-term short covering implications. Continued weakness in the dollar should pressure stocks and help gold prices going forward.

  Linda Piazza   1/27/03,  12:26:38 PM
Regret: I'm avoiding looking at the value of the puts I sold last Friday, and even worse, the ones I sold the Friday before that. Still, I keep reminding myself that it's less painful to know I preserved profits in each case than it might have been to look at losses in those positions. I used to feel driven to chase those lost potential profits, but I now realize there's always another good trade around the corner. If adrenaline is racing your heart this morning, don't feel driven to take a trade unless it fits your trading parameters. My trading plan the last two weeks included closing out those positions ahead of the weekend and looking for another entry this week after the markets had digested important news. That's what I'm doing.

  Mark Phillips   1/27/03,  12:23:59 PM
KSS $52.00 (-1.75) Following the Retail index (RLX.X) lower this morning, shares of KSS have finally broken below the $52.50 level, the site of significant support from late December and early January. Traders holding bearish positions should now be looking towards the $49.50-50.50 area as the next possible area of support. Stops on open positions should now be ratcheted down to $54.25, just above intraday resistance on Friday. The official stop on the play has now been lowered to $55.50, right at the highs from last Thursday/Friday. A failed rally below that level after a brief oversold rally will provide the next high-odds entry to the downside. Note that the RLX continues to deteriorate, having solidly cracked the $255 support level, now trading $250.67.

  Linda Piazza   1/27/03,  12:14:29 PM
CSCO currently sits only pennies above its 13.60 simple 200-dma.

  Linda Piazza   1/27/03,  12:05:28 PM
Down volume is now 7.3 times up volume on the NYSE an 6.4 times down volume on the Nasdaq. These remain at sustainable levels.

  John Seckinger   1/27/03,  12:03:28 PM
Ok, getting back to more shorter-term analysis. I detailed the 7945-50 area in the 11:00 update, and a quick penetration of this area should be deadly to bulls. Please use a five-minute chart and wait for a period CLOSE underneath this area. 7902 becomes the next level of support.

  Jonathan Levinson   1/27/03,  11:59:22 AM
The COMPX is printing new lows at 1321, with gold currently above 372/oz, The TRINQ at 2.91 is high but not extreme,a nd the TICK.NQ at -478 shows broad selling on this decline.

  John Seckinger   1/27/03,  11:55:55 AM
With the Dow back underneath 8000, I remember many months ago when I saw a huge "b" formation in a weekly chart of the Dow. The apex appeared to be around the 8025 area. The rejection of this pattern would have been a move above 9077. There were many large upswings before this pattern materialized, but at least it should increase my confidence going forward. So, now where? I am in the camp that 7197 will NOT be tested, and that the Dow will possibly go to 7500 and then gravitate back to this 8025 area before going significantly higher. This will then be a nice rejection of this weekly "b" pattern. To get a good "b" pattern, I do think we will need to probe some levels lower than here.

  Steven Price   1/27/03,  11:54:35 AM
With the price of oex options so over priced today can a person buy puts on a rally? Is the cost over riding the position?

This is definitely a concern with the VIX cracking the 40 barrier. Some resistance levels to get into puts on a failed bounce are Dow 8000, 8012 and 8075.

  Linda Piazza   1/27/03,  11:54:00 AM
The VIX is now over 40. A descending line can be drawn from July to October highs on the VIX. That line would now lie at about 41.40.

  Steven Price   1/27/03,  11:51:13 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the 1/2 short signal when the Dow traded 7980 at 11:48:52.

Stops are set at 8150 and traders should be aware I have classified trading over the next couple of days as high risk, due to global events. We are going to get a statement from Colin Powell later today and it is unlikely we are going to get sympathetic statements toward Iraq, considering the U.N. Ambassador's reponse.

  Linda Piazza   1/27/03,  11:49:52 AM
The OEX currently trades at an area of minor historical support. A move below 426.50 should push it past this last-ditch support.

  Jonathan Levinson   1/27/03,  11:49:26 AM
HUI and XAU are now in the green, HUI +1.11 and XAU +.39 in a dramatic turnaround. The COMPX is at 1325, and QQQ is nearing its low of the day, currently printing 24.45. The TRINQ is at 3.14, TICK.NQ -519 and QQV +2.27. Looks like the buyers are blinking here.

  Linda Piazza   1/27/03,  11:47:21 AM
KO: I've been following KO since October, and the OIN pick group also placed it on the put list. KO currently trades at six-year lows, hitting the OIN 41.90 trigger. If you decide to enter this trade, remember that KO tends to pop up or down several points in a day, a surprising amount of movement in a stodgy consumer non-cyclical stock.

  Steven Price   1/27/03,  11:45:18 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The U.S. response made it clear we are going to push for war and I cannot imagine reasons to go long in the curent environment. However, I have identified the high risk scenarios over the next couple of days, so I am going to stick with a small position. Go SHORT a 1/2 position at Dow 7980, stop at 8150.

  Linda Piazza   1/27/03,  11:42:53 AM
Today sees new lows firmly ahead of new highs on both the NYSE and Nasdaq, a clear divergence from patterns earlier in the year. On the NYSE new lows number 72, while new highs number 33, and on the Nasdaq, new lows number 66 while new highs number 28. The adv/dec numbers show more decliners, as could be expected, with a .41 ratio for the NYSE and a .53 ratio for the Nasdaq. Down volume is 5 times up volume on the NYSE, but only 1.7 times up volume on the Nasdaq. Those numbers are clearly sustainable.

  Steven Price   1/27/03,  11:36:48 AM
Swing Trade Signals
We have the State of the Union address tomorrow and a U.N. meeting Wednesday. Therefore, swing trading over the next couple of days will be a high risk proposition. As Linda mentioned, we may get a bounce from this area, but we have already gotten a H&S breakdown, failed bounce this morning and a move through the intraday lows. Gold is moving to six-year highs, but the bond market is failing to confirm the sell-off. I think higher risk traders can go short from these levels, but lower risk traders should not be playing during the next couple of days. I'd like to see how we react to Dow 8000, which we are quickly approaching.

Current levels: Dow 8015/SPX 850/OEX 430.27/COMP 1330

  Jonathan Levinson   1/27/03,  11:35:32 AM
The put to call ratio is back to 1.04 now, and the TRINQ spiked to its current 2.15, QQV back above 40 +2.19 on the day. The TICK.NQ -279 and FVX up to 2.875 +3.2 bps all say the same thing- selling is picking up here and the market is feeling distinctly bearish today. Will the buyer run away? That's the question right now. If they do, look out below. If not, and the sellers blink first, we could have a strong bounce.

  John Seckinger   1/27/03,  11:32:39 AM
The Utility Sector (UTY) continues to implode, down another 4.23-points to 245.49 and now far underneath the much-profiled 260 level. Resistance before the 260 area comes in at 249, while support is felt at 240 and 231. The UTY index is trading at the lower end of its Bollinger Bands (as is the Dow), and a move underneath 240 should continue to have negative implications on stocks in general.

  Jonathan Levinson   1/27/03,  11:27:19 AM
This looks like our downside breakout coming now.

  Jonathan Levinson   1/27/03,  11:22:28 AM
The continuation wedge has yet to break out, though it appears pretty imminent judging from the 5 and 10 minute COMPX charts.

  John Seckinger   1/27/03,  11:19:51 AM
The 11:00 AM Intraday Update has been posted. Link

  Linda Piazza   1/27/03,  11:14:48 AM
Perhaps note that when the DJI began moving up from July lows toward August highs, an early August pullback reached lows near the 8040 level John mentioned earlier. Those lows were 8031.1 on August 5th and 8049.9 on August 6th. After achieving those pullback lows, the DJI resumed its upward move. There's been minor support at the 8020-8040 levels in intervening months, too, so these levels could possibly serve as an area from which to launch a bounce that might relieve oversold pressure and provide better bearish entries. I have an intermediate-term bearish outlook on the markets, so I will be looking for entries on rollovers rather than trading long, against the intermediate trend. I'm not predicting a bounce from current levels, but only urging caution entering short positions just ahead of an area that launched a prior upward move. John also mentions how these numbers might relate to retracement levels.

  John Seckinger   1/27/03,  11:09:16 AM
It seems as though weakness in the 30-year is simply longs liquidating ahead of the UN report. The ZB03H contract is down '17 ticks at 111'27, and failed to take out Friday's high of 112'28 this morning (high was 112'22). Solid support is tiered lower, with the major level coming in at 111'00 (slight support at 111'16). Risk is certainly being short bonds, since a move above Friday's high should squeeze any shorts in the market and portend a significant move upwards. Will it be a trap? I am sure it will be eventually; however, the 30-year could see prices as high as 116 in the near-term nevertheless.

  Jonathan Levinson   1/27/03,  11:06:29 AM
The CBOE p/c ratio continues to stick, now 1.01. QQV is back below 40, at 39.86. TRINQ is in neutral buy territory, .89, but "neutral" has been the theme today. HUI and XAU are off their lows but still in the red, while FVX has come back down to its pre-market levels, +4.4 bps today. I have little guidance from the charts. The COMPX today is showing opening volatility, but no real violation of the downtrend yet.

  Linda Piazza   1/27/03,  10:59:19 AM
Blix now notes discrepancies in the Iraq report, including missing bombs and nerve gases.

  John Seckinger   1/27/03,  10:54:53 AM
If wondering how the 8040 low in the Dow might have been attained, I would imagine that institutional traders took a retracement from S2 and R2 - which resulted in 8040 exactly at 19.1%. Here is a chart of both fitted retracement and levels from R2 to S2 (as well as the 8120 level, which is 50% of the move from October to December). Link

  Linda Piazza   1/27/03,  10:54:10 AM
Although pointing to Iraqi cooperation with the inspection process on many levels, Blix currently is noting problems with air surveillance and demonstrations near their inspection sites. He mentions that these demonstrations are not likely to have occurred without the prompting of officials in Iraq and questions their motives.

  Mark Wnetrzak   1/27/03,  10:50:30 AM
Covered-Call Portfolio: GSPN
Globespan-Virata (NASDAQ:GSPN) has opened below both its 150- and 50-dma this morning and a move towards $3.50 into Thursday's earning's report seems likely. An early exit or adjustment may be wise, depending on your outlook (the FEB-$5 call is $0.15 x $0.30). More aggressive traders may simply buy back the calls on the current weakness and look to sell new calls (or the stock) on the strength of the next rally.

  Linda Piazza   1/27/03,  10:49:06 AM
Traders hoping for a bullish entry in the XAU might consider waiting for a pullback. Here's a chart of the XAU, showing that this index currently trades near the top of a regression channel. Link Notice that currently, the RSI indicator makes lower relative highs while the price makes higher relative highs. While it's always possible that the XAU could continue to climb along the top of its regression channel or even break out of the channel to the upside, current chart signals point to a possible pullback toward the middle of the regression channel. At that time, evaluate chart signals and monitor geo-political and economic outlooks again to screen for a possible bullish entry or for signs that further pullbacks might be expected.

  Jonathan Levinson   1/27/03,  10:43:00 AM
The put to call ratio has come down to a still-high 1.02 this past half hour. The 5 minute chart of the COMPX is showing us a neutral wedge, which should be a continuation pattern and projects to lower lows on an eventual breakout. If not for the put to call ratio, this would look like a no-brainer to me. FVX is up 5.1 bps now, down from its highs, the TRINQ, which never made it to extreme sell territory, is at 1.39, TRINQ -249 showing broad selling.

  Linda Piazza   1/27/03,  10:35:52 AM
Currently in the green, the Dow Jones Transportation Index this morning tested resistance near 2190, but has so far failed from that level and currently trades at 2173.73, up 10.40 on the day. Friday's low was just above 2155.

  Steven Price   1/27/03,  10:34:54 AM
With the VIX breaking out above recent resistance, readers can check out this weekend's Ask The Analyst column with this link Link . This is just my perspective on VIX action and I'm sure there are other traders who look at it in an even more contrarian manner.

  Steven Price   1/27/03,  10:32:22 AM
Swing Trade Signals
We rolled over and approached the lows of the day, before catching a slight bounce. A move below Dow 8049, COMP 1329, OEX 431, SPX 852 all would look very bearish.

Current levels: Dow 8074/COMP1336/SPX 856.16/OEX 433.66

Seeing some major market schizophrenia. I still think we are headed lower, but could see some real intraday bounces depending on the news.

  Jonathan Levinson   1/27/03,  10:25:23 AM
Looks like the put to call ratio didn't help us much there as QQQ tumbles a quick 40 cents off its high.

  Linda Piazza   1/27/03,  10:22:30 AM
At 37.67 as of this writing, the VIX is at levels not seen since last November.

  Mark Phillips   1/27/03,  10:20:47 AM
SYMC $43.93 (+0.01) As the first hour of the day winds down, we can see that good news isn't having much of an impact yet. SYMC was upgraded by Legg Mason and given a $52 price target. While that has managed to keep the stock from falling with the rest of the market this morning, the $44 level seems to be acting like a lid to price action as the market's play the wait-and-see game, looking for some sort of guidance from the UN reports later today. While the stock holding at current levels is encouraging, investors will likely be best served by waiting for some sort of broad market indication following the UN report before playing.

  Jonathan Levinson   1/27/03,  10:15:32 AM
Surprised me again- Al Green isn't as groovy as I thought, as the Fed announces an overnight repo of just 6.75B, for a net addition of 2.25B.

  John Seckinger   1/27/03,  10:13:41 AM
Note: Existing home sales stronger-than-expected, rising 5.2% to a 5.86 mln unit annual rate in December. Consensus estimates came in at 5.64 mln.

  John Seckinger   1/27/03,  10:10:08 AM
We definitely have some smart subscribers. "John, didn't the Dow have to CLOSE above the 8129 level high during the first five minutes of trading) on a five-minute chart) in order for us to think of a move to the next higher retracement area (8185)?" Yes it does. The 'tail' from 10:00 to 10:05 was from 8149 to 8124.

  Jonathan Levinson   1/27/03,  10:05:20 AM
The put to call ratio has just printed a whopping 1.31. That's a very bullish reading, and should have shorts watching their stops or getting stopped out at or above the highs of the day. It will be interesting to see where we go from here on the COMPX, now pulling back from the highs. The TRINQ is in neutral bullish territory at .65, TICK.NQ +49. The p/c ratio is but one indicator, but it just hit an extreme at the open today.

  John Seckinger   1/27/03,  10:04:42 AM
Steve talked about the fitted retracement to the downside. It can also be used to the upside as well (via Stacked Retracement). The next levels of resistance above would come in at 8185, 8242, and 8277, before hitting R1.

  Jonathan Levinson   1/27/03,  10:02:06 AM
Blink and you missed it. COMPX 10 points higher in seconds, QQQ 25, TRINQ .53, QQV still +1.65., FVX +7.7 bps.

  Linda Piazza   1/27/03,  10:01:41 AM
At 434.77, the OEX currently trades between support at 428-429 and resistance at 440. This may not be the best place for new short entries or the best time, either, in light of the geo-political concerns Steven mentioned earlier.

  Steven Price   1/27/03,  10:01:10 AM
Swing Trade Signals
As I sent the last entry, we took out the retracement level at 8072, and we continue higher. Getting a bounce, but not sure if it will last, tough to pick direction from here in oversold conditions.

Dow 8134/COMP 1347/SPX 862/OEX 437

The rally is taking us into positive territory now.

  John Seckinger   1/27/03,  10:00:20 AM
Note: 50% retracement of the move from October to December comes in at 8120, while the high today is 8128. Look for this area to now become support.

  John Seckinger   1/27/03,  9:56:56 AM
I was working with our IT department for a few minutes this morning. Here are today's levels.

Intra-day Pivot/Levels for Monday (01/27/02)...

INDU : S2= 7948, S1= 8040, P= 8204 , R1= 8295 , R2= 8459

SPX : S2= 842, S1= 852, P= 869, R1= 879, R2= 897

OEX : S2= 425, S1= 431, P= 441 , R1= 446, R2=456

NDX : S2= 971, S1=983 , P= 1006, R1=1018 , R2=1040

QQQ : S2= 24.11, S1= 24.46, P= 25.00 , R1= 25.35, R2= 25.89

  Linda Piazza   1/27/03,  9:56:49 AM
European markets trimmed their earlier losses from this morning, with the FTSE 100 currently down 2.28%, the CAC 40 down 2.27%, and the DAX down 1.39%.

  Jonathan Levinson   1/27/03,  9:56:12 AM
The XAU -1.41 at 80.79 looks like it's fallen off a cliff and is hanging on to HUI. -.81 at 151.10. Gold is struggling to take 370/oz and keep it, while the COMPX has just printed a new high at 1337.

  Steven Price   1/27/03,  9:55:34 AM
Swing Trade Signals
For those traders who have been following Jeff and John's 5-min retracements, the 19.1% downside fitted retracement comes in at Dow 8072, which has so far capped the bounce attempt. Traders looking for early intraday signals can viewed this failed rally below the opening range and fitted retracement as bearish.

  Steven Price   1/27/03,  9:50:33 AM
Swing Trade Signals
The Dow/OEX/SPX all failed their opening ranges, but have begun to bounce slightly. However, yields are green with bonds being sold. The COMP got a decent bounce that is now fading. The VIX is clearly through resistance at 35 and seems to indicate more bearishness. We are getting divergence across sectors, which can be expected when traders are unsure of what will happen in the near future.

Current levels: Dow 8067/COMP 1333/SPX 854.53/OEX 432.76

  Jonathan Levinson   1/27/03,  9:46:55 AM
I can just hear the mechanical blare of the siren and the mellifluous drone of the robotic automated female voice issuing from the loudspeakers in the ceiling of the Federal Reserve Building, "Emergency. Prepare huge repo jam immediately. Emergency." The clatter of half-caf latte mochachinos being returned to their china saucers as the staff grabs their blazers and dashes off to their control seats to begin loading up a huge repurchase agreement to be showered down into the trading pits by Al Green's cropdusters, swooping in low like the Millenium Falcon to the rescue. The Fed has Friday's 4.5B repo expiring today, and with the overnight action in the markets, I expect to see a huge repo with which to boost the markets short term. I've been wrong lately with my fed predictions- Al Green has been far stingier than I would have expected. The announcement is due shortly and I'll post it here.

  Linda Piazza   1/27/03,  9:42:52 AM
The 9:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   1/27/03,  9:37:48 AM
The QQV is above 40, currently +1.94 at 40.03, and the TRINQ is in neutral selling territory at 1.48, TICK.NQ -202.

  Jonathan Levinson   1/27/03,  9:36:08 AM
The COMPX set its low at the open, one point above 1328 support. It is currently filling the gap, printing highs at 1336, with QQQ currently 24.68.

  Steven Price   1/27/03,  9:23:50 AM
Swing Trade Signals
It appears that the head and shoulders breakdown is in full bloom this morning. My ideal short entry scenario for a failed bounce at 8200 does not appear to be likely - at least not until after the weapons report is released. I'm not going to try and predict the market reaction to that report and will stay on the sidelines to avoid getting caught on the wrong side of a sudden swing that is based on geo-political events. Traders will note that the trend, even with last Thursday's small bounce, remains down and if you are going to bet in one direction, that would be my preference. However, my fear is that we are very short-term oversold amd if the report is not as bad as expected, we get a big snap back rally. If that happens, that rally may provide a better short entry point.

  Jonathan Levinson   1/27/03,  8:46:26 AM
Yields are barely confirming this morning's large drop in equities, with FVX down just 1.2 bps, TNX -.6 bps and TYX -1.1 bps. A 45 cent drop in QQQ preopen would imply more of a flight to t-bills than this diminutive drop in yields implies.

  Jonathan Levinson   1/27/03,  8:11:44 AM
The US Dollar Index bounced from below 98.80, and is currently trying to claw its way back to 99.00. Gold broke 373/oz and is back at 371/oz. SPX futures are trading 849 and NDX 984.50, with QQQ down nearly 40 cents at 24.43.

  Linda Piazza   1/27/03,  6:43:43 AM
Good morning! It's probably a better morning if you're short than it is if you're long, however, and that was true in European and Asian trading, too. With the dollar again weakening against the yen and with Japan's trade surplus falling 37% in December, the Nikkei fell 1.4% in today's trading. Exporters such as Canon, Fujitsu, and Sony suffered on the news that exports fell 7.3%. Perhaps anticipating the disastrous trade surplus number or reacting to worries about Iraq, foreign investors placed more sell than buy orders before the Nikkei opened, a Bloomberg report mentioned.

Computer-related companies such as Toshiba also declined. Although expected to post improved earnings for the current quarter, few computer-related companies are expected to see continued improvement. Speaking at the World Economic Forum in Davos, Switzerland, Infineon's CEO said he expects price pressure to continue throughout the year. Bucking the trend was Trend Micro (pun intended), the world's fourth-largest maker anti-virus software. Friday evening and Saturday, a worm nicknamed the "Slammer worm," slowed Internet traffic although apparently not causing lasting harm.

A Survey of Investor Confidence number released in Europe showed the number little changed from the previous month, but a television commentator this morning noted that the survey had been concluded before last week's slide in the European markets. Another commentator noted that investors this week would focus on what was happening with Iraq rather than the long-term economic outlook. This week promises to see that focus continue. Hans Blix, chief U.N. weapons inspector, reports to the Security Council today at 10:30 ET, and is expected to ask for more time for inspections. He likely will report that Iraq did not fully cooperate with inspections, and may cite Iraq's refusal to allow surveillance flights or full questioning of Iraqi scientists. As of this writing, the FTSE 100 had plunged 3.67%, the CAC 40 had fallen 3.51%, and the DAX had fallen 3.49%.

  Steven Price   1/26/03,  10:48:59 PM
The Swing Trade Game Plan has been posted: Link

  Leigh Stevens   1/26/03,  10:48:25 PM
The Index Trader Wrap has been posted: Link

  John Seckinger   1/26/03,  10:47:57 PM
The Futures Trader Wrap has been posted: Link

  Jim Brown   1/26/03,  10:47:37 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in many cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.


Market Monitor Archives