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  Jeff Bailey   2/6/03,  11:26:12 PM
Candlestick for the BIX.X and "doji" (see 06:05:10 comment) and tonight's Index Trader Wrap.

Jim Brown sent me a link to a Candlestick web page. Again... I'm not a "follower" of candlesticks, but I see a a "doji" pattern after a decline being a more bullish reversing pattern. Here's a link that I'm looking at Link and there seem to be a multitude of these type of potentially "bullish" patterns.

Here is the "main page" where the above link was accessed from. Link

 
 
  Jeff Bailey   2/6/03,  6:05:10 PM
Candle stick chartists! What do candle stick chartist's make of the S&P Banking Index (BIX.X) 272.10 (unch). I think this could be an important sector to monitor tomorrow as strength/weakness could dictate market direction.

I'm not a candle-sticker, but think this is some type of "doji" pattern.

The reason I'm interested in the BIX.X is based on "market theory" that the financials are a sector that can portend market direction.

As such... this was a reason this was a sector of focus on October 8, 2002. Link

 
 
  Steven Price   2/6/03,  5:22:23 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I don't want there to be any confusion for tomorrow morning. I'm going to cancel the previous short entry at 7889, so that we can re-evaluate in the morning. I may choose the same action point again, but I'd like to be able to reassess with any overnight developments, so for now we are short a 1/4 position, with no stated entry points.

 
 
  Steven Price   2/6/03,  4:00:41 PM
Swing Trade Signals
Looks like we're going home with only a 1/4 short position as we never got the trigger on a rollover below 7900.

 
 
  Linda Piazza   2/6/03,  3:57:08 PM
Today the XAU's low of 74.92 came within $.22 of testing its simple 50-dma at 74.70. The XAU has since rebounded, so that today's candle now springs from that 50-dma.

 
 
  Jeff Bailey   2/6/03,  3:54:40 PM
The 3:15 PM Intraday Update has been posted. Link

 
 
  Jonathan Levinson   2/6/03,  3:50:58 PM
The bounce off the lows avoided the h&s pattern on the 15 minute COMPX candles from playing out for the time being.

 
 
  Steven Price   2/6/03,  3:48:22 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go short a 1/4 position at Dow 7889 - this would give us a 1/2 short position. Stop is set at 8170

 
 
  Steven Price   2/6/03,  3:46:09 PM
Swing Trade Signals
I'm looking for a failed bounce at Dow 7900 to step up to a 1/2 short postion with the addition of another 1/4.

 
 
  Mark Phillips   2/6/03,  3:44:23 PM
With the broad market finally breaking down in the final hour, I'm seeing an interesting divergence. While all the indices are breaking back under intraday support, the VIX really hasn't gone along for the ride. Sure it's up better than 5.5% today, but is well off its morning high of 39.64. For some reason, this latest plunge hasn't generated the amount of fear that I would have expected. The 41 level is still the pivotal value to watch for a real breakout (breakdown in the market).

 
 
  John Seckinger   2/6/03,  3:40:46 PM
As Jeff likes to say, "A funny thing happened when the bond market closed" I got that quote from this Link

 
 
  Linda Piazza   2/6/03,  3:39:41 PM
The SOX has dipped below its Tuesday lows.

 
 
  Jonathan Levinson   2/6/03,  3:38:15 PM
Gold is back up above 370/oz following the afternoon's "COMEX crush", while HUI has tacked on a quick point and is now down 2.75 on the day at 141.12. QQQ is trading 24.05, COMPX 1297, TRINQ .93, TICK.NQ -697.

 
 
  John Seckinger   2/6/03,  3:36:34 PM
Even with such a slow afternoon session, we could get a significant close. A daily close under 7900 would be, to me, pretty bearish and would confirm my early bearishness that almost turned into a trap a few hours later. It could still be a trap; however, odds for a move lower if the Dow settles under 7900 should be increased.

 
 
  Linda Piazza   2/6/03,  3:27:26 PM
Reader Question: How did you establish the 2200 to 2220 resistance band for the Dow transportation index which you mention in your 1:47 post today?

Response: I should have mentioned my reasoning behind that 2200-2220 area. They're historical S/R levels. I've had those levels marked on my $TRAN chart for quite some time now, as the area seems pivotal (in the historical sense) for this index. For example, there was a 2207 low on 10/29, a 2203 low on 10/16, a 2201 close on 10/16, highs near 2225 on October 1 and 2nd, a 2204 close on 9/05, etc. In late January, the fall in this index was arrested near that level for a day or so. Although I do pay attention to pivot analysis, gratefully printing up Jeff's matrix each and every night, and to retracement levels, it's uncanny how many times indices or stocks "stick" when they try to move past these historical levels of resistance or support.

 
 
  Jonathan Levinson   2/6/03,  3:22:01 PM
I'm very excited by this 4 point drop on the COMPX. The TRINQ has made it all the way up to .65 (grin), TICK.NQ -509. QQV is down .70 on the day, reflecting the boredom/complacency brought about by this range.

 
 
  John Seckinger   2/6/03,  3:20:32 PM
Finally, a move. Now let us see if we can get a five-minute close under the 7902 area.

 
 
  Linda Piazza   2/6/03,  3:16:06 PM
The European markets accelerated their losses after U.S. markets opened today, with the FTSE 100 closing down 2.22%, the CAC 40 closing down 1.68%, and the DAX closing down 2.82%.

 
 
  Linda Piazza   2/6/03,  3:13:32 PM
Funny, Jonathan! My computer keeps freezing and when I sign back on, I'm not sure whether it's updating or not as the prices all look the same.

 
 
  Jonathan Levinson   2/6/03,  3:10:21 PM
The carpet has not grown in my office during the past three hours.

 
 
  Linda Piazza   2/6/03,  3:10:17 PM
Currently trading at 22.82, GE has managed to stay above its 1/31 low of 22.45, but just barely. It traded as low as 22.60 today. So far, today's candle is a doji, indicating indecision. Dojis can be reversal signals, but daily 5(3)3 stochastics have made a bearish kiss, rolling in midrise, and MACD is rather inconclusive as it flattens, so GE's direction is difficult to predict at this point. If GE is pushed below the 22.45 level, next support is down at its October low of 21.40.

 
 
  Jonathan Levinson   2/6/03,  3:07:23 PM
The put to call ratio has fallen to 1.45 for this past half hour.

 
 
  John Seckinger   2/6/03,  3:06:14 PM
Now that the bond market is closed, let us hope we can get some movement. The 30-year looks to settle higher by '30 ticks at 112'22 (intra-day high of 112'25). This is still below yesterday's high, but might just be the catalyst to get the blue chips closer to 7900 once more.

 
 
  Jonathan Levinson   2/6/03,  2:59:22 PM
Intraday fib levels on QQQ are 24.24 and 24.17, being the 23.6 and 38.2% retracements off the day high. The TRINQ remains low at .54, TICK.NQ -498. Still concentrated buying keeping the COMPX up. The bond market is due to close in a few minutes, and it will be interesting whether this throws a wrench in the tight range with which we've been dealing.

 
 
  Steven Price   2/6/03,  2:50:00 PM
Hi, If the Open Interest is low, How safe is it to trade? What is the lowest open interest before we can trade? Where can I find the Delta and Implied Volatilty in the website? Thanks, Keith

There are differences of opinion on how many options you need to see in open interest to trade. I personally don't think there is much of a difference if you are playing directionally. The only problem with low open interest I see is that when the option is thinly traded, market makers are quick to shift the price on market orders. A customer limit order on a displayed bid or offer should be filled and I would probably stick with limits on thinly traded options.

I would suggest the CBOE site Options Calculator that allows to you input different variables to determine implied volatility, using different strikes, interest rates, stock price, etc. It can be reached with this link Link

 
 
  Linda Piazza   2/6/03,  2:43:53 PM
Interestingly, volume on the NYSE is almost 100 million shares ahead of volume on the Nasdaq on this light-volume day, with 937 million shares traded on the NYSE and 850 million on the Nasdaq. Decliners lead on both, with a .77 ratio on the NYSE and a .82 ratio on the Nasdaq. Down volume leads up volume on the NYSE, coming in at 1.79 times up volume. On the Nasdaq, however, up volume comes in at 1.27 times down volume. On both new lows are about double new highs.

 
 
  Jonathan Levinson   2/6/03,  2:35:56 PM
The Amex Gold Bugs Index ($HUI) is near a "critical" level, at least on the daily chart. The stochastics and macd are both on sell signals, and today's action has so far brought HUI to the bottom of its recent range. I see critical support just below 139. This level has not been tested today, and we saw a bounce at preliminary support just below 140. This coincides roughly with the levels discussed yesterday for Robert's trade in GG. The bearish cross of the 13 dma by the 5 dma has me concerned, but for the moment, support continues to look good with the possibility of a reverse h&s if it holds. Here's the chart: Link

 
 
  Steven Price   2/6/03,  2:23:39 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the 1/4 short position when the Dow traded 7949 at 14:21:10. I'm sticking wiht a very small position knowing we are toward the bottom of the recent range, but got significant technical breakdowns this morning. I'll think about adding after we take out today's lows. I may also add if we test the top of the range.

 
 
  John Seckinger   2/6/03,  2:20:50 PM
Shares of Adolph Coors Co. (RKY) on Thursday reported a weaker than expected fourth-quarter profit, and sent shares lower by over 10% and looks to record the biggest one-day drop in shares in nearly two years. The Golden, Colorado, company said it is cutting the value of its pension assets by $212 million. The company, who owns the No. 3 U.S. brewer Coors Brewing Co., said earnings rose 27 percent to $20.2 million, or 55 cents per share, from $15.9 million, or 44 cents per share, a year earlier. Excluding one-time items, such as a $4.5 million restructuring charge related to operations in the Americas, Coors said profit increased to 63 cents per share from 49 cents. Analysts' earnings estimates ranged from 59 cents to 90 cents per share. Excluding one-time items, pretax profit in the Americas slid 18.5 percent from a year earlier. Shares are trading at 51.51, and support may not be found until the 47 area. P&F charting is showing a bearish objective of 39 dollars.

 
 
  Steven Price   2/6/03,  2:15:51 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We got what looks like a double top on the intraday Dow chart and a bounce off the 61.8% fitted retracement at 7924. The bounce took us back toward the last lower high at 7970 and I'm going to enter short on a rollover from a third lower high. SPX also sitting just above the 840 triple bottom level. I'm going to enter a small short position here as we approach intraday resistance.

Go Short a 1/4 position at Dow 7949. Set stops at 8170. Target 7500.

 
 
  Kent Barton   2/6/03,  2:12:05 PM
That financial weakness that Jonathan observed in his 9:48 post is really widespread. C and JPM are leading the BKX.X banking index to levels not seen since October. Related stocks such as LEH, MER, MWD, and STT are all looking very bearish as well. It'll be very tough for the market to find its legs if the financials don't firm up.

 
 
  Jonathan Levinson   2/6/03,  2:11:11 PM
The amazing thing about trading ranges is how they affect traders' perception. Tension builds as the bollinger bands compress, and small moves begin to appear larger than they are as we begin to follow price down to its third decimal. Breadth has barely changed in the past half hour, while the put to call ratio has dropped a fraction to 1.57. COMPX 1310 and 1300 continue to be the levels to track.

 
 
  Mark Phillips   2/6/03,  2:10:09 PM
AIG $48.70 (-2.12) I've been intrigued by the very negative action in AIG ever since the big breakdown in late January and the stock is getting sold heavily again today, down more than 4% on volume that is already 50% over the ADV. Not only that, but the stock is nearing its July low of $47.61. That still looks like a viable downside target, confirmed by the PnF chart, which currently has a $47 bearish price target. Link

 
 
  Linda Piazza   2/6/03,  1:49:27 PM
The Dow Jones Transportation Index is positive today, up 30.88 at 2187.30, and approaching resistance between 2200 and 2220. On the daily chart, a rounding-saucer pattern appears to be forming. Daily 5(3)3 stochastics point up, but there might be the slightest hint of a flattening in those stochastics as this index approaches resistance. In the past months, this index has sometimes led the markets, being the first to test its 200-ema in early January, and then the first to fall away from that average. For that reason, the index might bear watching as it approaches resistance today. A break through that resistance might be an early signal of more strength in the market than is suspected, and a failure at resistance might be further confirmation of overall weakness.

 
 
  Jonathan Levinson   2/6/03,  1:48:27 PM
Gold is getting sold heavily, with spot gold down over 6$ to 369.20/oz. HUI is down 3.65 to 140.22, XAU down a mere .90 to 75.28. The outperformance XAU relative to HUI shows the benefit of hedged miners, which correct relatively less on a negative move in the price of the metal.

The COMPX is down to 1302, still well within today's range. The TICK.NQ and TRINQ continue to show concentrated buying supporting the index. Buying continues in treasuries, FVX -5.8 bps. The put to call ratio is lower but still sky high, last at 1.60.

 
 
  Jeff Bailey   2/6/03,  1:46:06 PM
The 1:00 PM Intraday Update has been posted. Link

 
 
  John Seckinger   2/6/03,  1:34:56 PM
Yields in the ten-year sector came a fraction of a point of falling underneath a rising daily trend line, and a break lower in yields should give the possibility of extended weakness in stocks. Please see Link

 
 
  Kent Barton   2/6/03,  1:29:31 PM
Nordstrom (JWN) $17.46 -0.09: This PI short play has been moving gradually lower ever since it abandoned support at $18.00. Shares tagged a multi-month low of $17.28 this morning after giving a double-bottom sell signal at $17.50. Last night Nordstrom reported a slight increase in same-store sales for January that was less than analyst expectations. In terms of downside potential, we'll now be watching for JWN to fill in the remainder of the small October 11th gap and move towards our $15.50-$16.00 target region. Traders with a shorter timeframe could think about heading for the exits if shares bounce near $17.00.

 
 
  Linda Piazza   2/6/03,  1:29:18 PM
The OEX 60-minute chart shows bullish kisses on both the 5(3)3 and 21(3)3 stochastics. So far, the OEX gets turned away each time it approaches resistance, and it's possible those stochastics will redraw themselves, but be aware of the potential for the OEX to consolidate or continue to test resistance while those stochastics cycle up.

 
 
  Steven Price   2/6/03,  1:29:09 PM
Good Morning Steven, I too have been waiting for the multiple breakdowns in the broad markets, and it is nice to see them fall in unison. However, would it not be prudent to confirm all the breaks with one additional box to ensure we are not caught in a bear trap before entering new positions or adding to ones already existing? With the SPX closing below 844 yesterday, Elliott Wave analysis is indicating further downside action in the very near future (SPX 809 - 797 by Feb 7 - 12). I feel confident we will not see the trap come to fruition but with the daily action we have experienced over the last week, anything seems possible. Just my thoughts. Keith

Very good point you have Keith. I think another box would certainly add some confidence to the downside, which is why I'm only thinking about risking a small position.

 
 
  Ray Cummins   2/6/03,  1:26:39 PM
Spreads/Combos/Premium Selling -- Notable Events

Shares of CTI Molecular Imaging (NASDAQ:CTMI) gapped lower this morning, following the company's quarterly earnings report. For the quarter, CTMI earned $0.07 a share, which was $0.02 above consensus as earnings swung from a year-ago loss to a profit on revenues that rose 27%. The company also reaffirmed its prior guidance for revenues of $355 - $365 million in fiscal 2003 and fully diluted earnings per share of $0.60 - $0.64. This includes revenues at or above $80 million in the second quarter, which represents a 50% increase over the first quarter.

Despite the bullish outlook, the announcement was not seen as favorable by investors and they quickly unloaded the issue. This is typical of the current "sell the news" mentality and since it is unlikely the share value will recover in the near-term, conservative traders should consider closing the synthetic position in the issue.

 
 
  Steven Price   2/6/03,  1:22:47 PM
Swing Trade Signals
Now that we continue to hang out over Dow 7950/SPX 840, I'm still looking for signs of a true rally failure. However, each time I sense a rollover, it seems we catch bids and are back between the lines that have held us over the last week. My overall sentiment remains down, but I'm not convinced a position entered here won't take some pain. I like the continued failures at the top of the opening range and still amleaning toward entering a short, but I just don't have a strong conviction about it. if I do enter it will most likely be a short 1/4 position, but I'm still in observation mode.

 
 
  Linda Piazza   2/6/03,  1:19:31 PM
In last night's article, Mark Phillips mentioned that he was standing aside in the recent choppy trading and that other conservative traders should be doing so, too. I'm usually reluctant to trade in conditions like these, but several technical developments persuaded me to wade in with a small OEX put position. I had a plan. I had a stop. I had a target: two, actually. My stop was never hit. The markets performed as I thought they would. My first target was nearly hit this morning, as I wanted to get out ahead of a possible bounce near 418-420. I closed that position for a profit . . . a 1% return-on-investment. I'm not even going to tell you the dollar amount of my profit, because it's too embarrassing. That's not much return for days of hard work, sitting in front of my computer, trying to manually push the markets down. (You do that, too, don't you?) Maybe Mark had the better idea.

 
 
  Jonathan Levinson   2/6/03,  1:18:44 PM
Mark, we've been getting whipped around in a range this morning on the COMPX. 1310 has been a better number to watch today. The TRINQ continues to show buying pressure, and the TICK.NQ at -245 is showing concentration of that buying. FVX continues to stay down, so money is still flowing into bonds. I'd guess that it's Al Green's repo money added today, perhaps the 28 2B surplus, that is feeding bonds.

 
 
  Mark Phillips   2/6/03,  1:08:38 PM
So much for my great wisdom! That flat coil finally broke to the upside as volume returned to the market. COMPX now back over the 1306 level that Jonathan has mentioned and DOW looks like it is going to take another run at the 8000 level. Treacherous waters, these markets are today.

 
 
  Mark Phillips   2/6/03,  12:59:40 PM
Watching the S&P E-mini futures (ES03H) over the past hour, it amazes me how much volume has dried up during the lunch hour. Volume bars are almost invisible on the 5-minute chart. I don't trade futures, but frequently look at them to get another read on market direction. I then turned my attention to the DOW -- for the past hour, it has been slapping around in a 16-point range -- VERY TIGHT! This pattern is bound to break soon, and my bet is a continuation to the downside...watch for a drop under 7936.50 to get it started.

 
 
  John Seckinger   2/6/03,  12:57:15 PM
Per last post, yields are starting to fall within ten-year yields (tnx.x), and the Dow is gravitating around its shorter-term moving averages (22 and 50 EMA, 5-minute chart). We should get a solid move in the near term. In other news, the German Free Press is talking about the "joint Iraqi-French economic association." The article states that "French companies are among foreign businesses which enjoy preferential treatment - apparently reflecting France's political position tending towards rejecting a US-led war on Iraq."

 
 
  Linda Piazza   2/6/03,  12:53:45 PM
KO: Coca-Cola is dropping beneath 40 again today. Last week's low was 39.15.

 
 
  Jonathan Levinson   2/6/03,  12:47:56 PM
The put to call ratio has "dropped" to 1.79. The TRINQ is at .63, COMPX at 1303. Thanks for all of the different views on the ITM covered put write. I can't respond to all of them. There's an impressive base of knowledge among you, but we knew that already, didn't we?

 
 
  Linda Piazza   2/6/03,  12:37:20 PM
The SOX steadied near 267.50, just above that 266.75 level I mentioned in my 12:12 post. It's possible that it will rise to test the underside of the broken pennant formation from the five-minute chart. The former support now crosses at just over 270. For those of you new to trading or to technical analysis, I always expect a retest of any broken formation and think it sometimes tells more about ultimate direction than does the original break.

 
 
  Jeff Bailey   2/6/03,  12:36:07 PM
Dow Industrials (INDU) 7,946 -0.47% ... per 11:59:03 post. Here's an "updated" chart of the Dow. Showing this to try and get "pivot analysis" and "retracement traders" in the mindset of a computer, and how I believe these pivot analysis levels, combined with retracement are used by computers, and how traders can "think like a computer" to then look for levels of support and resistance. Link

 
 
  Jonathan Levinson   2/6/03,  12:29:22 PM
The 15 minute COMPX has been turned back at 1310 again, and seems to be drawing the right shoulder of a head and shoulders formation. If so, it projects to approximately 1250 COMPX on a break of the 1290 neckline.

 
 
  Jonathan Levinson   2/6/03,  12:23:27 PM
The QQQ is a 24 & change. Why would someone be selling the Jan 05 45 Puts ?? So far out of the money ??

I don't know. I was puzzling over that too. I prefer to sell contracts that are close to the money or out of the money, but certaintly not that deep ITM. It's a very good question. Steve?

 
 
  John Seckinger   2/6/03,  12:21:54 PM
On the phone with Bailey as he did his 11:59 update, and watching as the 50 EMA crossed below the 22 EMA (five-minute chart of Dow). Both of these averages are near 7960, and should be resistance going forward. Looking elsewhere, the 30-year is higher by '17 ticks at 112'09 and has a range of 111'24 to 112'16. It will be very hard to take out yesterday's range of 113'01 to 111'18, so fixed-income traders will most likely just be looking at yields on the ten-year note (TNX.X). This note is currently yielding 3.953%, and a move under 3.936% would be significant (read: higher prices). This may not happen today as well. Just something to think about.

 
 
  Linda Piazza   2/6/03,  12:12:06 PM
I show the SOX now breaking down out of that pennant formation on the five-minute chart. (See my 11:22 post.) Bearish traders would next want to see the SOX move below the February 4th low near 266.75 and then the December 31st low near 261.

 
 
  Linda Piazza   2/6/03,  12:06:44 PM
Here's an update on an OSUR weekly chart I put up early in the week as a fish-that-got-away story. I'd been watching the stock for months, anticipating a reverse H&S pattern and intending to buy the stock as it moved above 6.00, the base of the right shoulder. Somehow I hadn't set the alert I thought I'd set, and Friday's move escaped me. Early in the week, when OSUR traded near 8.00, it caught my attention. I looked at it again and concluded that with 5(3)3 stochastics looking toppy on weekly and daily charts and with the current climate working against playing breakouts, I would pass on the play. Here's why: Link (Note: on the linked chart, I forgot to change the MA's when I flipped to a weekly chart, so that you're not see the typical MA's I would watch on a weekly chart.) Now I'll watch to see how far OSUR pulls back as the stochastics cycle down, looking for another entry. I would want OSUR to hold above its grouped 200-dma's, 50-dma, and 22-dma between 5.60 and 6.25.

 
 
  Jonathan Levinson   2/6/03,  12:04:24 PM
Is this QQQ trades a bullish indication from that trader's view?Thanks.

No. It's a hedged short on QQQ. As Steven points out, it's equivalent to selling OTM leap calls, which is a bearish trade.

 
 
  Jeff Bailey   2/6/03,  11:59:03 AM
Dow Industrials (INDU) 7,970 -0.2% ... bears need to defend current levels here to keep WEEKLY S2 potential in play. Here's what I see going on with the Dow today. Chart shown is 5-minute bar chart, with retracement from the WEEKLY R2 to WEEKLY S2. Looks like some inventory buying, or squaring at 80.9% retracement.Link

 
 
  Steven Price   2/6/03,  11:54:23 AM
Follow up on Jonathon's last post about the big trade in the Qs. Short put + Short underlying = Short call

If those trades were done together, then the customer was essentially selling out of the money LEAP calls.

 
 
  Jonathan Levinson   2/6/03,  11:46:07 AM
The put to call reading has printed 2.29 for this last half hour. COMPX is testing 1310 again, with the TRINQ at .35, TICK.NQ -129. This is very heavy put volume, and clearly some extraordinary transactions going through.

 
 
  Linda Piazza   2/6/03,  11:45:06 AM
Great information, Jonathan, on the QQQ puts and shares.

 
 
  Jeff Bailey   2/6/03,  11:41:24 AM
The 11:00 AM Intraday Update has been posted. Link

 
 
  Jonathan Levinson   2/6/03,  11:34:23 AM
I think I've found it- 427501 Jan 45 2005 QQQ puts sold today. I'm hearing trader talk that Lehman sold 300,000 Jan05 QQQ 45 puts on behalf of a customer. 30M QQQ shares were sold simultaneously. This accounts for the large volume in QQQ and the p/c ratio spike.

 
 
  Steven Price   2/6/03,  11:33:30 AM
Swing Trade Signals
Checking out John's last post about the Dow's failure to close below 7902 on a 5 min basis I also see it back above the opening range low. Are we in for another massive reversal? I'm not sure after getting whipped around the last week and I'm going to sit back and observe for a while, especially with the COMP heading higher.

Current levels: Dow 7957/SPX 840.25/OEX 424.27/COMP 1306/ QQQ 24.25

 
 
  Steven Price   2/6/03,  11:29:17 AM
Cephalon (CEPH): $50.73 (+2.62) This put play caught fire following an upgrade and has actually been on a tear since mid-day Wednesday. After setting a new relative low and looking as though we were in the process of another extended breakdown, we have now seen a bounce of over $6 from its intraday low. We will be dropping the play if it holds these gains, although the most aggressive traders can play a rollover from the descending trendline in the following chart. The breakdown did not go as planned, so we will likely move on. Link

 
 
  John Seckinger   2/6/03,  11:28:16 AM
Linda, solid observation. Turning to the Dow, we have STILL not had a five-minute close under the 7900 area. SPX getting closer to its breakdown area of 839, and it is once again hard to get the words "bear trap" out of my mind. It still will come down to where the markets close for the day, but bears really cannot let prices get even slightly higher from current levels.

 
 
  Jonathan Levinson   2/6/03,  11:28:07 AM
There has been large QQQ leap put volume over the past few days rumored to be related to a transaction that MER is put together, but I don't see any volume there today to account for the aberrant put to call ratio from the past half hour.

 
 
  Linda Piazza   2/6/03,  11:22:34 AM
The SOX has been displaying more strength than bears might have wanted in the last few days, but now I'm keeping John's "b" pattern in mind as I study the five-minute SOX chart, wondering if I'm seeing a distribution pattern that began yesterday afternoon. After falling yesterday afternoon, the SOX has now settled into a pennant formation (on the five-minute chart) with an apex at just below 269. Usually breakouts come about 2/3 of the way through these types of formations, so the SOX should soon break out of the pennant one direction or the other. Of course, this is a formation seen on a five-minute chart, so I mention it only because a break may lead the SOX to levels that gives clues as to further weakness or strength in this index.

If I'm understanding John's description well, those "b" patterns also fit well with the continuation patterns that are often seen midway through a fall. I've been watching to see if that kind of continuation pattern has been occurring on the daily OEX charts, too, as the OEX consolidates after falling steeply. Continuation patterns like this often have measuring characteristics since they tend to occur about midway in a movement. Watch, however, to make sure that the OEX closes below the recent consolidation before you draw too many conclusions. Link

 
 
  Steven Price   2/6/03,  11:22:06 AM
Alltel (AT): $44.85 (-0.76) OI put play AT finally gave up the $45 level, mad a rebound attempt and failed there. $45 is also bullish support on the PnF chart and I like the break below it. A trade of $44 is required for a complete break of that support line and traders looking to enter this position short may want to start out with a partial position here, as we can still technically get a bounce from the bullish support line until it is broken. Shorts can then step up to full positions on a trade below $44. Right now we are reapproaching $45 from the downside, so let's wait for that snapshot of possible resistance and enter on the failure if we get it.

 
 
  Jonathan Levinson   2/6/03,  11:22:00 AM
The QQQ has already traded 60M shares, nearly its average trading volume of 65M today. Volume is difficult to interpret, but I tend to regard volume explosions as indicating either a top or a bottom. With price up just .07 on the day with QQQ trading 24.15, there has been a great transfer of shares today.

 
 
  Jonathan Levinson   2/6/03,  11:13:15 AM
The latest put to call reading has just come in at 2.55. That is not a typo, but I don't believe the number, its being nearly double the highest reading I've ever seen. I expect this to be corrected, and will post the link below. It seems to be the equity portion of the reading that's out of whack. If anyone's hearing of large put activity during the past half hour, please email and let me know. Link

 
 
  Jonathan Levinson   2/6/03,  11:07:40 AM
The COMPX is hovering at 1300, with the TRINQ at .69 and the TICK.NQ -540. Biotechs are showing strength with the BTK +2.09 at 328.71. The five year yield remains weak, down 5.1 bps. This move higher has worked off the oversold extremes on the shorter stochastics, and, while there's little direction here, the lows of the day don't look particularly secure at the moment.

 
 
  John Seckinger   2/6/03,  11:01:09 AM
Some notes on the initial claims report this morning: The 11,000 contraction in claims follows a two week gain of 39K and a two week decline of 46K just prior. Last week's report was revised to a level above 400K -- which is really the barometer regarding payroll gains and losses. The 4-week average was unchanged at 385K. Continued claims four week average is at its lowest level since September 2001.

 
 
  Steven Price   2/6/03,  10:55:10 AM
Swing Trade Signals
I am looking at a possible double bottom intraday in the day and also watching the average as it approaches the bottom of the opening range at 7952. It has failed so far, and with the SPX still below 839, I'm thinking about entering a 1/4 short position here. I don't like the facvt that the COMP is over 1300 still and seems unwilling to give up that level for any extended period of time. For now I'll leave the short entry as a suggestion for aggressive traders and continue to watch the COMP. The SPX did add another box at 835 after the triple-bottom, reducing the risk of a bear trap.

 
 
  Linda Piazza   2/6/03,  10:51:57 AM
Volume patterns show adv/dec ratios of .52 on the NYSE and .63 on the Nasdaq. Up/down volume shows a .36 ratio on the NYSE and a .77 on the Nasdaq.

 
 
  Jonathan Levinson   2/6/03,  10:47:29 AM
Can you give me your read on Cree. I did read for what its worth that Fidelity has taken a position in Cree. It seems to have held up quite well. Any thoughts on a technical point of view.

On a purely technical basis, the stock is showing no buy signals on either the daily or weekly timeframes. It is still on sell signals on both the stochastics and macd. It opened below support just above 17, and I see no technical reason to be buying this stock here from the indicators I follow. For the weekly view, see this Link

 
 
  Mark Phillips   2/6/03,  10:40:08 AM
BEAS $10.62 (-0.49) I thought this one would never give up its support at the 11.00-11.50 area, but finally the catalyst for that break arrived this morning. Fechtor Detwiler wrote this morning about the threat of open source software to BEAS' customer base. Open source is essentially free...a bit cheaper than whatever BEAS charges for its application server software. Highlighted in the report was the fact that GE Supply has replaced BEAS software with JBoss, an open source product.

The negative reaction to the report drove the stock down to $10.04 in the early going, a mere 4-cents above the top or our recommended entry range for this LEAPS Call play. Since the initial report, Golman came out in defense of the stock, citing its belief that GE will not completely eliminate its use of BEAS software, noting that most big firms use some open source software.

While BEAS has rebounded from its lows, I don't consider this a good entry point into the play, as technicals indicate it is likely headed lower first. Note that the PnF chart Link is now on a Sell signal, with a preliminary downside target of $7.50, (negating the prior bullish vertical count of $20) and the weekly Stochastics are still in decline. Patience is warranted here, as I think we'll likely see a penetration below $10 before we see a solid long-term bullish entry.

 
 
  John Seckinger   2/6/03,  10:31:36 AM
As far as the Dow is concerned, here is what I am looking at. Notice that we did NOT get a five-minute close underneath the 7902 area. This is slightly puzzling. The SPX remains underneath 839, so we will see if the relative strength in the Dow can pull the general market higher. I still expect a five minute close under 7902. Stay Tuned. Please see Link

 
 
  Jonathan Levinson   2/6/03,  10:21:20 AM
The COMPX is bouncing again, back over 1300, with the TRINQ drilled back to .42 and the TICK.NQ back to neutral at +2. FVX has dropped only slightly, -4.7 bps on the day. The 10(5) stochastics are giving bullish crosses on the 30 minute and shorter timeframes. 1310 COMPX continues to be the s/r line in the sand.

 
 
  Linda Piazza   2/6/03,  10:09:51 AM
I second the caution expressed by Steven and others. As Jonathan mentioned, I like chart formations. Although I have an intermediate-term bearish outlook and although I also think this morning's OEX move perhaps broke the horizontal base of a bearish right triangle showing up on the 60-minute chart, there's an alternative interpretation to today's movement so far. Here it is, with the potential for a bounce back up to the top of that regression channel being evident. If you're going to enter here in either direction, know ahead of time where you'll get out and how much risk your account can take. Link

 
 
  Mark Phillips   2/6/03,  10:09:05 AM
Another VIX test coming up? We've been looking at the VIX over the past couple weeks and it looks like another test of that descending trendline that Kent pointed out could occur later today if the current selling continues. I went into a fair amount of analysis on the VIX in my Options101 piece last week. Link

That descending trendline comes into play right at 41 and if the VIX breaks above that level, I would look for significantly higher levels in a hurry -- remember July and October of last year?

 
 
  Jonathan Levinson   2/6/03,  10:08:19 AM
The COMPX is sitting at its low of 1292. The TRINQ is only 1.25, showing a generalized drift lower- nothing beyond neutral breadth here. The -522 TICK.NQ shows broad negative activity- this is more of a generalized selloff than a few bad issues rocking the boat. The continued strength in bonds looks like the selling could continue- FVX -5.7 bps, confirming the negativity on the COMPX.

 
 
  Steven Price   2/6/03,  10:07:58 AM
Swing Trade Signals
We got the triple bottom in the Dow with the move below 7900, to confirm the others. I'll be looking for short entries on any failed bounce now.

 
 
  Steven Price   2/6/03,  10:01:20 AM
Swing Trade Signals
The rubber band is stretching - we got breakdowns in the SPX (triple-bottom), OEX (triple-bottom) and the Dow came within 6 points. COMP below 1300. I am vacillating between going with a 1/4 short here, but as I've said, I'd much rather short a bounce. Also note the VIX near the high end of recent range and approaching resistance at 40.

Current levels: Dow 7910/SPX 835.06/OEX 421.43/COMP 1295/VIX 39.23

 
 
  Jonathan Levinson   2/6/03,  10:00:47 AM
Al Green has just ponied up another 8.25B in overnight repos, for a total of 13.25B added today. This leaves 3.5B unaccounted for, which is a net drain in liquidity.

 
 
  John Seckinger   2/6/03,  9:55:50 AM
Ok, now we are starting to see some real technical damage. I have to expect lower prices, and the entire time I worry about bear traps. That is ok, because risk is well defined. They really SHOULD crush stocks here, but a move higher absolutely has to shift sentiment on a dime. Dow at 7945.

 
 
  Jonathan Levinson   2/6/03,  9:55:12 AM
For Linda and other formation fans, that was "The Finger" on the one minute COMPX chart, though it looks like the knuckles are in the process of being amputated by the continuation in selling. Currently printing new lows, with the TRINQ up to 1.34.

 
 
  Linda Piazza   2/6/03,  9:53:48 AM
With its daily 5(3)3 stochastics in a full bullish move upwards, the VIX surged this morning and again heads toward that descending trendline I first put up on the Monitor a couple of weeks ago. Today that line crosses just above 40.

 
 
  John Seckinger   2/6/03,  9:50:47 AM
SPX at 839.89, and I expect weakness if 839 is broken. The objective is much lower at 812. A move above 849 would nullify this thinking. If curious where I derived at this, please see Link

 
 
  Linda Piazza   2/6/03,  9:49:18 AM
Still slightly in the green, the SOX this morning tested the upper Bollinger band on the five-minute chart and now is testing the midline average. Bears want to see the SOX dragged down rather than maintaining current levels.

 
 
  Jonathan Levinson   2/6/03,  9:48:56 AM
Financials are looking quite weak, with C down 1.99% to 32.98 and JPM down 2.18% tp 22.44. These are levels I haven't seen in a few months on these stocks.

 
 
  Jonathan Levinson   2/6/03,  9:47:25 AM
The bounce off the opening lows has driven the COMPX to just below 1310 and drove the TRINQ down to .42, now back up to .63. These are pretty strong swings taking place, even given the usual opening volatility.

 
 
  Steven Price   2/6/03,  9:43:15 AM
Swing Trade Signals
We got another bounce just above Dow 7950/SPX 840/OEX 424. This morning's trade was good for PnF reversals back into columns of "O" and puts us back on th everge of the triple (actually quad in this case) bottom breakdowns. However, if I closed my eyes and forgot the trend I would have bought the reversal down, as we continue to bounce in the same area we have all week. However, my bias remains down and I'd much rather short resistance.

 
 
  John Seckinger   2/6/03,  9:42:33 AM
After the first five-minutes of trading, I am now thinking about an "open TEST drive" higher; however, I do not forget the resistance from 8011 to 8020. Moreover, the day's pivot is at 8035. For those looking at retracements between R2 and S2, the 61.8% area comes in at 7990 (high so far today). As I made clear in my futures wrap, I think that a fall in equities will really have to take place in the next few days. The more consolidation within this range, the better chance of a reversal in trend and higher prices. A fall under 7900 would be a good start for bears.

 
 
  Jonathan Levinson   2/6/03,  9:31:59 AM
3 point gap down to 1298 COMPX, TRINQ 1.4, TICK.NQ -27, QQV +1.51 to 42.64.

 
 
  John Seckinger   2/6/03,  9:30:53 AM
Intra-day Pivot/Levels for Thursday (02/06/03)...

INDU : S2= 7850, S1= 7918, P= 8035 , R1= 8103 , R2= 8220

SPX : S2= 830, S1= 837, P= 849, R1= 856, R2= 869

OEX : S2= 418, S1= 422, P= 429 , R1= 433, R2=439

NDX : S2= 947, S1=958 , P= 979, R1=990 , R2=1010

QQQ : S2= 23.48, S1= 23.79, P= 24.33 , R1= 24.64, R2= 25.18

 
 
  Jeff Bailey   2/6/03,  9:30:40 AM
Expedia (EXPE) $59.05 ..... stock traded as low as $57.50 in last night's extended hour, but jumping to $61.41 in this morning's pre-market trade after Legg Mason upgrades to "buy" based on valuation.

 
 
  Jeff Bailey   2/6/03,  9:29:43 AM
The 9:00 AM Intraday Update has been posted. Link

 
 
  Mark Phillips   2/6/03,  9:28:07 AM
CEPH I commented last night that CEPH was looking awfully strong in a really weak overall market environment, and now we have a hint as to why. The stock was upgraded from Neutral to Overweight at JP Morgan this morning. The stock appears to be trading fractionally higher in the pre-market, but we know how unreliable the pre-market action can be. The bottom line is that our $49.10 stop remains the line in the sand. To break that level, CEPH needs to clear the 10-dma, 100-dma, and 200-dma, all of which are clustered just below $49 and just above yesterday's close.

 
 
  Steven Price   2/6/03,  9:20:01 AM
Swing Trade Signals
It appears we may get those triple bottom breakdowns I was talking about yesterday. The SPX looks most likely at 840, while the Dow needs a trade of 7900 and the SPX 422.50. Think I'm a little frustrated about being stopped out on the short yesterday? Those traders who did take my suggestion to short Dow 8150 should be keeping a tight stop, as we are heading into the same territory we have bounced from numerous times over the past week. If we do break down, I'm probably going to wait to enter short on a bounce. Of course, those bounces have been awfully big and that could leave me out of the game for a day or two. However, if we do get those breakdowns and then a weak failed rally I may step in small with a 1/4 position in case this really is the big one. It will depend on market conditions at the time.

 
 
  Jonathan Levinson   2/6/03,  9:13:53 AM
The fed has a lot of money due to it today. 8.75B in overnight repos, 5B in 9 day repos and 3B in 28 day repos, for a total of 16.75B. Al Green really pulled the elastic band off his pocket roll for this one. So far, 5B in 28 day repos has been announced this morning, for a 2B net addition on the 28 day repos. We await the announcement concerning the remaining 11.75B outstanding.

 
 
  Linda Piazza   2/6/03,  9:10:40 AM
Major European markets all trade in the red at the current time. The FTSE 100 is down 1.89%, the CAC 40 is down .83%, and the DAX is down 2.79%.

 
 
  Linda Piazza   2/6/03,  9:08:04 AM
U.S. productivity dropped an annualized 0.2% in the fourth quarter, surprising economists who had expected a 0.7% increase. Unit labor costs rose 4.8%, higher than the expected 3% rise. Many have felt that productivity gains have allowed the FOMC to cut rates without fearing inflation.

 
 
  Jonathan Levinson   2/6/03,  8:46:16 AM
There were 391,000 initial jobless claims in the week ended Feb. 1 from a revised 402,000 the prior week. Expectations were for 390,000 new claims.

This is a story I have not seen reported this morning concerning the situation in North Korea. North Korea is claiming its right to launch a preemptive strike agianst the US rather than await a possible attack. Link

 
 
  Jonathan Levinson   2/6/03,  8:36:35 AM
The US Dollar Index is beginning to tick up and bonds have opened. Unsurprisingly, US bonds are being bought, with FVX -3.7 bps, TNX -4 bps and TYX -1.8. QQQ is down to 23.925 on Island ECN. Spot gold continues higher, currently above 375/oz. If investors have decided to dump British pounds, all of the foregoing effects make sense to me. It does not surprise me that these investors would not be loading up on SUNW, MSFT, CSCO or others of that ilk- more likely to see them buying t-bills and gold.

 
 
  Jonathan Levinson   2/6/03,  8:18:37 AM
The Bank of England has cut rates to their lowest level in fifty years. The US Dollar Index has not rallied, however, and my chart shows it hugging the 99.60 line. Gold actually saw 369/oz last night but is now trading above 374/oz. US equity futures have not rallied either, and I presume (but have not verified) that we'll be seeing money fleeing to the euro, as the ECB did not cut rates. QQQ is currently trading 24.04.

 
 
  Linda Piazza   2/6/03,  7:51:18 AM
As expected, the ECB holds rates steady at 2.75%.

 
 
  Linda Piazza   2/6/03,  7:33:11 AM
After the surprise BOE announcement this morning, a guest commentator on CNBC World commented that government economists have to be looking at what's happening with the insurers and pension funds (referring to sharp asset reductions due to declining stock markets) and "seeing Armageddon."

 
 
  Linda Piazza   2/6/03,  7:09:31 AM
Good morning! By midmorning in Thursday's trading, the Nikkei had fallen 0.6%. Electronics parts makers led the fall after TDK Corp lowered full-year guidance to 3.1%. Sony and Canon dropped. Toyota started the day in the green after posting net profits that surprised on the upside, but closed flat. Other Asian markets fell, too, with Taiwan Semiconductor tumbling amid concerns about competition from China and a stalled recovery in demand. Also mentioned as a factor was North Korea's nuclear threat.

European markets fell in early trading, too. In Germany, the market reacted to an economic report indicating that December German factory orders fell 4.1%, far more than the predicted 1% decline. Export demand slowed 8.7%. Bundesbank VP Juergen Stark today commented that the government's growth forecast of 1% for the year, already revised down twice, needs a further downward revision. Many speculate that Germany may already be slipping into another recession. Car manufacturers DaimlerChrysler and Bayerische Motoren Werke AG fell on the news. Ericsson did gain in European trading, however, after the resignation and replacement of its current CEO. Echoing a theme heard widely of late was Royal Dutch/Shell's revelation that stock-market losses in its pension funds may reduce earnings by as much as $400 million.

The ECB and BOE met today. In a surprise move, the BOE cut rates by 1/4%. The BOE's statement indicates that the prospects for demand were weaker than previously thought. Despite European economic reports that CNBC World characterized this morning as "grim," the ECB is not expected to change benchmark interest rates. As of this writing, the FTSE 100 is down 21.10 points, the CAC 40 is up 7.27 points, and the DAX is down 35.58 points, but markets are currently reacting to the BOE's surprise announcement less than ten minutes ago and are likely to be volatile in the near term.

 
 
  Jeff Bailey   2/5/03,  1:50:37 AM
The Index Trader Wrap has been posted: Link

 
 
  John Seckinger   2/5/03,  1:50:30 AM
The Futures Trader Wrap has been posted: Link

 
 
  Steven Price   2/5/03,  1:50:23 AM
The Swing Trade Game Plan has been posted: Link

 
 
  Steven Price   2/5/03,  1:49:44 AM
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.

 
 

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