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  Jeff Bailey   2/12/03,  6:39:59 PM
Updated Pivot Matrix Here is the updated pivot analysis matrix Link

Making note of correlative support at OEX 411, found from DAILY S1 and WEEKLY S1. This may make some "sense" as a maximum downside for tomorrow.

Reason I think this way is Monday's Index Trader Wrap Link , where we noted a "zone" of support for the S&P 500 Index between WEEKLY S1 of 816 and MONTHLY S1 of 819. (pink dashed boxes on pivot matrix).

I didn't notice until after market close that the SPX and SPY had "pierced" their monthly S1 levels.

I will duscuss implications of this "zone" for SPX later tonight in the Index Trader Wrap.

  Jeff Bailey   2/12/03,  6:02:09 PM
Duke Energy $13.96 -9.6% .... will make quick note here that DUK achieved its bearish vertical count of $14.00 today. Link This was an initial target from prior bearish profile and traders still holding puts, might look to remove initial capital from trade at a minimum, or roll out and look for other opportunities.

Quick check on the sector bullish percent from Dorsey/Wright has "Electric/Utilities" sector in "bear alert" status at 58%. Bear alert status was achieved in late Januar (just prior to a red 2 on p/f chart) when bullish % reversed into column of "O" from 72% to 66%. As benchmark, early February (red 2) sector bullish % was 62%. To reach "bear confirmed" status, column of O's in bullish % would need to fall just below the October (red A on a p/f chart) of 18% to 16%.

  Jeff Bailey   2/12/03,  3:58:58 PM
The 3:15 PM Intraday Update has been posted. Link

  Jonathan Levinson   2/12/03,  3:37:51 PM
The COMPX is printing more lows at 1281. I'm looking as the Feb 10th lows as the last stop from the airball zone. While the head and shoulders pattern discussed earlier implies a downside target of 1265, there's not much in the way of support until 1225 COMPX, although it's unreasonable to expect that deep a plunge without lots of action along the way. The TRINQ at 2.21 and the QQV +.46 don't reflect the type of fear or selling pressure that would normally be indicative of a bottom.

  John Seckinger   2/12/03,  3:36:17 PM
Straight to the bottom of the support zone at 7750. Amazing weakness. This area was seen in my post this morning. If using Q-charts and would like to spice up the Alert program (as Jeff Bailey did), go to the Alerts tab, then Preferences, then Alert Delivery. Then the browse tab and feel free to change the sounds. Here is the Dow chart. Link

  Linda Piazza   2/12/03,  3:36:03 PM
My daughter just sent me this email. While I hope it's nothing but a rumor, for obvious reasons and am terrified for my daughter, I think we'll be seeing a lot of this in the future: There has been a possible bomb and biological substance found at Walmart in Copperfield [a Houston neighborhood]. They have evacuated Walmart, but have not evacuated us yet. An employee found it. The possible bomb is in a briefcase. The area is crawling with police/fire/ambulance, but it is not on the news yet.

  Jeff Bailey   2/12/03,  3:34:14 PM
General Electric (GE) $22.28 -0.88% ... per previous question regarding GE. Making some way below today's S1 and session lows here. Similar to the Dow isn't it? "The inchworm moveth lower!"

  Kent Barton   2/12/03,  3:33:45 PM
OI/PI short play Cabot Micro (CCMP, $41.90 +0.12) is finding some buyers after the company filed its 10-Q with the SEC.

  Jeff Bailey   2/12/03,  3:29:16 PM
Subscriber's watching/trading the levels ... Jeff, S1 for NDX

Correct you are! I'm trying to write 03:15 update, getting lots of downside alerts I've had set. Can't keep up.

  Jeff Bailey   2/12/03,  3:27:37 PM
QQQ ... "bad tick" in the Q's at $23.18. While that's 2-cents from our 61.8% retracement, probably a "coincidence."

  Steven Price   2/12/03,  3:26:26 PM
Swing Trade Signals

Steve, Could you discuss on MM your thoughts on a breakdown entry in the event there's no failed rally to enter? What parameters would you use to confirm "safe entry", whatever that is these days? Thanks, D

It certainly is beginning to look as though the last breakdown below 7800 after failing at 7816 again was the best momentum entry today. We have now sold off more than 200 Dow points from yesterday's high of 7985. I have a hard time entering on momentum breakdowns in the current markets, given the numerous bounces we've seen over the past few weeks. I'd much prefer to enter on a bounce, however, I could be left waiting and wishing I had entered on a breakdown. If we continue to fail on rebounds below 7800, which was the bottom of the range of the last couple days, then we will be squarely below that last support level and momentum traders can begin to enter position at current levels. However, I am still hoping for a rally at some point, preferably failing at thismorning's resistance around 7850, or allowing a move back toward 8000 again.

  Linda Piazza   2/12/03,  3:19:36 PM
Volume now stands at 905 million shares on the NYSE and 913 million on the Nasdaq. Adv/dec ratios continue to slip, with current ratios at .55 for both the NYSE and Nasdaq. Down volume is 3.3 times up volume on the NYSE and 3.87 times up volume on the Nasdaq.

  John Seckinger   2/12/03,  3:19:33 PM
The Dow finally made it to the support zone of 7750 to 7770. Look for 7770 to be resistance, and possibly the catalyst for a short-covering rally if we get a five-minute close above this area. Main support is below at 7700. 7700 is most likely out of reach today, though.

  Jeff Bailey   2/12/03,  3:18:58 PM
Regional Bank HOLDRs (AMEX:RKH) $97.00 ... trade here could be important sign of weakness, however, time/sales shows just 100 shares traded. Per prior comments, past trading at $97.00 in the RKH has seen some long column of O build. Link

Conviction may be building for bears with this.

Quick check of S&P Banks Index (BIX.X) 267.71 -0.65 is at its lows. No trade yet at DAILY S1 of 266.90 at this point, but things look headed lower. Don't they?

  Jeff Bailey   2/12/03,  3:12:45 PM
S&P 500 (SPX) 820.09 -1.09% ... has traded its DAILYS S1 of 821.90. Haven't gotten a "sell program" alert on the break. Maybe enough balancing was done yesterday with so many sell programs that nothing needs to be done until.... WEEKLY S2 of 816, or DAILY S2 of 814.50?

  Jonathan Levinson   2/12/03,  3:08:28 PM
QQQ at its low of the day, with QQV up just .12, just another bullish day premium-wise, while the TRINQ is up to 2.28 and the TICK.NQ at -327. We're seeing light-to-modest selling pressure so far, nothing more.

  Jeff Bailey   2/12/03,  3:04:43 PM
Dow Industrials (INDU) 7,770 -0.9% ... trades the DAILY S1 of 7,771.20 here. First "level of support" traded in the matrix today. Sign of weakness "leading" to weakness in my opinion. Dow bear now looks for NDX/QQQ to confirm the weakness at some point, trade their DAILY S1s.

  Linda Piazza   2/12/03,  3:04:34 PM
John, didn’t I hear this morning that Pimco’s Gross was moving out of treasuries and into corporate bonds, and even junk bonds?

  Linda Piazza   2/12/03,  3:02:51 PM
Referring to Jeff’s post about support (or lack thereof) for GE, I know Jonathan has been watching GE for a while. I have, too, not for the purpose of buying puts (wish I had) but just as an overall gauge of market strength or weakness. On the monthly chart, I had noted that throughout '93 and '94, GE based at 7.50. Snapping a Fibonacci retracement tool on GE, as Jeff taught us all to do, I noted that GE was already below a 61.8% retracement (27.96) and has just dropped below the 70.7% retracement (23.34) and now heads down to the 78.6% retracement (at 19.34). This correlates fairly well with monthly slight S/R in ’97 between 18.70-19.60.

  John Seckinger   2/12/03,  2:59:58 PM
Per 10:01 a.m. post, I was surprised to see shares of C and BAC higher after witnessing a significant widening in their corporate bonds. The term "widening" means that spreads between these bonds and Treasuries are getting farther apart, signaling inherent risk within the company. Currently, both companies are trading lower. I should have trusted by 'bond gut instinct.' (grin)

  Jeff Bailey   2/12/03,  2:55:57 PM
QQQ $23.90 -1%... is this the "magic level?"

  Jonathan Levinson   2/12/03,  2:55:53 PM
We have JaPalM and Citicorpse currently printing simultaneous lows of the day, with JPM -1.45% and C -1.75%. I've been hearing trader talk, unconfirmed rumors only, to the effect that there's more Enron news to surface tomorrow. That could be playing a role here, but there's no way to know at this point.

  Linda Piazza   2/12/03,  2:55:19 PM
Regarding the XAU, I note that the XAU also headed down in July and October, along with the other indices. As others have commented in the past, the XAU is composed of mining stocks and those stocks are sometimes affected by negative investor sentiment toward owning equities, too.

  Jeff Bailey   2/12/03,  2:45:58 PM
General Electric (GE) $22.44 -0.26% ... Jeff, I know you follow GE. Could you tell me where you see short term support in the stock.

Boy.... I'm not sure the word "support" should be used with GE. Only support I see right now is Monday's low of $22.23 and then the 52-week closing low of $22.

I ran a quick pivot analysis for DAILY based on yesterday's h,l and close. S2=$22.15, S1=$22.33, P=$22.57, R1=$22.75, R2=$22.99.

  Jonathan Levinson   2/12/03,  2:44:28 PM
The CRB continues to sink, now down 1.06% to its low of the day, with crude oil, platinum and cocoa the only commodities showing strength. The XAU and HUI continue to show weakness, with XAU -2.88 to 71.68 and HUI -4.21 at 133.53. I see support at 71 on the XAU chart, but the 200 dma at 71.81 should brace the index first, just .11 from here.

  Kent Barton   2/12/03,  2:44:26 PM
Jeff has been keeping a close eye on the BIX.X. This index, which measures the performance of regional/domestic banking stocks, has thus far remained above the relative low that was created on Tuesday. The BKX.X, meanwhile, has broken to multi-month lows. The BKX.X index gauges the performances of the large international money-center banks such as Citigroup and JP Morgan. Those two stocks also tagged new lows today. C looks especially weak as it fills in its October 15th gap and moves towards that month's lows near $26.

The market is going to a have a tough time putting together a sustainble rally if this financial weakness persists. This sector bearishness is also pressuring the brokerage group. GS (discussed by Steve in his 13:39 post), MER, MWD, and BSC are all looking very weak.

  Mark Phillips   2/12/03,  2:36:54 PM
AZO $64.67 (+0.37) Ever since about 1:15pm ET, AZO has had some pretty concerted buying interest, and I've been scratching my head, looking for the root cause. After all, there is no company-specific news and the broad markets are still sitting near their lows. So what's up??

I think the root cause may be some short covering ahead of the close. Competitor Advanced Auto Parts (AAP) is set to release earnings after the closing bell, and my thinking now is that AZO may be seeing some shorts move to the sidelines (following the failure to break down today) just in case AAP has something positive to say that could be construed as positive for the industry. I know that's really speculative, but the best information I can put my fingers on this afternoon. For that reason, I would suggest conservative traders might want to stand aside from entering new positions on this late-day strength until we see what shakes out after the close.

  Linda Piazza   2/12/03,  2:35:40 PM
I decided to take a look at the daily chart for the Wilshire 5000 ($WLSH on Stockcharts.com and TMW.X on Q-charts) today to see if it gave any clues as to market direction. Since we don’t repeat the support/resistance numbers as often for the Wilshire, I can often form a less biased opinion from looking at its charts. As I study the chart this afternoon, I see the Wilshire, currently at 7827.28, sort of hanging in empty space with some light support near 7770-7780. That light support doesn’t appear significant at this time, but it may be enough to support a short-covering rally before further downside. Short-covering rallies might be stopped at former support near 8000, or further up, at former resistance between 8200-8220. I also note the Wilshire’s H&S formation, with its target (approximately 7400, equal to its July low, depending on where you draw the neckline and whether you include candle shadows, etc.) not yet reached. I note the same consolidation pattern that we saw in recent weeks in the other indices, broken consolidation that now appears to have been a continuation pattern, as I suspected those patterns might be when they began forming. For those of you who know about John's "b" pattern, this type of continuation pattern is analogous to that one. If this continuation pattern occurred halfway down the decline, as often happens, that predicts an eventual target for the Wilshire down near its October lows. However, I also note oversold stochastics (with the possibility that bullish divergence might be setting up in the daily 5(3)3 stochastics if both stochastics and price turn up from here) and oversold RSI, too. The ADX, at 31.51, shows that this index still trends strongly, so these oscillators may not give good signals. Looking at this chart, then, I see the same long-term forecast (down) and the same dangers (a short-covering rally) as I see on the other indices.

  John Seckinger   2/12/03,  2:34:40 PM
It is interesting that 7815 is 50% of the day's range in the Dow.

  Jonathan Levinson   2/12/03,  2:34:37 PM
Wes, I'm hoping that the President's appearance will provide the spur you're looking for in your bearish trade. The TRINQ at 1.21 and the TICK.NQ -337 show a drop in buying, but no real selling pressure yet. QQV is up .67, a very modest gain given that the COMPX is flirting with support within two bearish chart formations.

  Steven Price   2/12/03,  2:31:12 PM
Swing Trade Signals
This latest rally back over Dow 7800 has not yet seen the SPX cross 825. We failed yet again at the 7916 level, but have moved above the descending trendline I have drawn from this morning's highs around 7850. I have considered shorting the 7815 area now that 7800 has been taken out intraday, but I am still hoping for a bigger rally into the 7850 area to enter. I am not sure if I'll get it and I am also concerned that a close above 7800 would be a victory for bulls who were able to defend that line in the sand on a closing basis. If that is the case, we may still get another bounce in the 7800-8000 range that we have seen over the last few days. This may be wishful thinking, but I'm less than sure about entering short here and I'm going to stay out for the moment. I am still anything but bullish and simply looking for a higher percentage entry.

  Jeff Bailey   2/12/03,  2:30:04 PM
Buy/Sell program alerts One sell program at the open when cash caught up with futures, but that's been it as I look at the $prem and have had alerts set today. This is much different than yesterday's count made later in the day. Somewhat representative of today's trade with the exception of about an hour.

Would be interesting to see if we get a buy/sell program at any DAILY level. Per 01:00 PM Update, really haven't seen any DAILY levels traded, other than quickly in the QQQ and NDX. We do note however that the premium alerts are based on the S&P 500.

  Linda Piazza   2/12/03,  2:23:26 PM
The XAU again tests its simple 200-dma.

  John Seckinger   2/12/03,  2:21:51 PM
Reading some notes on North Korea's nuclear program. Our CIA director, George J. Tenet, says North Korea probably has one or two nuclear weapons. Moreover, an unclassified U.S. intelligence estimate notes that the three-stage Taepo Dong 2 missile was probably close to being ready for flight testing. The country does have a moratorium on flight tests, though. Note: A three-stage Taepo Dong could deliver a several-hundred-pound payload from North Korea to targets about 9,300 miles. A two-stage Taepo Dong 2, which would be easier to use successfully, may be able to reach Alaska or Hawaii.

  Jeff Bailey   2/12/03,  2:14:32 PM
QQQ ... here's an updated 5-minute chart interval of QQQ. After breaking below "wedge" QQQ fell right to our "neckline" from POTENTIAL head/shoulder top formation. The "France advance" took QQQ above right shoulder. While I tend to "discount" unforseeable events that show up in a chart, especially on a short-term chart like we're looking at, the "rate of decline" and lack of volume on the break of our little wedge hints that today's further trade is a "slow bleed" lower. Maybe a break below the recent little lows will bring in some volume, but may need to get the break of DAILY S1 of $23.84. Link

  Jonathan Levinson   2/12/03,  2:07:34 PM
JON, I'm looking at a 10 min COMPX chart. The neckline looks like 1285 on Monday and Tuesday. Just bounced just above it again. I DO NOT see a neckline break, but I do see it bear flagging just above the neckline. Thinking of shorting here as the stochs rise in anticipation. What do you think?

I'll meet you in the middle- looking at my 15 minute chart, I see it at 1287ish, but it's splitting hairs. There's resistance at 1291, then higher at 1298-1300. A short at these levels with a stop at 1300 looks like a prudent play, as there continues to appear the risk of a breakdown from these levels. With the narrowness of today's range, we have fairly sharp s/r lines to work from. 24.078 is a 23.6% fib level off the lows, followed by 24.17 and 24.25.

  Steven Price   2/12/03,  1:53:56 PM
Swing Trade Signals
So far the bounces have failed at 7800 now that we are below that level. The next downside test bears can watch will be the S1 level of 7771. Low of the day is 7775. S1 for OEX 414.6 has held, but the SI in the SPX at 821.9 was violated with a low of 821.62.

  John Seckinger   2/12/03,  1:49:40 PM
As the Dow continues to trade in-between 7830 and support from 7750 to 7770, it was nice to see a ten-year auction conclude much better than the five-year action witnessed yesterday. The rate awarded today was 3.960%, while the 1.85 bid-to-cover can be compared to last quarter's 1.90%. Non-competitive bids were $128 mln, and this is something fixed-income traders liked. Now that bonds are finding a bid, will this pressure stocks? The yield curve is still steep, so I think stocks should continue to weaken.

  Jeff Bailey   2/12/03,  1:49:30 PM
The 1:00 PM Intraday Update has been posted. Link

  Kent Barton   2/12/03,  1:48:50 PM
Abbott Labs (ABT) $35.53 -0.64: ABT popped up as a possible short play during yesterday's pick meeting. This week's violation of support at $36.00 and the double-bottom p-n-f sell signal look like very positive developments for the bears. What's also interesting about Abbott is the fact that shares have fallen into a "fast-move" region that was created by the steep rally from the July lows near $30.00. The stock is currently filling in the July 25th gap that comprised a large chunk of that rally.

Short entries could be targeted on a move under today's low ($35.34), using a stop just above the descending 21-dma at $37.63. This moving average has provided resistance over the past three weeks. How far could ABT fall? The p-n-f bearish objective is $27, but the $30 area would provide a more realistic downside target for short-term traders.

  Steven Price   2/12/03,  1:39:32 PM
Goldman Sachs (GS) $64.50 (-0.55) Watch List candidate GS finally traded below the $64.50 from recent days and the end of September. The last time it traded below $64.50, it found its next support at $59. Today's intraday low is $64.27. PnF bullish support was back up at $68.

  Linda Piazza   2/12/03,  1:37:00 PM
Mark mentioned today’s volume. It currently stands at 655 million shares for the NYSE and 708 million for the Nasdaq. Ratios for adv/dec have drifted lower, but remain relatively near previous levels, with a .62 ratio on the NYSE and a .59 on the Nasdaq. Down volume is now almost three times up volume on the NYSE, and 2.4 times up volume on the Nasdaq. New lows have reached 117 on the NYSE and 75 on the Nasdaq, with new highs being 22 and 28, respectively.

  Linda Piazza   2/12/03,  1:31:38 PM
At 72.20, the XAU again sits just above its simple 200-dma at 71.81

  Jonathan Levinson   2/12/03,  1:29:33 PM
The COMPX is printing lows at 1286, and the TRINQ has broken higher, now 1.59, still a relatively neutral reading, and the TICK.NQ is lower at -454. Yields are lower, with FVX +1.4 bps now and TNX -4.1 bps. This looks like a clear neckline break on the 15 minute head and shoulders pattern.

  Kent Barton   2/12/03,  1:25:38 PM
Tractor Supply (TSCO) $30.68 -1.14 OI/PI short play TSCO has fallen to new relative lows. With no apparent news to explain the current 3.5% decline, it looks like ugly technicals are really taking their toll on the bulls. I'd be expecting the stock to temporarily stabilize and find some buyers as it approaches psychological support at $30.00. Short-term and/or conservative traders might want to take some profits if shares rebound from that level. The next level of historical support is down at $28.00, near the October lows.

  Mark Phillips   2/12/03,  1:24:44 PM
Shipping Stocks I got an email a bit earlier today telling me to take a look at FDX and UPS.

Interesting action in light of Linda's recent commentary on the Dow Transports. Both FDX and UPS are sitting just above some pretty significant support and a breakdown in these stocks will likely coincide with a breakdown in the Transports. Note that the $TRAN is now breaking below its recent consolidation and appears headed for the 2090 level enroute to perhaps revisiting the October low near 2000.

Both FDX Link and UPS Link have recently given PnF Sell signals, but I'm not in favor of entering new bearish positions on either stock right here, due to the fact that both are resting right on their bullish support lines. Of the two, I like UPS the best, as a break under $58 looks like it could be significant. Of course, adding one more wrinkle is the solid support that comes in near $57 from late 2001 and early 2002. Now, an oversold rebound and rollover below $60 with the $TRAN still looking weak would look a lot more attractive to me.

  Steven Price   2/12/03,  1:21:23 PM
Swing Trade Signals
Hitting new daily lows and those shorts still holding the 1/2 position may want to think about lowering stops again to just above that 7816 range, possibly 7820, to lock in gains. This would be the more conservative approach.

  Steven Price   2/12/03,  1:09:47 PM
Swing Trade Signals
We almost got that rally I was looking for but once again failed a 5 min close above the 7916 retracement. We then got a pullback that bounced at 7801. Right now it looks like yesterday's PnF reversals up in the SPX and OEX were the best short entries, now that both have reversed back down for the fifth straight time. (dipped back below 7800 as I typed)

Current levels: Dow 7804/SPX 824.28/OEX 416.54/COMP 1290

  Jonathan Levinson   2/12/03,  1:08:29 PM
My downside target on this h&s pattern is approximately 1265 COMPX.

  Jonathan Levinson   2/12/03,  1:07:41 PM
I seem to be seeing head and shoulders formations everywhere, and the most recent is on the 15 minute chart. A break below the day lows should confirm this latest pattern. In the meantime, the COMPX continues to stick near the lows of the day, with a neutral wedge being drawn at the tail end of that same h&s pattern on the 15 minute candles.

  Linda Piazza   2/12/03,  1:00:52 PM
CNBC now reports that the U.S. intelligence information about the untested missile is not new information, and that our intelligence community has known about this untested missile capacity for a while.

  Mark Phillips   2/12/03,  12:53:43 PM
I'm having a hard time reading much into today's market action, with volume once again looking pretty anemic to me. The major indices are continuing to drift lower, but the volume certainly isn't convincing. NYSE volume now just reaching 598 million shares, with the NASDAQ just ahead at 640 million. With the primary catalysts being the Greenspan testimony (yawn) and more developments on the geopolitical front, there just isn't a lot of directional action to get excited about.

This muddy picture is translating itself to many of the plays on the OI playlist as well. Take a look.

TRMS trading 133K shares vs. ADV of 588K

AZO trading 470K shares vs. ADV of 1.52 million

CB trading 515K shares vs. ADV of 1.46 million

Based on this light volume picture, I'm really not placing a lot of weight on today's price action. Another piece of anecdotal evidence of the directionless nature of today's action is that of my list of over 200 stocks that I have in my primary quote sheet, there are only 6 that have moved more than $1. That just reinforces my view (and that of several of the other writers) that this is a risky trading environment, marked by traders opting to stand on the sidelines.

  John Seckinger   2/12/03,  12:50:15 PM
It is interesting that ten-year yields both gapped underneath the profiled wedge (see chart), and has an exact high at the 50% retracement area of the longer-term timeframe (3.955%). This is bearish for stocks. Please see Link

  Jonathan Levinson   2/12/03,  12:40:39 PM
Resistance on the COMPX is looking stronger at 1300. I note a head and shoulders break on the 60 minute chart yesterday to its lows, with the neckline at 1300 even, high at 1320 and low at 1280. This rangebound action continues to fray nerves, with little action. The TRINQ, TICK.NQ and treasury yields continue to repeat the same story, as precious metals continue to languish near their lows.

  Jeff Bailey   2/12/03,  12:39:52 PM
QQQ $24.05 .... just slipping below short-term trend. Not seeing any type of "big" volume on the 5-minute chart, decent bid size here, with offer size seen at $24.11.

  Linda Piazza   2/12/03,  12:37:09 PM
CNBC has announced that U.S. intelligence states that North Korea has an untested missile capable of reaching the western U.S.

  Steven Price   2/12/03,  12:30:52 PM
Sorry for the error on the last header, it has been changed from an entry signal to commentary.

  Jeff Bailey   2/12/03,  12:30:51 PM
QQQ $24.10 -0.12% ... has really been oscillating either side of the WEEKLY pivot of $24.11 hasn't it? On 5-minute bar chart, can really see the formation of a "wedge" taking place. Note how the "apex" of this wedge points to the WEEKLY pivot? A little "pressure cooker" here.

Here's a 5-minute chart interval. QQQ stuck in a wedge right now.Link

  Steven Price   2/12/03,  12:28:40 PM
Swing Trade Signals
Watching the recent consolidation over the last 1/2 hour, I'm torn between whether I'm seeing a short entry as the rally ran out of steam, or a short-term bull flag. I'm hoping for the latter, so I can get in short on a failed rally at 7850.

  Mark Phillips   2/12/03,  12:26:06 PM
I've had several questions lately from readers wondering how to specify an entry price for limit orders for option traders. Specifically, when a stock is trading at $48.20, and you want to enter a trade to buy a MAR $50 put on a rally failure near $50, how do you determine what would be a reasonable price for the option at that point? This is actually a pretty common question and there are several on-line calculators available for making this determination. I know some traders use the calculator on the CBOE website, but I tend to prefer the one on the www.ivolatility.com site. It can be accessed here: Link

Just fill in the blanks on the left, hit calculate and you get the theoretical option values for a put and a call at the desired strike price. There will be some variance due to the numerous factors (like volatility) that influence option pricing, but it does provide a good starting point.

  Jeff Bailey   2/12/03,  12:19:27 PM
Per 11:40:58 PM post regarding subscriber's observation of "unusual" option trade, today's is no different. 17,500 contracts have traded today. Nothing "big" on an individual basis, but compare this is second most traded contract in the QQQ today and compares to 34,285 in the QQQ March 22 puts (QAVOU), which we would expect to see a little more action on closer expiration. Something is going on here, and I'm going to figure it out or else.

On thing I would do and added to previous post, is track open interest. I'm pretty "sure" that Feb. traders were sold naked. If that institution begins buying them back, then thinking is that open interest should decline. If QQQ starts breaking much below the $23.90, the "hedge" for the naked put trade is to short the QQQ at/near the $23.90 level, raise MORE cash to the account. Then, if exercised on the Jan. 05 $45 puts, cover QQQ short against the $45 strike.

  John Seckinger   2/12/03,  12:16:13 PM
Interesting side note: Citigroup Inc.'s (C) Chief Executive Sanford Weill said he would not take a bonus for 2002 because of the decline in the shares of C. Weill, who has a base salary of $1 million, pulled down a $17 million bonus in 2001. Shares of C are higher by 3 cents to 32.08.

  John Seckinger   2/12/03,  12:13:40 PM
It was interesting that the Dow failed to get a five-minute close back above the 7830 area (low during first five-minutes of trading); therefore, shorts can remain aggressive. I think a move under 7795 would be a nice confirmation of such bearish strength.

  Linda Piazza   2/12/03,  12:11:01 PM
Just thinking out loud: After redrawing themselves a couple of times during the course of the morning, the 60-minute OEX 5(3)3 and 21(3)3 stochastics now have kissed again. The less-reliable-but-quicker-to-give-signals 5(3)3’s have actually turned up and appear ready to test the 30 level that marks a movement out of oversold conditions. “Appear” must give given its due weight, however, as these stochastics are less reliable than the 21(3)3’s, which have also kissed but haven’t yet turned up. Extending the support line from yesterday’s bear flag pattern now shows probable resistance slightly above 426, but I’m not sure the OEX could make it up that far. It traded in a tighter bear-flag pattern early this morning before breaking down again, and resistance from that former support now crosses at about 420, the area that stopped the OEX earlier today. While I’m hoping for a move up to 420 or perhaps even higher, I’m not particularly hopeful that will happen. It’s difficult to gauge direction under current conditions, when any bit of news regarding Iraq, North Korea, or our own Code Orange status might change the direction of the markets at any moment.

  Jonathan Levinson   2/12/03,  11:57:35 AM
The CRB is currently down .60% to 247.84, with cotton, platinum and cocoa the only green in that index.

  Jonathan Levinson   2/12/03,  11:52:14 AM
Gold is extending its slide, with spot gold now -7.20, HUI -3.08, XAU -1.90.

  Jeff Bailey   2/12/03,  11:51:31 AM
The 11:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   2/12/03,  11:50:48 AM
I should also note that Al Green attributed the rise in gold and oil to Iraq. I disagree with that interpretation, as discussed in my weekend article. Nevertheless, that's what he said.

  Jonathan Levinson   2/12/03,  11:48:48 AM
Al Green dodged the question that Mr. Paul posed, noting only that fiat money systems are inherently inflationary, but that he's been impressed with the ability of central banks to "simulate" the controls brought about by a gold standard. The true question, which is "how are we dealing with commodity and health care cost inflation" was not really answered, as I suppose it shouldn't have been. Al Green is a central banker, and fiat money is his business. The implications of that are systemic in nature, and not easily answered.

The COMPX has paused in its decline, with QQQ now back to 24.16 and COMPX 1289. The TRINQ is still bullish at .85 and the TICK.NQ nearly neutral at -149. The trading range continues to hold for the time being, but I continue to see the risk of a further drop here.

  Steven Price   2/12/03,  11:48:28 AM
Swing Trade Signals
Dow now flirting with its last failure level at 7816, which coincides with the 19.1% downside fitted 5 min retracement of 7816. I'm still hoping for a better entry point, but this is definitiely a pivot level that can be used for aggresive traders to target another failed bounce.

  John Seckinger   2/12/03,  11:39:50 AM
Oil prices continue to show strength on Wednesday, as cold Arctic weather push oil prices to about $5 under peaks seen during the 1991 Gulf War. It was reported today that U.S. crude stocks fell 4.5 million barrels last week to their lowest levels since 1975. Reasons included export disruptions from Venezuela, and distillate supplies (due to the cold weather) is now now 20 percent below last year supply readings. Moreover, The International Energy Agency, said that low capacity from the top oil producers might not be enough to cover a disruption of Iraq's supply.

  Jonathan Levinson   2/12/03,  11:36:41 AM
Ron Paul has just raised The Question about gold, commodities and stagflation. Al Green is responding now.

  Linda Piazza   2/12/03,  11:35:01 AM
Volume remains light this morning, with 389 million shares traded on the NYSE and 451 million traded on the Nasdaq. Both show more decliners than advancers, by a .68 adv/dec ratio on the NYSE and a similar .64 ratio on the Nasdaq. Down volume measures 2.7 times up volume on the NYSE and 1.8 times up volume on the NYSE. With the indices so near recent lows, I would have expected the down volume to be a bigger proportion of trading today. Combined with the light volume, those up/down figures again make me wary, as it doesn't appear the markets are being strongly sold as yet. New lows far outrank new highs, with 99 new lows already appearing on the NYSE today.

  Linda Piazza   2/12/03,  11:11:55 AM
Steven mentioned the importance of watching the VIX today. In addition to watching for a move above 40, as Steven mentioned, you might also be alert to the location of the 21-pma on the hourly chart, currently at 38.13. The VIX popped above that MA this morning, testing it and then moving up, so it might be important.

  Jeff Bailey   2/12/03,  11:11:39 AM
El Paso Corp. (EP) $3.99 -15% ... a utility stock we haven't discussed in some time. Mentioned this one as longer-term bearish at $15.00 back in September and again at its triple-bottom sell signal at $12.50. Utilities can't get a break. Well, they're getting breaks, but they are to the downside.Link

New 52-week low today and the 6th biggest decliner in today's market.

Longer-term put holders of Amer. Elec. Power (AEP) Link begin to make some supply/demand observations perhaps, that EP setting new lows, perhaps a "leader to the downside," but AEP may be trying to play a little catch up in coming months.

Slow growth economy along with higher energy prices (gas/coal) a double whammy for the sector on the fundamental side of things.

  Jonathan Levinson   2/12/03,  11:10:21 AM
The put to call ratio is up to .81, TRINQ unchanged at .90 and TICK.NQ -303, Yields continue to sink, with FVX +2.5 bps and TNX -2.2 bps. For those without CNBC, you can watch Al Green's live testimony on free Bloomberg TV on the internet from www.bloomberg.com.

  Linda Piazza   2/12/03,  11:06:58 AM
Selection of Expiration Month in Options Trades: While many of us expect more downside to the markets, all traders should be conscious of oversold levels in stochastics (daily and hourly) when making decisions about strikes and expirations. February option expiration approaches, and decay will begin to accelerate. If a bearish position is entered and an explosive short-covering rally were to occur before a further downward move, that decay will also accelerate losses as the position moves against you. Because of that fear, I personally won’t be entering any more positions with February strikes, but then I tend to stay in trades for several days to several weeks. Those of you with shorter times in trades might make different decisions. In addition, I grew up in an area rumored to be a prime site of Castro’s missiles, also an area where we routinely evacuated just ahead of hurricanes. (Yes, I’m old as the hills.) A 17-year-old sailor at the time, my father participated in the atomic bomb tests at Bikini Atoll, so you can believe our house was stocked with supplies in case of a nuclear attack during the Cuban Missile Crisis, for whatever good that would have done, and our windows were boarded before we evacuated ahead of those hurricanes. While I’m optimistic by nature, I believe in being prepared. This sounds macabre, I know, but I’ve been thinking about all the reports yesterday about precautions being taken in NYC against possible terrorist attacks later this week, with NYC perhaps being one target. Many of us were in trades on 9/11, and could not exit those trades until markets reopened. Perhaps consider how your positions would be affected if Wall Street were again to be closed for a number of days, and then we'll all celebrate together when that doesn't happen, as I don't expect it will.

  Jeff Bailey   2/12/03,  11:06:57 AM
General Motors (GM) $34.30 -4.85% .... Today's trade at $35 has GM's p/f chart back on a sell signal and bearish vertical count now defensive to $26.00.Link

This should have Dow Industrials Bullish % ($BPINDU) Link seeing a net loss of at least 3.33% today.

  John Seckinger   2/12/03,  10:59:30 AM
Here is what I am looking at in the Dow. I am still focusing on the "Support Zone" below from 7750 to 7770. Please see Link

  Steven Price   2/12/03,  10:59:20 AM
Trimeris (TRMS) $42.73 (+0.02) OI call play TRMS not doing much today, but hovering in the green in spite of sell-offs in the Biotech Index (BTK -1%) and broader markets. It has been on both sides of the even line, but right now showing decent relative strength. This morning's high of $43 fell short at the 50-dma (43.03) as well. New entries can wait for a move over that level, but keep in mind our target is the $45-$46 area.

  Jonathan Levinson   2/12/03,  10:45:40 AM
Al Green testifying, reiterates the risks to productivity of the impending wave of retirements over the next decade.

  Jonathan Levinson   2/12/03,  10:44:00 AM
Mortgage applications fell last week despite low interest rates: Link

  Steven Price   2/12/03,  10:42:38 AM
Swing Trade Signals
Noticing the high in the VIX is 38.88. Once again failing below 40 and poossibly signaling an intraday bounce. We are getting a bit of a bounce here after taking out 7800 with a low of 7794, but have not yet held a 5 min close below that level.

  Jeff Bailey   2/12/03,  10:42:32 AM
North Korea Intl. Atomic Energy Agency tells U.N. that North Korea is in violation of agreements.

Implications here are that "if true" should bring U.N. sanctions. Sanctions that North Korea said if brought on, would also be viewed as "an act of war."

Dow = -52, SPX=-5.2, OEX = -2.73, NDX=-3.8, QQQ = -$0.09.

  Jonathan Levinson   2/12/03,  10:38:28 AM
The put to call ratio has returned to .78, back within its usual range.

  Jonathan Levinson   2/12/03,  10:35:40 AM
1290 COMPX continues to hold, and QQQ 24 (actually 24.03) has provided support again on the drop. The TRINQ didn't make it much above 1.0, and so it looks like rangebound trading with a continuing risk of a drop, if the low TRINQ is any indication.

  Jeff Bailey   2/12/03,  10:35:26 AM
QQQ $24.08 -0.33% ... back at session low after what I'm going to call "the France advance" this morning to $24.33.

  Linda Piazza   2/12/03,  10:34:46 AM
On Friday, John had noted a bearish engulfing candle in the QQQ’s, and I’d replied to his mention. Over the weekend, an astute reader had noted that bearish-engulfing patterns typically occurred as a stock or index was climbing. If those patterns occur as a stock or index is falling, they can instead be last engulfing candles, a reversal signal that portends a climb. I hadn’t mentioned that possibility Friday in the Monitor because I’d noted that the QQQ’s often produced these patterns during a decline, and that, for the QQQ’s, the pattern didn’t usually result in a reversal. Instead, it often resulted in a white candle for the next day, but a white candle that didn’t reverse the trend either because it sat lower than the previous day’s red candle or for some similar reason. I mentioned on Monday that I wanted to watch what happened, because if the QQQ’s began changing their previous pattern, the new pattern should be noted. Monday, the QQQ’s did produce a white candle, but of a small-bodied type that indicates indecision. Yesterday produced another of those candles, a red one this time. These candles are of the type often seen either in continuation patterns or reversal patterns, so the evidence still isn’t clear from these candles alone in my opinion. However, with an avalance of MA’s sloping down toward the QQQ’s, it’s difficult to believe that they have much upside in them.

  Mark Phillips   2/12/03,  10:33:08 AM
PII $48.55 (-1.02) Well, it looks like we made the right call last night in keeping this play alive. Traders that entered on the rollover from just below $51 are looking good this morning, with the stock already off nearly 2% and looking to continue the recent plunge. A close below 448.40 would look good for the bears, as it would represent a new closing low for this recent move. Even better would be a break of the $47.50 level, taking out last week's intraday low and that support zone from August of 2001.

  Steven Price   2/12/03,  10:30:52 AM
Swing Trade Signals
We are once again testing support at Dow 7800. Traders who have been using the alternate stop above 8000 may want to think about lowering that stop to just over yesterday afternoon's brief resistance at 7865. There has been a ceiling on the Dow so far on several attempts just over 7855 and if that intraday high is broken we could get an extended rally. Most aggressive stop is still just over 8000 and I am still hoping for an entry point in that area, although it is looking less likely. My alternate entry may be at 7850 on a bounce, althoguh I'll be looking at treasuries and techs at that point as well, if we get there.

  John Seckinger   2/12/03,  10:29:34 AM
Keeping with the France theme and the US Dollar, French industrial production figures were weak and most likely brought the Euro down against our currency. Also hearing of buyers of dollar versus yen, since the yen is getting towards its 50% retracement of the fall from December to February.

  Jeff Bailey   2/12/03,  10:28:59 AM
Dow Industrials (INDU) 7,801 -0.46% ... just edging below yesterday's low. Alert to weakness from the weaker index of late.

  John Seckinger   2/12/03,  10:24:56 AM
Is there anything to be learned by the short end of the bond yeild (read: 5-year notes) being up so much compared to the 10 and 30-year?

I view this "steepening" as traders expecting a weaker economy, and a break in the bank sector would prove this thesis to be correct. Of course, a steepening also takes place if there is a flight out of our domestic currency. Remember, the steepness of the yield curve is relative. Currently, there is a spread 98 basis points wide (200-day Hi is at 117). This 103 number is gathered by taking the yield on the 10-year note (3.94%) and subtracting it from the yield on the five-year note (2.96%). I think that any steepness above 90 means equities should remain in trouble over the long term. I have done an article called "yield curve". Please see Link

  Jonathan Levinson   2/12/03,  10:24:24 AM
FVX is holding its gains, +4.2 bps, while the COMPX continues to show little strength, with broad selling as depicted by the TICK.NQ -463, TRINQ .90. The theme continues to be supportive volume in relatively few stocks. HUI and XAU are recovering a bit from their lows. Most recent put to call reading was a whopping 1.27, but so far, little strength in equities.

  Jeff Bailey   2/12/03,  10:18:47 AM
Market Rumor .... here's the "rumor" that looks to have had U.S. Dollar showing gains and some bid in stocks and weakness in gold.

Rumor floating the trading desks that France may now be switching to support for U.S. against Iraq.

Why might this be viewed as "bullish?" .... thinking here is that there are undoubtedly some bears playing the "world war" type of scenario where there is disagreement on action to take against Iraq. Thought being if it were just U.S. and Britian, then Russia, France and others that oppose get involved on opposite side of a war.

If France sides with U.S., then Russia a bit out on a limb.

Still.... if France comes over to "U.S. side of things" doesn't just further implies war. MARKET will assess the information, and I'm thinking resume "fear of war" trade like we've been seenig for a couple of weeks. Time will tell and we'll simply stick with our trading plans.

  Linda Piazza   2/12/03,  10:17:50 AM
In his 8:12 post, Jonathan included a link to Greenspan’s speech. You might take time to read the speech during slow market periods today.

  Jeff Bailey   2/12/03,  10:15:26 AM
American Elec. Power (AEP) $20.32 -1.45% .... stock very defensive (yet again) today. Near-term target is $20.14 and would look to close out any Feb. puts. I still hold August $25's and still looking for something in mid-teens.

  Linda Piazza   2/12/03,  10:07:48 AM
On the OEX 60-minute chart, the 21-pma at 419.94 appears to be capping upward movement so far. Now both the 5(3)3 and 21(3)3 stochastics have made bullish kisses, but those bullish kisses are only the first tentative-and-easily-undone signs of a short-term ascent. My overall view is still bearish, so my own account management plan doesn't dictate a bullish entry on short-term gains against the main trend, but instead dictates a search for an ideal bearish entry.

  Jeff Bailey   2/12/03,  10:06:50 AM
US Dollar (dx00y) 100.61 +0.21% ... dollar pushing to a session high here. Need to check the wires and see if there's something here other than short-covering. John Seckinger mentioned weakness in gold (10:01:05).

  Steven Price   2/12/03,  10:05:07 AM
Swing Trade Signals
In a perfect world, we'll get a better short entry point on a failed rally during Alan Greenspan's testimony. Maybe some of yesterday's shorts will cover, such as they did yesterday morning. C'mon 8000! I haven't yet entered officially, but bears can feel good about the COMP resistance so far at 1300, having failed its rebound at 1301.

Current levels: Dow 7840/COMP 1299/OEX 419.15/SPX 830.15

  Linda Piazza   2/12/03,  10:03:36 AM
At 73.22, the XAU sits just above its simple 100-dma at 72.70 (after having dipped to that level earlier) and its simple 200-dma at 71.81. Just below those MA’s is the exponential 200-dma at 70.38. These MA’s should support the XAU, but stocks and indices don’t always pay attention to what should occur.

  John Seckinger   2/12/03,  10:01:05 AM
Note: The dollar was considerably weaker overnight, and seems to be finding bids as gold is roughly 20 dollars lower from last week's highs. Touching on the bank sector, corporate bonds recently issued by a few banks are trading weak at the moment, and this should be pressuring shares and the sector lower. Surprisingly, both shares are fractionally higher. Names include BAC and C.

  Steven Price   2/12/03,  10:01:03 AM
Swing Trade Signals
We recovered from the drop, with the Dow bouncing at 7814, but so far have failed again at 7850 on a 5 min closing basis. COMP back over 1300, but just barely. I'm thinking hard about going short here, but we are at the low end of the recent range and should be looking to start small. So far 7855 has been the ceiling.

  Jonathan Levinson   2/12/03,  10:00:48 AM
The fed has just drained 500M by adding an 8 day repo of 4.75B.

The COMPX has peaked its nose over the 1300 level, topping at 1301, and is slipping back for the moment. I continue to watch the 1305 level, followed by 1312 COMPX.

  Jeff Bailey   2/12/03,  9:58:19 AM
Semi-equipment stocks really rebounding here. AMAT $12.07 +1%, KLAC $32.67 +1.7%, NVLS $28.55 +2.8%

  Jeff Bailey   2/12/03,  9:54:38 AM
US Dollar Index (dx00y) 100.40 +0.01% ... just marginally green. In my opinion, equity bear would like to see this turn red too. Kind of like the banks, which can be impacted by dollar. Here... I'd say the BKX.X and components that have more international exposure see greater impact by the dollar. The KBW Bank Index (BKX.X) 709.11 +0.38% showing marginal gains.

  Jeff Bailey   2/12/03,  9:51:56 AM
Quick check ... of morning highs shows Dow, SPX, OEX came up just short of their DAILY pivots. NDX morning high has been 974.81, QQQ $24.24. Both just barely above their DAILY pivots, but saw some decent selling.

Bears would like to see the BIX.X 270.01 +0.2% in the red, and they are pulling back from best levels of 271.39.

  John Seckinger   2/12/03,  9:50:31 AM
Well, that bounce was short lived. Note that the five-year note is higher by 4.5 ticks, while the 30-year is only higher by 2 ticks. Whenever the shorter-term maturities are higher in price, this is definitely a steepening of the curve. This is bearish for stocks, as cash is going to a safe haven, away from equities. Speaking of equities, I am sticking with my ranges given this morning. If we can stay under 7830, I will look for a test of support first.

  Jeff Bailey   2/12/03,  9:48:28 AM
So far to plan... little "pop" from stocks, but now major indexes in the red.

Dow = -27 points, SPX = -1.65 points, OEX = 417.60 -0.98 points, NDX = -0.97 points, QQQ = -$0.02

  Jonathan Levinson   2/12/03,  9:45:26 AM
The COMPX gave up its bounce at 1298, which is near term resistance. I'm with Jeff on shorts at that level, which coincides with 24.24 QQQ. I wouldn't be too surprised by a revisit to the 1305 COMPX level, but it would take more oomph than I'm seeing so far. TRINQ currently 1.13, TICK.NQ -200, QQV +1.29 at 41.72.

  Jeff Bailey   2/12/03,  9:45:00 AM
QQQ $24.15 (unch) .... slipping back a bit after early rally to DAILY pivot. If short/put now placing stop just above yesterday's high (say $24.65), and next test is to see if QQQ won't fall below the $23.90, then DAILY S1 of $23.84 and close that level on a 5-minute bar chart interval.

WEEKLY Pivot is right in here at $24.11. That's a "hurdle" to for a bearish trader on intra-day basis.

  Steven Price   2/12/03,  9:43:56 AM
Swing Trade Signals
I'm getting some conflicting signals on the small rally, with treasuries green, as well as 5-yr and 30-yr yields. The rally is fading, but took out the high end of the opening range. Aggressive traders can look to go short below the bottom of the opening range at 7830, but I'm not ready to make it an official signal this close to 7800.

  Linda Piazza   2/12/03,  9:42:52 AM
The OEX 60-minute charts shows a bullish kiss on the 5(3)3 stochastics and a slight hinge upward on the 21(3)3 stochastics. On the daily chart, 5(3)3 stochastics and 21(3)3 stochastics are inconclusive, both being in oversold territory, both touching, but both flatlining in oversold territory. It was those 60-minute stochastics that kept me wary of entering with a put position yesterday. Ideally, I’d like to see hourly stochastics cycle up to overbought levels again while the OEX tests the bottom of the bear flag pattern it broke through yesterday. At the same time, I’d like to see daily stochastics at least bump up a bit so that they have room to turn down again. The bottom of the regression channel that defined the bear-flag pattern crosses now at about 424.50, although it will rise during the day. Here’s the bear-flag pattern as seen on a five-minute chart: Link Unfortunately, we may not get the ideal scenario today.

  Jonathan Levinson   2/12/03,  9:41:15 AM
The fed has 5.25B in overnight repos expiring today.

  Jeff Bailey   2/12/03,  9:41:01 AM
QQQ $24.21 +0.2% ... here's the QQQ, just traded a session high of $24.24, which is a penny above DAILY pivot. Can be looking short/put here per last night's Index Trader Wrap.

  Jeff Bailey   2/12/03,  9:39:06 AM
Treasuries see modest gains right now across the maturities.

  Jeff Bailey   2/12/03,  9:37:37 AM
S&P Banks Index (BIX.X) 270.23 +0.28% ... slight bid here in the BIX.X.

Should help the QQQ $24.10 to bid a bit (psychology), and looking for QQQ to work its way back near $24.23, which is DAILY pivot.

  Jonathan Levinson   2/12/03,  9:36:55 AM
Gold is getting sold, with spot gold down a whopping 5.60 to 356.10. HUI -2.11 at 135.11, XAU down 1.18.

  John Seckinger   2/12/03,  9:36:50 AM
After the first five-minutes of trading, the range in the Dow is very tight (7830 to 7844), and seems to be signaling indecision for bears. I see resistance above from 7870-7880, while support below is felt at 7750 to 7770.

  Jeff Bailey   2/12/03,  9:32:51 AM
The 9:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   2/12/03,  9:31:46 AM
4 point gap down open to 1391 COMPX, TRINQ 2.73, QQV +1.29 to 41.72.

  John Seckinger   2/12/03,  9:29:12 AM
Intra-day Pivot/Levels for Wednesday (02/12/03)...

INDU : S2= 7699, S1= 7771, P= 7874 , R1= 7950 , R2= 8057

SPX : S2= 814, S1= 821, P= 832, R1= 839, R2= 850

OEX : S2= 410, S1= 415, P= 420 , R1= 424, R2=430

NDX : S2= 948, S1=960 , P= 974, R1=986 , R2=1001

QQQ : S2= 23.54, S1= 23.84, P= 24.23 , R1= 24.353 R2= 24.92

  Steven Price   2/12/03,  9:23:13 AM
Swing Trade Signals
I am going to be looking to enter short but will allow the opening range to set in before doing so. Those traders who used my more aggressive stop loss over 8000 should be carrying 1/2 short positions, although right now I am flat. We have tested Dow 7800 twice successfully and appear to looking at another test this morning. This puts us in the low end of the recent range and short entries need to be aware of that. Right now, it is looking as though yesterday's 3-box reversals up in the SPX and OEX (2.5 point box) were once again shorting opportunities).

  Jonathan Levinson   2/12/03,  8:45:13 AM
Bonds have opened mixed, with FVX +3.9 bps, TNX -2.2 and TYX -1.1 bps.

  Linda Piazza   2/12/03,  8:17:18 AM
In meetings held today, NATO members failed to reach an agreement about their response to Turkey’s request for military assistance. Reportedly, the Secretary General presented members with a simplified plan that representatives were then expected to discuss with their governments.

  Jonathan Levinson   2/12/03,  8:12:29 AM
First things first: QQQ is trading down at 24.00, the USD is at 100.30, down last night but up from its lows, and gold is hanging at 361/oz. Not hanging, per se, but hovering.

Bloomberg.com and other services reported that Al Green said that the economy would bounce back after the uncertainty of the Eye-rack conflict was removed. This was reported in the usual hopeful fashion. I listened carefully to his testimony, and he didn't say that. He just didn't. He didn't imply it either. What he said was: The intensification of geopolitical risks makes discerning the economic path ahead especially difficult. If these uncertainties diminish considerably in the near term, we should be able to tell far better whether we are dealing with a business sector and an economy poised to grow more rapidly--our more probable expectation--or one that is still laboring under persisting strains and imbalances that have been misidentified as transitory.

The link to his testimony is below. I note this because AL Green's testimony yesterday was important, and I'd love it if everyone I knew would read it. The reason is that Al Green was unusually clear, pedestrian, and careful in his wording. He seemed to be trying very hard to convey what he took to be the truth, and what, oddly enough, I understand to be the truth. For this reason, I have a new found respect for Al Green. I will add, editorially, that his testimony identified nothing but significant challenges, and I heard very little that would cause me to drop everything, go long, and begin celebrating. Nevertheless, there's no need to trust me, because his words are linked below. However, I no longer trust Bloomberg or other media outlets- I'll go with the raw data wherever possible.


  Linda Piazza   2/12/03,  7:08:21 AM
Good morning! Japanese markets were happy to see the recent firming of the dollar against the yen, as exporters such as Honda helped get the Nikkei off to a green start. The yen fell to its lowest level against the dollar since mid-December. Mizuho Holdings climbed after Merrill announced yesterday that it might invest in the troubled bank. The Nikkei was closed yesterday, so this was the market’s first opportunity to react to the news. The Nikkei closed up 2.1%, almost at a three-week high.

In Australia, Commonwealth Bank pointed to declining stocks markets as the cause behind a 48% drop in H1 profit. Banking earnings rose, but the writedown amounted to $26 million in decreased values for fund management and life insurance units. One analyst noted that the writedown was smaller than predicted, calling it “good news.” Insurance and banking companies throughout the world have been announcing similar writedowns of late. In European trading, those writedowns again figured in trading, with insurance stocks ending their one-day short-covering rally and turning down again, lead by German insurers such as Munich Re. Two economic numbers hurt European trading today, too. The Bank of England lowered its economic growth forecast from 3.1% for the year to 2.5%, and said that inflation, while expected to be stronger than first thought, might slow toward the end of the year. Last year, the U.K.’s economy grew 1.7%. A slowdown in the growth of service industries, a drop in manufacturing orders, and loss of jobs contributed to the lowered forecast. In France, December industrial production fell 1.7%, surprising economists who had predicted a drop of only 0.3%. Two European companies in the news were Royal Philips Electronics and Cadbury Schweppes. Cadbury said that U.S. sales of its soft drinks fell and predicted it would miss its own earnings targets, while GS lowered the earnings forecast on Royal Philips Electronics. As of this writing, the FTSE 100 trades down 38 points or 1.04%, the CAC fell 54.34 points or 1.91%, and the DAX fell 45.59 points of 1.74%.

Geopolitical developments threaten to assume even more importance in European trading as this morning sees an announcement that there is a threat to London on the scale of 9/11. Security has been heightened at London’s Heathrow airport and at villages in flight paths, as some fear that shoulder-held anti-aircraft missiles may be used against aircraft taking off from Heathrow. EU members find themselves split on their reactions to the Iraqi situation. This morning, Spanish and German representatives met to try to iron out their differences.

  Jeff Bailey   2/11/03,  11:40:58 PM
QQQ ... here is a Daily Interval chart of the QQQ. This is the "daily" version of Tuesday night's Index Trader Wrap where we looked at the QQQ on 15-minute interval. Link

In yesterday's (Tuesday) market monitor (see 12:35:31) a subscriber sent me an e-mail saying "Jeff: $24.61 on QQQ was high end of down channel line." For the life of me, I coudn't figure out where he was taking this trend from. Later in the evening, after I asked him, he sent me a chart where he had taken trend from the January 23 high of $25.84.

His "trend" did make sense on his chart, and if that's the trend and channel he is trading then so be it.

I took a regression channel from the December 2nd high of $28.79 (2 Std. Dev.) and drug it lower. This is shown in the above chart. Here too we see some interesting correlation perhaps with what the subscriber was looking at. From last Tuesday evening's Index Wrap, I'm pretty firm in my decision that a stop in a bearish QQQ trade should be placed just above today's high at most. Also... interesting correlation to downside at $22.90 in QQQ WEEKLY S2 and lower end of regression channel and not too far off from lower Bollinger band of $23.01.

Lots of things saying "lower." If so, then QQQ should NOT trade above today's high. Right?

  John Seckinger   2/11/03,  10:06:49 PM
The Futures Trader Wrap has been posted: Link

  Steven Price   2/11/03,  10:06:40 PM
The Swing Trade Game Plan has been posted: Link

  Steven Price   2/11/03,  10:05:44 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.

  Jeff Bailey   2/11/03,  12:09:39 AM
Is this subscriber an elephant? Per last night's Index Trader Wrap and comments regarding large volume spike... Hi Jeff: I think that was the day the hug QQQ 45 put 05 trade was executed. 100,000+ contracts.

He's right! And must have a mind like an elephant to remember such an "obsure" but rather impressive options trade. I looked at this put option contrac (XCWMS) and sure as heck, this far in the money contract traded an impressive 430,000 contracts that day. Time and sales shows 10:14:46 size of 25,000 at $21.10, then next trade at 10:17:01 37,500 at $21.20, then a bunch of 9,000 starting at 10:28:17 to 10:37:27 all at $21.00, then two more large trades of 37,500 at $21.20, 10:58:57 another 25,000 at $21.10.

All of this looks like "crossing" of some sort between or among institutions and I can't tell if these orders were "sell" or "buy," but thinking is that these trades were "sell" related as it doesn't make too much sense to be buying so far out the money.

Now... Strike price ($45), minus the premiums received (say $21.10) is $23.90 in the QQQ.

Does $23.90 make any sense to anyone? Holy crud! This is our "neckline" point of $23.90. Tomorrow, if QQQ breaks below DAILY S1 of $23.84 be on the alert for some potential bearish action. Thinking is if these option were sold on Feb. 6th, then SELLER is OBLIGATED to BUY at $45-$21.10= $23.90 and may start coming in on a QQQ short to hedge a bit.

Now... he/she may not have to be overly aggressive at this point and may well have had intention all along of using the proceeds from the put selling to accumulate LONG position in the QQQ or NASDAQ-100. Still, observation was made in tonight's wrap that there's some "interest" and perhaps disagreement on the QQQ at current levels, so be alert!

Open Interest on this contract is currently 191,439.


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