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  Jeff Bailey   2/18/03,  10:11:26 PM
Split impact of MSFT on Index weightings What is the impact of the MSFT split on its percentage in the QQQ, Dow and the S&P 500. Will this change the sensitivity of the indexes in response to the movement of MSFT? I monitor MSFT as I trade the Futures.

Should not be any impact (up or down) on weighting in QQQ, SPX, OEX or Dow. Quick check of NASDAQ-100 Weighting Link shows MSFT at 11.72% and MSFT has been around the 12% weighting in recent weeks.

In tonight's Index Trader wrap, we see bullish % showing 1-net gain of stocks to reversing p/f buy signals. This is because the 2:1 split in MSFT becomes "adjusted" and now shows a "buy signal" on MSFT at $27 Link

I can "trick" the p/f chart of MSFT, switch the box size to $0.50 (since stock split 2:1, can change box size to 0.50 to see how MSFT's p/f chart used to look pre-split) Link

I will say this. I was once short Amazon.com (AMZN) pre-split. Just after stock split 2:1, p/f chart all of a sudden was "bullish" and days later a bullish triangle unfolded. Got stopped out "early" for a loss. Lesson learned was that I must honor CURRENT p/f chart, especially if short a rather "bullish" p/f chart.

  Kent Barton   2/18/03,  5:19:45 PM
Barr Labs (BRL, $76.08 +2.28) declared a 3-for-2 stock split after the bell. The split will be distributed on or about March 17th to shareholders of record on February 28th.

  Steven Price   2/18/03,  3:54:17 PM
Swing Trade Signals
Spoke too soon. Back over 8000 to 8021, lots of conflicting signals and I'm on the sidelines.

  Linda Piazza   2/18/03,  3:53:54 PM
As requested by a reader, here’s an update on the SPX descending trendline that I first mentioned in my 11:06 post today. This shows what’s been happening to SPX prices with respect to that trendline. Link

  Jeff Bailey   2/18/03,  3:51:32 PM
The 3:15 PM Intraday Update has been posted. Link

  Steven Price   2/18/03,  3:50:29 PM
Swing Trade Signals
Sorry for the long delay between entries, I've been in a pick meeting that lasted longer than usual. I think the fade in the Dow back below 8000 looks bearish. That doesn't change the fact that we are up almost 400 points since Thursday morning. However, If we close below that level, I'll be deciding whether I think that 8000 can still be considered resistance. I'd still like to see a test of 8150, which I think is a tougher level to break and I'd get back in short with a tight stop there. Aggressive traders, however, may want to lean short after an awfully big fade.

  Linda Piazza   2/18/03,  3:36:49 PM
Here’s a chart showing the candlestick support I described in my 3:24 post. Here you can see the support of Thursday’s candle being successfully tested before markets moved up, as well as the potential midline support offered by today’s larger-than-normal white candle. This may seem like voodoo, but it’s simply a 50% retracement of a big move. Link (Note: I've marked the midline of the candle, not including the shadow.) As I mentioned earlier, a move below that midline support would be considered bearish while a successful test of the support would be considered bullish. If markets should continue to fall, I’ll be watching that level.

  Jonathan Levinson   2/18/03,  3:28:35 PM
We are seeing our first red candle of the day on the 60 minute stoch as the COMPX returns to 1333 support. The TRINQ has "rallied" to .26 (heavy sarcasm on a slow afternoon) as QQQ falls below 25.00. The ADX, which I've been testing intraday today, gave a sell signal very early in the move and has yet to whipsaw out of it. VXN has gone positive and QQV is +1.27 on the day, as the TICK.NQ goes below -200.

  Linda Piazza   2/18/03,  3:24:45 PM
Today’s first SPX 60-minute candle was another of those larger-than-normal white candles that candlestick theorists sometimes watch. Candlestick theorists expect to find support midway down that white candle, and it’s considered bullish if that support holds and bearish if it does not. Last Thursday, we saw a similar larger-than-normal white candle. That candle’s midline support was successfully tested Thursday afternoon and again on Friday and held, and markets climbed higher. Today, that midline support is found at SPX 842.67 (body and shadow) or 841.84 (body only). Comparable levels for the OEX are 427.22 (body and shadow) or 426.83 (body only).

  Jeff Bailey   2/18/03,  3:24:39 PM
BP Amoco (BP) $38.92 +0.95% ....stock steady near its highs. Company saying that a fire at its 410,000 barrel-per-day refinery in Whiting, Indiana, has been contained, and said the refinery has not been shut down.

Officials could not give details, however, CNBC reported that a catalytic converter may have been sourse of fire.

This news hit the wires when Dow started trading off its highs. Might have had some traders a bit "fearful" of some type of terrorist activity, but doesn't appear to be the case at BP refinery.

  John Seckinger   2/18/03,  3:20:48 PM
Bond market closes, daily R2 penetrated, and weakness takes over. I will look for support at the 7985 level, and would not like to see the Dow get back above its daily R2 at 8031.

  Jeff Bailey   2/18/03,  3:15:50 PM
Dow Industrials (INDU) 8,021 +1.42% ... starting to "fade" a bit from the highs.

Treasuries closed for trading and by session's end, the long end (30-year and 10-year) reversed earlier losses to finish marginally positive on price, lower on YIELD. 10-year YIELD ($TNX.X) finished with 3.948%. Shorter-dated 5-year futures (fv03h) $113'045 was off just fractionally -'005, with YIELD ($FVX.X) 2.92% marginally higher.

  Jonathan Levinson   2/18/03,  3:09:32 PM
NEW YORK, Feb 18 (Reuters) - BP Plc (London:BP.L - News; NYSE:BP - News) said a fire at its 410,000 barrel-per-day (bpd) refinery in Whiting, Indiana, has been contained, and added that refinery has not been shut down.

  Jeff Bailey   2/18/03,  3:07:31 PM
QQQ $25.08 +2.36% .... similar action on intra-day basis as 03:03:25 post with the Dow. Current QQQ trade is $25.08 and this is DAILY R2. 5-minute chart of QQQ shows 50-pd SMA holding support right here, and served as support on Friday from afternoon rally on.

  Jonathan Levinson   2/18/03,  3:07:12 PM
The COMPX pulled back before reaching the 1350 level and is back below 1340. FVX is closed flat on the day, +.5 bps, and TNX flat in the red. Little else is changed on my breadth indicators. Other than the opening action, today has been a very quiet day.

  John Seckinger   2/18/03,  3:04:37 PM
Here is something that confuses me. The yen is higher against the dollar, and analysts attributed this to repatriation and less of a chance of intervention by Japanese authorities. There is usually a seasonal move of yen back to Japan for year-end book closings on March 31, but that is not cited as the real reason. This is only confusing because the overall dollar index is higher. It makes sense on a yield curve and stock relationship, since Japan could be selling five-year notes to raise cash to buy Yen. Selling five-year notes would then have speculators look to sell fives as well and buy stocks. Note: The Dow has fallen under its Daily R2.

  Jeff Bailey   2/18/03,  3:03:25 PM
Dow Industrials (INDU) 8,033 +1.58% ... little "afternoon low" here, but comes right at the DAILY R2 of 8,031.10, which most likely becomes an intra-day level of support, where "resistance" from this level was broken to the upside. Shorter-term traders will monitor here for 5-minute bar-chart interval close below the 8,031 level. Nothing major here, but first little sign on intra-day basis of some softening from a very bullish day.

  Linda Piazza   2/18/03,  3:00:33 PM
The VIX again approaches that 35.50 level that has marked lows for the last two weeks, but has so far moved up each time it pushes below that level. Today’s low has been 35.25, just below the 22-dma of 35.38.

  Linda Piazza   2/18/03,  2:53:36 PM
As the two S&P’s test their descending trendlines today, the hourly candles grow smaller, a visual confirmation of indecision. That indecision can result in a move either direction, but for now those tiny candles signal a reluctance or inability to move the markets higher after this morning’s explosive move. Perhaps that indecision is shortly to be resolved, after the bond markets close.

  Linda Piazza   2/18/03,  2:41:48 PM
Wouldn’t it be nice if some of the U.S. tech stocks had offered this deal back in early 2000? Sumitomo Mitsui, Japan’s troubled second-largest bank, needs to sell preferred shares this week in a move some have called “desperate.” That adjective gained extra weight today as the bank promised to gift investors with extra shares when they convert, if the stock has fallen further before that conversation occurs. They promise to compensate for 40-50% of any losses.

  John Seckinger   2/18/03,  2:38:41 PM
I am starting to wonder if market participants are just waiting for the bond market to close. Note: The CDC in Atlanta was evacuated due to a chemical alarm, I believe.

  Jonathan Levinson   2/18/03,  2:37:23 PM
Word of explosions at the Centre for Disease Control in Atlanta (video shows calm evacuation and building intact), and at an oil refinery in Indiana which is apparently out of control. I have not confirmed this data yet.

  Jonathan Levinson   2/18/03,  2:35:19 PM
Despite the continued decline in FVX, the COMPX continues higher, with the latest round of highs at 1343. We're now targeting 1350 as the next resistance zone. The TRINQ managed to squeeze down to .24, impressive given how low it was to begin with. The TICK.NQ managed to squeek up to +100, indicating narrow breadth in buying. VXN has finally gone negative while QQV holds positive at 41.36 +1.08. FVX has sunk along with the COMPX as I typed this, now +1.2 bps on the day.

  Jeff Bailey   2/18/03,  2:19:42 PM
The 1:00 PM Intraday Update has been posted. Link

  Linda Piazza   2/18/03,  2:17:09 PM
The February Factory Index for New York fell to 1.3 from January’s 20.72, surprising economists who had expected the number to be above 10, and probably near 16. With inventories higher in late 2002 and with components showing both orders and factory shipments falling in February, manufacturers may have been reluctant to boost production. Thursday sees the release of the Philadelphia Fed’s manufacturing survey and some see the New York number as a harbinger of a lower number there, too.

  John Seckinger   2/18/03,  1:58:48 PM
Nobody really seems to know what is going on in the bond pits, since traders that went long into the weekend liquidiated their positions at the start of trading today. Well, if only they followed the yield curve. The five-year note is down '04 ticks and the long bond is higher by '03 ticks. Traders bearish on stocks that were long five-year notes and short bonds are ALSO liquidation their position by selling fives and buying back their bond shorts. This is what is giving the bid in bonds. It is a temporary thing, but it certainly could mean that stocks will keep their bid for the next hour until the bond market closes.

  Linda Piazza   2/18/03,  1:53:56 PM
The SPX still challenges that descending line from mid-January, but has not yet been able to break cleanly above that level. (See my 11:06 post.) The resistance formed by that descending trendline also corresponds with the resistance that might be expected as the SPX attempts to move over its (simple) 21-dma at 852. There’s also some slight historical R/S in this area. Here’s what I see so far: after a steep fall, the SPX makes a light-volume but explosive run-up to resistance, then stalls while 60-minute stochastics—both 5(3)3 and 21(3)3—flatten in overbought territory. Although I’m willing to be convinced otherwise, so far this looks like a textbook short-covering bounce. My strongest reserve comes from the knowledge that bullish percent levels are so low. The point is, though, that we won’t know whether this is only a technical bounce or not until we see the outcome of the test, and bearish traders should not be overconfident that the markets “have to” turn around again. Many of us began warning seven or eight trading days ago that a technical bounce was due, and hopefully, those overleveraged in bearish positions were able to lighten those positions ahead of this bounce.

  Kent Barton   2/18/03,  1:52:58 PM
The software index has gotten quite a pop over the past two days. Thanks to sector-wide short-covering, the GSO.X is now trading just under its 50-dma at 106.50. Slapping a retracement bracket on a daily chart from the January high to February low, you'll notice that this moving average roughly coincides with the 38% level.

Meanwhile, MSFT is approaching psychological resistance at $25.00 ($50.00 on a pre-split basis). Software bulls will be looking for a move through this level to fuel a continued rally in the GSO.X.

  Jonathan Levinson   2/18/03,  1:45:13 PM
Volumes are very light on the major exchanges, with the COMPX trading 807M shares so far, NYSE 881M shares. Of that, there are more than 6 advancing shares for each declining on each exchange. On the COMPX, the TRINQ remains in the cellar, .26, with the TICK.NQ near neutral at +38. Speaking of cellars, HUI and XAU have taken a few steps back toward theirs, with HUI -2.57 and XAU -.32. FVX is also pulling back, now up 2.2 bps on the day.

  John Seckinger   2/18/03,  1:42:08 PM
Bulls are defending the daily R2 level in the Dow (8031), while Bears are defending some strong resistance just above. As hard as it is to say, I will continue to think of higher prices until 8031 is cleared. Some of the other markets (futures) have already hit very solid resistance levels, so technically I would like to see this resistance hold and bond prices continue to go green and stock prices roll. However, I will be patient and wait until 8031 is cleared.

  Kent Barton   2/18/03,  1:27:14 PM
Cytyc (CYTC) $12.92 +0.40: CYTC is responding well to the broader market bullishness today. Late last week it looked as if the buyers might be exhausted after the rapid move up from $12.00. This was especially evident on Friday afternoon, when shares traded sideways while the major indexes moved higher. Today the previous pattern of relative strength has returned. CYTC is trading at new multi-month highs and now roughly one dollar away from our profit-target at $13.94. The next challenge for the bulls will be whole-number resistance at $13.00. Some traders might want to consider closing out a portion of their short positions if CYTC rolls over from this level.

  Jeff Bailey   2/18/03,  1:09:02 PM
Dow Industrials (INDU) 8,072 +2% ... making a session high here and a "bear's resolve" will be tested near-term.

10-year YIELD ($TNX.X) 3.974% is at roughly mid-point of today's YIELD range and at this point, not really "confirming" the move in the Dow at this point, with any type of pickup in selling. Session high YIELD has been 3.995%.

  John Seckinger   2/18/03,  1:02:59 PM
With the thinking beginning at 9:38, the Dow continues to show an "open drive" pattern higher. A move back under the daily R2 level would have me thinking on a more neutral level, but bulls have held this level during the last hour. The main objective is at 8120, with 8104 offering some resistance along the way. The daily R2 is below at 8031.

  Jonathan Levinson   2/18/03,  1:00:27 PM
Just a moment to reflect on the immense repo that Al Green fired off today. $15 billion is a pretty penny, even by the fed's standards. Reader Matt speculates that this sum is added to assist the fed's 22 primary dealers in supporting the runup in equities, while my first impression was that it was intended to paint one those huge red candles on the TYX chart. Others speculate that it's simply intended as a quick liquification for banks amid an east-coast blizzard and war fears. Perhaps Al Green was frightened by Arch Crawford's apocalyptic predictions. There's no way to know, but it's always a good idea to know where the gunpowder is being stored. Until its expiry tomorrow, we know of 15B sitting in the hands of the fed's primary dealers.

  Jeff Bailey   2/18/03,  12:58:06 PM
Boots&Coots (WEL) $0.34 -30.6% ... Company announced that its lender Checkpoint Business has presented a proposal to its board of directors to restructure WEL. The proposal would involve a voluntary Chapter 11 bankruptcy filing by WEL and the cancellation of its common equity as part of the bankruptcy process. WEL considering the proposal from Checkpoint and possible alternatives, but has not made any decision about the proposal at this point.

  Steven Price   2/18/03,  12:54:14 PM
EMC $8.29 (+0.38) OI call play EMC set a new relative high today, breaking the old one of $8.28 to trade $8.34. It is curretnly finding support at that old high, but struggling. I like a move higher from here to a new relative hig for new entries, as it will indicate previous resistance as support.

  Jeff Bailey   2/18/03,  12:50:34 PM
Forest Labs (FRX) $49.40 +6.81% ... stock continues bit of a turnaround from Friday morning after UBS Warburg said it believes that FRX is a good long-term story, despite recent weakness due to lack of short-term catalyst. Says stock should be driven by the successful launch of Lexapro, and believes second-half of 2003 should be good for FRX based on positive news from Memantine. Firm made note that stock was trading (on Friday) at 23 times earnings, yet for the past 15-years has traded 27 times earnings.

  John Seckinger   2/18/03,  12:49:44 PM
Looking at the 10-year note, the current yield stands at 3.982%. The pivot appears to be at the 4.00% level. A break to lower yields should take the contract to the 2/13 close of 3.87%. The December 30th close of 3.797% would be next, with support below felt at 3.7%. Yield resistance is seen at 4.18% (1/09 close) and 4.26% (10/22 & 11/27).

  Jonathan Levinson   2/18/03,  12:49:42 PM
Many have been discussing COMPX volatility. While I favor the QQV for my QQQ trades, the COMPX volatility index is the VXN. There's been much ado about the bullish descending wedge breakout of the VXN last week, and it seems to be holding its gains today. The VXN is the VIX, but for the COMPX.

Why are we seeing this divergence, particularly today as the COMPX rallies? The obvious answer is that it's signalling a sharp fall to come. If the VXN is in a bullish breakout, then it implies that the COMPX is ready for a bearish breakdown, as the VXN normally "trades" inversely to COMPX. Well, that sure hasn't worked out so far today, but these are longer cycles we're discussing, and today's daily candle is still in the process of printing. Nevertheless, why are VXN and QQV up today if not because of this bearish divergence? They're telling us that implied volatility is rising in the top traded option contracts on those indices. Is "fear higher on the COMPX/QQQ today? Doesn't look like it. Perhaps the sudden jump has jacked up call option premium, and perhaps disbelief or mistrust in this move has caused put traders to hang on to their contracts a little tighter, while bidders are willing to pay more for those contracts because they believe that a fall is just ahead. This latter interpretation coincides with the surprisingly higher put to call ratios we saw on Friday and today. If so, a contrarian who's trading bullish here should be comforted by the persistent bearishness on this rally. As always, the market leaves us with competing interpretations and a big fat question mark.

  Mark Phillips   2/18/03,  12:48:10 PM
Insurance Stocks Is it the end of the decline or the setup for a new bearish entry? With the Insurance index (IUX.X) up better than 2% so far today and trading at the high of the day, there sure isn't an indication of weakness yet today. That is the backdrop for our two OI Put plays on CB and HIG. While neither stock is up strongly today, the fact that they are up at all and trading at their highs of the day means that traders looking for a rollover before initiating new bearish positions.

Of the two, HIG looks to be the weakest, as it is still sitting well below its 10-dma ($38.40). In contrast, shares of CB are pushing above the 10-dma (currently $49.67), and that looks like relative strength to me. That said, for traders willing to take the risk, CB is closing in on significant resistance between $50.00-50.50. A rollover in this area can be used for new entries, keeping in mind that our stop remains in place at $50.75. On a risk/reward basis new entries on CB in that area look favorable, but only if we see some weakness there first.

  Linda Piazza   2/18/03,  12:46:00 PM
New lows still outnumber new highs on the NYSE, and now new lows draw nearly even to new highs on the Nasdaq, with 51 new lows and 53 new highs. Earlier, new highs had outstripped new lows on the Nasdaq. Adv/dec numbers show a 2.6 ratio on the NYSE-traded issues and a 1.84 ratio on the Nasdaq. Up volume is 7.4 times down volume on the NYSE and just over 7 times down volume on the Nasdaq, with those ratios remaining relatively stable since mid-morning. Volume stands at 562 million shares on the NYSE and 687 million on the Nasdaq.

  Mark Phillips   2/18/03,  12:37:28 PM
AMGN $53.49 (+0.89) While the broad markets are strongly positive today, the Biotechs are once again lagging. the BTK index is only up 1%, vs. 2-3% gains in the broad market. Despite the lack of sector strength, AMGN is continuing the rebound that began on Friday, tacking on another 1.7% today and currently trading at its high of the day. Once again, the rebound from ascending trendline (currently $51.60) proves the merits of buying bounces from that level. Traders looking to buy a breakout just might get a chance later today, depending on how the stock behaves when it reaches the $54 level. Last week's intraday high was $53.96, and a push through the $54 level can be used for momentum entries, although today's light volume doesn't inspire confidence.

  Linda Piazza   2/18/03,  12:34:13 PM
The FTSE 100 and CAC 40 closed up 1% and 1.965%, respectively. The DAX still trades and currently is up by 15.66 points.

  Mark Phillips   2/18/03,  12:23:29 PM
EXPE $62.87 (+3.12) This new OI Put Play got one heckuva strong bounce this morning, continuing the rebound that started on Friday. Currently trading near the high of the day, the stock continues to work on resistance at that descending trendline (currently $62.80) that began with the late November highs. With daily Stochastics (5,3,3) now in a solid bullish ascent, new bearish entries near current levels carry higher risk, as it bucks the recent (past 2 days) trend. While the hourly oscillators are buried in overbought territory, I wouldn't be in favor of new bearish entries here unless we see these shorter-term oscillators post bearish reversals along with the stock dropping back under the $62.30 area, which provided intraday support on the last pullback. More conservative traders will want to see a break under $61 (support after this morning's gap up) before playing. Remember that our stop is set at $63.10, and a close above that level will have us dropping the play tonight.

  John Seckinger   2/18/03,  12:12:16 PM
As the Dow has yet to test its daily R2 level from above (8031), the dollar index (DX00Y) continues to make headway higher and is back above the 100 level. Gains in equities seem to be pressuring the Yen lower and getting cash to enter into the Greenback. The 100.20 area should be a good test going forward (currently near 100.07 now), and resistance is certainly tiered above if that level is cleared (100.40, 100.60, and 100.80). A move back below 99.75 should have longs liquidiating once again, and would be good reason for equity bears to get involved.

  Jeff Bailey   2/18/03,  12:03:16 PM
The 11:00 AM Intraday Update has been posted. Link

  Jonathan Levinson   2/18/03,  11:58:03 AM
HUI and XAU are recovering from their lows, currently -1.51 and +.35 respectively. FVX has stabilized, currently +4.3 bps on the day. COMPX 1333 continues to provide support. A break of this level should bring into play next support at 1328, followed by 1318-20.

  Linda Piazza   2/18/03,  11:52:46 AM
The current death toll for the South Korean subway fire is set at 120 people. Witnesses reported seeing a man throwing plastic bottles containing flammable liquids. Since the man reportedly has a history of mental illness, it’s not clear that this arson would be associated with recent upheavals in that region. Although Iraq has garnered the lion’s share of attention, North Korea today threatened that it might withdraw from the armistice that ended the Korean War. North Korea claims that when the U.S. began troop buildups in the area, it violated the accord and that continued violations will nullify it. China has been brokering a peaceful resolution to the dispute over the North Korean nuclear program, and North Korea balanced its threatening stance today by agreeing that the dispute should be resolved through dialogue.

  Steven Price   2/18/03,  11:46:33 AM
Swing Trade Signals
Given the fact that we are hovering in the previous range 7950-8150, I really don't have a good feel for direction from here for more than an intraday basis. I think after a bounce of over 400 Dow points in 3 days, we are bound to give something back. However, if we do get an uprutrn in bullish percents by the end of the day, that would indicate a possible longer term bounce. Obviously geo-political events continue to be the wild card here and make picking direction over a 2-3 day period more difficult. While I am still leaning short in my own mind, we got PnF buy signals in the OEX and SPX, although the OEX (2.5 box) is up against a descending trendline and all major indices are approaching heavy resistance. I am simply seeing too many conflicting signals to feel comfortable with entry right now.

  John Seckinger   2/18/03,  11:43:44 AM
The aggressive bullish channel in the Dow has certainly been broken, and we should have our test of the Daily R2 level at 8031 momentarily. This should be a good test of bulls' conviction.

  Linda Piazza   2/18/03,  11:42:05 AM
Current volume patterns show the adv/dec ratios at 2.75 for NYSE-traded issues and 1.74 for Nasdaq-traded issues. New lows have now advanced beyond new highs on the NYSE, although new highs still outrank new lows on the Nasdaq. Up volume is almost 7 times down volume on the NYSE and about 7.2 times down volume on the Nasdaq. Volume now stands at 415 million shares traded on the NYSE and 540 million on the Nasdaq.

  Jonathan Levinson   2/18/03,  11:42:01 AM
The COMPX is backing off its highs slowly, back to short term support at 1333. The TRINQ remains very low at .25, TICK.NQ +61, and the QQV is still up over 2 points on the day. FVX has continued to slide, now up 4.3 bps on the day. I believe that the fade in the FVX and the persistence in the QQQ and COMPX volatility indices should have bulls on alert, although the uptrend from Thursday remains intact.

  John Seckinger   2/18/03,  11:26:56 AM
Reuters Group Plc announced today that it will buy Multex.com for $195 million cash. Reuters already owned six percent of the U.S.-based firm. Then the bad news surfaced. Reuters announced 3,000 more job cuts and warned of revenues falling faster than expected. The company reported a net loss of 394 million pounds ($631 million), the biggest in its 151-year history. Shares fell to a 14-year low, and are lower by 1.78-points to 13.02. Ticker: RTRSY.

  Jeff Bailey   2/18/03,  11:19:01 AM
Dow Industrials (INDU) 8,053 +1.82% ... hovering right near WEEKLY R1 of 8053.20. Bearish traders that took some chips off the table late Thursday, or Friday might look short/put with 1/4 positions here, stop above 8,125, target 7,850 (WEEKLY Pivot).

  Linda Piazza   2/18/03,  11:12:03 AM
The XAU has been testing its simple 200-dma at 71.76 today. Currently at 71.76, the XAU also remains above its exponential 200-dma at 70.44. That exponential 200-dma appears to be flattening on the daily chart.

  Jonathan Levinson   2/18/03,  11:11:06 AM
The FVX continues to fade slowly from its highs, diverging from the COMPX and QQQ. This is clearly an upside break of the bullish descending wedge on the COMPX daily candles. Just as the head and shoulders pattern on that same timeframe didn't reach its projected low of approximately 1200, so we will watch the projected high from this descending wedge breakout of approximately 1400. The h&s neckline continues to be tested from the downside at current levels, and the COMPX is clearly short term overbought after tacking on better than 70 points since Thursday. This is currently a difficult level to trade in either direction with different trendlines battling it out.

  Linda Piazza   2/18/03,  11:06:13 AM
Here’s another chart I’m watching for market guidance today. This is a 60-minute chart of the SPX, showing that the SPX currently challenges a trendline (red) that’s been capping the SPX’s movements since January 29. Link

  John Seckinger   2/18/03,  11:00:03 AM
It is interesting that the 30-year is only lower by '11 ticks as the Dow races higher by about 160-points and now in a tight bullish regression channel. The five-year note is getting crushed, so that could explain some of the cash fueling the equity rally. Is this going to be one of those days when the blue chips slowly edges higher all session? Until the Dow trades back under R2 and 8031, there is a good chance. On a daily chart, the next significant retracement level comes in at 8120.

  Jeff Bailey   2/18/03,  10:55:26 AM
10-year Treasury YIELD ($TNX.X) 3.985% ... shows selling today and higher yield and has traded its rounding lower 50-day SMA of 3.995% in early going, and just off that level here. 10-year YIELD has not been able to close above 50-day SMA since falling below on 01/17/03. Still withing "BIG WEDGE" noted in previous commentary and bounced strong from upward trend tested on Thursday, in Friday's session. Close above 4.0% YIELD has 4.05% in play (downward trend of wedge). Would monitor this YIELD closely next couple of sessions along with stock. If YIELD stalls out here, no further selling, then may tie in with John Seckinger's "zone of resistance" on Dow (see 10:19:55) and my SPX zone of resistance 850-855 (see 10:14:07).

  Linda Piazza   2/18/03,  10:50:39 AM
This is proving to be an interesting day. Depending on how you draw the necklines, many indices are currently challenging their H&S necklines. Of course, it’s natural and expected that they should do so, so why does it feel so bullish when that test occurs? I caution that it’s not until we see how markets behave on this test that we can begin to build a bullish case. Right now, the only certainty is that we’re seeing the kind of “throwback” to the previously broken trendline that Martin Pring and observation say often happens.

  Jeff Bailey   2/18/03,  10:46:43 AM
Symantec (SYMC) $45.90 +2.45% ... computer security software maker higher today after receiving positive comments from a ThinkEquity analyst after a report by the federal government released late Friday titled "The National Strategy to Secure Cyberspace." In the report Link , the government advocates the importance of secure networking technologies and its importance as a component of its IT spending initiative. The analyst at ThinkEquity believes heightened focus on computer network security bodes well for SYMC, not only on government front, but also consumer.

P/F chart of SYMC is bullish and really looks to "buck the trend" of broader marekt and software sector. Bullish vertical count is $67 (column of O from $31-$42) and first sign of trouble would be a trade at $43. Link

  Jonathan Levinson   2/18/03,  10:44:42 AM
After a shallow pullback the COMPX is headed for its highs, as the TRINQ falls back to .25 and the TICK.NQ rises to +2.06. QQV remains high, however, and the persistence of QQQ volatility today puts at least some doubt on the rally so far. FVX is down a touch, now +6.1 bps on the day. QQQ continues to struggle to gain the 25.00 level.

  Linda Piazza   2/18/03,  10:40:21 AM
At 36.42 as of this typing, the VIX looks to move down to test first support in the 35.50 area. Below that is a cluster of MA’s between 32.59 and 35.42 that should provide support.

  John Seckinger   2/18/03,  10:38:31 AM
As the Dow continues to consolidate right around the daily R2 level, one economic note that can be mentioned is that the Department of Labor revised December's unchanged PPI reading to -0.1%, with the core revised to -0.5% (from -0.3%). The Nov decline was increased to -0.3% (from -0.4%), with the core revised to -0.1% (from -0.3%). These revisions are based on seasonal adjustments.

  Linda Piazza   2/18/03,  10:32:33 AM
In early trading today, volume patterns show the expected buying. Adv/dec ratios stand at 3.12 for the NYSE and 1.75 for the Nasdaq. Up volume is 7.4 times down volume on the NYSE and 6.3 times down volume on the Nasdaq. I wouldn’t want to step in front of this train by entering the opposite direction, but I do note extremely light volume at 197 million shares on the NYSE and 306 million on the Nasdaq. That does not yet show much confirmation of today’s move. New highs outrank new lows for the first time in a while. Last week, I noted that the new lows had reached a crescendo, and now I make note that perhaps that was a harbinger of a rally, whether a bear-market rally or the start of something more substantial.

  Jonathan Levinson   2/18/03,  10:31:35 AM
Trader talk that most trading desks are short staffed due to the east-coast blizzard today.

  Linda Piazza   2/18/03,  10:22:04 AM
I’m noticing that while the S&P’s and the DOW have climbed above the former support-turned-resistance from the consolidation in late January and early February, the Russell 2000 lags, having not yet challenged that area on today’s move up. At 8013.74 as of this writing, the Wilshire 5000 currently challenges that level at about 8026.

  John Seckinger   2/18/03,  10:19:55 AM
Using daily, weekly, and monthly retracement analysis, I have a "resistance zone" from 8050 to 8062. I think this is why the Dow appears heavy right now.

  Jonathan Levinson   2/18/03,  10:14:34 AM
The TRINQ touched .22 and is now at .27, showing buying hysteria on the COMPX. The TICK.NQ is +80, showing that this is very concentrated buying so far. FVX is holding its gains, +.66, and HUI and XAU are off their lows, now -3 and -.52 respectively. The COMPX pulled back from 1335, which coincides with its h&s neckline on the daily candles. The pullback so far is very shallow.

  Jeff Bailey   2/18/03,  10:14:07 AM
S&P 500 Index (SPX.X) 848.65 +1.64% .... Approaching WEEKLY R1 of 849.80. Late Friday evening, I place conventional retracement (Oct. low-Dec. high) along with "fitted" retracement's from MONTHLY and WEEKLY S2-R2s. Currently looking for resistance in the SPX from 850-855 area.

  Linda Piazza   2/18/03,  10:10:39 AM
Here’s one chart to watch today. CSCO challenged its exponential 200-dma at 14.11, having moved just above it at 14.23 this morning. The thick green line marks a reverse H&S neckline. CSCO fell back after testing that neckline in January, but it’s not uncommon for two right shoulders to be formed. I’ll be watching for a daily close above that exponential 200-dma and a push back toward that neckline. Of concern to those bullish on CSCO, however, are the oversold indications of the 5(3)3 stochastics and RSI. The more reliable 21(3)3 stochastics are just now moving up out of oversold levels, however. Link

  Jeff Bailey   2/18/03,  10:03:39 AM
Boots&Coots (WEL) $0.40 -18% ... Jeff, Did you check out WEL this morning? Looks like the "war thermometer" is dropping!

Yes I saw this. At dinner last night with my father, he said something to me about what I thought of an Iraq newspaper calling for Saddam Hussein to step down. This was "news to me" and I've been trying to find anything on it in the various news sources we have. Not that I don't believe my father actually heard this on the radio (he listens to the radio a lot), just want to make sure (he'd getting up there in his age). My question is... if an Iraqi newspaper did print "Saddam should step down," is the editor or columnist still alive today?

Disclosure: I currently hold SPECULATIVE bullish position in WEL.

  John Seckinger   2/18/03,  10:00:45 AM
We tested the daily R2 level in the Dow at 8031, but didn't get a five-minute close above. Using fitted retracements based off the first five-minutes (0% at 7909 and 19.1% at 7985), resistance above R2 is seen at 8060, 8104, and 8150. Resistance via this method doesn't end until 8300. Last Thursday, the Dow did trade below all support levels found via fitted retracements, and then rallied strongly.

  Jonathan Levinson   2/18/03,  9:58:13 AM
The fed has just announced a whopping 15B overnight repo, for a net add of 13B. This is a huge amount, and tells me that the fed is very concerned about something. Could it be the selling in bonds we're seeing today?

  Linda Piazza   2/18/03,  9:53:38 AM
Is this rally real or is it another bear-market rally? I don’t know, but until evidence proves otherwise, I’ll consider it another bear-market rally. That doesn’t mean I’m advising holding onto losing bearish positions, but neither would I necessarily advise anyone other than scalpers to enter long just yet. On January 8, I wrote the following post, noting the configuration in the various indicators and looking for a similar configuration in past sessions: The daily OEX chart shows a bearish kiss of the 5(3)3 stochastics, with MACD flattening near zero after approaching that level from below, and with the RSI (14) turning down from the 55 level. I scanned across the chart, looking for a similar configuration of indicators. I found it in the middle of May, just before the slide into July lows. That doesn't mean that a similar slide will be repeated, but only that I'll now be watching for similar market behavior or for divergences from that behavior. As we know, we did get a slide in the indices. Since then, I’ve continued to look for similarities in that May-July slide and current market conditions. In particular, this weekend, I went looking for a three-candle configuration such as the one we saw the least three days of last week, coupled with a similar correlation in the oscillators. I found it on June 17. On the linked chart, the two blue lines mark the May top and the January rally. The two green lines mark correspondences between Friday’s configurations and June 17 configurations. Link

What happened next? The next day saw the NDX bullish percent reverse into bull alert from a 16% level. VIX and gold moved down. Funds rotated out of defensive sectors. However, after a day of consolidation, the markets continued the slide toward July lows. Of course, other conditions were different and so we can’t equate the situations exactly. Although NDX bullish percent was already very low, Dow bullish percent was at 42 the Sunday before June 17, so had much further to fall than it does now. We weren’t facing imminent war or perhaps information (or rumors) that would lift the war premium. Also, today, so far, the markets are doing anything but consolidating. Still, I’ll use past behavior to warn me against drawing too many bullish conclusions too soon.

  Jonathan Levinson   2/18/03,  9:50:45 AM
HUI and XAU are seeing selling today with the weakness in gold, with HUI -3.6 to 131.66 and XAU - 1.14 to 71.01.

  Steven Price   2/18/03,  9:48:21 AM
Swing Trade Signals
Got the push over 8000, which should leave all shorts out at this point and aggressive longs in with the move over 8015. I guess I'm in the passenger's seat until we get a test of Dow 8150. I'd actuallly like to get a look at the end of day bullish percents for a more decisive sign of a reversal, or lack of confirmation of the bounce. That doesn't mean I won't enter, but I'm leaning against it, with such strong resistance at 8150 on the bearish side, but a big reversal over the last 3 days on the bullish side.

Current levels: Dow 8031/COMP 1332/OEX 429.62/SPX 846.86

  John Seckinger   2/18/03,  9:44:31 AM
It is reported that Kuwait has shut down two oil fields in case of a war with Iraq. They moved some of their operations from the north to southern part of the country. March Light Sweet Crude Oil (CL03H) is lower by 0.40 cents at 36.40. In other news, after a weaker-than-expected NY Fed's Empire State manufacturing index, economists are revising their estimates for Thursday's Philly Fed report lower. Both the bond and stock market do not seem to be focusing on this at all.

  Steven Price   2/18/03,  9:42:54 AM
Swing Trade Signals
So far unable to crack Dow 8000 and aggressive shorts can think about a position here with a tight stop not far over 8000. Current levels: Dow 7994/SPX 843.76/OEX 427.88/COMP1327.

COMP above resistance at 1320, but Dow unable to confirm.

  Jonathan Levinson   2/18/03,  9:41:43 AM
The fed has 2B in expiring repos for today with the announcement due at 10AM. The COMPX has paused at 1328 and has pulled back a point, an old s/r line we remember well. The TRINQ is at .27, QQV down to a gain of 2.15 so far. Support will be at 1318-20.

  John Seckinger   2/18/03,  9:38:46 AM
With the first five-minutes behind us, the Dow posted a range of 7909 to 7985. For a potential "open drive" situation to take place, the Dow should stay above the 50% retracement of this range (7947). Looking upwards, R2 is at 8031. If this level is cleared, we will turn to "fitted retracements".

  Steven Price   2/18/03,  9:34:29 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out on the 1/2 short signal when the Dow traded 7950 at 9:31:44. Aggressive shorts should be the only shorts left at this point, with a stop over 8000.

  Jonathan Levinson   2/18/03,  9:32:48 AM
10 point gap up open on the COMPX to 1320, TRINQ .43, QQV +3.14 to 43.42.

  Jeff Bailey   2/18/03,  9:29:32 AM
The 9:00 AM Intraday Update has been posted. Link

  John Seckinger   2/18/03,  9:27:51 AM
Intra-day Pivot/Levels for Tuesday (02/18/03)...

INDU : S2= 7664, S1= 7786, P= 7847 , R1= 7970 , R2= 8031

SPX : S2= 808, S1= 822, P= 828, R1= 841, R2= 848

OEX : S2= 409, S1= 416, P= 419 , R1= 426, R2=429

NDX : S2= 943, S1=962 , P= 972, R1=992 , R2=1002

QQQ : S2= 23.32, S1= 23.91, P= 24.20 , R1= 24.79, R2= 25.08

  Steven Price   2/18/03,  9:24:49 AM
Swing Trade Signals
We are currently short a 1/2 position in the broader markets. The stop is set at Dow 7950. If we break that level, then 8000 is the next significant resistance level. Beyond 8000 is 8150 and if we break 8000, I will most likely sit out until we test 8150. Aggressive traders can play long over 8015, but should realize there is strong resistance just 135 points higher.

Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Current stop is set at 7950, but aggressive shorts can use a stop above 8000.

I suppose the Saddam exile rumors could be behind this morning's spike, but I'm having a hard time seeing why anyone would buy stocks in this environment. Still, as I pointed out in the Swing Wrap, given oversold bullish percents in the Dow and OEX, we could be in for a trend reversal. It looks like we have a good chance of being stopped out and more conservative traders can get out on the open if they so choose.

  Jonathan Levinson   2/18/03,  9:11:08 AM
Note that MSFT is now trading at post-split prices.

  Linda Piazza   2/18/03,  8:46:43 AM
European commentators tie the early-morning bounce in European markets to the release of the ZEW (German-based Center for European Economic Research) number this morning. Although expectations for the eurozone economy fell by 1.2 points, the Indicator for Economic Sentiment for Germany climbed slightly to 15. Although commentators say that it would take a 30 number to show a real recovery, eurozone markets bounced off the lows after that release and climbed to their highs. At 8:00 ET, the release of the eurozone industrial production figures, showing downward revisions in December as well as lower-than-expected numbers for January deflated some of the enthusiasm, driving the FTSE and the DAX into the red again, while the CAC remains up 17.71 points on the day. Our markets aren’t the only markets experiencing difficult trading conditions.

  Jonathan Levinson   2/18/03,  8:43:34 AM
08:23 ET Website reports Iraq has asked Iran to allow Saddam to flee : DPA, a German newswire, says that the news website Baztab (apparently an Iranian news site) is reporting that Iraq has asked Iran to allow Saddam to flee via Iran to political exile in Russia.

  Jonathan Levinson   2/18/03,  8:32:58 AM
QQQ is now trading 24.71. Bonds just opened with initial selling, FVX +2.6 bps, TNX +1.1 and TYX +0.2 bps.

  Jonathan Levinson   2/18/03,  8:14:51 AM
QQQ is trading higher by 10 cents from its Friday close, currently 24.59. The US Dollar Index is trading 100.50, while gold is currently 347/oz. NDX futures are 990, SPX 839.25. This was a very tense weekend in general and for traders in particular, and speculation about the top of last week's rally was rampant. Arch Crawford was calling for a terrible disaster and urging people to pray for peace, as people worldwide waited nervously on geopolitical developments. The consensus seems to be for the strongest resistance to appear in the SPX 860 area, with a smaller contingent eyeing SPX 843 as a possible rally top. In any event, these are key s/r levels we'll be watching.

  Linda Piazza   2/18/03,  6:54:34 AM
Good morning and commiserations to those of you digging out from the winter storm. European markets could be called stormy or at least choppy in the last two days’ trading. “We cannot speak of a rally,” said an Italian commentator at the close of Monday’s trading. “It is a technical rebound only.” That seemed to be the conclusion of many analysts after Monday’s European trading. One proof quoted was the rebound in beaten-down insurance and tech stocks such as factory controls maker Invensys, which had plummeted in Friday’s trading. Early Monday trading was quite volatile due to the light volume, but European benchmarks settled in the green, with the FTSE 100 moving up 2.23%, the CAC 40 moving up 1.92%, and the DAX moving up 1.36% and climbing above 2700 to end at 2710.85. Early today, European markets headed back down again after UBS, Switzerland’s largest bank, reported a new loss much wider than expected and said it doesn’t see improvement in its business soon. Reuters, reporting its first full-year loss, also said it doesn’t foresee a recovery soon. As of this writing, European markets have pulled off their lows, with the FTSE 100 now down only 9.30 points or .25%, the CAC 40 now up 5.02 points or .17%, and the DAX now up .70 points or .03%.

On Monday, Sumitomo Mitsui, Japan’s second largest bank, fell on the announcement that it will sell $2.5 billion of preferred shares, convertible to common stock as early as April. In a move called “desperate” by one fund manager, the bank plans the action to replenish funds lost through bad loans. Goldman Sachs has been hired to manage the sale of the stock. Sumitomo Mitsui joins four other banks planning to raise capital, including Mizuho Holdings, hit both by bad loans and by declines in the stock market. Despite these worries, exporters gained on Monday, buoyed by January gains in U.S. industrial production and hopes for a U.S. economic recovery, and the Nikkei closed up .80%, but those recoveries didn’t last through today’s trading. Today, the Nikkei ended down .90%.

Wim Duisenberg, President of the ECB, spoke yesterday. Investors hoping for a hint of a rate reduction at the March ECB meeting were disappointed as Duisenberg commented that interest rates were appropriate at the moment, but that risks remained in the economy. Many deduced that he was leaving open the possibility of reducing rates if a war with Iraq were to be prolonged. He surprised many with a strong statement about the unsustainability of the U.S. deficit.

Much international attention focused this weekend on EU meetings to forge an Iraq policy. Blair had stated that the UK might go to war without the second UN resolution. France’s position had seemed intractable, but a concessionary statement coming out of the EU meeting called for more time for weapons inspections while also mentioning for the first time the possible use of force as a last resort. Germany took the lead in negotiating the united statement, compromising its own opposition to war. In addition, NATO met this weekend, agreeing to send Patriot missiles and AWACS surveillance planes to Turkey with the proviso that the weapons be used only for defense. Commenting yesterday on the effect of a war in Iraq on the global economy, an IMF official predicted that a war could slow the global economic growth to 1.5%. That might be of particular interest to Germany, as on Monday Germany’s Bundesbank’s monthly report noted that the Germany economy probably contracted in Q4.

  Leigh Stevens   2/17/03,  12:05:06 AM
The Index Trader Wrap has been posted: Link

  John Seckinger   2/17/03,  12:04:51 AM
The Futures Trader Wrap has been posted: Link

  Steven Price   2/17/03,  12:04:43 AM
The Swing Trade Game Plan has been posted: Link

  Steven Price   2/17/03,  12:04:06 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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