Option Investor
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  Steven Price   2/20/03,  7:37:01 PM
Here is a list of stocks with long and short potential for traders to watch:



While none of these made our final list, for various reasons, they are stocks traders can watch as I have them on my radar.

  Jeff Bailey   2/20/03,  6:20:43 PM
Pivot Analysis Matrix for tomorrow. Link

Very close correlative support in the SPX and BIX.X DAILY S2s and WEEKLY pivots.

Correlative resistance marked in red between DAILY and WEEKLY.

  Steven Price   2/20/03,  6:00:38 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
As we were never triggered on the second 1/4 position short entry at 7875, I am cancelling the signal and will re-evalutate in the morning. This leaves us with a 1/4 short position and stop at 8170. No entry signals are currently still in play.

  Jeff Bailey   2/20/03,  3:49:41 PM
Dow Industrials (INDU) 7,910 -1.12% ... rally from the 03:00 bond market close finds some resistance today at the DAILY S1 of 7,942.90 and turns back into "zone of support" from 7,902-7,925. This is slight DIVERGENCE from yesterday's ability of Dow to rally back to DAILY pivot. For pivot level traders, somewhat bearish action as it relates to YESTERDAY's action.

  Jonathan Levinson   2/20/03,  3:48:22 PM
I am going nuts watching the QQQ. Thinking of going short but looking at April Puts. But like you said it is doing nothing and holding around the 25 level. Would you wait until tomorrow before making any decision? That is what I am thinking on doing.

Join the club, William. Ultimately, I believe the only way to trade this is to have an opinion about where this market is headed after the range breaks, and to lock and load based on that view. With stop losses, preferably tight. I would be inclined to purchase more time, such as with Aprils, to permit a smoother exit if your stop gets hit and you need to sell the position. I believe that we could see 1360-65 COMPX on a bounce, but that should be substantial resistance, as should 1380 beyond it. But, there's no need to marry a position, and so a tight stop is recommended on the off-chance that the COMPX breaks out to the upside. Of course, cash is a position, and you can wait for a clearer entry. It's tough to analyse a flat line, which the QQQ is nearly printing.

  John Seckinger   2/20/03,  3:42:49 PM
It is interesting that the close of the bond market took place at or near the lows of the session once again. The Dow, this time, rose to its Daily S1 before pulling back slightly. Since it doesn't seem like we will have our bearish close under 7902, I will attempt to forecast tomorrow's calculations. Using today's range and potential close at 7925, tomorrow's pivot would be at 7948 and S1 at 7870. R1 would be at 8003. I was hoping the Dow would close well under 7903 and then Friday's pivot would be at 7903.

  Jeff Bailey   2/20/03,  3:41:08 PM
The 3:15 Intraday Update has been posted. Link

  Jonathan Levinson   2/20/03,  3:37:18 PM
You've gotta love ranges- the QQQ's up .05 and traders everywhere are panicking, going long, covering shorts, hedging, etc. We're staring at a line so flat that every twitch causes a flurry. So far, however, this bounce appears to be printing a lower low on the 30 minute candles.

  Linda Piazza   2/20/03,  3:36:44 PM
Here’s a 15-minute chart of the SPX showing the downward sloping regression channel that may be defining a bull flag pattern. Bull flag patterns tend to move counter to the previous direction (which was up) and prices tend to move in a tighter pattern of lower highs and lower lows. Upside breakouts tend to occur before prices retrace 50% of the previous move. However, it’s only a potential bull flag and would not be confirmed until an upside breakout. Instead, this could be just what it appears—a test and failure from the descending trendline from late January (marked in red on the chart). Link

  Linda Piazza   2/20/03,  3:27:26 PM
It’s difficult for me to interpret the Russell’s actions today. The tiny candle huddled at the bottom of yesterday’s range near psychological support at 360, and the down-sloping MA’s all look bearish. The 5(3)3 stochastics are in overbought territory and the fast line looks to be turning down a bit, so that it appears that the Russell is perhaps losing momentum as it tries to maintain current levels. Other oscillators are difficult to interpret. Still, the Russell has that July 354.11 low and last week’s 351.78 low just below current levels, and it is maintaining that psychological support, if just barely. Is this opex week at work in the small caps, maneuvering them to appropriate levels and expending a lot of effort to do so? I'm not sure if small caps are subject to that kind of manipulation.

  Jonathan Levinson   2/20/03,  3:08:46 PM
The COMPX is still in its range, with a brief dip as MSFT printed a low of the day, currently 1332 and near upper end of the narrowing range. The five year yield is fading, now -5 bps, which an interesting development and not bullish, but I continue to expect the opex flatline to continue into tomorrow's close. The QQV is flat, TRINQ 1.0, and TICK.NQ +3. A very flat session indeed. NYSE volume is 1.12B and COMPX volume 1.02B. Still light, showing a lack of commitment either way to current levels.

  Linda Piazza   2/20/03,  2:57:48 PM
OEX 425.10-425.20 appears to have been an important level since January 31, as the OEX has frequently used that level as support or resistance since late January. It’s been possible to draw a horizontal trendline through that level beginning with the January 31 candle and touching several other candles through the ensuing weeks. (This level correlates with today’s S1 level, too, I note.) The OEX stubbornly refused to fall below that level in early trading today, and then retested and fell away from that horizontal trendline, confirming its importance and confirming the bearish implications of a move below that line. However, remaining aware that this is option expiration week and that bullish percents are low, I’m watchful of the possibility that the current regression channel on the intraday charts could be a bull flag pattern setting up.

  John Seckinger   2/20/03,  2:51:13 PM
With the bond market set to close in 10 minutes, the 30-year is currently higher by '11 ticks at 113'26. This is its session high. Even with the commitment of traders report showing about everybody long bonds, I still expect a move above 114'00 before looking for a solid bull trap in the near term. This means lower stock prices, and then a solid bounce in equities. Unfortunately, this could take a week to develop. The yield curve got steep from the 5 to 30 year, as well as from the 10-year note out to 30; however, the curve I look at (five to 10 year) remained relatively flat. In conclusion, the yield curve is only slightly bearish stocks. I would not be surprised to see the Dow at 7902 right as the bond market closes.

  Jeff Bailey   2/20/03,  2:46:42 PM
10-year YIELD ($TNX.X) 3.845% ... Has traded its WEEKLY S1 of 3.858% and DAILY S2 of 3.84%, with a session low of 3.838%. As I follow the 10-year YIELD, I'm becoming more "convinced" that the pivot formula is being used in the bond market too. Intra-day action on this bond's YIELD matches retracement from pivot analysis like a heat-seeking missile.

Bond market closed in 14-minutes. Yesterday, stock began a recovery at the 03:00 PM EST marking of bond market's close. Will monitor for SIMILARITY or DIVERGENCE into today's close.

  Linda Piazza   2/20/03,  2:45:29 PM
Yesterday was CSCO’s second close in a row above its exponential 200-dma, currently at 14.14. CSCO’s low today was 14.20, just above that important MA, but now the 5(3)3 stochastics have a hinge in the fast line, MACD hints that it might be flattening as it crosses above zero, and RSI has definitely turned down. I like RSI because it’s often a leading indicator. These oscillator patterns aren’t yet definitive, and stochastics especially can redraw themselves, but they do hint that CSCO expended a lot of energy to get these levels and may either consolidate or retrace recent gains. CSCO and other big-caps have been outperforming the small caps to the upside, so it’s important to watch them to gauge when the broader markets might be losing some upside momentum, too. At 14.33, CSCO currently trades in the middle of its almost three-month long trading range of 12.80 to about 15.50. A failure here and move back to the bottom of that range or below it would be a lower high, while a move above 15.50 would bring CSCO closer to the neckline of a reverse H&S formation.

  Linda Piazza   2/20/03,  2:35:24 PM
Opex flatline! Great term, Jonathan.

  Steven Price   2/20/03,  2:33:13 PM
Important caveat to the last entry. I restricted the volume levels to higher volume stocks and used higher price ranges looking for those stocks down more than 1%. Still, it is a divergence from what I usually see.

  Steven Price   2/20/03,  2:30:32 PM
Red flag for bears. While things certainly seem bearish, I have been scanning stocks for new additions to the play list and I came across an interesting phenomena. One of the scans I use looks for stocks with moves of more than 1% intraday and I found more stocks up than down on that indicator. With the SOX up on the day (another red flag), many of those up on the day were obviously techs.

  Linda Piazza   2/20/03,  2:30:30 PM
The OEX remains contained within the regression channel that marks a possible bull flag pattern. If it is a bull flag pattern, an upside breakout should occur before the OEX drops below 420. Currently, the top of the channel or flag crosses at 426.14. This is just below the midline of that larger-than-normal white candle from Thursday morning, a level that theoretically should now provide resistance. Breaking to the upside of that regression channel or bull flag also requires breaking above historical resistance near 427. In addition, the 21-pma on the 60-minute chart now crosses at 427.69. Of course, the OEX has had no trouble with those levels going both directions in the last few days, but nonetheless, they’re levels that bear watching.

  Jonathan Levinson   2/20/03,  2:20:46 PM
As reader Wes points out, the NDX looks like it wants to resolve a neutral triangle or pennant on the shorter intraday timeframes. However, predicting direction is not possible given that it's coming at the end of a trading range. If it were printed at the end of the recent spike from a week ago, it would be a continuation pattern and we'd be guessing for a break to the upside, but here, it's really just a guess on either direction. Looking at the trading range, I see all types of patterns, but I believe "opex flatline" is the best description- no direction is apparent to me, though I'm personally guessing... you know... not up.

  John Seckinger   2/20/03,  2:18:32 PM
It is interesting that both 30- and 15-year mortgage rates fell to new record lows on Thursday, but that a weak claims report and growing trade gap took the spotlight. The significant rise in the PPI report can even state the case "Higher inflation with poor growth number." That is not good as well. Reasoning is because the trade deficit numbers has implications for GDP.

  Jeff Bailey   2/20/03,  2:16:57 PM
Dow Industrials (INDU) 7921 -0.98% ... Per John Seckinger's 01:44:29 post, current "rebound" back to 7,921, should find selling at 7,925, which was "upper" end of our little 7,902-7,925 zone.

For QQQ traders, correlation between Dow 7,925 is QQQ $25.00 at this point.

  Linda Piazza   2/20/03,  2:14:04 PM
Current ratio-method adv/dec numbers stand at .77 for the NYSE and .87 for the Nasdaq. Contrary to earlier patterns, down volume leads up volume on both the NYSE and the Nasdaq, by two times on the NYSE and by a slighter multiplier of 1.17 times on the Nasdaq. New lows lead on both the NYSE and the Nasdaq, by a 49:19 ratio on the NYSE and a 66:51 ratio on the Nasdaq. Total volume is 720 million shares for the NYSE and 868 million for the Nasdaq.

  Kent Barton   2/20/03,  2:13:37 PM
Reader question: I'm very close to taking my money off the table (in APD) but given this recent two day rally, momentum could be on my side for more downside. - Craig

Response: The Dow Jones has managed to rebound from support at 7900, and APD has experienced a similar rebound from $38.00. Has the stock put in a short-term bottom? That will probably depend on whether the Dow can actually hold above support. But looking at the 5-minute chart for APD, there are a few things that could help fine-tune an exit point. The first thing you'll notice is the heavy intraday resistance near $38.50. Thus, conservative traders looking to lock in some profits might want to consider closing a portion of their short positions if shares move $38.55 or $38.60. The 5-minute interval also shows a steady trend of lower highs ever since Tuesday morning. APD is currently trading on that trendline. From a bigger-picture perspective, the stock is looking very weak on the daily chart and also showing relative weakness versus the market. APD looks like it'll have a tough time moving back above the $39.00 area if the major indexes continue to drift lower.

  Jonathan Levinson   2/20/03,  2:08:26 PM
Very little is happening on the COMPX, though precious metals are pulling back some, with HUI at 139.61, up 2.97 and XAU +.96 at 74.40.

  Jeff Bailey   2/20/03,  1:54:37 PM
The 1:00 PM Intraday Update has been posted. Link

  Steven Price   2/20/03,  1:50:27 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I'm having some second thoughts about entering just above the Dow's daily S2. Let's cancel the entry at 7889 and lower it to a move below that S2 of 7885. For the extra 15 points, it seems worth it to make sure we take out that level.

Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Lower the entry on the short 1/4 position to 7875.

  John Seckinger   2/20/03,  1:44:29 PM
The Dow finally broke under the 7902 level (61.8% retracement of the move from October to December). The daily S2 level is below at 7885, but the weekly pivot is below at 7841 (a more important level). As noted before, a close under 7902 should be viewed as bearish.

  Kent Barton   2/20/03,  1:41:30 PM
1-800 Contacts (CTAC) $19.52 -1.13: Take a look at the daily chart for CTAC. Looks awfully bearish, doesn't it? The stock (which trades on relatively light volume) has fallen below support at $20.00 and is now beginning to fill in the huge December 3rd gap. This gap was created after the company signed a distribution deal with Johnson & Johnson. CTAC has plenty of room to fall, with the bottom of the gap all the way down at $14.50. The weekly chart shows some possible support at $18.00.

  Jonathan Levinson   2/20/03,  1:28:19 PM
The failure of COMPX 1333 looks as interesting as it has on the other occasions during the past days in this range, and the indicators reflect that, with Nasdaq-100 volatility .15 above flat for the day. However, VXN has moved up to 49.1, a 1.47 point gain today, showing greater fear throughout the broader market than in the NDX. FVX has faded and is now -4.5 bps on the day. A break of 24.70 QQQ will have me less dubious about this pullback to the bottom of the range, because at that point the gravitational pull of QQQ 25 will begin to diminish. I expect the powers that be to attempt to hold QQQ at 25 until tomorrow's close so as to expire the maximum amount of option money worthless.

  Steven Price   2/20/03,  1:23:06 PM
Swing Trade Signals
I've been considering adding to the short position all morning and we finally got a move back below the S1s in the OEX and SPX. Let's add to the position below Dow 7900.

Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go short a 1/4 position at Dow 7889. This will give us a 1/2 short position.

  Kent Barton   2/20/03,  1:21:40 PM
Amid speculation that some chemical companies may begin to cut their dividends in an effort to bolster the bottom line, APD ($38.14 -0.83) has tanked to new 52-week lows. Air Products offers an annual dividend of 84 cents. Whether or not that number will shrink is anyone's guess, but there's no arguing with that ugly daily chart! We're looking for this breakdown to ultimately take the stock down to the $35.00 region. Traders who entered short positions near $40.00 might want to strongly consider using a stop slightly above the descending 21-dma at $40.58.

  John Seckinger   2/20/03,  1:13:39 PM
Shares of Biogen (BGEN) are lower by 3.24 points to 34.92, after the company said it will delay for several years the European launch of its drug for the skin disorder psoriasis. This delay is due to regulators demanding additional clinical data. Amevive was approved in the United States last month, and the company noted sales of the drug to reach $500 million by 2005. $500 million will be hard to achieve without help from European consumers. Deutsche Bank then cuts earnings views on BGEN shortly thereafter.

  Linda Piazza   2/20/03,  1:13:37 PM
As I study the OEX hourly chart, I note that the candles are again getting smaller as the OEX balks at moving below 425. As I study that chart, I note a quick move up from Thursday morning’s lows, and then this counter-movement as the OEX moves in a tight pattern of lower highs and lower lows. I’m beginning to wonder if this could be a bull flag pattern. It fits the definition. If so, prices should break out of the pattern before the OEX falls below 420, which is about a 50% retracement of the move from Thursday lows to Tuesday highs. Since I expected a retest of broken trendlines and expected a failure at those levels and have a long-term bearish outlook, I’m not favoring the viewpoint that this is a bull flag pattern, but our accounts are in peril when we fail to notice potential patterns that don’t fit our favored viewpoints.

  Jeff Bailey   2/20/03,  1:06:13 PM
Dow Industrials (INDU) 7,917 -1% ... making some way lower into our near-term support zone of 7,902-7,925.

It's becomeing obvious to me that QQQ traders are simply making bid/ask adjustments as it relates to Dow trades. Today, firming bids in QQQ come in to $25.00 in the QQQ as Dow traded 7,925 and would bounce back near 7,940, the Dows DAILY S1 serving resistance at 7,943. QQQ would edge higher to $25.20 under such action. As Dow drifts into support zone here, bids "go away" in QQQ and most likely sit near the $24.88 level, with would be 61.8% retracement if placed from QQQ DAILY R2-S2.

If Dow should crack the 7,900 level to the downside, look for QQQ to pick up some near-term steam to yesterday's lows of $24.70 in a quick move lower. $24.68 is 80.9% retracement on QQQ if set from DAILY S2-R2.

  Linda Piazza   2/20/03,  12:53:04 PM
I’m getting a good laugh as I switch to CNBC World this morning. European economists and analysts pull fewer punches when talking about the U.S. economy than do their U.S. counterparts. Currently, they were analyzing Bush’s speech this morning, calling it Economics 101 and simplistic. The overall conclusion, however, was that the problems in the U.S. economy are structural and not cyclical, and that those problems are even worse in the eurozone. While Iraq presents challenges to any economic recovery, it’s only exacerbating problems that already existed, they conclude.

  Jonathan Levinson   2/20/03,  12:46:25 PM
The COMPX continues to hold just above 1333, an amazing feat given the latest picture of the economy painted by today's data. Volume is light on the COMPX at 695M and 726M on the NYSE, but looking higher than yesterday's volume did at this time. QQV and VXN are up fractionally so far. I continue to watch 1328 and 1320 COMPX as short term and key support on this rally. Until then, this rangebound trading will continue to leave us wondering about which way it will break.

  Linda Piazza   2/20/03,  12:45:04 PM
I’ll be taking a couple of days off early next week. If Jim were still writing on this side of the Monitor, he’d be warning about high March options prices beginning today as traders roll out of February positions and into March positions. Prices will begin to settle out early next week, but factor those higher prices into your decisions beginning today. I’m not suggesting February options rather than March options, but only suggesting that you be aware of this tendency. Personally, I stop trading front-month options a couple of weeks before options expiration.

  John Seckinger   2/20/03,  12:38:54 PM
Per 10:55 post, the 7902 level in Dow really is the level to watch. Moreover, it is interesting that the Dow is gravitating around the 7925 to 7927 level and NOT the daily S1. This is because we have a small 'zone' to deal with that includes a longer-term retracement study, versus an S1 level that is alone and doesn't match up well with other levels. 7902 is a stand-alone level, but is long-term in nature and should have greater significance.

  Linda Piazza   2/20/03,  12:36:00 PM
Currently at 36.48, the VIX again appears to have found support near the confirmation level of the double bottom formed from November and January lows, at least temporarily. That double-bottom pattern predicts a rise in the VIX to the high 40’s, but it’s highly speculative to conclude that the VIX fulfills targets predicted by these kinds of chart formations. It’s been my premise that the VIX can be studied using conventional technical analysis tools, and several of us have been watching how the VIX acts in relationship to these kinds of formations, trendlines, MA’s, and oscillator studies. Mark Phillips has been writing about the VIX for a long time, and recently penned an article about applying technical analysis to the VIX: Link

RBR: I did reply to your email, but the mail was bounced back to me.

  Jonathan Levinson   2/20/03,  12:34:29 PM
Jan US LEI has just been revised down to -.1%.

Looks like even the government puts out pro forma numbers...

  Mark Phillips   2/20/03,  12:28:52 PM
CB $48.28 (-0.61) OI Put play is picking up some speed to the downside right now, following a Wachovia downgrade from Mkt Perform to Underperform, citing the following causes for price pressure. Additional reserve strengthening is likely for both asbestos and non-asbestos lines, a lack of a CFO and ongoing struggles in the personal lines business. Firm cuts 2003 EPS estimates from $4.64 to $4.10 and sees reasonable valuation in the $39-41 area.

I must say that I am a bit surprised to not see more weakness in the stock, with it still holding above $48 and last week's lows. I would recommend waiting for a break under the 447.50 level before adding new positions.

  Steven Price   2/20/03,  12:22:56 PM
Swing Trade Signals
Once again testing intraday lows, but SPX and OEX hanging over S1. It looks like we just broke down from a bearish wedge on the 5 min chart.

Current levels: Dow 7921/OEX 425.67/SPX 839.99

  Linda Piazza   2/20/03,  12:14:01 PM
On the 60-minute chart, the OEX moves back and forth across the midline support of Tuesday’s larger-than-normal white candle and the 21-pma on the hourly chart, currently at 426.90. The OEX is at 426.12 as I type. On the 60-minute chart, both the 21(3)3 and 5(3)3 stochastics have turned down, but the 5(3)3’s are already back in oversold territory. On the daily chart, the 5(3)3 stochastics now attempt a bearish kiss, RSI has clearly turned back down, and MACD appears to be flattening after having tried to move back up toward zero.

The test of the broken neckline was expected and natural. So far, the OEX appears to be failing that test, and I haven't altered my long-term bearish outlook on this index. However, in my opinion, the OEX hasn’t yet confirmed a failure. There’s some historical support for the OEX at current levels, and until the OEX drops further, I wouldn’t be surprised to see yet another attempt to break resistance. If the OEX does drop, watch for a possible bounce at historical resistance near 418-420, and then again at 407-411.

  Jonathan Levinson   2/20/03,  12:13:28 PM
February Philadelphia Fed regional business survey reading declined to 2.3 from a reading of 11.2 in January. The consensus call was for a +10.0 reading, while SMR was looking for 2.0 reading, all estimates were in a +1.2 to +15.0 range.

  Jeff Bailey   2/20/03,  12:06:27 PM
The 11:00 AM Intraday Update has been posted. Link

  Steven Price   2/20/03,  12:04:09 PM
Swing Trade Signals
As I sent my last entry, we spiked lower but have bounced just slightly. Philly Fed Index came in far below expectations. 2.3 vs. 11.0 expectations.

  John Seckinger   2/20/03,  12:02:28 PM
Philly Fed index 2.3 vs 11.0 consensus. My prediction of 9.0 was well off as well, but at least I was more bearish than the average economist (grin).

  Steven Price   2/20/03,  12:01:32 PM
Swing Trade Signals
We've been steadily climbing for the past hour and I'm wondering if we are going to make another run at Dow 8000 from the downside. The COMP is back in positive territory and we are churning. We have seen three higher lows on the intraday chart now.

Current levels: Dow 7954/OEX 427.33/SPX 842.93/COMP 1336.09/NDX 1004.21

  Jonathan Levinson   2/20/03,  11:59:35 AM
The carpet hasn't grown a bit in my office for the past hour- FVX is down hair to 2.832%, down 2.7 bps, as QQQ trades 25.04. TRINQ .76, QQV -.38, TICK.NQ +103. HUI is up 3.12, XAU +1.25.

  John Seckinger   2/20/03,  11:58:38 AM
Side Note: U.S. distillate stocks, including heating oil and diesel fuel, fell 4.6 million barrels to 103.6 million barrels last week. This is down 20 percent year over year. In fact, distillate stocks have fallen nearly 30 million barrels since early January. Falling stocks should help increase crude oil prices, and crude stocks are at their lowest level since 1975. In the Midwest, crude oil inventories in are at its lowest ever reading since EIA has kept regional inventory data.

  John Seckinger   2/20/03,  11:35:01 AM
Remember: The February Philadelphia Fed report is due out at 10:00 a.m., and economists expect a 11.0 reading. I expect a reading of 9.0. It was first thought that the lower NY empire index would push estimates lower, but the Empire Index rose in January and Philadelphia never followed suit. The employment reading is expected to climb, while prices paid component has been averaging double digits for last nine months. Shipments also expected to fall. Last October, this index was at -7.5, then +6.5 in November, and 11.3 in December and 11.2 in January.

  Jonathan Levinson   2/20/03,  11:30:43 AM
MSFT, C at lows of the day.

  John Seckinger   2/20/03,  11:27:00 AM
Keeping with the Treasury theme, they announced a larger-than-expected $35 bln three and six-month bill auction as the suspension of 'G-Fund' investment provides some room under the debt limit. The auction will raise $6 bln of new cash. Both the bill pass and this news shouldn't really affect stocks, especially since it was a bill pass and not a coupon pass that went out a significant amount of time (ex: five years or more). Of course, I am only looking for the correlation between the injection of cash, the affect on the yield curve, and movement in stocks (read: not movement in precious metals, etc.).

  Jonathan Levinson   2/20/03,  11:21:28 AM
The fed has just done a bill pass in the amount of $2.49B.

  John Seckinger   2/20/03,  11:17:40 AM
Note: There was a bill pass by the Fed (April 3rd - August 21 '03) that totaled $2.5 bln. Time: 11:07 a.m.

  Linda Piazza   2/20/03,  11:08:43 AM
Adv/dec ratios this morning stand at .82 for the NYSE and .85 for the Nasdaq, ratios that are slightly bearish but certainly sustainable. Up volume comes in at 1.57 times down volume on the NYSE, but up volume slightly beats down volume on the Nasdaq. The NYSE shows more than twice as many new lows as new highs, and new lows outrank new highs on the Nasdaq, too, but not by as high a ratio. Volume is only 283 million shares traded on the NYSE, while it’s a slightly more robust 407 million shares traded on the Nasdaq.

  Steven Price   2/20/03,  11:05:31 AM
Swing Trade Signals
While the Dow continues to print below yesterday's lows, the SPX has yet to do so and so far the OEX bounced just 0.04 above that level. Does this qualify as a pullback level on the way up? I don't think so, but it's something we need to consider.

  Mark Phillips   2/20/03,  11:04:12 AM
AMGN $53.22 (-0.76) The weakness in the Biotechnology sector that Steve mentioned this morning has served to knock AMGN back from the $54 level again today after the slight move above that level yesterday afternoon. Mild support at $53 seems to be at work so far today, with the stock beginning to recover part of its early slide. While this rebound does look encouraging, in terms of new entries, AMGN is currently in "no man's land" above stronger support near $52.50 and resistance at $54. Accordingly, traders still looking for an entry will want to either wait for a rebound from that support or a convincing (read:volume) move over $54, with confirmation coming with a push through $54.25, as mentioned in last night's Play of the Day writeup.

  Steven Price   2/20/03,  11:03:10 AM
Semiconductor Index (SOX): 291.90 (+2.91) The SOX is failing to confirm weakness in the broader indices. Two days of upgrades, yesterday from Morgan Stanley and today from Merrill Lynch have propped up the sector, which has managed to hold its recent gains, despite pulling back slightly yesterday. This index was the first to slow its fall last week, finding support at 260 before the rest of the markets bounced. While it is only a sector index, it has closely mirrored action in the broader markets and traders may want to keep an eye on it.

  Jonathan Levinson   2/20/03,  10:59:26 AM
QQQ 24.89, COMPX 1330 as the TRINQ makes it to 1.0, TICK.NQ -198, QQV +.66. FVX now -2.3 bps. I'm looking to 1320, the top of this week's gap, as The Number to watch. A break below should be discouraging to bulls in the extreme, particularly on the heels of today's data which, I believe, raises the spectre of stagflation.

  John Seckinger   2/20/03,  10:50:55 AM
Looking at the Dow, support is felt at 7925, but I would the most weight in 7902, since this is a longer-term retracement level (61.8% level of the move from October to December). This is analogous to being at the "bottom of a range." A daily close under 7902 would definitely be viewed as bearish.

  Steven Price   2/20/03,  10:50:40 AM
Swing Trade Signals
It took a while to get all averages into the red, but we are red across the board. The Dow continues to test new lows, while the SPX and OEX hold above their daily S1s. I'm going to watch for a break in those S1s as a possible addition point to the current short position.

  Linda Piazza   2/20/03,  10:50:34 AM
On the 60-minute chart, the OEX has now fallen slightly below the midline support offered by the larger-than-normal candle from Monday morning’s trading. The MA shown on the chart is the 21-pma, now at 426.30, showing that the OEX has also fallen slightly below that level. Both actions have bearish implications, but an hourly close below these levels will offer stronger confirmation than a brief move below these levels. Link

  Jeff Bailey   2/20/03,  10:48:05 AM
Natural Gas Index (XNG.X) 160 +1.4% ... rivals Gold/Silver Index (XAU.X) 74.80 +1.86% for sector gainer in early going. The Energy Information Administration reported that U.S. natural gas inventories fell 203 bcf last week.

  Steven Price   2/20/03,  10:45:30 AM
Steven: What 'dramatic change' would keep us in the play? Printing (what's it called?) a long tailed 'hammer' at the end of day? Or should we even wait that long. Should I dump it now and take the loss? Thanks, Jerry

NPSP $19.75 (-4.59) If the stock were to make up a significant portion of the drop, with the formation you described, I might think about holding the play, as the initial reaction was overdone. So far it has made up about $1.50 of the initial drop and it does not look as though that scenario is going to play out. I'd be leaning in the direction of using the bounce to close the play. Sometimes a merger announcement can send a stock plummeting, only to see it made up, and move higher. However, there is no doubt that the scenario we had envisioned did not play out and holders from this point forward would be playing a different scenario.

  Jonathan Levinson   2/20/03,  10:42:55 AM
I'm picturing Jeff with one of those little spike-topped motorcycle helmets and his "snake" quote emblazoned on his jacket. Trading ranges can do this to my thought patterns. The TRINQ is still bullish at .67, QQV flat, TICK.NQ slightly negative. The five year yield (FVX) is down 2 basis points, and I find both the weakness in yields and the weakness in equities underdone given the awful economic data this morning.

  John Seckinger   2/20/03,  10:40:46 AM
Breaking News AP reports that the FBI has arrested people in Florida and Illinois on terrorism ties.

  Jeff Bailey   2/20/03,  10:38:34 AM
Dow Industrials 7,939.54 -0.75% ... First of our indexes to trade their DAILY S1. Dow DIAMONDS (DIA) 79.77 -0.95% also testing S1 of $79.92.

This action has the NDX/QQQ now testing their DAILY Pivots of 1004.9/$25.01 respectively.

"The snake moveth lower" right now.

Similar to yesterday the QQQ sitting on WEEKLY R1 of $24.96 as support here. Index Traders may look for QQQ fall below this level as "confirmation" to further weakness in the Dow. Dow Indu has traded matching 7,935 low found yesterday.

  Linda Piazza   2/20/03,  10:24:00 AM
While the FTSE 100 remains up by 22.60 points, both the CAC 40 and the DAX have fallen into negative territory, with the CAC down 43.48 points and the DAX down 33.89 points.

  Jeff Bailey   2/20/03,  10:23:55 AM
10-year YIELD ($TNX.X) 3.866% ... YIELD moving below yesterday's low and below upward trend from our "wedge." This is an observation of "defensive" action in my opinion, especially considering some "inflationary" data this morning. Stocks vulnerable to the downside here.

  Jonathan Levinson   2/20/03,  10:22:41 AM
The gap has just about filled on the COMPX, and we are back to this week's trading range. A golf clap to the market makers and specialists, as QQQ continues to dance around the 25 expiry level.

  John Seckinger   2/20/03,  10:21:11 AM
There is an analyst out who used to be with Goldman Sachs, noting that the Fed should get rid of the 'strong dollar policy' and the Fed should continue to cut interest rates.

  Jeff Bailey   2/20/03,  10:18:13 AM
S&P Banks Index (BIX.X) 274.76 -0.38% .... has been hovering near unchanged levels all morning and not really showing the "bullishness" of the major indexes followed in our pivot matrix. Was "early" one to trade daily pivot.

As of now, all index/sector from DAILY pivot analysis have traded DAILY pivots with no trades at DAILY R1. Only NDX/QQQ have NOT traded their DAILY pivots at this point. Still has me rather bearish from technical perspective.

  Jeff Bailey   2/20/03,  10:14:49 AM
Leading Indicators were inline with expectations and unchanged. The Conference Board said the coincident index rose 0.2% and the lagging index fell 0.1% in January.

  Linda Piazza   2/20/03,  10:07:15 AM
Remember the S&P (both) hourly charts showing the descending trendline from late January? Here’s an update on the 60-minute SPX chart, showing the SPX’s move so far today. Note that the 21(3)3 stochastics are turning up again, but from overbought territory, while the 5(3)3’s move up strongly toward those overbought levels. Yesterday, I thought that it might take one more cycle up on the 5(3)3’s before the 21(3)3’s capitulated and rolled. Hourly stochastics can stay at overbought levels for days, however, while prices continue to climb, so it’s still a wait-and-see game. Link

  Jonathan Levinson   2/20/03,  9:58:02 AM
Al Green has just fired off a 10.25B ON/RP. That leaves 7.25B net draining from the system.

  John Seckinger   2/20/03,  9:58:01 AM
Looking at bonds for a moment, a commitments of traders report is showing the highest levels since August of 2001. This seems to mean that everyone is bullish fixed income securities and are looking for lower interest rates. That might signal "trap," but I still think there may be one more wave higher in bond prices (above the 114 area detailed yesterday). 30-year currently at 113'09, down '6 ticks. Ticker: ZB03H

  Linda Piazza   2/20/03,  9:57:31 AM
The Russell 2000 struggles to hold to the 360 level this morning. Tuesday, the daily RSI turned down, but may be flattening today. MACD may be turning up, but remains below zero. 5(3)3 stochastics approach overbought levels and may be beginning a slight roll. These oscillators aren’t giving confirmation of the bearish two-candle pattern from the previous two days, but also are not predicting a move up as yet. ADX is at 29.78, telling us that it may be more important to watch MA’s, according the great information John presented in a futures article several weeks ago. The 22-dma is overhead at 367.45 and slopes down to meet the Russell. Other MA’s are grouped near 380 and again near 400.

  Steven Price   2/20/03,  9:56:01 AM
Swing Trade Signals
Short-term traders can note the converging (and rising) 5 min 21,50 and 200 pmas in the Dow all sitting between 7970 and 7980, just below where we bounced.

  Steven Price   2/20/03,  9:50:14 AM
Swing Trade Signals
Dow has faded just barely into the red, but the SPX/OEX/COMP all holding small gains. I was thinkning about adding to the short on the move back under 8000, but without confirmation from other indices, I'm going to wait.

  Linda Piazza   2/20/03,  9:47:10 AM
The NDX did briefly push above that 1014.64 level from yesterday's inside day, climbing to 1015.22 before quickly falling back to 1010.08, the current level. Tuesday’s high was 1015.34, so that although the NDX pushed above the high of the inside candle, it has not yet made it above Tuesday’s high. I would not consider that move a buy signal, but instead would be alert to the possibility that the move was a trap of the type we've seen often lately.

  John Seckinger   2/20/03,  9:45:18 AM
The aggressive short-term bullish regression channel continues in most markets; however, the Dow made a one-tick new low and failed to take out the high by 10-points. The bull and bear trap all in five minutes. Look for a test of the pivot.

  Jonathan Levinson   2/20/03,  9:42:41 AM
Jman can you tell me how you determine an exit strategy for your option trading?

Yes. I'm considering doing an article to cover this, but in brief, I try as much as possible to pick chart targets and let the market tell me when to go. This has worked in the past, but as I've become increasingly patient, I've begun to sit and watch profits disappear. I am now leaning toward trailing stops to solve my addiction to patience. The other fact, of course, is premium decay. I now try to exit contracts at least one week before they become front month- to avoid getting caught in the decay spiral. All of these thoughts are particular to me. Different traders have different time horizons, and will need to adjust their strategy to fit their style.

  Linda Piazza   2/20/03,  9:39:35 AM
Yesterday, the NDX printed an inside day, or a harami for those used to candlestick theory. Yesterday’s high was 1014.64, and the low was 994.25. Theory says that a move above the high would be a buy signal and a move below the low would be a sell signal. However, lately, I’ve noticed some traps, with markets pushing briefly above the high or below the low, only to reverse and move the other direction. Any NDX move above yesterday’s high is going to soon confront the simple 50-dma at 1016.22 and the simple 200-dma at 1018.44.

  John Seckinger   2/20/03,  9:39:14 AM
The first five-minutes saw a range from 8002 to 8025, and the following weakness should take out this 8002 low (or bullish divergence). The pivot is still below at 7993. Resistance is still seen from 8050 to 8060. Support is felt from 7960 to 7970. We just got our 8001 print.

  Steven Price   2/20/03,  9:38:58 AM
NPS Pharmaceuticals (NPSP) $18.95 (-5.39) OI call play NPSP announced a merger with ENZN, which invloves stock transfers into a new company. For NPSP shareholders it is a 1:1 stock ratio in the new compnay and with ENZN priced much lower (but shareholders only getting a (0.72) share, NPSP is getting hammered. We are well below our stop here and unless something changes dramatically, we will be dropping the play.

  Jonathan Levinson   2/20/03,  9:34:58 AM
Al Green has a lot of money due today: 9B in ON/RPs, 9.5B in multiday repos, and 4B in 28 day repos. 5B has just been added in 28 day RPs, so we have 17.5B left to account for. Awaiting the 10AM announcement.

  Steven Price   2/20/03,  9:34:10 AM
Looks like the biotechs will have some trouble this morning after a big downgrade to CEPH, based on increased commercial risk to their lead product Provigil after disappointing fourth quarter sales results and less than reassuring guidance for this quarter. Biogen also trading much lower after Amevive approval was delayed in Europe.

  Jonathan Levinson   2/20/03,  9:32:13 AM
5 point gap up on the COMPX to 1339, TRINQ .52, TICK.NQ +67, QQV +.04.

  Jonathan Levinson   2/20/03,  9:30:21 AM
With MER now bullish semiconductors, following Morgan Stanley's upgrade yesterday, a cynic such as myself would be looking for a top in the SOX anytime now.

  John Seckinger   2/20/03,  9:30:15 AM
Intra-day Pivot/Levels for Thursday (02/20/03)...

INDU : S2= 7885, S1= 7942, P= 7993 , R1= 8050 , R2= 8100

SPX : S2= 833, S1= 839, P= 845, R1= 851, R2= 857

OEX : S2= 422, S1= 426, P= 428 , R1= 432, R2=435

NDX : S2= 985, S1=995 , P= 1005, R1=1016 , R2=1025

QQQ : S2= 24.48, S1= 24.78, P= 25.01 , R1= 25.31, R2= 25.54

  Jeff Bailey   2/20/03,  9:27:26 AM
The 9:00 AM Intraday Update has been posted. Link

  Linda Piazza   2/20/03,  9:25:47 AM
European markets continue to ease off their highs as the U.S. market open approaches, with the CAC 40 now about 11 points in the red, the DAX holding about 7 points in the green, and the FTSE 100 about 39 points in the green.

  Steven Price   2/20/03,  9:17:49 AM
Swing Trade Signals
We are currently short a 1/4 position only. I must say I am surprised that we are getting any upside following the data releases this morning. Maybe it's a "no Iraq news" rally. With strong overhead resistance at Dow 8150-8160, I'll be looking to possibly add to the position in those areas. I am maintaining a very small position at this level because with yesterday's action, it did not appear I would get my ideal entry up at that level. I still may not, but from the look of the futures, the 8000 line will be below us and I'll be watching to see if it can act as support.

  Jonathan Levinson   2/20/03,  9:15:43 AM
Thanks for the market commentary as it is very educating for myself (and I believe for most of the subscribers). Yesterday, I was listening to an Independent Investment Analyst and he made a few interesting comments on the state of the Stock Markets in the US. Here is a list of the key ones.

1. FTSE is known to be ahead in terms of pricing DOW and according to him FTSE is priced as if DOW will go to 4700. I initially thought I didn't hear it correctly but he re-iterated that number and said historically FTSE is a leading indicator for DOW index.

2. On the US Dollar front, his comments were, US dollar will suffer another 20 to 25% drop as it is being artifically supported by the FED printing money as if US Dollar is going out of style. I guess US being the major consumption market, this drop in US dollar will not bode well for the US companies.

I don't make very long term forecasts, but the FTSE news is fairly well known. As you know, the Neuermarket (their version of the COMPX) was closed in 2002 after losing 96% of its value. This doesn't mean that our COMPX will do so as well, just as the INDU can go wherever it wants. The future is uncertain, but weekly charts continue to look anything but bullish to me.

The US Dollar is going out of style, with the euro up 25% relative to the dollar in the past year. Lower dollar is good for US exporters, but as the balance of trades data shows, the US is more importer than exporter and less purchasing power is bad for consumers, which is bad for the US economy. However, it's bad for the world's exporters as well, who must devalue their currency to maintain US demand for their exports. And so, currencies worldwide should devalue, which is good for gold and commodity prices.

  Jonathan Levinson   2/20/03,  8:59:18 AM
Or, it could be an upturn in the intermediate cycles, such as the 5 week stochastics, bringing us to am "all news is good" phase. I personally hope not, given my current open positions, but hope so, given prevailing geopolitical conditions.

The December jump in the trade deficit was 44.2B.

  Linda Piazza   2/20/03,  8:55:41 AM
In regard to Jonathan's 8:52 post, CNBC commentators are surmising that market participants just can't believe the data, and think something must be wrong with the data itself!

  Linda Piazza   2/20/03,  8:53:51 AM
How did European markets react to the release of the U.S. economic data? All had been at their day’s highs before the release of the data, and all have eased from those highs, but still trade in the green. Currently, the FTSE 100 trades up 45.90 points, the CAC 40 trades up 1.44 points, and the DAX trades up 20.23 points.

  Jonathan Levinson   2/20/03,  8:52:10 AM
The data just out looks pretty awful to me, but the futures and QQQ have held up surprisingly well. Gold spiked at 8:30 on the news and the futures sold a touch, but the strength is surprising and the selloff slight. That doesn't feel to me like a market that wants to go down.

  Jonathan Levinson   2/20/03,  8:40:44 AM
Some quick tidbits from the CNNfn.com homepage this AM: "Don't sell too soon" and "There is no housing bubble". Perhaps it was the publication of these little gems that caused QQQ to drop from its AM high of 25.34 to the current 25.19 on Island ECN. Well, maybe not- it was the 8:30 data that just came out. It was announced that the US trade deficit has set yet another new record at $435.2B for 2002, the largest inbalance in history and jumping unexpectedly for the month of December above 44B, and US initial jobless claims have just surprised to the upside at 402,500. The January PPI was up 1.6%, also surprising to the upside. Yields are flat as I type this, and the US Dollar Index is below 100.00, gold above 350/oz.


  Linda Piazza   2/20/03,  7:36:53 AM
Good morning! All European markets currently trade in the green. DaimlerChrysler dominated the news as the company predicted that new models and cost-cutting efforts will increase profit in 2003. The world’s fifth-largest car manufacturer does not foresee growth in demand in Western Europe or Japan and forecast shrinking demand in the U.S., but was praised for forecasting 2003 profits, something fewer companies are willing to attempt. The Chrysler group beat earlier forecasts of break-even operating profit, reporting 1.3 billion euros for the year excluding one-time costs. Last year, this group lost 2.2 billion euros. Despite analysts’ concerns about falling demand and pension problems if stock market declines should continue, DaimlerChrysler was up in early trading. As of this writing, the FTSE 100 was up 50.20 points or 1.37%, the CAC 40 was up 7.18 points or .25%, and the DAX was up 35.25 points or 1.34%.

Sumitomo Mutsui led other financial stocks and the Nikkei lower in early trading on the Nikkei. Investors may also have been reacting to the government’s conclusion that the Japanese economy may be weakening again. The Nikkei dropped in early trading and closed down 27.52 points or 0.32%. In other Asian news, Samsung Electronics rose after prices for high-speed memory chips rose for the first time in nine weeks. AU Optronics also rose after announcing that sales of its flat-panel displays rose 3.8%.

Geopolitical developments this morning included notations that the U.K. will sponsor a U.N. resolution that sets a deadline for Iraq to show its cooperation and that a North Korean MiG-19 fighter jet violated neutral airspace in the first similar incident since 1983.

  Jeff Bailey   2/20/03,  2:25:06 AM
The Index Trader Wrap has been posted: Link

  John Seckinger   2/20/03,  2:24:59 AM
The Futures Trader Wrap has been posted: Link

  Steven Price   2/20/03,  2:24:53 AM
The Swing Trade Game Plan has been posted: Link

  Steven Price   2/20/03,  2:24:17 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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