Option Investor
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  Jeff Bailey   3/13/03,  7:11:46 PM
Pivot Matrix for tomorrow .... Link shows a BIG range in the DAILY pivot matrix between S2-R2, and there's potential for the indexes to extend today's rally to SPX 850.

The tone may be set early in the morning, and selling in Treasuries could spur further short-covering in equities. The index to watch for leadership is the NDX.X as it traded FIRMLY through its WEEKLY R1 and a first area of resistance looks to be 1046-1050 while 1062-1070 isn't out of the question should bonds see another strong round of selling.

I think it is too early to get overly bullish here, and at some point a pullback becomes important in helping to try and determine if yesterday's lows were indeed a bottom. Here too, the NASDAQ-100 (NDX.X) may be the place to look for sign of "a bottom." On a pullback a bottom would be looked for if the NASDAQ-100 can hold level near 990 (WEEKLY/MONTHLY pivot).

At this time, I don't have a bullish % reading on the NASDAQ-100, but when I flipped through the 30 charts of the Dow, it looks like many of these stocks have been so deeply sold, that we need to either get some type of consolidation in a 10% range in order to eventually get reversing up buy signals, or one heck of an extended move higher before the Dow's Bullish % ($BPINDU) would reverse back up.

For example... AA +5.35% Link didn't even register a 3-box reversal. DIS +6.71% Link didn't either and at current levels would take a 17% gain in order to do so.

  Jeff Bailey   3/13/03,  3:55:37 PM
QQQ $25.54 +5.4% .... looks to trade right at our downward trend from the December highs and above our conventional 38.2% retracement from October lows and December highs of $25.34. This was a level I felt in our Index Trader Wraps that would be deemed "bullish".

  Linda Piazza   3/13/03,  3:52:03 PM
This is more of Jonathan's territory than mine, but I'm scanning everywhere and noticed that while the COMPX has climbed above the 1300 level today, a river of MA's courses down toward it on the daily chart, all converging just under one version of the broken H&S neckline. Does the SOX's movement over similar MA's today predict that the COMPX will break above what appears to be massive resistance? Wish I knew.

  Jonathan Levinson   3/13/03,  3:51:14 PM
The headline is "Stocks Rally on Hopes of Iraq Resolution". Link is below. Now, many were expecting a war rally. The rally today is therefore a peace rally. I'd vote for a peace rally any day, as I believe that peace is more bullish than war, but it gives you an idea of how difficult, if not impossible, it is to trade the news alone. As Joe Granville said, "News is for suckers."


  Steven Price   3/13/03,  3:49:05 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We are approaching the stop of 7830 and a closing run could take us out.

Current levels: Dow 7814/SPX 830/OEX 422.30/COMP1334

  Jim Brown   3/13/03,  3:47:07 PM
Market Monitor Disconnects - We have been getting some complaints of disconnects while using the new monitor. We have narrowed it down to users with firewalls and users with Linksys brand routers on their cable/DSL systems. Linksys has an internal hardware firewall in some of their routers which periodically resets connections. We are working on a proxy server for those impacted with this problem.

  Steven Price   3/13/03,  3:44:04 PM
Swing Trade Signals
My stop is set for a move over 7800 to 7830. If that happens I will likely be more of a believer that this rally is more evidence of a reversal than an oversold bounce. After looking at about 1000 charts today, there are numerous stocks rallying right into resistance. I can envision a continued rally in the morning, if we don't get stopped out on the short today. The Dow is trading 7800 as I write and I have no qualms with anyone looking to simply close out now.

  Jeff Bailey   3/13/03,  3:41:36 PM
The 03:15 PM Intraday Update has been posted. You may view it here: Link

  Linda Piazza   3/13/03,  3:41:19 PM
Today, the FTSE 100 climbed 199.90 points or 6.08% to 3486.90, erasing yesterday's gains. The CAC 40 and DAX both climbed just over 151 points, both gaining substantially more than 6%. The CAC ended the day at 2554.71, and the DAX ended at 2354.31. The FTSE ended the day just above 3480 resistance, and then faces resistance overhead at 3568 and 3600. The CAC faces resistance at current levels and then at 2600. The DAX faces resistance at current levels and then 2450, 2500, and 2550.

  Linda Piazza   3/13/03,  3:35:11 PM
I must have had fourteen alerts set for $TRAN 2008. They've all been sounding one after the other. In case I wouldn't have noticed anyway, I've officially been alerted, multiple times, that the Dow Jones Transportation Index, currently at 2006.14, just tested 2008, the October lows, reaching a high of 2008.67.

  Jonathan Levinson   3/13/03,  3:20:30 PM
Just emailing with Linda and a good line came out: In a difficult market, there's no feeling like "buying cash".

  Jonathan Levinson   3/13/03,  3:13:50 PM
I do not believe that yesterday was The Bottom, but as someone more distinguished than I once said, "The markets can remain irrational longer than you can remain solvent." It's all about account management.

  Linda Piazza   3/13/03,  3:13:12 PM
Currently at 2007.13, the Dow Jones Transportation is closing the distance on the October lows just above 2008. At 353.62, the Russell 2000 approaches its broken October-to-March trendline and 21-dma at 356.76.

  Jonathan Levinson   3/13/03,  3:12:50 PM
The TRINQ is back at .14, TICK.NQ +188. This is a buying frenzy near the highs of the day. Next resistance is now in play, 1330-33. If you're holding your positions and are stunned like a deer in the headlights, wake up, measure the damage, and manage your account. These rallies are lethal to bears, and don't become a casualty. If you're overleveraged, reduce or hedge if you haven't already done so.

  Linda Piazza   3/13/03,  3:07:50 PM
At 36.09, the VIX is near the low of the day, down 5.07 from yesterday's 41.16 high. The VIX has dropped beneath the descending trendline again today.

  Linda Piazza   3/13/03,  3:02:37 PM
We've certainly experienced wild swings in volume patterns lately. Earlier in the week, NYSE down volume measured 17.5 times up volume. Today, Nasdaq up volume is 10.5 times down volume. Here are the other statistics: Adv/dec ratios are 2.47 on the NYSE and 2.22 on the Nasdaq. On the NYSE, up volume is 3.47 times down volume. Total volume is 1.2 billion shares on the NYSE and 1.3 billion on the Nasdaq. New lows still outnumber new highs.

  Jonathan Levinson   3/13/03,  2:57:40 PM
The TICK.NQ is dropping, now at +24. The TRINQ is still at .21. This sustained TRINQ reading is the most disconcerting of all the indicators I watch, for the simple reason that each of the major bear market rallies I've followed it through showed the same thing. In August and October, the TRINQ got buried and stayed there, just as it has today. On most days, the TRINQ might make it down this low on a burst of short covering and signals a good shorting opportunity when it does. Not today, however. Next resistance is 1330-33 COMPX, 1340 and then 1350.

  Linda Piazza   3/13/03,  2:54:23 PM
On the 60-minute OEX chart, both the 5(3)3 and the 21(3)3 stochastics are now in overbought territory and appear toppy as the OEX pulls back slightly from its first test of 420 and the 21-dma just below 420. Appearances can be deceiving, however, as stochastics don't give reliable signals in a strongly trending market. As Jonathan mentioned yesterday, watching Bollinger bands can be helpful. Also watch behavior around historical S/R, broken trendlines, and moving averages.

  Jeff Bailey   3/13/03,  2:44:20 PM
Penn Natl. Gaming (PENN) $17.50 +5.6% ... getting upside alert here per previous Friday's late evening commentary regarding gaming sector. Trade at $17.50 triggeres triple-top buy signal and has stock clearing longer-term bearish resistance. With gaming sector just reversing back lower into "bear confirmed" status yesterday, would only suggest 1/2 positions bullish right now. However, I'm thinking it was broader market weakness yesterday which had group reversing lower. Link

  Steven Price   3/13/03,  2:41:02 PM
Swing Trade Signals
It certainly looks like we are going to get our test of Dow 7800 as the SPX has cruised through 825 and the OEX has crossed 420. Big gain in the COMP to 1324 now, as well.

Current levels: Dow 7779/OEX 420.12/SPX 826.30/COMP 1324

  Linda Piazza   3/13/03,  2:40:49 PM
Is this a bear-market rally or something more? I don't know, but I do note that during the May-to-July slide, the decline was several times interrupted by two-day OEX gains of 28-30 points before the slide continued. We should expect explosive bear-market rallies to interrupt bear-market declines. We should honor our stops during those bear-market rallies, however, as there's always a chance that one of the rallies could be longer lasting.

  Jonathan Levinson   3/13/03,  2:40:16 PM
Agreed Steven. Note that volume is also pretty decent here, with NYSE volume 1.43B and COMPX volume 1.25B so far.

  Jeff Bailey   3/13/03,  2:35:14 PM
S&P Banks Index (BIX.X) 264 +2.53% .... session high here and may have further upside near-term to WEEKLY/MONTHLY correlative resistance at 272.

  Linda Piazza   3/13/03,  2:33:24 PM
That bigger move on the OEX came right on schedule. The OEX now moves up to test its daily 21-pma at 419.82, and may be doing so by the time I complete this entry.

  Steven Price   3/13/03,  2:31:44 PM
Swing Trade Signals
Now through Dow 7750 and COMP 1320 and setting new highs on the day. While I stepped in front of the train with a small position, I think anyone playing long here has a reversal argument as well. The SPX is pushing up against 825 and a breakout above that level may get shorts covering yet again. Those traders with anything but aggressive risk profiles should not be picking tops.

  Linda Piazza   3/13/03,  2:23:56 PM
The five-minute OEX candles grow tiny again, again portending a bigger move to come soon.

  Jeff Bailey   3/13/03,  2:19:12 PM
The 01:00 PM Intraday Update has been posted. You may view it here: Link

  Jonathan Levinson   3/13/03,  2:18:47 PM
7 days of COMPX declines have now been reversed within 24 hours. The 60 minute chart shows a perfect flagpole, now all we need is the flag. The FVX is up 16.4 bps now, not a hint of buying in bonds. The pullback on the COMPX continues to be a pause, with QQQ sticking at 25.10.

  Linda Piazza   3/13/03,  2:13:26 PM
Here's what I'm watching on the OEX 60-minute chart. The OEX currently pushes toward the top of a regression channel that's been containing prices from February 18 to the present. A move and close above 420 would break the OEX out of this regression channel, push it above historical resistance at 420, and bump it above the daily 21-pma at 419.82. Until then, this appears to be just another short-covering rally, but that does not mean that difficult account management decisions shouldn't be made along the way if stops are violated. One warning signal comes from the SOX, which has moved above its own longer-term regression channel to do battle with its simple 100-dma. Let's watch the outcome of both battles. Link

  Steven Price   3/13/03,  2:12:11 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the second 1/4 position short when the Dow traded 7735 at 14:10:14. We are now short a 1/2 position with a stop at 7830. I am targeting yesterday's lows on the play. However, if we do get past 7800, I can see another run to 8000 and I will likely step out of the way until then.

  Jonathan Levinson   3/13/03,  2:04:51 PM
The COMPX is pulling back, really just a pause, currently down to 1318. The FVX is up 15.7 bps, and the selling in bonds shows little sign of abating. NDX volatility is way down, -2.08 for the QQV.

  Jonathan Levinson   3/13/03,  1:55:20 PM
Taking a look at the stochastics, I see no sell signals whatsoever on the COMPX, currently trading above 1318 resistance. The 30 minute and shorter 10(5) stochastics are buried at or near 100% overbought, with the 60 minute topping as well. The daily candles show the stochs in full bull runs with plenty of room to the upside. If the move doesn't abort from the overbought readings on the shorter timeframes, the daily move is targeting at least 1340-50. Bears, watch your stops.

  Steven Price   3/13/03,  1:53:30 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We are now testing Dow 7750 and COMP 1320. If the rally is going to run out of steam, this resistance should be a likely level. I am going to add another 1/4 short to the current position, to make a 1/2 short here, with the stop still set at 7830. This is another HIGH RISK entry against the tide, but I am playing an oversold bounce at resistance.

Go Short a 1/4 position in the Dow at 7735.

  Kent Barton   3/13/03,  1:50:01 PM
Every Dow component is trading in positive territory, with the exception of HPQ, BA, MO and MRK.

  Mark Phillips   3/13/03,  1:49:15 PM
I got this email from a reader earlier today, and thought I'd share it and my response with everyone.

Mark, I entered a put position yesterday on kss based on the Prem. inv. rec. I'm not sure which trader made the call on this play, but you are as sharp as anyone, so I will pick your brain. Despite much worse than expected retail sales, the stock skyrocketed! This could not have been sell the rumor buy the news since the unexpected happened. In any event,would you hold for a breakdown around 55 or do you feel the stock is on a rebound? I am puzzled at the markets' perspective on kss right now.Close the position and take my lumps or monitor for a rollover?

Well, KSS was certainly looking like a nice rollover candidate yesterday, but today's ramp sure blew that idea out of the water! I don't think this move has anything to do with the Retail Sales report. This is a pure short-covering ramp, and based on the heavy selling in the Treasuries, I'm getting a sense of assett allocation from bonds back into equities. Seems Jeff has been mentioning this possibility in his recent index wraps.

As to KSS, I would not continue to hold bearish positions at this juncture, but it all depends on your risk profile and how much heat you were willing to take when entering the position. The key for me is the change of position on the PnF chart. Link Today's move generates a PnF Buy signal and could be warning of a more significant upward move. I note that this is the first PnF Buy signal for KSS since the stock topped out in early December. If it was my money, I'd take my lumps, exit the play and move on. At the very least, I'd place a stop just over $55, as a trade at that level would give another X to the current bullish column, significantly reducing the risk that the current rally is a bull trap.

Since I'm not covering the play though, perhaps one of you PI guys would like to chime in? Kent? Jeff? Have at it!

  Linda Piazza   3/13/03,  1:41:45 PM
The SOX is now pushing up above the regression channel that has contained its movements since early in December. This is the first move above the top, descending line since that time. The SOX also currently tests its simple 100-dma, at 303.91.

  Kent Barton   3/13/03,  1:37:41 PM
TOO Inc (TOO) 15.48 +0.82: Rallying in tandem with the RLX.X retail index after spending serveral sessions near $14.50. Shares are trading at new short-term highs and are gaining upward momentum as I type this. The next hurdle for the bulls will be the relative high at $15.83.

Most traders will probably not to chase the stock higher at this point. Instead, those looking to enter new long positions can watch for a pullback to the $15.00-$15.15 area. That region of previous resistance should now provide support.

  Linda Piazza   3/13/03,  1:37:29 PM
The OEX tested that five-minute 21-pma, printing smaller candles as the average rose toward it, and then the OEX moved up again. Turning to the daily chart, we see the 21-dma at 419.78. As mentioned earlier this morning, this 419-421 level should provide strong resistance, as it also represents the confluence of the upper end of the trading range from March 4-10, other historical S/R in this area, and the weekly pivot at 420.6. It will be important to watch how the OEX behaves near that level.

  Jonathan Levinson   3/13/03,  1:36:21 PM
The COMPX is closing in on 1318 resistance, SPX on 820 resistance. 820 looks quite heavy to me, but I note that the COMPX has already cleared its equivalent level fromt he week of March 3-10. The indicators are saying little that they haven't been saying all day, though the TICK.NQ has now risen to +145 and the FVX to a 15.2 bps gain.

  Steven Price   3/13/03,  1:32:56 PM
Swing Trade Signals
Have I been caught in the trap of not trading what I see? After a bearish couple of months, it is hard to switch teams as the economic data continues to disappoint. I am still of the opinion that we are seeing an oversold bounce, but as the Dow moves to new highs on the day above 7700 and the SPX cracks 820, doubt creeps in. I still think there is heavy resistance in the 7750-7800 range and might add another 1/4 position at that resistance, but trading in this environment is not for the risk averse. The VIX at 36.24% still has some room to fall before hitting the 34-35% range that has signaled reversals back down.

  Steven Price   3/13/03,  1:25:47 PM
BBOX $26.21 (-0.57) For those traders still holding BBOX puts, the stock continues to fall in spite of a rally tech wide. I'd probably lower my stop if I were still in the play and wanted to take an aggressive stance to $28.50, where the stock found resistance intraday on Wednesday. More conservative traders, however, should observe support at $26 and think about closing out for a significant gain of around $13.

  Jonathan Levinson   3/13/03,  1:16:06 PM
The TRINQ is compressing lower at .15, while the TICK.NQ is up to +87 now. QQQ is trading both sides of 25.00, COMPX struggling to break away from 1312. The upper 20-200 bollinger band on the 60 minute COMPX candles continues to keep a lid on the upside, but once the short term overbought condition is eased, we could see another push. For some perspective, the 20 period moving average on that time frame is way below at 1278- it certainly hasn't been a boring week, has it? Next resistance is above at 1318-20, support below is at 1309 and 1302.

  Linda Piazza   3/13/03,  1:08:45 PM
The five-minute 21-pma will soon factor in the OEX's movements again, as that moving average now rises to 415.31, just beneath the OEX's curent 41.83 level and near S/R between 415-416. The five-minute candles grow smaller, usually, but not always, portending a bigger move to come soon.

  Linda Piazza   3/13/03,  12:48:32 PM
One OEX possibility that must be kept on the radar screen today comes from an examination of the ten-minute chart. This chart shows a possible bullish cup-and-handle formation on the OEX, with the lip of the cup being near the current level (416). The bowl-portion of the cup is not a classically rounded cup or bowl shape, but my understanding is that the shape is not important in this instance. I would have actually proposed 420 as the possible location of a lip of a rounding bottom formation, but the markets seem to have considered the current level important as this morning's pullback occurred at this level, and the OEX currently hesitates here, too. Overbought stochastics on the ten-minute chart (both 5(3)3 and 21(3)3)) as well as on all longer-period intraday charts lead me to believe that the OEX would not necessarily have the strength to fulfill the target of a cup-and-handle formation, but we must examine all possibilities. If the OEX falls from here, the formation is being rejected.

  Jonathan Levinson   3/13/03,  12:41:31 PM
A few comments about this latest surge: The put to call ratio has risen to .76, with the increase led by more bearishness on the part of equity option traders as opposed to index option traders. The TRINQ persisting this low, currently .16, could be signalling a steep rise from here, though I personally doubt it given the low TRINQ, merely +66 here. Continue to watch the levels- 1312, then 1318 are s/r zones to the upside from here. We've already seen 1309, 1298-1302, and 1290 on the way up from the lows.

  Jonathan Levinson   3/13/03,  12:28:50 PM
The COMPX broke through 1302 and is trying for 1312, currently trading 1309. The 60 minute candle is more than 1/2 way above the upper bollinger band, which tends to signal a short term reversal. The TRINQ is showing a very overbought market at .16, though it could be moreso. FVX looks to be setting new highs at a 13.6 bps gain. TICK.NQ is just +56, showing narrow breadth on this surge.

  Linda Piazza   3/13/03,  12:23:06 PM
That mini-double-bottom on the five-minute OEX chart worked out pretty well. (See my 11:31 post.) The OEX moved up toward the target, hesitated just underneath it, printing one small five-minute candle, and then resumed the move up. Targets predicted by formations on five-minute candles don't often help those in position trades make long-term decisions, but since this one predicted a move back toward the day's high, I thought it might be a useful one to watch.

  Linda Piazza   3/13/03,  12:19:17 PM
At 298.72 as I type, the SOX will next face overhead resistance at historical and psychological resistance of 300. Just over that level lie the simple and exponential 100-dma's. I switch to exponential averages after the 50-dma, but since some traders watch one and some the other, it might be best for us to watch both! The exponential 100-dma is closest, at 301.55, and the simple 100-dma is just over that, at 303.91.

  Linda Piazza   3/13/03,  12:08:26 PM
Turning to the 60-minute OEX chart as the OEX again tests the bottom of the March 4-10 415-420 consolidation range, I note that the 5(3)3 stochastics have risen since yesterday afternoon and are now in overbought territory, with a bearish kiss that might well unkiss on a continued rise of the OEX. The longer-term 21(3)3's are reaching overbought territory, but are not there yet and not even hinting at a rollover. The 21-pma has flattened and then turned up, a bullish sign.

  Steven Price   3/13/03,  12:08:14 PM
Swing Trade Signals
Back where we started, with all the indices about where we got short. The COMP, however, is at highs of the day and if it can manage to hold above 1300, we could take another run at 1320. Traders uncomfortable with the short after the bounce can punt here where we got in.

  Jeff Bailey   3/13/03,  11:57:21 AM
Flour Corp. (FLR) $30.35 +3.9% ... stock trying to make a move higher here. Mentioned this one as potential bullish from article we came across Link as potential benefitor from "war with Iraq."

Catching to the eye was the "volume spike" that came just after move above longer-term 200-day SMA, with intermediate-term 50-day SMA now threatening a cross above the 200-day. Link

Would still consider partial bullish positions, but look for point/figure chart "buy signal" at $31 to get initial bullish count of $40, and eventual break of bearish resitance trend to signal longer-term change in trend. Link

Stock's relative strength versus SPX improving, and a reading of 40 would have stock's RS chart vs. SPX giving a "buy signal." Link

  Jeff Bailey   3/13/03,  11:52:59 AM
The 11:00 AM Intraday Update has been posted. You may view it here: Link

  Jonathan Levinson   3/13/03,  11:48:27 AM
The latest put to call ratio came in at .62, with a day low of .61, showing strong bullish speculation in the option market.

  Linda Piazza   3/13/03,  11:47:24 AM
Most volume patterns remain positive, with the adv/dec ratios currently at 2.01 on the NYSE and 1.70 on the Nasdaq. Up volume is 2.4 times down volume on the NYSE and a whopping 7.5 time down volume on the Nasdaq. New lows remain ahead of new highs on both indices. Total volume is 571 million shares on the NYSE and 605 million on the Nasdaq.

  Jonathan Levinson   3/13/03,  11:46:58 AM
The TRINQ is down to .19 now, TICK.NQ positive at +11, nearly flat, while HUI is actually up, +.70 on the day to 117.08, XAU +.52 at 64.17. NDX volatility as measured by the QQV is down .91 to 39.97, COMPX volatility as measured by the VXN is down .71 to 46.79, back into its bullish descending wedge formation described in my weekend article. FVX is heading back toward its highs, currently +11.2 bps. 1302 COMPX remains unchallenged so far.

  Steven Price   3/13/03,  11:41:14 AM
Swing Trade Signals
The COMP has made it back to 1300 and the Dow back over 7650. The COMP is struggling there again, but the fact that it found a bid and came back knocking on the door looks bullish. I'm comfortable with the 1/4 short in front of resistance, but that's about all I'm willing to risk right now. Traders can adjust to a larger position if they want to take on a little more risk, but those traders who read last night's articles know my concerns with oversold bullish percents and the H&S completions. While I still believe we are in a downtrend,the last bounce in the trend went 400 points and this time we are even more oversold.

Current levels: Dow 7657/COMP 1299/OEX 414.49/SPX 815.17

  Linda Piazza   3/13/03,  11:31:43 AM
We've had a little mini-double-bottom on the OEX five-minute chart. It should send the OEX up to 415.75 or perhaps to the day's highs. Patterns like this on five-minute charts often don't meet their targets, as they're not particularly reliable, but let's watch this one.

  Mark Phillips   3/13/03,  11:16:40 AM
So what do we make of the excitement this morning? Sure we had a burst of short-covering and gold got smacked lower to the tune of $10-11 per ounce. But where's the follow-through??

I find the action on the OIN Put list to be rather instructive here, as resistance seems to be holding firm. Here are some of the plays that caught my attention after the completion of the opening 90 minutes of trading.

LLY - Notably weak this morningm, as it is back in the red and looks to challenge the $53 level later today. I read this weakness as a confirmation that the recent breakdown under $55 was truly significant on a supply/demand basis. Failed rallies (liek today's failed push to $54.80) should provide the best entries into this play.

PII - While still showing a fractional gain on the day I like the way it reversed from the day's high ($46.76), just one penny above our 446.75 stop and right at the top of Monday's gap.

TIN - Showing its relative weakness, TIN has given back almost all of its early upward move and is now trading just off its low of the day. It will be important to see how the stock behaves when/if it fills its opening gap with a trade down to the $37.50 area.

VZ - Pushed up as high as $34.44 before being turned back and now solidly below $34 again.

My point isn't necessarily that any/all of these plays look attractive here. No, what catches my attention is that none of these recently weak stocks have been able to break above resistance this morning, and that indicates to me that there isn't much upside conviction...at least not yet. It could come later today, but we're going to need to see strong volume to push the pile through those multiple layers of resistance resting just overhead.

  Linda Piazza   3/13/03,  11:09:10 AM
The OEX has had its first five-minute close beneath its five-minute 21-pma since the rally off the lows began yesterday afternoon. I caution that a five-minute pattern should not be guiding your position trades, but studying these patterns can still give clues that can prove helpful. The OEX now tests the daily R1 at 411.80, also an area of some consolidation. A fall below this level should mean a test of historical support near 409-410, also today's opening level. A fall through today's opening levels would be bearish. Steadying here and then moving above today's highs would be bullish, but would also pit the OEX against next resistance fairly soon.

  Steven Price   3/13/03,  11:08:18 AM
Swing Trade Signals
The 5 min 21-pmas in the Dow/SPX/OEX all fell after providing brief support on this last test.. SPX is testing 810 as I type and the Dow is sitting at the morning low of 7618. I'm watching a break below 810 as the next significant support level.

  Jeff Bailey   3/13/03,  11:05:34 AM
OEX and BIX.X .... from this morning's 09:00 Update... OEX rallied into that "little zone" of 415.57-416.6 from our MONTHLY/WEEKLY retracement.

I'm watching the S&P Bank Index (BIX.X) 260.10 +0.98% right here, as it has moved just above its WEEKLY S2 of 259.30 (it seems to be lagging the OEX/SPX move and not really confirming bullishness). If BIX.X should begin to slip more than 1-point below this WEEKLY S2, be alert to weakness in the OEX and SPX.

My thinking this morning was the OEX had some upside potential to its WEEKLY pivot, but I don't think it will make it, if BIX.X just sits here, or moves lower.

  Jonathan Levinson   3/13/03,  11:02:23 AM
The narrow rangebound action and "slow" trading feels like typical flagpole "flag" action such as we saw one month ago. This move off the lows hasn't yet touched 1298, which was the lower end of the 1298-1302 s/r zone from last week. The FVX is up 9.3 bps, still off from its highs of the day, and HUI and XAU are off their lows, with XAU actually in the green by a few cents. Breadth still shows hysterical buying in a few stocks, with TRINQ .29 and TICK.NQ -153.

  Linda Piazza   3/13/03,  10:55:01 AM
Several five-minute candles ago, the OEX found support at its rising 21-pma, concurrently at its daily R1 level of 411.80, rising again to test recent historical resistance just under 414. February 25 saw a low of 413.69, and that level has played a part in trading since then. The OEX has turned back from that level. The five-minute 21-pma has continued to rise and now is just below at a level concurrent with the 50% retracement of the first five-minute candle. A move through the 412.50 level would then bring the OEX back under that 50% retracement and the five-minute 21-pma. The OEX moved above that 21-pma yesterday afternoon in the first signal that it would rally, so a move below and successive closes below that pma might prove significant.

  Steven Price   3/13/03,  10:54:28 AM
LLY $53.70 (-0.34) OI put play LLY is one of the few stocks left behind in the morning rally. It did make a run at $55, with a high of $54.80, but it has rolled over decisively and I like new entires below the day's low of $53.45. $55 had been previous support and now appears to be acting as resistance.

  Jeff Bailey   3/13/03,  10:53:40 AM
Question ... Jeff: The other day, you mentioned a volume spike in MCK that looked suspicious to you on an intra-day basis. You've said before that institutions will sometimes get a client out of a position before a downgrade. Do you think this might be what happened with MCK the other day?

Good question, and we are never sure. However, I've discussed before, and even again today in the monitor, that volume increases hint of interest and disagreement. There's an old trader's saying that "volume proceeds price action."

Being a supply/demand trader like I am, that saying drives home with me. Why? Because once the disagreement is settled and a "break" from that disagreement (up or down) could then have the party on the wrong side of the trade admitting their "mistake" if they lack conviction and the move in the direction of the break has the stock moving a little quicker in the direction of the break. It's been our observation from the p/f chart, that the resolution would be lower as supply looked to be in control.

  Steven Price   3/13/03,  10:51:24 AM
Swing Trade Signals
It's still early and the moving averages on the 5 min chart are playing catch-up to the morning spike, but so far the first bounce at 7618 came off the 21-pma. That average is rising sharply and currently sits at 7628. We did get a 5 min close above 7650, but have pulled back slightly.

  Steven Price   3/13/03,  10:48:35 AM
Swing Trade Signals
ADV/DEC volume picking up again. I'd love to see some resistance at 7650 and we should get a look here in the next couple minutes.

  Jeff Bailey   3/13/03,  10:42:16 AM
Forest Labs (FRX) $49.36 +0.75% .... not "outperforming" the market today, but on my way to work, I was thinking... I want it to at least show a positive gain today after showing some support at the $47.50 level like we thought it should on Tuesday. Again... have been trying to "fine tune" things with a $0.50 box scale Link to "create trouble" for a bull with that bearish resistance trend and make FRX prove itself to a bull with a trade at $51.50.

The conventional $1 box still "strong," but it has been my thinking that stock has "suffered" or stagnated more as a result of broader market bearishness, along with sector weakness. First sign of renewed strength on p/f chart of FRX would be a trade at $52. Link

  Linda Piazza   3/13/03,  10:36:26 AM
Volume patterns show that advancers lead decliners and up volume zooms ahead of down volume. Total volume is 290 million shares traded on the NYSE and 356 million on the Nasdaq. New lows outnumber new highs, although by only 4 issues on the Nasdaq.

  Jeff Bailey   3/13/03,  10:36:16 AM
McKesson (MCK) $23.60 -3.98% ... Jeff: I'm still holding May puts that you suggested a while back based on MCK's tech breakdown. Do you still have a downside target below $20 in the near term?

Yes, no change to prior analysis. Still playing two things here. 1) The bearish triangle and using Professor Davis' study regarding this pattern being profitable 87.5% of the time for an average decline of 33.3% in 2.5 months. From $25, a 33.3% decline gives a target of $16.68. Link

2) The bearish vertical count (column of O from 34-25) gives us a bearish price objective of $14.

I'm keeping an eye on Dorsey's "Drug" sector bullish %. Current reading is "bull correction" at 28%. I can't show you the chart but this has the bullish % in a column of O, as drug stocks are giving sell signals, but this is somewhat bearish phase and we can sure see from the MCK p/f chart, that its been in a bearish phase. I "like" shorting/putting WEAK stocks with "plenty of room" to a bearish target like Professor Davis' study and bearish vertical count seem to hint at.

So... for your and my May puts, we would be targeting a "zone" of $16.68-$14 based on Prof Davis' study and bearish vertical count. We just want the sector and the MARKET (SPX) to stay in a bearish phase. If the market or sector bullish % reverses up, then we'll begin getting more protective in our bearish position.

  Linda Piazza   3/13/03,  10:32:45 AM
The OEX is falling beneath the 50% retracement of the first five-minute candle. This is short-term bearish, but the OEX will soon face another test of support as it approaches the rising five-minute 21-pma at 411.10. For those of you who watch the pivot analysis points, I note that this MA is also just under today's R1 at 411.80. The OEX currently trades at 412.18.

  Jonathan Levinson   3/13/03,  10:31:32 AM
Breadth has changed for the worse, but the buyers are still carpet bombing with the TRINQ at .25. TICK.NQ is now -241, QQV is +.15, HUI and XAU are wobbly and stunned but climbing back up the ropes. FVX is now up only 8.8 bps, still big but down from double digit gains as Al Green's dealers buy back treasury bonds (my guess). 1302 COMPX continues to be the day high, currently trading its low of the day at 1291.

  Linda Piazza   3/13/03,  10:24:04 AM
Currently at 412.89, the OEX has halted its fall right at the 50% retracement of the five five-minute candle at 412.60, the midline support level predicted by candlestick theory and Fibonacci retracement theory, too. A move below is short-term bearish; a move up from here is short-term bullish.

  Jeff Bailey   3/13/03,  10:22:00 AM
Per 10:05 I think a trader/investor could also use the 10-year bond's price and check against stocks you might be trading. Simple thinking would be...1) Is money flowing out of a stock and into bond? 2) Is money flowing out of bond and into stock? 3) Is money flowing out of bond, but passing up this stock? 4) Is money flowing into bond, but stock still finding byers (sideline cash, or cash from other stock selling). #3 is probably best short candidate, while #4 better bullish candidate.

RS chart of MCK vs. 10-year. Link (I'm more bearish on MCK and own bearish position)

RS chart of CSCO vs. 10-year. Link (I'm more bearish on CSCO and own bearish position)

RS chart of MMM vs. 10-year. Link? S=mmm&N=A&RS=on&M=$UST&T=on&O=21 (I'm more bullish on MMM, but no positions at this time)

RS chart of FRX vs. 10-year. Link (I'm more bullish on FRX, and own bullish position)

Here's an article I wrote regarding the use of point and figure charts to perhaps get "better" readings from relative strength. Link

  Linda Piazza   3/13/03,  10:18:31 AM
European markets have been building on early gains. As of a few moments ago, the FTSE 100 had climbed 160.30 points or 4.88%, the CAC 40 had climbed 112.57 points or 4.68%, and the DAX had climbed 90.34 points or 4.10%.

  Jonathan Levinson   3/13/03,  10:13:03 AM
How strong do you find the1302 resistance??

So far, strong enough. Next resistance is at... well, we know them by heart by now- 1309, 1312, 1318, 1332, 1340. The TRINQ is very low and we're approaching opex week. Looking at the put/call open interest, market makers want to see an expiry between 24 and 25 QQQ, but closer to 25. That's just one benchmark, but the area from 1300-1318 is very heavy resistance.

  Linda Piazza   3/13/03,  10:07:23 AM
One index to watch for signs of strength or weakness today is the Russell 2000, currently at 349.32. Many believe that no rally has staying power without the participation of the small caps. On March 6, the Russell was one of the first of the indices to fall through the ascending trendline that had been in place since October. Today, as the Russell rises, it might be important to note that the broken trendline now crosses at 356.55, the exact location of the falling 21-dma. Link

  Steven Price   3/13/03,  10:06:10 AM
Swing Trade Signals
Interesting pullback in the Dow to just above the R2 level (7645 vs. R2 7642). That looks bullish to me for the moment.

  Jeff Bailey   3/13/03,  10:05:14 AM
Questions regarding bonds I've gotten a lot of questions from traders regarding.... "how will we know when the selling in bonds is significant enough to have a longer-lasting impact on stocks?"

Here's what I'm thinking and getting ready to do.

Here is a chart of the 10-year Treasury bond ($UST) Link with scale set at 0.125.

Here is a chart of the Dow Industrials (INDU) Link which we've discussed in the past.

Now, I "know" that we had a "bottom" in the Dow back in October, right? RIGHT! How can I use the p/f chart to give me an idea of when I should have been long the Dow, and perhaps the major indexes on the thought or more importantly, the OBSERVATION that there was a more meaningful shift taking place AWAY from bonds into stocks?

How about a relative strength chart? Here's a RS chart of the Dow vs. 10-year bond, where we compare relative strength based on PRICE. (scale 50) Link Do you see the "triple-top" buy signal in this RS chart in October? Just after the "red A?" This would have been a good time to have gotten more serious with a bullish play in the Dow. Do you see where we might be at a "relative" low level as it relates to the October lows? This makes sense perhaps as it relates to the Dow Industrials Bullish % ($BPINDU).

I can add some "noise" to the RS chart with a 25-point box. Link

In Tuesday evening's Index Wrap Link we made special note from the Pivot Matrix, that the "only thing" we saw hinting of bullishness for yesterday's trade, was the 10-year YIELD.

I think the U.S. Dollar is also important, and it may be useful to also understand its relationship with the 10-year bond.

  Jonathan Levinson   3/13/03,  10:03:39 AM
My guess was right- Al Green pulled the elastic off his big roll and sent out a 6B 7-day repo, which is a 3.25B net addition. I expect that we've seen the highs of the day in treasury yields.

  Steven Price   3/13/03,  10:00:06 AM
Swing Trade Signals
One of the reasons I wanted to get in short now was the failure at COMP 1300. I'm still concerned about the possibility of a bigger turnaround, so I started with only a 1/4 position, but as I have pointed out, the overall trend remains down. I'll try not to be stubborn about looking for bearish opportunities only, but it's going to take more than a two day rally to turn the markets decisively.

  Linda Piazza   3/13/03,  9:55:22 AM
Currently at 1972.98, the Dow Jones Transports have risen to test former support. The first historical resistance might be found at current levels, up to 1985, and then again near its October 10 low of 2008. Above that is the 21-dma at 2055.36, near slight historical resistance.

  Jonathan Levinson   3/13/03,  9:55:03 AM
Looking at a chart of the ten year yield, it's gapped up out of the downtrend since its Feb highs. I expect to see a Al Green send a large repo to buy it back down- that's my guess, and the announcement is due out in a few minutes.

  Jonathan Levinson   3/13/03,  9:52:59 AM
The fib levels from the 1302 COMPX high to yesteday's 1255 low are: 1290, 1284, 1278, 1273 and 1266.

  Jonathan Levinson   3/13/03,  9:50:59 AM
Al Green has announced a 28 day repo of 4B, which covers today's expiring 28 day repo in the same amount. We await the 10AM announcement for yesterday's 2.75B overnight repo. With yields up strongly this morning, I expect to see at least 2.75B to cover what's expiring from yesterday.

  Jeff Bailey   3/13/03,  9:48:26 AM
McKesson (MCK) $24.21 -1.34% ... Link has been mentioned as bearish here in market monitor. Just this minute stock downgraded by AG Edward to "hold" from "buy". Edwards also downgrades ABC Link and CAH Link .

  Linda Piazza   3/13/03,  9:47:00 AM
Currently at 37.63, the VIX is now sitting on my "best fit" descending trendline, and has moved below Mark's more conservative and perhaps more correct descending trendline that incorporates all candle shadows.

  Steven Price   3/13/03,  9:46:54 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on our 1/4 short entry at 7674 at 9:46:10

  Linda Piazza   3/13/03,  9:44:53 AM
Bulls and bears alike should be watching the 420 level on the OEX. The 21-dma is located at 419.69. We saw resistance near that level from March 4-10, and there's historical resistance at that level dating back to some weekly closes in July and August, 2002. The weekly pivot is at 420.6.

  Steven Price   3/13/03,  9:44:40 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
we appear to be running out of steam at 7700. COMP also finding sellers at 1300. Let's start small here with a 1/4 position short and I'll look to ad if we get another move toward 7750-7800. Go short a 1/4 position at Dow 7674. Set stops at 7830.

  Jonathan Levinson   3/13/03,  9:41:58 AM
Gold is now quoting spot prices down 14.20 to 331.90.

  Steven Price   3/13/03,  9:39:57 AM
Swing Trade Signals
We took out Dow 7650 and SPX 816. However, the COMP has been unable to break 1300. I really like to see a sign of weakness to go short, but we are still climbing, and I don't want to step in front just yet.

  Linda Piazza   3/13/03,  9:37:44 AM
This morning's move has brought the OEX right back up to the bottom of that approximate 415-420 trading range that contained prices from March 4-March 10.

  Jonathan Levinson   3/13/03,  9:37:29 AM
The TRINQ is now .14, so I guess it was the real deal after all. For a few moments, there simply were almost zero sellers.

  Jonathan Levinson   3/13/03,  9:33:30 AM
I am showing a TRINQ reading of .1 now, but I assume that quote.com is printing bad data.

  Jonathan Levinson   3/13/03,  9:31:30 AM
18 point gap up open to 1297 COMPX, TRINQ .69, QQV +1.03 to 41.91, TICK.NQ +242.

  Jeff Bailey   3/13/03,  9:30:04 AM
Per Steve's 09:25:01 ... I need to give my 2-cents worth on this one. Volume doesn't matter, but increase in volume does show interest, and disagreement (for every buyer, there's a seller).

"after the first bomb drops".... I've thought about this too. Two questions here. Will the first bomb drop? At what value will the index/stock your trading be at when/if the first bomb drops.

  Jeff Bailey   3/13/03,  9:29:16 AM
The 9:00 AM Intraday Update has been posted. You may view it here: Link

  Steven Price   3/13/03,  9:25:01 AM
Good point from a reader:

Does size really matter? I know it doesn't on the P&F charts, but a look at volume during the previous two market reversals shows why today is probably not the next big reversal. I'll look for that shortly though, after the first bomb falls. -Ross

  Jonathan Levinson   3/13/03,  9:22:34 AM
It's not time to hold a wake for gold just yet. Attached is a weekly chart. I see support in the 325-330 range, below which its uptrend from 2001 could be said to be violated. This coincides with the 200 dma at 328.41.


  Steven Price   3/13/03,  9:21:49 AM
Swing Trade Signals
Looks like we may get another shot at that entry I was looking for on Tuesday around 7750 if the morning rally continues. I am also entertaining the possibility that after fulfilling the H&S pattern objectives yesterday we could be in for a more sustained rally. I really don't think that is the case, but I'm going to try not to get tunnel vision here. Right now the plan is to short a failed rally at resistance, but I'm not going to step in front of a speeding train. Dow 7650 could be resistance again as well and more aggressive traders may want to target a failure there for a short entry point.

  Linda Piazza   3/13/03,  9:12:09 AM
We've all been watching the SOX lately, and today's bump up will give us all a chance to see just how strong this index really is. Just above yesterday's closing levels lie a raft of possible resistance levels, including a descending trendline that's been in place since the December 2 high and which now crosses somewhere between 292-295, one version of the broken H&S neckline that's also near that level, the simple 50-dma at 292.13, psychological resistance at 300, and several layers of resistance above those. We should see a bump up today to test one or more of those levels of resistance. Oscillator evidence has been mixed, so hasn't been a good predictor of how the semis might behave. MA evidence is somewhat mixed, too, with the 21-dma turning up (bullish), the simple 50-dma flattening (somewhat bullish, since it had been falling), but with the simple 200-dma still moving down. When I look at the weekly chart, I see that the 10-week ema is coming up to meet the 30-week ema. Bullish crossovers of these two averages can be a signal of a change in intermediate trend, although the middle of last year saw a brief bullish crossover just before a bearish crossover that led into the October lows. When I look at the group as a whole and then at some of the stocks individually, OBV appears to be trending down and hasn't yet shown an increase that would lead me to believe that there's been accumulation behind the strength seen here. As I said yesterday, I'm not yet ready to conclude that either bears or bulls have won the battle with this index, but certainly look forward to finding out the answer, as I'm sure many of you do, too.

  Jonathan Levinson   3/13/03,  8:46:14 AM
The deflationary data out this morning has gold selling off, down 9.1 to 337.00. In the meantime, QQQ is trading 24.67, up approx 20 cents since 8:30.

  Jonathan Levinson   3/13/03,  8:42:38 AM
Bonds are seeing significant selling, with FVX +12.9 basis points, TNX +11.1 and TYX +7.3 bps.

  Linda Piazza   3/13/03,  8:38:44 AM
February retail sales fell 1.6%, with core sales falling 1.4%. Sales excluding gasoline fell 1.6%.

  Linda Piazza   3/13/03,  8:22:24 AM
European markets make slight gains over earlier reports, with the FTSE 100 now up 122 points, the CAC 40 was up 89.45 points, and the DAX was up 72.46 points.

  Jonathan Levinson   3/13/03,  8:09:32 AM
The 15 minute candlechart of the US Dollar Index shows a flagpole formation starting at noon yesterday, and is currently trading just off its best levels, above 98.80. Equity futures are looking strong, with QQQ trading 24.40 currently, up 17 cents from its close. Gold bottomed overnight at 342/oz, currently trading just above 343/oz.

  Linda Piazza   3/13/03,  7:01:09 AM
Good morning. "Panicked Withdrawals" reads one subtitle from an article describing the redemption out of funds controlled by South Korean trusts. Trading company SK Global misstated 2001 results, prompting fears that it might default on its bonds. Perhaps in an effort to fund redemptions, government bonds were sold, spiking the yields. The Bank of Korea will meet with the government to consider the recommendations of the Korea Investment Trust Companies Association to consider an industry stabilization fund. This development is reminiscent of yesterday's and today's Bank of Japan meeting with the Japanese government to consider a measure to stabilize Japanese financial markets. At least one component of those Japanese financial markets--Mizuho Financial Group--rose in Thursday trading. This lender canceled a plan to sell shares overseas, instead calling on its Japanese clients to buy shares. Other financials gained in early trading, too, after the Prime Minister announced that the Financial Services Agency would today reveal its plan to avoid a financial crisis. Yesterday, the hope of such a plan spurred the buying of big caps, but today those stocks were being sold again. In addition to other investor concerns, the anticipated North Korean launching of a Rodong medium-range ballistic missile increased fears. Both the South Korean Kospi and Japanese Nikkei ended down on the day, with the Nikkei dropping 74.48 points or 0.94%, to 7868.56. South Korea's Kospi did see some late-day buying, but still closed the day down 0.01%.

European markets undertake a recovery today, attended by a coincident drop in bonds. Some of the biggest equity gains came in groups that had tumbled the hardest, such as financial-related stocks. This hints that short-covering plays a part in the rally and European commentators note the light volume on the FTSE in particular, but these are rallies, nonetheless. Financial-services company Fortis was a big gainer, climbing 13% after keeping its dividend at current rates and saying it would pay the dividend in cash rather than stock, as had been feared. Several companies announced plans to buy back shares. Consumer-electronics maker Phillips announced cost-cutting measures, including layoffs and the closing of two U.S. factories. As of this writing, the FTSE 100 has climbed 102.40 points or 3.12% to 3389.40, the CAC 40 has climbed 88.39 points or 3.68% to 2491.43, and the DAX has climbed 67.89 points or 3.08% to 2270.85. The CAC has nearly retraced yesterday's losses, but the FTSE and the DAX still have more than 60 and 30 points, respectively, to make up before completely retracing yesterday's losses.

  Jeff Bailey   3/12/03,  10:38:07 PM
The Index Trader Wrap has been posted: Link

  Vlada Raicevic   3/12/03,  10:37:59 PM
The Futures Trader Wrap has been posted: Link

  Steven Price   3/12/03,  10:37:51 PM
The Swing Trade Game Plan has been posted: Link

  Steven Price   3/12/03,  10:35:30 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

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


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